Why in News ?
MEIS benefits Capping affect traders. The government’s decision to cap export incentives under MEIS scheme at Rs. 2 crore per exporter on outbound shipments made during September-December, 2020 is going to seriously affect traders according to FIEO.
What is the Decision ?
The government capped the benefits under the Merchandise Export from India Scheme (MEIS) at Rs 2 crore per exporter on exports made between September 1, 2020 to December 31, 2020 without changing the coverage of the scheme and the applicable rates.
Merchant Export from India Scheme (MEIS)
- Launched by the Government of India to boost the export of notified goods that are produced or manufactured in the country.
- The scheme has been introduced through the Foreign Trade Policy (FTP) and came into effect on 1 April 2015.
- Making India’s products more competitive in the global markets the scheme provides incentive in the form of duty credit scrip to the exporter to compensate for his loss on payment of duties.
- To offset infrastructural inefficiencies and the associated costs of exporting products produced in India giving special emphasis on those which are of India’s export interest and have the capability to generate employment and enhance India’s competitiveness in the world market.
- To determine the quantity of incentive the countries have been segregated into three groups
- Group A has India’s traditional destinations such as the EU countries and USA.
- Group B has the maximum number of countries and covers almost all of India’s major export destinations globally. It is worth mentioning here that Group B has the highest quantum of incentive.
- Group C on the other hand has no incentive at all. It can be divided into, SAARC, Australia and New Zealand, some EU and African countries.
- MEIS duty credit scrip can be transferred or used for payment of a number of duties including the basic customs duty.
Why government decide to cap export incentives ?
The move is aimed to protect genuine exporters and allow them to claim benefits for exports in the period besides reducing the possibility of fraud by taking new IEC to circumvent the cap while advance notice of four months of the end date of MEIS provides certainty for future pricing decisions.
Import Export Code : A 10 digit identification number that is issued by the DGFT (Director General of Foreign Trade), Department of Commerce, Government of India.
- New Import Export Code (IEC) obtained on or after September 1 will be ineligible to submit any MEIS claim for exports.
- Any IEC holder who has not made any exports for a period of one year preceding 1-9-2020 or any new IECs obtained on or after 1st September would not be eligible for submitting any claim under MEIS.
- In addition, it has been notified that MEIS scheme is withdrawn with effect from January 1, 2021.
- MEIS is not consistent with the trade rules of the World Trade Organization.
- Instead, Remission of Duties or Taxes On Export Product (RoDTEP) will replace MEIS.
- To reimburse taxes and duties paid by them such as value added tax, coal cess, mandi tax, electricity duties and fuel used for transportation.
- These are not getting exempted or refunded under any other existing mechanism.
- The Ministry of Finance has set up a committee under the chairmanship of former commerce and home secretary GK Pillai to finalise the rates under RoDTEP.
What are the concerns ?
- Exports that will be made during September-December are based on orders that had been negotiated earlier, factoring in the existing Merchant Export from India Scheme (MEIS) benefit.
- These benefits are part of the export competitiveness and therefore the sudden change will affect exporters financially as buyers were not going to revise their prices upwards.
Indian Export Market
- India’s exports were $265.26 billion in the April-January period, a 1.93% decline on-year.
- The country had clocked $331 billion of exports in 2018-19.
- India is the leading diamond exporter in the world with an 18.8% market share of an annual export market worth $127 billion.
- India is the fourth-largest exporter with a 5.3% share of a global export market that is worth $504 billion annually.
- India’s top export destinations are the United States at $42 billion.
Source : The Hindu
Topics
Prelims : Remission of Duties or Taxes On Export Product, Merchant Export from India Scheme (MEIS)
GS II : Government policies and interventions for development in various sectors and issues arising out of their design and implementation
Current Affairs Compilation : 4 September 2020