Government tightens norms for deemed export benefits

The commerce ministry has tightened the norms for deemed export benefits to manufacturers in the wake of large-scale misuse of the incentive scheme. The move is expected to result in annual savings to the tune of Rs1,800 crore to the exchequer.

The decision comes after a meeting of the Policy Interpretation Committee of the Directorate General of Foreign trade (DGFT) in March.

Deemed exports entitle suppliers of items of import-substitution to benefits such as rebate on duty chargeable on imports or excisable material used in the manufacture of goods that are supplied to these projects.

Under the revised norms, benefits of deemed exports would be made available only if the bill of entry is executed in the name of the authority executing the project.

Also, only eligible suppliers, including the main contractor or sub-contractor to the project authority, will be eligible for such incentives.

Deemed export benefits accrue to domestic manufacturers who supply products within the country but replace imports of such items while payments may be received either in foreign currency or in rupees.  Most often, domestic supplies to projects financed by multi-lateral or bilateral agencies qualify for benefits under deemed exports.