After witnessing numerous extensions from time to time over the past few years, finally, the long awaited new Foreign Trade Policy 2023 ('FTP' or 'the Policy'), based on principles of 'Trust' and 'Partnership' with exporters, with the aim to take India's exports to two (2) trillion dollars by 2030, was unveiled on April 01, 2023. The new FTP encompasses a dynamic and perennial policy with the aim to accommodate the emerging industrial and economic requirements from time to time. Standing tall on four (4) pillars viz. incentive to remission, export promotion to collaboration, ease of doing business and focus on emerging areas, the policymakers have made an impressive effort to meet the expectations of the industry and make India a global economy.
One of the key highlights of the FTP undoubtedly is the introduction of a dedicated chapter for ecommerce exports. The Government has rightly identified the great potential and future in retail that this sector holds. With an aim to promote the current substantial surge in e-commerce trade, all benefits under the FTP have been extended to e-commerce exports as well. The Policy aims to operationalize Dak Ghar Niryat Kendras throughout India to facilitate cross border e-commerce and international market reach to artisans, weavers, craftsmen, and Micro, Small and Medium Enterprises ('MSMEs'). Moreover, the FTP provides for establishment of designated hubs with warehousing to help e-commerce aggregators for easy stocking, customs clearance and return processing. The government also stated its intensions to bring a comprehensive e-commerce policy addressing the export/import ecosystem soon, based on the recommendations of the working committee on e-commerce exports and inter-ministerial deliberations.
Going forward with the vision of transforming India into major merchanting hubs like Dubai, Singapore and Hong Kong, the Policy has introduced provisions for merchanting trade. Merchanting trade as we all know involves shipment of goods from one foreign country to another without touching Indian ports, involving Indian intermediary is a step to reduce transaction costs for smaller firms, which have a major share in India's goods exports. However, this policy will not be applicable for goods/items covered in the Convention on International Trade in Endangered Species of Wild Fauna and Flora ('CITES') and Special Chemicals, Organism, Materials, Equipment and Technologies ('SCOMET') list.
Another important move relates to the SCOMET includes an endeavour to streamline the licensing procedure for SCOMET by simplifying policies to facilitate export of dual use high-end goods/ technology such as drones, certain chemicals etc.
The objective behind this is clearly to bring emphasis on a robust export control system in India, which could provide access to dual-use high-end goods and technologies to Indian exporters.
Moreover, given the Policy aims at boosting the exports from India, major reforms made in this direction is focusing on new towns like Moradabad, Mirzapur, Varanasi for boosting exports of specialized items from there such as apparel, handicrafts, handmade Carpet & Dari and handlooms. Further, there is also an initiative taken towards making specified districts as export hubs to promote exports at the district level and accelerate the development of the grassroots trade ecosystem.
The new FTP also revises the export performance threshold(s) used as a yardstick to give star ratings to export houses, which will open more doors of better branding opportunities in export markets and help exporters avail more benefits as available at higher rated export houses. The Government not only aims at increasing exports from India but also targets to work towards making Indian Rupee a global currency and facilitating international trade settlement in INR. With this vision in place, the Policy brings the revolutionary amendment to the effect that all FTP benefits would now be extended to exports realisations made in INR through VOSTRO Accounts setup as per RBI instructions1.
Digitisation is being propelled to implement a paperless, online environment, building on the 'ease of doing business' initiative. With the automation of the approval processes, FTP aims at reducing the application processing time for various permissions i.e. Advance Authorization, Export Promotion Capital Goods, revalidation of authorizations and extension of export obligation period, from earlier three days/one month to only one day. Moreover, automatic approvals of 'e-certificate of origin' and automating the application process for 'export obligation discharge certificate' are some other areas wherein the Policy targets to bring e-initiatives, thereby reducing time and efforts involved.
The Ongoing tax neutralisation schemes like Export Promotion Capital Goods Scheme, Advance Authorisation and the Remission of Duties and Taxes on Exported Products ('RoDTEP') and remission of state and central taxes and levies will continue some amount of process re-engineering. However, it is important to note that such subsidies provided by the Indian Government earlier vide these schemes have been questioned in the WTO alleging that such subsidies should be prohibited under the Agreement on Subsidies and Countervailing Measures ('ASCM'). However, the matter is at an appellate stage in the WTO. However, interestingly the Government does seem to keep its stand before the WTO regarding these schemes intact. Further, due consideration must also be given to the nitty gritty of newer subsidies so that it does not get challenged under ASCM.
Another big-ticket announcement made under the Policy is the introduction of Amnesty Scheme i.e. "Amnesty scheme for one time settlement of default in export obligation by Advance and EPCG authorization holder". The Amnesty Scheme intends to close the cases of defaults in Export Obligation (EO) under specified schemes, wherein the EO period was valid beyond August 12, 2013 including the extended peoteriod(s). Under the Amnesty Scheme, exporters can regulate pending cases by paying full customs duties exempted in proportion to unfulfilled EO with interest capped at 100% of duty amount. Further, interest will not be payable on portion of Additional Customs Duty and Special Additional Duty.
Although the Policy has a lot to offer, it failed to address the much-expected new policy for the Service sector. In August 2021, the Government introduced a new policy i.e. Remission of Duties or Taxes on Export Products Scheme (RoDTEP) for goods exporters, however, the duty remission scheme for service exporters i.e. Duty Remittance of Export Services Policy ('DRESS') which was on the cards in place of Service Export Incentive Scheme (SEIS) gets completely missed in this Policy.
Within the framework of the Government's aim of Atmanirbhar Bharat and boosting domestic manufacturing, strengthening the export base and encouraging ease of doing business, and it is a step ahead of the previous foreign trade policies.
The focus on digitization and speedy approvals, globalization of rupee, continuing benefits to e-commerce industry are forward looking initiatives by the Government and will support the Indian economy in the long-run.
Footnote
1 RBI/2022-2023/90, A.P. (DIR Series) Circular No. 10 dated July 11, 2022
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