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Exporters fear uncertainty over govt’s move to cap export incentives

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NEW DELHI: Exporters have said the government’s decision to cap export incentives under the Merchandise Export from India Scheme (MEIS) and a likely downward revision to keep the claims in check would “seriously affect” traders and cause uncertainty. They have also sought clarity on whether any change in the benefit rate would be notified for those who are not affected by the cap if the budgeted amount of Rs 5,000 crore is exhausted.

Federation of Indian Export Organisations (FIEO) President Sharad Kumar Saraf said exports that will be made during September-December 2020 are based on the orders which have already been negotiated much earlier, factoring the existing benefit under the scheme.

“These benefits are part of the export competitiveness and therefore the sudden change will affect the exporters’ financially as buyers are not going to revise their prices upward,” he said.

The government on Tuesday capped the benefits under the MEIS at Rs 2 crore per exporter on exports made between September 1-December 31, 2020 without changing the coverage of the scheme and the applicable rates. It also said that the new Import Export Code (IEC) obtained on or after September 1 will be ineligible to submit any MEIS claim for exports, and the ceiling would be subject to a downward revision to ensure that the total claim doesn’t exceed the allocated Rs 5,000 crore for the period.

“Blockage of MEIS is also a matter of serious concern for the exporting community,” said Mahesh Desai, chairman, EEPC India, adding that the scheme was extended in March and it was on that basis that exporters had priced their products from April when suddenly on July 23, 2020, the DGFT website blocked the uploading of shipping bills and “that came as a shock”.

“The sudden imposition of a cap of Rs 2 Crore per IEC, on MEIS benefit of exports made during the period is going to seriously affect exporters, whose numbers may not be very large, but their contribution to exports warrant a revisit to the imposition of cap,” Saraf said.

As per Bhuvnesh Seth, Vice Chairman, Export Promotion Council for EOUs and SEZs, the decision is with immediate effect and such sudden change in trade policies should be avoided as they bring uncertainties in the decision making and pricing policies of exporters.

“This would create an uncertainty as that means that scheme can be withdrawn even earlier than December 21, 2020,” Seth said, adding that this uncertainty may be removed and scheme in whatever form should be available till a particular date.

Under MEIS, the government provides duty benefits depending on product and country. Rewards under the scheme are payable as percentage of realised free-on-board value (of 2%, 3% and 5%) and MEIS duty credit scrip can be transferred or used for payment of a number of duties including the basic customs duty.

Exporters urged the government to extend the MEIS till March 31, 2021, coterminous with the existing Foreign Trade Policy and also said that incentives under the SEIS (Service Exports from India Scheme) for the exports made during 2019-20 and this financial year are still unresolved.

They also said while the committee on Remission of Duties or Taxes on Export Product (RoDTEP) has started work, the industry is facing challenges in providing the data due to frequent local lockdowns, non-availability of transport and non-functioning of auditors.

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