./.RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/IND/8
8 November 1999
(99-4809)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Questions from the UNITED STATES Regarding the
New and Full Notification of INDIA1
The following communication, dated 4 November 1999, has been received from the
Permanent Mission of the United States.
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Income Tax Exemption for Export Profits under Section 10A, 10B, and 80 HHC of the Income
Tax Act
This programme exempts profits earned on exports from the corporate income tax.  Export
profits are deducted from taxable income before computation of the income tax owed.
Q1. What is the corporate income tax rate?  To estimate the magnitude of this subsidy, it is
necessary to know the corporate tax rate.
Q2. Would the Government of India please expl ain why the following programmes were not
included in its notification?  In addition, please provide the full name of the subsidy, the enabling
legislation, the reason for the subsidy, to whom the subsidy is granted, the amount of the subsidy, and
the trade effects of the subsidy.
• Export Promotion Capital Goods Scheme (EPCGS)
Under this scheme, capital goods may be imported duty free provided the importer can meet
an annual export obligation over a five-year period.
•     Export Oriented Units Scheme (EOU) and Export Processing Zone (EPZ) Scheme
Companies undertaking to export their entire production may be set up as one of the above
schemes.  In fact, these companies may sell a small percent of production in the domestic
market.  Under these schemes, companies may import free of duty all types of goods,
including capital goods.
                                                     
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Page 2
• Pre-shipment Export Financing (PSEF)
Preferential short-term financing is provided to companies based on export purchase orders
presented to banks as proof that the company intends to purchase inputs to produce for export.
• Post-shipment Export Financing (POSEF)
Post-shipment short-term financing is provid ed to companies based on invoices issued to
foreign buyers.  Banks issue short-terms loans based on these export invoices to enable
companies to extend credit terms to overseas buyers.
• Export Trading Houses, St ar Trading Houses, and Superstar Trading Houses
Depending on their level of exports, companies qualify as one of these types of trading
houses.  The main benefit received under this programme appears to be the receipt of SpecialImport Licences (SIL) valued as a percent of total exports for the year.  With an SIL, a
company may import restricted merchandise to be used or sold on the domestic market.
• Exemption from Interest Tax on Export Credits
Under this programme, interest paid on export credits (short-term export financing) is exempt
from the interest tax.
• Duty Entitlement Passbook Scheme (DEPBS)
Exporters may earn credits upon export based on the deemed import content of the export
product as per standard input/output norms.  These credits may then be used in payment of
duties on imported inputs.
• Advance Licences
Advance licences are granted to a merchant-exporter (trading house) and to manufacturer-
exporters for the import of inputs required to manufacture goods without payment of basic
customs duty.  The licence holder has an obligation to export a certain quantity of finishedproduct within a certain period based on the standard input-output norms published by the
Director General of Foreign Trade.
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