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.
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.
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:
However, certain categories have been made ineligible for availing of the benefit of this scheme. These categories include:
[*Exporters under SEZ, EOU and Advance Authorisation, etc. would be covered under the scheme from a later date]
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:
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
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.
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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