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Incentives and Drawbacks

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Incentive schemes:

Besides foreign exchange facilities under the Import Export Policy,2002-07, a number of financial
incentives are also available to the exporters.
1. Marketing and Development Assistance (MDA)
Assistance under Marketing Development Fund is provided the Govt. for stimulating and diversifying
the export trade for the following purposes:
i. Market and commodity research, area survey and research
ii. Export publicity and participation in trade fairs and exhibitions;
iii. Trade delegation and study teams
iv. Establishment of offices and branches in abroad.
The Federation of Indian Exporters Organistions (FIEO) grants certain activites on behalf of the Ministry of

2. Spices Export Promotion schemes - under these schemes the Spices Board develops the production
and exports of value added spices under various schemes.

3. Air freight subsidy on Horticulture and Floriculture Exports--The Government grants air freight subsidy
on selected fruits and floriculture items.

4. New External Marketing Assistance Scheme for Jute-The scheme envisages grant of market assistance at the rate of 5 - 10% of the F.O.B.Value realistion on export of specified diversified products. The benefit under the scheme is available to both manufacturer exporters and merchant exporters.

5. Financial Assistance scheme for Agricultural, Horticulture and meat exports- The Agricultural Products
Export Development Authority (APEDA) provides assistance upto 50% of the cost of study subject to the
ceiling surveys by growers, exporters, and their organisations. The assistance aims at encouraging
exporters traders to develop their own market and information sources.

6. Financial assistance for marine products exports--There are a number of financial assistance to promote
export production and marketing products of the fisheries sector.

7. Market Access Initiative (MAI) - Financial assitance shall be available under the schemes to the export
promotion councils, industry and trade associations and other eligible entities, as may be notified
from time to time for certain purposes viz., marketing studies on country product focus approach basis,
promotioin of selected brands, participation in sales promotion
campaign through international departmental stores etc.,

8. Towns of Export Excellence-- A number of towns in specific locations have emerged as dynamic industrial
locations contributing to India's exports viz., 'industrial clusters' . Selected towns producing goods
worth of Rs.1000 crore or more will be notified as Towns of Exports Excellence and on the basis of
potential for growth in exports. A number of such industrial cluster towns are exportinga substantial
portion of their products which are world class. For example, Tirupur,is exporting 80% of its production
of hosiery, like wise wollen blanket in Panipat, wollen knitwear in Ludhiana are the eligible export towns.

9. Special Focus on Cottage and Handicraft sector: The small scale sector alongwith the cottage and handicraft sector has been contributing tomore than half of the total exports of the country. The units in handicraft sector shall be entitled to duty free imports of specified items upto 3% of FOB value of their exports.

Drawback schemes:

1. Duty drawback: Under the duty drawback scheme the export products get relief in respect of Customs and
Excise duties paid on raw materials and components used in their production. For claiming the drawback
on export of goods, the exporter is not required to file a separate application for granting the amoung
of drawback, as the drawback shipping bill itself treated as a claim and it is finalised after ensuring
that the goods have been presented for examination by Customs and cleared for being put on board a
vessel/air craft and ensuring that the necessary formalities to enable processing the claims are
adhered with. The payment of drawback claim is made directly by the Customs House/Central Excise
Commissioner having jurisdiction over the port/air port through which the export is made.

2. Income Tax Exemptions and deductions:
The exemptions and deductions at specified rates are available to the exporter and other foreign
exchange earners under the Income Tax Act, 1961. The deductions are made in respect of export turnover
(Under Section 80HHC)

3. Sales Tax exemptions:
By virtue of section 5 of Central Sales Tax Act, any dealer who is registered with the Sales Tax
authorities can claim the exemption from Sales Tax in respect of his sales madein the course of exports
out of the territory of India.The exporter can also buy the goods for export from dealer/manufacturer for the purpose of trade in export without payment of sales tax by issuing Form H to the selling dealer from whom he purchased goods for export.
After the goods have been exported the exporter will fill in form H in triplicate. One copy of the form
will be retained by the exporter and remaining two copies will be given to dealer/manufacturer from
whom the exporter has purchased the goods for export.
The basic condition to avail the sales tax exemption is that the exporter should be registered with the
Sales Tax Department.

4. Reimbursement of Central Sales Tax to 100% EOU and EHTP/STP units:
100% Export oriented units and EHTP/STP units are entitled to full reimbursement of Central Sales Tax
paid by them on purchases made from Domestic Tariff Area (DTA) fir utilisation in the production of goods
for export. The supplies from DTA must be utilised for export production and may include raw materials,
components, consumables, packing materials, capital goods, spares, material handling equipment etc.,

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