Deemed Exports Under FTP 2023
Goods that never leave India but count as exports. Here is which supplies qualify and what they earn.
Deemed exports are supplies that never leave India but are treated as exports for specified benefits. Under para 7.01 of the Foreign Trade Policy (FTP) 2023, they are transactions where the goods supplied do not leave the country and payment is received in Indian Rupees or free foreign exchange. The goods must be manufactured in India.
The purpose, in the FTP's words, is a level playing field for domestic manufacturers. An Indian supplier bidding for a project financed by a multilateral agency, or selling inputs to an exporter holding an Advance Authorisation, would otherwise compete against duty-free imports while carrying domestic duties.
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The Seven Categories of Supply
Para 7.02 lists the supplies regarded as deemed exports. Categories (a)-(c) must be made by a manufacturer; (d)-(g) by a main contractor or sub-contractor.
| Category | Supply |
|---|---|
| (a) | Goods supplied against an Advance Authorisation, Advance Authorisation for annual requirement or DFIA |
| (b) | Goods supplied to an EOU, STP, EHTP or BTP unit |
| (c) | Capital goods supplied against an EPCG Authorisation |
| (d) | Goods for projects financed by multilateral or bilateral agencies notified by the Department of Economic Affairs, under International Competitive Bidding |
| (e) | Goods for projects that Customs Notification 50/2017 allows to import at zero basic customs duty, under International Competitive Bidding (including specified mega power projects) |
| (f) | Goods for the United Nations or international organisations for official use, or for projects they finance |
| (g) | Goods for nuclear power projects of 440 MW or more, certified by the Department of Atomic Energy |
The Three Benefits
Para 7.03 allows any or all of these, depending on the category:
- Advance Authorisation / DFIA
- The supplier can import its own inputs duty free to make the deemed export supply, as an exporter would.
- Deemed export drawback
- Refund of duty on inputs used, at the All Industry Rate if no CENVAT credit was availed on excisable inputs, or at a Brand Rate on proof of basic customs duty actually paid.
- Refund of terminal excise duty
- For excisable goods in the Fourth Schedule to the Central Excise Act, 1944, where the supply qualifies and no exemption applies, provided the recipient does not take CENVAT credit or rebate on them.
Conditions That Trip Up Claims
- check_circleSupplies must go directly to the designated project, agency, unit or authorisation holder. Third-party supplies are not eligible.
- check_circleA sub-contractor may supply the main contractor and be paid by the main contractor. A sub-contractor named in the main contract may supply the project site directly and be paid by the project authority.
- check_circleCement earns deemed export benefits only under category (d). Steel and eligible fuel qualify only for specified recipients.
- check_circleSimple interest at 6% a year is payable if a drawback or terminal excise duty refund is not settled within 30 days of the final approval letter.
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Deemed Exports Are Not Supplies to an SEZ
This is the distinction the exam returns to. A supply from the domestic tariff area to an SEZ unit is not a deemed export under Chapter 7. For Advance Authorisation purposes the FTP treats it as a physical export (para 4.05(c)), and the SEZ Act defines it as an export. Supplies to EOUs, by contrast, are deemed exports under category (b).
GST has its own, narrower list. Para 7.01(ii) says deemed exports for GST include only the supplies notified under section 147 of the CGST Act on the GST Council's recommendation, with GST's own conditions. A supply can qualify under the FTP and still not be a GST deemed export.
Where Banks and Other Schemes Fit
Deemed exports count towards EPCG export obligation (para 5.04(f)), and their FOR value counts towards status holder recognition. They are excluded from RoDTEP (para 4.55). On finance, RBI's export credit instructions allow pre-shipment credit in foreign currency (PCFC) for deemed exports only for supplies to projects financed by multilateral or bilateral agencies, liquidated by a short post-supply foreign currency loan until the project authority pays.
How CCFE Tests This
Expect definition questions (goods do not leave India, payment in rupees or free foreign exchange) and category questions (is a supply to an EOU, an SEZ, or a UN agency a deemed export?). The trap is SEZ: candidates who reason that "it stays in India, so it is a deemed export" get it wrong. Another is picking RoDTEP as a deemed export benefit; it is not one.
FAQs
What are deemed exports under FTP 2023?expand_more
Transactions where goods manufactured in India are supplied without leaving the country, with payment in Indian Rupees or free foreign exchange, falling within the categories in para 7.02.
Is a supply to an SEZ unit a deemed export?expand_more
No. A supply from the domestic tariff area to an SEZ unit is treated as an export, not a deemed export. Supplies to EOUs, STPs, EHTPs and BTPs are deemed exports.
What benefits are available on deemed exports?expand_more
Advance Authorisation or DFIA, deemed export drawback, and refund of terminal excise duty, depending on the category of supply.
Do deemed exports get RoDTEP?expand_more
No. Deemed exports are on the RoDTEP ineligible list in para 4.55 of FTP 2023.
Next steps
- SEZ and EOUarrow_forward
- Advance Authorisationarrow_forward
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