Telecom Ministry Starts Trend on Checks on Manufacture Value
Addition (VA) for Export Subsides
· Other
Ministries can Follow Suite to Ensure VA for Export Incentives
The
Government of India has a scheme of extending export subsidy of three percent
interest subsidy on pre shipment and post shipment credit. In other words, if
the bank charges 12 percent interest to exporters in the normal course, the
exporter is actually charged only nine percent, the bank gets the three percent
subsidy from Reserve Bank of India out of the funds allocated by the Ministry
of Commerce.
The subsidy in its present form is effective from 1
April 2015 for a period of five years. Telecom products of interest are covered
in the scheme as under
Code
8517 Telecom Instruments Telephone Sets, Including Telephones For Cellular
Networks or For Other Wireless Networks; Other Apparatus For The Transmission
or Reception of Voice, Images or Other Data, Including Apparatus For
Communication In A Wired or Wireless Network (Such As A Local or Wide Area
Network), Other Than Transmission or Reception Apparatus of Heading 8443, 8525,
8527 or 8528.
(a)
The rate of interest equalization @ 3% per annum is available on Pre Shipment
Rupee Export Credit and Post Shipment Rupee Export Credit.
(b)
The scheme is applicable w.e.f 01.04.2015 for 5 years
.Government,
(c)
All exports under 416 tariff lines [at ITC (HS) code of 4 digit] as per
Annexure A and exports made by Micro, Small & Medium Enterprises (MSMEs)
across all ITC (HS) codes.
(d)
Scheme is not applicable to merchant exporters.
(e)
Banks are required to completely pass on the benefit of interest equalization,
as applicable, to the eligible exporters upfront and submit the claims to RBI
for reimbursement, duly certified by the external auditor.
(f)
Ministry of Commerce and Industry Places funds in advance with RBI for a
requirement of one month and reimbursement is made on a monthly basis through a
revolving fund system.
Please
Note:
1. The scheme is applicable only to Manufacturer
exporters. The export the conditions of what amounts to manufacture as defined
in the FTP
(Para
9.31 “Manufacture” means to make,
produce, fabricate, assemble, process or bring into existence, by hand or by
machine, a new product having a distinctive name, character or use and shall
include processes such as refrigeration, re-packing, polishing, labeling,
Re-conditioning repair, remaking, refurbishing, testing, calibration,
re-engineering.))
2. Manufacturing must satisfy the Origin Rules on
what constitutes manufacture. This means para 2.108 of the FTP must be
followed. It states:
2.108
Rules of Origin (Non-Preferential)
(a)
Rules of Origin (Non-Preferential) criteria are as under:
(I)
Goods are to be manufactured by the exporting entity as per the definition of
“Manufacture” in Paragraph 9.31 of FTP; and
(II)
If imported inputs (Duty Paid or Duty Free) have been used for the production
of export product, the export product can be considered to be originating in
India (Non Preferential) only if the imported inputs undergo the processing /
operations that exceed the following:
(i) simple operations consisting of
removal of dust, sifting or screening, sorting, classifying, matching
(including the making-up of sets of articles), washing, painting, cutting; - 4
–
(ii)
changes of packing and breaking up and assembly of
consignments;
(iii)
simple cutting, slicing and repacking or placing in bottles, flasks, bags,
boxes, fixing on cards or boards, and all other simple packing operations;
(iv)
operations to ensure the preservation of products in good condition during
transport and storage (such as drying, freezing, keeping in brine, ventilation,
spreading out, chilling, placing in salt, sulphur
dioxide or other aqueous solutions, removal of damaged parts, and like
operations);
(v)
affixing of marks, labels or other like distinguishing
signs on products or their packaging;
(vi)
simple mixing of products ;
(vii)
simple assembly of parts of products to constitute a
complete product;
(viii)
disassembly;
(ix)
slaughter which means the mere killing of animals; and
(x)
mere dilution with water or another substance that
does not materially alter the characteristics of the products.
The
Ministry of Commerce, however, said in the scheme that Telecom products would
be covered under a special scheme for value addition. The extract from the
circular states:
“(h)
Telecom product exports would, after notification of the guidelines by the
Department of Telecommunications, however, be subject to minimum value addition
as notified by Department of Telecommunications, to be eligible under the scheme”
The
Department of Telecomm has now released the value addition norms for this
sector. Notification no 18-34/2013/IP dated 28th November, 2016 is attached.
1. Value addition norms are very high. Imported
inputs must not more than 60 percent in the final products and
2. Manufacture must be from CKD including PCBA.
3. In the case of mobiles which fall under
85171290 HS for complete mobiles and 851770 HS for Parts, the criteria for
import content is lowered to 80 percent of the export value.