Export Incentive Scrip Issuance & Trading: A few points to keep in mind

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June 29, 2018

Category : Articles

For past many months news has been surfacing in the media that those companies that have wrongly claimed services export benefits under the erstwhile Served From India Scheme (SFIS)  are being asked via DRI to repay the incentive amount to Govt. This incident which is not malignant on the companies part can be attributed to the multiple interpretations of the wordings of the scheme in the policy. As per the policy, this scheme was restricted to Indian Origin companies exporting services from India in the specified four modes of exporting services.
On the other hand, MNC had claimed the SFIS benefit with the understanding that since they are also exporting services from their Indian offices and hence satisfying the essential condition of ‘Served From India’ and hence should get the benefit. The Crux is due to lack of clarity in the policy wordings such multiple interpretations have arisen.However, with the Foreign Trade Policy (2015-20) this Served from India Scheme (SFIS) is replaced by Service Exports from India Scheme (SEIS) leaving no room for any misinterpretation while assessing eligibility. The intention is to provide benefits to all service providers located in India, instead of Indian Service Providers.
Although SEIS has no such interpretation conflict but since it is wider in its usage, it has some critical procedural understanding necessary for its proper use. There are many critical points on which if proper heed is not paid then it may turn out into a messy deal given that trading is allowed for it. For instance, SEIS benefit wrongly claimed under different services other than the actual one, may render the scrip void or call for legal actions by the DRI. And if such rogue SEIS scrip is further traded among businesses, it may affect all of them. Similarly, one issue could be the mismatch in FIRC and Invoices’ amounts and that too not properly justified. This can lead to legal troubles if investigated in future. Similarly, improper segregations of services provided to SEZ, EOUs, and STPs, clubbing of such revenue with revenue against services rendered to the foreign customer, clubbing services under one service, filing an application on the basis on invoices only without considering FIRCs, filing unbilled revenue, etc.
There are certain areas which need careful consideration before filing SEIS application. One issued one should also take care of trading formalities, how and when it should be traded? Whom should it be transferred to? Whom should it be procured from? Nature and description of services on which SEIS was claimed etc. ? These are some of the sensitive points which careful consideration by the applicant for risk-free and foolproof application with no negative implications in future.