April 2023 / India

The Finance Bill 2023 was recently passed by the Lok Sabha (lower house) and the Rajya Sabha (upper house), incorporating changes in the Finance Bill introduced by the Finance Minister on 1 February 2023. The key amendments, in respect of income tax, in the Finance Act 2023 are as follows.

Marginal relief to resident individuals opting for new scheme

A rebate will be available to resident individuals opting for the new individual income tax scheme if the total income during the previous year did not exceed INR 700,000. Furthermore, the amended Finance Act provides a marginal rebate to resident individuals whose income marginally exceeds INR 700,000.

Clarity on capital gains from debt mutual funds

Debt mutual funds lose their long-term capital gains (LTCG) tax benefit if less than 35% is invested in equity instruments. Hence, any income or gain from sales, redemptions or maturities from these funds will be considered short-term capital gains and taxed at the applicable tax slab of the investor, regardless of the investment's holding period.

Change in tax rates on specified income

The amended Finance Act provides the following tax rate changes:

• a concessional tax rate of 10% on dividends (normally 20%) received from an International Financial Services Centre (IFSC) Unit by a non-resident or foreign company; and
• royalty and fees for technical services received by a non-resident or foreign company are to be taxed at 20% (previously 10%).

Applicability of tax deduction at source (TDS) on online gaming winnings from 1st April 2023

The Finance Act brought forward the applicability of the 30% TDS on winnings from online gaming from 1 July 2023 to 1 April 2023.

Expansion of meaning of original funds for providing exemption from capital gains

An investment vehicle in which the Abu Dhabi Investment Authority is the direct or indirect sole shareholder, unit holder, beneficiary or interest holder and such investment vehicle is wholly owned and controlled, directly or indirectly, by the Abu Dhabi Investment Authority or the government of Abu Dhabi shall be eligible for exemption on the transfer of capital assets to the resultant fund formed in India.

Exemption from capital gains on transferring interest in a joint venture (JV)

The transfer of interest in a JV by a public sector company in exchange for shares in a foreign company shall not be considered as transfer and hence is exempted from capital gains tax.

Unit of IFSC may opt for tonnage tax scheme after claiming income-based deduction

The Finance Act allows a unit of an IFSC that has claimed the income-based deduction benefit to make an application to opt for a tonnage tax scheme within 3 months from the date such income-based deduction benefit ceases.

Additional benefits for offshore banking units

Section 80LA previously provided a deduction of 100% of the income from any 5 consecutive assessment years and a deduction of 50% of the income from offshore banking units for the subsequent 5 assessment years. However, the amended Finance Act increased the deduction from 50% to 100% for the subsequent 5 assessment years.

No surcharge and cess on income from securities held by specified fund

In respect of income from securities held by a specified fund referred to in section 10(4D), no surcharge and cess shall be levied on income tax calculated on the same. This amendment shall be applicable from 1 April 2023.

Tax to be collected at source if remittance under liberalized remittance scheme is made within India

Tax collection at source (TCS) shall be applicable in relation to remittance under the Liberalized Remittance Scheme (LRS), even if the remittance is made within India, at the rate of 20% with effect from 1 July 2023.

Maximum rate of TCS shall be 20%

The maximum rate of TCS has been capped at 20% in case of persons not having a valid permanent account number (PAN) and non-filers of returns of income.

Introduction of new rate of TDS

Tax shall be deducted at the rate of 9% on sums paid by way of interest on money borrowed from a source outside India by issuing a long-term bond or rupee denominated bond, which is listed only on a recognized stock exchange located in an IFSC, on or after 1 April 2023.

Exemption on income received by non-resident from portfolio of securities

Income received by a non-resident from a portfolio of securities or financial products or funds, managed or administered by any portfolio manager on behalf of such non-resident, in an account maintained with an offshore banking unit in any IFSC is exempt from income tax.

Benefits in respect of shares of a domestic company engaged in aircraft leasing

With effect from 1 April 2023, the Finance Act exempts income earned by a non-resident or a unit of an IFSC on the transfer of shares of a domestic company engaged in aircraft leasing, subject to the fulfilment of certain conditions.

The dividend received by an IFSC unit engaged in aircraft leasing business shall be exempt, provided that the company paying the dividend is also an IFSC unit engaged in aircraft leasing business.

Taxability of specified sum received from business trust

The Finance Act provides that a "specified sum" shall be computed as per the computation mechanism provided in the Act, in order to bring the sums received by a unit holder from a business trust into the ambit of taxation. Further, with effect from 1 April 2023, the cost of acquisition of a unit shall be reduced by any sum received from the business trust, subject to specified conditions.

The Reserve Bank of India issued information about the FDI companies' financial performance in India during the years 2021–2022. Based on the annual audited financial statements of 2,206 FDI companies in India, the information about financial performance is provided. Here are some of the data's salient features:

• The majority of investments in 2206 enterprises fell into one of two categories: manufacturing or services. Out of the 2206 companies, 847 were in the manufacturing sector, and the remaining 982 were in the services sector.

• Japan was the biggest investor in the manufacturing sector, investing in over 157 companies across several sub-industries. Singapore and the USA were the next-largest investors, each investing in 92 and 91 companies, respectively. Singapore was regarded as the main investor in the services industry, investing in 246 firms, followed by the USA and Mauritius, which each made investments in 156 and 194 companies, respectively.
• Among the 2206 companies 576 (~26.1 per cent) companies were public and 1630 (~73.9 per cent) companies were private. The investments in the private company performed better as the Gross Profit (EBIT) in private companies increased from 2.7  per cent in 2020-21 to 24.0 per cent in 2021-22 whereas in public companies the EBIT grew from 22.3 per cent in 2020-21 to 27.4 per cent in 2021-22.
• As the COVID-19 pandemic's effects faded and economic activity picked up in 2021–2022 for FDI enterprises, sales of the sample companies increased by 29.7 per cent from growth of 2.0 per cent the previous year. Consequently, from 2.4 per cent the year before to 30.9 per cent in 2021–2022, the value of production has also increased.
• In order to keep up with the jump in sales, operating costs rose; the proportion of raw material costs to total spending went up from 47.0 per cent to 51.1 per cent. Furthermore, the ratio of gross savings to gross capital formation rose from 55.6 per cent in 2020–21 to 81.2 per cent in 2021–22, demonstrating better money management.
• Royalty payment by FDI companies increased by 33.4 per cent from 19.7 per cent to 1.35 per cent of their total spending in 2021–2022; research and development accounted for 0.11 per cent of total expenditure. From 3,46,282 crores in 2020–21 to 3,91,545 crores in 2021–22, operating profit increased by 13.1 per cent.
• The sample companies' operating profit climbed by 21.4 per cent in 2021–2022; manufacturing firms kept their operating profit margin, which fell somewhat for the services sector.
• Around 36 per cent of the new funds were used in fixed capital formation by the sample enterprises. During 2021–2022, non–current investments, inventory, and receivables were also significant uses of cash.
• The Profit After Tax (PAT) in companies seeing investment across all industries from Japan increased from -14.5 per cent in 2020-21 to 138.2 per cent in 2021-22. Whereas the PAT in companies from Mauritius across all industries decreased from -62.6 per cent in 2020-21 to -167.9 per cent in 2021-22, thereby making investment from Mauritius loss making on average.

In summary, the manufacturing and services sectors received the most investments, with Japan, Singapore, and the USA being the major investors. Private companies performed better than public ones, and sales and production values increased as the pandemic's effects subsided. However, operating costs increased, and better money management practices were implemented. Manufacturing firms maintained their operating profit margins, while the services sector saw a slight decline. New funds were primarily allocated towards fixed capital formation, non-current investments, inventory, and receivables. Finally, there were variations in the Profit After Tax (PAT) across investing countries, with Japan seeing a significant increase and Mauritius experiencing a decrease, making their investments less profitable on average.

Source: Investindia.gov.in

On 12 and 13 April 2023, India's Goods and Services Tax Network (GSTN) issued two advisories mandating taxpayers with an annual aggregate turnover (AATO) of INR 1 billion to report e-invoices on the Invoice Registration Portal (IRP) within 7 days of the date of the invoice.

This restriction applies to invoices as well as all document types for which a unique invoice reference number (IRN) is to be generated, i.e. debit notes and credit notes, as clarified by the advisory dated 13 April 2023.

Such taxpayers will not be allowed to report invoices older than 7 days from the date of reporting. This restriction does not apply to taxpayers with AATO less than INR 1 billion.

This restriction comes into effect from 1 May 2023.

Lithium is a critical component used in the production of batteries for electric vehicles, cell phones, computers, and other gadgets. With its use case spanning the domains of defence, aviation and energy, it is viewed as a strategic material. India recently revealed its first significant finding of lithium reserves in Jammu and Kashmir.

The demand for essential metals like lithium and cobalt is predicted to increase by roughly 500 percent by 2050. Currently, the majority of the world's lithium is supplied by China, Australia, Chile, and Argentina. India imported lithium batteries worth $1.2 billion in 2019–20, up from $384 million in 2017, according to the Ministry of Mines. With 5.9 million tonnes of lithium found in India, the government has announced that the reserve is of exceptional quality. However, the extraction of the metal is expected to be a time-consuming process. As per the officials, the reserve has undergone a G3 level study, which will be followed by a G2 and G1 study before the final extraction of the metal can take place. This detailed approach will ensure that the extraction is done in a careful and systematic manner, with a thorough understanding of the geology and other factors that may impact the process.

The India Opportunity

The discovery of Lithium reserves in the Salal-Haimana region in Jammu and Kashmir's Reasi district will have significant implications for the Indian economy, especially the electric vehicle industry and battery manufacturing industry. The global electric vehicle market, heavily dependent on Lithium, is projected to reach $823.75 billion by 2030, registering a Compounded Annual Growth Rate (CAGR) of 18.2 per cent from 2021 to 2030. The Indian electric vehicle market is poised to grow at a CAGR of 23.76 percent by 2028. India is projected to have 6.8 million electric vehicles on its roads by 2030, up from 0.5 million in 2020. Lithium and batteries would be needed in enormous quantities for India to achieve the aforementioned goal.

Foreign Direct Investment (FDI) in the battery manufacturing sector has been pouring into India, with major companies such as Suzuki, Toshiba, and Denso from Japan having made substantial investments in the Indian market. The government has relaxed FDI norms permitted FDI up to 100 percent under automatic route in the manufacturing of ACC batteries, signalling its commitment to making India a favourable destination for foreign investment in the electric vehicle industry. This move is part of the Indian government's larger vision to make India a global manufacturing hub and a leading player in the electric vehicle market.

Government Initiatives

The government’s supportive policies and initiatives have been encouraging the growth of the domestic battery manufacturing. Khanij Bidesh India Ltd (KABIL), a joint venture business with the participation of three Central Public Sector Enterprises has been established to identify, acquire, develop, and process critical minerals and metals such as lithium, cobalt, copper, and nickel, which are essential for the growth of various industries, including electric vehicles and renewable energy. KABIL operates both in India and abroad, and its primary objective is to reduce India's dependence on imports of critical minerals and metals, aligning with the vision of Atmanirbhar Bharat. The company is also expected to contribute to the Indian economy by creating employment opportunities, promoting domestic manufacturing, and enhancing the country's strategic reserves of essential minerals and metals. The government has also launched the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme, which provides incentives for the adoption of electric vehicles. The Union Budget 2023 has allocated INR 51.72 billion (approximately $ 631 million) towards its FAME-II scheme to subsidize and promote the adoption of clean energy vehicles. The government has allowed 100 percent FDI in electric mobility and encouraged domestic manufacturing of battery packs. Due to this measure, LiB technology has overtaken lead-acid batteries in mobile and stationary applications. Additionally, the government has established a National Mission on Transformative Mobility and Battery Storage to facilitate research and development in the field.

Conclusion

In conclusion, India's recent discovery of lithium reserves is a significant step towards achieving energy security and environmentally friendly transportation. The Indian government has taken a comprehensive approach towards the growth of the battery sector, with initiatives such as FAME and KABIL, providing opportunities for foreign investors to invest in this growing sector. India's lithium reserves and the government's initiatives bode well for the country's energy security and economic growth in the coming years.

Source: Investindia.gov.in

Foreign trade today constitutes 45% of India’s Gross Domestic Product (GDP). Strategies to increase exports need the active assistance of the State Governments, given the variety of factors that go into creating an enabling and favourable foreign trade environment. Therefore, in order for exports to rise exponentially, states must actively participate in export promotion operations.

The Honble’ Prime Minister of India's aspiration for each district to become an export hub shifted attention to the need for districts to be active stakeholders in the promotion of exports of goods and services produced or manufactured there. To increase local production and make districts active participants in promoting the export growth of local goods/services, the export promotion activity has to be decentralised. Every district has products and services which are being exported, and can be further promoted, along with new products / services, to increase production, generate economic activity and achieve the goal of Atmanirbhar Bharat, Vocal for Local and Make in India.

The Foreign Trade Policy (FTP) 2023-28 of India has thus taken up the goal to boost India’s foreign trade through decentralized export promotion. One of the strategies outlined in the policy is the Districts as Export Hubs Initiative. This initiative aims to identify potential export products and services in all districts and create institutional mechanisms to promote them.

Objectives 

• To enable MSMEs, farmers, and small businesses to benefit from export opportunities in foreign markets.
• To shift focus on District led Export Growth for self-sufficiency and self reliance
• Attract investment in the District to and boost manufacturing and exports
• Create a district-level ecosystem for innovation and technology utilisation to increase export competitiveness.
• Reduce transaction cost for the exporter at various stages of export cycle
• Handholding and assistance to exporters by doorstep delivery of timely and relevant information
• Providing platforms for wide and global reach of products and services from the district through E-commerce and Digital marketing which in turn, will promote Artisans, Farmers, Handicraft, Handloom, tourism and other cottage industries

Conclusion

The Districts as Export Hubs Initiative proposed under the FTP 2023-28 aims to boost India’s foreign trade through decentralized export promotion. The initiative proposes many strategies such as creating an institutional framework, identifying potential export products, capacity building for new exporters, conducting export promotion outreach programs, addressing infrastructure and logistics bottlenecks, and converging ongoing government schemes to support these initiatives.

The implementation of these strategies is expected to create an enabling environment for exports at the district level, which will lead to increased foreign trade and economic growth for India. It is hoped that the initiative will encourage entrepreneurs and small businesses to explore the potential of exports, thereby contributing to the overall growth of the Indian economy.

In conclusion, the Districts as Export Hubs Initiative is a step in the right direction towards achieving the goal of boosting India’s foreign trade through decentralized export promotion. It is important that the initiative is implemented effectively to realize its potential in promoting exports and driving economic growth in India.

Source: Investindia.gov.in

Italy and India may seem like two vastly different worlds, but they share a strong bond of friendship that has spanned over two millennia. The two nations have celebrated 75 years of diplomatic relations, and as the saying goes, "Chi Trova un Amico, Trova un Tesoro" - those who find a friend find a treasure.

From the rolling hills of Tuscany to the bustling streets of Mumbai, the two countries share a common thread of culture, politics, and economics. Family life is central to both nations, and the importance of regional diversity and language is deeply ingrained in their societies. Even their love for food is strikingly similar, with Italian pasta and pizza finding a place on Indian tables, and Indian spices adding a punch to Italian dishes.

Our past is alive with moments of appreciation and cross – cultural exchange between India and Italy. The spice route, linking India and Italy for centuries, not only facilitated trade but also shaped our shared heritage. Marco Polo's journey to India in the 13th century left him awestruck by its lavish culture and flourishing trade.

The world of art is indebted to Italy for its timeless contributions, with the masterpieces of da Vinci, Michelangelo, and Botticelli revered for centuries. In parallel, Indian art's intricate designs, vivid colors, and profound symbolism have bewitched audiences worldwide. We can also discern the subtle nuances of Hellenistic and Greco-Roman art mingling with the ancient Indian art, particularly during the Mauryan epoch.

As if destiny had woven their paths together, the large Indian diaspora in Italy has only strengthened the Indo – Italian friendship. With over 200,000 Indians living in Italy, the exchange of ideas, traditions, and values continues to flourish.

Both India and Italy have a rich history and are home to some of the most iconic historical landmarks. The ruins of Pompeii and the majestic Colosseum in Rome stand witness to Italy's glorious past, while the Taj Mahal and Red Fort in India reflect the country's rich cultural heritage. The cities of Venice and Alappuzha, also known as the "Venice of the East," and "Venetian Capital" of Kerala are famous for their beautiful backwaters and houseboats, attracting tourists from all over the world.

India and Italy also share a common vision for regional stability, international rule of law, innovation, technology, and sustainability. The spirit of cooperation between the two nations is reflected in their strong economic ties. Italy is one of India's top four trading partners in the EU, with over 700 Italian companies operating in India. In turn, over 140 Indian companies have made Italy their home. The "Make in India" initiative launched by Prime Minister Narendra Modi in 2014 has been instrumental in attracting Italian companies to India and making the country a manufacturing hub.

The India – Italy bilateral relations has grown by leaps and bounds in recent years. The new dimension of their relationship was on full display during the visit of newly elected Italian Prime Minister Georgia Meloni to India on 2nd March 2023. She met with Prime Minister Narendra Modi and was invited as chief guest and keynote speaker at the 8th Raisina Dialogue. During her visit, the two leaders announced elevating the relationship of Italy and India to that of a Strategic Partnership, marking a new chapter in their diplomatic ties. Furthermore, a Startup Bridge was announced between the two nations, for knowledge sharing and market entry support.

Prime Minister Meloni’s visit extended beyond political commitments. It also encompassed Italy’s optimistic economic outlook towards India. To foster business ties, the India-Italy Business Roundtable was hosted on April 2, 2023, by the Department for Promotion of Industry and Internal Trade, Ministry of Commerce, and the Italian Embassy in New Delhi. Industry leaders from strategic sectors such as infrastructure, automotive, energy transition, defense, finance, and telecom attended the event from both nations. Furthermore, to celebrate and promote the role of Italian manufacturing in India, the Embassy of Italy in New Delhi and the Indo-Italian Chamber of Commerce and Industry organized a unique exhibition titled "ITALIAN TECH in INDIA - Italian Know-How for India’s Energy Transition and Manufacturing Growth." The exhibition displayed the significant contributions of Italian companies to India's economic and technological advancement, accentuating the best of what Italy and India have to offer each other.

India – Italy friendship is a testament to the power of cultural exchange, economic cooperation, and mutual respect. The ties between the two countries have only grown stronger over the years, and there is no doubt that this friendship will continue to flourish for many years to come.

  Source: investindia.gov.in

Foreign Trade Policy (2023) is a policy document based on continuity of time-tested schemes facilitating exports as well as a document which is nimble and responsive to the requirements of trade. It is based on principles of ‘trust’ and ‘partnership’ with exporters. In the FTP 2015-20, changes were done subsequent to the initial release even without announcement of a new FTP responding dynamically to the emerging situations. Hereafter, the revisions of the FTP shall be done as and when required. Incorporating feedback from Trade and Industry would also be continuous to streamline processes and update FTP, from time to time.

The Key Approach to the policy is based on these 4 pillars:

1. Incentive to Remission
2. Export promotion through collaboration - Exporters, States, Districts, Indian Missions
3. Ease of doing business, reduction in transaction cost and e-initiatives and
4. Emerging Areas – E-Commerce Developing Districts as Export Hubs and streamlining SCOMET policy.

The FTP 2023 aims at process re-engineering and automation to facilitate ease of doing business for exporters. It also focuses on emerging areas like dual use high end technology items under SCOMET, facilitating e-commerce export, collaborating with States and Districts for export promotion.

The new FTP is introducing a one-time Amnesty Scheme for exporters to close the old pending authorizations and start afresh.

The FTP 2023 encourages recognition of new towns through “Towns of Export Excellence Scheme” and exporters through “Status Holder Scheme”. The FTP 2023 is facilitating exports by streamlining the popular Advance Authorization and EPCG schemes, and enabling merchanting trade from India.

Process Re-Engineering and Automation

Greater faith is being reposed on exporters through automated IT systems with risk management system for various approvals in the new FTP. The policy emphasizes export promotion and development, moving away from an incentive regime to a regime which is facilitating, based on technology interface and principles of collaboration.Considering the effectiveness of some of the ongoing schemes like Advance Authorisation, EPCG etc. under FTP 2015-20, they will be continued along with substantial process re-engineering and technology enablement for facilitating the exporters. FTP 2023 codifies implementation mechanisms in a paperless, online environment, building on earlier 'ease of doing business' initiatives. Reduction in fee structures and IT-based schemes will make it easier for MSMEs and others to access export benefits.

It is proposed to reform the e-Certificate of Origin platform to allow self-certification of Certificate of Origin (CoO) and its automatic approval, where feasible. Another initiative being considered is the electronic exchange of CoO data with partner countries.

Duty exemption schemes for export production will now be implemented through Regional Offices in a rule-based IT system environment, eliminating the need for manual interface. During the FY23-24, all processes under the Advance and EPCG Schemes, including issue, re-validation, and EO extension, will be covered in a phased manner. Cases identified under risk management framework will be scrutinized manually, while majority of the applicants are expected to be covered under the 'automatic' route initially.

 Towns of Export Excellence

Four new towns, namely Faridabad, Mirzapur, Moradabad, and Varanasi, have been designated as Towns of Export Excellence (TEE) in addition to the existing 39 towns. The TEEs will have priority access to export promotion funds under the MAI scheme and will be able to avail Common Service Provider (CSP) benefits for export fulfillment under the EPCG Scheme. This addition is expected to boost the exports of handlooms, handicrafts, and carpets.

 Recognition of Exporters

Exporter firms recognized with 'status' based on export performance will now be partners in capacity-building initiatives on a best-endeavor basis. Similar to the 'each one teach one' initiative, 2-star and above status holders would be encouraged to provide trade-related training based on a model curriculum to interested individuals. This will help India build a skilled manpower pool capable of servicing a $5 Trillion economy before 2030. Status recognition norms have been re-calibrated to enable more exporting firms to achieve 4 and 5-star ratings, leading to better branding opportunities in export markets.

Promoting export from the districts

The FTP aims at building partnerships with State governments and taking forward the Districts as Export Hubs (DEH) initiative to promote exports at the district level and accelerate the development of grassroots trade ecosystem. Efforts to identify export worthy products & services and resolve concerns at the district level will be madethrough an institutional mechanism – State Export Promotion Committee and District Export Promotion Committee at the State and District level, respectively.District specific export action plans to be prepared for each district outlining the district specific strategy to promote export of identified products and services.

Streamlining SCOMET Policy

India is placing more emphasis on the "export control" regime as its integration with export control regime countries strengthens. There is a wider outreach and understanding of SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies) among stakeholders, and the policy regime is being made more robust to implement international treaties and agreements entered into by India.A robust export control system in India would provide access of dual-use High end goods and technologies to Indian exporters while facilitating exports of controlled items/technologies under SCOMET from India.

Facilitating E-Commerce Exports

E-commerce exports are a promising category that requires distinct policy interventions from traditional offline trade. Various estimates suggest e-commerce export potential in the range of $200 to $300 billion by 2030. FTP 2023 outlines the intent and roadmap for establishing e-commerce hubs and related elements such as payment reconciliation, book-keeping, returns policy, and export entitlements. As a starting point, the consignment wise cap on E-Commerce exports through courier has been raised from ₹5Lakh to ₹10 Lakh in the FTP 2023. Depending on the feedback of exporters, this cap will be further revised or eventually removed.Integration of Courier and Postal exports with ICEGATE will enable exporters to claim benefits under FTP. The comprehensive e-commerce policy addressing the export/import ecosystem would be elaborated soon, based on the recommendations of the working committee on e-commerce exports and inter-ministerial deliberations.Extensive outreach and training activities will be taken up to build capacity of artisans, weavers, garment manufacturers, gems and jewellery designers to onboard them on E-Commerce platforms and facilitate higher exports.

Facilitation under Export Promotion of Capital Goods (EPCG) Scheme

The EPCG Scheme, which allows import of capital goods at zero Customs duty for export production, is being further rationalized. Some key changes being added are:

• Prime Minister Mega Integrated Textile Region and Apparel Parks (PM MITRA) scheme has been added as an additional scheme eligible to claim benefits under CSP (Common Service Provider) Scheme of Export Promotion capital Goods Scheme(EPCG).
• Dairy sector to be exempted from maintaining Average Export Obligation – to support dairy sector to upgrade the technology.
• Battery Electric Vehicles (BEV) of all types, Vertical Farming equipment, Wastewater Treatment and Recycling, Rainwater harvesting system and Rainwater Filters, and Green Hydrogen are added to Green Technology products – will now be eligible for reduced Export Obligation requirement under EPCG Scheme

Facilitation under Advance authorization Scheme

Advance authorisation Scheme accessed by DTA units provides duty-free import of raw materials for manufacturing export items and is placed at a similar footing to EOU and SEZ Scheme. However, the DTA unit has the flexibility to work both for domestic as well as export production. Based on interactions with industry and Export Promotion councils, certain facilitation provisions have been added in the present FTP such as

• Special Advance Authorisation Scheme extended to export of Apparel and Clothing sector under para 4.07 of HBP on self-declaration basis to facilitate prompt execution of export orders – Norms would be fixed within fixed timeframe.
• Benefits of Self-Ratification Scheme for fixation of Input-Output Norms extended to 2 star and above status holders in addition to Authorised Economic Operators at present.

Merchanting trade

To develop India into a merchanting trade hub, the FTP 2023 has introduced provisions for merchanting trade. Merchanting trade of restricted and prohibited items under export policy would now be possible. Merchanting trade involves shipment of goods from one foreign country to another foreign country without touching Indian ports, involving an Indian intermediary. This will be subject to compliance with RBI guidelines, andwon’t be applicable for goods/items classified in the CITES and SCOMET list. In course of time, this will allow Indian entrepreneurs to convert certain places like GIFT city etc. into major merchanting hubs as seen in places like Dubai, Singapore and Hong Kong.

Amnesty Scheme

Finally, the government is strongly committed to reducing litigation and fostering trust-based relationships to help alleviate the issues faced by exporters. In line with "Vivaad se Vishwaas" initiative, which sought to settle tax disputes amicably, the governmentis introducing a special one-time Amnesty Scheme under the FTP 2023 to address default on Export Obligations. This scheme is intended to provide relief to exporters who have been unable to meet their obligations under EPCG and Advance Authorizations, and who are burdened by high duty and interest costs associated with pending cases. All pending cases of the default in meeting Export Obligation (EO) of authorizations mentioned can be regularized on payment of all customs duties that were exempted in proportion to unfulfilled Export Obligation. The interest payable is capped at 100% of these exempted duties under this scheme.  However, no interest is payable on the portion of Additional Customs Duty and Special Additional Customs Duty and this is likely to provide relief to exporters as interest burden will come down substantially. It is hoped that this amnesty will give these exporters a fresh start and an opportunity to come into compliance.

Sources: Press Information Bureau ; DIRECTORATE GENERAL OF FOREIGN TRADE - Government of India