Government Announces 2003-04 Exim Policy

In the midst of global uncertainty due to the on-going war in Iraq, the Ministry of Commerce and Industry of the Government of India announced the 2003-04 Export and Import ("Exim") Policy on March 31, 2003. This policy seeks to supplement and refine the 5-year policy of 2002-2007. The 2003-04 Exim Policy has taken into cognizance the country's export performance and its future export potential and has also factored in the changing trends in the international market place.

The Exim Policy has been announced against a backdrop of an export increase (provisional) of 16.76% (in US Dollar terms) and 18.8% (in Rupee terms) in the months of April 2002 to February 2003, as compared to the same period in the previous year.

Mr. Arun Jaitley, the Honourable Union Minister of Law & Justice and Commerce and Industry, has announced several pro-active measures to preserve and promote India's competitiveness in world trade.

The Exim policy recognizes that exports have to be treated as a national priority by all agencies of the Government of India, the State governments and even the private sector. A partnership between the government agencies and all stakeholders has been advocated with the objective of achieving 1 per cent of the world merchandise trade by 2007.

The objective of this policy, according to Mr. Jaitley is the "identification of engines of growth and provision of extra power to them and building on areas of our core competence".

Some of these measures are summarized hereunder:

• In the services sector, companies having a minimum foreign exchange earning of Rs. 1 million shall be allowed duty free import of office equipments, professional equipments, spares and consumables, up to 10 per cent of the average foreign exchange earned in the preceding three years.
  

• In the Information Technology sector, in order to give a boost to electronic hardware industry, supplies of a number of items from Electronic Hardware Technology Park ("EHTP") units to Domestic Tariff Area ("DTA") shall now qualify for fulfillment of export obligation. In the area of embedded programs the procedure for import and re-export of the hardware including automobiles in which such programs are embedded for testing and development has been simplified. Import of hardware for testing and development purposes shall now be allowed duty free, and hardware for embedding up to USD 10,000 will be permitted to be disposed off after testing subject to a certification from the Software Technology Parks of India authorities. Units in Export Oriented Units ("EOU"), EHTP, Software Technology Park ("STP") and Software Export Zones ("SEZ") will now get the benefit of 100 per cent depreciation over a 3-year period on computer and computer peripherals.

• In the Gem and Jewellery sector, exporters dealing in purchase / sale of diamonds and diamond-studded jewellery shall be provided the facilities of a Diamond & Jewellery Dollar Account.

• In the agricultural and allied sector, companies having proven credentials shall be encouraged to sponsor Agri Export Zone (AEZ) for boosting agri exports.

• In the case of SEZs, sales from DTA to SEZs shall be treated as export. This would now entitle domestic suppliers to various benefits including Drawback/ Duty Entitlement Pass-Book ("DEPB") Scheme benefits, and Central Sales Tax exemption Domestic sales by SEZ units will now be exempt from Special Additional Duty (SAD). The restriction of one-year period for inward remittance of export proceeds has also been removed for SEZ units. The value of capital goods imported by SEZ units will now be amortised uniformly over 10 years. The goods required for operation and maintenance of SEZ units can now be imported duty free.

• In the case of EOUs, the EOUs are now required to fulfill the criteria of a "net positive foreign exchange earner". No additional requirements relating to export performance will be imposed. Further, export / import of all products through post parcel/courier by EOUs will now be permitted.

• The Export Promotion Capital Goods (EPCG) Scheme has undergone several changes in order to reduce the burden of export obligation on the exporters. The DEPB Scheme rates have been rationalized in line with general reduction in Customs duty.

• Issuance of Importer-Exporter Code (IEC) numbers, linked to Income Tax Permanent Account number is under progress. The IEC holders shall henceforth be required to furnish online return of imports/exports made on yearly basis.

• For the entertainment industry, entertainment exports shall be promoted by granting tax incentives to venture capital funds, which provide finance to this sector. The Ministry of Commerce and Industry is currently in dialogue with the Ministry of Finance for this purpose.

In addition to the above measures, import of 69 items and export of 5 items have been removed from restricted list.

With these pro-active measures, the country is all set to achieve and hopefully surpass its export target by the year 2007.