What is International business Division related bond licences, ARE forms?

Question

What is International business Division related bond licences, ARE forms?

Answer 1

Hi Goutam
In International Business, to encourage the exporters, Government of India have introduced various incentive schemes to bring more revenue to country.  Listing a few for your information.
<b>1)  Duty Entitlement Pass Book Scheme
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Duty Entitlement Pass Book Scheme (DEPB Scheme)- The scheme is easy to administer and more transparent. The scheme is similar to Cenvat credit scheme. The exporter gets credit when he exports the goods. The credit is on basis of rates prescribed. This credit can be utilised for payment of customs duty on imported goods.
The objective of the scheme is to neutralise incidence of customs duty on the import content of export product. The neutralisation shall be provided by way of grant of duty credit against the export product.
Exports under DEPB scheme are allowed only when DEPB rate for the concerned export product is finalised.
Under this scheme, exporters will be granted duty credit on the basis of notified entitlement rates. The entitlement rates will be notified by DGFT. The entitlement rates will be a % of FOB.  The entitlement rate will be fixed on basis of SION (Standard Input Output Norms) and deemed import content. Value addition achieved in export product will also be taken into account.  Supplies made to unit in SEZ are also entitled to DEPB.  DEPB is issued only on post-exportation basis. Excise duty paid in cash on inputs will be eligible for brand rate of duty drawback.
<b>2)  Export Promotion Capital Goods (EPCG) scheme
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EPCG scheme - Under Export Promotion Capital Goods (EPCG) scheme, a licence holder can import capital goods (i.e. plant, machinery, equipment, components and spare parts of the machinery) at concessional rate of customs duty of 5% and without CVD and special duty. Computer software systems are also eligible. Import of spares of capital goods is permitted, without any limit. Jigs, fixtures, dies, moulds will be allowed to the extent of 100% of CIF value of licence. Spares for existing plant and machinery can also be imported. Second hand capital goods upto 10 year old can also be imported under EPCG scheme.
EPCG authorisation is issued with validity period of 24 months
<b>3)  Advance License</b>
An advance licence is granted for the import of inputs without payment of basic customs duty. Such licences shall be issued in accordance with the policy and procedure in force on the date of issue of the licence and shall be subject to the fulfillment of a time-bound export obligation, and value addition as maybe specified. Advance licences maybe either value based or quantity based.
As per the latest amendments to the EXIM Policy, the facility of Back to Back Inland Letter of Credit has been introduced, to enable an Advance Licence holder to source his inputs from domestic suppliers.
Value based advance license
Under a value based advance licence, any of the inputs specified in the licence maybe imported within the total CIF value indicated for those inputs, except inputs specified as sensitive items.
Under a value based advance licence, both the quantity and the FOB value of the exports to be achieved shall be specified. It shall be obligatory on the part of the licence holder to achieve both the quantity and FOB value of the exports specified in the licence.
<b>4)  Drawback
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Drawback is allowable if any manufacture, process or any operation is carried out in India [section 75(1) of Customs Act]. Thus, drawback is available not only on manufacture, but also on processing and job work, where goods may not change its identity and no ‘manufacture’ has taken place.
Type of Drawback Rates – All Industry Drawback rates are fixed by Directorate of Drawback, Dept. of Revenue, Ministry of Finance, Govt. of India, Jeevan Deep, Parliament Street, New Delhi - 110 001. The rates are periodically revised - normally on 1st June every year. Data from industry is collected for this purpose. The types of rates are as follows :
<b>All Industry Rate</b> - This rate is fixed under rule 3 of Drawback Rules by considering average quantity and value of each class of inputs imported or manufactured in India. Average amount of duties paid is considered. These rates are fixed for broad categories of products. The rates include drawback on packing materials. Normally, the rates are revised every year from 1st June, i.e. after considering the impact of budget, which is presented in February every year. All Industry drawback rate is not fixed if the rate is less than 1% of FOB Value, unless the drawback claim per shipment exceeds Rs 500.
The AIR (All Industry Rate) is usually fixed as % of FOB price of export products. However, in respect of many export products, duty drawback cap (ceiling) has been prescribed, so that even if an exporter gets high price, his duty drawback eligibility does not go above the ceiling prescribed.
<b>Brand Rate</b>  - It is possible to fix All Industry Rate only for some standard products. It cannot be fixed for special type of products. In such cases, brand rate is fixed under rule 6. The manufacturer has to submit application with all details to Commissioner, Central Excise. Such application must be made within 60 days of export. This period can be extended by Central Government by further 30 days. Further extension can be granted even upto one year in if delay was due to abnormal situations as explained in MF(DR) circular No. 82/98-Cus dated 29-10-1998.
<b>Special Brand Rate</b> - All Industry rate is fixed on average basis. Thus, a particular manufacturer may find that the actual duty paid on inputs is higher than All Industry Rate fixed for his product. In such case, he can apply under rule 7 of Drawback Rules for fixation of Special Brand Rate, within 30 days from export. The conditions of eligibility are (a) the all Industry rate fixed should be less than 80% of the duties paid by him (b) rate should not be less than 1% of FOB value of product except when amount of drawback per shipment is more than Rs. 500 (c) export value is not less than the value of imported material used in them - i.e. there should not be ‘negative value addition’.
<b>5)  ARE Forms
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Any goods manufactured in India and exported, means the rebate of duty or tax, as the case may be, chargeable on any imported materials or excisable materials used or taxable services used as input services in the manufacture of such goods. To account all these transactions, Central Excise have asked the manufacturers to submit various forms depending upon their business.  ARE form is mainly used for exports for claiming excise duty either by Letter of Undertaking, Bond or Rebate.
Last but not least, unfortunately, in SAP, but for excise, none of the issues are addressed.
Hope this information would suffice.  Reward if this helps you.
Thanks
G. Lakshmipathi