Focus on labour-intensive segments and Micro, Small and Medium Enterprises

The government on Tuesday 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), as well as to increase employment generation and value-addition in the country.

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

The incentives were announced as part of the Mid-Term Review of the Foreign Trade Policy (FTP). “The FTP will continue to be reviewed and evaluated regularly for addressing concerns of the exporters, simplification of procedures and for promotion of exports,” an official statement said.

The FTP for the period 2015-2020 had set an ambitious target of $900 billion for India’s exports of goods and services by 2019-20. It also aimed to raise India’s share in world exports from 2% to 3.5%. Though the FTP Mid-Term Review was to be brought out before July 1, to be implemented along with the GST, it was postponed as the government wanted to consider feedback from exporters regarding GST.

Commerce and Industry Minister Suresh Prabhu, speaking on the occasion, referred to the GST-related challenges faced by the exporters and said, “Any new legislation can’t be made perfect in one go. For instance, the even Income Tax Act, which deals with direct tax and therefore far simpler compared to the GST (which subsumed /replaced several indirect taxes), was amended several times. We will regularly revisit and address all the operational issues relating to the GST.”

He asked exporters to look at the big business opportunities worldwide, adding that the government is keen to ensure that India is a “powerful export-oriented country.”

Finance Secretary Hasmukh Adhia said the export (incentive) package was approved by the GST Council to resolve the exporters’ problem of blockage of working capital. He further stated that input tax credit and Integrated Goods and Services Tax (IGST) refunds for exporters are being expedited. He said the GST will be very beneficial for exporters in the long run, and added that the new regime will also curb tax evasion.

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, the government said. This is in addition to the 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.

Further, incentives under Services Exports from India Scheme (SEIS) have also been increased by 2%, leading to additional annual incentive of ₹1,140 crore. A new scheme of self-assessment based duty free procurement of inputs required for exports has been introduced. A state-of-the-art Trade Analytics division has been set up in Directorate General of Foreign Trade for data-based policy actions. The initiative envisages processing trade information for specific policy interventions. Besides, a new Logistics Division has been created in the Department of Commerce to develop and coordinate integrated development of the logistics sector.

Support to Export Credit Guarantee Corporation is also being enhanced to increase insurance cover to exporters, particularly MSMEs, for exploring new or difficult markets, an official statement said.

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.