The Indian government launched MEIS and SEIS schemes for making our products and services more competitive in the global markets. Check out this post to know the different ways in which these schemes are helping Indian exporters.
The Indian government launched the MEIS (Merchandise Exports from India Scheme) and SEIS (Service Exports for India Scheme) in FTP 2015-20. These schemes replaced the existing SIS (Served from India Scheme) which was introduced with FTP 2009-15.
While both these schemes are made up of multiple sub-schemes, the primary objective of MEIS and SEIS is to make Indian goods and services competitive in the international markets. Apart from replacing the existing SIS, the schemes focus on rationalizing export incentives and increases their scope by eliminating a host of restrictions.
Here are some of the biggest advantages of MEIS and SEIS for Indian exporters-
Incentives under MEIS
Indian exporters are entitled to receive certain incentives and rewards under MEIS. The incentives vary between products and the country to which the products are being exported. The FOB (Free On Board) value is taken into consideration for calculating the incentives.
The incentive received by an exporter is either the realized export value of FOB in free foreign exchange or the export value of FOB as per the Shipping Bill. The lower of the two will be taken into consideration for determining the export incentives under MEIS. Exporters are incentivized through Duty Credit Scrips which are transferable and are valid for paying Customs Duties.
Incentives under SEIS
Just like MEIS provides incentives to goods exporters, SEIS aims to offer the same to Indian service exporters. Based on the net foreign exchange earned, a service provider can receive government incentive of 3% to 5%. Just like MEIS, the incentive under SEIS is in the form of Duty Credit Scrips.
Many different types of services such as business services, communication services, environmental services, educational services, engineering and construction services, transport services, health-related services, etc. are eligible for SEIS incentive.
No GST on MEIS and SEIS Incentives
While schemes such as FPS (Focus Product Scheme), MLFPS (Marlet Linked Focus Product Scheme), FMS (Focus Market Scheme), and others were launched under FTP 2009-2015, taxation continued to be a major problem for the exporters. The exporters were required to pay a considerable portion of these incentives as taxes.
But under the new MEIS and SEIS schemes, the export incentives are exempt from paying any GST as per the amendment introduced in 2017. However, exporters should know that for GST purposes, the Duty Credit Scrips as treated as “goods” and not “services”.
Risk Management System for Authenticity
There can be cases where exporters might try to get a higher credit scrip than they are entitled to. Irrespective of whether this is done intentionally or unintentionally, there are now Risk Management Systems implemented at DGFT (Directorate General of Foreign Trade) to prevent such misuse.
Every month the systems select up to 10% of the total scrips issued and checks them for their authenticity. This helps in improving the transparency of the whole incentives process under MEIS and SEIS while also minimizing the chances of tax evasion by Indian exporters.
Higher Insurance Coverage
As per the current Foreign Trade Policy norms, ECGC (Export Credit Guarantee Corporation) offers insurance of up to 60% of the total bank credit received by an exporter. But significant changes are expected to be made in MEIS and SEIS from 2020, and one of the most important of them would be the increase in insurance coverage to up to 90%.
The lack of insurance often made it very difficult for the exporters to get more credit from the lenders. But with ECHC offering insurance of up to 90%, the lenders too would be encouraged to lend higher loans to the exporters.
Availing the Benefits of MEIS and SEIS
The MEIS and SEIS are multi-faceted schemes that can significantly benefit Indian exporters if understood and used correctly. In order to take maximum advantage of the schemes, a large number of exporters rely on professional tax advisory services.
Professional tax advisors can assist exporters in availing all the different policy benefits in a legal and timely manner. Their expertise, coupled with knowledge of all the latest changes in government policies, can help exporters gain a competitive edge. Besides, they can further help companies by providing them with a clear idea of how all the different incentives and policies materialize eventually and help the business grow.