New Delhi: The government on Tuesday announced additional incentives worth Rs 8,450 crore a year to boost both merchandise and services exports as part of its mid-term review of the foreign trade policy (FTP) for 2015-20, with specific focus on micro, small and medium enterprises (MSMEs) and labour-intensive sectors to boost job creation.
The benefits, which represent a 34% annual rise from earlier, came in the form of an enhancement of the duty credit scrips under two flagship export schemes — Merchandise Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS) — by 2 percentage points. The MEIS is the most important export promotion scheme under which the government provides exporters duty credit scrip at 2%, 3% or 5% of their export turnover, depending upon products and shipment destinations.
Before Tuesday’s announcement, the potential revenue forgone by the government on account of the scheme was estimated at Rs 22,000-23,500 crore a year. While a key request by the commerce ministry to allow exporters to use MEIS scrip to pay their goods and services tax (GST) liabilities doesn’t seem to have been accommodated by the finance ministry yet, exporters have been given some relief in this respect. The validity of duty credit scrips has been increased from 18 months to 24 months to enhance their utility in the GST framework. Similarly, the GST rate for the transfer and sale of scrips has been reduced to zero from 12% announced earlier.
To ease pains of exporters, revenue secretary Hasmukh Adhia said refunds will be expedited and urged them to fill up the refund forms correctly to enable the government to clear them. The revenue department has said the quantum of IGST refund claims, as filed through shipping bills from July to October, is around Rs 6,500 crore and the quantum of refund of unutilised credit on inputs or input services, as per the RFD 01A applications filed on GSTN portal, is to the tune of Rs 30 crore.
Refunds to the tune of Rs 451 crore have been granted to exporters against July IGST claims, said a government official. As such, the government will introduce a virtual duty payment system (e-wallet facility) for exporters from April next year. Hailing the decision to raise the MEIS incentives, some exporters, however, said restricting the usage of the scrip to the payment of just basic customs duty, and not IGST, is unfair (they used to pay various indirect taxes using the scrip before the GST regime).
Similarly, the recalibration of duty drawbacks with the new taxes (GST) is far from over. Some of them said compared with the pre-GST era, the benefits are still negative for textile exporters. Commerce and industry minister Suresh Prabhu said focus is on data driven policy, identifying new products, doubling farmers income, enhancing partnership with other countries in providing services. He said the FTP will leverage the long term advantages of historic reform of GST in terms of reduced compliance and logistics costs. The MEIS incentive for ready-made garments and made- ups, which was hiked just recently by 2 percentage points, also was clubbed with incentives for other sectors under the MEIS.
