Lok Sabha Question No. 3078 (UNSTARRED), answered on 2018-08-06
Subject: Misuse of Trade Promotion Schemes
Ministry: COMMERCE AND INDUSTRY
Asked by: RAJU ALIAS DEVAPPA ANNA SHETTI

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY (DEPARTMENT OF COMMERCE)

## LOK SABHA UNSTARRED QUESTION NO. 3078 (H) TO BE ANSWERED ON 06 th  AUGUST, 2018

## MISUSE OF TRADE PROMOTION SCHEMES

## 3078(H).  SHRI RAJU SHETTY:

Will  the  Minister  of COMMERCE  &  INDUSTRY ( वा ͨणÏय  एवं  उɮयोग  मंğी ) be pleased to state:

- (a) the details of schemes being implemented for promotion of foreign trade and export in the country;
- (b) whether any cases of misuse of these schemes have come to the notice of the Government during the last three years;
- (c) if so, the details thereof during the said period, State-wise; and
- (d) the  steps  taken  by  the  Government  to  put  a  check  on  such  cases  of  misuse  of  these schemes and the outcome thereof?

## ANSWER

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THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE AND INDUSTRY (SHRI C. R. CHAUDHARY)

- (a)  Madam,  under  the  Foreign  Trade  Policy  2015-20,  the  Government  of  India  has  the following schemes for promotion of foreign trade and export from the country.
- i. Merchandise Exports from India Scheme (MEIS) incentivizes exporters in terms of Duty  Credit  Scrips  at  the  rate  2,  3,  4,  5,  7  and  10%  of  realized  FOB  value  of exports.  These  scrips  are  transferable  and  can  be  used  to  pay  certain  Central Duties/taxes including customs duties, but not IGST/CGST/SGST. At present, the Scheme covers approx 8052 tariff lines at 8 digits level.
- ii. Service  Exports  from  India  Scheme  (SEIS)  rewards  service  providers  of  notified services, on Net foreign exchange earnings, who are providing service from India to the rest of the World, in the form of Duty Credit scrips which are utilizable just like MEIS.
- iii. Advance  Authorization  and  related  schemes,  under  which  the  importer  of  a  raw material is provided the facility of importing raw materials without payment of duty, provided the imported material is used for manufacturing export products.
- iv. Export promotion Capital Goods Scheme (EPCG),  allows the exporters to import duty free capital goods, which can be used at pre-production, production and post production  stages  of  the  manufacture  of  export  product  and  services  provided, they commit to fulfill an export obligation equal to six times of the duty saved in six years.
- v. The Foreign Trade Policy also has provisions for local supplies, to provide a levelplaying  field  to  domestic  manufacturers  under  'Deemed  Exports',  which  refer  to those transactions in which goods supplied do not leave country, and payment for such supplies is received either in Indian rupees or in free foreign exchange.
- vi. Further, the Ministry implements a scheme namely Trade Infrastructure for Export Scheme (TIES). The scheme was launched during BE 2017-18, for 3 years, with the  objective  to  enhance  export  competitiveness  by  bridging  gaps  in  export infrastructure, creating export focused infrastructure and inducing states to take up more export-oriented projects including those required for addressing quality and certification concerns.
- (b) & (c) Yes Madam, instances of misuse of these schemes have come to the notice of the Government in the last three years. The misuse is related to improper availment of EPCG benefits, advance authorization scheme, claim of benefits under Focus Market Schemes/ Focus Product Schemes based on fraudulent documents/ shipping bills, availment of DFIA (Duty  Free  Import  Authorization)  scheme  benefits  on  doubtful  transactions,  Evasion  of Customs Duty by utilizing SFIS scrips obtained on ineligible remittances etc. A summary of state wise cases for the period is attached in the Annexure I.
- (d)  The  Government  takes  note  of  any  such  misuse  as  reported  by  the  Department  of Revenue Intelligence (DRI) inputs, or during routine audit or scrutiny of applications. Under the  provisions  of  the  Rule  7  of  the    FT  (Development  and  Regulation)  Rules  such  IEC holders  are  immediately  placed  in  the  Denied  Entity  List  and    subsequent  action  under FT(D&R) Act is initiated with due procedure. The outcome of such actions is full recovery of undue benefits granted to such firms along with interest and penalty as imposed by the relevant Adjudication authority. The DGFT has an Enforcement Cum Adjudication (ECA) division  through which this effort is co-ordinated with different agencies.

## Annexure - I

Details of Cases of Misuse of Schemes in the period 2015-16 to 2017-18*

|   Sl. No. | Name of State   |   No. of Cases |
|-----------|-----------------|----------------|
|         1 | Gujarat         |             77 |
|         2 | Punjab          |             53 |
|         3 | Haryana         |             03 |
|         4 | Delhi           |             11 |
|         5 | Karnataka       |             01 |
|         6 | Tamilnadu       |             02 |
|         7 | Uttar Pradesh   |             01 |
|         8 | West Bengal     |             01 |
|         9 | Maharashtra     |             04 |
|        10 | Andhra Pradesh  |             01 |