The Merchandise Exports from India Scheme (MEIS) was introduced by the Government of India on 1 April 2015 under the Foreign Trade Policy (FTP) umbrella for 2015-2020. The scheme aimed to promote India's merchandise exports by offering financial support in terms of freely transferable "duty credit scrips" to exporters. These incentives helped remove some of the costs and infrastructural inefficiencies associated with international trade, making Indian exports more competitive.
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Enhance Export Competitiveness: Reduce the cost disadvantages arising from logistical gaps, infrastructural bottlenecks, and high input costs to make Indian exports more competitive in global markets.
Address Infrastructural Inefficiencies: Provide reimbursements to exporters to offset India-specific challenges such as expensive logistics, high power tariffs, and regulatory costs.
Promote Export Diversification: Support expansion into new and emerging markets, helping India move beyond traditional export destinations.
Boost Employment and Value Addition: Encourage export-led manufacturing in labour-intensive sectors like textiles, agro-products, and electronics to create jobs and enhance value addition.
How Does MEIS Work?
Under MEIS, exporters of products listed in Appendix 3B to specified markets were rewarded with duty credit scrips. These scrips typically amounted to 2–5% of the FOB value of exports, with certain items eligible for up to 7%.
The duty credit scrips could be used to pay Basic Customs Duty, Additional Customs Duty, excise duty, and service tax (prior to the rollout of GST).
In addition, the scrips were freely tradable, enabling exporters to sell them in the open market. This flexibility allowed non-importing exporters to benefit from the incentives, thereby improving liquidity and strengthening cash flows.
Eligible Goods and Markets
MEIS embraced diverse products and markets, providing incentives suited to different industries and export markets, with certain exclusions.
Eligible Products: More than 4,500 lines of products were covered under MEIS, crossing sectors like textiles, agriculture, electronics, chemicals, engineering goods, pharmaceuticals and others. These products were categorised under ITC (HS) codes enumerated in Appendix 3B of the FTP handbook.
Eligible Markets: The incentive rates were custom-made for three categories of export destinations: advanced, emerging and focus markets. There was a prescribed incentive rate for each product-market combination, meant to deepen India's penetration into focused regions.
Exclusions: Certain products were out of the purview of MEIS, such as goods subject to transhipment, specified minerals and exports under schemes such as Advance Authorisation or DFIA.
MEIS Rewards Structure
Benefits under MEIS ranged between 2%-5% of the export's FOB price. The incentives differed based on the product and market destination, with pharma and handicrafts providing as much as a 7% incentive. For instance, if the exporter exported textiles valued at $1,000 to the US, the exporter would be given a duty credit scrip of $50 based on the incentive rate.
Process for Availing MEIS
In order to avail MEIS benefits, exporters undertook the following procedures:
Pre-Requisites: Exporters should be registered with the Directorate General of Foreign Trade (DGFT) and possess a valid Importer-Exporter Code (IEC).
Procedural Steps:
Indicate the desire to avail MEIS at the customs clearance stage through the shipping bill.
Export proceeds must be realised in USD or EUR foreign exchange.
Submit online through DGFT's Form ANF 3A, supporting documents like the E-Bank Realisation Certificate (e-BRC) and the shipping bill.
Evaluation: After verification of the application, the DGFT sanctioned a duty credit script, which was transferable or utilisable.
MEIS was withdrawn for exports shipped after December 31, 2020, because of difficulty at the World Trade Organisation (WTO) with regard to its WTO compliance. It was substituted with the Remission of Duties and Taxes on Export Products (RoDTEP) scheme from January 2021.
Aspect
MEIS
RoDTEP
Type
Direct incentive/subsidy
Refund of embedded taxes like GST.
Incentive Rate
2–7% (product/destination)
1–3% refund rates
WTO Compliance
Challenged as subsidy
Compliant (refund only)
Transferability
Scrips transferable
Not transferable
Coverage
Notified products/markets
Broader coverage, most products
Advantages of MEIS (When Operational)
MEIS offered several benefits to exporters, ranging from financial incentives to improved market presence. Key advantages included:
Boost to Exporters' Income: Direct financial support by MEIS greatly enhanced the liquidity of the exporters, particularly the small and medium-sized enterprises (SMEs).
Reduction of Trade Deficit: With the increased volume of exports, India was able to reverse its increasing trade deficit.
Increased Global Competitiveness: By compensating for the cost of logistics and operations, Indian products gained competitiveness in global markets.
Although the MEIS scheme provided advantages, it also had a few weaknesses, such as issues with administration and long-term viability concerns.
WTO Complaints: MEIS was in trouble with the WTO-prohibited subsidy per the 2019 ruling.
Dependence on Subsidy: Certain industries became dependent on subsidies and not on long-term competitiveness.
Delay in Processing Claims: There was a delay in processing claims, which affected the timeliness of incentives.
Budgetary Ceiling: In the final year of MEIS, the government put a ceiling on the overall benefit that a firm could avail in light of budget limitations.
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Iron & steel rods, metal pipes, tubes
Electronic and white goods
All types of FMCG commodities
All kinds of food like oils essence flavours and other various packed items
Automobiles
New machinery machine tools and spares in closed ISO containers
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Machinery machine tools spares duly packed/lashed
Stationery items
Timber and wood products
Edible oil in tanker
Aggregators/Transporters
All types of containers
All types of paints duly packed
Auto spare parts
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Granite and marble
Metal hand tools
Metal scrap in ISO container
Metals of all types excluding precious metals
Non hazardous chemicals in bags
Pharmaceuticals and bulk drugs
Rough marble in blocks
Toys, games and sports equipment
Used CPM machines and equipments
Used machinery machine tools and spares in closed ISO container
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Conclusion
The Merchandise Exports from India Scheme was instrumental in boosting India's merchandise exports between 2015 and 2020. Through its focused export incentives, the scheme enabled Indian exporters to compete on the global stage, curtail trade deficits and explore new markets. While it has since been replaced by RoDTEP, MEIS continues to have a lasting influence on India's export profile. The shift to RoDTEP marks a transition towards a more WTO-friendly, tax refund mechanism, promoting long-term efficiency gains in exporters
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29 Apr 2024 by Policybazaar5149 Views
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