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Commerce ministry caps MEIS benefit to exporters during last 4 months of the scheme, govt says move aimed at protecting genuine exporters

The MEIS will expire on 31tst December, the government is bringing a new scheme RoDTEP in its place from 1st January 2021 to promote exports

After the Commerce ministry announced a cap on benefits given to exporters under the Merchandise Export from India Scheme (MEIS), the ministry has said that only 2% exporters who claim the benefit will be impacted by the change. According to an analysis done by the Department of Commerce, 98 percent of the exporters who claim MEIS will be unaffected by the changes.

The department added that the unaffected exporters who have already factored in MEIS in the pricing of their products do not face any change or uncertainty. This is because, neither coverage of products nor rates of MEIS will be changed for them. “Genuine exporters are protected and allowed to claim benefits for exports in the period and the possibility of fraud by taking new Importer Exporter Code (IEC) to circumvent the cap is avoided,” a statement issued by the department said. It also added that advance notice of four months of the end date of MEIS provides certainty for future pricing decisions.

On 1st September, the Department of Commerce under the ministry of Commerce and Industry had announced caping MEIS benefits to exporters to Rs 2 crores for the period 1st September t0 31st December. Amending the relevant sections of the Foreign Trade Policy, it was announced that total reward granted to an IEC holder under the MEIS scheme will not exceed Rs 2 crore on exports made during this period.

It also says that any IEX holder who has not made any export with Let Export Order (LEO) date during the period 1st September 2019 to 31st August 2020, or any new IEC obtained after 1st September 2020 will not be eligible to claim any benefits under MEIS for any export made after 1st September 2020. The ceiling of Rs 2 crore may be reduced further so that the total benefit given under the scheme does not exceed Rs 5,000 crore, the allocation determined the union govt.

Benefits under MEIS will not be available for exports made from 1st January 2021. Which means, the scheme will be withdrawn from the beginning of the calendar year 2021.

Under the MEIS, the govt provides rewards to exporters to offset infrastructural inefficiencies and associated costs. The rewards vary according to products and country, and it is calculated as percentage of realised free-on-board value, which may be 2%, 3% or 5%. Exporters receive Duty Credit Scrips for their scripts, which freely transferable, and they can be used for making various payment like basic customs duty, additional customs duty, central excise duty etc on import or domestic procurement of goods. The objective of the Merchandise Exports from India Scheme (MEIS) is to promote the manufacture and export of notified goods/ products.

Earlier this year, the Commerce Ministry had announced that the MEIS will not be available after 31st December 2020. The government is bringing a new export incentive scheme in its place, the Remission of Duties and Taxes on Export Products (RoDTEP) scheme. The new scheme will reimburse the taxes and duties incurred by exporters such as local taxes, coal cess, mandi tax, electricity duties and fuel used for transportation, which are not getting exempted or refunded under any other existing scheme. The rebate would be claimed as a percentage of the Freight On Board (FOB) value of exports. The MEIS was also not compatible with WTO guidelines, while the RoDTEP complies with all WTO guidelines on export incentives.

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