The government on Tuesday capped the benefits under the Merchandise Export from India Scheme (MEIS) at Rs 2 crore per exporter on exports made between September 1, 2020 to December 31, 2020 without changing the coverage of the scheme and the applicable rates.
It also said that the new Import Export Code (IEC) obtained on or after September 1 will be ineligible to submit any MEIS claim for exports, and the ceiling would be subject to a downward revision to ensure that the total claim doesn’t exceed the allocated Rs 5,000 crore for the period.
Under MEIS, the government provides duty benefits depending on product and country. Rewards under the scheme are payable as percentage of realised free-on-board value (of 2%, 3% and 5%) and MEIS duty credit scrip can be transferred or used for payment of a number of duties including the basic customs duty.
“In addition, it has been notified that MEIS scheme is withdrawn with effect from January 1, 2021,” the directorate general of foreign trade (DGFT) said in a notification.
The commerce and industry ministry had proposed a fresh round of incentives under the key scheme after the finance ministry said the MEIS failed to deliver the desired result of boosting exports. India’s merchandise exports have hovered around $300 billion in the last five years, despite the scheme’s liberal application across sectors. The liability under MEIS was around Rs 45,000 crore in FY20.
“98% of the exporters who claim MEIS will be unaffected by the changes and less than 2% exporters are likely to be affected as per analysis of claims in the relevant period of 2018-19,” said an official in the know.
The move is aimed to protect genuine exporters and allow them to claim benefits for exports in the period besides reducing the possibility of fraud by taking new IEC to circumvent the cap while advance notice of four months of the end date of MEIS provides certainty for future pricing decisions.
Unaffected exporters who have already factored in MEIS in the pricing of their products do not face any change or uncertainty since neither coverage of products nor rates of MEIS will be changed according to the official.