The US has alleged that the MEIS is not in sync with global trade norms.
As part of its 100-day agenda to boost exports, the government is weighing a major promotion scheme to ensure fast refund of central and state taxes and levies to soften the blow of an ongoing global trade war. Currently, similar incentives are granted to only garments and made-up exporters.
India is preparing the new scheme as the existing Merchandise Exports for India (MEIS) Scheme is being opposed by the US in the World Trade Organisation (WTO), a senior official told FE. The US has alleged that the MEIS is not in sync with global trade norms. The commerce ministry could also propose a WTO-compliant production-based support scheme to boost exports, instead of offering the MEIS.
The MEIS is the most important export promotion scheme under which the government, providing exporters duty credit scrip at 2%, 3% or 5% of their export turnover, depending on products and shipment destinations.
According to the proposal, the new scheme would ensure refund of all unrebated central and state levies and taxes imposed on inputs that are consumed in exports of all sectors. State VAT/central excise duty on fuel used in transportation, captive power, farm sector; mandi tax; duty of electricity; stamp duty on export documents, purchases from unregistered dealers; embedded CGST and compensation cess coal used in the production of electricity are some of the major levies.
In March, the Cabinet Committee on Economic Affairs had cleared a proposal to offer garment and made-up exporters more relief by way of raising the compensation level to them for various levies imposed by the centre and states, with potential revenue foregone of Rs 6,300 crore annually for the central government. The total compensation under the remission of state levies scheme and a new scheme to reimburse against embedded central taxes (even after the GST rollout) will be raised to 6.05% (of freight-on-board value) for garments and 8.2% for made-ups from the current 1.7% and 2.2%, respectively. The government had then set up a panel to explore the feasibility of extending this scheme to other sectors.