Deemed Exports: Eligibility & Benefits

India, like most countries, in continually bringing into power some regulations that are aimed at encouraging local suppliers and manufacturers to consistently move from strength to strength. These policies provide a set of benefits to manufacturers so they not only set up operations within the country but also increase their scale of production domestically.

What is it?

‘Deemed Exports’ is a concept that falls under The Export and Import (EXIM) Policy of India and aims to provide support to producers. In simple terms, it refers to any goods that are manufactured and transported domestically but are treated as exports in all books (be it laws or finance). All transactions that take place between the buyer and seller for these goods will be treated as export transactions. These may be carried forward in either Indian Rupees or in a convertible foreign currency.

What are the benefits of being a deemed export?

A number of benefits have been allotted to deemed exports. If your goods are eligible to be named ‘deemed exports’ they will be able to avail all the benefits that come with it. Some of these are listed below:

  1. Suppliers of deemed exports earn themselves an Advance License for intermediate supply/deemed export/DFRC/DFRC for immediate supplies.
  2. Suppliers also do not have to pay excise duty as deemed exports are exempted from terminal excise duty or the duty applied can be fully refunded. This applies to all supplies that are made against International Competitive Bidding (ICB).
  3. Even though deemed exports are treated like exports which are zero-rated under GST in India, a GST amount is still applied to them. However, the supplier is eligible to get a full refund on the tax amount making them an economical choice.
  4. Any deemed export is also eligible for drawback refunds on inputs used in manufacturing or supply under the ‘Deemed Export Drawback’ scheme.
    Suppliers can also receive a Special Import License which will be drawn up at a 6% rate of the Freight on Board (FOB) value of goods. This 6% credit script is transferable so it can either be sold in the market or to offset import duty.

Is my business eligible to sign up for this?

The first and foremost requirement for your products to be treated as ‘deemed exports’ is for them to be manufactured in India and not be exported outside the country. Likewise, these benefits are only applicable to goods produced in India and not any services.

In addition to these, the following criteria will be considered whilst providing the eligibility of being a deemed export and availing their benefits:

  1.  Any goods that are supplied against the follwing: Advance Licence, Advance Licence for annual requirement, DFRC under the Duty Exemption ot Remission Scheme.
    Any goods that are supplied to parties that hold a license under the Export Promotion Capital Goods (EPCG) scheme.
  2. Any goods that are being supplied to Export Oriented Units (EOUs), Software Technology Parks (STPs), Electronic Hardware Technology Parks (EHTPs) or Bio-Technology Parks (BTP).
  3. While the supplier can get a full refund on the GST applied on deemed goods, it is essential for them to pay the entire GST that’s levied on the goods at the time of supply for the process to go ahead smoothly and legally.
    Supplies that are made for any UN projects or any supplies that are funded by the UN or for any nuclear power projects through competitive bidding will also be eligible for the same.
  4. The goods must not be supplied under a bond or a Letter of Undertaking (LOU).
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