1. What is SEIS Incentives (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 –
- Merchandise Exports from India Scheme (MEIS) for merchandise exporters
- Service Exports from India Scheme (SEIS) for Service exporters
- 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 –
- Foreign exchange remittances related to the financial service sector;
- Raising of all the types of foreign currency loans;
- Export proceeds realization of the clients;
- Issuance of Foreign Equity through ADRs/GDRs or other similar instruments;
- Issuance of foreign currency Bonds;
- Sale of securities and other financial instruments;
- Other receivables not connected with services rendered by financial institutions;
- Earned through contract/regular employment abroad (e.g. labour remittances);
- Payments for services received from EEFC Account;
- Foreign exchange turnover by Healthcare Institutions;
- Foreign exchange turnover by Educational Institutions;
- Export turnover relating to services of units operating under SEZ / EOU / EHTP / STPI / BTP Schemes or supplies of services made to such units;
- Clubbing of turnover of services rendered by SEZ / EOU /EHTP / STPI / BTP units with a turnover of DTA Service Providers;
- Exports of Goods;
- 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;
- 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 Year||XXX|
|Net Foreign Exchange Earnings||XXX|
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.||SECTORS||CPC Prov. Code||Admissible rate in %(on Net Foreign Exchange Earnings For the period 01/04/2017 to 30/10/2017||Admissible rate in % (onNet Foreign Exchange Earnings For the period 01/11/2017 to 31/03/2018|
|b.||Accounting auditing and book keeping services||862||5%||7%|
|f.||Intergrated Ingineering services||8673||5%||7%|
|g.||Urban Planning and Indascap architectural service||8674||5%||7%|
|h.||Medical and Dental Service||9312||5%||7%|
|j.||Services Provided by midwives, nurses, physiotherapists and paramedical personnel|
|B.||Research and development services|
|a.||R&D services on natural sciences||852||5%||7%|
|b.||R&D services on social sciences and humanities||851||5%||7%|
|c.||Interdisciplinary R&D services||853||5%||7%|
|C.||Rental/Leasing services without operators|
|a.||Relating to ships||83103||5%||7%|
|b.||Relating to aircraft||83104||5%||7%|
|c.||Relati ng to other transport equipment||83101 83102 83105||5%||7%|
|d.||Relating to other machinery and equipment||83106 83109||5%||7%|
|D||Other business services|
|b.||Market research and public opinion polling services||864||3%||5%|
|c.||Management consulting service||865||3%||5%|
|d.||Services related to management consulting||866||3%||5%|
|e.||Technical testing and analysis services||8676||3%||5%|
|f.||Services incidental to agricultural, hunting and forestry||881||3%||5%|
|g.||Services incidental to fishing||882||3%||5%|
|h||Services incidental to mining||883 5115||3%||5%|
|i.||Services incidental to manufacturing||884 885||3%||5%|
|j.||Services incidental to energy distribution||887||3%||5%|
|k||Placement and supply services of personnel||872||3%||5%|
|l||Investigation and security||873||3%||5%|
|m||Related scientific and technical consulting services||8675||3%||5%|
|n||Maintenance and repair of equipment (notincluding maritimevessels, aircraft or other|
|o||Building cleaning services||874||3%||5%|
|A .||Hospital services||9311||5%||7%|
|7||TOURISM AND TRA VEL-RELATED SERVICES|
|A||Hotels and Restaurants (including catering)|
|B||Travel agencies and tour operators services||7471||5%||7%|
|c.||Tourist guides services||7472||5%||7%|
|8||RECREATIONAL,CUL TURAL AND SPORTINGSERVICES (other thanaudiovisual services)|
|A||Entertainment services (including theatre, live bands and circusservices)||9619||5%||7%|
|B||News agency services||962||5%||7%|
|c.||Libraries, archives, museums and other cultural services||963||5%||7%|
|D||Sporting and other recreational services||964||5%||7%|
|A||Maritime Transport Services|
|c||Rental of vessels with crew||7213||5%||7%|
|d||Maintenance and repair of vessels||8868||5%||7%|
|e||Pushing and towing services||7214||5%||7%|
|f||Supporting services for maritime transport||745||5%||7%|
|B||Air transport services|
|a||Rental of aircraft with||734||5%||7%|
|a||Motion picture and video tape production and distribution service||9611||5%||7%|
|b||Motion picture projection service||9612||5%||7%|
|c||Radio and television servIces||9613||5%||7%|
|d||Radio and television transmission services||7524||5%||7%|
|3||CONSTRUCTION AND RELATED ENGINEERING SERVICES|
|A||General construction work for building||512||5%||7%|
|B||General construction work for civil engineenng||513||5%||7%|
|C||Installation and assembly work||514 516||5%||7%|
|D||Building completion and finishing work||517||5%||7%|
|A||Primary education services||921||5%||7%|
|B||Secondary education services||922||5%||7%|
|C||Higher education services||923||5%||7%|
|B||Refuse disposal services||9402||5%||7%|
|C||Sanitation and similar servIces||9403||5%||7%|
|6||HEALTH-RELATED AND SOCIAL SERVICES|
|b||Maintenance and repair of aircraft||8868||5%||7%|
|C||Airport operations and ground handling||5%||7%|
|C||Road Transport Services|
|a||Passenger transportation||7121, 7122||5%||7%|
|C||Rental of commercial vehicles with operator||7124||5%||7%|
|d||Maintenance and repair of road transport equipment||6112 8867||5%||7%|
|e||Supporting services for road transport services||744||5%||7%|
|D||Services auxiliary to all modes of transport|
|a||Cargo handling services||741||5%||7%|
|b||Storage and warehouse services||742||5%||7%|
|C||Freight transport agency serVices||748||5%||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
|A||Maritime Transport Services.|
|a||Rental of vessels with crew|
|(I)||Time Charter/Voyage Charter/Bare Boat Charter Services.|
|(II)||Offshore Support Vessel Services|
|b||Maintenance & repair of vessels.|
|(I)||Services provided for ship repair, dry dock and maintenance by ship repair service provider.|
|c||Pushing & towing services.|
|(II)||Shifting of vessels|
|(IV)||Charges for detention of pilot|
|(VI)||Cold movement Services.|
|(VII)||Pullback tug Services for Single Point Mooring (SPM) operations.|
|(IX)||Pilot cancellation Charges.|
|d||Supporting services for maritime transport.|
|(I)||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|
|(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.|
|(XXVI)||Survey & Inspection Services|
|(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|
|(XXXV)||Handling Services not specified elsewhere.|
|(XXXVIII)||Gas freeing certificate charges|
|(XXXIX)||Shifting and Weighment Services|
|(XL)||Wagon Handling Services|
|(XLI)||Grab transportation Services|
|(XLII)||Hot work Permit Services|
|(XLIV)||Cargo Brokering charges for export cargo|
|B||Air Transport Services|
|C||Ground Handl ing|