Export profits are exempt from income tax in the proportion of export turnover to total turnover.
The Export Promotion Capital Goods (EPCG) scheme allows import of capital goods at concessional rates of duty, subject to an export obligation. The EPCG scheme for the services sector allows import of capital equipment at concessional duty rates by professionals such as architects, consultants and doctors. The scheme is also applicable to hotels and restaurants, travel agents and diagnostic centres. The export obligation is in the form of the foreign exchange earned by the importer.
Inputs required to be imported for export production are exempted from customs duty under the Advance License scheme. It allows free transfer of Advance Licenses and can be availed of by any exporter.
Special import licenses for items in the Negative List of imports are available to three categories of exporters.
According to the latest changes to the EXIM Policy, the category of "deemed exports" has been expanded to include supplies made to EPCG licence holders and projects in the Power, Oil and Gas sectors notified by the Ministry of Finance. This is in addition to the supply of capital goods to fertilizer plants and supply of goods to projects notified by the Ministry of Finance as eligible for zero customs duty.
Criteria for Recognition of Export and Trading Houses
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Average FOB FOB value Average Net foreign
value of eli- of eligible net forex exchange
gible exports exports earned from earned from
Category during the during the eligible eligible
preceding 3 preceding exports exports
licensing licensing during the during
years. year preceding the pre-
3 licensing ceding
years. licensing
year.
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Export Houses Rs.100 mln. Rs.150 mln. Rs.60 mln. Rs.120 mln.
Trading Houses Rs.500 mln. Rs.750 mln. Rs.300 mln. Rs.600 mln.
Star Trading
Houses Rs.2.5 bln. Rs.3 bln. Rs.1.25 bln. Rs.1.5 bln.
Super Star
Trading Houses Rs.7.5 bln. Rs.10 bln. Rs.4 bln. Rs.6 bln.
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Higher royalty payments of 8% (net of taxes) are permitted on export sales as compared to 5% on domestic sales.
Export commissions upto 10% are also permissible.
Special imprest licenses are given for duty free import of raw material, etc. required for the manufacture and supply of products to UN, multilateral and bilateral agencies, EOUs and EPZ units, specified Indian public sector organisations, etc.
Centre for Monitoring Indian Economy, Bombay
Contact Addresses for More Information
Last updated: May 1995.