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Understanding export incentives in India: What are the benefits for exporters?
To promote exports from India, the government provides export incentive schemes for exporters. In this blog, learn more about various export schemes in India & their benefits.
India has thousands of exporters and businesses selling internationally via various mediums including the increasingly popular e-commerce exports. From leather and toys to clothing, jewellery and consumables, India exports an exquisite range of products that are known for its authenticity and flavors. To encourage more and more sellers to export from India and provide benefits to them in their businesses, the Government of India provides export incentives to exporters. This not only helps exporters and their businesses but also motivates them to contribute to the growing export trade of the country with a sense of pride.
How do export incentives work in India?
Export incentives in India are economic assistance given to exporters like low-cost loans, tax exemptions, subsidies and government-financed advertisements, among others, it helps them reduce the overall export cost, thus helping them set competitive prices in the global market. All government incentives by countries must be in compliance with the World Trade Organization (WTO), which keeps a check on legal and ethical world trade practices.
Top export incentives for exporters
Below are a few export incentives schemes in India that helps MSMEs and sellers avail benefits:
1. SEIS (Service Exports from India Scheme)
SEIS was introduced to encourage sellers who export notified services. Under this export scheme, an incentive of 3-7% of the net foreign exchange earnings is provided to service exporters. The requirement from an exporter is to have an active IEC with minimum net foreign exchange earnings worth US$ 15,000 (INR 11L approx) to be eligible for a claim under the scheme2.
2. RoDTEP (Rebate of Duties & Taxes on Exported Products scheme)
Replacing the old MEIS (Merchandise Exports from India Scheme) in a phased manner from December 2020, the RoDTEP is the new export incentive scheme that offers refund on all hidden and other taxes that were not refunded any other export incentive scheme. This can be central and state taxes on transportation fuel used on export products, duties on electricity used for product manufacturing, toll tax, stamp duties on import-export legal paperwork, etc3.
3. EPCG (Export Promotion Capital Goods Scheme)
Under this scheme, capital goods (goods that are used to manufacture other products like leather used to make leather bags, etc) used in the pre-production, production, and in post-production of final export products can be imported at 0% customs duty, also called Zero duty EPCG. This scheme also helps reduce the service exporter’s capital costs4.
4. RoSCTL (Rebate on State & Central Taxes and Levies scheme)
The The new export incentive scheme — RoSCTL, introduced in 2019, is applicable on all readymade apparel and textiles like bedsheets, clothing, garments, carpets, rugs, etc. This scheme grants refund on taxes such as VAT on transportation fuel, captive power, ‘mandi’ tax and electricity duty5.
5. AAS (Advance Authorization Scheme)
Advance Authorization Scheme (AAS) allows duty-free imports of raw materials, which are required to produce and manufacture final export products. The provision covers fuel, packaging material, and some wastage during the production of the final product. It allows exporters to import raw materials at 0% import duty if those raw materials will be used to manufacture export products6.
6. NIRVIK Scheme
Providing high insurance cover, reduced premium for small exporters and a simplified claim settlement process, the NIRVIK scheme was introduced by the ECGC (Export Credit Guarantee Corporation of India). It is primarily an insurance cover guarantee scheme that provides a cover of up to 90% of the principal and interest, as against the current credit guarantee of only up to 60% loss7.
7. EOU Scheme (Export Oriented Units)
The EOU scheme was introduced in 1980 with the aim to encourage exports by creating additional production capacity, earn foreign exchange to the country and to generatinge additional employment. 2 It provides a few waivers and concessions in compliance and taxes to the exporters. The companies that are set to export their 100% production of goods are allowed to set up an Export Oriented Unit (EOU)8.
8. GST refund for exporters
GST (Goods & Services Tax) Act offers a few schemes to exporters in India:
LUT Bond Scheme – Exporters can export goods without paying any GST by obtaining a ‘Letter of Undertaking’ (LUT) bond.
IGST Refund – Exporters can pay Integrated GST on exports, and later claim the refund of that amount from the customs department.
1% GST benefit for merchant exporters – Merchant exporters can get export goods from local suppliers at a 0.1% concessional GST rate9.
LUT Bond Scheme – Exporters can export goods without paying any GST by obtaining a ‘Letter of Undertaking’ (LUT) bond.
IGST Refund – Exporters can pay Integrated GST on exports, and later claim the refund of that amount from the customs department.
1% GST benefit for merchant exporters – Merchant exporters can get export goods from local suppliers at a 0.1% concessional GST rate9.
9. Duty Free Import Authorisation (DFIA Scheme)
The purpose of the Duty Free Import Authorization (DFIA) scheme is to allow the duty-free imports of raw materials. This export incentive scheme enables duty-free imports of fuel, oil, inputs, energy resources, and the catalyst consumed/ utilized in the process of production of export products. Imports under this scheme shall be exempted only from the payment of Basic Customs Duty (BCD)10.
10. Duty Drawback Scheme (DBK Scheme)
This scheme is a special rebate under Section 75 of the Indian Customs Act on exported products or materials. It allows exporters to get concessions or compensation on applicable products used in the processing of goods that are manufactured in India and then exported to foreign countries11.
11. Duty Entitlement Passbook (DEPB) Scheme
The DEPB scheme consists of two parts — post-export DEPB and pre-export DEPB (eliminated with effect from April 1, 2000). Exporters can avail this scheme after the export at predetermined credit on the FOB (Free On Board) value of products. The DEPB rates depend on the FOB value or value cap, whichever is lower. The key benefit of this scheme is that it can be availed on all import goods except restricted products such as gold, gold pens, gold watches, nibs, etc12.
12. Interest Equalisation Scheme (IES)
This export incentive scheme provides pre- and post-shipment export credit to exporters. It is implemented as well as governed by the Reserve Bank of India (RBI) and respective banks. The scheme provides 5% of interest to all manufacturers in the MSME sector and 3 % financial support to all exporters in 416 tariff lines13.
13. Market Access Initiative (MAI) Scheme
The MAI scheme provides financial assistance in export promotion activities to export promotion organizations, trade promotion organizations, national-level institutions, research institutions, exporters, laboratories, etc.
14. Transport and Marketing Assistance Scheme (TMA Scheme)
The TMA scheme provides financial support to transport and marketing of agricultural products. It is extended to all exporters of eligible agricultural products who are registered with the concerned Export Promotion Council as per the Foreign Trade Policy. The scheme remained in operation for exports up to 31.03.2021.
How to export from India?
Thanks to the growing use of e-commerce and the ease in reaching new international customers online, exporters can now sell internationally with Amazon Global Selling. With state-of-the-art tools like easy listing across 18 marketplaces and hassle-free shipping with Fulfillment by Amazon (FBA), Indian exporters can expand their businesses in a simple manner by registering in 15 minutes. While you reach millions of international customers, your business and revenue also contribute to the growing export trade from India.
Register your business
First, you must register your export business with Amazon Global Selling. You don’t have to be an existing Amazon India seller. The registration can be done online on Seller Central. You’ll need the following documents to register:
• PAN
• ID proof (Aadhar, driving license or passport)
• Business address proof (Bank statement)
• Credit or debit card (international transactions enabled)
• PAN
• ID proof (Aadhar, driving license or passport)
• Business address proof (Bank statement)
• Credit or debit card (international transactions enabled)
List your products
Once you have successfully registered to sell globally on Amazon, you can list your products. Remember to follow tips on how to list your products include attractive pictures and descriptions that’s clear to international customers. You can also seek help from third party service providers.
Ship and receive payments
Once a customer places an order, you can choose to deliver by yourself or you can opt for Fulfillment by Amazon (FBA). Under FBA, Amazon takes care of shipping, delivery, returns and customer concerns. Once a customer purchases your product, Amazon credits the money in your bank account in the currency of your choice.
More blogs on export schemes
Frequently Asked Questions
How do I claim export incentives in India?
Different export incentives may have different processes to apply and claim benefits. RoDTEP scheme can be filed at www.icegate.gov.in.
Who issues export incentive licenses in India?
Export incentives are provided by the Government through the Directorate General of Foreign Trade (DGFT).
Published on December 27, 2021.
Sources:
1. https://www.ibef.org/blogs/indian-export-incentive-schemes
2. https://www.dgft.gov.in/CP/?opt=seis
3. https://cip.icegate.gov.in/CIP/static/images/doc/RoDTEP/SCHEME1.pdf https://www.dgft.gov.in/CP/?opt=epcg
4. https://cip.icegate.gov.in/CIP/static/images/doc/RoDTEP/FAQs1.pdf
5. https://www.dgft.gov.in/CP/?opt=adnavce-authorisation
6. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1601493
7. https://www.nsez.gov.in/Resources/EOU%20FAQs.pdf
8. https://services.gst.gov.in/services/quicklinks/refunds
9. https://www.dgft.gov.in/CP/?opt=adnavce-authorisation
10. https://old.cbic.gov.in/resources//htdocs-cbec/customs/duty-drawback.pdf
11. https://www.indiafilings.com/learn/modified-norms-of-interest-equalization-scheme-for-msme-exporters/
12. https://commerce.gov.in/press-releases/centre-revises-transport-and-marketing-assistance-tma-scheme-for-specified-agriculture-products/
13. https://commerce.gov.in/international-trade/trade-promotion-programmes-and-schemes/trade-promotion-programme-focus-cis/market-access-initiative-mai-scheme/
Sources:
1. https://www.ibef.org/blogs/indian-export-incentive-schemes
2. https://www.dgft.gov.in/CP/?opt=seis
3. https://cip.icegate.gov.in/CIP/static/images/doc/RoDTEP/SCHEME1.pdf https://www.dgft.gov.in/CP/?opt=epcg
4. https://cip.icegate.gov.in/CIP/static/images/doc/RoDTEP/FAQs1.pdf
5. https://www.dgft.gov.in/CP/?opt=adnavce-authorisation
6. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1601493
7. https://www.nsez.gov.in/Resources/EOU%20FAQs.pdf
8. https://services.gst.gov.in/services/quicklinks/refunds
9. https://www.dgft.gov.in/CP/?opt=adnavce-authorisation
10. https://old.cbic.gov.in/resources//htdocs-cbec/customs/duty-drawback.pdf
11. https://www.indiafilings.com/learn/modified-norms-of-interest-equalization-scheme-for-msme-exporters/
12. https://commerce.gov.in/press-releases/centre-revises-transport-and-marketing-assistance-tma-scheme-for-specified-agriculture-products/
13. https://commerce.gov.in/international-trade/trade-promotion-programmes-and-schemes/trade-promotion-programme-focus-cis/market-access-initiative-mai-scheme/
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*Map not to scale. The map has been used for design and representational purpose only, it does not depict the geographical boundaries of the country. These do not conform to the external boundaries of India recognized by the Survey of India.
*Map not to scale. The map has been used for design and representational purpose only, it does not depict the geographical boundaries of the country. These do not conform to the external boundaries of India recognized by the Survey of India.
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