Home » Indian Exim Policy » Handbook Procedures-1 » Deemed Exports

CHAPTER: 10

Deemed Exports

10.1 Policy
The Policy relating to Deemed Exports is given in chapter-10 of the Policy.

10.2
In respect of supplies made in terms of paragraphs 10.2(a) of the Policy, the supplier shall be entitled to Advance Licence for intermediate supply.

If the supplier has made the supplies against Advance Release Order (ARO) or Back to Back Letter of Credit issued against Advance Licence, in terms of paragraphs 7.7 or 7.8 of the Policy, he shall be entitled to the benefits listed in paragraphs 10.3 (b) and (c) of the Policy. However, in such cases where Advance Release Order (ARO) or Back to Back Letter of Credit has been issued against DFRC, in terms of paragraphs 7.7 or 7.8 of the Policy, he shall be entitled only to the benefit listed in paragraph 10.3 (b) of the Policy.

10.3
In respect of supply of goods to EOU/ EPZ/ SEZ/ EHTP/ STP in terms of paragraphs 10.2 (b) of the Policy, the supplier shall be entitled to the benefits listed in paragraph 10.3(a) or (b) of the Policy.

10.4
In respect of supplies made under paragraphs 10.2 (c) (d) and (f) of the Policy, the supplier shall be entitled to the benefits enumerated in paragraphs 10.3 (a) (b) and (c), whichever is applicable.

10.5
In all cases of deemed exports, supplies shall be made directly to the designated Projects/ Agencies/ Units/ Advance Licence/ EPCG licence holders. The sub-contractor may, however, make the supplies to the main contractor as per paragraph 10.12 instead of designated projects/agencies.

10.6 Procedure for issue of Advance Release Order/ Back to Back Inland Letter of Credit

1. The procedures for issue of ARO and Back to Back Inland Letter of Credit, in respect of category (a) of paragraph 10.2 of the Policy, is given in paragraphs 7.12 and 7.13 of this Handbook.
2. For the purpose of claiming deemed export benefits, if any, the indigenous supplier shall produce documentary evidence substantiating the realisation of proceeds from the recipient through the normal banking channel as well as a copy of ARO/Non-negotiable copy of Back to Back Inland Letter of Credit.

10.7 Other Conditions
In respect of supplies under paragraphs 10.2 (b) of the Policy, the DTA unit shall claim the Advance Licence for deemed export from the concerned licensing authorities. Alternatively, the DTA unit may claim deemed export drawback from the concerned Development Commissioner. However, for supplies to EHTP/STP, the DTA unit shall claim deemed export benefits from the licensing authorities concerned.

Such supplies shall be certified by the receiving agencies.

10.8
In respect of supply of capital goods under paragraphs 10.2 (c) of the Policy. The supplier shall produce a certificate from the respective Excise authorities evidencing supplies/ receipt of the manufactured capital goods and shall produce documentary evidence substantiating the realisation of proceeds from the EPCG licence holder through the normal banking channel.

10.9

In respect of supplies under categories mentioned in paragraphs 10.2 (d) (e), (f), (g) and (h) of the Policy, payment against such supplies shall be certified by the Project Authority concerned, as prescribed in form given in Appendix 14-B. However, supplies to the projects funded by such agencies alone, as may be notified by Department of Economic Affairs, Ministry of Finance, shall be eligible for deemed export benefits. A list of such agencies/funds is given in Appendix-40.

10.10

1. Supplies under category mentioned in paragraphs 10.2 (e) of the Policy shall be for the plants being set up at Kakinnada, Gadepan, Babrala and Shahjahanpur and those which may have been set up or expanded/ revamped/ retrofitted/ modernised during the Eighth Plan period, provided such supplies are made under the procedure of International Competitive Bidding. Supplies of capital goods (excluding office machines howsoever described) and spares upto 10% of the FOR value of such capital goods alone shall be eligible for the deemed export benefits.
2. The benefit of deemed exports shall also be available in respect of supplies of capital goods and spares to fertilizer plants which are set up or expanded/ revamped/ retrofitted/ modernised during the Ninth Plan provided such supplies are made under the procedure of International Competitive Bidding, without reference to bid evaluation methodology. The domestic supplier, under paragraph 10.2(e) of the Policy, shall be eligible for the benefits listed in paragraphs 10.3(a) or (b) of the Policy.

10.11
The supply of capital goods and spares upto 10% of the FOR value of the capital goods to the power projects in terms of paragraphs 10.2(g) shall be entitled for deemed export benefits provided the same is certified by the Central Electricity Authority and the International Competitive Bidding procedures have been followed, at IPP stage, for supply of such capital goods to the power projects. The domestic supplier shall be eligible for the benefits listed in paragraphs 10.3 (a) or (b) of the Policy. The benefit of deemed exports shall also be available for renovation/ modernisation of power plants.

However, supply of goods required for setting up of any mega power projects specified in S.No. 338 of Department of Revenue notification No.16/2000 dated 1/3/2000, as amended from time to time, shall be eligible for deemed exports benefits as mentioned in paragraph 10.3(a)(b) and (c) of the Policy, if such mega power project is - (a) an inter state thermal power plant of a capacity of 1000 MW or more; or (b) an inter-state hydel power plant of a capacity of 500 MW or more-as certified by an officer not below the rank of a Joint Secretary, Government of India in the Ministry of Power.

Supplies under paragraph 10.2(g) of the policy to the new refineries being set up during the Ninth plan period, shall be entitled for deemed export benefits provided items and equipments are covered under S.No.204 of Customs Notification No. 16/2000 dated 1.3.2000, as amended from time to time. The domestic supplier shall be eligible for the benefits given in paragraph 10.3 (a) or (b) of the policy.

10.11 A Supplies to UN Organisation

The supplies of goods to projects funded by UN agencies shall be eligible for the benefits given in paragraph 10.3 (a) or (b) of the Policy.

10.12
Supplies made by an Indian sub-contractor of an Indian or foreign main contractor, shall also be eligible for deemed export benefits provided the name of the sub-contractor is indicated either originally or subsequently in the contract, and payment certificate is issued by the project authority in the name of the sub-contractor in the form given in Appendix 14-B. In respect of supplies made by sub-contractor to the main contractor under paragraph 10.2 (d) (e) (f) (g) and (i), the main contractor may make payment to the sub-contractor and issue payment certificate in the form given in Appendix-14 B as form 1-C. The deemed exports benefits to the sub-contractor would be available to the extent of goods that are manufactured and supplied by him or outsourced from other manufacturers, for the value as indicated in Appendix 14-A.

While entertaining the claim of sub-contractor, the sub-contractor would be required to submit a copy of payment certificate issued by project authority to the main contractor for supplies as well as payment certified from the main contractor indicating receipt of payment from main contractor to the extent supplies affected by sub-contractor through banking channel, in addition to other prescribed documents

10.13 Deleted

10.14 Deleted

10.15 Procedure for Claiming Benefits

The procedure for claiming benefits under paragraph 10.3 (b) and (c) of the Policy shall be as under:

1. An application in the form given in Appendix-17, alongwith the documents prescribed therein, shall be made to the Regional Licensing Authority concerned.
2. The claim shall be filed against payment certificate received on monthly basis/quarterly basis/half yearly basis, except for supplies under paragraph 10.2 (d) (e) (f) and (g) where it shall be filed on the basis of proof of having received the supplies. However, in respect of supplies effected prior to 1.4.99, the supplier shall have the option to file claim either on the basis of the payment certificate received or on the basis of supplies effected. Such claims shall be filed within a period of six months from the end of monthly/quarterly/half yearly period as per the option of the applicant which shall be counted from the date of receipt of the payment certificate or from the date of receipt of the supplies by the Project Authority as per the applicant’s option.
3. The application shall be filed within a period of six months from the end of the monthly /quarterly /half yearly period, as per the option of the applicant. Such claims may also be filed even where part payment certificates have been received.
4. Where no All Industry Rate of Drawback is available or the same is less than 4/5th of the duties paid on the materials or components issued in the production or manufacturer of the said goods, the exporter may apply for fixation of brand rate in the form given at Appendix-17 to the Directorate General of Foreign Trade with a copy to the Licensing Authority concerned.
   
   The application for fixation of brand rate shall be filed within a period of six months from the date of last supply covered under a single contract relating to an individual order or project. The application for claim of Drawback under brand rate shall be filed within a period of six months from the date of issuance of payment certificate. The provision of late cut as given in paragraph 15.16 shall also be applicable under this sub paragraph.
5. Subject to the procedure laid down in this Handbook, the Customs and Central Excise Duty Drawback Rules, 1995 shall apply mutatis-mutandis to deemed exports.
6. Regional Licensing Authorities may consider provisional payment to the extent of 75% of the Drawback claim in the case of private companies and 90% in the case of Public Sector Undertakings, pending fixation of Brand Rate.