Govt removes all uncertainties on new export incentives
New Delhi: The government has removed all uncertainties with regard to the export incentive issues and the latest credit enhancement measures will help the sector march ahead, Director General of Foreign Trade Alok Vardhan Chaturvedi has said.
Ending uncertainty for exporters, the government on Saturday announced a new scheme for reimbursing input duties and taxes to replace the popular Merchandise Export Incentive Scheme (MEIS) which is not compliant with world trade rules.
Finance Minister Nirmala Sitharaman announced that the Remission of Duties or Taxes on Export Products (RoDTEP) will replace the existing all Merchandise Exports from India Schemes (MEIS).
Existing dispensation in textiles of MEIS + old ROSL (Rebate of State Levies Scheme) will continue up to December 31, 2019. Textiles and all other sectors which currently enjoy incentives up to 2 per cent over MEIS will transit into RoDTEP from January 1, 2020.
In effect, RoDTEP will more than adequately incentivize exporters than existing schemes put together. The revenue foregone for the new scheme is estimated at up to Rs 50,000 crore per annum.
“We expect that announced schemes will more than compensate the existing MEIS. This kind of certainty is very important that MEIS and ROSL will continue till December 31 and RoDTEP will be effective from January 1. That was quite a bit of uncertainty in the export sectors and that is going to increase our exports by allowing the exporters to plan well and in advance,” Chaturvedi told IANS while saying that there was decline in exports credits to the sector which was a matter of worry and now that has been addressed with clarity.
He, however, said the slowdown was not much there in exports sector but the global prices of petroleum do affect exports and imports.
“I will not say that kind of slowdown is there in exports. It was (the export slowdown) there in August , but from April-August there was hardly anything in decline in exports and it was more or less equal to last year’s exports. But If petroleum prices are high globally, generally our exports and imports are high and vice versa. Our pharmaceutical and chemical exports are doing good and it’s only in case of jems and jewellery and steel prices which are down because of global prices are down,” the DGFT said.
Responding to the query if MEIS was taken off as it was not WTO compliant, he said refunds are the rights of the exporters.
“I won’t say it was WTO uncompliant but some kind of incentive is there and these kind of refund of duties are exporters rights like GST, customs duties refunds. Exports are zero rated in any case. But still there are many tax that are outside GST like electricity taxes, Central and VAT on petroleum which dont get refunded. These are cases which need to be considered. But the Government has its limitations they can not continue with with both kinds of schemes. That’s why one has to be taken off. MEIS has also been challenged by people as an export subsidy scheme. We have said it is not uncompliant of WTO and we are fighting it in WTO,” Chaturvedi pointed.
The share of export credit has come down and this was a cause of concern especially for the MSME sector that suffers due to demand of collateral from lending institutions. The government aims to take exports of goods and services to $1 trillion each in the next five years.
The total disbursement of export credit was Rs 7.38 lakh crore in December 2018, a decline of 20 per cent year-on-year. Share of PSU banks in total disbursement of export credit declined to 45 per cent in FY18 from 65 per cent in FY16, the Commerce Ministry had said earlier.
In August, exports declined 6 per cent to $26 billion while trade deficit narrowed to $13.4 billion. The escalating trade war between the US and China, and rising protectionism affected India’s prospects of higher exports. Shipments of gems and jewellery, engineering goods, petroleum products recorded negative growth.