Govt to retain exports scheme till March after WTO asked for its scrapping

A scheme to promote exports will be extended till March 31 this year though the government had decided to discontinue it under pressure from the World Trade Organization (WTO), a business association has said.

The government has not officially announced extending the Merchandise Exports from India Scheme (MEIS) but it will stay till the new Foreign Trade Policy begins on April 1, said the Federation of Indian Export Organisations on Thursday.

The government had decided to discontinue MEIS--its largest export promotion scheme--after the WTO said it distorted trade by providing direct subsidies. The organization, in November 2019, ruled against India in its trade dispute with the US and asked it to stop all export promotion schemes within four months.

Finance Minister Nirmala Sitharaman announced in September a new scheme named Remission of Duties or Taxes on Export Products (RoDTEP) to replace MEIS for all goods exports. Government officials said RoDTEP, would also be based on MEIS and is estimated to cost Rs. 50,000 crore in tax rebates but the rates are yet to be decided.

Indian industry had opposed withdrawing MEIS, arguing they needed government support to ride out a global slowdown blamed on a trade war between the US and China.

"The issue of MEIS benefits on specified products of apparel and Made-ups (is that the word?) is likely to be resolved soon and thereafter exporters would be eligible for benefits till 31 March along with Rebate of State and Central Taxes and Levies (RoSCTL) benefits," said FIEO president Sharad Kumar Saraf. Benefits under the RoSCTL have been provided to the two sectors since is in place since March.

MEIS—introduced in 2015 by merging five schemes—incentivises merchandise exports of more than 8,000 items. Exporters earn duty credits at fixed rates of 2 per cent, 3 per cent, and 5 per cent, depending upon the product and country.

The exporters federation said that certain products, for which additional MEIS benefits of 2 per cent had been removed on 7 December, will also have their benefits reinstated till March 31.