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EOP Extension Fees Reduced and Simplified Drastcally by DGFT

The Directorate General of Foreign Trade announced on Wednesday 18th January 2023, that it has made the process of charging a composition fee for extending the export obligation period under the Advance Authorisation Scheme simpler, in order to improve ease of doing business. 

The Advance Authorisation Scheme allows for duty-free import of inputs that must be used in products that are to be exported within a specific timeframe, and these products cannot be sold on the domestic market. 

The DGFT has made changes to the Handbook of Procedures of the Foreign Trade Policy in order to simplify the process of charging the composition fee for extending the export obligation period and to improve the IT capabilities of the DGFT.

Below is the Public Notice No 52/2015-2020 Dated 18th January 2023 for your reference:

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In exercise of powers conferred under Paragraph 1.03 and 2.04 of the Foreign Trade Policy 2015-2020, as amended from time to time, the Director General of Foreign Trade hereby makes the following amendments in the provisions of Para 4.42 of the Handbook of Procedures 2015-2020:

 

Existing Para 4.42

Amended Para 4.42

(d) Extension in export obligation period for Authorisations issued under Appendix-4J shall be allowed for a period not more than the half of the stipulated export obligation period. In such cases, composition fee shall be levied @ 0.5% per month of unfulfilled FOB value, in case exports effected are more than 50% in value terms within initial Export Obligation period and @1% per month where less than 50% exports in value terms have been effected within initial export obligation period.

(d) Extension in export obligation period for Authorisations issued under Appendix-4J shall be allowed for a period not more than the half of the stipulated export obligation period.

In such cases, composition fee shall be levied in such a manner as prescribed hereunder:

 

CIF VALUE OF ADVANCE AUTHORIZATION (AA) LICENSES ISSUED

COMPOSITION FEE TO BE LEVIED (IN Rs.)

Up to Rs.2 Crores

5,000

More than Rs.2 Crores to Rs.10 Crores

10,000

Above Rs.10 Crores

15,000

 

(e) Regional Authority may consider a request of Advance Authorisation holder for one extension of EO period upto six months from the date of expiry of EO period subject to payment of composition fee of 0.5% of the shortfall in EO. Authorisation holder will have to submit a self – declaration to RA stating that unutilised imported/domestically procured inputs are available with the applicant.

 

(e) Regional Authority may consider a request of Advance Authorisation holder for one extension of EO period upto six months from the date of expiry of EO period subject to the payment of composition fee as prescribed hereunder:

CIF VALUE OF ADVANCE AUTHORIZATION

COMPOSITION FEE TO BE LEVIED (IN Rs.)

Up to Rs.2 Crores

5,000

More than Rs.2 Crores to Rs.10 Crores

10,000

Above Rs.10 Crores

15,000

Authorisation holder will have to submit a self – declaration to RA stating that unutilised imported/domestically procured inputs are available with the applicant.

 

(f) Request for further extension of six months after first extension as in (e) above can be considered by Regional Authority, provided Authorisation holder has fulfilled minimum 50% export obligation in quantity as well as in value, on pro-rata basis. This will be subject to payment of composition fee @ 0.5% per month on unfulfilled FOB value of export obligation. No further extension shall be allowed by Regional Authority. This provision shall also be applicable to Advance Authorisations issued during FTP 2009-2014. However, only two extensions of six months each as mentioned above can be allowed subject to payment of composition fee and under no circumstance Regional Authority shall allow any extension beyond 12 months from date of expiry of EO period. At the time of filing application for second EO extension, the Authorisation holder will have to submit a self – declaration to RA stating that unutilised imported/domestically procured inputs are available with the applicant.

(f) Request for further extension of six months after first extension as in (e) above can be considered by Regional Authority, subject to the payment of composition fee as prescribed hereunder:

CIF VALUE OF ADVANCE AUTHORIZATION

COMPOSITION FEE TO BE LEVIED (IN Rs.)

Up to Rs.2 Crores

10,000

More than Rs.2 Crores to Rs.10 Crores

20,000

Above Rs.10 Crores

30,000

No further extension shall be allowed by Regional Authority. However, only two extensions of six months each as mentioned above can be allowed subject to payment of composition fee and under no circumstance Regional Authority shall allow any extension beyond 12 months from date of expiry of EO period. At the time of filing application for second EO extension, the Authorisation holder will have to submit a self – declaration to RA stating that unutilised imported/domestically procured inputs are available with the applicant

(g) Deleted

(g) Whenever a ban / restriction is imposed on export of any product, export obligation period in respect of Advance Authorisation already issued prior to imposition of ban, would stand automatically extended for a period equivalent to the duration of ban, without any composition fee.

 

(h) The revised composition fee for EOP extension under para 4.42 of HBP (2015-20) will only be applicable for the requests made on or after 19.01.2023. However, existing/pending applications shall be governed by the earlier relevant provision of HBP (2015-20).

     

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The previous formula for composition fee was complex and hard to grasp, which made the process more burdensome and arduous for exporters.

The revised composition fee formula, which calculates the fee based on a specific rate for different levels of the “CIF (cost, insurance, freight) value of authorisation,” has been made more straightforward and easy to calculate, according to the Directorate General of Foreign Trade. This change will automate the process of extending export obligations with minimal human intervention and reduce the risk of errors or misconceptions.

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