The government may continue the additional 2% duty incentive under an existing export scheme for electronic exports that ended on December 31.
The issue was discussed at the Prime Minister’s Office and an announcement to continue with the overall 4% incentive for electronics under the Merchandise Export from India Scheme (MEIS) is expected in the upcoming budget, officials said.
“The extra incentive for electronics exports will continue till a new scheme to replace MEIS is in place,” said one official aware of the development.
The additional 2% benefits under MEIS were announced in August to help exporters who had claimed that delayed Goods and Services Tax (GST) refunds were hurting business. The government had announced on December 10 that it would end the additional benefit for all exports except garments and made-ups on December 31.
The commerce department is finalising the Remission of Duties or Taxes on Export Products (RoDTEP) scheme, which is compliant with multilateral trade rules and likely to replace MEIS in a few months. The MEIS scheme was found to violate the World Trade Organization rules as it was export focussed and India has appealed the organisation’s ruling on the subject. Till then, New Delhi can continue with the scheme.
As per the official, the proposal to continue the scheme for electronics has been approved by the higher echelons of the government.
“Electronics exports are at a nascent stage and they need support. Companies which invest here can make this their export base. Moreover, the sector has suffered because of inverted duty structure,” said Ajay Sahai, director general, Federation of Indian Export Organisations.
India’s exports of electronics goods rose 41% in the April-December period to $8.8 billion from $6.2 billion in the year-ago period.
As per officials, the scheme was ended because it was benefiting only a few exporters.
The electronics manufacturing industry, for which the export incentive dropped to 2% from 4%, had criticised the move. At present, electronics from China are 17-19% cheaper than those from India while those from Vietnam are 13-15% cheaper.
“The government was compensating Indian industry through the 4% incentive but the gap was still there. The electronics industry specifically the mobile phone manufacturing require incentives to be able to compete in the export market and while restoring the MEIS benefit is the first step, more incentives are necessary to counter the disabilities which Indian industry suffers,” said Bipin Sapra, partner at advisory firm EY.
The Manufacturers’ Association for Information Technology (MAIT) has proposed incentive in the range of 8-10% to offset India’s disability to attract global manufacturing into the country.
Electronics exports ($ million)
Month FY19 FY20
Dec 828.54 1,080.11
Apr-Dec 6,274.25 8,841.73
Electronics exports may continue to get 4% export incentive
Budget announcement likely on additional benefit
Govt had ended extra 2% benefit to exports from Dec 31, 2019
Extra incentive to reduce gap with China, Vietnam
Move aimed to improve electronics industry competitiveness
Source : Times of India