Export benefits and incentives
In order to boost exports from India various incentives and benefits have been allowed inter alia under the
Excise and Customs Law. A brief account of the same is given below :
(i) Rebate of duty on “export goods” and “material” used in manufacture of such goods : Rule 18 of the Central
Excise Rules, 2002 provides for grant of rebate of duty paid on goods exported or duty paid on the
material used in the manufacture of export goods, subject to such conditions, limitations and procedures
as specified in the Notifications Nos. 40/2001-CE(NT) and 41/2001-CE(NT), both dated 26-6-2001.
(ii) Export of goods without payment of excise duty under Bond: As per Rule 19, any excusable goods can be
exported or inputs for manufacture of such goods can be removed without payment of duty from the
factory or warehouse or any other premises as may be approved by the Commissioner under Bond
subject to the conditions safeguards and procedures notified by CBEC vide the Notifications Nos. 42/
2001-CE(NT) to 45/2001-CE(NT), all dated 26-6-2001.
Further, to facilitate export under Bond, export warehouses have been allowed to be setup, from where
goods can also be exported directly. Goods can also be cleared directly from the job workers’ premises
to export warehouses of even merchant exporters for export.
(iii) Cenvat credit of input excise duty provided drawback for the same is not taken : Where goods are exported
under bond, the input credit taken on account of export can be utilized for paying duty on similar
products cleared for home consumption. Assessee may also obtain cash refund. However, cash refund
of input credit is not admissible for ‘deemed exports to FTZ units and 100% EOU’s.
(iv) Setting up of units in FTZ/EPZ/ETP and Jewellery Complexes and 100% EOU/SEZ : All required inputs and
capital goods, whether indigenous or imported, are made available to these units free of customs and
excise duties under bond. For getting indigenous/imported inputs, CT-3 book-lets/Procurement Certificate
is issued to them by the Range Officer. These are customs bonded units set up under section 65 of the
Customs Act, 1962 but with a much relaxed control and in accordance with the EXIM Policy for
manufacture of articles for export out of India or for production or packaging or job work for export of
goods or services out of India.
Inter-unit transfers for valid reasons are freely allowed among EPZ/EOU/SEZ units themselves. The
warehousing licence for that would be valid for 5 years.100% EOUs have been given the facility of sending the Customs bonded goods to such contractors in DTA for job work and EOUs/EPZ units have also been allowed to carry out job work for DTA units.
Capital goods can be sent to DTA for repairs and return under the Range Superintendent’s permission.
All EOUs and units having an investment of ` 5 crores or above, in plant and machinery, have to show
positive value addition only.
(v) Drawback of Customs and Central Excise Duties in respect of inputs, both indigenous and imported : An All
Industry Rate Schedule is laid down and published for this purpose within 3 months of presentation of
each Budget. If an exporter’s goods do not figure therein or if he finds the all Industry rate too low (less
than four-fifths of the input duties paid by him), he can apply for fixation of brand rate(s) for his goods.
Anti-dumping duty, if actually paid on inputs, can only be claimed by way of brand rate. It is a Simplified
Brand Rate Fixation Scheme under which all applicant exporters can be allowed a provisional brand
rate within 15 days without pre-verification of data submitted by them. Exporters should send the data
duly verified by them and accompanied by original duty paying documents (bills of entry and invoices)
direct to the Ministry of Finance (Revenue Department), Joint Secretary (Drawback), Jeevan Deep
Building 10, Parliament Street, New Delhi – 110 001.
DTA exporters are also eligible for grant of drawback at brand rate only in respect of duties suffered on
their inputs which are processed by EOU/EPZ units. Sanctions for brand rate are normally valid for one
year but for brand rates having all Industry Rate linkage, validity is up to notification of the next AIR
Drawback for inputs is permissible not only in case of manufacture but also for processing or other
operations for export of goods.
(vi) Drawback of 98% customs duty (including anti-dumping duty). If imported goods are re-exported as such,
drawback of 98% customs duty is permitted. Re-export can be through any port and to any party (not
necessarily the original supplier of the goods).
(vii) Duty free Replenishment Scheme : The scheme allows duty free replenishment on post-export basis for
import of inputs on the basis of input-output norms where such norms exist and on condition of uniform
value addition of 33%. The duty exemption is only for basic customs duty, surcharge and SAD. There
would be no exemption for anti-dumping duty or safeguard duty or CVD. But Cenvat credit of CVD can
(viii) DEEC Scheme : For imported inputs against Advance Licence (Quantity Based only) Duty Entitlement
Export Certificate has to be taken subject to bond executed with customs authorities undertaking to
export stipulated quantity/value of specified finished goods. These licences are not transferable.
However, imports against these licenses have been exempted from payment of all kinds of duties like
basic, additional Customs duty, special customs duty, anti-dumping/safeguard duty.
(ix) DEPB Scheme : Duty entitlement pass book scheme patterned on the credit-debit system of Central
Excise CENVAT scheme was scheduled to phase out by March 31, 2002 but is being continued till VAT
comes comes into force.
Under the scheme, exporters are granted duty credits, on the basis of pre-notified entitlement rates, which will
allow them to import inputs duty free. The exporter can export any product under the DEPB Scheme provided
the same is covered by the Standard Input-Output Norms. The importer has the option to forego exemption
from C.V.D. and pay the C.V.D. in cash so that he or the customer can claim Cenvat credit. Goods in the
Negative List of EXIM Policy cannot be exported.
Pass Book credit can also be used for paying duty on (1) SIL imports, and (2) imports under other schemes like
EPCG Scheme or Project Imports, thereby availing the exemption from Special Additional Duty. In case the
imported goods are eligible for another partial exemption from payment of duty, such exemption would also be
applicable to goods imported against a DEPB scrip. In the case of composite items, the lowest rates applicable
to their constituents would be allowable.
Verification of present market value of the export product is assigned to SIIB Branch of Customs House to be
completed in 30 days.
(x) Imports for repair, jobbing, etc. free of duties (both basic and additional) : Such imports are made subject to
bond for their re-export with 10% value addition. No CCP is required now. Jobbing operations would be
carried out in accordance with the Customs (Import of Capital Goods at Concessional Rate for
Manufacture of Excisable Goods) Rules, 1996 and not in Customs Bond under section 65. Such export
should be completed within 6 months.
(xi) Import of capital goods at 5% concessional rate under EPCG Scheme : Such imports are subject to export
obligation and are applicable to all sectors and to all capital goods without any threshold limit. No
payment of additional Customs duty (e.v.d.) and special additional duty (SAD) applies. The scheme has
also been extended to identified service sectors. The export obligation is to be completed in eight
years. However, for the following categories, export obligation period will be 12 years :
1. EPCG licences of ` 100 crores or more;
2. Units in agri-export zones; and
3. Companies undet the revival plan of the BIFR.
Further, supplies under deemed exports are eligible to counting for discharge of export obligation.
(xii) Duty Free Entitlement Credit Certificate to Status holders : Who show incremental growth of more than 25%
in exports, such certificate would be equal to 10% of the incremental growth achieved during 2002-2003
subject to a maximum turnover of ` 25 crores. Imports under it would be exempt from basic customs
duty, CVD and SAD. Actual user condition would apply to certificate and the goods imported thereunder
[Notificatio No. 53/2003-Cus]
(xiii) Duty Free Entitlement Credit Certificate to Service Providers : It would be equal to 10% (5% in the case of
hotels) of average forex earnings of the preceding three years subject to a maximum earning of ` 10
lakhs. Extent of exemption and all conditions shall be same as in case of status holders. Service
providers should register themselves with FIEO. [Notification No. 54/2003-Cus]
(xiv) Special Economic Zones : By new notifications 22, 23,24, 25/2003-CE & 51-52/2003-Cus. Special incentives
have been provided for the special economic zones set up on Chinese model at Mumbai, Kandla,
Cochin and other locations by converting the existing EPZs into SEZ, which would be treated as under
outside territory of India.
Export Without Payment of Duty
The Rule 19 of the Central excise Rules, 2002, which corresponds to Rule 13 of the Central excise Rules. 1944
provides that :
1. Any excisable goods may be exported without payment of duty from a factory of the producer or the
manufacturer or the warehouse or any other premises, as may be approved by the Commissioner.
2. Any material may be removed without payment of duty from a factory of the producer or the
manufacturer or the warehouse or any other premises for use in the manufacture or processing of
goods which are exported, as may be approved by the Commissioner.
3. The export under sub-rule (1) or sub-rule (2) shall be subject to such conditions, safeguards and procedure
as may be specified by notification by the Board.
Categories of Exports
There are two categories of export without payment of duty –
(i) Export of finished goods without payment of duty under bond or undertaking.
(ii) Export of manufactured/processed goods after procuring raw material without payment of duty under bond.
Simplified Export Procedure For Exempted Units
Units, which are fully exempted from payment of duty by a notification granting exemption based on value of
clearances for home consumption, may be exempted from filing ARE. 1 and Bond till they remain within the full
exemption limit. The following simplified export procedure, as detailed out in the Central Excise Manual, 2001,
shall be followed in this regard by such units :
Filing of Declaration
Manufacturers exempted for payment of duty will not be required to take Central Excise Registration. They
shall however, file a declaration in terms of Para 2 of Notification No. 36/2001-CE(NT), dated 26-6-2001, and
obtain declarant code number [notwithstanding they are exempted form declaration], but for this procedure.
The clearance document will be, as follows :
(i) Such manufacturers are permitted to use invoices or other similar documents bearing printed Serial
Numbers beginning from 1st day of a financial year for the purpose of clearances for home consumption
as well as for exports. (The printing of Serial Numbers can be done by use of franking machine). The
invoices meant for use during a month shall be pre-authenticated by the owner or partner or Director/
Managing Director of a Company or other authorized person.
(ii) The declarant’s Code Number should be mentioned on all clearance document.
(iii) Such declarant’s document should contain particulars of the description of goods, name and address of
the buyer, destination, value, [progressive total of total value of excisable goods cleared for home consumption since beginning of the financial year], vehicle number, date and time of the removal of the goods.
(iv) The clearance document will be signed by the manufacturer or his authorized agent at the time of
(v) In case of export through merchant exporters, the manufacturer will also mention on the top “EXPORT
THROUGH MERCHANT EXPORTERS” and will mention the Export-Import Code No. of such merchant
(vi) In case of direct export by the manufacturer-exporters, he will mention on the top “FOR EXPORT” and
his own Export-Import Code No., if any.