Export Incentives

Export Incentives

The government provides export incentives to not only motivate exporters who bring in foreign exchange but also to compensate them for costs incurred while exporting. These incentives are in line with the government’s ‘Aatmanirbhar’ and ‘Make in India’ initiatives to attain self-sufficiency and ensure higher reach of local products. India’s Foreign Trade Policy (FTP) 2015-20 advocates various export incentives that are offered by the government through the Directorate General of Foreign Trade (DGFT). A list of key incentives provided by the government to achieve its goal are as follows:

India Exports Incentive Schemes

Rebate of Duties & Taxes on Exported Products (RoDTEP Scheme)

The RoDTEP scheme has replaced the old Merchandise Exports from India Scheme (MEIS) from December 2020. The RoDTEP scheme aims to refund all hidden taxes, which were earlier not refunded under any export incentive scheme, such as the central and state taxes on the fuel used for transportation of export products, duties levied on electricity used for manufacturing, mandi tax levied by APMCs, toll tax & stamp duty on the import-export documentation and others.

Service Exports from India Scheme (SEIS)

The objective of ‘Service Exports from India Scheme’ (SEIS) is to motivate traders who export notified services. Service Exports also bring in foreign exchange to the country and is hence encouraged. Under SEIS, an incentive of 3-7% of the net foreign exchange earnings is provided to the service exporters. It requires the service providers to have an active Import–Export Code (IEC Code) with a minimum net foreign exchange earnings worth USD 15,000 to be eligible for a claim under the scheme.

Duty Exemption/Remission Schemes

Advance Authorisation Scheme (AAS)

Advance Authorisation Scheme allows duty-free imports of raw materials, which are required to produce export goods. It allows traders to import raw materials at 0% import duty if those raw materials will be used to manufacture export products.

Duty Free Import Authorisation (DFIA Scheme)

The purpose of this scheme is the same as the Advance Authorisation Scheme, i.e., to allow duty-free imports of raw materials. However, this scheme is applicable post exports; this means that duty-free imports will only be allowed once exports are completed.

Duty Drawback Scheme (DBK Scheme)

Under Duty Drawback Scheme (DBK), exporters are given compensation on customs and central excise duties incurred on materials used in the manufacture of exported goods.

The Rebate on State & Central Taxes and Levies Scheme (RoSCTL Scheme)

The old RoSL scheme was replaced by the new RoSCTL scheme in 2019. RoSCTL scheme is only applicable to the apparel and made-up industry, covering Chapters 61-63 of the ITC (HS). It grants refund on taxes such as VAT on transportation fuel, captive power, ‘mandi’ tax and electricity duty. This scheme will be soon merged with the RoDTEP scheme in all sectors.

Export Promotion Capital Goods Scheme (EPCG Scheme)

EPCG scheme facilitates the imports of capital goods to produce goods and services by manufacturers. Under this scheme, exporters can partner with a manufacturer and import the required capital goods to produce export goods at 0% duty. This scheme also helps reduce the service exporter’s capital costs. Service exporters such as hotels, travel & tour operators, taxi operators, logistics companies and construction companies are some beneficiaries under this scheme.

Export Oriented Units (EOU)

EOU scheme was introduced in 1981 and aims to increase exports by providing a favourable ecosystem to companies, which are 100% exporters. This scheme allows certain waivers and concessions in compliance and taxation matters.

Others

GST Refund for Exporters

Under the GST Act, exporters are eligible for the following schemes:

• LUT Bond Scheme – Exporters can export goods without paying any GST by obtaining a ‘Letter of Undertaking’ (LUT) bond.

• IGST Refund – Exporters can export goods on payments of ‘Integrated GST’ and later, claim the refund for the same from the Customs Department.
   
• 1% GST Benefit for Merchant Exporters – Merchants can procure the export goods from domestic suppliers at 0.1% concessional GST rate.

Transport and Marketing Assistance Scheme (TMA Scheme)

This scheme is applicable for agricultural exports and came into effect in 2019. Under the TMA scheme, freight costs up of to a certain amount will be reimbursed by the government to make Indian agricultural products competitive in the global space.

Deemed Export Benefit Scheme

‘Deemed Exports’ refers to those transactions in which the supplied goods do not leave the country and the payment for such supplies is received either in Indian rupee or in free foreign exchange. This scheme provides a level-playing field to the domestic manufacturers in certain specified situations, as may be decided by the government from time to time.

Star Export House/Status Holder Certificate

This scheme provides recognition to the eligible exporters. Status holders are regarded as business leaders who have successfully contributed to India’s foreign trade. Exporters are given star ratings based on the volume and value of exports completed. Eligible holders receive privileges such as faster customs clearance, exemption from compulsory negotiation of documents through banks, exemption from furnishing bank guarantee required for various export promotion schemes, GR waiver, preference in payments of import duties and other benefits.

Market Access Initiative (MAI) Scheme

Launched in 2018, the Market Access Initiative (MAI) scheme plays a catalytic role in promoting exports by exploring new markets and supporting all export promotion activities in those new markets. The scope of this scheme is to provide financial support to eligible agencies to undertake market access initiatives such as marketing, market research, promotion and branding in new markets, taking care of statutory compliance costs in importing country.

Towns of Export Excellence (TEE)

Towns with high export potential and exporting goods worth greater than Rs. 750 crores (USD 101.29 million) are considered as towns of export excellence (TEE). Recognised associations in those towns are provided with financial assistance as per the guidelines provided by the market access initiative (MAI scheme). In this scheme, there are a total of 37 TEEs across the country; does not offer any direct benefit to individual exporters.

NIRVIK Scheme

The Export Credit Guarantee Corporation of India (ECGC) introduced the NIRVIK scheme, which provides high insurance cover, reduced premium for small exporters and a simplified claim settlement process. It is primarily an insurance cover guarantee scheme that provides a cover of up to 90% of the principal and interest, as against the current credit guarantee of only up to 60% loss.

Recent Government Initiatives

Production-Linked Incentive (PLI) Scheme to Boost Exports

The central government introduced the production-linked incentive (PLI) scheme in March 2020 to make India a competitive player in global markets and boost domestic manufacturing & exports. The PLI scheme aims to give companies incentives on incremental sales of products manufactured in domestic units. The scheme invites foreign companies to set up units in India; however, it also aims to encourage local companies to set up or expand existing manufacturing units, generate more employment and reduce the country's reliance on imports.

The scheme was originally designed for FY20 for a few select industries such as mobiles phones and allied equipment manufacturing, pharmaceutical ingredients and medical devices. This was implemented by the Ministry of Electronics and Information Technology (MEITY) and the Department of Pharmaceuticals with a financial outlay of Rs. 51,311 crore (US$ 7,089 million) to be used over a five-year period. In FY2020, the scheme benefitted ~150 manufacturing units, generating incremental sales of Rs. 46,400 crore (US$ 6,187 million) and showcased significant potential for additional employment over the next eight years.

As a result, the scheme has been expanded to accommodate an additional 10 ‘sunrise’ sectors to boost the economy and India’s self-reliance. This initiative was announced by the Union Finance Minister, Ms. Nirmala Sitharaman, during the Atmanirbhar Bharat 3.0 Stimulus Package for FY20–21, with an estimated allocation of Rs. 145,980 crore (US$ 20,169 million) spread across five years.

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