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.
RoDTEP stands for the Remission of Duties or Taxes on Export Products Scheme. This scheme has been introduced by the Government of India by making amendments in the Foreign Trade Policy 2015-20 vide DGFT Notification No. 19/2015-20 dated 17.08.2021. The scheme has been introduced with an objective to neutralize the taxes and duties suffered on exported goods which are otherwise not credited or remitted or refunded in any manner and remain embedded in the export goods. This scheme provides for rebate of all hidden Central, State, and Local duties/taxes/levies on the goods exported which have not been refunded under any other existing scheme. This does not only include the direct cost incurred by the exporter but also the prior stage cumulative indirect taxes on goods. It is a WTO compliant Scheme and follows the global principle that the taxes/duties should not be exported; they should be either exempted or remitted to exporters, to make the goods competitive in the global market. The RoDTEP scheme has been made effective for the exports from 1st January 2021.
The Appendix 4R of Handbook of Procedures, Notified by Department of Commerce under DGFT notification No. 19/2015-20 dated 17.08.2021 may be assessed to check the RoDTEP Rates.
The benefit under RoDTEP scheme would be in the form of transferable duty credit scrip, or it may be in the form of electronic scrip which will be maintained in the electronic ledger.
The scrips are transferable to any other person having a valid IEC and valid ICEGATE Registration.
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.
As per Notification No. 66 dated 01.04.2022, imports under Advance Authorisation had been exempted from IGST and Compensation Cess till 30.06.2022. CBIC had issued another Notification No. 37/2022-Customs dated 30.06.2022 removing the date limitation for the exemption under the Schemes. Thus, the exemption of IGST and Compensation Cess on goods imported under these Schemes continued to be available beyond 30th June, 2022.
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.
The scheme is administered by Department of Revenue which has two components viz-a-viz: All Industry Rate (AIR) and Brand Rate. It comes under Duty Remission Scheme. Under the Scheme, Duty Drawback as per specified rates in Schedule of All Industry Rate of Drawback is granted. Exporter has the option to avail the benefit by getting fixation of Brand Rate on an application in the prescribed format.
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.
As per Notification No. 66/2015-20 dated 01.04.2022, Capital goods imported under EPCG scheme for physical exports were exempted from whole of the Integrated Tax and Compensation Cess leviable thereon upto 30th June, 2022. CBIC had issued another Notification No. 37/2022-Customs dated 30.06.2022 removing the date limitation for the exemption under the Schemes. Thus, the exemption of IGST and Compensation Cess on goods imported under these Schemes is available beyond 30th June, 2022.
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.
Under the GST Act, exporters are eligible for the following schemes:
‘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.
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.
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.
The Interest Equalisation Scheme (IES) has come as a boon for exporters, especially the MSMEs, since the Commerce Ministry launched it in 2015. The interest equalisation scheme covers mostly labour-intensive and employment generating sectors. The scheme is effective from April 1, 2015.
Government of India has approved the extension of Interest Equalization Scheme for Pre and Post Shipment Rupee Export Credit (‘Scheme’) up to March 31, 2024 or till further review, whichever is earlier. The extension takes effect from October 1, 2021 and ends on March 31, 2024.
Revised interest equalisation rates under the Scheme is 3 per cent for MSME manufacturer exporters exporting under any HS lines, and 2 per cent for manufacturer exporters and merchant exporters exporting under 410 HS lines (after excluding 6 HS lines pertaining to Telecom Sector as mentioned above).
Banks, while issuing approval to the exporter, will necessarily furnish i) the prevailing interest rate, ii) the interest subvention being provided, and iii) the net rate being charged to each exporter, so as to ensure transparency and greater accountability in the operation of the Scheme.
The extended Scheme is not available to those beneficiaries who are availing the benefit under any Production Linked Incentive (PLI) scheme of the government.
For the period from October 1, 2021 to March 31, 2022, banks shall identify the eligible exporters as per the Scheme, credit their accounts with the eligible amount of interest equalisation and submit sector-wise consolidated reimbursement claim for the said period to the Reserve Bank by April 30, 2022.
Other provisions of the extant instructions issued by the Bank on the captioned Scheme shall remain unchanged.
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.
On November 20, 2020, the cabinet approved production-linked incentive (PLI) scheme for 10 high-potential sectors, including auto, battery cell, pharma, telecom networking, food and textiles. This scheme, estimated to provide benefits worth Rs 1.46 lakh crore (US$ 19.72 billion) over a five-year period, will set the bar high for businesses to avail these incentives. The initiative re-establishes the government’s ‘Make in India’ goal and clears a long-standing MSME bias.