Export Incentives

Apply for Export Incentives

Export Incentives are a form of economic help that is provided by the government to the forms of industries. The reason why authorities provide these incentives, to keep domestic products competitive in the market. In India, Foreign trade policy (FTP-2015 – 2020) underlines many export incentives.

Types of Export Incentives

Exports from India Scheme:

Merchandise exports from India Scheme (MEIS), Service exports from India Scheme(SEIS)

Export promotion capital goods scheme (EPCG):

Zero duty EPCG scheme, EOU, EHTP, STP, BTP schemes.

Duty exemption/ Remission Schemes:

Advance authorization scheme, advance license for annual requirement, DIFA scheme, Duty drawback scheme, RoSCTL.

Merchandise Export

The Merchandise Export from India Scheme (MEIS Scheme) is a newly launched scheme launched as a part of the new Foreign Trade Policy and is applicable from 2015 to 2020. This new scheme replaces the 5 similar incentive schemes available earlier under Foreign Trade Policy 2014-2019 and rationalises the incentives given under these schemes. Under the MEIS Scheme – the Govt has allocated more than 22,000 crore per annum for exports.
The new Foreign Trade Policy for 2015-2020 has not only revamped the incentives and rewards for Merchandise Exporters but also for Service Exporters through the SEIS Scheme. In this article, we would mainly be discussing the benefits to exporters under the MEIS Scheme. For benefits to service exporters under the SEIS Scheme, kindly refer this article – 5% Incentives by Govt to Service Exporters under SEIS Scheme.

Schemes have now been replaced by the MEIS

– Focus Product Scheme (FPS)
– Market Linked Focus Product Scheme (MLFPS)
– Focus Market Scheme (FMS)
– Agriculture Infrastructure Incentive Scrip (AIIS)
– Vishesh Krishi Gramin Upaj Yojana (VKGUY)

Last Date for filing Duty Credit Scrips

Application for obtaining Duty Credit Scrips under MEIS shall be filed within a period of:-
– 12 months from the Let Export Order (LEO) date, or
– 3 months from the date of:
– Uploading of EDI Shipping Bills onto the DGFT Server by Customs
– Printing/ Release of Shipping Bills for Non-EDI Shipping Bills (whichever is later)

Validity Period and Revalidation of Scrips

– Duty Credit Scrip to be valid for a period of 18 months from the date of issue and must be valid on the date on the date on which actual debit of duty is made.

– Revalidation of Duty Credit Scrip shall not be permitted unless the validity has expired while in the custody of Customs Authority/ RA.

Facility for Splitting of Scrips

– Duty Credit Scrips shall be issued on request subject to a minimum of Rs. 5 Lakh each and multiples thereof may also be issued at the time of application.
– In case of EDI enabled ports = Split certificates shall be permitted with the same port of Registration as appearing on the original scrip after issuance.
– In case of export through non-EDI Ports – Facility of split not allowed after issue of Scrip.

Commodities for which such incentives under the MEIS Scheme

Highest Rewards for Agricultural and Village industry products; Value added and packages products; Eco-friendly and green products; Labour Intensive Products and Products with large no. of producers and/or exporters, Industrial Products from potential winning sectors and Hi-tech products

Last Date for filing Duty Credit Scrips

First time support provided for export of Fruits, Vegetables, Dairy Products, Oil Meals, Ayush & Herbal Products, Paper, Paper Board Products.

Validity Period and Revalidation of Scrips

Global support provided to Fruits, Flowers, Vegetables, Tea, Coffee, Spices; Cereals Preparation, Shellac, Essential Oils, Processed Foods, Eco Friendly Products that add value to waste; Marine Products; Handloom, Coir, Jute Products and Technical Textiles, Carpets Handmade; Other Textiles and Readymade Garments supported in the market in the European Union, USA, Canada and Japan; Handicraft, Sports Goods and Furniture, wood articles;

Facility for Splitting of Scrips

Support to major markets given to Pharmaceuticals, Herbals, Surgicals; Industrial Machinery, IC Engine, Machine Tools, Parts, Auto Components/ Parts; Hand Tools, Pumps of all types; automobiles, two-wheelers, bicycles, ships, planes, chemicals, plastics, rubber, ceramic and glass, Leather Garments, Saddlery Items, Footwear, Steel Furniture, Prefabs, Lighters, Wood, Paper, Stationary; Iron, Steel and Base Metals, Products

Procedure for filing Application under MEIS Scheme

Step 1

Application for claiming incentives under the MEIS Scheme shall be filed online in the specified format i.e. ANF-3A using Digital Signature.

Step 2

The application for export of goods shall be filed with the concerned Regional Authority of DGFT on DGFT Website.

Step 3

Separate application shall be filed for each port of export.
An application can be filed with upto a maximum of 50 shipping bills

Step 4

In case of exports through the EDI Port – the hard copy of the application, shipping bill, e-BRC and RCMC are not required to be submitted. However, the proof of landing is required to be submitted. Relevant EDI shipping bill and e-BRC to be linked with the online application.

Step 5

In case of exports through non EDI-port, the hard copy of the export promotion copy of non-EDI shipping bills and proof of landing in the prescribed manner is required to be submitted. But the hard copies of applications to DGFT, electronic bank realisation certificate (e-BRC) and RCMC is not required to be submitted. Scanned copies of any other prescribed documents for claiming scrip are required to be submitted.

Step 6

The documents which are not required to be submitted (in original), are required to be retained by the applicant for a period of 3 years from the date of issuance of scrip. The licensing authority may call for such documents in original at any time within 3 years.

Step 7

In case of failure to submit the original documents when demanded by the licensing authority, the rewards granted are required to be refunded along with interest. No manual feeding is allowed for EDI Shipments to the applicants in the online system.

Step 8

“Let Export Date” to be taken as the relevant date for determination of eligibility of product, corresponding ITC (HS) code, and markets for claiming rewards under MEIS.

SEIS Scheme

The SEIS Scheme or Service Export from India Scheme is an incentive given by the Ministry of Commerce through the Directorate General of Foreign Trade (DGFT) to Service Exporters based in India. This rewad scheme is to promote the export of services from India.
SEIS Scheme was introduced on 1st April 2015 for 5 Years under the Foreign Trade Policy of India 2015-2020. Earlier, this Scheme was named as Served from India Scheme (SFIS Scheme) for Financial Year 2009-2014.
Its main objective is to boost and maximize the export of notified/selected Services from India. Under SEIS Scheme, Exporters of selected Services are entitled to a 3% / 5% / 7% incentive on the Net Foreign exchange earned in the form of Duty Credit Scrips. These SEIS scrips can be used to pay Import duty or can be encashed by selling it to any Importer.

Mode 1

Cross Border Trade (Supply of Service from India to any other Country).
For Example –
An Indian Audit firm is sending audited accounts to a Foreign Company operating in London. [This may categorize as export of “Accounting & Auditing Services”]
An Indian Company doing market research activities for a Foreign Company based in the UAE [This may categorize as export of “Market research Services”]

Mode 2

Consumption Abroad (Supply of a Service from India to the Service consumer of any other country (currently) in India).
For example –
A Foreign Tourist from America living in a 5-star hotel in India and paying for accommodation & food in Foreign Currency through International Credit Cards. [This may categorize as Export of “Hotel Services”]
An Indian tour operator company is planning and selling packages to foreign tourists for their travel in India. These types of companies are also known as Inbound Tour Operators. [This may categorize as export of “Travel agencies and Tour operator Services”]

Mode 3

Commercial presence (Supply of a Service from India through Commercial presence in any other Country).
For Example – An Indian Company having an office in Singapore and providing Engineering Services to clients based in Singapore. It means the physical presence of an Indian company in foreign countries.

Mode 4

Presence of natural persons (Supply of a Service from India through the presence of natural persons in any other Country).
For example – An Indian Doctor performs surgery by visiting the patient based in the USA. / An Indian Consultant provides Services by visiting his Client in the UK.

Ineligible categories under the SEIS Scheme

All the remittances received for giving Services that are not a part of appendix 3D, will not be considered for benefit.
This remittance precisely means that all other sources of foreign exchange earnings like equity or debt participation, donations, loan repayment receipts, etc. which is not related to the Service provided, will not be considered.
It should be noted that the entitlement calculation under SEIS will not involve the following Services.

Under the Financial Services Sector
Raising loans of all types in foreign currency.
Realization of Export proceeds of clients.
Use of ADRs/GDRs/other instruments for issuance of Foreign Equity.
Foreign Currency Bonds Issuance.
Selling Securities and Foreign Currency Bonds.
Selling Securities and other Financial Instruments.
Other types of receivables which are entirely different from the Services which are rendered by the financial institutions.

Under Regular/ Contractual employment in a foreign country
Payments which are received from the EEFC Account for various Services.
Equity participation, donations, etc. or any other kind of foreign exchange turnover by the Healthcare Institutions.
Equity participation, donations, etc. or any other kind of foreign exchange turnover by the Educational Institutions.

Turnover of various DTA Service Providers gets clubbed with the turnover of Services rendered by EOU/EHTP/STPI or BTP units.
All the foreign exchange earnings by Airlines or even Shipping whose neither origin nor source country is India.
Telecom Sector Service providers.

What is the significance of SEIS Scrip?

Step 1

Let us consider Company M/S XYZ. Company is into the export of services, and they have applied for SEIS. Hence, they have received SEIS scrip for Rs. 1 Lakh (Say for Example). Now this Company is also into Import of Goods. Therefore, they can set-off this Credit of Rs. 1 Lakh against the Basic Customs Duty which is payable to them at Customs during Import of Goods.

Step 2

In the above Example, Company XYZ is into the Import of Goods. But what will happen to the scrip if the Company is not importing anything? How will the Import Duty Credit be utilized? How will the scrip be beneficial to the Company?
It is here where we look at the core concept of the Freely Transferable Nature of Rewards under SEIS.

Step 3

It means that the Duty Credit Scrip is Freely Transferable/Saleable/Tradeable.

Therefore, it can be sold to any individual who is into Imports of Goods or Services. This freely transferable nature of Scrips endorsed on the Duty Credit Scrip itself.

This feature is unique to only SEIS. It wasn’t present in the earlier Served from India Scheme (SFIS Scheme).

Step 4

Consider an organization Exporting Services worth Rs. 1 crore in a particular FY and gets rewarded duty scrip of value Rs. 5 lakh (let’s assume Rate of Reward @5%). Now, either the holder can use it to import Goods/Services without paying duties up to Rs 5 lakh or sell it out in the market (in case he doesn’t import goods
or utilize it) and get money in exchange of duty scrip.

Therefore, it can be said that rewards under SEIS Scheme are as good as cash incentive, and all the service providers should take the SEIS Scheme benefits.

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FAQ

How do Export Incentives work?

The government collects a smaller amount of tax for the exported goods to increase the competition in the global market. This provides growth in the Indian Export business. These incentives may change as per the shortage or quantity of the product. Export incentive schemes can be subdivided into the merchandise and service sector.

Benefits of Exporting?

It has immense benefits such as it increases your sales. Exporting business gives a guaranty to increase sales in the market up to a large extent.

It is always beneficial for the wealth of the nation

Apply for Export Incentives