Customs, DRAWBACK, E-commerce, EXPORT INCENTIVE, FOCUS, Import-Export, MEIS, Merchant Exporter, Uncategorized



Foreign Trade Policy (FTP) is regulated by the Government of India by way of the Foreign Trade (Development & Regulation) Act, 1992. This Act is concerned with the development and regulation of foreign trade by facilitating imports into and augmenting exports from India. FTP is a set of guidelines and instructions formulated by Central Government covering a period of 5 years. The latest FTP has been issued covering period 2015-2020. Following schemes are mainly covered in the policy of 2015-2020.


The scheme has been designed by merging 5 different schemes of earlier policy (Focus Product Scheme, Market Linked Focus Product Scheme, Focus Market Scheme, Agri. Infrastructure Incentive Scrip, VKGUY) in one scheme. Duty credit script is granted on making export of specified products to specified countries. The scripts can be used for payment of duty liability and is freely transferable in market.


This scheme has replaced the earlier Served From India Scheme (SFIS). SEIS provides for rewards to all Service providers of notified services, who are providing services from India, regardless of the constitution or profile of the service provider. The rate of reward under SEIS would be based on net foreign exchange earned. The reward issued as duty credit scrip, would no longer be with actual user condition and will no longer be restricted to usage for specified types of goods but be freely transferable and usable for all types of goods and service tax debits on procurement of services / goods.


This scheme endeavours to neutralise the incidence of customs duties of the imported inputs. Advance authorisation are exempted from payment of basic customs duty, additional customs duty, anti-dumping duty and safeguard duty, if any. To avail such benefit under the scheme, there is a condition to fulfil export obligation. The scheme necessitates export with minimum value addition of 15%. Advance authorisations are issued to the exporters on the basis of their annual requirements.


DFIAs are issued to exporters to allow duty free import of inputs, fuel, oil, energy sources, catalyst which are required for production of export products. The DFIA authorisations are issued only for the specific products for which SION have been notified. Unlike certain exceptions, most of the provisions of DFIA are similar to the provision of Advance Authorisation Scheme.


DBK has been one of the popular and principal methods of encouraging exports. It is a relief by way of refund/recoupment of customs and excise duty paid on inputs or raw materials and service tax paid on input services used in manufacture of export goods. Duty Drawback is beneficial provision given under the Customs Act, 1962 and Drawback Rule, 1995. Drawback is not allowed when assessee opts for advance authorisation scheme. DBK could be all industry rate or brand rate. Latest Notification through which DBK allowed is 110/2015-cus.


EPCG Scheme allows import of capital goods at Zero customs duty. Alternatively, the Authorisation holder may also procure Capital Goods from indigenous sources. Import under EPCG Scheme is subject to an export obligation equivalent to 6 times of duty saved on capital goods to be fulfilled in 6 years. The scheme covers manufacturer exporters with or without supporting manufacturer(s), merchant exporters tied to supporting manufacturer(s) and service providers.


“Deemed Exports” refer to those transactions in which goods supplied do not leave country, and payment for such supplies is received either in Indian rupees or in free foreign exchange. It mainly covers supplied made to SEZ/ EOU / STP / EHTP / BTP. Deemed exports are allowed most of the benefits which are extended to exporter making physical exports outside India.

Amazon FBA in UK from India,, Business, Customs, E-commerce, E-commerce Business, EXPORT INCENTIVE, FOCUS, GST, GST Registration, GST Returns, Import-Export, Merchant Exporter, Uncategorized


CBEC has notified that inter-state/ domestic supply of taxable goods by a registered supplier to a registered recipient/ merchant exporter, for exports, shall attract a nominal GST rate of 0.1%, under CGST/ IGST/ UTGST, in line with recommendations of the 22nd GST Council Meeting held on 6 Oct. 2017, subject to fulfillment of certain conditions, as under:

  1. The registered supplier shall supply the goods to the registered recipient on a tax invoice;
  2. The registered recipient shall export the said goods within a period of ninety days from the date of issue of a tax invoice by the registered supplier;
  3. The registered recipient shall indicate the Goods and Services Tax Identification Number of the registered supplier and the tax invoice number issued by the registered supplier in respect of the said goods in the shipping bill or bill of export, as the case may be;
  4. The registered recipient shall be registered with an Export Promotion Council or a Commodity Board recognised by the Department of Commerce;
  5. The registered recipient shall place an order on registered supplier for procuring goods at concessional rate and a copy of the same shall also be provided to the jurisdictional tax officer of the registered supplier;
  6. The registered recipient shall move the said goods from place of registered supplier –
    1. directly to the Port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported; or
    2. directly to a registered warehouse from where the said goods shall be move to the Port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported;
  7. If the registered recipient intends to aggregate supplies from multiple registered suppliers and then export, the goods from each registered supplier shall move to a registered warehouse and after aggregation, the registered recipient shall move goods to the Port, Inland Container Deport, Airport or Land Customs Station from where they shall be exported;
  8. In case of situation referred to in condition (vii), the registered recipient shall endorse receipt of goods on the tax invoice and also obtain acknowledgement of receipt of goods in the registered warehouse from the warehouse operator and the endorsed tax invoice and the acknowledgment of the warehouse operator shall be provided to the registered supplier as well as to the jurisdictional tax officer of such supplier; and
  9. When goods have been exported, the registered recipient shall provide copyof shipping bill or bill of export containing details of Goods and Services Tax Identification Number (GSTIN) and tax invoice of the registered supplier along with proof of export general manifest or export report having been filed to the registered supplier as well as jurisdictional tax officer of such supplier.

The registered supplier shall not be eligible for the above mentioned exemption if the registered recipient fails to export the said goods within a period of ninety days from the date of issue of tax invoice.

  • 1% GST Rate for Supplies to Exporters: CBEC Notification 40/2017 Central Tax Rate 23 Oct. 2017
  • 1% GST Rate for Supplies to Exporters: CBEC Notification 41/2017 IGST Rate 23 Oct. 2017
  • 1% GST Rate for Supplies to Exporters: CBEC Notification 40/2017 UT Tax Rate 23 Oct. 2017
Business, Customs, GST, GST Registration, GST Returns, Import-Export, Indirect Taxes, Uncategorized



  1. In a relief to exporters, it was announced that IGST paid for the month of July and August will be refunded from October 10 and October 18 respectively.
  2. An e-wallet will be created for each exporter by April 1, 2018 to facilitate the refunding of their returns.
  3. Quarterly filing of returns and quarterly payment of tax for taxpayers having turnover up to Rs. 1.5 Cr from third quarter i.e. from October,2017.
  4. The due dates for filing the quarterly returns shall be announced in due course. Meanwhile, all tax payers have to file Form GSTR 1,2 & 3 for the month of July, August and September, 2017 on the monthly basis.
  5. GSTR 3B shall be required to be filed on monthly basis till December, 2017.
  6. The threshold for composition scheme has been hiked from Rs 75 lakh to Rs 1 crore.
  7. No requirement to pay GST at the time of receipt of advances on account of sale of goods for taxpayers having turnover up to Rs. 1.5 crore.
  8. Manufacturers and restaurants will pay 1 per cent, 2 per cent and 5 per cent respectively under composition scheme
  9. Exemption from registration for service providers making inter-State supply of services up to Rs. 20 lakh (Rs. 10 lakh in special category States except J&K)
  10. Suspension of reverse charge mechanism under Section 9(4) of the CGST Act and 5(4) of the IGST till 31st March 2018.
  11. Items including unbranded namkeen, unbranded ayurvedic medicines, ICDS food packages, khakra chapati, waste obtained from rubber, plastic and paper have been brought under the 5% slab.
  12. Job work rates rationalized on several services.
  13. Rate for Synthetic yarn; artificial yarn; spun yarn of manmade fiber reduced from 18% to 12%.
  14. Invoice Rules are being modified to provide relief to certain classes of registered person.

 Author: CA Rinki Mittal

GST, GST Returns, Uncategorized



Every registered dealer (except Input service distributors, composition dealers, suppliers of online information and database access or retrieval services who have to pay tax themselves, NR, Tax payer liable to collect TCS, Tax payer liable to deduct TDS) have to file a monthly return that contains details of all outward supplies i.e. sale made in Form GSTR1.

Suppose Ram is the registered dealer filing GSTR1               

⇓⇓⇓⇓Details of outward supplies filed by Ram in his GSTR1 will be auto-populated in GSTR2A of all the dealer to whom Supplies were made by Ram suppose Shyam is one of the dealer to whom supplies were made by Ram.

Now every dealer whose details filed above (Shyam in our example) shall verify, validate, modify or delete the details received under form 2A as per his records.

If any changes are made by dealer (Shyam) in form GSTR2A then such changes will be available in Form GSTR1A of Supplier (Ram). He can either accept or reject the details. If form 1A is accepted by Supplier (Ram), form GSTR1 furnished earlier shall stand amended to the extent of modifications accepted by him.


If changes made by Shyam are accepted by Ram then his form GSTR2A will be amended accordingly. On the basis of this form GSTR2 will be generated. GSTR2 is prefilled for a tax payer based on the detail filed in GSTR1 and validation made by both the parties.

Now dealer (Ram) has to file form GSTR3 from the information which is auto – populated through GSTR1 and GSTR2.  And have to pay any tax liability, interest, Penalty if any.


Author: CA Rinki Mittal

Income Tax, Penalty


A new section 234F has been inserted by the government in the Income Tax Act. As per this section, an individual would have to pay a fee of up to Rs 10,000 (maximum) for filing income tax return after the due dates specified in section 139(1) of the Act.

The fee to be levied is based on the time period of delay which is as follows:

  1. A fee of Rs 5,000 in case returns are filed after the due date but before the December 31 of the relevant assessment year or
  2. Rs. 10,000 in case it is filed after December 31 of the relevant assessment year.

However, as a relief to the taxpayers earning less than Rs 5 lakh the maximum penalty will be Rs. 1000.

Penalty for filing income tax return after due date is only applicable from FY 2017-18
i.e. this fee is applicable with effect from April 1, 2018 and will not apply for returns filed for FY 2016-17 for which the deadline is July 31, 2017.

For the purpose of filing income tax returns, financial year (FY) refers to the year in which you have earned the income through various sources such as salary, rent etc.

The financial year immediately following the above mentioned year is the assessment year for the preceding FY.

You are required as per income tax rules to file your income tax returns for the income earned in a financial year in the related assessment year.

This penalty will be applicable from assessment year April 1, 2018 and onwards and therefore apply to returns filed after this date. This means that all income tax returns to be filed for the financial year 2016-17 or assessment year 2017- 18 and before will not come under the purview of this section.

Currently, section 271F allows an assessing officer at his sole discretion to levy penalty of Rs 5,000 only if an individual fails to file his/her return before the end of relevant assessment year. This section will not be applicable from assessment year 2018-19 and thereafter but will be applicable for returns filed for FY2016-17 and before.

However, the current provisions of section 234A will still be applicable along with the newly introduced fees. According to Section 234A, simple interest is levied at the rate of 1% per month or part of it on any tax amount if not paid within due dates.

This interest will be payable for the period starting from due date of filing return till the date the return is filed. In case the return has not been filed at all then interest will be calculated from the due date till the date of completion of assessment order passed by the assessing officer.

However, the amount already paid via advance tax or TDS will be subtracted from the total tax payable plus interest along with the fees, applicable from April 1, 2018, as per section 140A of the Act.

If you have claimed a refund in your return which is filed after due date even then, fees provision will be applicable under section 234F.

Since all the new changes will be applicable from assessment year 2018-19 and onwards so even if you have missed the deadlines for earlier income tax returns, the penalty of maximum of Rs 10,000 will not be applicable.

GST, GST Registration



  • A trader dealing only in exempted goods or where his aggregate turnover is below Rs 20 lakh in the financial year, but not engaged in inter-state supplies, is not required to register under GST.
  • As per Section 2(6) – “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess;
  • Rs 20 lakh registration limit is only for intra-state traders.
  • Traders, thus, will not be able to avail of threshold exemption of Rs 20 lakh turnover, if they have inter-state supplies.
  • They have to register if they have inter-state Rs 20 lakh Threshold exemption is only for traders who are trading within the state.
  • But once registered, the traders will have to pay taxes on all supplies, even if turnover is less than Rs 20 lakh.
  • Even if there were no transactions in a certain month, return would have to be filed once registration was done.

As per section 22 Registration of CGST Act

  1. (1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees:

Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees.

(2) Every person who, on the day immediately preceding the appointed day, is registered or holds a licence under an existing law, shall be liable to be registered under this Act with effect from the appointed day.

Business, E-commerce, EQUALIZATION LEVY, Google Tax, Income Tax



The Google Tax was brought in by the honorable Finance Minister of India, Arun Jaitley in the Union Budget 2016. However, it is known as Google Tax around the world, yet in India it is known as the “EQUALIZATION LEVY”.


As per the Union Budget 2016, the budget states that any individual or entity who use Non-Resident technology services shall pay 6% of the total gross payment as the equalization levy to the government, but only if the total gross payment exceeds one lakh rupees for the single financial year. It is known as Google Tax or Equalization Levy.

This Law is specially made for the foreign e-commerce companies who has no permanently fixed establishments in India.


As of now, this tax law is applicable only on online advertisements. This tax applies to advertisers, not publishers. Means it will not affect your AdSense earning. If you Publish ads on your website with AdSense, this tax doesn’t apply because you are a publisher.

But if you are an advertiser and wants to publish your company’s/product’s ads then this tax will be applicable to you. And for the better or worse the government is preparing rules to expand the list of services under this rule which may be including app marketing and many others.

For example: Let’s suppose you run an organization and need to pay Rs. 10 lakhs to a foreign company for using their online ad benefits like the way many of the populace use Google ads or Facebook ads.

With this new tax, you have to withhold 6% of Rs. 10 lakh i.e. Rs. 60,000/ – and need to pay the equalization of Rs. 9,40,000/- only. Google tax of Rs. 60,000/ – should be paid to the legislature. Assuming that the companies will bear the loss of tax and do not increase their advertising rates.

Facebook, Google, Yahoo, and LinkedIn are major payers of this tax. Excluding the LinkedIn other companies have simply burdened the users with this additional tax.

In such case you have to withhold 6% of Rs. 10 lakh i.e. Rs. 60,000/ – and need to pay the equalization of Rs. 10,00,000/-. Google tax of Rs. 60,000/ – should be paid to the legislature totalling to Rs. 10,60,000/-

Currently, the equalization levy is applicable only on online advertisements, but news of including cloud computing and online entertainment services have been reported, if this turns out to be true then companies like IBM, Microsoft, Amazon Web Services, Apple and Netflix will also be affected.


The Budget has proposed that any  individual or entity  fails to deduct this tax or equalization levy or doesn’t deposit it with the government, then the entity will not be allowed to consider the expenses in calculating taxable profits. This will increase the taxable income, thereby hiking the company’s tax liability.

Amazon FBA in UK from India,, Amzon, Business, E-commerce, E-commerce Business, EXPORT INCENTIVE, FOCUS, Import-Export, Income Tax, Income Tax Laws in USA, Indirect Taxes, IRS, UK VAT, US Taxation


Indian exporters are exporting various goods like- Leather Bags, Leather Wallets, Handicrafts, Mobile Accessories, Soft toys, etc. to countries like- Dubai, Kuwait, Middle-east, Australia, Europe, etc. since long time.

Also, with the advancement of internet, many of the young entrepreneurs have started to export goods through online e-Commerce websites like- (USA),, (USA), etc.

Did you know that, Exporters are eligible for 100% refund of following taxes paid by them on export of goods-

(1) Central Excise Duty (12.5%),

(2) VAT/CST (5%-14.5%),

(3) Service Tax (15%), etc.


Also, Exporters are eligible for various export incentives which is about 4%-8% (as per product exported) of value of goods exported.


Most of the exporters are not aware about the incentives available to them which reduces their overall profit margin by 25%-30%.


Due to lack of awareness, many exporters export their goods as free samples and then receive Foreign Inward Remittance in their accounts or accounts of their family members & relatives. After withdrawing the export proceeds, they close such account without compliance with RBI Circulars in respect to closure of FIRC which results in serious non-compliance of Foreign Exchange Regulation Act, 1999 (FERA). Also, the Bank has your KYC details which are submitted by the Bank to the Reserve Bank of India (RBI) after 12 months from the date of receipt of foreign inward remittance. RBI then traces such defaulters and harsh action may be taken under the Prevention of Money Laundering Act (PMLA).


Such export proceeds remain unreported in Income Tax while submitting annual income tax return.


What if your export margins can increase by 25%-30% ?

What if you can comply with RBI/ FERA norms ?

What if you can report your actual sales & net profit figures to the Income Tax department ?


Yes, you can do it…!!


You may be located anywhere in India, we shall assist you in:

(1) Obtaining refund of- Central Excise, VAT/ CST, Service Tax paid on goods exported out of India,

(2) Obtaining various export incentives provided by Government of India,

(3) Obtaining Bank Loan for purchase of goods for exports,

(4) Proper accounting of purchases, sales, income, expenses, bank reconciliation, Receivable/ Payable monitoring, etc.

(5) Filing of VAT Returns, Income Tax Return, etc.

(6) Clearance of e-BRC with your AD Banker for Foreign Inward Remittance Certificate (FIRC) for amount received for inward remittance,

(7) Payment of Import Duties in the country of export,

(8) Payment of VAT/ Sales & Use Tax in country of export (for USA & UK),

(9) Payment of Federal taxes/ Income taxes in country of export (for USA & UK).


We relieve you from all the hassles, all the tough part, the calculations, the reconciliations, the taxes… all of them… and allow you to concentrate on the main part of your business… INCREASE SALES… INCREASE PROFITS…!!

Author: CA Vikram Jain

Amazon FBA in UK from India,, Amzon, E-commerce, E-commerce Business, HMRC, Import-Export, Indirect Taxes, UK VAT, VAT



 E- Commerce is all about… Growing Fast… or Dying Slow…!!


If you sell goods in United Kingdom, it is likely that you will be required to register for Value Added Tax (VAT). VAT in the United Kingdom is a tax on consumer spending. It is collected by VAT-registered traders on their sales within the EU territory, and passed on to the national tax authorities via VAT tax return filings.

You shall be required to get a UK VAT number if you comply with any One of the below mentioned conditions:

  1. You store your inventory in a warehouse situated in United Kingdom,
  2. You have your own showroom/ warehouse/ place of business in United Kingdiom,
  3. Your annual sales in United Kingdom exceeds £83,000/- during the financial year i.e. from April of current year to March next year.

You must register for VAT with HM Revenue and Customs (HMRC) if your business’ VAT taxable turnover is more than £83,000/-.

When you register, you’ll be sent a VAT registration certificate. This confirms:

  • your VAT number
  • when to submit your first VAT Return and payment
  • your ‘effective date of registration’ – this is the date you went over the threshold, or the date you asked to register if it was voluntary

You can register voluntarily if your turnover is less than £83,000, unless everything you sell is exempt. You’ll have certain responsibilities if you register for VAT.

Your VAT responsibilities: From the effective date of registration you must:

  • charge the right amount of VAT
  • pay any VAT due to HMRC
  • submit VAT Returns
  • keep VAT records and a VAT account

You can also reclaim the VAT you’ve paid on certain purchases made before you registered.

While you wait you can’t charge or show VAT on your invoices until you get your VAT number. However, you’ll still have to pay the VAT to HMRC for this period.

You should increase your prices to allow for this and tell your customers why. Once you’ve got your VAT number you can then reissue the invoices showing the VAT.


For UK VAT registration, you need to provide details like:

  • Expected Annual turnover,
  • business activity and
  • bank details.

Your registration date is known as your ‘effective date of registration’. You’ll have to pay HMRC any VAT due from this date.

You should get a VAT registration certificate within 14 working days, though it can take longer.

You can appoint an accountant (or agent) to submit your VAT Returns and deal with HMRC on your behalf.


You must register for VAT with HM Revenue and Customs (HMRC) if your business’ VAT taxable turnover is more than £83,000/-.

VAT taxable turnover is the total value of everything you sell that isn’t exempt from VAT.

You must register for VAT with HM Revenue and Customs (HMRC) if it goes over the current registration threshold in a rolling 12-month period. This isn’t a fixed period like the tax year or the calendar year – it could be any period, eg the start of June to the end of May.


There’s a time limit for backdating claims for VAT paid before registration. From your date of registration the time limit is:

  • 4 years for goods you still have, or that were used to make other goods you still have,
  • 6 months for services

You can only reclaim VAT on purchases for the business now registered for VAT. They must relate to your ‘business purpose’. This means they must relate to VAT taxable goods or services that you supply.

You should reclaim them on your first VAT Return (add them to your Box 4 figure) and keep records including:

  • invoices and receipts
  • a description and purchase dates
  • information about how they relate to your business now

When to tell HMRC: You need to tell HM Revenue and Customs (HMRC) about any changes to the following within 30 days or you could face a financial penalty:

  • the name, trading name or main address of your business
  • the accountant or agent who deals with your VAT
  • the members of a partnership, or the name or home address of any of the partners

Changing bank details: You must tell HMRC at least 14 days in advance if you’re changing your bank details.

You’ll also have to tell your bank to change your Direct Debit details if you pay your VAT by Direct Debit, but you shouldn’t do this within 5 banking days before or after your VAT return is due.

You must write to the Annual Accounting Registration Unit to change your Direct Debit details if you use the Annual Accounting Scheme. Include your registration number.

Death and illness: You must tell HMRC within 21 days if you take on the VAT responsibilities of someone who has died or is ill.

Author: CA Vikram Jain, Amzon, Business, E-commerce, E-commerce Business, GST, Import-Export, Income Tax, Income Tax Laws in USA, Indirect Taxes, IRS, US Taxation, VAT

E- Commerce is all about… Growing Fast… or Dying Slow…!! Series 1, Lesson 5:

CA Vikram Jain

E- Commerce is all about… Growing Fast… or Dying Slow…!!

Series 1, Lesson 5:


As per Department of Treasury, Internal Revenue Services, United States of America-

“A Non- resident alien usually is subject to U.S. Income Tax only on US Source Income“.

US Source Income- for Sales of inventory – Geographical area where the goods are sold shall be considered as determining factor for US Source Income.

Inventory property-

Inventory property is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business.

Income from the sale of inventory that you purchased is sourced where the property is sold.

Generally, this is where title to the property passes to the buyer.

For example, income from the sale of inventory in the United States is U.S. source income, whether you purchased it in the United States or in a foreign country.

Income from the sale of inventory property that you produced in the United States and sold outside the United States (or vice versa) is partly from sources in the United States and partly from sources outside the United States.

These rules apply even if your tax home is not in the United States.

Conclusion- This means, if you are a non-resident in USA and sell goods in geographical territories in USA, you shall be liable to pay Income Tax in USA.

Financial Year in USA ends on- 31st December.

Due date for filing Income Tax Return in USA- within 105 days from end of Financial year i.e. 15th April of next year.

Eg.: For FY 01.01.2015 to 31.12.2015, due date for filing income tax return shall be 15.04.2016.

Important Note: As per Double Tax Avoidance Agreement (DTAA) between USA & India, if you pay tax in USA, you can claim benefit of the tax paid in USA while filing your Income Tax Return in India.

Non- compliance to Income Tax laws in USA-

Intentional non- compliance to USA Income Tax laws is considered as “TAX EVASION” which is considered as an act liable for Criminal prosecution in USA.

Most of the e-Commerce Sellers wish to comply with laws of the land where they trade in business. Also, with professional help, they can buy mental peace and concentrate on the core business activities of exports, exploring new market places, etc.

However, due to non- availability of professional help they send goods as free samples, gifts, etc. which is against the laws.

Also, they cannot claim export benefits, incentives, drawbacks, etc. and end up in non-compliance which may cause serious business injuries at a later stage.

Benefits of exporting goods in an organized manner-

COMPARATIVE ANALYSIS: Export of Goods to USA through official channel
Export of Goods to USA as Sample/ Free gift

  1. Foreign Exchange Management Act 1999

(a). Selling through official channel- Complied with.

(b). Supplying goods as free sample/ gift- Annual maximum limit for supply of free gifts under FEMA is Rs. 1.00 Lakhs. If goods are supplied as free gift above the prescribed limit, it shall be deemed to be contravention of FEMA and shall be considered as civil/ criminal offence.

  1. Foreign Inward Remittance Certificate (FIRC)

(a). Selling through official channel- FIRC (for payment received in foreign currency) is closed on receipt of export proceeds and RBI guidelines are complied with.

(b). Supplying goods as free sample/ gift- RBI/ FEMA guidelines can’t be complied with against goods sent as free gift.

  1. Indian Income Tax Act, 1961

(a). Selling through official channel- For turnover upto Rs. 2.00 Crore – Assessee has to declare net profit @ 8% (No audit required). For turnover above Rs. 2.00 Crore– Audit under Section 44AB is to be conducted and Tax Audit Report to be obtained in Form 3CA/ 3CB & Form 3CD.
(b). Supplying goods as free sample/ gift- No proper financial books of accounts can be made available for audit. No Tax Audit Report can be issued as goods are supplied as free sample.

  1. Refund of Excise Duty

a). Selling through official channel- Excise duty is levied @ 12.50% by the manufacturer. The same is- waived off or refundable in full, for export of goods through official channel which results in decrease in cost of purchase.

(b). Supplying goods as free sample/ gift- No refund of Excise duty is available for goods sent as free samples/ gifts.

  1. Refund of Local Sales Tax

(a). Selling through official channel- Local Sales Tax (nearly 14%) is waived in full for export of goods against Form H- for exports- through official channel which results in decrease in cost of purchase.
(b). Supplying goods as free sample/ gift- No refund of Sales tax is available for goods sent as free samples/ gifts.

  1. Refund of Service Tax

(a). Selling through official channel- Service Tax @ 15% is levied on freight, transportation, insurance, currency conversion charges, Custom House Agency charges, etc. The same are refundable in full – for exports- through official channel which results in decrease in cost of purchase.
(b). Supplying goods as free sample/ gift- No refund of Service tax is available for goods sent as free samples/ gifts.

  1. Export incentive

(a). Selling through official channel- Export incentives are available on goods exported through official channel @ 2% to 5% on FOB value of goods exported various products.

(b). Supplying goods as free sample/ gift- No such incentive is available for goods sent as free samples/ gifts.

  1. Credit facilities

(a). Selling through official channel- Bank Loan/ Credit limits @ 6-7% per annum for exporters exporting goods through official channel.

(b). Supplying goods as free sample/ gift- No such credit limit is available.

You may hire a professional consultant who can guide you in a systematic manner for growth in your exports business.

Author: CA Vikram Jain