Mayur College

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pasdfghjklzxcvbnmqwertyuiopasdfghj klzxcvbnmqwertyuiopasdfghjklzxcvbn mqwertyuiopasdfghjklzxcvbnmqwerty A PROJECT REPORT uiopasdfghjklzxcvbnmqwertyuiopasdf ON ghjklzxcvbnmqwertyuiopasdfghjklzxc ADVANCE AUTHORIZATION SCHEME Submitted in partial fulfillment of vbnmqwertyuiopasdfghjklzxcvbnmqw the requirement for Master of Management Studies (MMS) ertyuiopasdfghjklzxcvbnmqwertyuiop asdfghjklzxcvbnmrtyuiopasdfghjklzxc vbnmqwertyuiopasdfghjklzxcvbnmqw ertyuiopasdfghjklzxcvbnmqwertyuiop asdfghjklzxcvbnmqwertyuiopasdfghjkl zxcvbnmqwertyuiopasdfghjklzxcvbnm qwertyuiopasdfghjklzxcvbnmqwertyui STERLING opasdfghjklzxcvbnmqwertyuiopasdfgh jklzxcvbnmqwertyuiopasdfghjklzxcvb nmqwertyuiopasdfghjklzxcvbnmqwer
Name of the Faculty Guide By Mayur Antre Name of the Company Guide Day and Date: Roll No. B. 63 Batch of 2010-12
NCRD’S INSTIUTE OF MANAGEMENT STUDIES AFFILIATED TO UNIVERSITY MUMBAI

ACKNOWLEDGEMENT
Perseverance, inspiration, and motivation have always played a key role in the success of any venture, but no significant achievement can be solo performance especially when starting a project ground up. At the outset it is my duty to acknowledge with gratitude the generous help that I have received from Indian Oil Corporation Limited. It took many very special people to enable it and support it. Here I would like to acknowledge their precious cooperation and express my sincere gratitude to them. Firstly, I would like to express my sincere gratitude to Mr. Sharad Sawant for granting me the opportunity to undertake an internship at the Indian oil Corporation Limited (Marketing Division, Mumbai). I am extremely thankful to Miss Sara Mathias who has assigned us mentor and has been very supportive. She has played a great role as a coordinator. My deep appreciation goes to Mr. Sagar Mudhole our mentor for this project. His energy, zeal, guidance and constant support has helped us to gain lot of knowledge and helped us to finish our project efficiently. I would like to grab the opportunity to thanks Miss Lalitha whose patience and sincerity has helped us in getting the right information at right time. And she over a period of time has rendered her valuable guidance and without whose profound advice this study would not have been completed successfully. I, also heartily thank all the respondents for their invaluable support, time, information and suggestions at every step of the study work, which led to the successful completion and a worthwhile learning. Student Name:- Mayur Antre Date ……………………….. Signature………………………

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CERTIFICATE OF ORIGINALITY
I_____________________________________ Roll No __________________of 2010, a full time bonafide student of first year of Master of Management Studies (MMS) Programme of Sterling Institute of Management Studies, Nerul, Navi Mumbai, affiliated to University of Mumbai. I hereby certify that this project work carried out by me at _________________________________________________ the report submitted in partial fulfillment of the requirements of the programme is an original work of mine under the guidance of the industry mentor ____________________________________________ ___________________________________________________________________________ and faculty mentor_______________________________________________________and is not based or reproduced from any existing work of any other person or on any earlier work undertaken at any other time or for any other purpose, and has not been submitted anywhere else at any time.

(Faculty Mentor's Signature) Date:

(Student's Signature) Date:

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COLLEGE CERTIFICATE By Faculty Guide
This is to certify that _________________________________(Name) a student of______(discipline)_______from______(Institute/University) has done/is doing his/her semester project at _________ from ___________to_____________ under my guidance. The project work entitled “_____________________” embodies the original work done by__________during his/her above full semester project training period. Date: Name of Faculty Guide DR. Anjankumar Maiti Position of Faculty Guide Signature Authorized Signatory

Place Your College Name with Stamp Director ( Academic Activities)

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Company Certificate

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INDEX
SR NO 1 INDUSTRY OVERVIEW 2 COMPANY OVERVIEW 3 TAXATION in INDIA 4 Literature Review 5 6 7 8 9 10 11 12 Research Topic Research Finding Data Analysis and Interpretation Recommendation and Suggestion Research Objective Conclusion Bibliography 35 40 61 68 73 74 61 62 29 11 7 TOPIC Executive Summary 3 PAGE NO

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EXECUTIVE SUMMARY
The Duty Exemption Scheme enables duty free import of inputs required for export production. According to Director General of Foreign Trade (DGFT), various duty exemption scheme have been introduce by it under Foreign Trade Policy (FTP) in order to promote and encourage more export. FTP 2009-14 aims at arrest and reverse the declining trend of exports and to provide additional support especially to those sectors which have been hit badly by recession in the developed world. It likes to set a policy objective of achieving an annual export growth of 15% with an annual export target of US$ 200 billion by March 2011. In the remaining three years of this Foreign Trade Policy i.e. upto 2014, the country should be able to come back on the high export growth path of around 25% per annum. By 2014, it is expect to double India‟s exports of goods and services.

Advance Authorization is issued to allow duty free import of inputs, which are physically incorporated in the export product (making normal allowance for wastage). In addition, fuel, oil, energy, catalysts etc. which are consumed/utilised in the course of their use to obtain the export product, may also be allowed under the scheme.

At present India imports about 50% of its required crude oil demand from foreign country mainly from the Middle East Asia and Eupore. Import of crude oil is subjected to 5% customes duty, hence by availing the survice of Advance Authorization this can be brought down. This scheme enables you to take advantage of Duty Exemption Scheme at 15% value addition

This project covers; the study of Advance Auhorisation at H.O. related to indirect taxes, flow of information from the various offices and locations to the H.O. (taxation department).
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INDIAN OIL CORPORATION LTD.

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INDUSTRY OVERVIEW Economy of India
The Economy of India is the tenth largest in the world by nominal GDP and the fourth largest by purchasing power parity (PPP). The country's per capita GDP (PPP) is $3,339 (IMF, 129th) in 2010. Following strong economic reforms from the post-independence socialist economy, the country's economic growth progressed at a rapid pace, as free market principles were initiated in 1991 for international competition and foreign investment. Despite fast economic growth India continues to face massive income inequalities, high unemployment and malnutrition.

Oil Industry in India
An Introduction to Oil Industry in India
After the Indian Independence, the Oil Industry in India was a very small one in size and Oil was produced mainly from Assam and the total amount of Oil production was not more than 250,000 tonnes per year.

This small amount of production made the oil experts from different countries predict the future of the oil industry as a dull one and also doubted India's ability to search for new oil reserves. But the Government of India declared the Oil industry in India as the core sector industry under the Industrial Policy Resolution bill in the year 1954, which helped the Oil Industry in India vastly.

Oil exploration and production in India is done by companies like NOC or National Oil Corporation, ONGC or Oil and Natural Gas Corporation and OIL who are actually the oil companies in India that are owned by the government under the Industrial Policy Rule. The
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National Oil Corporation during the 1970s used to produce and supply more than 70 percent of the domestic need for the petroleum but by the end of this amount dropped to near about 35 percent. This was because the demand on the one hand was increasing at a good rate and the production was declining at a steady rate.

Oil Industry in India during the year 2009-2010 fulfilled most of demand through importing oil from multiple oil producing countries. The Oil Industry in India itself produced nearly 135 million metric tons of Oil from the year 2009-2010. The Import that is done by the Oil Industry in India comes mostly from the Middle East Asia.

The Oil that is produced by the Oil Industry in India provides more than 35 percent of the energy that is primarily consumed by the people of India. This amount is expected to grow further with both economic and overall growth in terms of production as well as percentage. The demand for oil is predicted to go higher and higher with every passing decade and is expected to reach an amount of nearly 250 million metric ton by the year 2024.

Some of the major companies in the Oil Industry in India are:
    

Oil India Ltd. Indian Oil Corporation Limited Reliance industries Bharat Petroleum Corporation Limited Hindustan Petroleum

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INDIAN OIL CORP.OVERVIEW
Indian Oil Corporation Limited, or Indian Oil, is an Indian state-owned oil and gas company headquartered at Mumbai, India. It is India‟s largest commercial enterprise, ranking 125th on the Fortune Global 500 list in 2010. Indian Oil and its subsidiaries account for a 47% share in the petroleum products market, 34.8% share in refining capacity and 67% downstream sector pipelines capacity in India. The Indian Oil Group of Companies owns and operates 10 of India's 19 refineries with a combined refining capacity of 65.7 million metric tons per year.

Indian Oil operates the largest and the widest network of fuel stations in the country, numbering about 17606 (15557 regular ROs & 2049 Kissan Sewa Kendra). It has also started Auto LPG Dispensing Stations (ALDS). It supplies Indane cooking gas to over 47.5 million households through a network of 4,990 Indian distributors. In addition, Indian Oil's Research and Development Center (R&D) at Faridabad supports, develops and provides the necessary technology solutions to the operating divisions of the corporation and its customers within the country and abroad. Subsequently, Indian Oil Technologies Limited - a wholly owned subsidiary, was set up in 2003, with a vision to market the technologies developed at Indian Oil's Research and Development Center. It has been modeled on the R&D marketing arms of Royal Dutch Shell and British Petroleum.

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History
Indian Oil began operation in 1964 as Indian Oil Company Ltd. The Indian Oil Corporation was formed in 1964, with the merger of Indian Refineries Ltd. Feroze Gandhi was the first chairman of Indian Oil Corporation Limited.

Indian Oil Company Ltd 1959

Indian Refineries Ltd. 1958

Indian Oil Corporation Ltd 1964

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Products
Indian Oil is not only the largest commercial enterprise in the country it is the flagship corporate of the Indian Nation. Besides having a dominant market share, Indian Oil is widely recognized as India‟s dominant energy brand and customers perceive Indian Oil as a reliable symbol for high quality products and services.

Benchmarking Quality, Quantity and Service to world-class standards is a philosophy that Indian Oil adheres to so as to ensure that customers get a truly global experience in India. Our continued emphasis is on providing fuel management solutions to customers who can then benefit from our expertise in efficient sourcing and least cost supplies keeping in mind their usage patterns and inventory management. Our Retail Brand template of XtraCare(Urban), Swagat(Highway) and Kisan Seva Kendras(Rural) are widely recognized as pioneering brands in the petroleum retail segment. Indian Oil‟s leadership extends to its energy brands - Indane LPG, SERVO Lubricants, Autogas LPG, XtraPremium Branded Petrol, XtraMile Branded Diesel, XtraPower Fleet Card, Indian Oil Aviation and XtraRewards cash customer loyalty programme.

Products
          

Indane Gas Auto Gas Natural Gas Petrol/Gasoline Diesel/Gas oil ATF/Jet Fuel SERVO lubricants & greases Marine Fuels & Lubricants Kerosene Bulk/Industrial Fuels Bitumen
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Petrochemicals  Special Products

Group companies and joint ventures



Indian Oil Technologies Ltd: Indian Oil Technologies Ltd. is the marketing arm of IOCL which markets the entire range of technologies developed at the Indian Oil R&D Centre, Faridabad. Indian Oil Technologies Ltd. headquarters is located at the Indian Oil R&D Centre.

 

Indian Oil (Mauritius) Ltd. Lanka IOC PLC - Group company for retail and storage operations in Sri Lanka. It is listed in the Colombo Stock Exchange. It was locked into a bitter subsidy payment dispute with Sri Lanka's Government which has since been resolved.[citation needed]

  

IOC Middle East FZE Chennai Petroleum Corporation Limited Green Gas Ltd. - a joint venture with Gas Authority of India Ltd. for city-wide gas distribution networks.



Indo Cat Pvt. Ltd., with Intercat, USA, for manufacturing 15,000 tonnes per annum of FCC (fluidised catalytic cracking) catalysts & additives in India.



Indian Oil - CREDA Biofuels Ltd.A joint venture with Chattisgarh government for production and marketing of Bio-fuels.



Numerous exploration and production ventures with Oil India Ltd., Oil and Natural Gas Corporation

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International rankings
Indian Oil is the highest ranked Indian company in the Fortune Global 500 listing, 125th position in 2010. It is also the 18th largest petroleum company in the world and the number one petroleum trading company among the National Oil Companies in the Asia-Pacific region. IOCL was featured on the 2010 Forbes Global 2000 at position 313. It is fifth most valued brand in India according to an annual survey conducted by Brand Finance and The Economic Times in 2010.

Loyalty programs
XTRAPOWER Fleet Card Program is aimed at Large Fleet Operators. Currently it has 1 million customer base. XTRAREWARDS is a recently launched loyalty program for retail customers where customers can earn reward points on their purchases.in the org

Competitors
Indian Oil Corporation has two major domestic competitors, Bharat Petroleum and Hindustan Petroleum. Both are state-controlled, like Indian Oil Corporation. There are two private competitors, Reliance Industries and Essar Oil.Other competitors are coming faster.

Concerns
The volatility in the crude market & subsidy burden on the IOCL has dented the company performance like other PSU oil companies. This is also reflected in its FORTUNE rating this year. Moreover, bureaucratic hurdles in projects are hurting company advancement. IOCL has one of the best technical manpower for execution of jobs.

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Comparison of IOCL with its main Competitor

Parameters Size Employees Revenue Patents

IOCL Largest 36,217 51.81Billion (USD) 195 including 48 US patents

HPCL Second largest 11,246 31.7 Billion(USD ) Not known.

Advantage -IOCL More resources that can be utilized Excellent potential in HR Very high shareholder value Greater opportunity to develop new products

Refineries

10

4

Long term supply of petroleum products.

Pipeline Overseas presence Availability of raw materials

9,300 km Present independently in 3 countries Very high due to large number of refineries and very good distribution system

1054 kilometres Not present independently Access to raw material is limited

Fast distribution of products A greater market for its products The cost involved in the transportation of the goods is saved to a great extent.

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Indian Oil Products
Fuels & Feedstock Lubricants & Greases Naphtha Automotive Lubricating Oils Light Diesel Oil Automotive Specialty Oils Furnace Oil/ LSHS/ HHS Industrial Lubricating Oils Metal Working Oils Paraffin & Microcrystalline Waxes Jute Batching Oil Railroad Oils Calcined Petroleum Coke Hexane Petrochemicals & Specialties Benzene Liquefied Petroleum Gas High Speed Diesel/ Gas Oil Motor Spirit/ Gasoline Aviation turbine fuel/ Jet Kerosene Superior Kerosene Oil/ KERO Other Products

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Objectives


To serve the national interests in oil and related sectors in accordance and consistent with Government policies.



To ensure maintenance of continuous and smooth supplies of petroleum products by way of crude oil refining, transportation and marketing activities and to provide appropriate assistance to consumers to conserve and use petroleum products efficiently.



To enhance the country's self-sufficiency in crude oil refining and build expertise in laying of crude oil and petroleum product pipelines.



To further enhance marketing infrastructure and reseller network for providing assured service to customers throughout the country.



To create a strong research & development base in refinery processes, product formulations, pipeline transportation and alternative fuels with a view to minimizing/eliminating imports and to have next generation products.



To optimise utilisation of refining capacity and maximize distillate yield and gross refining margin.



To maximise utilisation of the existing facilities for improving efficiency and increasing productivity.



To minimise fuel consumption and hydrocarbon loss in refineries and stock loss in marketing operations to effect energy conservation.



To earn a reasonable rate of return on investment.

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To avail of all viable opportunities, both national and global, arising out of the Government of India‟s policy of liberalisation and reforms.



To achieve higher growth through mergers, acquisitions, integration and diversification by harnessing new business opportunities in oil exploration & production, petrochemicals, natural gas and downstream opportunities overseas.



To inculcate strong „core values‟ among the employees and continuously update skill sets for full exploitation of the new business opportunities.



To develop operational synergies with subsidiaries and joint ventures and continuously engage across the hydrocarbon value chain for the benefit of society at large.

Obligations



Towards customers and dealers:- To provide prompt, courteous and efficient service and quality products at competitive prices.



Towards suppliers:- To ensure prompt dealings with integrity, impartiality and courtesy and help promote ancillary industries.



Towards employees:- To develop their capabilities and facilitate their advancement through appropriate training and career planning. To have fair dealings with
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recognised representatives of employees in pursuance of healthy industrial relations practices and sound personnel policies.


Towards community:- To develop techno-economically viable and environmentfriendly products. To maintain the highest standards in respect of safety, environment protection and occupational health at all production units.



Towards Defence Services:- To maintain adequate supplies to Defence and other para-military services during normal as well as emergency situations.

Financial Objectives


To ensure adequate return on the capital employed and maintain a reasonable annual dividend on equity capital.

 

To ensure maximum economy in expenditure. To manage and operate all facilities in an efficient manner so as to generate adequate internal resources to meet revenue cost and requirements for project investment, without budgetary support.



To develop long-term corporate plans to provide for adequate growth of the Corporation‟s business.



To reduce the cost of production of petroleum products by means of systematic cost control measures and thereby sustain market leadership through cost competitiveness.

To complete all planned projects within the scheduled time and approved cost.

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Managerial Hierarchy in IOCL
Indian Oil‟s workforce is placed in two cadres, i.e. Officers and Staff. The Officers‟ hierarchy is as follows: Managerial hierarchy at IOCL Grade A Grade B Grade C Grade D Grade E Grade F Grade G Grade H Grade I Officer Assistant Manager Deputy Manager Manager Senior Manager Chief Manager Deputy General Manager General Manager Executive Director/ Director/ Chairman

The Staff Cadre consists of the following:
  White Collar Workmen (WCW) – They are generally placed in Administrative Offices and look after office functions ranging from typing, stenography, filing, accounts, maintenance and technical assistance to officers etc. Blue Collar Workmen (BCW) – They function from operating locations. Their designations range from chargeman to khalasi, operator, driver, forklift operator, etc.

Both WCW and BCW fall in Six Grades – GRADE I to GRADE VI in Marketing Division and in Eight Grades – GRADE I TO VII in Refineries and Pipelines Division. Employee strength - 33,04 There are 2,316 women employees, constituting 7.71% of the total
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Set up of Indirect Tax at Indian Oil Corporation
HEAD OFFICE

EXECTIVE DIRECTOR GENERAL MANAGER DGM Manager 4 Regional offices

15 STATE OFFICES CHIEF/SENIOR MANAGER

4 Regional offices

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DECISION MAKER

COPORATE OFFICE NEW DELHI

ADVISORY BOARD

HEAD OFFICE MUMBAI

DEAL WITH EXCISE ISSUES

REGIONS
Northern Region Western Region Eastern Region Southern Region SR

STATE OFFICES

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FUNCTION OF TAX GROUP AT IOCL
The taxation department at IOCL is engaged performing varied functions which are related to handling the internal and external aspects affecting the working. The various functions of the taxation department are being performed aligned with the external factors like government policy, laws and henceforth. The various functions of the taxation department are as follows: Change Implementation Regulatory Changes The basic function includes updating the departments with changes. Communicated through the notifications issued by the regulatory authorities and then implement them in the working as in effect with the complying date. Example - Any modification or changes made in the act by law, obligatory for the organization will be communicated by the H.O. to all the requisite locations, offices and regions. Change in Business Operations The changes in the business regulations made due to the decision made by the high level management needs to be updated and incorporated in the working immediately. Tax Compliance: The department is also liable to abide by the tax compliances issued by the regulatory authorities in relation to the accounting, calculating and filling of the related effective indirect tax applicable to IOCL. Litigation Management: There are various incidences and cases where various litigation arises in context with various laws and provinces related to the state laws and the central laws. Therefore it is the function of the taxation department to manage these litigation.

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Environmental Scanning: For dealing with various litigation tax department has to do environmental scanning, procedurally:      Review of each case. Analyze the pros & cons of each case Identify the course of actions Strategizing the actions to be taken Execute the strategies for achieving the desired objective.

Tax Planning: The main basic function of the taxation department is to analyze the working of the corporation in order to formulate an effective tax plan so as to facilitate easy formulation of methods for accounting taxation to be followed by all the state and location offices. Responsibility Centre: The core function of the tax department is to act as a responsibility centre for the whole corporation on various issues.    All Taxation Issues- Head Office Excise, Customs & Sales Tax - Regional Office Sales Tax and Other Local Levies - State Offices

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SWOT Analysis for IOCL
Internal environment Strengths
 IOC controls 12 refineries, by virtue of which it has a total share of around 40% of India‟s overall refining capacity. IOC has also acquired equity stakes in CPCL and BRPL, and in 2001, these refineries became subsidiaries of IOC.   58% of IOC‟s refining capacity is located in the Northern and Western regions, which are high demand and high growth areas. Although its refineries are located the interior of the country, and not near the major ports IOC has a very strong distribution network by virtue of having a share of 48% in the country‟s product pipelines. The total capacity of these product pipelines is 49.79 MMT.  IOC also acquired management control of the marketing company IBP, thereby strengthening its position in these activities. It also has a dominant share in all segments in terms marketing infrastructure. Its network includes 19830 retail outlets, 8000 LPG distributors, and 6492 kerosene/LDO dealers.  By virtue of entering into extensive joint venture agreements, and of its own initiative as well, the company has a presence in various other related activities such aspetroleum storage, pipelines, lube additives, exploration, petrochemicals, gas, training and consultancy, etc.  The company has already entered overseas markets such as Sri Lanka, Maldives, and Oman and is presently considering entering Turkey through a JV. The company is in talks with Caliak of Turkey to set up a 10 million TPA grassroot refinery with an investment of $2 billion and establish retail business. IOC is also weighing the possibility of entering Indonesia.

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Weakness
The company is the market leader in the industry, but still it had many weaknesses.    The major weakness for the company is the R&D. The company starts working on it. The petrochemical product development technology is another weakness for the company. The technological drawback, as compared to some major foreign player is another weakness for the company.

External environment Opportunity
The IOCL has much opportunity in the present market conditions. This is because the petroleum products are become a need for everyone and still contains a lot of Scope for customization.



Since the company has the maximum no. Of out lets and also the maximum no. Of refineries in India, it can very easily go for extension at any point of time, and can introduce any new products, which will get support from its huge market network.

  

The company can make the buying process more easy for the customers, by implying many more schemes in the range of XTRAPOWER AND XTRAREWARD. The company can think over the issue to build its own pipelines, so that it will be a independent player and it will also support its aviation fuel supply. Company have a great scope in E&P. It is already involves in E&P but only in a very limited scale.

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Threats
Since the company is the market leader in the field , so have maximum threats from the other players and many other issues.   The foreign players with more advanced technology are the biggest treat for the company. The crude oil supply is also a big issue in front of the company, because the company cannot fix its price and so, some time had operate in loss also. it is the biggest problem because the maximum part of their crude is been imported.   In future the market will welcome more private players, which will eat up its market share. If the Govt. Policies allow the private players to set their own price, the private player can seriously harm the market share of IOCL.

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TAXATION in INDIA
India has a well developed tax structure with a three-tier federal structure, comprising the Union Government, the State Governments and the Urban/Rural Local Bodies. The power to levy taxes and duties is distributed among the three tiers of Governments, in accordance with the provisions of the Indian Constitution. The main taxes/duties that the Union Government is empowered to levy are Income Tax (except tax on agricultural income, which the State Governments can levy), Customs duties, Central Excise and Sales Tax and Service Tax. The principal taxes levied by the State Governments are Sales Tax (tax on intra-State sale of goods), Stamp Duty (duty on transfer of property), State Excise (duty on manufacture of alcohol), Land Revenue (levy on land used for agricultural/non-agricultural purposes), Duty on Entertainment and Tax on Professions & Callings. The Local Bodies are empowered to levy tax on properties (buildings, etc.), Octroi (tax on entry of goods for use/consumption within areas of the Local Bodies), Tax on Markets and Tax/User Charges for utilities like water supply, drainage, etc. Since 1991 tax system in India has under gone a radical change, in line with liberal economic policy and WTO commitments of the country. Some of the changes are:
  

Reduction in customs and excise duties Lowering corporate Tax Widening of the tax base and toning up the tax administration

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Types of TAX
1. Direct Tax. 2. Indirect Tax

1. Direct Tax

The term direct tax generally means a tax paid directly to the government by the persons on whom it is imposed.

In the general sense, a direct tax is one paid directly to the government by the persons (juristic or natural) on whom it is imposed (often accompanied by a tax return filed by the taxpayer). Examples include some income taxes, some corporate taxes, and transfer taxes such as estate (inheritance) tax and gift tax. In this sense, a direct tax is contrasted with an indirect tax or "collected" tax (such as sales tax or value added tax (VAT)); a "collected" tax is one which is collected by intermediaries who turn over the proceeds to the government and file the related tax return. Some commentators have argued that "a direct tax is one that cannot be shifted by the taxpayer to someone else, whereas an indirect tax can be.

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2. Indirect Tax
The term indirect tax has more than one meaning. In the colloquial sense, an indirect tax (such as sales tax, a specific tax [a tax per unit], value added tax (VAT), or goods and services tax (GST)) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer). The intermediary later files a tax return and forwards the tax proceeds to government with the return. In this sense, the term indirect tax is contrasted with a direct tax which is collected directly by government from the persons (legal or natural) on which it is imposed. Some commentators have argued that "a direct tax is one that cannot be shifted by the taxpayer to someone else, whereas an indirect tax can be." An indirect tax may increase the price of a good so that consumers are actually paying the tax by paying more for the products.Examples would be fuel, liquor, and cigarette taxes. An excise duty on motor cars is paid in the first instance by the manufacturer of the cars; ultimately the manufacturer transfers the burden of this duty to the buyer of the car in form of a higher price. Thus, an indirect tax is such which can be shifted or passed on. The degree to which the burden of a tax is shifted determines whether a tax is primarily direct or primarily indirect. This is a function of the relative elasticity of the supply and demand of the goods or services being taxed.

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Types of indirect tax
1. Value Added Tax / Sales Tax 2. Service Tax 3. Custom Excise 4. Entry Tax

1. Value Added Tax / Sales Tax
India does not have a classic Value Added Tax (VAT) structure. Instead, separate tax on sale of goods and on rendering of services is imposed under different legislations. Sale and purchase of goods is subjected to charge of sales tax. Sales tax is levied under Central and State Sales Tax legislations depending upon the movement of goods in pursuance of a sale transaction. If the transaction involves movement of goods from one state to another (interstate), the tax is levied under Central Sales Tax Act (CSTA), 1956.

This Act also covers transactions of import of goods into or export of goods out of India. Sales tax is not imposed on import of goods into the country or export of goods out of the country. The Central Sales Tax (CST) Act is administered by the state governments and the tax is levied at the origination of transaction (origin based levy). The revenue collected under Central Sales Tax Act is retained by the state governments. The rates of tax under Central Sales Tax Act vary from state to state and product to product. The standard rate of CST is 4 per cent or the lower rate applicable in the state of seller if the purchaser is purchasing the same for resale or for use in manufacture of goods for sale or for specified purposes and both

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the seller and buyer are registered dealers. Otherwise, the rate is higher of 10 per cent or the rate applicable in the state of sale.

2. Service Tax
It is an indirect tax. Service tax is a tax on services provided .The provisions of service tax are contained in chapter V of the Finance Act, 1994 and administered by the Central Excise Department. The word „Service‟ is not defined in Finance Act, 1994. Applicability of Service Tax:
 

The Act extends to whole of India except the state of Jammu and Kashmir. Service tax not applicable on Export of services, subject to Conditions given in Export of service rules, 2005.

3. Custom Excise
Customs duties are levied on import of goods into India at the rates specified in the Customs Tariff Act, 1975. The effective rates of customs duties may vary pursuant to general and / or specific exemption or concession notifications issued by the government in this regard. Custom excise duty in India currently comprises the following:
 

Basic Customs Duty (BCD) - The rate varies for different items from 5% to 40%. Countervailing Duty (CVD) - This duty is equivalent to central excise duty leviable on a like product manufactured in India. Current rate applicable to majority of the industrial products is 16 per cent plus 2 per cent education cess, taking the effective rate to 16.32 per cent. This duty is calculated on the value of product + basic customs duty.



Additional Duty of Customs (ADC) - This duty is levied to countervail the sales tax, valueadded tax, local taxes and other charges leviable on the like goods on their sale or purchase or transportation in India. Presently, this duty is levied at 4 per cent on certain items viz items bound under the Information Technology (IT) Agreement and on specified inputs /
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raw materials for manufacture of electronic / IT goods. This duty is levied on value of product +basic customs duty + countervailing duty.


Education Cess - This cess is levied at 2 per cent on the amount of BCD +CVD. In addition, government also levies anti-dumping and safeguard duties on specified products for specified periods. "Value" for the purpose of levy of customs duty is "transaction value" in the course of international trade in arm's length unrelated party transaction.

Import-Export Policy Import of goods into and export from India is regulated by the Foreign Trade Policy (the Policy) issued from time to time by Government of India. The Policy remains in force for five years and is amended from time to time. The Policy currently in force is for tax year 2009-014. Majority of goods are now freely importable.

4. Entry Tax
Stamp Duty Stamp duty is imposed on execution of specified instruments. The levy is governed by the Indian Stamp Act, 1899 or the State Stamp Acts. Some states have enacted separate legislations, whereas some have adopted Indian Stamp Act with or without modifications. The rates vary from state to state.

Research and Development Cess A research and development cess is a special levy on all payment made for the purchase of technology from abroad, including royalty payments, payments for technicians, lump sum payments, and payments for design and drawings.

Local Property Taxes Property tax is payable as per local municipal laws on commercial and residential property
34 | S I M S Advance Authorization

LITERATURE REVIEW
Foreign Trade Policy (2009-2014) Legal Framework
Summary of Foreign Trade Policy 2009-14
Enhanced insurance coverage and exposure for exports through ECGC (Export Credit Guarantee Corporation) schemes has been ensured till March 31, 2014. It has also been decided to continue with the interest subvention scheme for this purpose. The plan is to encourage value addition in manufactured exports and towards this end, the government has stipulated a minimum 15 per cent value addition on imported inputs under Advanced Authorization Scheme.

The new policy has decided to give special focus to new emerging markets to make Indian exports more competitive. Additional resources have been made available under the Market Development Assistance Scheme and Market Access Initiative Scheme. Additionally, incentive schemes are being rationalised to identify leading products which would catalyse the next phase of export growth. The new policy also seeks to promote Brand India through six or more `Made in India‟ shows across the world every year.

The Foreign Trade Policy 2009-2014 (FTP), incorporating provisions relating to export and import of goods and services, shall come into force with effect from 27 August, 2009 and
th

35 | S I M S Advance Authorization

shall remain in force upto 31 st March, 2014 unless otherwise specified. All exports and imports Upto 26th August 2009 shall be accordingly governed by the FTP 2004-2009.

In case an export or import that is permitted freely under FTP is subsequently subjected to any restriction or regulation, such export or import will ordinarily be permitted notwithstanding such restriction or regulation, unless otherwise stipulated, provided that shipment of export or import is made within original validity with respect to available balance and time period of an irrevocable commercial letter of credit, established before date of imposition of such restriction. However for operationalizing such irrevocable commercial letter of credit the applicant shall have to register the Letter of Credit and contract with the concerned RA within 15 days of the issue of any such restriction or regulation. The short term objective of FTP policy is to arrest and reverse the declining trend of exports and to provide additional support especially to those sectors which have been hit badly by recession in the developed world. Government likes to set a policy objective of achieving an annual export growth of 15% with an annual export target of US$ 200 billion by March 2011. In the remaining three years of this Foreign Trade Policy i.e. upto 2014, the country should be able to come back on the high export growth path of around 25% per annum. By 2014, expect to double India‟s exports of goods and services. The long term policy objective for the Government is to double India‟s share in global trade by 2020.

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LITERATURE REVIEW SOURCE
  
 

FTP (2009-14) Hand Book v1and v2 FTP(2004-09) BOOK ON FOREIGN TRADE POLICY By V S Datey (IOCL LIBRARY) Indirect taxation By SS Gupta IOCL internal circulars



37 | S I M S Advance Authorization

EXPORT AND TRADING HOUSES
Eligibility for Export and Trading Houses Status
Merchant as well as Manufacturer Exporters, Service Providers, Export Oriented Units (EOUs) and Units located in Special Economic Zones (SEZs), Agri Export Zones (AEZs), Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Bio-Technology Parks (BTPs) shall be eligible for status.

Status Category:
Applicant shall be categorized depending on his total FOB (FOR - for deemed exports) export performance during current plus previous three years (taken together) upon exceeding limit below. For Export House (EH) Status, export performance is necessary in at least two out of four Years (i.e., current plus previous three years). Status Category Export Performance FOB / FOR Value (Rupees in Crores Export House (EH) 20 20

Star Export House (SEH)

100

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Trading House (TH) Star Trading House (STH) Premier Trading House (PTH)

500 2500 7500

Privileges of Export and Trading House Status Holders
A Status Holder shall be eligible for privileges as under: (i) Authorization and Customs Clearances for both imports and exports on self-declaration basis; (ii) Fixation of Input-Output norms on priority within 60days; (iii) Exemption from compulsory negotiation of documents through banks. Remittance / Receipts, however, would be received through banking channels; (iv) 100% retention of foreign exchange in EEFC account; (v) Exemption from furnishing of BG in Schemes under FTP; (vi) SEHs and above shall be permitted to establish Export Warehouses, as per DoR guidelines. (vii) For status holders, a decision on conferring of ACP Status shall be communicated by Customs within 30 days from receipt of application with Customs. (viii)As an option, for Premier Trading House (PTH), the average level of exports under EPCG Scheme shall be the arithmetic mean of export performance in last 5 years, instead of 3 years.

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RESEARCH TOPIC
DUTY EXEMPTION & REMISSION SCHEMES
Schemes

A.

Duty Exemption Scheme

The Duty Exemption Scheme enables duty free import of inputs required for export production. An Advance Authorization is issued under Duty Exemption Scheme. Duty Exemption Scheme consists of

(a) Advance Authorization Scheme and

(b) Duty Free Import Authorization Scheme (DFIA).

B. Duty Remission Scheme
A Duty Remission Scheme enables post export replenishment/ remission of duty on inputs used in the export product. Duty Remission scheme consist of (a) DFRC (Duty Free Replenishment Certificate) (b) DEPB (Duty Entitlement Pass Book Scheme) and (c) DBK (Duty Drawback Scheme).

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Value Addition A. Pre Export value addition calculation
Value addition (VA) is calculated as:

A-B VA = ----------- x 100, where B A = FOB value of export realised

B = CIF value of inputs covered by Authorization,

B. Pre import value addition calculation
Value addition (VA) is calculated as: A-B VA = ----------- x 100, where B A = FOR value of supply received. B = CIF value of inputs covered by Authorization,

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DUTY EXEMPTION SCHEMES

(a)

Advance Authorization Scheme

 Advance Authorization is issued to allow duty free import of inputs.  It is a Pre Export Incentive.  The facility available to Merchant Exporter, Manufacturer Exporter.  The Scheme provides Exemption from Basic, Additional Duty.

Advance Authorization is issued to allow duty free import of inputs, which are physically incorporated in the export product (making normal allowance for wastage). In addition, fuel, oil, energy, catalysts etc. which are consumed/utilised in the course of their use to obtain the export product, may also be allowed under the scheme.

Duty free import of mandatory spares upto 10% of the CIF value of the Authorization which are required to be exported/ supplied with the resultant product may also be allowed under Advance Authorization.

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Advance Authorizations are issued on the basis of the inputs and export items given under SION. However, they can also be issued on the basis of Adhoc norms or self declared norms. Advance Authorization can be issued either to a manufacturer exporter or merchant exporter tied to supporting manufacturer(s):

i) For Physical exports (including exports to SEZ); and/ or

ii) For Intermediate supplies.

Advance Authorization can also be availed by the sub-contractor of the main contractor to such project provided the name of the sub contractor(s) appears in the main contract.

Such Authorization can also be issued for supplies made to United Nations Organisations or under the Aid Programme of the United Nations or other multilateral agencies and paid for in free foreign exchange.

Advance Authorization is issued for duty free import of inputs subject to actual user condition. Such Authorizations are exempted from payment of basic customs duty, additional customs duty, education cess, anti dumping duty and safeguard duty, if any. Advance Authorization and/or materials imported there under shall not be transferable even after completion of export obligation. However, the Authorizatione will have the option to dispose off the product manufactured out of the duty free inputs once the export obligation is completed.

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Advance Authorizations is issued only if with a positive value addition.

Advance Authorization shall be issued in accordance with the Policy and procedure in force on the date of issue of Authorization.

The validity period of advance Authorization for export is 24 months from the date of issue of advance Authorization.

The facility of Advance Authorization shall also be available where some or all of the inputs are supplied free of cost to the exporter.

In such cases, for calculation of value addition, the notional value of free of cost inputs along with value of other duty-free inputs shall be taken into consideration.

Export Obligation
The period for fulfilment of the export obligation under Advance Authorization is 24 moths from the date of issue of advance Authorization

Request for extension in EOP may be made in ANF 4E. RA shall grant one extension for six months from expiry date with payment of composition fee of 2% of duty saved on all unutilized imported items as per Authorization. Request for a further extension of six months may be considered by RA with payment of composition fee of 5% of duty based on all unutilized imported items as per Authorization

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Provision for BIFR units
Any firm/company registered with BIFR or any firm/ company acquiring a unit, which is under BIFR, shall be allowed EOP extension as per the rehabilitation package prepared by the operating agency subject to subsequent approval of BIFR.

However, in cases where the rehabilitation package does not specify the EOP extension period, a time period upto 5 years reckoned from the date of issue of Authorization would be permitted on merits of the case for fulfillment of export obligation.

Similarly, SSI units shall also be entitled for similar facility as per the rehabilitation scheme of the concerned State government. However, in cases where the State rehabilitation scheme does not specify the export obligation extension period, a time period upto 5 years reckoned from the date of issue of Authorization would be permitted on merits of the case for fulfillment of export obligation.

Export Obligation Period Extension, as mentioned above, shall be without the payment of composition fee for cases where rehabilitation package has been announced/approved.

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Advance Authorization for annual requirement
Advance Authorization can also be issued on the basis of annual requirement for physical exports, intermediate supplies and / or deemed exports.

One to Five Star Export House shall be entitled for the Advance Authorization for annual requirement. All other categories of exporters having past export performance (in the preceding two years) shall also be entitled for the Advance Authorization for annual requirement.

In addition, a merchant exporter shall also be issued the Advance Authorization for Annual Requirement provided they agree to the endorsement of the name(s) of the supporting manufacturer(s) on the relevant Authorization.

The entitlement in terms of CIF value of imports under this scheme shall be upto 300% of the FOB value of physical export and / or FOR value of deemed export in the preceding licensing year or Rs 1 crore, whichever is higher. Such Authorization shall have value addition.

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Advance Release Orders
An Advance Authorization holder, holder of advance Authorization for annual requirement, holder of DFIA and holder of DFRC intending to source the inputs from indigenous sources/State Trading Enterprises/ EOU/SEZ/ EHTP/STP/BTP units in lieu of direct import has the option to source them against Advance Release Orders denominated in free foreign exchange/ Indian rupees...

The transferee of a DFRC shall also be eligible for ARO facility. However, supplies may be obtained against the Authorization from EOU/ EHTP/BTP/STP/SEZ units, without conversion into ARO.

Back-to-Back Inland Letter of Credit
An Advance Authorization holder, holder of advanceAuthorization for annual requirement, holder of DFIA, and holder of DFRC may, instead of applying for an Advance Release Order, avail of the facility of Back-to-Back Inland Letter of Credit.

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Prohibited Items
Prohibited items of imports mentioned in ITC (HS) shall not be imported under the Advance Authorization/DFIA/DFRC. Further the items reserved for imports by State Trading Enterprises cannot be imported against advance Authorization/ DFIA/DFRC. However those items can be procured from State Trading Enterprises against ARO or Invalidation letter issued to the holder of advance Authorization/DFIA/DFRC. The State Trading Enterprises are also allowed to sell the goods on High Sea Sale basis to the holders of Advance Authorization/DFIA/DFRC.

In addition, the State Trading Enterprises are permitted to issue "No Objection Certificate (NOC)‟ if they so desire, for import by holder of advance Authorization. DFIA holders would also be eligible to import such items based on No Objection Certificate (NOC) from the STEs for only such products as notified by DGFT. However, the Authorization Holder would be required to file Quarterly Returns of the imports effected against such „No Objection Certificate‟ to the concerned State Trading Enterprises (STEs) and the STEs, in turn, would submit Half-yearly import figures of such imports to the concerned administrative Department for monitoring with a copy endorsed to the Department of Commerce.

Similarly prohibited items of exports mentioned in the ITC (HS) shall not be exported under the Authorization issued under the Advance
48 | S I M S Advance Authorization

Authorization/DFIA/DFRC scheme. Further, export of restricted items shall be subject to all conditionalities or requirements of export Authorization or permission.

Duty Free Replenishment Certificate (DFRC)
DFRC is issued to a merchant exporter or manufacturer exporter for the import of inputs used in the manufacture of goods without payment of basic customs duty. However, such inputs shall be subject to the payment of additional customs duty equal to the excise duty at the time of import. DFRC shall be issued on minimum value addition of 25%. DFRC may be issued for physical exports against freely convertible currency / physical exports to SEZ. DFRC may also be issued in respect of physical exports (other than supplies to SEZ) for which payments are received in non-convertible currency. Such exports are, however, being subject to value addition. DFRC shall be issued only in respect of products covered under the Standard Input Output Norms as notified by DGFT. However, in respect of Standard Input Output Norms which are subject to "actual user" condition or where the export proceeds have not been realised at the time of filing application or for import of fuel under the general norms, DFRC shall be issued with actual user condition for these inputs. However, for fuel, the import entitlement may be transferred only to the companies which have been granted Authorization to market fuel by the Ministry of Petroleum & Natural Gas.
49 | S I M S Advance Authorization

DFRC will not be issued against SION which prescribes a prior import condition for inputs. DFRC shall be issued for import of inputs as per SION as indicated in the shipping bills. The validity of such Authorizations is 24 months. DFRC and or the material(s) imported against it shall be freely transferable. However, DFRC with actual user condition or the material(s) imported against it shall not be transferable. The export products, which are eligible for modified VAT, shall be eligible for CENVAT credit/ service tax credit. However, non excisable, non dutiable or non CENVAT products shall be eligible for drawback at the time of exports in lieu of additional customs duty to be paid at the time of imports under the scheme. The exporter shall be entitled for drawback benefits in respect of any of the duty paid materials, whether imported or indigenous, used in the export product as per the drawback rate fixed by Directorate of Drawback (Ministry of Finance). The drawback shall however be restricted to the duty paid materials not covered under SION.

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Facility of Clubbing

Facility of clubbing shall be available only for redemption /regularisation of cases and no further import or export shall be allowed.

RA, under whose jurisdiction Authorization is issued or NC in other cases, shall consider a request in ANF 4D for clubbing all imports and exports of more than one Advance Authorization provided imported inputs are properly accounted for as per norms.

Value addition of the Authorizations so clubbed shall be average of minimum value addition prescribed in FTP and Procedure laid thereunder, imposed on individual Authorizations.

Facility is available only for Advance Authorization(s) where there is shortfall in fulfillment of EO, and which is sought to be clubbed with an advance Authorization(s) which is valid for imports.

For expired Authorization(s) with EO shortfall and which is sought to be clubbed with an advance Authorization(s) which is valid for imports, applicant shall pay composition fee for EO period extension

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(b) Duty Free Import Authorization Scheme (DFIA).

Scheme
DFIA is issued to allow duty free import of inputs, fuel, oil, energy sources, and catalyst Which are required for production of export product. DGFT, by means of Public Notice, may exclude any product(s) from purview of DFIA. This scheme is in force from 1st May, 2006.

Entitlement
Under DFIA, Authorizations shall be issued only for products for which Standard Input and Output Norms (SION) have been notified. In case of post export DFIA, a merchant exporter shall be required to mention only Name (s) and address(s) of manufacturer(s) of the export product(s). Applicant is required to file application to concerned RA before effecting exports under DFIA. Pre-export Authorization shall be issued with actual user condition and shall be exempted from payment of basic customs duty, additional customs duty / Excise duty, education cess, antidumping duty and safeguard duty, if any.

In case of actual user DFIA and where CENVAT credit facility on inputs have been availed for the exported goods, even after completion of export obligation, the goods imported against such DFIA shall be utilized in the manufacture of dutiable goods whether
52 | S I M S Advance Authorization

within the same factory or outside (by a supporting manufacturer).

Value Addition
A minimum 20% value addition shall be required for issuance of such authorization. Items, for which higher value addition is prescribed under Advance Authorization Scheme, shall be applicable.

Export Obligation
The period for fulfilment of the export obligation under Advance Authorization is 24 moths from the date of issue of the Authorization.

Request for extension in EOP may be made in ANF 4E. RA shall grant one extension for six months from expiry date with payment of composition fee of 2% of duty saved on all unutilized imported items as per Authorization. Request for a further extension of six months may be considered by RA with payment of composition fee of 5% of duty based on all unutilized imported items as per Authorization. However, any extension beyond 36 months from the Authorization issue date shall not be allowed.

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Transferability
Once export obligation has been fulfilled, request for transferability of Authorization or inputs imported against it may be made before concerned RA. Once transferability is endorsed, Authorization holder may transfer DFIA or duty free inputs, except fuel and any other item(s) notified by DGFT. However, for fuel, import entitlement may be transferred only to companies which have been granted Authorization to market fuel by Ministry of Petroleum and Natural Gas. Once transferability is endorsed, imports / domestic procurement against Authorization or transfer of imported inputs / domestically procured inputs shall be subject to payment of applicable additional customs duty / excise duty. While endorsing transferability, Authorization would bear a note as to liability of such additional customs duty / excise duty. However, in case where CENVAT facility has not been availed, exemption from additional customs duty / excise duty would be available even after endorsement of transferability on DFIA. Wherever SIONs prescribe actual user condition and in case of Acetic Anhydride, Ephedrine and Pseudo Ephedrine, DFIA shall be issued with actual user condition for these inputs and no transferability shall be allowed for these inputs even after fulfillment of export obligation

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CENVAT Facility
CENVAT credit facility shall be available for inputs either imported or procured indigenously.

For Duty Free Import Authorization (DFIA) applications
1. Two copies of the application must be submitted unless otherwise mentioned.

2. Each individual page of the application has to be signed by the applicant.

3. a. Part 1 & Part 4 has to be filled in by all applicants. In case of applications submitted electronically, no hard copies of Part 1 may be submitted. However in cases where applications are submitted otherwise, hard copy of Part 1 has to be submitted. b. Only relevant portions of Part 2 need to be filled in. 4. Application must be accompanied by documents as per details given below: V. For Duty Free Import Authorization

1. Bank Receipt (in duplicate)/Demand Draft/EFT details evidencing payment of application fee.

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2. In cases where import of fuel has been sought for the grant of Duty Free Import Authorization:

a. Self certified copy of the permission issued to the manufacturer exporter by the competent authority (concerned State Electricity Board or Power Corporation or Regulatory Commission of the State) under Section 44 of theElectricity (Supply) Act, 1948 for the installation of captive power plant based on the specified fuel unless the permission is specifically waived by the State Electricity Board; and b. Self certified copy of the letter intimating the date of commissioning of the captive power plant from the concerned authority which issued the permission letter, is to be submitted. 5. Additional documents required in case of supplies under deemed export/intermediate supplies under Duty Free Import Authorization :

Invalidation letter in case of supplies to

i. An EPCG Authorization holder;

ii. An Advance Authorization holder;

iii. A Duty Free Import Authorization

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DUTY REMISSION SCHEMES DEPB (Duty Entitlement Pass Book Scheme)

The Duty Entitlement Passbook (DEPB) scheme is one of Scheme among exporters.

the Duty Neutralization

Notified on 1/4/1997, the DEPB Scheme consisted of  Post-export DEPB and  Pre-export DEPB. The pre-export DEPB scheme was abolished from 1/4/2000.

The credit earned by the exporter by exporting the goods under DEPB is given by DGFT in the form of DEPB scrip against which the exporter can import any goods and in place of payments of custom duty, the exporter can get DEPB scrip debited.

The DEPB allows import of any items except the items which are otherwise restricted for imports. such as Gold Nibs, Gold Pen, Gold watches etc.

DEPB validity period is of 12 months from the date of credit.

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Under the DEPB, an exporter may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency.

Credit given under DEPB Schemes is utilized for payment of Indian customs duty including capital goods, which are free to import. This license as well as goods imported against it is freely transferable only after export payment confirmation

The Director General of Foreign Trade notifies the rates of DEPB.

Caps fixed on certain items but there would be no verification of Present (PMV) on such items.

Market

Value

Exports made under DEPB are not entitled for drawback.

The port from where goods are to be imported shall be stated on DEPB. The DEPB license can be transferred only for the import from the same port as specified in the license.

Both merchant exporters and manufacturer exporters are eligible for this license

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Scheme
Objective of DEPB is to neutralise incidence of customs duty on import content of export product. Component of customs duty on fuel (appearing as consumable in the SION) shall also be factored in the DEPB rate. Component of Special Additional Duty shall also be allowed under DEPB (as brand rate) in case of non-availment of CENVAT credit. Neutralization shall be provided by way of grant of duty credit against export product.

An exporter may apply for credit, at specified percentage of FOB value of exports, made in freely convertible currency.

Credit shall be available against such export products and at such rates as may be specified by DGFT by way of public notice. Credit may be utilized for payment of Customs Duty on freely importable items and/or restricted items. DEPB Scrips can also be utilized for payment of duty against imports under EPCG Scheme.

DEPB holder shall have option to pay additional customs duty in cash as well.

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Validity
Validity period of DEPB for import/export is 24 months.

Transferability

DEPB and / or items imported against it are freely transferable. Transfer of DEPB shall however be for import at specified port, which shall be the port from where exports have been made. Imports from a port other than the port of export shall be allowed under TRA facility as per terms and conditions of DoR notification.

Applicability of Drawback
Additional customs duty / Excise Duty and Special Additional Duty paid in cash or through debit under DEPB may also be adjusted as CENVAT Credit or Duty Drawback as per DoR rules.

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RESEARCH FINDINGS
Advance Authorization and IOCL

As crude oil is an input raw material for the manufacture of petroleum products and custome duty is suffered on crude oil, it is eligible to be claimed under export benefit schemes. IOCL has been availing benefit under advance authorization scheme for

1. ATF supplied to foreign going aircrafts. 2. Fuel supplied to foreign going vessels. 3. Actual export.

As per the scheme, the input required ie crude oil to manufacture export of petroleum products can be imported without payment of customes duty under Advance Authorization.

Advance Authorization is valid for 24 months. Export obligation under advance authorization Should be fulfilled within 36 months.

The import of raw material is on the basis of standard input- output norms (SION). The SION is available for petroleum products. However there must be positive value addition.

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Application for the advance authorization should be made to licensing authority of DGFT.

Contains of Advance Authorization:
1. Name and description of items to be imported and exported . 2. Aggregate CIF value of import. 3. Quantity of export. 4. Quantity of import. 5. FOB/FOR value.

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Various doccument appended to the shipping bills

1. Invoice and AV-7 raised for such export.

2. GR forms as per RBI guideline.

3. Indent/Acceptance of the contract/LC.

4. Quality control certificate.

5. Export declaration.

6. Copy of Advance Authorization licence or application for the same.

7. Any other relevant document like ARE-1, ADR/MDR ETC.

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Procedure in custome house
Following is the procedure followed in customs house under Advance Authorization 1. Shipping bills to be submitted to the Noting section of export branch at respective Airport and Ports. 2. After noting the authorities will open a case file in running serial no. in respect of every licence and forwarded it to the appraising officer for assessment. 3. The appraising officers will verfy the shipping bills along with the Advance Authorization and also ARE-1. 4. Then shipping bill is to be presented to the inspector of the customs for the examination of the product to be exported. 5. ATF is supplied to the foreign going aircraft under supervision of inspector of customs. 6. After refueling of aircraft, “Aircraft Delivery Recepit” (ADR) will be prepared on the basis of the flow meter reading in the presence of Aircraft Maintenance engineer and officer of IOCL. 7. Before certifying ADR captain of the Aircraft has to sign on the ADR. 8. After satisfying the details of export the superintendent in charge will allow “let export of the ATF”

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9. The commercial invoice will contain only the approximate quantity which will be different than the actual quantity exported. In such case a short shipment advice or shut out notice are to be prepared.

Customs House Agent (CHA)
CHA (Customs House Agent) activities are governed by Customs House Agent Licensing regulation, 2004. The Customs House Agent means a person licensed under these regulation to act as an agent for the transaction of any business relating to entry or departure of conveyances or the import or export of goods at any customs station.

Major Documentation to be prepared by CHA for IOCL:
1. Preparation of pre-shipping doc. (weekly basis). 2. Provide confirmation to IOCL regarding “let‟s export”. 3. Preparation of short shipment memos. 4. Preparation of shipping bills. 5. Preparation of ARE-1. 6. Preparation of export declaration. 7. Preparation of GR form. 8. Matching of export doc. With export sales made at each location on daily basis. 9. Any other doc. If required

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Activities carried out at iocl for: Advance Authorization licence for ATF supplied to foreign going air craft
Sr.no 1 Activity For obtaining AAL assess the quantity location Wise refinery wise and advise well in advance to Regional E&C Dept. 2 To file application online, obtain the AA application file no., online payment 3 4 5 6 To appoint customs approved CHA To execute the export of ATF under AA Monitoring the supplies against AA Total set of doc. Under a particular AA to be submitted to Regional Aviation Regional Aviation Regional Aviation Regional Aviation Location in-charge in consultation with location Finance officer in-charge. 7 To verify the correctness of above mentioned doc. 8 To reconcile the total payment by the cusomer and invoice wise linking to the payment 9 To obtain customer wise / location wise BRC 10 11 To prepare a total set of doc. For AA To get redemption certificate/ EODC from DGFT` Regional Aviation Regional E&C Concern PAD locationincharge/ location Finance incharge. Regional Aviation Regional Aviation Task Regional Aviation- To inform the requirment for taking advance autho. At least 3-weeks in advance. Regional E&C

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Activity carried out at iocl for: Advance Authorization licence for Marine Supplies
Sr.no 1 Activity For obtaining AAL assess the quantity location Wise refinery wise and advise well in advance to Regional E&C Dept 2 To file application online, obtain the AA application file no., online payment 3 4 To appoint customs approved CHA To execute the supplies under AA and complet the doc. Under AA with the help of CHA 5 6 Monitoring the supplies against AA Total set of doc. Under a particular AA to be submitted to Regional Marine Regional Marine Regional Marine and Regional E&C Regional Marine Location in-charge in consultation with location Finance officer in-charge 7 8 To verify the correctness of above mentioned doc. To reconcile the total payment by the cusomer and invoice wise linking to the payment, knocking off in SAP 9 To obtain customer wise / location wise BRC Regional Marine Regional Marine Regional Marine Regional E&C Task Regional Marine

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DATA ANALYSIS & INTERPRETATION
Stament showing import and export carried out under Advance Authorization for the fiscal year 2010-11 at IOCL.
Import-Export completed
Rgion no Adv. License no Export as Actual Per Export AA(MT) (MT) 129651 85766 152431 7058 9981 384887 Items of Import Import as Actual per Import AA(MT) (MT) 139360 80400 107200 12669 10720 350349 123511 79000 103710 10150 9916 326286 Actual Duty Benefit. INR/Crs 19.87 12.54 17.10 1.68 1.64 52.82

NR SR SR ER ER

0150278443 130000 510261839 510270527 5102624 510261840 TOTAL 75000 100000 15450 10000 330450

CRUDE OIL CRUDE OIL CRUDE OIL CRUDE OIL CRUDE OIL

 The above table shows that a total of 52.82crs. Rupees. Actual Duty Benefit.  From the remaining of the data which gives the values of unclaimed and uncompleted import-export under advance Authorization for 2010-11, the total duty benefit is about 98.34crs rupees.  This shows that about 100crs rupees will be the total benefit from advance Authorization to IOCL.  Advance Authorization has been of great fortune for IOCL in availing the benefit under duty exemption schemes.

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Flow chart wise description of various schemes
1. DUTY DRAWBACK

Duty Drawback

Is a Reimbursement of

Import Duty

Excise Duty

Paid on Inputs

Used in the Manufacture of Export Products

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2. ADVANCE AUTHORIZATION Advance Authorization

Is a Facility

To Import Inputs

Used

Required

In the Manufacture of Export Product

Without Payment of Import Duty

Subject to 15% Value Addition

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3. DUTY FREE IMPORT AUTHORIZATION

Duty Free Import Authorization Is A Pre / Post Export Facility To Import Inputs

Used In Manufacturer of Export product

Without Payment Of Import Duty Subject To 20% Value Addition

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4. DUTY ENTITLEMENT PASSBOOK
D.E.P.B

Is Notional Credit Given

By Customs

As % of F.O.B. Value Of Exports

To Be Utilized

Against Payment Of Import Duty

For Any Product

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RECOMMENDATION & SUGGESTIONS
FOR ADVANCE AUTHORIZATION

 Is a preferred Export Incentive where Import content in Export Product is higher.

 The quantity of inputs involved is substantial.



While deciding on Advance Autho., local purchase price must be compared with the price of the imported product after the availing duty exemption on it.



At every stage transaction cost of operating under the scheme should be compared with other Export Incentive schemes.



At 15% value addition this scheme gives the lowest value addition limit hence more preferable than other schemes.

 Export obligation period upto 36months.

 Hence we can easily conclude that Advance Authorization is more attractive than other scheme

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RESEARCH OBJECTIVES
ADVANCE AUTHORIZATION VS ANNUAL ADVANCE AUTHORIZATION

 Annual Advance Autho. is preferable where the number of Advance Authos. in a licensing year ranges from 5 to 10 Authos.  The transaction cost under Annual Advance Autho. is lower as compared to Advance Authorization.  The Annual Advance Autho. is preferable where product of export and import are standardized.  Advance Autho. is suitable where Export orders are on an ad- hoc basis.  The option of applying for Advance Autho. under self declaration basis is not available under Annual Advance Authorization.  The flexibility in operation is more under Advance Autho. than Annual Advance Authorization.

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Advance Authorization vs. DBK

 Advance Autho. is preferable where FOB value of exports is high  DBK is preferable where indigenous content of inputs if high in export product  DBK is preferable where FOB value of exports is lower  DBK is preferable where All Industry Rate of Drawback is fixed.  Advance Autho. is preferable where product of export is non standardized  Advance Authorization is preferable where SION is fixed.  In case of Deemed export, DBK is preferable where product supply is based on indigenous content, or the supply is effected under ARO or against Back to Back Letter of Credit

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CONCLUSION
Advance Authorization scheme is one of the most attractive Duty Exemption Scheme introduce by Indian Government. At 15% value, addition it provides a better way to import raw material for the purpose of export. As crude oil is the main raw material for the production of petroleum products and its scarcity in India, hence import of crude oil is an inevitable option. Crude oil import is subjected to 5% duty. With the help of Advance Authorization scheme petroleum companies can avail the service of duty exemption on it. Various features of Advance Authorization scheme make it an attractive option, like an Export Obligation Period of 36 months, minimum Value Addition of 15%, Facility of Clubbing.

Indian government on 24/6/2011 announced to cut the customs duty of crude oil from 5 percent to zero in a bid to lift burden on state-owned oil marketing companies, according to the notification.

An empowered group of ministers headed by Indian finance minister Pranab Mukherjee also decided to cut customs duty of diesel and petroleum from 7.5 percent to 2.5 percent and excise duty on diesel from 4.6 rupees per liter to 2 rupees per liter.

The slash of customs duties and excise tax will cost Indian government 490 billion rupees (10.9 billion U.S. dollars) this fiscal year due to losses of revenue.

76 | S I M S Advance Authorization

About 70% of indirect tax to the government is going from import of crude oil, now looking at the announcement of zero percent customs duty, the estimated fiscal deficit of 4% of the GDP of Indian economy is unlikely to happen.

Hence once again the fiscal deficit remains a concern to the Indian economy, but if we look it the other way the government takes customs on import and gives subsidaries to the oil companies so cutting on customes duty will not affect that much.

What is to be done is that government should cut on the various duties applied to the finalized petroleum products which will make an impact on Indian consumers.

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Bibliography
    

Internet. IOCL internal circulars FTP (2009-14) Hand Book v1and v2 Wikipedia.

78 | S I M S Advance Authorization

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