The government has recently announced plans to release Rs. 56,027 crore in pending claims during the fiscal year 2021-22 for merchandising and service exports under various export promotion schemes. Bearing good news for over 45,000 exporters, approximately 98% of which belong to the MSME (Micro, Small and Medium Enterprises) category, this step seems promising. This will promote the goal of recording $400 billion merchandise exports in FY 2021-22, a significant increase with the growing demand for Indian goods in developed countries.
Incentives for Exporters
Exporters are set to receive benefits from export promotion schemes including Merchandise Exports from India Scheme (MEIS), Service Exports from India Scheme (SEIS), Rebate of State Levies (RoSL), Rebate of State and Central Taxes and Levies (RoSCTL), and RoDTEP (Remission of Duties and Taxes on Exported Products).
Impact on Foreign Exchange
The success of China as an exporting nation, which has manufacturers receiving loads of government incentives such as tax rebates to produce almost exclusively for foreign markets, could be replicated. The monetary incentive is sure to inspire more exporters to contribute to foreign exchange.
Reducing Current Account Deficit
These incentivizing schemes will help lower the Current Account Deficit, essentially the shortfall caused when a country’s import value exceeds its export value. India’s current account deficit has averaged 2.2% of GDP in the past decade, a number that stood at around $15 billion in July-September 2020.
Liquidity Boost
Several merchandise sectors, including Agriculture and Allied sectors, auto and auto components, would benefit greatly from these incentives, as they need to maintain cash flows and meet export demand in the recovering international market.
About the Export Promotion Schemes
The MEIS introduced in the Foreign Trade Policy (FTP) 2015-20, provides duty benefits determined by product and country. The scheme’s rewards are payable as a percentage of realized free-on-board value, ranging from 2%, 3% to 5%.
Meanwhile, the Service Exports from India Scheme was introduced in April 2015 for five years under the FTP of India 2015-2020, replacing the Served from India Scheme (SFIS Scheme) for FY 2009-2014. The Ministry of Commerce and Industry provides incentives to service exporters based in India through this scheme.
The Remission of Duties or Taxes on Export Product (RoDTEP) scheme aims to enhance exports in India by offering a fully automated route for Input Tax Credit (ITC) in the GST to offset tax paid on the purchase of inputs utilized in manufacture.
The Rebate of State and Central Taxes and Levies (RoSCTL) scheme, announced in March 2019, offers rebates for certain embedded state and central duties and taxes not refundable through GST. Previously known as Rebate for State Levies (ROSL), the scheme was initially only available for garments and made-ups.
