The Engaged in export business in India has its own opportunities and threats. However, exports are one of the major sources of income for the Indian economy
Trading is not a new-age business in India and has been in practice since ancient times. India was one of the competitive exporters of silk, spices, cotton, sugar, and precious stones then. Engaged in Export Business Indian traders exchanged their rich commodities in return for gold, silver, and other valuable items from other countries. Trade and Commerce have therefore been an integral part of the Indian economy.
Various factors such as the quality of raw materials available in India, its rich and varied natural resources, and resilient workmanship have fostered the growth of exports in India. However, with several changes in the global scenario and with trade barriers imposed, the export industry does face its own threats and challenges. Furthermore, Indian exporters find it quite grueling to sell products at a cheaper and more competitive rate which makes their export products less preferable in the global market.
The main challenge the exporters face in the current situation is the lack of infrastructure like congested ports and roads to transport the goods to the required locations. Excessive procedural compliances also deter new entrants from entering the export business. That said, the predominant difficulty that surpasses all the other challenges is the low credit access to the business. Although easing every difficulty is far from possible, the Indian government has stepped up to help the exporters to leverage their businesses with governmental aid and several other schemes. The benefits can be availed under multiple schemes for a given consignment with little to no exceptions.
Merchandise Exports from India Scheme (MEIS Scheme)
The main objective of the MEIS scheme is to encourage the manufacturing sector and promote exports of notified products from India. The exporters are provided with incentives in Free on Board (FOB) values of the goods regardless of their annual turnover. The products that are categorized under Appendix 3B are eligible to reap benefits from the MEIS scheme, irrespective of the country the products are being exported. However, the rate of incentives provided varies across the products. The exporters can avail of the privileges under the scheme by submitting an application online to the jurisdictional Director General of Foreign Trade (DGFT) office. It is pertinent to note that the benefits under the schemes are not given as cash incentives but rather as duty-credit scrips also known as MEIS licenses.
Rebate of Duties & Taxes on Export Products: (RoDTEP Scheme)
The MEIS scheme was replaced by the RoDTEP scheme in December 2020 since the former was not compliant with the principles laid down by the World Trade Organisation (WTO). The most promising feature of this scheme was that it refunded the hidden taxes under various export incentive schemes like that of the Central & State taxes levied on the fuel used for commuting the exported products. The application process is similar to the MEIS scheme except for the change of rate in incentives.
Export Promotion Capital Goods (EPCG) Scheme:
The EPCG scheme facilitates the import export code of capital goods such as machinery or other long-term assets to promote India’s manufacturing capability. It also promotes the pre-production, production, and post-production of capital goods at zero customs duty.
Service Export From India (SEIS) Scheme:
The SEIS scheme promotes and maximizes the export of notified Services from India. Service exports play a vital role in providing valuable foreign exchange to the country. The scheme, therefore, serves to encourage and motivate service exporters in the country. The emoluments under this scheme are given out as transferable duty credit scripts. The scheme can be availed by making an online application to the jurisdictional DGFT office.
Availing the Advantage of Deemed Exports:
Deemed exports refer to certain transactions where the goods are supplied within India and the payment may be received either in INR or foreign exchange. They are known as deemed exports since the goods are supplied to Export Oriented Units, or units in specially designed Software Technology Parks. This also refers to the capital goods being supplied to license holders under EPCG, or supply for power projects, UN agencies etc. Under GST, deemed exporters of products can avail refund claims for the tax paid by them, provided, an input tax credit has not been availed.
Export-Oriented Unit Scheme:
Companies that solely concentrate on exports can get registered under the EOU scheme. The scheme was put forth in 1981 with the objective to improve exports from India. The scheme encourages companies that are indulging in exports completely by offering them waivers and concessions thus facilitating the seamless flow of business. The characteristic feature of the scheme is that it facilitates zero-duty imports while procuring raw materials for goods. It also helps in faster custom clearance procedures for exporting the products. Further, an EOU can be established anywhere in the country, unlike an SEZ unit. The export entities can avail the advantages of the EOU scheme by making an application to the respective Board of Approval.
Income Tax Exemption for Export Profits:
Under the Income Tax Return, export businesses are eligible for several deductions. Units set up in SEZs are eligible for a 100 percent exemption from their export income for a period of five years. For other units that have both export and domestic profits, a deduction will be available in the proportion that export profits bear to the overall profit. Thus, if a company has made 20 lacs profit from its export business and 30 lacs profit from its business in India, the total profit taxable is 50 lac rupees, with one-third of it being export profit. Let us assume the tax liability calculated at 30 percent, is Rs. 15 lacs, then an amount of 5 lacs would be exempted, being one-third of the tax attributable to export business.
It is true that the whole world is a global village. But trading across barriers is not as easy as it sounds. Further, India being a developing nation, the export business does need a bigger push to move ahead and compete with other countries. The developmental schemes and various benefits put forward by the government should be effectively used by the export companies in India to reap the maximum profits out of the business.