DEEMED EXPORTS :
Deemed Exports refer to those transactions in which goods manufactured in India are supplied to specified projects or to specific categories of consumers. In deemed exports, goods supplied do not leave the country and payment for such supplies is received either in Indian rupees or in free foreign exchange by the recipient of the goods.
The objective of deemed exports is to ensure that the domestic suppliers are not in disadvantageous position vis-à-vis foreign suppliers in terms of the fiscal concessions. The underlying theory is that foreign exchange saved must be treated at par with foreign exchange earned by placing Indian manufacturers at par with foreign suppliers. Deemed exports broadly cover three areas.
a. Supplies to domestic entities who can import their requirements duty free or at reduced rates of duty.
b. Supplies to projects/ purposes that involve international competitive bidding.
c. Supplies to infrastructure projects of national importance.
(I) CATEGORIES OF SUPPLIES CONSIDERED AS ‘DEEMED EXPORT’
| Supply by manufacturer | Supply by main/sub-contractors(s) |
| Supply of goods against Advance Authorisation/ Advance Authorisation for Annual Requirement/ DFIA | Supply of goods to projects or turnkey contracts financed by multilateral or bilateral agencies/Funds notified by Department of Economic Affairs (DEA), under International Competitive Bidding. |
| Supply of goods to units located in EOU/ STP/BTP/EHTP | Supply of goods to any project where import is permitted at zero customs duty as per customs Notification No. 12/2012-Cus dated 17.03.2012 and supply is made against International Competitive Bidding. |
| Supply of capital goods against EPCG authorisation | Supply of goods to mega power projects against International Competitive Bidding (even if customs duty on imports made by such project is not zero). The ICB procedures should be followed. Supplier is eligible for benefits as specified. International Competitive Bidding (ICB) is not mandatory for mega power projects if requisite quantum of power has been tied up through tariff based competitive bidding or if project has been awarded through tariff based competitive bidding. |
| Supply of marine freight containers by 100% EOU provided said containers are exported within 6 months | Supply to goods to UN or international organisations for their official use or supplied to projects financed by them. |
| Supply of goods to nuclear projects through competitive bidding (need not be international competitive bidding). |
(II) BENEFITS FOR DEEMED EXPORTS
Deemed exports shall be eligible for any / all of following benefits in respect of manufacture and supply of goods, qualifying as deemed exports, subject to specified terms and conditions:
a. Advance Authorisation/ Advance Authorisation for Annual requirement/ DFIA
b. Deemed Export Drawback
c. Refund of terminal excise duty if exemption is not available.
(III) ELIGIBILITY FOR REFUND OF TERMINAL EXCISE DUTY/ DEEMED EXPORT DRAWBACK
Refund of Terminal Excise duty or Central Excise duty paid on inputs/ components will be available only when CENVAT credit/ rebate of the same have not been availed by the recipient of such goods. Similarly, supplies will be eligible for deemed export drawback on Central Excise paid on inputs and service tax paid on input services, provided CENVAT credit facility/ rebate has not been availed by the applicant. However, in such cases, basic customs duty paid can be claimed as brand rate of duty drawback.
(IV) COMMON CONDITIONS FOR DEEMED EXPORT BENEFITS
(i) Supplies shall be made directly to entities listed in the point (I) above. Third party supply shall not be eligible for benefits/exemption.
(ii) In all cases, supplies shall be made directly to the designated Projects/Agencies/Units/ Advance Authorisation/ EPCG Authorisation holder. Sub-contractors may, however, make supplies to main contractor instead of supplying directly to designated Projects/ Agencies. Payments in such cases shall be made to sub-contractor by main-contractor and not by project Authority.
(iii) Supply of domestically manufactured goods by an Indian Sub-contractor to any Indian or foreign main contractor, directly at the designated project’s/ Agency’s site, shall also be eligible for deemed export benefit provided name of sub-contractor is indicated either originally or subsequently (but before the date of supply of such goods) in the main contract. In such cases payment shall be made directly to sub-contractor by the Project Authority.