SEIS Export Incentive

Services Exports From India Scheme (SEIS)
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1. What is SEIS (Service Exports from India Scheme)

Under the Foreign Trade Policy, the ‘Exports from India Scheme’ was introduced with the objective to provide rewards to the exporters to offset the infrastructural inefficiencies and associated costs.

Following are the three schemes for export of Merchandise and Services –

  1. Merchandise Exports from India Scheme (MEIS) for merchandise exporters
  2. Service Exports from India Scheme (SEIS) for Service exporters
  3. Export promotion capital goods scheme (EPCG Scheme)

 

Chapter 3 of the Foreign Trade Policy 2015-2020 contains provisions relating to the ‘Exports from India Scheme’.

The Service Exports from India Scheme (SEIS) was announced with the objective to encourage and maximize the export of the notified services from India. Under the present article we would look into the eligibility and ineligibility criteria of SEIS.

For procedure for claiming incentives under SEIS scheme read here.

2. Eligibility criteria under SEIS

Service provider of only those services which are notified in Appendix 3D, located in India, shall be rewarded under SEIS.

In order to get eligible for SEIS, the services need to be rendered in the manner provided at Para 9.51(i) and Para 9.51(ii) of the Foreign Trade Policy 2015-2020 and the same is provided below –

Mode 1 – Cross Border trade : Para 9.51(i) – Supply of a service from India to any other country

Mode 2 – Consumption abroad : Para 9.51(ii) – Supply of a service from India to service consumer of any other country in India.

The service provider needs to have a minimum ‘net foreign exchange earnings’ (explained below) of US$ 15,000 in the year of rendering service in order to get eligible for Duty Credit Scrip.

In case of the individual service provider and sole proprietorship, the minimum ‘net foreign exchange earnings’ (explained below) is US$ 10,000 in the year of rendering service to be eligible for Duty Credit Scrip.

Services charges on specified service for which the payment has been received in Indian rupees, shall be treated as a receipt in deemed foreign exchange as per the guidelines of the Reserve Bank of India.

In case the IEC holder is engaged in both the manufacturing of goods as well as the provision of service, then, the foreign exchange earnings and the total expenses / payment / remittances of only the service sector shall be taken into account.

It is important to note here that in order to claim the reward under SEIS, the service provider needs to have an active IEC at the time of rendering of the services for which the rewards are claimed.

 

3. Ineligibility criteria under SEIS

Foreign exchange remittance other than those earned for the rendering of the notified service would be ineligible under SEIS.

Other sources of foreign exchange earnings such as equity or debt participation, donations, receipts of repayment of loans etc. and any other receipt of foreign exchange which is not related to the rendering of service would be ineligible under SEIS.

The following shall not be taken into account for the calculation of entitlement under the scheme –

  1. Foreign exchange remittances related to the financial service sector;
  2. Raising of all the types of foreign currency loans;
  3. Export proceeds realization of the clients;
  4. Issuance of Foreign Equity through ADRs/GDRs or other similar instruments;
  5. Issuance of foreign currency Bonds;
  6. Sale of securities and other financial instruments;
  7. Other receivables not connected with services rendered by financial institutions;
  8. Earned through contract/regular employment abroad (e.g. labour remittances);
  9. Payments for services received from EEFC Account;
  10. Foreign exchange turnover by Healthcare Institutions;
  11. Foreign exchange turnover by Educational Institutions;
  12. Export turnover relating to services of units operating under SEZ / EOU / EHTP / STPI / BTP Schemes or supplies of services made to such units;
  13. Clubbing of turnover of services rendered by SEZ / EOU /EHTP / STPI / BTP units with a turnover of DTA Service Providers;
  14. Exports of Goods;
  15. Foreign Exchange earnings for services provided by Airlines, Shipping lines service providers plying from any foreign country X to any foreign country Y routes not touching India at all;
  16. Service providers in Telecom Sector

 

4. How to calculate the “Net Earning Foreign Exchange Earnings”

The formula for calculation of the ‘net foreign exchange earnings’ is being provided in the below-mentioned table –

As already mentioned above, if the IEC holder is a manufacturer of goods as well as a service provider, then, the foreign exchange earnings and the total expenses / payment / remittance of only the service sector will be considered while calculating the net foreign exchange earnings.

Gross Earnings of foreign exchange XXX
(-) Total expenses / payment / remittance of foreign exchange by IEC holder, relating to the service sector in the Financial YearXXX
Net Foreign Exchange EarningsXXX

 

5. SEIS benefits and its utilisations there of

Under the Foreign Trade Policy 2015-2020, the Government of India, with effect from 1st April, 2015, introduced the Service Exports from India Scheme (SEIS). The newly introduced SEIS replaced the earlier SFIS (Served from India Scheme).

After going through the eligibility and ineligibility criteria of SEIS in the earlier article, the question that would arise in one’s mind is what benefits one can get if they qualify the eligibility criteria of SEIS and the said question is being answered in the present article.

 

6. Available benefits under SEIS

In SEIS, the benefit is available to the eligible service provider of the notified service in the form of ‘Duty Credit Scrips’.

The issuance of ‘Duty Credit Scrips’ would be based on the notified rates listed in Appendix 3D on the net foreign exchange earnings. The said notified rates vary from 5% to 7% on the notified services.

If the service provider is engaged in providing multiple services, in such case, the service provider is required to classify the eligible services as per Appendix 3D and claim the incentives / benefits, accordingly.

Further it must be noted that the ‘Duty Credit Scrips’ i.e. SEIS incentives would be available only on the amount which has been realized against the services rendered and not against the amount which has not been received.

 

7. Utilisation of Duty Credit Scrips

‘Duty Credit Scrips’ received as a reward / benefit under SEIS can be used for payment of following duties / taxes –

1. Payment of Basic Customs Duty and Additional Customs Duty specified under section 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 for import of inputs or goods, including capital goods, as per DoR notification, except items listed in Appendix 3A.
2. Payment of Customs Duty and fee as per paragraph 3.18 of the policy.
3. Payment of Customs Duties in case of EO defaults for Authorization issued under chapter 4 and 5 of the Foreign Trade Policy. Such utilization shall be in respect of those goods which are permitted to be imported under the respective reward scheme.
4. Payment of composition fee under Foreign Trade Policy.
5. Payment of application fee under Foreign Trade Policy.
6. Payment of value shortfall in EO under para 4.49 of the Handbook of Procedure 2015-2020.

It is mandatory that the ‘Duty Credit Scrips’ must be valid on the date on which the actual debit of duty is made.

Further, it is important to note here that the ‘Duty Credit Scrips’ so issued as reward under SEIS is freely transferrable, meaning thereby that in case the exporter of services is not availing any imports of goods or service, in such case, the said scrips can be sold / transferred to any other person at a mutually decided price.

 

8. Validity period of Duty Credit Scrips

The Duty credit scrips issued under SEIS in the form of reward shall be valid for a period of 24 months from the date of its issue.

 

9. Revalidation of Duty Credit Scrips

Revalidation of duty credit scrips is possible only and only in case if the validity has expired while in the custody of the Customs Authority or Regional Authority or Government Authority. In any other case the revalidation of duty credit scrips is not permitted.

Service provider of only those services which are notified in Appendix 3D and Appendix 3E, located in India, shall be rewarded under SEIS.

10. Services Eligible for SEIS Incentives

10.1. Appendix 3D: List of services eligible under Services Export from India Scheme along with rate of Incentives.

Sr.No.SECTORSCPC Prov. CodeAdmissible rate in %(on Net Foreign Exchange Earnings For the period 01/04/2017 to 30/10/2017Admissible rate in % (onNet Foreign Exchange Earnings For the period 01/11/2017 to 31/03/2018
1BUSINESS SERVICE
A.Professional Service
a.Legal service8615%7%
b.Accounting auditing and book keeping services8625%7%
c.Taxation services8635%7%
d.Architectural service86715%7%
e.Engineering service86725%7%
f.Intergrated Ingineering services86735%7%
g.Urban Planning and Indascap architectural service86745%7%
h.Medical and Dental Service93125%7%
i.Veterinary Services9325%7%
j.Services Provided by midwives, nurses, physiotherapists and paramedical personnel
B.Research and development services
a.R&D services on natural sciences8525%7%
b.R&D services on social sciences and humanities8515%7%
c.Interdisciplinary R&D services8535%7%
C.Rental/Leasing services without operators
a.Relating to ships831035%7%
b.Relating to aircraft831045%7%
c.Relati ng to other transport equipment83101 83102 831055%7%
d.Relating to other machinery and equipment83106 831095%7%
DOther business services
a.Advertising services8713%5%
b.Market research and public opinion polling services8643%5%
c.Management consulting service8653%5%
d.Services related to management consulting8663%5%
e.Technical testing and analysis services86763%5%
f.Services incidental to agricultural, hunting and forestry8813%5%
g.Services incidental to fishing8823%5%
hServices incidental to mining883 51153%5%
i.Services incidental to manufacturing884 8853%5%
j.Services incidental to energy distribution8873%5%
kPlacement and supply services of personnel8723%5%
lInvestigation and security8733%5%
mRelated scientific and technical consulting services86753%5%
nMaintenance and repair of equipment (notincluding maritimevessels, aircraft or other
transport equipment)
633 8861-88663%5%
oBuilding cleaning services8743%5%
pPhotographic services8753%5%
qPackaging services8763%5%
rPrinting, publishing884423%5%
sConvention services879093%5%
A .Hospital services93115%7%
7TOURISM AND TRA VEL-RELATED SERVICES
AHotels and Restaurants (including catering)
aHotel
bRestaurants (includingcatering)641-6433%5%
BTravel agencies and tour operators services74715%7%
c.Tourist guides services74725%7%
8RECREATIONAL,CUL TURAL AND SPORTINGSERVICES (other thanaudiovisual services)
AEntertainment services (including theatre, live bands and circusservices)96195%7%
BNews agency services9625%7%
c.Libraries, archives, museums and other cultural services9635%7%
DSporting and other recreational services9645%7%
9TRANSPORT SERVICES
AMaritime Transport Services
aPassenger transportation72115%7%
bFreight transportation72125%7%
cRental of vessels with crew72135%7%
dMaintenance and repair of vessels88685%7%
ePushing and towing services72145%7%
fSupporting services for maritime transport7455%7%
BAir transport services
aRental of aircraft with7345%7%
2COMMUNICATION SERVICES
Audiovisual services
aMotion picture and video tape production and distribution service96115%7%
bMotion picture projection service96125%7%
cRadio and television servIces96135%7%
dRadio and television transmission services75245%7%
eSound recordingn.a.5%7%
3CONSTRUCTION AND RELATED ENGINEERING SERVICES
AGeneral construction work for building5125%7%
BGeneral construction work for civil engineenng5135%7%
CInstallation and assembly work514 5165%7%
DBuilding completion and finishing work5175%7%
4EDUCATIONAL SERVICES
APrimary education services9215%7%
BSecondary education services9225%7%
CHigher education services9235%7%
DAdult education9245%7%
5ENVIRONMENTAL SERVICES
ASewage services94015%7%
BRefuse disposal services94025%7%
CSanitation and similar servIces94035%7%
6HEALTH-RELATED AND SOCIAL SERVICES
Crew
bMaintenance and repair of aircraft88685%7%
CAirport operations and ground handling5%7%
CRoad Transport Services
aPassenger transportation7121, 71225%7%
bFreight transportation71235%7%
CRental of commercial vehicles with operator71245%7%
dMaintenance and repair of road transport equipment6112 88675%7%
eSupporting services for road transport services7445%7%
DServices auxiliary to all modes of transport
aCargo handling services7415%7%
bStorage and warehouse services7425%7%
CFreight transport agency serVices7485%7%

10.2. Appendix 3E: List of services where payment has been received in Indian rupees which can be treated as receipts in deemed foreign exhange as per guideline of RBI

 

TRANSPORT SERVICES 
AMaritime Transport Services.
aRental of vessels with crew
(I) Time Charter/Voyage Charter/Bare Boat Charter Services.
(II) Offshore Support Vessel Services
bMaintenance & repair of vessels.
Services provided for ship repair, dry dock and maintenance by ship repair service provider.
cPushing & towing services.
(I)Pilotage Services.
(II) Shifting of vessels
(III) Warping Services.
(IV) Charges for detention of pilot
(V) Towing Services.
(VI) Cold movement Services.
(VII) Pullback tug Services for Single Point Mooring (SPM) operations.
(VIII) Tug Services.
(IX) Pilot cancellation Charges.
dSupporting services for maritime transport.
(1) Port dues for entry of vessels.
(II)Service Charges for Supply of water/fresh water to vessels
(III) Berth hire Services.
(IV) Anchorage Services for stay of vessels at Anchorage.
(V)Tug hire for miscellaneous services to carry pilots and other crew from and to the shore, supply ship stores etc.
(VI) Hire of launch for special jobs.
(VII) Hire of Fire Float / Fire tender
(VIII) Hire of Diving services.
(IX) Services for providing pneumatic fender (including to and fro transportation of fenders at Dock! Oil Jetties/ Barge Jetties/ IW AI Jetty/ Any other Jetty or Anchorage point)
(X) Supply of skilled man-power for marine services.
(XI) Pilot attendance Services at SPM.
(XII) Reefer Container Charges.
(XIII)Storage Services, shutout charges.
(XIV) Terminal Handling Services
(XV)Stevedoring Services.
(XVI) Cargo Dispatch Services.
(XVII) Cargo Storage Services.
(XVIII) Bunker Supply Services.
(XIX) Garbage Collection Services.
(XX) Slop Collection/ Disposal Services.
(XXI) Tank Washing Services.
(XXII) Internal Transportation Services.
(XXIII) Warehousing Services.
(XXIV) Inter-carting Services.
(XXV) Packing Services.
(XXVI) Survey & Inspection Services
(XXVII) Barge Charges
(XXVIII) Ship chandling Services
(XXIX) Shore Crane Hire Services
(XXX) Equipment Hire Services viz Forklift, Excavator, Payloader, Reach Stacker, Empty Handler, Hydra, Screening Net, Gangway, Grab, Hydra Cranes, Generator, Power supply, etc.
(XXXI) Gangway hire Services
(XXXII) Security Services for providing security guards
(XXXIII) Cargo consolidation charges for export cargo
(XXXIV) Dispatch Services
(XXXV) Handling Services not specified elsewhere.
(XXXVI) Phytosanitary Services
(XXXVII) Lighterage Charges
(XXXVIII) Gas freeing certificate charges
(XXXIX) Shifting and Weighment Services
(XL) Wagon Handling Services
(XLI) Grab transportation Services
(XLII) Hot work Permit Services
(XLIII) Refloating Services
(XLIV) Cargo Brokering charges for export cargo
BAir Transport Services
CGround Handl ing

 

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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SEIS Export Incentive

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