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Understanding Deemed Exports
What are Deemed Exports?
In international trade, “export” usually means sending goods, materials or technology out of the country. But “deemed exports” are different. They refer to transactions where the goods stay in the country, but the payment for them is received in Indian Rupees or foreign currency. Deemed exports are important in India’s Foreign Trade Policy because they ensure that goods made in India help boost the national economy.
Categories of Deemed Exports
Deemed exports encompass a variety of supply scenarios, provided the goods are manufactured within India. Here are some key categories:
- Supply Against Advance Authorisation : Goods supplied against an Advance Authorisation or Advance Authorisation for annual requirements are considered deemed exports
- Supply to Export-Oriented Units (EOUs) : This includes supplies to units in Software Technology Parks (STPs), Electronic Hardware Technology Parks (EHTPs), and Bio-Technology Parks (BTPs).
- Supply to EPCG Authorization Holders : Capital goods supplied to holders of Export Promotion Capital Goods (EPCG) Authorisation.
- Supply to Projects Financed by Multilateral or Bilateral Agencies : These supplies must be under International Competitive Bidding (ICB) procedures.
- Supply to Specific Projects : Includes supply of capital goods and other items to projects like fertilizer plants and power projects, as permitted by the Ministry of Finance.
- Supply to Marine Freight Container Manufacturers : Supply of containers by 100% EOUs, provided they are exported out of India within six months.
Benefits of Deemed Exports
Deemed exports come with several advantages, aimed at promoting domestic manufacturing and easing the supply process for critical projects and units:
- Advance Authorisation : This benefit allows for duty-free import of inputs required for manufacturing export products.
- Deemed Export Drawback : Manufacturers can claim a refund of the excise duty paid on inputs used in the manufacture of supplied goods.
- Exemption from Terminal Excise Duty : Supplies made against ICB procedures are exempt from terminal excise duty. In other cases, a refund of the duty is available
Difference Between Export and Deemed Export
The fundamental difference between exports and deemed exports lies in the destination of the goods. While exports involve the movement of goods out of the country, deemed exports are transactions where the goods remain within the domestic territory. Despite this, deemed exports are treated with similar importance due to their contribution to domestic economic growth and compliance with international trade norms.
Eligibility Criteria for Deemed Exports
To qualify under the deemed exports scheme, the following criteria must be met:
- Goods Only : The scheme applies strictly to goods, not services.
- Production in India : Goods must be manufactured or produced within India.
- Domestic Transactions :The goods must not leave Indian territory.
- Government Notification : The goods must be officially recognized as deemed exports by the Central Government under Section 147 of the CGST Act, 2017.
- Currency and Tax Payment : Transactions can be conducted in Indian Rupees or convertible foreign exchange, with GST paid at the time of supply.
- Bond Exclusion : Goods cannot be supplied under a Letter of Undertaking (LUT) or bond.
Conclusion
Deemed exports serve as a crucial component of India’s trade policy, ensuring that domestically produced goods contribute significantly to the economy even when supplied within the country. By understanding the categories, benefits, and eligibility criteria, manufacturers and suppliers can leverage deemed exports to enhance their business operations and comply with regulatory requirements. This unique concept not only supports national economic growth but also streamlines the supply of essential goods to key sectors and projects within India.