POLICY “Deemed Exports" refers to those transactions in which the goods supplied do not leave the country and the payment for such supplies is received either in Indian rupees or in free foreign exchange. CATEGORIES OF "DEEMED EXPORTS" SUPPLY (Para 8.2 of the Policy) The following categories of supply of goods by the main/ sub-contractors shall be regarded as ''Deemed Exports" under this Policy, provided the goods are manufactured in India: a) Supply of goods against Advance Licence or DFRC under the Duty Exemption /Remission Scheme; b) Supply of goods to Export Oriented Units (EOUs) or units located in Special Economic Zone (SEZs) or Software Technology Parks (STPs) or Electronic Hardware Technology Parks (EHTPs): c) Supply of capital goods to holders of licences under the Export Promotion Capital Goods (EPCG) scheme; d) Supply of goods to projects financed by multilateral or bilateral agencies as notified by the Department of Economic Affairs, Ministry of Finance under International Competitive Bidding, where the tender evaluation is without including the customs duty; e) Supply of capital goods, plants, machinery, accessories, tools, dies and such goods which are used for installation purposes till the stage of commercial production and spares to the extent of 10% of the FOR value to fertilizer plants. f) Supply of goods to any project or purpose in respect of which the Ministry of Finance, by a notification, permits the import of such goods at zero customs duty coupled with the extension of benefits under this chapter to domestic supplies; g) Supply of goods to the power projects and refineries h) Supply of marine freight containers by 100% EOU (Domestic freight containersmanufacturers) provided the said containers are exported out of India within 6 months or such further period as permitted by the Customs; and i) Supply to projects funded by UN agencies. j) Supply of goods to nuclear power projects through competitive bidding as opposed to International Competitive Bidding. The benefits of deemed exports shall be available under paragraph (d), (e), (f) and (g) only if the supply is made under the procedure of International Competitive Bidding (ICB). BENEFITS FOR DEEMED EXPORTS (Para 8,3 of the Policy)
Deemed exports shall be eligible for the following benefits in respect of manufacture and supply of goods qualifying as deemed exports :1. Advance Licence for intermediate supply/ deemed export/DFRC. 2. Deemed Exports Drawback. 3. Refund of Terminal Excise duty. PROCEDURE Benefits to the Supplier In respect of supplies made against Advance Licence, the supplier shall be entitled to Advance Licence for intermediate supplies. If the supplies are made against Advance Release Order (ARO) or Back to Back Letter of Credit Issued against Advance Licence, supplier shall be entitled to the following benefits; Deemed Exports Drawback. Refund of Terminal Excise duty; whichever is applicable. In cases where Advance Release Order (ARO) or Back-to-Back Letter of Credit has been issued against DFRC, supplier shall be entitled only to the benefit of Deemed Exports Drawback. In respect of supply of goods to EQU/SEZ/ EHTP/ STP, the supplier shall be entitled to all the benefits, whichever is applicable. In all cases of deemed exports, supplies shall be made directly to the designated Projects/ Agencies/ Units/ Advance Licence/EPCG licence holders. The sub-contractor may, however, make the supplies to the main contractor instead of designated projects/ agencies. PROCEDURES/CRITERIA FOR CLAIMING DEEMED EXPORTS BENEFIT The indigenous supplier shall produce documentary evidence substantiating the realization of proceeds from the recipient through the normal banking channel in the form given in Appendix-22A & a copy of ARO/ Non-negotiable copy of Back-to-Back Inland Letter of Credit. In respect of supplies to EOU.SEZ etc. the DTA units shall claim the deemed exports benefit from tine Development Commissioner, (except DFRC & Advance Licence for deemed export). Such supplies shall be certified by the receiving agencies. In respect of supply of capital goods to EPCG licence holder, the supplier shall produce a certificate from the respective Excise authorities evidencing supplies/ receipt of the manufactured capital goods. Documentary evidence substantiating the realization of proceeds through the normal banking channel in the form given in Appendix- 22A.
In respect of supplies under categories mentioned in paragraphs 8,2(d),(e) ;(f),(g),(h) and (j) of the Policy, payment against such supplies shall be certified by the Project Authority concerned, as prescribed in form given in Appendix-12A. Supplies to the projects funded by agencies/ funds Listed in Appendix-33, shall be eligible for deemed export benefits Supplies under category mentioned in paragraphs 8.2 (e) of the Policy shall be for the plants being set up at Kakinada, Gadepan, Babrala and Shahjahanpur and those which may have been set up or expanded/ revamped/ retrofitted/ modernized during the Eighth Plan period,, provided such supplies are made under the procedur e of International! Competitive Bidding. Supplies of capital goods (excluding office machines howsoever described) and spares up to 10% of the FOR value of such capital goods alone shall be eligible for the deemed export benefits. The benefit of deemed exports shall also be available in respect of supplies of capital goods and spares to fertilizer plants which are set up or expanded/ revamped/ retrofitted/ modernized during the Ninth Plan provided such supplies are made under the procedure of International Competitive Bidding, without reference to bid evaluation methodology. The domestic supplier, under paragraph 8.2 (e) of the Policy, shall be eligible for the benefits listed in paragraphs 8,3(a) and (b) of the Policy, whichever is applicable. The benefit of deemed exports under paragraph 8,2(f) of the Policy would be available for the supplies of goods specified in list 12 for categories specified in S.No.214, 216 and 217 of Department of Revenue notification No.21/2002-Customs dated 1/3/2002, as amended from time to time, required in connection with petroleum operations undertaken under petroleum exploration licences or mining leases as the case may be, issued or renewed after 01.04.1959 and granted by the Government of India or any State Government to the Oil and Natural Gas corporation or Oil India Limited on nomination basis, and petroleum operations undertaker under specified contracts including those new exploration licensing Policy. These supplies shall be regarded as deemed exports under the said Policy, provided the goods are manufactured in India, and shall be eligible for deemed export benefits given under paragraph 8.3(a)(b) and (c), whichever is applicable of the Policy. The supply of capital goods and spares up to 10% of the FOR value of the capital goods to the power projects in terms of paragraphs 8.2(g) shall be entitled for deemed export benefits provided the same is certified by the Central Electricity Authority and the International Competitive Bidding procedures have been followed, at IPP stage, for supply of such capital goods to the power projects. The domestic supplier shall be
eligible for the benefits listed in paragraphs 8.3 (a) and (b) of the Policy. The benefit of deemed exports shall also be available for renovation/ modernization of power plants, whichever is applicable. However, supply of goods required for setting up of any mega power projects as specified in S.No.400 of Department of Revenue notification No.21/2002-Customs dated 1/3/2002, as amended by Department of Revenue notification 26 dated 1.3.2003 and subject to any further amendments thereof, shall be eligible for deemed exports benefits as mentioned in paragraph 8,3(a)(b) and (c) of the Policy, whichever is applicable, if such mega power project is --an inter state thermal power plant of a capacity of 1000 MW or more; or an inter-state hydel power plant of a capacity of 500 MW or mere as certified by an officer not below the rank of a Joint Secretary, Government of India in the Ministry of Power .