27 Jun 2015 20:01 IST

Why the foreign trade policy is an exporter’s delight

Earlier reward schemes have been merged into a single Merchandise Export from India Scheme

Call it what you will, incentives are what get people to work harder. The basic idea that incentives can be used to motivate behaviour is a powerful one. It works well for employees, better parenting and works best when it is a business. Aiming to almost double India’s exports of goods and services to $900 billion by 2020, the government on April 1, 2015 announced several incentives in the five-year Foreign Trade Policy for exporters and units in the Special Economic Zones (SEZ).

The new five-year FTP provides a framework for increasing exports of goods and services, generation of employment and increasing value addition in the country, in congruence with the Prime Minister’s ‘Make in India’ vision. The new policy will support both manufacturing and services, with an emphasis on improving the ‘ease of doing business’.

The policy has simplified the earlier reward schemes by merging them into one into single unconditional scheme, called Merchandise Export from India Scheme (MEIS). Rewards for export of notified goods to notified markets under MEIS will be payable as a percentage of the realised FOB value (in free foreign exchange).

Benefits for SEZs

The debits towards basic Customs duty along with existing additional duty of Customs/excise duty and service tax are also allowed adjustment as duty drawback. After various litigations last year, the Serve from India Scheme (SFIS) has been replaced by Service Exports from India Scheme (SEIS) to allow benefits to all services providers located in India, instead of Indian Service Providers. There is no conditionality attached to any scrips issued under these schemes.

SEZs have lost their sheen after imposition of the minimum alternate tax (MAT) and dividend distribution tax (DDT) in 2012. To boost exports from SEZs, the Government has decided to extend benefits of both MEIS and SEIS to SEZ units.

To incentivise the ‘Make in India’ theme, the policy proposes to reduce export obligations if capital goods under the Export Promotion Capital Goods (EPCG) Scheme are procured from indigenous manufacturers (only 75 per cent in place of 90 per cent) and grant higher level of rewards under MEIS for export items with high domestic content and value addition.

Easier filing of applications

As a progressive move towards conducting business more easily, online filing of documents/applications and paperless trade has been proposed. It has been decided to develop an online procedure to upload digitally signed documents by a chartered accountant, company secretary or cost accountant to do away with present physical forms. Hard copies of certain applications and specified documents need not be submitted to regional authorities, saving paper as well as cost and time for the exporters

Under the EPCG scheme, obtaining and submitting a certificate from an independent chartered engineer, confirming the use of spares, tools, refractory and catalysts imported for final redemption of EPCG authorisations has been dispensed with.

Some of the other notable initiatives for Export Oriented Units and Software Technology Parks are that they have been allowed to share infrastructure facilities among themselves. Inter-unit transfer of goods and services has been allowed.

Fast-track clearances

EOUs have been allowed the facility to set up warehouses near the port of export. STP units and EHTP (electronic hardware technology park) units have been allowed to use all duty-free equipment for training purposes. A simplified procedure has been provided to fast-track the de-bonding / exit of the STP/ EHTP units. EOUs with a physical export turnover of ₹10 crore and above have been allowed the facility of fast-track clearances of import and domestic procurement.

Despite providing so much for ease of business and incentives for improved export performances, the Federation of Indian Export Organisations (FIEO) has urged the Prime Minister to review the new FTP, as exports for a certain category might shrink again this financial year.

The move to take exporters gradually away from subsidy must be appreciated. Yet, the timing of the move is critical considering the glory of ‘Make in India’ theme of the Government.

FTP 2015-2020 has proved to be a bundle of delight for exporters who have stable relationships with their customers overseas. Incentives certainly get people to work harder. Hard work, better rewards, stronger economy!