₹8,450 crore package to boost exports post GST 

₹8,450 crore package to boost exports post GST 

Context

The FTP mid-term review was to be brought out before July 1, to be implemented along with the GST. It was postponed to incorporate feedback from exporters regarding GST

What has happened?

The government has announced incentives worth ₹8,450 crore to boost exports of goods and services — mainly from labour-intensive segments and the Micro, Small and Medium Enterprises (MSME) — and to increase employment generation and value-addition. The incentives were announced as part of the mid-term review of the Foreign Trade Policy (FTP)

Backdrop

The move comes at a time when India’s shipments shrank in October — the first after 14 consecutive months of positive growth — due to the impact of the Goods and Services Tax (GST)

Highlights of FTP 2015-2020

The Foreign Trade Policy (FTP) 2015-20 was unveiled by Government of India on April 1, 2015. Following are the highlights,

• Framework for increase in exports: FTP 2015-20 provides a framework for increasing exports of goods and services as well as generation of employment and increasing value addition in the country, in line with the ‘Make in India’ programme
• Target: It set an ambitious target of $900 billion for India’s exports of goods and services by 2019-20
  • It also aims to raise India’s share in world exports from 2% to 3.5%
• Guideline to respond to challenges: The Policy aims to enable India to respond to the challenges of the external environment, keeping in step with a rapidly evolving international trading architecture and make trade a major contributor to the country’s economic growth and development.
• New schemes introduced: FTP 2015-20 introduces two new schemes, namely
  • ‘Merchandise Exports from India Scheme (MEIS)’ for export of specified goods to specified markets
  • ‘Services Exports from India Scheme (SEIS)’ for increasing exports of notified services.
• Fully transferable duty credit slips: Duty credit scrips issued under MEIS and SEIS and the goods imported against these scrips are fully transferable
• Categorization of countries for rewards under MEIS: For grant of rewards under MEIS, the countries have been categorized into 3 Groups, whereas the rates of rewards under MEIS range from 2 per cent to 5 per cent. Under SEIS the selected Services would be rewarded at the rates of 3 per cent and 5 per cent
• Encouraging procurement of capital goods from indigenous manufacturers: Measures have been adopted to push procurement of capital goods from indigenous manufacturers under the EPCG scheme by reducing specific export obligation to 75per cent of the normal export obligation
• Measures have been taken to give a boost to exports of defense and hi-tech items
• Benefit for E-commerce export extended to new items: E-Commerce exports of handloom products, books/periodicals, leather footwear, toys and customised fashion garments through courier or foreign post office would also be able to get benefit of MEIS (for values up to INR 25,000)
• Approved exporter system: Manufacturers, who are also status holders, will now be able to self-certify their manufactured goods in phases, as originating from India with a view to qualifying for preferential treatment under various forms of bilateral and regional trade agreements. This ‘Approved Exporter System’ will help manufacturer exporters considerably in getting fast access to international markets.
• Steps to encourage manufacturing and export: A number of steps have been taken for encouraging manufacturing and exports under 100 per cent EOU/EHTP/STPI/BTP Schemes. The steps include a fast track clearance facility for these units, permitting them to share infrastructure facilities, permitting inter unit transfer of goods and services, permitting them to set up warehouses near the port of export and to use duty free equipment for training purposes.
• Trade facilitation and enhancing the ease of doing business are the other major focus areas in this new FTP. One of the major objective of new FTP is to move towards paperless working in 24×7 environment

Highlights of FTP mid-term review

The highlights of the FTP Mid-Term Review included

• Restoring the benefits under the export promotion schemes of duty free imports under Advanced Authorisation, Export Promotion Capital Goods and 100% Export Oriented Units, thus resolving the problem of blocked working capital for exporters following the roll-out of GST
• Export incentives under Merchandise Exports from India (MEIS) have been increased by 2% across the board for labour-intensive MSME sectors leading to additional annual incentive of ₹4,567 crore. This is in addition to already announced increase in MEIS incentives from 2% to 4% for ready-made garments and madeups in the labour intensive textiles sector, with an additional annual incentive of ₹2,743 crore
• A new scheme of self-assessment based, duty-free procurement of inputs required for exports has also been introduced
• Analytics division: A state-of-the-art Trade Analytics division has been set up in the Directorate General of Foreign Trade for data based policy actions. The initiative envisages processing trade information for specific policy interventions
• A new Logistics division:Besides, a new Logistics Division has been created in the Department of Commerce to develop and coordinate integrated development of the logistics sector
• Enhanced support to ECGC:Support to Export Credit Guarantee Corporation is also being enhanced to increase insurance cover to exporters, particularly MSMEs, for exploring new or difficult markets
• Change in validity period & GST rates for duty scrips: In addition, the validity period of Duty Credit Scrips has been increased from 18 to 24 months and GST rates on transfer/sale of scrips has been reduced to zero
• Issue of gold availability for exporters has been resolved by allowing specified nominated agencies to import gold without payment of IGST

Steps taken to help exporters

• Export incentive package: The export (incentive) package was approved by the GST Council to resolve the exporters’ problem of blockage of working capital
• Input tax credit and integrated goods and services tax (IGST) refunds for exporters were being expedited