As a part of economic reforms, Indian government has formulated many economic policies which have led to the country’s gradual economic development. Certain initiatives have been enacted to improve the condition of exports to other countries and to benefit export business entities. These benefits simplify the export process and make it more flexible and have been a blend of both social, democratic and liberalization policies.
Different types of export incentive schemes and benefits that the government has initiated are briefed hereunder.
Advance Authorization Scheme
Economy prefers a favorable balance of trade, i.e., the value of exports should be greater than the value of imports. Governments propose various schemes to boost exports by the country. Businesses can import certain Inputs into the country without having to pay duty payment, if this input is to produce an export item. The inputs imported are exempt from duties like Basic Customs Duty, Additional Customs Duty, Education Cess, Anti-dumping duty, Safeguard Duty and Transition Product-Specific Safeguard duty, Integrated tax, and Compensation Cess, wherever applicable, subject to certain conditions.
Export obligation is usually set as a condition for issuing Advance Authorization. The scheme has the validity period of 12 months for imports and 18 months for carrying out the Export Obligation (EO).
Advance Authorization for Annual Requirement
Exporters who have a previous export performance for at least two financial years can avail the Advance Authorization for Annual requirement scheme or more benefits.
Advance Authorization can be issued for inputs used in the product that is to be exported based on the following:
- Standard Input Output Norms (SION) notified: The Director General of Foreign Trade (DGFT), on the recommendation of the Norms Committee, is the authority to issue standard norms that define the amount of input required in the manufacture of the output product which will be exported. It is available for a wide range of products.
- Self-declaration: Sometimes the SION may not be available for a product. In such a case, an application may be made to the Regional Authority who will issue the Advance Authorization upon review.
- Application prior to fixation of the norm by the Norms Committee: An exporter can also make an application to the norms committee, requesting the needed Authorisation. After providing all the required data to the norms committee, the committee endeavours to either fix these norms or provide ad-hoc norms based on the application made. Such ad-hoc norms are valid for one authorization only and no repeat authorizations can be issued.
- Self-Ratification Scheme: Advance Authorization under this Scheme is available only to an exporter who holds the Authorized Economic Operator (AEO) Certificate under Common Accreditation Programme of CBEC. This Scheme can be opted for when there is no SION or valid ad-hoc norms for an export product and where, SION has been notified, but the exporter wishes to use additional inputs in the manufacturing process. Ratification by the norms committee is not required under this scheme and the regional authority may issue Advance Authorization upon fulfilment of the relevant conditions.
Export Duty Drawback for Customs, Central Excise, and Service Tax Duty or tax paid for inputs against the exported products is refunded to the exporters. This refund is carried out in the form of Duty Drawback. In case the duty drawback scheme is not mentioned in the export schedule, exporters can approach the tax authorities for getting a brand rate under the duty drawback scheme.
Zero duty EPCG (Export Promotion Capital Goods) Scheme:
In this scheme, which applies to exporters of electronic products, import of capital goods for production, per-production, and post-production is allowed at zero percent customs duty if the export value is at least six times the duty saved on capital goods imported. The exporter needs to verify this value (Export Obligation) within six years of issuing date.
Post Export EPCG Duty Credit Scrip Scheme:
Under this export scheme, exporters who aren’t sure about paying the export obligation can obtain an EPCG license and pay the duties to the customs officials. Once they fulfill the export obligation, they can claim a refund of the taxes paid.
Towns of Export Excellence (TEE):
Towns that produce and export goods above a value in the identified sectors would be known as towns of export status. Towns will be given this status based on their performance and potential in exports to help them reach new markets.
Market Access Initiative (MAI) Scheme:
An effort to provide financial guidance to eligible agencies for undertaking direct and indirect marketing activities like market research, capacity building, branding, and compliance’s in importing markets.
Marketing Development Assistance (MDA) Scheme:
This scheme aims to promote export activities abroad, assist export promotion councils to develop their products and other initiatives to carry out marketing activities abroad.
Merchandise Exports from India Scheme (MEIS):
This scheme applies to the export of certain goods to specific markets. Rewards for exports under MEIS will be payable as a percentage of realized FOB value.
Implementation of these schemes have resulted in exports increased by a right margin, and there is a favourable atmosphere among the business community. The government is also upcoming with many other benefits to strengthen the export sector of the country further.
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