Last Thursday, July 21, 2016, DGFT brought in clarity over non-inclusion of central and state taxes such as: VAT, Service tax, Luxury Tax etc in the Net Foreign Exchange Earning (NFE) calculated for the purpose of availing SFIS/SEIS benefits under FTP.

DGFT has also emphasized upon stricter compliance of provisions present under FTP for NFE calculations under various scheme, so that applications with wrongful NFE calculation does not slip by easily. It seems that reason of such applications is considered to be misinterpretation of those provisions.

To prove this DGFT quoted statements from various previous year FTPs and HBPs such as; “Service providers shall be entitled to duty credit equivalent of the foreign exchange earned by them” and “only such foreign exchange remittances as are earned as amounts in lieu of the services rendered by the service exporter would be counted for computation of the entitlement under this scheme” and clarified that the State and Central Taxes involved in these amounts are not the part of earnings of Exporter; rather these are obligations of the service provider to the government. Hence these should not be counted as part of NFE to avail benefit of SFIS/SEIS, as per the above provisions.

So, one thing is clear that there will be some redoing in the already submitted applications on exporters’ part, but it will be possible only after further instruction from DGFT. And no one knows how long it will take. Hoping that applications for this newly launched and already popular scheme, SEIS, will not go into doldrums and a huge backlog of applications will not generate for this scheme, like the ones, generated for other scheme in the past.