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India’s commerce ministry on Tuesday released the mid-term review of its foreign trade policy focussed on boosting the country’s micro, small and medium enterprises, labour intensive sectors and the agricultural sector.
The revisions in the trade policy are expected to aid exports and generate employment too, said Directorate General of Foreign Trade, Alok Chaturvedi, in the media presentation.
The mid-year review was slated for release on 1 July. It was deferred as the government sought to factor in feedback from exporters following implementation of the Goods and Services Tax. The five-year policy, announced in 2015, aims to nearly triple India’s exports to $900 billion by 2020 and increase the nation’s share of global exports to 3.5 percent from 2 percent then.
Here are the highlights from the foreign trade policy review.
The government will provide additional incentives for merchandise and services exports to the tune of Rs 8,450 crore annually. This is an increase of 34 percent from the existing sops.
Incentives in the Merchandise Exports From India scheme have been increased by 2 percentage points to 4 percent for all labour-intensive sectors. The additional annual incentives for labour intensive and MSME sectors would be Rs 4,567 crore.
The MEIS incentives for the two sub-sectors of textiles – readymade garments and made ups – will get additional incentives of Rs 2,743 crore.
Incentives for services exports have been increased 2 percent for certain notified sectors. The estimated additional annual incentive is around Rs 1,140 crore. The notified areas include business, legal, accounting, architecture, engineering, education, hospitals and restaurants.
The validity period for duty credit scrips too has been increased to 24 months, from 18 months earlier. This is to “enhance their utility” in the GST framework. The GST rate for the transfer and sale of such scrips has been reduced to zero from 12 percent earlier.
“These announcements are expected to help the exporters in this moment of crisis,” said Abhishek Rastogi, Partner at Khaitan & Co., in an emailed media statement.
The new indirect tax regime has led to many teething issues for exporters, leaving them with a working capital crunch. Exporters have to pay Integrated GST while exporting goods, and could not claim refunds because of frequent changes made by the government in return filing procedures.
The review said that the issue of working capital blockage due to upfront payment has been addressed. It reiterated earlier announcements made by the GST Council in this regard.
The review has also allowed duty free imports of raw material for producing export goods. It has introduced a new “trust based” self-ratification scheme where exporters will declare what they have imported to use as raw materials. This will lead to “immense ease of trading,” said Alok Chaturvedi.
The policy will also focus on increasing shipments of “agricultural value added products” through “stable and open” exports.
Supply of goods and services to Special Economic Zones will be treated as zero rate under GST. Suppliers would get tax refunds based on the pattern of actual exports. Earlier, the tax refunds were dependent on the states.
The DGFT has set up a “contact” portal on its website for complaints, resolution, queries and feedback on foreign trade and exports. Each request will be assigned a reference number so that it can be monitored.
The review also facilitates setting up of a new analytics division under the DGFT for data-based policy actions. The team will process trade information from the various trade data sources and “identify specific actions” to address export interests of India.
A new division will be set up under the commerce ministry to develop an action plan for the logistics sector, which was recently granted infrastructure status by the government.
This article has been published in an arrangement with Bloomberg Quint.
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