There is a term called service exports from India, and multiple segments are included. The idea is to highlight the promotion of all services from India by allowing duty scrip credits applicable for eligible exports. Getting rewarded is a significant objective and this blog is intended for small-term entrepreneurs to make them aware of the Government incentives related to the given segment.
What is SEIS?
The Service Exports from India Scheme (SEIS) is a program under the Indian Foreign Trade Policy aimed at promoting service exports from India. It provides incentives to service providers based in India, regardless of the form of the company, to encourage the export of notified services from India.
The scheme offers duty credit scrips, which are redeemable against payment of customs duties on imports, as well as income tax exemption and duty drawback benefits.
SEIS Schemes
Different Categories of SEIS Schemes
SEIS provides incentives for various service categories such as travel, transport, construction and repair, computer-related services, and more.
The scheme also covers passenger transports, vessel and boat rentals, freight and cargo transportation, pushing and towing services, rental of aircraft with crew members, maritime transport, airport operations, and ground handling.
How to Apply for SEIS Schemes?
Eligible exporters can apply for SEIS schemes by following the application process outlined by the Directorate General of Foreign Trade (DGFT).
Documents Required
Significant paperwork is necessary for the SEIS scheme, including different types of authorization and other relevant documents.
Check the Status of SEIS Applications
The status of SEIS applications can be checked through the official channels provided by the DGFT.
Procedure to Withdraw
The procedure for withdrawing benefits under the SEIS scheme can be obtained from the relevant authorities or the official documentation. To know more, reach out to the experts at Vakilsearch right away!
SEIS Eligibility
The Service Export from India Scheme (SEIS) provides incentives to service providers engaging in international trade. To be eligible for SEIS benefits, certain criteria must be met. Here is an overview of the eligibility criteria:
Modes of Service Export:
Only services rendered in Modes 1 and 2 are eligible for the SEIS Scheme. Modes 3 and 4 are not eligible to claim SEIS incentives.
Modes of Service Export Explained:
- Mode 1 – Cross Border Trade: Example: An Indian audit firm providing services to a foreign company in London.
- Mode 2 – Consumption Abroad: Example: A foreign tourist from America paying for accommodation in India using an international credit card.
- Eligible Entities: Service providers offering notified services, as per Appendix 3D, are eligible for SEIS benefits. For instance, software services exporters are not qualified for SEIS.
- IEC Code Requirement: To claim SEIS benefits, the service exporter must have an active Importer Exporter Code (IEC Code).
- IEC Code Activation Date: Services provided by the exporter after the activation date of the IEC Code are eligible for SEIS benefits. Invoices generated after this date can be considered for rewards under SEIS.
- Minimum Net Free Foreign Exchange Earnings: Eligible service exporters (companies, LLPs, or partnerships) should have a minimum net free foreign exchange earnings of $15,000 in the year of rendering services to apply for SEIS. Individuals and sole proprietors must have a minimum of $10,000 in net free foreign exchange earnings.
- Net Foreign Exchange Earnings Calculation: Net Foreign Exchange Earnings = Gross Foreign Exchange Earnings – Total Foreign Exchange Payments/Remittances/Expenses borne by the service provider in the financial year.
- SEZ Units Eligibility: SEZ (Special Economic Zone) units are eligible for SEIS benefits, while EOU (Export Oriented Unit), STP (Software Technology Park), BHTP (Bio-Technology Park), EHTP (Electronic Hardware Technology Park) units are not eligible to claim SEIS incentives.
- Acceptance of Indian Rupees: Some eligible services are allowed to accept Indian rupees towards their service charges instead of foreign currency, as listed in Appendix 3E.
Inclusion of Free Foreign Exchange:
Free foreign exchange earned through international credit cards and other instruments, as permitted by the RBI, is considered in the computation of the value of exports.
Meeting these pre-conditions is crucial for service providers to avail themselves of the benefits provided by the SEIS Scheme.
SEIS Benefits
The SEIS (Service Exports from India Scheme) offers various benefits to service providers and investors. The benefits of SEIS include incentives, tax reliefs, and duty credit scrips. Here are the benefits of SEIS based on the search results:
Incentives for Service Providers:
- Service providers of selected services are entitled to a 3%, 5%, or 7% incentive on the net foreign exchange earned through duty credit scrips.
- The duty credit scrips are transferable and can be used for payment of essential customs duty and specific other duties.
- The incentives are calculated based on the net foreign exchange earnings for the export of qualified services in a financial year.
- To claim the incentives, the service provider is required to have an active Importer Exporter Code (IEC) at the time of rendering such services.
- The entitlement value for the SEIS benefits is based on the net foreign exchange earned and is listed in Appendix 3D.
Tax Benefits for Investors:
Investors can invest up to £200,000 in SEIS-eligible companies each tax year and claim up to 50% of this back through income tax relief.
Directors that have invested in their own company under SEIS can claim tax relief.
Procedure for Disbursing SEIS Benefits:
- An online application needs to be filed on the DGFT server, and the relevant information needs to be entered in the SEIS ECOM module to apply for SEIS benefits.
- Necessary documents such as Importer Exporter Code (IEC Code), application form ANF-3B, CA certificate, statement showing the nexus between invoices and FIRC, are required for applying to get the SEIS License Services.
- The company must meet certain criteria to apply for SEIS, such as trading for under two years, having less than 25 employees, and not having more than a certain turnover.
- In essence, the SEIS scheme offers a range of benefits to service providers and investors, including incentives, tax reliefs and duty credit scrips. The procedure for disbursing SEIS benefits involves meeting specific criteria and submitting necessary documents.
SEIS Claims: Everything You Need to Know
- Under the SEIS scheme, service exporters for eligible service categories are granted benefits in the form of transferable Duty Credit Scrips as a percentage of Net Foreign Exchange earned on the export of qualified services in a financial year.
- The Duty Credit Scrips can be used for the payment of Basic Customs Duty and certain other duties as listed in the Foreign Trade Policy 2015-20.
- The rate of reward is based on Net Foreign Exchange earned and is listed in Appendix 3D of the Foreign Trade Policy 2015-20.
- Claims for services rendered in a particular year can be filed up to 31st March of the third year. However, if submitted after 31st March of the first year, a certain late cut/penalty is applicable to the total entitlement.
- Eligible service providers include companies, partnerships, and proprietorships providing notified services as per specified modes
- The application process for SEIS involves registering on the Directorate General of Foreign Trade (DGFT) website, linking the existing Importer-Exporter Code (IEC), and applying for the SEIS scheme under the services section
If you wish to calculate SEIS rewards and incentives or understand SEIS conditions and eligibility, request a callback from our experts today!
What is a Duty Credit Scrip?
Only eligible service providers are entitled to a duty credit scrip on which a specific rate about the net foreign exchange can be earned. Along with that, one should note the number of customs duties, excise duties, types of GST needed, and all kinds of export obligations like obtaining a RCMC Certificate, that are also fulfilled in the long run. Significant paperwork is necessary for Service Exports from India Scheme, EPCG and types of authorisation, and once that is done, the process of service export moves on smoothly.
What Are Some of the Reward Rates in the SEIS Scheme that We Have Now?
Some of the rates of reward made between April 2015 to September 2015 in the segment of 5% reward in the professional services included legal services, accounts and audit, taxation, engineering, architectural service, veterinary, medical, dental, urban planning, midwifery, nursing, and all those services that are provided by physiotherapists and also paramedical staffs.
Apart from this, there are 5% rewards in research and development services, and these segments include research and development in humanities, natural science, and interdisciplinary areas. There is also an option of a 5% rate of reward related to all those cases considered to be services where there are no operators, like shipping, aircraft industry, transport equipment and machinery and other equipment. This 5% applies to radio and motion picture service, transmission service, television and videotape production, synthesis and distribution network services.
If you want to apply in case of construction and other relatable engineering services, then also there is a provision for a 5% rate of reward in case of general construction works that are related to the building, any type of civil engineering, all kinds of assembly and installation works, and everything related to the construction and completion of any building work.
What About the Reward in the Educational and Environmental Sectors?
There is also the affirmation of the 5% reward rate in the educational and environmental sectors. Primary and secondary educational services, higher education and all types of adult education fall under this reward category. Apart from this, sewage, refuse disposal, and various sanitation services can be ascribed to this 5% reward category.
Since the health sector is also an emergency sector, the reward rate applies to hospital services.
Recreation, Culture, and Tourism: Rate of Reward
Apart from the above areas, it is also in the field of tourism, travel, recreational, cultural and sporting services that we find the 5% reward rate. These include hotels and restaurants (3% reward), travel agencies and the services provided by the tour operators (5%) and tour guide services (5%).
For a large number of entertainment services like theatre, live performance groups and bands, circuses etc., news agencies, libraries, archives, local, state and central museums, and sports, there is a 5% rate of reward that is allotted.
Under the Service Exports from India Scheme scheme, there is also the 5% rate of compensation that applies to passenger transports, vessel and boat rentals, freight and cargo transportation, and all types of pushing and towing services. Apart from this, the SEIS scheme also applies to the rental of any aircraft with crew members, all sorts of maritime transport, airport operations, and all types of ground handling. The reward is also applicable for the rental all commercial vehicles that use the operator’s system.
Conclusion
India’s Service Exports from India Scheme volume, on the whole, consists of both segments, i.e. service and merchandise. The overall revenue earned from this segment during 2019 – 20 has been recorded to be among the highest. The travel and tourism segment has been added after the pandemic outbreak, contributing significantly to the Indian economy. Revenue accruals have increased considerably, right from the year 2019 to 2022, has been stated by the ministry.
Major economies across the globe have signed trade deals, and India has been promoting medical tourism and other forms of tourism essentially, post the outbreak of the pandemic. Small firms promoting travel, restaurants and hotels have been primarily enabled in the given category, which has added to the overall Gross domestic product. However, the registration process needs to be completed per the norms laid down by the Indian Government. Most of the small managed firms disbursing services like travel and tourism have been guided in this blog to register the brands under the given category, i.e. Indian service of exports, to gain a competitive advantage.
However, with promising opportunities for the travel and tourism segment post the pandemic era, we suggest that small managed enterprises should be aware of the relevant information. Following the norms of application as laid down by the Indian Government is essential, and experts suggest a step-by-step approach to deal with the same. However, making careful documentation is extremely important for the registration process. If you are a small entrepreneur in the related category, we suggest you take professional legal services through Vakilsearch, a legal consultancy firm located in Chennai, India.
