Ineligible categories under MEIS

i.Supplies made from DTA units to SEZ units.

ii.Export of imported goods covered under paragraph 2.46 of FTP;

iii.Exports through trans-shipment, meaning thereby exports that are originating in third country but trans-shipped through India;

  1. Deemed Exports;

v.SEZ/EOU/EHTP/BPT/FTWZ products exported through DTA units;

vi.Export products which are subject to minimum export price or export duty

vii.Export made by units in FTWZ

Sl. No. Chapters Products under the following chapters are not eligible for incentive under MEIS
1 Chapter-01 Live animals
2 Chapter-02 Meat and edible meat offal
3 Chapter-10 Cereals
4 Chapter-24 Tobacco and manufactured tobacco substitutes
5 Chapter-25 Salt; sulphur; earths and stone; plastering materials, lime and cement
6 Chapter-26 Ores, slag and ash
7 Chapter-27 Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes
8 Chapter-31 Fertilizers
9 Chapter-34 Soap, organic surface-active agents, washing preparations, lubricating preparations, artificial waxes, prepared waxes, polishing or scouring preparations, candles and similar articles, modelling pastes, “dental waxes” and dental preparations with a basis of plaster
10 Chapter-43 Furskins and artificial fur; manufactures thereof
11 Chapter-47 Pulp of wood or of other fibrous cellulosic material; recovered (waste and scrap) paper or paperboard
12 Chapter-77 (reserved for possible future use)

Export of goods through courier or foreign post offices using e-Commerce under MEIS:

Exports of goods through courier or foreign post office using e commerce, as notified in Appendix 3C,

– of FOB value up to Rs. 25000 per consignment shall be entitled for rewards under MEIS.

– of FOB value more than Rs 25000 per consignment then MEIS reward would be limited to FOB value of Rs.25000 only.

             (Such goods can be exported in manual mode through Foreign Post Offices at New Delhi, Mumbai and Chennai. )

Merchandise Exports from India Scheme (MEIS) under Foreign Trade Policy of India (FTP 2015-20):-

  1. What is the MEIS scheme?

    Merchandise Exports from India Scheme (MEIS) under Foreign Trade Policy of India (FTP 2015-20) is one of the two schemes introduced in Foreign Trade Policy of India 2015-20, as a part of Exports from India Scheme. (The other scheme is SEIS, Service Exports from India Scheme).

    The Government of India has brought in the Merchandise Exports Incentive Scheme (MEIS), replacing five other similar incentive schemes present in the earlier Foreign Trade Policy 2009-14. The schemes that have been replaced by the MEIS scheme include:

    • Focus Product Scheme (FPS)
    • Focus Market Scheme (FMS)
    • Market Linked Focus Product Scheme (MLFPS)
    • Agri. Infrastructure incentive scheme
    • Vishesh Krishi Gramin Upaj Yojna (VKGUY)

    As per the present FTP, the MEIS scheme does not aim to merely replace these five schemes but also aims to rationalize the incentives and enlarges their scopes by removing various restrictions.

  2. The Objective of the MEIS Scheme

    To offset infrastructural inefficiencies and the associated costs of exporting products produced in India giving special emphasis on those which are of India’s export interest and have the capability to generate employment and enhance India’s competitiveness in the world market.

  3. About the Scheme

    With the aim in making India’s products more competitive in the global markets, the scheme provides incentive in the form of duty credit scrip to the exporter to compensate for his loss on payment of duties. The incentive is paid as percentage of the realized FOB value (in free foreign exchange) for notified goods going to notified markets. To determine the quantity of incentive, the countries have been segregated into three groups. Incentives on export of each product at 8-digit level (ITC HS codes), depend on the group in which its destination country belong.

    There are essentially three country groups. Group A has India’s traditional destinations such as the EU countries and USA. Group B has the maximum number of countries and covers almost all of India’s major export destinations globally. It is worth mentioning here that Group B has the highest quantum of incentive. Group C on the other hand has no incentive at all. It can be divided into, SAARC, Australia and New Zealand, some EU and African countries.

  4. Revision of MEIS scheme

    The first schedule of the MEIS consisting of the definition of the country groups and the incentives on the 8-digit product lines was published along with the Foreign Trade Policy 2015-20 in April, 2015. However, after repeated representations from various industry associations and export promotion councils including us on the inadequacy of the incentives, the DGFT came out with a new schedule vide Public Notice No. 06 /2015-2020 published on 4th May, 2016. While the country groups have remained same in the new schedule, there has been a re-orientation of the incentive rates and in general the incentive basket has broadened. We have studied both the earlier schedule and the new one. The key changes include

    • Additions of some product lines (at 8 digits) to the list of beneficiaries under MEIS. For instance, products coming in the category of the medical and scientific instruments have been included in the MEIS schedule and incentives have been given for all three groups.
    • Amendment in the incentive rates for some product lines already included in the schedule. Here the most important change has been the grant of incentives to Group A countries for some product lines. This has obviously contributed towards expansion of the incentive market and has addressed one of our concerns

Conclusions with Brief Note on MEIS:-

Objective

To offset infrastructural inefficiencies and associated costs involved in export of goods/products, which are produced/manufactured in India, especially those having high export intensity, employment potential and thereby enhancing India’s export competitiveness.

Entitlement under MEIS

Exports of notified goods/products with ITC[HS] code, to notified markets as listed, shall be rewarded under MEIS ( @ 2 % or 3%,4%, 5% or 7% as applicable). (Appendix 3B- listed goods market and rates).

  Basis of Calculation of Rewards

The basis of calculation of reward would be on realized FOB value of exports in free foreign exchange, or on FOB value of exports as given in the Shipping Bills in free foreign exchange, whichever is less, unless otherwise specified.

Incentive or rewards given under this scheme may vary from product to product and from Country to Country. The Country/Market for which incentive are allowed are divided into three category.

 

    Category A    Category B  Category C
Traditional Markets (34)

•European Union

•USA

•Canada

Emerging & Focus Markets(140)

•Africa

•Latin America & Mexico

•CIS Countries

•Turkey ,western Asian countries

•ASEAN countries

•Japan, South Korea,China, Taiwan

Other Markets (65)

Export Promotion Capital Goods (EPCG) scheme

Export Promotion Capital Goods (EPCG) scheme allows import of capital goods including spares for pre production, production and post production at zero duty subject to an export obligation of 6 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from Authorization issue date.
EPCG scheme covers manufacturer exporters with or without supporting manufacturer(s)/ vendor(s), merchant exporters tied to supporting manufacturer(s) and service providers. The Scheme also covers a service provider who is designated / certified as a Common Service Provider (CSP).

EPCG authorization holder can export either directly or through third party (s). Export proceeds are to be realized in freely convertible currency except for deemed exports. Import of capital goods imported under the EPCG scheme shall be subject to Actual User condition till export obligation is completed.

Export Obligation under EPCG scheme is required to be fulfilled (by Exporter) by export of goods manufactured/services rendered by the applicant.

There are two types of export obligation that are mandatory.

First, Annual Average in which export obligation is over and above, the average level of exports achieved by the authorization holder in the preceding three licensing years for the same and similar products within the overall export obligation period including extended period, if any. Such average would be the arithmetic mean of export performance in the last three years for the same and similar products.

Secondly, Specific Average which is 6 times the duty saved amount in which the Authorization holder shall also fulfill a minimum of 50% export obligation in each block of years – the first block being of 4 years and the second block is of 2 years.

Royalty payments received in freely convertible currency and foreign exchange received for R&D services shall also be counted for discharge under EPCG.

EPCG Authorization holder may also source capital goods from a domestic  manufacturer. Such domestic manufacturer shall be eligible for deemed export benefit under FTP. EPCG Authorization holders can opt for Technological Upgradation of existing capital good imported under EPCG Authorization. Import of
second hand capital goods is not permitted under the EPCG scheme.

To incentivize fast track companies to accelerate exports, there is a provision for early redemption and in cases where Authorization holder has fulfilled 75% or more of specific export obligation and 100% of Average Export Obligation till date, if any, in half or less than half the original export obligation period specified , remaining
export obligation shall be condoned.

Authorization holder is required to submit to RA concerned by 30th April of every year, report on fulfillment of export obligation.

The scheme allows one or more requests for grant of extension in export obligation period, on payment of composition fee equal to 2% of proportionate duty saved.

amount on unfulfilled export obligation or an enhancement in export obligation imposed to the extent of 10% of total export obligation imposed under authorization, as the case may be, at the choice of exporter, for each year of extension sought.

Such first extension in EO period can be for a maximum period of 2 years.

Extension in EO period beyond two years’ period may be considered, for a further extension upto 2 years with a condition that 50% of duty payable in proportion to the  unfulfilled export obligation is paid by authorization holder to Custom authorities before an endorsement of extension is made on EPCG authorization by RA concerned. In such cases, no composition fee is to be paid or additional EO is to be imposed. In case the firm is still not able to complete the export obligation, duty already deposited will be deducted from total duty plus interest to be paid for EO default.

In case, EPCG authorization holder fails to fulfil prescribed export obligation, he shall pay duties of Customs plus interest as prescribed by Customs authority. This facility can also be availed by EPCG authorization holder to exit at his option.

The EPCG Scheme provides for in addition, a specific EO of 75% of normal Export Obligation for export of Green Technology Products. The scheme also provides for Post Export EPCG duty credit scrip(s) which are available to exporters who intend to import capital goods on full payment of applicable duties in cash and choose to opt
for this scheme.

Further, for units located in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Jammu &Kashmir, specific EO shall be 25% of the EO.

Thanks

CA Pankaj Kumar Mishra

FCA, M-COM, B-COM, ISC( Mathematics)