Service Exports from India Scheme.
The new Foreign Trade Policy 2015-2020, with effect from 1.4.2015, Service Exports from India
Scheme (SEIS) has been announced by the Government thereby replacing the
Service Exports From India Scheme (SFIS) available under Foreign Trade Policy
2009-14.
1. Major Attractions of Service
Export from India Scheme:
I.
Applicability: Applies only to ‘Service Providers located in India’ instead of
‘Indian Service Providers’. It is one of the most significant change from the
previous Service Export From India Scheme
II.
Net Foreign Exchange Earnings Based Rewards: Rate of reward under SEIS are based on net foreign exchange
earned.
III.
Freely Transferable Scrips: Rewards issued as duty credit scrip is freely transferable and
usable for all types of goods and service tax debits on procurement of services
/ goods.
IV.
Duty
Drawback & CENVAT Credits : Debits are eligible
for CENVAT credit or drawback.
V.
Scrip can be
used for payment of:
(i) Customs Duties for import of inputs or
goods, except items listed in Appendix 3A;
(ii) Payment of excise duties on domestic
procurement of inputs or goods, including capital goods and
(iii)
Payment of service tax on procurement of services
(iv)
Payment of Customs Duty and fee as per paragraph 3.18 of this Policy.
2. Implications of Applicability of
Scheme to Service Providers located in India instead of Indian Service
Providers:
There have been a number
of litigations in the past involving foreign subsidiaries & brands who were
denied benefits under SFIS despite
conducting business in India on grounds that they were not " Indian
Service Providers" & not adding to the endeavour of Exports of Indian Service Providers.
Some of the popular companies whose applications were
rejected by DGFT between 2009-12 were Yum Restaurants India Pvt. Ltd. ( Holding
Co. of KFC, Pizza Hut & Taco Bells), Nokia Solutions etc.
3. Eligibility Conditions for
Claiming Rewards under SEIS:
Only following cases of Services Exports From India are
eligible for Rewards under the scheme.
a. Cross Border Trade from India to any other country and
b. Supply of a ‘service’ from India to service consumer(s) of any other country.
Following Service Exports are not eligible to claim rewards in the following cases:
a. Exports of Service by means of Commercial Presence Abroad: i.e. Supply of a ‘service’ from India by means
of commercial presence in any other country and
b. Exports with assistance of employees or
representatives located abroad: Supply of a ‘service’ from India through the presence of
employees or representatives in any other country not eligible for reward under
the scheme
4.
Net Foreign Exchange Earning Limits for Claiming rewards under SEIS:
a. General Limit :
Minimum net free foreign exchange earnings criterion prescribed is US$15,000 in
preceding financial year for eligibility under the Scheme.
b. Lower Limits : for Individuals Service
Providers & Sole Proprietorships:
For Individual Service Providers and sole proprietorship, such minimum net free
foreign exchange earnings criterion is US $10,000 in preceding financial year.
Note: In case of an Import & Export
Code Holder, for calculating threshold limit under SEIS Foreign Exchange
earnings only in respect of Services are to be considered & Foreign
exchange earnings in respect of trading, capital receipts are not to be
considered. IEC is necessary for a Manufacturer & service provider to claim
reward under SEIS in respect of export of such services.
5. Meaning of Net Foreign Exchange Earnings
under SEIS- Certain Exclusions.
Net Foreign Exchange: Gross
Foreign Exchange Recipts
Less : Payments of Expenses in Foreign Currency/ Remittances of foreign exchange by the
applicant.
i.
Foreign Exchange Recipts &
Payments via credit cards as notified by RBI shall also be taken into account
for calculating net foreign exchange earnings.
ii.
Foreign Exchange earnings for services provided by
Airlines, Shipping lines service providers plying from one foreign country to another with
routes not touching India at all.
iii.
Service providers in Telecom Sector.
iv.
In case of Educational Sector Services, capitation
fees received by schools shall not be considered for calculating threshold
limit for rewards under SEIS.
v.
Clubbing of turnover of services rendered by SEZ / EOU
/EHTP / STPI / BTP units with turnover of DTA Service Providers
vi.
Raising of all
types of foreign currency Loans;
vii.
Export proceeds
realization of clients;
viii.
Issuance of foreign
currency Bonds;
ix.
Issuance of foreign
currency Bonds;
6. Nature
of Rewards under SEIS:
Duty Credit Scrips shall be granted as rewards under MEIS
and SEIS.
I.
Meaning of Duty Scrips: Duty Scrip can be
understood as a certificate, which can be used for payment of Taxes later i.e.
as a certificate of credit of duty.
II.
The Duty Credit Scrips and goods imported / domestically
procured against them shall be freely transferable. The Duty Credit Scrips can
be utilised for:
(i)
Payment of Customs Duties for import of inputs or goods including capital goods,
except items listed in Appendix 3A.
(ii)
Payment of excise duties on domestic procurement of inputs or goods, including
capital goods as per DoR
notification.
(iii)
Payment of service tax on procurement of services as per DoR notification.
(iv)
Payment of Customs Duty and fee as per paragraph 3.18 of this Policy.
7. Cenvat
Credit/ Duty Drawback of Duty Paid through Scrips issued under SEIS:
I. Exemption for Payment of Custom Duty:
As per notification no. 25/2015 of Customs, There is an
Option to Pay Custom Duty on Imports against debit in Duty Credit Scrips issued
under SEIS Duty :
I.
Exemption to Imports into India: The Central Government has exempted importers from cash payment of Custom Duty when goods are imported into India against debit in duty
credit scrip issued under Service
Exports from India Scheme by the Regional Authority.
II.
Conditions for
Exemption for Duty of Customs:
a.
Issue of Valid Duty Scrip under SEIS Scheme
:
Importer must have a valid duty credit scrip issued to him located in India against export of notified
services listed in SEIS Scheme and Aayat Niryat Forms of Foreign Trade Policy
2015- 2020.
b.
Registration of Duty Scrip at Port of
Registration:
The duty scrip shall be registered with the Customs Authority at
the port of registration specified on the said scrip.
The duty scrip shall be produced before the proper officer of customs
at the time of clearance for debit of the duties leviable on the goods against
credit in the duty scrips and the proper officer of customs.
c.
Duty Drawback if, Exemption not Claimed:
If the importer does not avail abovementioned exemption then,
the importer shall be entitled to avail drawback of the duty of customs paid on
such imports.
d.
CENVAT Credit & Duty Drawback: The importer shall be entitled to avail drawback of the duty of
customs leviable under the First Schedule to the said Customs Tariff Act
against the amount debited in the said scrip.
II. Exemption for Payment of Excise Duty: As per notification no.
21/2015 of Deptt. The Central Government
has exempted the goods specified in the First Schedule and the Second Schedule
to the Central Excise Tariff Act, 1985, when cleared against a Service Exports
from India Scheme duty credit scrip issued by the appropriate Regional
Authority.
Conditions for Exemptions from Excise Duty
(i).
Presentation of Documents to Custom
Officer: Provided condition (i) of notification no. 25 mentioned
above are complied with & that the holder of the scrip presents the said
scrip to the said Customs Authority along with a letter or proforma invoice
from the supplier or manufacturer indicating details of its jurisdictional
Central Excise Officer.
(ii).
Debit of Duty
& Updation of Records: The said custom authority, taking
into account debits already made to the duty scrips, debit the amount of excise
duty from the scrip, update its own records, mention necessary details on the
said scrip & send the written advice of such debits to the appropriate
Excise officer.
(iii).
Clearance Of
Goods: For clearance of goods, the assessee presents the said
scrip to excise officer & officer shall endorse the clearance of goods
& validate on back side of scrip the amount of duty leviable & keep a
record of such clearances.
(iv).
Maintenance of
Records: The manufacturer retains
a copy of the scrip for claiming CENVAT Credit & Drawback of the duty paid
under the scheme.
III. Option to pay Service Tax by
means of Duty Credit Scrip & Claim Credit thereon.
Central Government has exempted
the taxable services provided or agreed to be provided against a Duty Credit
Scrip by a person located in the taxable territory from the whole of the
service tax leviable thereon under section 66B of the said Act.
The exemption shall be
subject to the following conditions, namely:
a.
Location of Service
Provider: That the holder of the scrip, to who has provided or agreed to
provide taxable services must be located in the taxable territory.
b.
Presentation of Duty
Credit Scrip to Customs Officer: That the holder of the scrip
who may either be the person to whom the scrip was originally issued or a
transferee holder, presents the scrip to the said Customs Authority along with
a letter and an invoice or challan or bill, as the case may be, issued under
rule 4A of the Service Tax Rules, 1994 by the service provider indicating
details of his jurisdictional Central Excise Officer.
c.
Presentation of Duty
Credit Scrip to Excise Officer: The holder of the scrip
presents the scrip debited by the said Customs Authority within thirty days to
the said Excise Officer, along with an undertaking addressed to the said
Officer, that in case of any service tax short debited in the scrip, he shall
pay such service tax along with applicable interest.
d.
Verification of debit
of Duty: Based on the said written advice and undertaking, the said
Officer shall verify and validate, on the reverse of the scrip, the details of
the service tax leviable, which were debited by the said Customs Authority, and
keep a record of payment of such service tax and interest, if any.
e.
CENVAT Credit of
Service Tax: Holder of the scrip, to whom the taxable services were provided
or agreed to be provided shall be entitled to avail drawback or CENVAT credit
of the service tax leviable under section 66B of the said Act, against the service
tax debited in the scrip and validated by the said Officer.
Exemption from Service Tax under RCM
to Exporters Receiving Services In Relation to Export from a Commission Agent
Located Outside India.
Description Of Service: Service provided by a commission agent located
outside India & engaged under a contract by the Exporter for export of
goods.
Quantum of Exemption: Exemption
shall be limited to the amount of Service Tax calculated on a value of 10% of
FOB Value of export goods provided the service has been used for such goods
only.
Conditions for Exemption:
(i).
The amount of commission paid/ payable must be
mentioned on the shipping bill or bill of export.
(ii).
The exporter shall submit with half yearly
return the following documents:
·
The original documents showing actual payment
of commission to the commission agent.
·
A copy of agreement or contract entered into
between the commission agent located outside India & the exporter in
relation to sale of export goods outside India.
Non-Availability of Exemption:
The exemption shall not be available on:
·
Export of canalised items, project exports.
·
Export financed under lines of credit extended
by the Govt. of India or EXIM Bank.
·
Export made by an Indian partner in a company
with equity participation in an overseas joint venture or wholly owned
subsidiary.
Contributed by Tanveer Alam CA Finalist at Sandeep Ahuja & Co
Contributed by Tanveer Alam CA Finalist at Sandeep Ahuja & Co
