Export promotion is a strategy for the economic development of a nation wherein the domestically produced goods and services are injected into the international market. Now, to promote these exports, the Government provides various benefits to the Indian traders. The exporters who trade services across nations, the benefits come in the form of rewards like duty credit scrips, which form the basis of the Service Exports from India Scheme (SEIS). Similarly, the exporters of goods receive benefits in the form of incentives under the Merchandise Exports from India Scheme (MEIS). Both the SEIS Scheme and MEIS Scheme thus, form the incentive process of DGFT.
The Government of India provides all these incentives to the exporters in order to give a proper direction, guidance, and encouragement to the service sectors. But why? Well, the service sector forms an integral part of the country’s economy and its development is vital to the growth of the nation as a whole.
The SEIS Scheme (Service Exports from India Scheme) was introduced in the year 2015 which is valid for a period of 5 years until 2020 as per the Foreign Trade Policy of India 2015-2020. Earlier this scheme was named as Served From India Scheme (SFIS). Under the SEIS Scheme, the service exporters residing in India are eligible to claim the benefits.
Under the SEIS Scheme, the Government gives Incentives to Service Exporters from India. Only selected services are eligible under the SEIS Scheme as per Appendix 3D. One such service which is eligible is “Communication Services”.
However, Appendix 3D only provides the Broad description of Services which are Eligible (For Example Appendix 3D only states that “Communication Services” are eligible). But how does one know which exact services are included in Communication Services? In order to know and confirm that the service which you are providing is eligible under SEIS or not, one needs to look at the detailed description of SEIS Services.
Appendix 3D also has a column of Provisional CPC Code against each service type.
Introduction to CPC Classification
The Central Product Classification (CPC) is a detailed product classification consisting of all goods and services. Enforced by the United Nations Statistical Commission, CPC was introduced to be an international standard, clearly defining and explaining all the goods and services classified under it and assigning to each of them a CPC Code for correct recognition. This classification was necessary to give the claimants a clear idea under which category their product falls and what percentage of benefit they are entitled to.
In simple language, CPC Classification provides a description of Services harmonized by different codes which are centrally acceptable in many countries. Therefore, this CPC Classification plays an important role in deciding whether the service provided by you will be eligible under SEIS or not.
Now let’s decode these codes and understand its significance. The main Heading of “Communication Services” is further divided into sub-categories Motion picture and video tape production and distribution services, Motion picture projection service, Radio and television service, Radio and television transmission services, Sound recording.
|Communication Services||CPC Code|
|Motion picture and video tape production and distribution services||9611|
|Motion picture projection service||9612|
|Radio and television service||9613|
|Radio and television transmission services||7524|
These codes basically mean that if the Service that you are providing matches with the Code description then you are eligible to apply for SEIS Scheme.
Let us consider Company M/S XYZ. Company is into the export of Communication services and they have applied for SEIS. Hence, they have received a DUTY credit scrip for Rs. 1 Lakh (Say for Example). Now this Company is also into Import of Goods. Therefore they can set-off this Credit of Rs. 1 Lakh against the Basic Customs Duty which is payable to them at Customs during Import of Goods.
In the above Example, Company XYZ is into the Import of Goods. But what will happen to the scrip if the Company is not Importing anything? How will the Import Duty Credit be utilized? How will the scrip be beneficial to the Company?
It is here where we look at the core concept of the Freely Transferable Nature Of Rewards under SEIS.
It means that the Duty Credit Scrip is Freely Transferable/Saleable/Tradeable in nature. Therefore it can be sold to any individual who is into Imports of Goods or Services. This freely transferable nature of Scrips is also endorsed on the Duty Credit Scrip itself. PFB below the Cropped Image of Above Duty Credit Scrip.
It shows that the Scrip is Transferable in nature and it does not come with any actual user Condition.
This feature is unique to only SEIS. It wasn’t present in the earlier Served from India Scheme (SFIS).
Therefore to sum it up, Consider an organization Exporting Communication Services worth Rs. 1 crore in a particular FY and gets rewarded duty scrip of value Rs. 5 lakh (let’s assume Rate of Reward @5%). Now, either the holder can use it to import Goods/Services without paying duties up to Rs 5 lakh or sell it out in the market (in case he doesn’t import goods or utilize it) and get money in exchange of duty scrip.
Therefore, it can be said that rewards under SEIS Scheme are as good as cash incentive and all the service providers should take the SEIS Scheme benefits.