The government on Tuesday capped export incentives under the scheme, MEIS, at Rs 2 crore per exporter on outbound shipments made during the period from September 1 to December 31, 2020. The move comes after the Department of Revenue asked the commerce ministry to review the coverage of Merchant Export from India Scheme (MEIS) so that the fiscal benefits under the programme can be brought down to Rs 9,000 crore in the current financial year.
“A limit on total reward under MEIS has been imposed so that for exports made in the period September 1, 2020 to December 31, 2020, the total reward which can be claimed by an IEC (Import Export Code) holder does not exceed the ceiling of Rs 2 crore,” the Directorate General of Foreign Trade (DGFT) said in a notification. Further, it has been notified that any IEC holder who has not made any exports for a period of one year preceding September 1, 2020 or any new IECs obtained on or after the date of publication of this notification would not be eligible for submitting any claim under this scheme.
The DGFT also said that the MEIS will be withdrawn with effect from January 1, 2021. “The ceiling will be subject to further downward revision to ensure that the total claim under MEIS for the period (September 1 to December 31, 2020) does not exceed the prescribed allocation by the government, which is Rs 5,000 crore,” it said.
There will be no change in the coverage of MEIS and the applicable rates. “98 per cent of exporters especially MSMEs will benefit under MEIS with reward cap of Rs 2 crore/ IEC from 1st September to December 31, 2020. This will remove uncertainty and protect genuine exporters while ensuring Make in India-Make for the World,” Commerce and Industry Minister Piyush Goyal said in a tweet.
The Department of Revenue had also requested the commerce department that the MEIS incentives should be targeted and need calibration in a manner that it promotes exports instead of spreading incentives in a manner that does not yield the desired result. The liability under the scheme ballooned to about Rs 45,000 crore in 2019-20. However, exports remained range bound.
In 2014-15, the exports were $310 billion and in 2019-20, it was $313 billion. Under MEIS, the government provides duty benefits depending on product and country. Rewards under the scheme are payable as a percentage of realised free-on-board value and MEIS duty credit scrip can be transferred or used for payment of a number of duties, including the basic customs duty.
The MEIS scheme, introduced in April 2015, will be wound up by December 31, 2020, and the government has already announced the Remission of Duty or Taxes on Export Products (RoDTEP) scheme to replace MEIS. Under RoDTEP, the remission of embedded taxes and other levies on exports shall be allowed.
The commerce ministry will now open the online system for exporters to apply for availing tax incentives under the scheme as it was blocked from July 23. Contracting for the fifth straight month, India’s exports slipped 10.21 per cent to $23.64 billion in July on account of decline in the shipments of petroleum, leather and gems and jewellery items.
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