Merchandise Exports From India Scheme: Govt may extend MEIS by 3 months

By: |
December 9, 2020 7:30 AM

The government had earlier announced that it will roll out the RoDTEP scheme from January 2021 to make the outbound shipments zero-rated.

It had set up a committee late July under former commerce secretary GK Pillai to suggest RoDTEP benefit rates.It had set up a committee late July under former commerce secretary GK Pillai to suggest RoDTEP benefit rates.

The government is weighing a proposal to extend by three months the validity of the Merchandise Exports From India Scheme (MEIS) to March 31, 2021. Any such extension will allow it to complete an exhaustive exercise for rolling out the proposed Remission of Duties and Taxes on Exported Products (RoDTEP) scheme, which is supposed to replace the MEIS, and offer more time to exporters to prepare themselves for the transition, sources told FE.

Moreover, it makes sense to operationalise the new scheme along with the launch of the next foreign trade policy, which will remain in effect for five years from April 1, 2021. “A final decision on such an extension will be made soon,” said an official source.

The government had earlier announced that it will roll out the RoDTEP scheme from January 2021 to make the outbound shipments zero-rated. The scheme is essentially aimed at reimbursing even embedded taxes (that are not subsumed by the GST) paid on inputs consumed in exports.

It had set up a committee late July under former commerce secretary GK Pillai to suggest RoDTEP benefit rates. However, given that firming up the rates of benefits for thousands of products across various industries is a lengthy exercise, the government may need more time to finalise the incentive structure, said one of the sources. Allowing the MEIS to continue until the new scheme is fully operational is crucial to supporting the exporters as they struggling in the wake of the pandemic, exporters said.

MEIS came under tighter government scrutiny in recent months, especially in the wake of Covid, and the resource-starved revenue department slashed its allocation under the scheme to just Rs 15,555 crore for the April-December period, which is just about 40% of the outlay for the entire last fiscal. Some key wings of the government, such as the revenue department and Niti Aayog, have termed the MEIS an inefficient programme that only drains the exchequer. For their part, exporters flag several structural bottlenecks, including embedded taxes and elevated logistics costs, to highlight the need for sustained benefits.

Already, merchandise exports have witnessed a loss of momentum since the 6% expansion in September, the first since February. India’s outbound shipments faltered by 5.1% in October and, according to preliminary estimates, the contraction just exacerbated to 9.1% in November. As FE has reported, India has emerged as the worst performer among key developing economies in Asia in merchandise exports in the aftermath of the Covid-19 outbreak, trailing not just the usual stars China and South Korea but also Vietnam, Indonesia, Malaysia and even Bangladesh.

Do you know What is Positive GDP growth seen in Q3, need to fight inflation: RB, Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1RBI remains net purchaser of US dollar in November, buys USD 10.261 bn
2Vaccination drive going well; world surprised at Indian economy’s V-shaped recovery: Amit Shah
3India’s GDP within striking distance of attaining positive growth: RBI