How to Best Utilise the Export Promotion Schemes
Exports have a significant place in a country’s economy. More exports mean higher inward foreign remittance, lower current account deficit, and more employment opportunities, which contribute to improved economic growth.
There are numerous factors such as poor infrastructure, higher associated costs and cost of credit which make export expensive in India. Therefore, the Indian Government promulgates Export Promotion Schemes to support the exporters in India.
Thus, all export-import businesses must know about the important export promotion schemes in India to maximise their benefits and profits.
What is Export Promotion Scheme?
Export promotion schemes, which are issued under the Foreign Trade Policy, provide ways to encourage and boost India’s exports. The goal is to compensate for a lack of infrastructure and associated costs while also assisting Indian exporters.
Foreign trade in India is governed by the Ministry of Commerce and Industry, which reports to the Government of India. The Director General of Foreign Trade (DGFT) is the responsible authority for carrying out the Government of India’s Foreign Trade strategy.
Important Export Promotion Scheme in India
The following are the major export promotion schemes through which you can gain benefits and improve your export-import business while expanding efficiently in international markets.
Rebate of Duties & Taxes on Export Products (RoDTEP Scheme)
RoDTEP scheme’s objective is to refund all the hidden taxes and cess which no export incentive scheme refunded earlier. This includes all the undercover taxes such as:
- Central and State taxes on fuel consumed in the transportation of export products
- Duty paid to the state on electricity consumption while manufacturing
- Mandi tax levied by APMCs
- Stamp duty and toll tax paid for the import-export documentation
Service Export from India Scheme (SEIS scheme)
This scheme intends to encourage and maximise Indian exports of designated services. The export of services also plays an essential role in adding value to a country’s foreign exchange, hence it is necessary to boost service exports as well.
Exporters of notified services are eligible for a 3–7% bonus on net foreign exchange earnings, as stated in Appendix 3D. To qualify for the incentive, service exporters must obtain an Import-Export Code (IEC) with at least 15,000 USD in net foreign exchange earnings.
The reward under this scheme is provided through freely transferable duty credit scrips instead of cash or bank transfers. All you have to do is apply online under the SEIS scheme to the jurisdictional DGFT office.
Below are the schemes that export-import businesses can utilise for duty exemption and remission.
Advance Authorisation Scheme (AAS)
The Advance licence scheme, initiated by the DGFT, intends to boost export product manufacturing by permitting duty-free import of raw materials used in the production of finished products. In other words, under the AAS, raw materials that must be used to make export products can be imported with a 0% import charge.
Physical export (including supply to SEZ) and Deemed Exports (such as supply to EOU units or any AA/EPCG holder) require an advance licence. Licence holders are required to maintain a minimum of 15% value addition and export manufactured products within 18 months of receiving the licence.
Products imported through the Advance Authorisation Scheme are non-transferable nor can they be sold.
Duty-free Import Authorisation (DFIA Scheme)
DFIA scheme is quite similar to the Advance License scheme, both allow duty-free import of raw materials for manufacturing purposes.
However, unlike Advance Authorization, DFIA is a post-export mechanism, and the DFIA licence is transferrable. This means that DFIA permits duty-free imports once the product has been exported. Only products covered by the Standard Input Output Norms (SION) are eligible for the DFIA scheme’s advantages.
Duty Drawback Scheme (DBK Scheme)
The DBK system, which is governed by the Department of Revenue (Customs Department), allows for the repayment of customs taxes and central excise payable on the import of indigenous products used in the making of export products.
Instead of scrips, the Duty Drawback is deposited directly to the exporter’s bank within two months of the product’s shipment date.
The DBK scheme cannot be used in conjunction with the DFIA or Authorisation schemes.
Scheme for Rebate on State and Central Taxes and Levies (RoSCTL Scheme)
This scheme is solely applicable to the Apparels and made-up sectors listed in ITC (HS) Chapters 61-63.
It allows for the reimbursement of Central and State taxes and levies such as VAT on transportation fuel use, electricity charge, mandi tax, and so on.
Export Promotion Capital Goods Scheme (EPCG Scheme)
The EPCG scheme aids in the facilitation of capital goods or/and machinery imports in order to manufacture high-quality goods and services and increase competitiveness. Imports are subject to a 0% duty, regardless of whether they are for pre-production, production, or post-production.
Service exporters who earn in foreign currencies are also eligible to apply for an EPCG licence. The initiative can benefit hotels, tour and travel organisations, logistics firms, taxi operators, and construction companies.
Export Oriented Units (EOU)
The primary objective of this strategy is to provide a beneficial platform for enterprises that only engage in export activities. EOU gives benefits in terms of compliance and taxation.
GST Refund for Exporters
Exporters can gain benefits from the following programmes:
- LUT Bond Scheme – Allows for GST-free exports.
- Reimbursement of IGST – Allows for the reimbursement of paid IGST. To proceed with the application, you must submit essential documents using the ICEGATE portal.
- Merchant Exporters Can Get a 1% GST Break – Merchants can get export products from local vendors at a 0.1% GST rate.
Transport and Marketing Assistance Scheme (TMA Scheme)
This programme is intended for agricultural exports. It allows for the reimbursement of freight charges up to a certain amount in order to help India’s agricultural products compete in the international market.
Deemed Export Benefit Scheme
This comprises transactions in which products are not exported and payment is made in Indian currency or free forex. This is being implemented to assist domestic manufacturing in particular government-regulated settings.
Star Export House/Status Holder Certificate
The status holder certificate is given to exporters who have made significant contributions to India’s overseas trade. They are assigned a star rating based on the amount and value of exports processed. Eligible exporters receive numerous benefits, including exemption from mandatory bank document negotiation, speedier customs processing, exemption from providing bank guarantees required for export promotion schemes, preference for paying import duties, GR waiver, and much more.
Market Access Initiative (MAI) Scheme
TEE towns are those with high export potential and export items worth more than 750 crores. According to the MAI plan, verified associations in such towns are provided financial assistance.
Towns of Export Excellence (TEE)
Towns that have high export potential and export goods of more than ₹ 750 crore come under TEE. Verified associations in such towns are given financial support as per the provision laid in the MAI scheme.
Interest Equalisation Scheme (IES)
This scheme provides exporters with pre and post-shipment export credits in INR. In 416 tariff lines, it offers 5% interest to all MSME manufacturers and 3% to exporters. This scheme is governed by the RBI and the respective banks. Banks directly pass on the benefits of lower lending rates to exporters, who are compensated by the RBI.
The Export Credit Guarantee Corporation of India introduced this scheme. The NIRVIK scheme provides small exporters with low premiums, extensive insurance coverage, and a simple claim settlement process. This is primarily an insurance cover guarantee strategy that provides approximately 90% of the capital and interest.
Production-Linked Incentive (PLI) Scheme to Boost Exports
The PLI scheme was approved by the Cabinet for ten high-potential industries, including battery cells, pharmaceuticals, auto, food, textiles, and telecom networking. This incentive strengthens the Make in India effort and eliminates the MSME bias.
The Production-Linked Incentive strategy is expected to strengthen manufacturers’ competitiveness, encourage investments in important industries, boost exports, encourage self-reliance, and enhance job possibilities.
Revamp Services Export from India Scheme (SEIS) for Services Sector
This programme primarily consists of nine sectors and offers duty credit scrips that enable the holder to purchase freely importable articles without paying customs duty.
Tips to Maximise Your Benefits
Now that you know which product markets receive which incentives and have a basic understanding of all the major export promotion programmes. You can conduct extensive market research and understand demand-supply and price variations, profitability, and other essential factors. Then you may determine which market you wish to start your export business in.
This technique will assist you in developing a sound business plan and executing it efficiently. Also, to decrease the danger of losses in any element, ensure that you establish and maintain a solid network of suppliers, partners, and purchasers.
The Government of India has implemented these Export Promotion Schemes in order to encourage export enterprises through incentives and so boost overall economic growth. As a result, make the most of these export chances!