Indian Government has offered various scheme and number of incentives to encourage exports from India. Foreign Trade Policies are amended and modified by the DGFT every year to provide assistance to the Importers and exporters. There are various scheme launched by the Indian Government to enhance the exporting activities and employment of the country. Following measures taken by the government to boost exports in India –
- Development of EPZ, FTZ, SEZ units
- 100% Export Oriented Units (EOUs)
- Tax exemption on profits earned
- Cash Assistance to the exporters
- Export Promotion Capital good Scheme (EPCG)
- Duty Exemption Scheme
- Export Incentive Scheme
- Exemption of Sales Tax
- Technical assistance and Training
- Advisory Councils
- Indian Institute of Foreign Trade
- Trade reps
- Setting up of Commodity boards to promote exports
- Aside Scheme(Assistance to states for developing Export infrastructure and allied activities)
- Market Initiative Scheme(MAI)
- ECGC Scheme(Export Credit Guarantee Corporation of India Ltd)
- National Export Insurance Account
In this post we are going to understand few major steps taken by the government in details –
Development of EPZ, FTZ, SEZ units
Export Processing Zone (EPZ) are industrial units which are located near airport or seaport and formed in international custom territory of a country. Entire Production of EPZ is extended for export. Economic laws are different than the economic laws of country. EPZs are provided good infrastructure and industrial flats are available at concessional rate.
Objectives of EPZs:
- Foreign Direct Investment (FDI) upto 100% is allowed.
- Employment generation
- Technology Promotion
- Economic growth of country
- Create skilled man power
Special Economic Zone (SEZ) policy was announced in April 2000 under foreign trade policy. Now it is governed by the SEZ act passed by the Government in 2005.
SEZs are engaged in export oriented production, It is area of the country selected by the Government.
SEZ are open to all manufacturing, trading, services. Tax benefits are much more than EPZ
Free Trade Zone (FTZ):
Goods imported in FTZ can be re-exported without any processing in the same form while in EPZ value addition required to achieve
Export Incentive Scheme
MEIS Scheme and SEIS Scheme:-
Merchandise Exports from India Scheme (MEIS) & The Service Exports from India Scheme ( SEIS Scheme ) are the two schemes under the Foreign Trade Policy 2015-20 for giving incentives to the goods exporter and service exporter respectively in the form of duty credit scrips.
The MEIS & SEIS both the schemes provide incentives to the exporters which aims to make indian goods competitive in the global markets by offsetting infrastructural inefficiencies and associated costs and to encourage export of notified services from india respectively.
The MEIS is the new scheme which replaced 5 similar schemes which were available in the FTP 2014-19 and SEIS replaced the Served from India scheme (SFIS).
The Duty scrips are transferable and can be used for following
- Payment of Basic customs duty and additional customs duty.
- Payment of Central excise duties on domestic procurement of inputs.
The Exporter can waive off his import duty through the scrips obtained under SEIS and MEIS Scheme or they can transfer/sell it to the importer who needs to pay his import duty, in return that importer will transfer money to the exporter depending on the market rate.
Under the MEIS, benefit is determined as a percentage of the FOB value of exports. The rate of reward is specified in Appendix 3B of FTP which is categorized according to ITC(HS) code.
Under MEIS rate of rewards varies from product to product and are in the range of 2% to 5% for most items,
Whereas in SEIS rewards are calculated on the basis of Net Foreign Exchange Earned. The services which are eligible for the benefits are given in Appendix 3E.
In SEIS rates of rewards are in the range of 5% – 7% depending on the notified type of the services.
There are almost 8000 plus products under MEIS which are eligible for the incentives, below are list of few Goods and Services which are eligible under both the scheme.
The Foreign Trade Policy 2015-20 is extended till 31st March 2021 due to Covid-19 Pandemic.
Under the extended policy exporter can continue to avail the MEIS benefits till 31st December 2020, Later on it will be replaced by RoDTEP Scheme, a new scheme in a phased manner.
The Ministry of Commerce had approved the continuation of the SEIS scheme for the FY 2019-20.
The Government may give confirmation for the application under SEIS scheme for the FY 2020-21 but as of now there is no confirmation given from them
License is valid for the 24 months from the date of the issue of the license for both MEIS & SEIS Scheme.
Advance Authorization Scheme
An Advance Authorization is issued to allow duty free import of raw materials which can be used in production of export products. We can also import duty free fuel, oil, energy, catalysts etc. which are consumed in the process of obtaining export products.
The Following Duties are exempted under Advance Authorisation License –
a) Basic Customs Duty
b) Additional Customs Duty
c) Education Cess
d) Anti-dumping Duty
e) Countervailing Duty
f) Safeguard Duty
g) Transition Product Specific Safeguard Duty wherever applicable
There are following four methods to obtain An Advance Authorisation
1) Standard Input Output Norms (SION)
3) Applicant specific prior fixation of norm by the Norms Committee.
4) Self Ratification Scheme
Value addition is a term used to calculate and examine the amount of profit an exporter had with respect to the imported inputs when the duties are exempted.
Cabinet approved on 13th March 2020 Government approved RoDTEP Scheme which will replace existing MEIS Scheme and RoSCTL Scheme.
Technical Assistance & Training for Exporting:
The small Industries Development Organization (SIDO) with 26 small industries Service institutions provide following services
- Motivate Entrepreneurs to Export
- Provide Services related to documentation, application procedure, export incentive.
- Conduct Seminar, Webinar, meetings to update and guide exporters
- Hold discussion with export promotion agencies
Trade representatives do the market surveys for the exporters who are in abroad, pass the information one country to other for smooth process of Import Export.
Setting Up of Commodity Boards to Promote Exports
There are All India Handloom and Handicraft Board under the Commerce ministry and additionally seven commodity boards are set up to help the traditional products. They advise the Government on Foreign trade policies, signing trade agreements, fixing Quotations.
Few of State Government have set up Specialized Export Trade Corporations (SETC), There are board of trade, Export – Import Advisory councils. Established in Andhra Pradesh, Bihar, Karnataka , UP, MP, HP .
Indian Institute of Foreign Trade:
The Government set up this autonomous body to train people in international trade, survey and organize trainings Programmes. It works in co-operation with trade industries, universities, Educational and research institutions.
There are people who manage exhibitions, makes arrangements for participation in international exhibition, suns show rooms in foreign countries and setup trade centers outside India.
EPCG scheme allows an exporter to import capital goods including spares for pre-production, production and post-production at zero Customs duty, for exports.
Manufacturer exporters, Merchant exporters tied to supporting manufacturer and Service Providers including Common Service Provider (CSP) can avail the benefits under EPCG scheme.
Export Obligation under EPCG Scheme is required to be fulfilled by export of goods manufactured/services rendered through the Machine by the applicant.
Two types of Export Obligation:
- Average export obligation
- Specific Export Obligation
- Goods include refrigeration equipment, power generating sets, packaging machinery and equipment, machine tools, equipment and instruments for testing, research and development, quality and pollution control.
- It may be for use in manufacturing, mining, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, agriculture, and viticulture as well as for use in the services sector.
- Capital Goods also include Computer systems and software, Spares, molds, dies, jigs, fixtures, tools & refractories and Catalysts for initial charge plus one subsequent charge.
——-After fulfilling the Export Obligation an application on the prescribed form ANF 5C along with the specified documents is required to be submitted to licensing authority for redemption.