DGFT has announced some drastic changes in the scheme of MEIS vide issue of notification no.30 dtd.01.09.2020.In a nutshell, it can be summarized, in following 4 points:-
1. For the exports to be effected between 1.09.2020 to 31.12.2020 the total reward is limited to Rs. 2crores per IEC (if you have export of Rs.200 crores FOB value between 01.09.2020 to and 31.12.2020 then you would get MEIS of Rs. 2 crores only irrespective of MEIS rate for your product /s). Even if, you have exports of Rs.1000 crores, during these 4 months your MEIS would be limited to Rs.2 crores.
2. Any IEC holder who has not exported anything between 01.09.2019 to 31.08.2020, would not be eligible for any MEIS, even if he exports the goods after 01.09.2020. Similarly, any new exporter who has obtained IEC after 01.09.2020, will also not be eligible for any MEIS reward.
3. MEIS scheme is withdrawn with effect from 01.01.2021.
4. The ceiling of Rs. 2crores, will be subject to downwardrevision, to ensure that total MEIS reward for 01.09.2020 to 31.12.2020,(for all products together) does not exceed Rs.5000 crores which is announced allocation by the government.
On careful study of this notification, my serious observations are as under:-
· As mentioned in para 3.13 of FTP, Government has made provisions to reserve the right in public interest to specify export products or services or market, to impose restrictions / change in the rate/ceiling on duty credit scrip and also to prescribe value cap of any kind or limit total reward per IEC holder. In other words, Government can always say that, the ceiling /cap on MEIS is well within the provisions of FTP. This will automatically stop any legal action,someone may contemplate.
· Having said this, the restrictions imposed, may further be revised downwards, which means, government can reduce the rate of MEIS for specific products during the period 01.09.2020 to 31.12.2020.
· The revenue impact on account of MEIS scheme was estimated at Rs.40,934 crores for the FY 2019-20 (Source:- https://www.indiabudget.gov.in/doc/rec/allrec.pdf).
In the current Financial Year (2020-21), the allocation for the 4 months (September to December 2020) in only Rs.5,000 crores, whereas if, Government decides to continue giving benefits proportionately (as per last year),the amount should have been in excess of Rs. 13,000 crores. In other words, the funding is reduced by Rs.8,000 plus crores that too for these 4 months.
Government has already blocked, filing of claims of MEIS for exports effected on or after 01.04.2020. On top of this, this notification not only limits the allocation to Rs. 5,000 crores but, also hints at further downward revision in MEIS rates.
To make it very simple it is better not to consider, MEIS benefits as part of costing. Whatever you receive, treat it as Bonus.
This notification will impact all the sectors and all the exporters whether small scale or large scale.
The new scheme RoDTEP is still under consideration and if one has to draw inference the new scheme may not be giving Rs. 50,000 crores, as originally announced by the Finance Minister. We will have to wait and watch.
We all are aware that, MEIS and EPCG scheme are not WTO compliant schemes. One can expect some drastic changes in EPCG scheme as well in the near future. As an exporter, one has to be ready to accept uncertainties on these two popular schemes.
In my personal capacity, I always felt that, Incentives like MEIS may give temporary relief but, they cannot really further the cause of exports. Our exports in last 6 years has already proved this.
Your views are welcome!!!
Sudhakar Kasture
Director, EXIM Institute (A Division of Helpline Impex Pvt. Ltd.)
Mumbai.
E-mail:sk@helplineimpex.co.in
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