Export Incentives

Last updated: August 18, 2022

EXPORT INCENTIVES

The Foreign Trade Policy 2015-20 (extended up to 31 March 2022) and other Government of India schemes for promoting international trade have been building an ecosystem that best supports sustainable export activities. Here are the schemes for exports from India: 

 

The Government of India has introduced Merchandise Exports from India Scheme (MEIS) through the Foreign Trade Policy (FTP) 2015-20 w.e.f. April 1, 2015, with extended validity up to March 31, 2021. It seeks to promote the export of notified goods manufactured/ produced in India. MEIS is a major export promotion scheme of GOI implemented by the Ministry of Commerce and Industry. The popularity of the scheme can be gauged from the fact that in 2019-20, the liability under the MEIS rose to about Rs.450 billion. The Department of Commerce is reviewing the coverage of MEIS tariff lines and rates so that the MEIS incentive for this fiscal is capped at Rs 90 billion, and the saving shall be used for supporting the sectors that have potential to grow and contribute towards the Atmanirbhar Bharat and has a higher potential for exports. Salient features of MEIS are as under:

  1. MEIS is a result of major consolidation and simplification: Earlier there were 5 different schemes for rewarding merchandise exports with different kinds of duty scrips with varying conditions attached to their use. Now all these schemes have been merged into a single scheme, namely Merchandise Exports from India Scheme (MEIS).
  2. MEIS incentive Rates: Rewards under MEIS are payable as a percentage (2, 3 or 5 per cent) of realized FOB value of covered exports, by way of the MEIS duty credit scrip. The scrip can be transferred or used for payment of duties/taxes  . Scrips and inputs imported under the scrips are fully transferable. This has provided much flexibility to exporters. Earlier schemes had many conditions attached to the scrips about their usage and importability of items.
  3. Allocation and Product Coverage: At the time of the introduction on April 1, 2015, MEIS covered 4914 tariff lines. The product and market coverage were worked out keeping in view the annual allocation of Rs 180 billion by the Department of Revenue. In light of the major challenges being faced by Indian exporters in the backdrop of the global economic slowdown, Department of Commerce introduced increased support for export of various products and included some additional items under the Merchandise Exports from India Scheme (MEIS) through Public Notice 44 issued on 29th October 2015. MEIS currently incentives a total of 5012 tariff lines. This enhanced the estimated allocation to Rs 210 billion. Thereafter, as a measure of ease of doing business and to reduce transaction cost, the requirement of landing certificate for claiming MEIS has been dispensed with by giving global coverage to 2,787 lines which did not have such coverage earlier, vide Public Notice No. 6/2015-20 dated 4.5.2016, which raised the envisaged allocation to Rs 220 billion per annum.
  4. Duty credit scrips are freely transferable and usable for payment of customs duty, excise duty, and service tax: All scrips issued under MEIS and the goods imported against these scrips fully transferable.
  5. Incentives to be available for SEZs: Incentives under MEIS are available to units located in SEZs also.

Ineligibility of benefits under MEIS

The sectors or segments mentioned below are not entitled to MEIS incentives:

  1. Supplies made from DTA units to SEZ units 
  2. Export of imported goods covered under paragraph 2.46 of FTP; 
  3. Exports through trans-shipment, meaning thereby exports that are originating in third country but trans-shipped through India; 
  4. Deemed Exports; 
  5. SEZ/ EOU /EHTP/ BTP /FTWZ products exported through DTA units; 
  6. Export products which are subject to Minimum export price or export duty. 
  7. Exports made by units in FTWZ.

For more, click here

The reward/incentives provided by the Government make the exporters competitive in the international market including Europe, The United States of America and Africa. These three markets are covered under the scheme for all notified 5,012 tariff lines.

The objective of the Service Exports from India Scheme (SEIS) scheme is to encourage and maximize export of notified services from India.

The scheme is designed to provide rewards to exporters to offset infrastructural inefficiencies and associated costs. The Duty Credit Scrips and goods imported/ domestically procured against them are freely transferable and could also be used for payment of a number of Central duties/taxes including the basic customs duty.

For more, click here 

These schemes enable duty-free import of inputs for export production with an export obligation. This scheme consists of:

Advance Authorization Scheme

Under this scheme, duty-free import of inputs is allowed, which are physically incorporated in the export product (after making normal allowance for wastage) with a minimum 15 per cent value addition. Advance Authorization (AA) is issued for inputs in relation to resultant products, as per SION or on the basis of self-declaration, as per procedures of FTP. AA normally has a validity period of 12 months for the purpose of making imports, and a period of 18 months for the fulfillment of Export Obligation (EO) from the date of issue. AA is issued either to a manufacturer exporter or merchant exporter tied to a supporting manufacturer(s).

Advance Authorization for annual requirement

Exporters having past export performance (in at least preceding two financial years) shall be only be issued for items having entitled to Advance Authorization for Annual requirement. This shall ION.

Duty-Free Import Authorization (DFIA) Scheme

DFIA is issued to allow duty-free import of inputs, with a minimum value addition requirement of 20 per cent. DFIA shall be exempted only from the payment of basic customs duty. DFIA shall be issued on a post export basis for products for which SION has been notified. Separate schemes exist for gems and jewellery sector for which FTP may be referred.

Duty Drawback of Customs/Central Excise Duties 

The scheme is administered by the Department of Revenue. Under this scheme, products made out of duty paid inputs are first exported and thereafter refund of duty is claimed in two ways:
i) All Industry Rates: As per Schedule
ii) Brand Rate: As per application on the basis of data/documents.

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

As a major step to boost exports, Government of India has decided to extend the benefit of the Scheme for Remission of Duties and Taxes on Exported Products (RoDTEP) to all export goods with effect from 1st January, 2021.

The RoDTEP scheme would refund to exporters the embedded Central, State and local duties/taxes that were so far not being rebated/refunded. The refund would be credited in an exporter’s ledger account with Customs and used to pay Basic Customs duty on imported goods. The credits can also be transferred to other importers.

The Government of India has notified RoDTEP Scheme Guidelines and Rates on 17 August 2021. The scheme for zero rating of exports will boost India’s exports & competitiveness in the global markets .The rates of RoDTEP will cover 8555 tariff lines.

Interest Equalisation Scheme for Pre and Post Shipment Rupee Export Credit

This scheme allows manufacturing and merchant exporters an interest subsidy of 3% on pre-and-post-shipment rupee credit for exports of 416 products (tariff lines). The central bank’s notification came after the government approved the extension of the scheme, with “same scope and coverage” 

The Government of India has approved the extension of Interest Equalization Scheme, with the same scope and coverage, for a further period of three months, i.e. up to September 30, 2021. RBI Notification

Zero duty EPCG scheme

Zero duty EPCG scheme allows import of capital goods for pre-production, production and post-production (including CKD/SKD thereof as well as computer software systems) at zero Customs duty, subject to an export obligation equivalent to six times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in six years reckoned from Authorization issue-date.

Post Export EPCG Duty Credit Scrip Scheme

A Post Export EPCG Duty Credit Scrip Scheme shall be available for exporters who intend to import capital goods on full payment of applicable duty in cash.

Units undertaking to export their entire production of goods and services (except permissible sales in DTA), maybe set up under the Export Oriented Unit (EOU) Scheme, Electronics Hardware Technology Park (EHTP) Scheme, Software Technology Park (STP) Scheme or Bio-Technology Park (BTP) Scheme for the manufacture of goods, including repair, re-making, reconditioning, reengineering and rendering of services. Trading units are not covered under these schemes.

Towns of Export Excellence (TEE)

Selected towns, producing goods worth Rs 7.5 billion or more, are notified as TEE based on the potential for growth in exports. Registered export units in the region are eligible for the facility of EPCG schemes, as well as financial assistance under MAI Scheme through recognized Associations. Till January 2022, thirty-nine (39) towns have been recognized as Towns of Export Excellence (TEE) under the current Foreign Trade Policy. More details

Rebate of duty on “export goods” and “material” used in the manufacture of such goods.

Rebate of duty paid on excisable goods exported, or duty paid on the material used in the manufacture of such export goods, may be claimed under Rule of 18 of Central Excise Rules, 2002.

Export of goods under Bond i.e. without payment of excise duty.

Rule 19 of Central Excise Rules 2002 provides clearance of excisable goods for exports without payment of central excise duty from the approved factory, warehouse, and other premises.

Market Access Initiative (MAI) Scheme

Under the Scheme, financial assistance is provided for export promotion activities on focus country, focus product basis to Export Promotion Organizations/Trade Promotion Organizations/National Level Institutions/ Research Institutions/Universities/Laboratories, Exporters etc., for enhancement of exports through accessing new markets or through increasing the share in the existing markets EPCs, Industry & Trade Associations, etc. The supported activities include export market research & product development, product registration, organizing / participating in fairs, exhibitions and Buyer Seller Meets (BSMs) abroad, Reverse Buyer Seller Meets etc.

Marketing Development Assistance (MDA) Scheme

Financial assistance is available for exporters having an annual export turnover up to Rs 300 million for trade fairs, buyer-seller meets organized by EPC’s/ Trade promotion organizations. MDA guidelines are available here.

Status Holder Scheme

Upon achieving prescribed export performance, status recognition as ‘one-star Export House’, up to ‘five-star Export House’, is accorded to the eligible applicants as per their export performance. Such Status Holders are eligible for various non-fiscal privileges as prescribed in the Foreign Trade Policy. In addition to the above schemes, facilities like 24X7 customs clearance, single window in customs, self-assessment of customs duty, prior filing facility of shipping bills, etc. are available to facilitate exports.

Common digital platform for Certificate of Origin 

A common digital platform for Certificate of Origin (CoO) has been launched to increase Free Trade Agreement (FTA) utilization by exporters.

OneDistrict One Product (ODOP)

In order to leverage India’s full export potential,  ODOP Initiative aims to select, brand, and promote One Product from each District of the country.

District Export Action Plans have been prepared in 557 districts, and adopted by District Export Promotion Committees (DEPC) in 218 districts. Further, State Export Promotion Committees (SEPCs) and District Export Promotion Committees (DEPCs) have been constituted in 36 states/Uts. More details

Ubharte Sitaare Fund (USF)

Union Finance Minister, on 21 August 2021, launched the Ubharte Sitaare Fund (USF) for export-oriented small and mid-sized companies and startups. The fund, jointly sponsored by Exim Bank and SIDBI, has a size of Rs 2.50 billion with a green shoe option of Rs 2.50 billion. The fund will invest by way of equity, and equity-like products, in export-oriented units, both in the manufacturing and services sectors.

Trade Infrastructure for Export Scheme (TIES), Ministry of Commerce & Industry, Department of Commerce. 

The objective of TIES is to enhance export competitiveness by bridging gaps in export infrastructure, creating focused export infrastructure, first mile and last mile connectivity for export-oriented projects and addressing quality and certification measures. The scheme has been further extended up to the year 2025-26.

Under the TIES, financial assistance for 27 export infrastructure projects has been approved during FY 2019-20 to 2022-23 for which Rs 2.07 billion have been released (till 19th July, 2022). More details

Services Exports

12 Champion Services Sectors have been identified for promoting and diversifying services exports by pursuing specific action plans.

Transport and Marketing Assistance (TMA) for Specified Agriculture Products

TMA provides assistance for the international component of freight, to mitigate the freight disadvantage for the export of agriculture products, and marketing of agricultural products, is under implementation.

Assistance to the exporters of agricultural products is also available under the Export Promotion Schemes of Agricultural & Processed Food Products Export Development Authority (APEDA), Marine Products Export Development Authority (MPEDA), Tobacco Board, Tea Board, Coffee Board, Rubber Board and Spices Board.

In addition to the above, active role of EPCs, Commodity Boards and Indian missions abroad towards promoting India’s trade, tourism, technology and investment goals has been enhanced.