Special Schemes for Promotion of Export in India
Exports are critical to a country’s economic prosperity. The bigger the exports, the greater the inward foreign remittances, the more jobs and employment, the lower the current account deficit, and hence the greater the total economic growth. As a result, in order to grow swiftly, India must improve its export performance. India is still considered a developing nation. China exports about eight times as much as India. Despite being one of the world’s largest countries, India is ranked 18th among the world’s top exporting countries in 2019. Even a small country like Singapore is ahead of India in terms of economic development. The high cost of export items is one of the primary factors behind India’s low export performance. Indian exporters are unable to sell their goods at a lower and more competitive price, rendering them uncompetitive in the global market and resulting in order cancellation.
In order to support the exporters and promote export there are various schemes that are introduced by the government such as Special Economic Zones (SEZs), Export-oriented Units (EOUs), Software Technology Parks (STPs), Electronics Hardware Technology Parks (EHTPs), Biotechnology Parks (BTPs), Merchandise Exports from India Scheme (MEIS) etc.
Merchandise Exports from India Scheme (MEIS)
The Merchandise Exports from India Scheme (MEIS) was created to encourage the manufacture and export of specified goods and products from India. Exports of notified goods/products to notified markets indicated in Appendix 3B of the Handbook of Procedures are issued freely transferable duty credit scrips based on the realized FOB value of the exports in free foreign exchange at a fixed rate under this system. These duty credit scrips can be used to pay basic customs duties on inputs or commodities imported. However, this scheme has been discontinued now and has been replaced by Rebate of Duties & Taxes on Export Products (RoDTEP Scheme).
Rebate of Duties & Taxes on Export Products (RoDTEP)
The new RoDTEP Scheme will replace the old MEIS Scheme in a phased manner from December 2020. The old MEIS scheme was not WTO-compliant, hence the new plan was required. It was against the International Trade rules. The RoDTEP scheme intends to reimburse all hidden taxes and levies that were previously unreimbursed under any export incentive scheme, for e.g. Central & state taxes on the fuel, Mandi tax levied by APMCs, Toll tax & stamp duty etc. The application process will be similar to that of the MEIS Scheme, however there will be certain adjustments in the rate of incentives. The new RoDTEP Scheme’s list of eligible products and benefit rate are currently being established.
Export-oriented units (EOU)
The EOU Scheme was established in 1980 and is regulated by Chapter 6 of the Foreign Trade Policy. The jurisdictional Development Commissioner oversees the establishment of units and their performance under the Foreign Trade Policy regulations. The scheme’s goal was to increase exports by adding more production capacity. Units that agree to export their whole production of commodities are permitted to form an EOU under this arrangement. Manufacturing, services, software development, trading, repairing, remaking, reconditioning, re-engineering, including the manufacture of gold/silver/platinum jewellery and articles thereof, agriculture, including agro-processing, aquaculture, animal husbandry, biotechnology, floriculture, horticulture, pisci-culture, viticulture, poultry, sericulture, and granites are among the industries in which these units may be involved.
EOUs can export all products in ITC (HS) without paying duty, with the exception of restricted commodities. Permits required for importation under other legislation, on the other hand, will be applicable. Before an EOU may begin commercial production, it must invest a minimum of Rs. 10 million in plant and machinery. Other than proposals for building up units in the services sector (excluding R&D, software and IT-enabled services, or any other service activity as may be authorised by the BOA), applications for setting up units under the EOU programme are approved or denied, by the committee.
EOU units are exempt from paying central excise duty on goods manufactured in India and bought through DTA, as well as from paying customs duty on capital goods, raw materials, consumables, and parts imported from other countries. These units are also eligible for a refund of the CST they paid on their purchases. Supplies to EOUs from the Domestic Tariff Area (DTA) are regarded presumed exports, and Indian suppliers might benefit from them. Furthermore, foreign investment of up to 100% is permitted, subject to sectoral regulations.
Electronics Hardware Technology Parks (EHTPs)
Chapter 6 of the Foreign Trade Policy covers the Electronics Hardware Technology Parks (EHTPs) Scheme. The Ministry of Communications and Information Technology is in charge of the EHTP Scheme. An EHTP can be established by the Central Government, a State Government, a public or private sector business, or any combination of these entities under the EHTP Scheme. EHTP units can be set up in authorized EHTP complexes or anywhere else where EOUs can be set up. This type of unit is a duty-free custom-bonded region that is eligible for a CST return on purchases.
EHTP units are authorised to import any sort of commodities (excluding forbidden goods, such as capital goods, raw materials, consumables, office equipment, and so on) for the purpose of manufacturing and exporting export products without paying duty. Software can be exported via a data communication channel or via physical conveyance. The period for realisation and repatriation of export proceeds for EHTP units is nine months from the date of shipment. Four Foreign investments of up to 100% are also permitted, subject to sectoral regulations.
Software Technology Park (STP)
Chapter 6 of the Foreign Trade Policy covers the Software Technology Parks (STP) Scheme. The STP Scheme is a 100 percent export-oriented programme for developing and exporting computer software and services via data communication networks or physical media, as well as professional services. The single-point contact service to the STP units is the main draw.
In 1991, the Ministry of Communications and Information Technology established the Software Technology Park of India (STPI) to implement the STP programme. STPI is an autonomous organisation in India that manages and regulates IT parks and STPs. STPI’s principal goal is to turn India into an IT behemoth and one of the world’s leading generators and exporters of IT and software in the next several years. Approvals for STP schemes are granted through a single-window clearance system.
An STP unit can be built up in authorised STP complexes or elsewhere that EOUs can be set up. This type of unit is a duty-free custom bonded area that is eligible for a CST refund on purchases. STP units are permitted to import all types of items (excluding restricted goods, such as capital goods, raw materials, consumables, office equipment, and so on) for the purpose of manufacturing and exporting export products without paying tariffs. Software can be exported via a data communication channel or via physical conveyance. For the STP units, the period of realisation and repatriation of export proceeds shall be nine months from the date of export.
Special Economic Zones (SEZs)
The Special Economic Zone (SEZ) Act was adopted in 2005 by the Department of Commerce, Ministry of Commerce & Industry, Government of India, with the goal of establishing an internationally competitive and hassle-free environment for exports. For the purposes of trade operations, duties, and tariffs, a SEZ is described as a “particularly demarcated duty-free enclave that shall be assumed to be foreign territory (out of Customs authority).” The SEZ Act of 2005, which was accompanied by SEZ Rules, went into effect on February 10, 2006.
It offers significant procedure simplification and a single-window clearance mechanism for situations involving the federal and state administrations. The programme is designed for larger businesses and will have a substantial impact on future exports and employment. The SEZ strategy strives to develop competitive, convenient, and integrated zones that provide world-class infrastructure, utilities, and services to global firms. The SEZ Act of 2005 envisions state governments playing a vital role in export promotion and infrastructure development. Some of the features of SEZ are-
- Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units.
- Exemption from Central Sales Tax, Exemption from Service Tax and Exemption from State sales tax. These have now subsumed into GST and supplies to SEZs are zero rated under IGST Act, 2017.
- Other levies as imposed by the respective State Governments.
- Single window clearance for Central and State level approvals.
- This scheme has a significant impact on future exports & employment. About 230 IT-ITeS specific SEZs have been notified by the DOC.
Biotechnology Park (BTP)
BTP is also mentioned under Chapter 6 of Foreign Trade Policy. All products, with the exception of prohibited exports under ITC (HS), are duty-free for BTP units. All types of products, including capital goods, as specified in the Foreign Trade Policy that are required by the unit for its activities or in connection with them may be imported duty-free, provided they are not restricted imports under the ITC (HS). BTP units are eligible for a refund of CST paid on purchases and are free from paying Central Excise Duty on items acquired from DTA that are manufactured in India. For BTP units, the period of realisation and repatriation of export proceeds shall be nine months from the date of export.
The basic objectives are-
- To boost up the biotechnology sector all over the country by setting up biotechnology parks.
- To strengthen the existing infrastructure facilities to make Indian Biotech industry a global leader.
- To create high-quality infrastructure with the necessary support for undertaking Research and Development.
- To foster innovation and entrepreneurship.
Written by- Harshvardhan Singh Sikarwar