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Duty-free credit entitlement certificate route norms relaxed — Service providers allowed to import `any' capital goods

K.R. Srivats

New Delhi , Feb 2

IN a reversal of its earlier stance, the Finance Ministry has now permitted all service providers to import "any capital goods" under the duty-free credit entitlement certificate (DFCEC) route.

The only exception to the latest standpoint would be import of agriculture, dairy products, motorcars, sports utility vehicles and all-purpose vehicles. These products and items cannot be imported under the entitlement available in the DFCEC route.

Under the DFCEC route, service providers (other than hotels) are entitled to duty-free imports equivalent to 10 per cent of the average foreign exchange earned by them in preceding three licensing years. Hotels are entitled for duty-free imports equivalent to 5 per cent of the average foreign exchange earned by them in preceding three years.

The Exim Policy now specifies that the duty-free entitlement can be used to import "any capital good including spares, office equipments and professional equipments, office furniture and consumables".

This entitlement would be available only to those service providers, who have a total foreign exchange earning of over Rs 30 lakh in the preceding one/two/three licensing years.

Before the latest change, the Exim Policy provided that the duty-free entitlement under DFCEC is to be used for import of spares, office equipment and furniture, professional equipment and consumables other than agriculture and dairy products. Further, the entitlement was available only to those service providers who have an average foreign exchange earning of over Rs 10 lakh in the preceding three licensing years.

In November last year, the Finance Ministry had, after due consultation with the Commerce Ministry, taken the position that service providers would not be permitted to import capital goods which are other than office equipment and professional equipment under the DFCEC route. The rationale for such a position then was that the service providers could always avail the export promotion capital goods scheme (EPCG) scheme for import of capital goods other than office equipment and professional equipment.

So what has prompted the Finance Ministry to change its stance? According to official sources, the change has been brought about to appease the service providers, who had demanded that all capital goods (even those that are not in the nature of professional or office equipment) be allowed under the DFCEC route

"The issue of importability of capital goods under DFCEC had recently been re-examined. The revenue department has now operationalised the new position along with the changes that were made to give effect to the Exim facilitation measures announced by the Commerce Minister on January 28 this year," sources said.

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