Service Export from India Scheme (SEIS) is a new tax credit scheme introduced by Government of India via Foreign Trade Policy 2015-20 (FTP).
Under this scheme, an exporter of the notified services can claim for rewards in the form of Duty scrips. This scheme is valid for all service providers from India irrespective of profile of the service provider.
Thus, an eligible service exporter can avail duty scrips equal to 3% - 5% of Net Foreign Exchange Earnings. The rate depends on the type of service provided.
Net foreign exchange = Gross Foreign exchange earnings by the IEC (Import Export Certificate) holder reduced by total expenses and payments/ remittances. It must be noted that all must be related to service sector in the given Financial year.
It is interesting to note that the duty scrips are freely transferable and usable for all types of debits of goods and services on procurement. Debits made will be eligible for CENVAT credit or drawback. Additionally the scrips can be used for the following purposes –
Payment of Custom duties on imports
Payment of excise on domestic procurement, including capital goods
Payment of service tax
It can be noted that the scrips are freely tradable, but same would attract VAT as it will be treated as goods for VAT purpose.
Also such duty credit scrip would be valid for a period of 18 months from the date it has been initially issued.
As can be seen from the above, this scheme gives a unique opportunity to the service exporters from India to claim an additional benefits of upto 5% of the net foreign exchange earning over and above other benefits already provided under various other schemes.
Actual realization of the benefit may require the service exporter to follow the following steps, professional help from Chartered Accountants working in the same field may make the entire process less cumbersome.
Identification whether the service falls under the notified services
Rate of exemption available for the said service (3% or 5%)
Whether various other parameters as listed in Foreign trade policy are satisfied
Determination of Net Foreign Exchange earnings, which includes deduction of all the expenses incurred in providing the said service.
The same needs to be verified and certified by a Chartered Accountant before presenting the case to DGFT (Director general of Foreign Trade).
Certification of Net foreign exchange is a must condition by DGFT.
Once DGFT receives the application, the same is decided on the merits of the information provided and if everything is satisfactory, Duty scrips will be allotted to the service exporter. Also client representation can be made by the CA in front of DGFT in case of any anomalies.
Some prerequisites and procedural aspects –
To get the duty credit scrip, application must be made within 12 months from the end of relevant financial year of the claim period
A minimum of US $15,000 of net free foreign exchange earnings is a must to be eligible for the scheme
An active IEC (Import export certificate) is a must at the time of providing such services to be eligible for the scheme.
As it can be seen, applying for the scheme can lead to benefits for the exporter and should be availed by every service exporter for the period between 2015-20. This should be applied for every financial year at the end of the same. Thus, the same can be applied for currently for the services exported for the period of 1 March 2015 to 31 March 2016.
CA firms can help in this entire process of whether preparing Net foreigh exchange earnings, or certifying the Net earning calculated (as is mandatory by DGFT), and sorting out all the regulatory issues in between.