At a time when the global economy is still recovering from a slowdown, the government on Tuesday announced fresh incentives worth Rs 8,450 crore to boost exports and support the MSME and labour-intensive industries.
The incentive came as a part of the mid term review of India’s Foreign Trade Policy (FTP) 2015-2020.
“The revised FTP focuses on the goal of exploring new markets and new markets and new products as well as on increasing India’s share in traditional markets and products, leveraging benefits of Goods and Services Tax (GST) by exporters; close monitoring of export performances and taking immediate corrective measures based on data analysis,” read the FTP statement, 2017.
The commerce ministry had unveiled FTP 2015-20 in April 2015, with an aim to almost double India’s exports of goods and services to USD 900 billion by 2020.
The mid-term review was supposed to take place around the time GST was implemented (July 1). However, the commerce ministry delayed the review in a bid to comprehend the impact of the new tax regime on the business of the exporters.
The revised FTP focuses on exploring new markets and products, as well as increasing the country’s share in traditional markets, leveraging the benefits of GST, increasing ease of trading across borders and increasing farmers’ income through a focused policy for agricultural exports.
The government has repositioned India’s export strategy by increasing incentives in the Merchandise Exporters from India Scheme (MEIS). The MEIS rate has been increased to 4 percent from 2 percent earlier, effective November 1.
“There has been across the board increase of 2 percent in existing MEIS incentive for exports by MSMEs/labour-intensive industries involving additional incentive of Rs 4,567 crore ,” the policy statement said.
Key sectors receiving the incentives are leather, agriculture, carpets, hand-tools, marine products, rubber products, ceramics, sports goods, medical and scientific products and electronic and telecom components.
“Government should gradually extend the MEIS to other sectors of exports since they are also facing numerous challenges in exports. A one-time relaxation to meet Export Obligation may be provided to the industry so that they can escape the penal provisions ,which will be disruptive and will provide an opportunity to add to exports besides providing employment,” Ganesh Gupta, President of Federation of Indian Export Organisation (FIEO), said.
Impetus worth Rs 1,140 crore has been given to the services trade, as well as annual incentives worth Rs 2,743 crore for sub-sectors under the textiles sector.
In addition, the validity period for duty credit scrips under MEIS has also been increased to two years from 18 months earlier.
Duty credit scrips are benefits given to exporters under MEIS, which can be used to pay taxes such as customs duty and some other taxes.
While the implementation of GST has led to a blockage of working capital and delay in refunds, the government reiterated that the new tax system will enhance trade facilitation while benefiting exporters.
“While exporters will be happy with the direction, they would look forward to some quick and long term solution to working capital blockage with respect to input GST. It requires continuous monitoring of the situation on the ground and flexibility in approach, which GST council has shown in last few months.” Pratik Jain, Leader- Indirect Tax, PwC India said.