The Government of India has always endeavoured to encourage and incentivise exports, and it has been an avowed policy to export goods and services and not taxes and duties. The Ministry of Commerce, Government of India has consistently formulated schemes aimed at diversifying Indian exports and creating a stable policy environment- Foreign Trade Policies (FTP). The FTP 2015-20 announced various schemes (some new and others modified existing schemes) as a step towards the Prime Minister’s much touted ‘Make in India’
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On June 30th, 2017 the Directorate General of Foreign Trade (DGFT) issued a Trade Notice amending the scope, applicability and procedural aspects of some of the FTP schemes, in view of and to align with the new GST regime that India embraced from 01st July, 2017 – all these changes took effect from July 1st, 2017. Are these FTP schemes still incentivising exports after the amendments? Some of the key amendments scheme-wise are discussed below:.-
Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS) are focussed on boosting merchandise and service exports from India. The rewards granted under these schemes are that of duty credit scrips. Previously, the scrips could be used for making payments of customs duties on the import of goods, excise duties on certain domestic procurement of goods and service tax on the receipt of specified services.
Under the GST regime, MEIS and SEIS scrips can be used only for payment of Basic Customs Duty (BCD), and cannot be used for payment of Integrated GST (IGST) and GST Compensation Cess leviable on imports, and Central GST (CGST), State GST (SGST), IGST and GST Compensation Cess on domestic procurements. Therefore GST will have to be paid in cash by importers, resulting in cash outflow at the point in time of import, although credit of such taxes paid in cash would be available to them. One moot aspect also is that the Government has assured refund for taxes paid in exports within 7 days (upto 90%), yet, it does not consider the life-cycle of production/service rendition from the point of import!