Duty Credit Scrips or Licenses are the benefits obtained under various Government Incentives schemes under the foreign trade policy of India, and the aim of these Scrips to promote exports and boost the inflow of foreign exchange to India.
It provides the tax benefits to the exporters and can be used to set up the import duties, issued under various Government incentives schemes.
Use of Duty Credit Scrips/Licenses –
- It remains valid for 24 months from the issuance date and can be used for the payments of Basic custom duty, Additional custom duty, safeguard duty, anti-dumping duty etc
- It can not be used to set off the GST. Compensation cess.
- It can be transferred to other people who can use it against their own outstanding tax.
- It can be revalidated after a special request to DGFT.
How a Duty Credit Scrip works:-
It helps exporters to limit their cash flow in tax liabilities and free up cash for much-needed working capital.
Exporters can be issued scrips of 2% to 7% depending on the Exim policy consider exporters received an order of export and wanted to use the imported raw materials to start the manufacturing process and exporters need to pay the import duty on the import of raw materials by eating into their working capital, In this case having Duty credit scrip or license can take the burden off from exporters shoulders. It the exporters have a License of Rs 2 Lakh and import duty is 2.5 Lakh on the import of raw materials in this case 2 Lakh duty can be waived off with the help of DSC or license.
There are various scheme to get Duty credit Scrip/Licenses, we will understand each in details-
The Indian Government launched MEIS and SEIS scheme under foreign trade policy 2015-20 replacing various schemes present in earlier policy is to offset infrastructural inefficiency and associated cost involved in the export process.
MEIS Scheme replaced the following schemes –
- Focus Product Scheme (FPS)
- Focus Market Scheme (FMS)
- Market Linked Focus Product Scheme (MLFPS)
- Agri Infrastructure Incentive Scheme
- Vishesh Krishi Gramin Upaj Yojna (VKGUY)
Under MEIS Scheme exporters avail the benefits of 2% – 7% on the FOB value of exports in the form of Duty Credit Scrip which is transferable in nature
The license will be valid for 24 months from the date of the issue. Revalidation of the License is not permitted under the MEIS Scheme.
- 12 months from LEO (Let Export Order) or 3 months from date of a) uploading of EDI shipping bills by customs in DGFT server b) Printing/Release of shipping bills for Non- EDI shipping bills whichever is later.
Products which are eligible for MEIS Scheme through E-commerce
- Handicraft Items / Products
- Handloom products
- Books / Periodicals
- Leather Footwear
- Customized Fashion Garments
There is a limit of 5 Lakh per consignment for this category that will be applicable for application under the MEIS scheme.
Documents required for MEIS application: –
- Shipping bills
- DGFT DSC
- Valid RCMC
Procedure to claim benefits under MEIS Scheme:-
- Documents preparation – DGFT DSC, Shipping bills, Valid RCMC, e-BRC
- Application preparation online on DGFT website
- The Application form will be submitted along with ANF 3A by linking all the required details and attaching shipping bills and e-BRCs.
- DGFT issue the License after reviewing it.
- Verification of License done at the customs office,
- Selling of License done if the license holder does not intend to use it for waiver of import duty @ market rate.
Government-approved RoDTEP scheme on 13the March 2020 which replaced existing MEIS Scheme and RoSCTL scheme.
Eligibility criteria under SEIS Scheme:
- Service Provider Should have active IEC (Import Export Code).
- Service Exporter should have minimum net free foreign exchange earnings of US$15,000 in the year of rendering the services for the Pvt. Ltd. , Partnership or LLP company.
- And for individual or proprietorship such minimum net free foreign exchange earnings criteria would be US$10,000.
- SEIS rewards are calculated on the basis of Net Foreign Exchange Earned. The services which are eligible for the benefits are given in Appendix 3E.
- In SEIS rates of rewards are in the range of 5% – 7% depending on the notified type of the services.
Documents required under SEIS Scheme :-
- Invoice raised in the FY
- FIRC against invoice
- oIEC copy
- Valid RCMC copy
- Justification & Brief writeup of services provided.
Procedure For application Under SEIS:
- The Online Application can be done on DGFT website from there need to select Online Ecom Application under Services Tab
- After that we need to select the financial year for which we would file the application for SEIS.
- All the required details need to be filled in the form ANF 3B.
- If there are more than one services then applicant has to follow the classification as per appendix 3D and need to specify the Service Category Information.
Under SEIS application shall be filled within a period of 12 months from end of relevant financial year of claim period.
Application under SEIS can be done till next 3 Years after the end of relevant FY, in this case Late Cut would be applicable.
It is very much important to know, how Many times applications can be done in a financial Year for MEIS & SEIS Scheme?
- Under MEIS Scheme application can be done Yearly, Half yearly or quarterly basis or we can also submit one shipping bill also for claiming the benefits.
- The Shipping bills of different Financial Years can not be clubbed in one application.
- Application for SEIS has to be done on an annual basis ie. only one application can be filled in 1 FY.
Rebate of Duties and taxes on the export products Scheme (RoDTEP) launched by the Government will come in effect from January 2021. Under RoDTEP Scheme benefits will be provided in the form of Duty credit Scrip and this scheme will be implemented with the help of end to end digitization process.