Against the backdrop of a decline in exports this year, India on Tuesday unveiled additional fiscal incentives of around Rs 8,500 crore to promote shipments from the country for labour-intensive sectors like leather, carpet and marine products.
The incentives, announced in a mid-term review of the country's five-year foreign trade policy made public in April 2015, are aimed at offsetting the impact of the goods and services tax (GST).
In October this year, India's exports fell 1.15 percent year-on-year to $23.09 billion, according to the country's commerce ministry.
During April-October this year, India's exports grew 9.62 percent in dollar terms. India's main export markets cover the United States, Europe and the United Arab Emirates.
The government doubled the incentives to 4 percent under Merchandise Exports from India Scheme (MEIS) hoping to help Indian businesses face competition.
Under the MEIS scheme for exporters, identified sectors are given duty exemption scrips, which are fixed at a certain percentage of the total value of their exports. These scrips can be used to pay duties on inputs and can be traded.
Indian garment manufacturers have complained that GST has reduced the cost of importing garments from Bangladesh under quota-free and duty-free scheme, posing a major challenge to domestic garment makers.
The incentives of Rs 8,450 crore that will be applicable from November include higher benefits of Rs 2,743 crore offered to readymade garments and made-ups a few days ago.
All put together, there will a 34 percent rise in sops from the existing Rs 25,000 crore.
The additional fiscal incentives consist of Rs 749 crore for leather sector, Rs 921 crore for handmade carpet of silk, jute products, handloom and coir, Rs 1,354 crore for agriculture products, Rs 759 crore for marine products, Rs 369 crore for telecom and electronic components and Rs 193 crore for medical equipment.
Industry Minister Suresh Prabhu, accompanied by Finance Secretary Hasmukh Adhia, told the media that the foreign trade policy “aims to promote exports by simplification of processes, enhancing support to high employment sectors, and leveraging benefits of GST”.
Adhia said Rs 8,500 crore is amount of “extra monetary benefits that will go to the exporters” as a result of the policy.
He said the GST will help make tax-related processes simpler for exporters.
The government on Tuesday also announced that the validity of the scrips under the incentive schemes has been increased from 18 months to 24 months under the mid-term review of the foreign trade policy.
Among the services sector that will benefit from the extra incentives include educational, hospital, hotels and restaurants, business, legal, accounting and architectural entities.
“The extension of validity of scrips from 18 months to 24 months along with the provision of zero GST on sale of scrips will help the industry in a big way,” said Ashok Rajani, chairman of Apparel Export Promotion Council.
The other initiatives like the doing away with the testing of samples for drawback purpose and the introduction of e-sealing facility for exporters will lead to quick clearances of the consignment.
“This will not only help in easing the port congestion but will also aid in quick movement of cargoes,” Rajani said.