Amidst a series of changes in the tax framework of the country, the government of India recently announced the highly anticipated policy development with regard to foreign trade.
Amidst a series of changes in the tax framework of the country, the government of India recently announced the highly anticipated policy development with regard to foreign trade. This was a crucial development as the much-needed changes came in the wake of dwindling exports, global economic slowdown and a highly uncertain business environment across the world. The mid-term review of the Foreign Trade Policy (FTP) 2015-20 was an opportunity before the government to make corrective changes in the Indian foreign trade policy to adjust with the changing global trade scenario and realign the policy provisions to harmoniously sync with GST made applicable with effect from July 1, 2017. These changes were imperative to provide a boost to the Indian economy and position India as an evolved manufacturing so as to resolve some of the unaddressed issues left behind by the newly introduced GST provisions. The issue of working capital blockage for exporters due to upfront payment of GST was badly hurting exporters and was taken up by the courts through various writ petitions.
While the government has been consistently taking steps to facilitate provision of refunds, integrating the mechanism into the FTP has been a welcome move. The issue of non-availability of import benefits against old advance authorisation licences has also been addressed in the mid-term changes, as now, under advance authorisation, export promotion of capital goods and 100% EOU scheme, exporters have been extended the benefit of sourcing inputs/capital goods from abroad as well as domestic suppliers for exports without upfront payment of GST. In addition, the government has promised the launch of e-wallet facility from April 1, 2018. These measures are expected to resolve the liquidity challenges faced by exporters to a large extent. As part of the global export repositioning strategy, the government laid out mechanisms for continued support for multilateral treaties and agreements. This would help businesses in India integrate with major regions of the world and expand markets in new regions, enhance participation of Indian industry in global value chains, increase farmers’ income through focused policy for agricultural exports and promote exports by MSMEs and labour-intensive sectors to generate more employment.
The revised policy also seeks to extend incentives of up to Rs 2,743 crore to the garments and textile industry. There has been an increase of about 2% on incentives under MEIS and SEIS schemes across the board with increased validity of the duty credit scrips from 18 months to two years, benefiting a wide range of sectors such as leather, agriculture, carpets, hand tools, marine and rubber products, ceramics, sports goods, medical, scientific products as well as electronic and telecom equipment. This translates into reduced costs and increased savings for the exporters which would yield competitive and quality products from India into international markets. Besides, scrips have been made freely transferable as GST rates on such transfer or sale of scrips have been reduced to zero from the earlier rate of 12%. This would incentivise service exporters without significant imports who would have unutilised scrips which they can sell and generate additional revenue. The government have given the hint that it is interested in looking at incentivising new products and exploring new markets for targeted incentives, such as Africa, Latin America and the Caribbean regions. The new policy envisages hand-holding, support and assistance to exporters with their export-related problems.
One can now expect a more proactive assistance from the DGFT to exporters looking to meet regulatory obligations and access new export markets. Procedures related to clearances involved in cross-border trade will also be simplified. Self-certification scheme for duty-free imports and establishment of a new trade data analytics division under the DGFT to analyse real-time data for fine-tuning the policy are indeed futuristic initiatives. The mid-term review has ushered in a promise for interesting times ahead. This reaffirms the government’s resolve and belief in Make-in-India. This shows the government is paying serious attention to the issues faced by businesses and is ready to take immediate action to resolve them. It is hoped the central government will closely collaborate with all state governments to implement this efficiently at the ground level.