Export incentives and export promotion schemes in India[Part - 1]

[YAGAY andSUN]

Export incentives and export promotion schemes in India are designed to encourage exports, provide relief to exporters, and make Indian products more competitive in global markets. These schemes are backed by various legal frameworks, acts, and notifications under the Customs Act, GST Act, and other relevant legislation.

Let’s break down the key export promotion schemes and incentives, along with their legal frameworks:

1. AIR Duty Drawback

Duty Drawback under the All Industry Rate (AIR) scheme allows exporters to claim a refund of customs duties paid on imported goods used in the production of exported goods.

• Legal Framework:
  • Customs Act, 1962 (Section 74 and 75)
  • Customs (Drawback) Rules, 2017
• Key Features:
  • AIR Duty Drawback is based on a fixed rate prescribed by the government, applicable to all exporters of a particular product.
  • AIR rates are determined for various products by the Directorate General of Foreign Trade (DGFT) based on the product's classification and export sector.
• Eligibility:
  • Exporters who have exported goods after paying Customs duties on raw materials or inputs.

2. Duty Drawback under Section 74 of the Customs Act

Section 74 of the Customs Act, 1962 deals with the duty drawback for goods that are re-exported (re-imported goods) after being exported earlier.

• Legal Framework:
  • Customs Act, 1962 - Section 74.
• Key Features:
  • Refund is allowed on customs duties paid on imported goods that are exported but later returned to India.
  • Only the import duties on the goods (not the excise duties or other taxes) are refunded.
• Eligibility:
  • The goods must be re-exported within the specified time period (usually 3 years) to claim the refund.

3. Brand Rate Fixation under Section 75 of the Customs Act

Brand Rate Fixation is a process where exporters can apply to the government for a specific rate of duty drawback on a particular brand of goods.

• Legal Framework:
  • Customs Act, 1962 - Section 75 (fixation of brand rates).
• Key Features:
  • Allows exporters to apply for a brand-specific rate if their product does not fall under the standard AIR rates.
  • The brand rate is determined based on the cost of production, duties paid, and other factors specific to the exporter’s products.
• Eligibility:
  • Exporters must prove that the goods exported are of a particular brand and have specific duty inputs.

4. RODTEP (Remission of Duties and Taxes on Export Products)

RODTEP is a newer scheme introduced to replace the Merchandise Export from India Scheme (MEIS). It aims to refund certain embedded duties and taxes not refunded under any other scheme.

• Legal Framework:
  • Customs Act, 1962 - Section 25.
  • Introduced by the Finance Act 2020 and operationalized by the DGFT Notifications.
• Key Features:
  • Provides remission on embedded taxes and duties, including taxes on goods and services used in the production of exports.
  • Applicable to all goods exported except for a few ineligible sectors.
• Eligibility:
  • Exporters must meet eligibility criteria, and the benefit is claimed at the time of export through an online application process.

5. ROSCTL (Rebate of State and Central Taxes and Levies)

ROSCTL is a scheme that provides a rebate for state and central taxes on export goods, particularly focusing on the textile and apparel sectors.

• Legal Framework:
  • Notification No. 14/2020-Customs (NT) under the Customs Act, 1962.
• Key Features:
  • Provides a rebate on state and central taxes paid on the export of apparel, garments, and made-up textiles.
  • Aimed at reducing the cost of exports from the textile sector.
• Eligibility:
  • The scheme is primarily available for textile and apparel exporters.

6. MAI (Market Access Initiative)

The MAI Scheme is designed to promote India’s exports and expand its presence in international markets.

• Legal Framework:
  • Foreign Trade Policy 2015-2020.
• Key Features:
  • Provides financial assistance for market development activities, such as market research, participation in trade fairs, and promotional campaigns.
• Eligibility:
  • Exporters, industry associations, and government agencies engaged in promoting exports can benefit from the MAI scheme.

7. MDA (Market Development Assistance)

The MDA Scheme provides financial assistance to organizations and exporters for marketing and promotional activities.

• Legal Framework:
  • Foreign Trade Policy 2015-2020.
• Key Features:
  • Aimed at promoting exports in new markets.
  • Provides support for organizing trade exhibitions, research, and promotional activities.

8. ECGC (Export Credit Guarantee Corporation)

ECGC provides credit risk insurance and export financing to protect exporters against the risk of non-payment.

• Legal Framework:
  • ECGC Act, 1961.
• Key Features:
  • Provides guarantees against commercial and political risks associated with international trade.
• Eligibility:
  • Available to all exporters.

9. Advance Authorization Scheme

This scheme allows duty-free import of inputs required for the production of export goods.

• Legal Framework:
  • Foreign Trade Policy.
  • Customs Act, 1962 (Section 74 and 75).
• Key Features:
  • Allows import of raw materials without paying customs duties, provided the goods are used for export.
• Eligibility:
  • Exporters who have an obligation to export a certain quantity of goods can avail of this benefit.

10. EPCG (Export Promotion Capital Goods) Scheme

The EPCG Scheme allows exporters to import capital goods at zero customs duty, subject to the fulfilment of export obligations.

• Legal Framework:
  • Foreign Trade Policy 2015-2020.
• Key Features:
  • Enables import of machinery and equipment needed for production at concessional duties to boost export capacity.
• Eligibility:
  • Exporters who meet the export obligation conditions specified under the scheme.

11. Export Authorization for Restricted Goods

Some goods are subject to Export Authorization due to restrictions on exports under India's Foreign Trade Policy.

• Legal Framework:
  • Foreign Trade (Development and Regulation) Act, 1992.
• Key Features:
  • Exporters must seek prior authorization for goods listed under restricted categories.
• Eligibility:
  • Must apply for an export license through DGFT and comply with restrictions.

12. IGST Refund (Integrated Goods and Services Tax)

Exporters are eligible for a refund of IGST paid on export goods under the GST regime.

• Legal Framework:
  • GST Act, 2017 - Section 16(3).
• Key Features:
  • Refund can be claimed for the IGST paid on export of goods or services.
• Eligibility:
  • Exporters must file claims via GST RFD-01 on the GST portal.

13. Refund of Accumulated ITC of GST

When a business accumulates Input Tax Credit (ITC) that it cannot use due to the export of goods or services, it can claim a refund.

• Legal Framework:
  • GST Act, 2017 - Section 54.
• Key Features:
  • The unutilized ITC can be refunded under conditions specified by GST rules.
• Eligibility:
  • Exporters who have input taxes paid on inputs used for exports can claim refunds.

14. Inverted Duty Structure

In this structure, exporters pay higher taxes on inputs than on the exported goods. Under this situation, exporters are allowed to claim refunds on the excess tax paid.

• Legal Framework:
  • GST Act, 2017 - Section 54.
• Key Features:
  • Refund of unutilized ITC due to inverted duty structure in GST.
• Eligibility:
  • Exporters in sectors where input duties are higher than output duties.

15. Refunds for SEZ Units

SEZ Units (Special Economic Zones) are allowed to claim refunds on taxes paid on inputs used in the production of goods exported from SEZs.

• Legal Framework:
  • SEZ Act, 2005.
• Key Features:
  • Goods and services supplied to SEZ units are exempt from GST and customs duties.
• Eligibility:
  • SEZ units must apply for refunds through the designated authorities.

Conclusion

These schemes, incentives, and refund mechanisms are aimed at promoting exports from India and making Indian products globally competitive. The legal framework supporting these schemes includes provisions in the Customs Act, Foreign Trade Policy, GST Act, and various notifications issued by the Government of India.