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Indian Export Benefit Schemes - A Complete Guide to Export Incentives

Exports play a crucial role in ensuring a balance of trade for any economy. As per WTO’s data released in April 2019, India’s share in global exports for the year 2018 stood at 1.7% for merchandise whereas, at 3.5% for the service sector. Exports are instrumental in creating employment, increasing foreign exchange reserves, and reducing the current account deficit. These become the foremost reasons for the Indian Government to launch export incentive schemes. Here’s a complete guide to various export incentives in India provided by our government for promoting exports.

EXPORT BENEFITS: PRODUCTS

A. Merchandise Export from India Scheme (MEIS)

To provide a refund to the exporters of duties paid, the Government of India initiated the MEIS scheme that provided duty credit scrips as export benefits. The export incentive was provided as a fixed percentage of the FOB value of the notified goods and ranged between 2% / 3% / 5% / 7% of the FOB Value depending upon 3 categories of the market as provided in Appendix 3B. MEIS scheme, being WTO non-compliant, has been replaced with RoDTEP Scheme w.e.f. 1st January 2021.

B. Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme

As a replacement for the MEIS scheme, RoDTEP Scheme aims to provide export benefits in India by reimbursing the exporters of the duties that are neither credited nor refunded to them. Such duties include:

  1. Excise Duty and VAT on the fuel used for the following purposes:
    • Self-incurred transportation costs
    • Operating Machines and plants
    • Generating electricity via DG sets or power plants
  2. Stamp duty paid on export documents
  3. Electricity Duty paid for the purchase of electricity
  4. Property Tax/ Mandi Tax/ Municipal Tax
  5. GST [Compensation Cess/CGST/SGST/IGST], the credit of which is disallowed on certain items like food, beverages, works contract services, passenger transportation, etc.

However, certain categories have been made ineligible for availing of the benefit of this scheme. These categories include:

  1. Exports of imported goods as per para 2.46 of FTP i.e., Import for Export
  2. Export products subject to export duty or minimum export price
  3. Exports through transhipments, meaning exports originating in the third country but transshipped through India
  4. Deemed Exports
  5. Products prohibited as well as restricted for exports (as per Schedule 2 of Export Policy in ITC (HS))
  6. Products manufactured:
    • by DTA units supplied to SEZ/FTWZ units or,
    • in BTP or EHTP or,
    • in a warehouse, wholly or partly, under section 65 of Customs Act, 1962 (i.e., MOOWR, etc.)
  7. Products manufactured or exported:
    • to discharge an export obligation against DFIA/ Advance Authorisation/ Special Advance Authorisation issued under any duty exemption scheme of the relevant FTP* or,
    • by a 100% EOU* or,
    • by a unit situated in FTZ, EPZ or SEZ* or,
    • by availing the benefit of the Notification No 32/1997- Customs (i.e. jobbing transactions)
  8. Exports from Non-EDI port or for which electronic documentation in ICEGATE EDI has not been generated 
  9. Goods are taken into use after manufacture (second-hand goods)

[*Exporters under SEZ, EOU and Advance Authorisation, etc. would be covered under the scheme from a later date]

C. EPCG Scheme

Another Indian export incentive scheme is EPCG scheme where an importer, having an export business, can import capital goods without levy of customs duty subject to the condition that exports equivalent to 6 times of duty saved on import of such capital goods should be made by such importer within 6 years from the date of issuance of the authorization.
Such capital goods are known as Export Promotion Capital Goods, being the capital goods used to manufacture goods exported to other countries. Apart from machinery, such goods also include moulds and dies, jigs, tools, fixtures, spares (including refurbished/reconditioned).
The applicant shall obtain the EPCG license by filing an application with the licensing authority, Director General of Foreign Trade. Self-certified copies of the following documents shall be submitted:

  • PAN card
  • Digital signature
  • GST registration certificate
  • Excise registration
  • Registration certificate from the tourism department
  • Import Export Code (IEC)
  • Registration cum Membership Certificate
  • Brochure
  • Proforma Invoice
  • Certificate of Chartered Accountant
  • Certificate of Chartered Engineer

EXPORT BENEFITS: SERVICES

Service Exports from India Scheme (SEIS)

Service exporters where they are provided transferable Duty Credit Scrips as export incentives based on a percentage of net Foreign Exchange earned in a financial year on the export of eligible services. These duty credit scrips can then be used for payment of Basic Customs Duty as well as duties listed in para 3.02 of FTP 2015-20.

To become eligible for the SEIS scheme, a service provider being a partnership firm/ LLP/ company shall, in the preceding financial year, have a minimum net free foreign exchange earnings of $15,000. Whereas, in the case of individual service providers or proprietorships, the amount is $10,000.

Net Foreign Exchange = Gross earnings in foreign exchange – Total remittances, payments, or expenses of foreign exchange 

Ineligible Foreign Exchange

Only the foreign exchange earnings through notified services are eligible for the scheme. Other sources such as donations, receipts, or repayment of loans or debt/equity participation are ineligible and will not be counted for SEIS entitlement.

BOTTOM LINE

Government support in the form of export benefits for MSMEs as well as for existing and prospective exporters is accessible. Any company willing to avail of any kind of benefit under the Foreign Trade Policy must apply a professional mindset or take professional assistance to apply for the benefits to avoid any disputes with the department at a later stage.  

 

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