Foreign Trade Policy 2023: One-off default regulation, e-commerce exports, trade payments in rupee focus areas

An amnesty program for one-off settlement of export commitment arrears, a push towards e-commerce exports, trade payments in rupees and trade norms for merchanting were identified as key focus areas of the government’s new foreign trade policy announced on Friday. The government reiterated its $2 trillion target for exports of goods and services by 2030 with a shift in incentives to a decree- and claims-based regime.

The foreign trade policy, which takes effect on April 1, was unveiled after the previous policy expired three years ago, which was then extended until March 31, 2023 amid the Covid-19 pandemic and global geopolitical turmoil. The previous foreign trade policy for 2015-2020 had an export target of US$900 billion by 2020, which was extended by three years along with the policy. India is expected to end this fiscal year with total exports of $760-$770 billion, up from $676 billion in 2021-22.

The new foreign trade policy has not set an end date for trade policy targets, with officials saying the policy will be dynamically updated based on feedback from stakeholders. Director-General for Foreign Trade (DGFT) Santosh Sarangi said the policy would be updated “as needed”.

Trade and Industry Minister Piyush Goyal said the export target of $2 trillion by 2030 would be met. He also said the industry cannot thrive solely on the basis of subsidies or crutches.

Trade Minister Sunil Barthwal said the government is focused on strengthening the rupee payments system and said India stands ready to trade rupees with countries facing currency failure or dollar shortages.

Duty exemption schemes such as pre-approval and duty-free import authorization (DFIA) will continue. Four new export cities – Faridabad for clothing, Moradabad for handicrafts, Mirzapur for handmade carpets and Varanasi for hand weaving and handicrafts – were declared.

The inclusion of green energy in foreign trade policy is also being pushed. Battery Electric Vehicles (BEV) of all types, vertical farming equipment, wastewater treatment and recycling, rainwater harvesting systems and rainwater filters, and green hydrogen have been added to green technology products and are now eligible for reduced export obligations under the Export Promotion Scheme for Capital Goods (EPCG).

The Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) dual-use export policy has been consolidated in one place in the Trade Policy. A focus is on policy simplification to facilitate the export of high-value dual-use items/technology such as UAVs/drones, cryogenic tanks, certain chemicals, etc.

Under the Exporters Amnesty Scheme, an online registration portal will be established and there will be a six-month window until September 30 to claim the system. It covers all pending export non-compliance cases of licenses that can be legalized against payment of all exempted duties in proportion to non-compliant export commitments. The maximum interest is limited to 100 percent of this tax exemption, the portion of the additional duties and special additional duties does not bear interest. Cases investigated for fraud and diversion are not eligible under this scheme.

Abhishek Jain, Tax Partner, KPMG said: “The continuation of programs such as Advance Authorization, EPCG with simple procedures will continue to encourage exports from India and facilitate doing business. Emerging sectors such as battery vehicles, e-commerce and merchanting have been given the boost they need. Another big point was the introduction of the amnesty program to be used by various exporters. Finally, for sectors/industries with unresolved expectations/issues, timely statements should be submitted to ensure policy updates.”

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