The Hindu Business Line : Capital goods import under DFCEC scheme — Software exporters allowed to import only `professional equipment'

Industry & Economy - Exports & Imports
Info-Tech - Software

Capital goods import under DFCEC scheme — Software exporters allowed to import only `professional equipment'

K.R. Srivats
Harish Damodaran

New Delhi , Nov. 27

SOFTWARE exporters and other service providers have been barred from importing capital goods, other than `professional equipment' specifically required for rendering their service, under the Duty Free Credit Entitlement Certificate (DFCEC) scheme introduced in the recent Exim Policy.

The Finance Ministry has, in a recent communiqué issued to the various Customs field formations, clarified that import of capital goods "which are other than professional equipment or office equipment" will not be allowed under the DFCEC scheme for service providers.

Further, even in respect of such equipment, only those professional equipment that are "required by the service provider for the purpose of rendering service and earning free foreign exchange" would qualify for imports under the new scheme.

In other words, companies engaged in software, call centre, hotels, tourism and other service providing businesses, will not be able to use the DFCEC scheme as a conduit for importing any capital good or machinery in general without payment of duty.

The Ministry has pointed out that the objective behind the DFCEC scheme is to permit duty-free import of those goods "required in the profession of the service provider" and which increase his capability "to render a better and efficient service".

In so far as capital goods in general are concerned, their imports by service providers have already been provided for under the Export Promotion Capital Goods (EPCG) route.

The DFCEC scheme allows service providers (other than hotels) to undertake duty-free imports equivalent to 10 per cent of the average foreign exchange earned by them in the preceding three years. In the case of hotels, the corresponding entitlement is 5 per cent.

Further, the service providers can use the duty free entitlement only for import of spares, office equipment and furniture, professional equipment and consumables other than agriculture and dairy products. The certificates are also not transferable and the goods imported have to be certified for installation in the service provider's workplace within 6 months.

The EPCG scheme, on the other hand, permits imports of all capital goods by any exporter (including service providers) at a concessional 5 per cent duty, subject to his undertaking an export obligation equivalent to 8 times the duty savings amount over a specified period ranging from 8 to 12 years.

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