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Friday, April 10, 2020
Home Finance How to get 5% Incentives from Government for Export Business

How to get 5% Incentives from Government for Export Business

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In order to encourage export business Foreign Trade Policy gives Benefits to exporters. The Government has provided various incentives to any entity or person engaged in export of goods or services. One of such major incentive is issuance of duty credit scrip to any person engaged in Exports.

The above incentive is categorised in two main schemes:

  1. MEIS – Merchandise Exports from India Scheme (For Export of Goods)
  2. SEIS – Services Exports from India Scheme (For Export of Services)

MEIS

Any person engaged in export of Notified Goods to Notified Country is eligible for the benefit of the duty credit scrip at a rate specified in Appendix 3B of Foreign Trade Policy 2015-20. (Rate varies from 4% to 7%)

SEIS

Any person engaged in export of Notified services is eligible for the duty credit scrip at a rate specified in Appendix 3D of Foreign Trade Policy 2015-20. (Rate varies from 5% to 7%)

Use of the Scrip

The scrip issued under above schemes can be used to pay the custom duty applicable on imports.

Benefits

The scrip issued are freely transferable. So if the person to whom the scrip is issued is not engaged in imports, then he can easily transfer the same to any person engaged in imports for monetary value (which is almost equivalent to value of scrip) and the transferee would be entitled for the complete benefit of the scrip. 

Conditions

Certain conditions are laid down by the government for availing the above benefits. Some of the common conditions are as follows:

  1. The person claiming the benefit should possess IEC Code.
  2. The minimum net free foreign exchange* to claim benefit under SEIS should be $10,000 in previous financial year for individual and $15,000 in previous financial year for others.
  3. There should be inflow of foreign exchange unless specifically exempted by government.

*Net free foreign Exchange = Gross Earnings of Foreign Exchange (Less) Total expenses / payment / remittances of Foreign Exchange by the IEC holder.

Example:

Suppose a person is engaged in export of services and in previous year his net free foreign exchange is $ 20,000. Let’s take conversion rate to be ₹70 and rate of SEIS as 7%. 

So his net free foreign exchange in INR would amount to ₹14,00,000/- and he would be eligible for benefit of ₹98,000/-.

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CA Karan Kotharihttp://vyapaarJagat.com
CA Karan Kothari is running his firm with name "K P KOTHARI & Associates LLP" in Ahmedabad. Providing various services of Chartered Accountants to the Startups and SMBs.
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