Table of Contents
- Steps taken by Government to Boost Exports in India
- 1. Import Replenishment (REP) Licenses
- 2. Import – Export Pass Book Scheme
- 3. Duty Exemption Scheme
- 4. 100% Export Oriented Units
- 5. Tax exemption on earnings
- 6. Exemption of Sales Tax
- 7. Cash assistance to exporters
- 8. Liberalized Exchange Rate Management System (LERMS)
- 9. Export Promotion Capital Goods Scheme (EPCG)
Steps taken by Government to Boost Exports in India
To encourage exports, the Government of India has offered a number of incentives. The export-import policy announced by the government every year specifies the details of export assistance and incentives. Some of the important incentives are given below:
1. Import Replenishment (REP) Licenses
Under this scheme, the exporters are allowed to import raw materials and components used in the manufacture of export products. The policy contains a list of items of import for which REPs are to be granted. Deemed exporters are also granted REP license.
Deemed exports mean, producers who supply the inputs to final exporters. They are considered as indirect exporters and are eligible for certain export benefits. Certain supplies of import substitution are also termed as deemed exports. They qualify for grant of REP but not other benefits.
In India, When there was an import restriction earlier, the Import Replenishment licenses were sold at a premium. Now, with liberalization of imports, the scheme is no longer attractive. The holder of REP license is permitted to import canalized items, capital goods, samples and tools.
2. Import – Export Pass Book Scheme
This scheme enables, the Export House, Trading Houses and manufacturer — exporters having good track record of exports, to import duty free raw materials. The scheme has extended its coverage even to well-established manufacturers.
3. Duty Exemption Scheme
Duty exemption scheme allows the duty free import of certain components, raw materials, consumables and spares for export production. It covers categories of advance license, blanket advance license and advance customs clearance permits. It provides benefits to indirect exporters. The license holder of this scheme is also eligible for REP license.
4. 100% Export Oriented Units
These units are exempted from import licensing formalities. They are allowed to import capital goods, raw materials, components, consumables and spares under the Open General License on the condition that their entire production should be exported and operations are carried out under customs bonded factory.
A 100% export oriented unit can be set up in Free Trade Zones (FTZs), promoted by Government with infrastructure facilities. Examples are Madras Export Processing Zone (MEPZ), Santacruz Electronic Processing Zone (SEPZ), besides similar zones are in Kandla (Gujarat), Noida (Delhi), Cochin. Units in FTZ and 100% Export oriented units have been given special status.
Under Income Tax Act, there is complete tax holiday for 5 years for these units. The EOU/EPZ scheme has been liberalized to include units which export 50% of their production for agriculture, aquaculture, horticulture, floriculture, animal husbandry, poultry and sericulture units.
The taxation system spells out a number of benefits to small-scale industries. Various tax benefits are available to small business units, both at the Centre and State level. The Central government levies direct taxes, whereas indirect taxes are levied by the State government. State government provides benefits in sales tax, water tax, octroi duty and electricity tariff, etc.
5. Tax exemption on earnings
The profits earned on export earnings are deducted by 50% for calculation of tax. It can be availed of by an individual or company. There are also deductions available for earnings in foreign exchange by approved hotels or travel agents. There is a provision of deduction in respect of expenditure incurred by the companies for promoting sales outside India.
6. Exemption of Sales Tax
There is an exemption from sales tax, excise duty and import duty for exports. Exemption of excise duty can be obtained by way of rebate or duty drawback.When the exports earning are negative, no duty drawback is paid on claims.
7. Cash assistance to exporters
Cash assistance is given to enable exporters to compete in the international market. It is given as a percentage on the FOB value of exports. There is International Price Reimbursement Scheme. This scheme is designed to match the differences in the international prices of steel, aluminium, pig iron, etc.
8. Liberalized Exchange Rate Management System (LERMS)
Under Liberalized Exchange Rate Management System, the Government allows partial convertibility of rupee for all the approved transactions. In this system, exporters of goods and services who receive remittances from abroad would be able to sell bulk of their foreign exchange receipts at market determined rates from the authorized dealers.
9. Export Promotion Capital Goods Scheme (EPCG)
This scheme permits the import of capital goods at a concessional rate of customs duty, subject to export obligation to be fulfilled over a period of time. The scheme is applicable to service sector also. Second hand capital goods are allowed to be imported under certain conditions. The importer has to obtain the EPCG licence.
The capital goods cannot be sold for 5 years. Small industries can import capital goods through National Small Industries Corporation of India Ltd (NSIC) and State Small Industries Corporation (SSIC). Application for imports of capital goods, raw materials, components and consumables should be routed through the DIC.