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Export Incentives in India: Understanding the Advantages for Exporters

The Government of India facilitates Exports from India through various export incentive schemes. In this article, we will delve into the different export schemes in India and explore the benefits they offer exporters.

India boasts many exporters and businesses engaged in international trade, including the increasingly popular e-commerce exports. From exquisite leather goods and toys to clothing, jewellery, and consumables, Indian exporters offer a wide range of products. To encourage more sellers to export from India and support their businesses, the Government of India provides export incentives.

How do export incentives function in India?

Export incentives in India encompass various economic assistance the government provides exporters. These incentives may include low-cost loans, tax exemptions, subsidies, government-financed advertisements, and more. They help exporters reduce overall export costs, enabling them to set competitive prices in the global market. It is important to note that all government incentives must comply with the World Trade Organization (WTO) regulations, which ensures adherence to legal and ethical practices in global trade.

Top export incentive for Indian exporters

Let’s take a closer look at some of the prominent export incentive schemes in India that provide leverage to Micro, Small, and Medium Enterprises (MSMEs) and other sellers:

RoDTEP (Rebate of Duties & Taxes on Exported Products scheme): Introduced as a phased replacement for the MEIS, the RoDTEP scheme provides refunds on various hidden and other taxes that were previously not covered under any different export incentive scheme. These taxes may include central and state taxes on transportation fuel used in export products, duties on electricity used in product manufacturing, toll tax, stamp duties on import-export documentation, and more.

EPCG (Export Promotion Capital Goods Scheme): The EPCG scheme enables the import of capital goods used in the pre-and post-production stages of final export products at a 0% customs duty. It facilitates cost reduction for service exporters by minimizing their capital expenditure.

RoSCTL (Rebate on State & Central Taxes and Levies scheme): Introduced in 2019, the RoSCTL scheme applies to various readymade apparel and textile products such as clothing, garments, bedsheets, carpets, and rugs. It grants refunds on taxes like VAT on transportation fuel, captive power, “mandi” tax, and electricity duty.

AAS (Advance Authorization Scheme): The Advance Authorization Scheme allows duty-free imports of raw materials required to produce and manufacture final export products. This provision covers fuel, packaging materials, and some wastage during production. Exporters can import these raw materials at a 0% import duty if they intend to produce export goods.

NIRVIK Scheme: Introduced by the Export Credit Guarantee Corporation of India (ECGC), the NIRVIK scheme offers high insurance coverage, reduced premiums for small exporters, and a simplified claim settlement process. It primarily serves as an insurance cover guarantee scheme, providing coverage of up to 90% of the principal and interest, compared to the current credit guarantee of up to 60% loss.

EOU Scheme (Export-Oriented Units): The EOU scheme aims to promote exports by granting waivers and concessions on compliance and taxes. A 100% export-oriented unit is an industrial unit that exports its entire production, excluding a limited portion for domestic tariff area sales, which may involve activities such as repair, re-making, reconditioning, re-engineering, and service provision.

GST refund for exporters: The Goods and Services Tax (GST) Act in India offers several schemes for exporters, including:

  • LUT Bond Scheme: Exporters can export goods without paying GST by obtaining a ‘Letter of Undertaking’ (LUT) bond.
  • IGST Refund: Exporters can pay Integrated GST on exports and subsequently claim a refund from the customs department for that amount.
  • 0.1% GST benefit for merchant exporters: Merchant exporters can avail of export goods from local suppliers at a concessional GST rate of 0.1%.

SEIS (Service Exports from India Scheme): This scheme encourages service exporters. Under SEIS, exporters are eligible for incentives ranging from 3% to 7% of their net foreign exchange earnings. To qualify for the scheme, an exporter must possess an active Importer-Exporter Code (IEC) and have a minimum net foreign exchange earnings of US$ 15,000 (approximately INR 11 lakh).

By leveraging these export incentive schemes, Indian exporters can enjoy a range of benefits and support from the government, facilitating their growth and success in the international market.