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Soumik Dey
Soumik Dey

FOREIGN TRADE POLICY

Government’s export package a GST after-thought

suresh-prabhu-pti Minister for Commerce & Industry, Suresh Prabhu, MoS C.R. Chaudhary and Finance Secretary Hasmukh Adhia at the mid-term review of the Foreign Trade Policy on Tuesday | PTI

Hoping to lift sagging exports, that had turned to the negative zone in the month of October, the government has announced incentives for exporters in a number of sectors. The Rs 8,000 crore package is intended to provide a boost to the MSMEs and labour intensive sectors.

Announcing the new export incentive scheme on Tuesday, commerce and industry minister, Suresh Prabhu said that the new Foreign Trade Policy will leverage longterm advantages of the historic GST reform. “This is in terms of reduced compliance and logistics cost,” he said.

Speaking about the incentive package, junior minister C.R. Chaudhary, credited Prime Minister Narendra Modi for conceiving the scheme for boosting manufacturing and exports.

"The issue of working capital blockage due to GST has also been resolved," said Chaudhary. He stressed on the need to diversify the export basket, and said that the export of agricultural products will be encouraged for increasing farmers’ incomes.

According to finance secretary Hasmukh Adhia, the credit for the incentive package goes to the GST Council. “The GST Council has been very sensitive to exporters and recommended this package,” says Adhia.

According to him, issues faced by exporters on account of GST return filing and receiving refunds for IGST leading to working capital blockage, has been suitably addressed in this financial package announced for exporters.

The Merchandise Exports Incentive Scheme (MEIS) has been in existence from 2015 and was due for a midterm review in 2017. Under the scheme, the government will now announce exports to the tune of 2-5 per cent from an earlier 1 to 3 per cent incentive on merchandise exports under five categories.

According to commerce secretary Rita Teotia, the biggest challenge, however, remains as addressing constraints within the country, such as infrastructure bottlenecks, high transaction costs, complex procedures, constraints in manufacturing and inadequate diversification in our services. “The new scheme would also include incentives for the service sector under the Service Exports Incentive Scheme (SEIS). There is an allocation of Rs 1,140 in the new scheme for service export incentives,” said Teotia.

A major chunk of the scheme has been devoted to the export of readymade garments and finished textile products in the current scheme. The textile sector has been the worst hit due to impact of demonetisation and GST and led protests across textile hubs in the country.

India has already lost its leadership position in readymade garments exports to neighbours Sri Lanka and Bangladesh and is now seeking to regain the lost territory. In the month of October, India’s garments exports declined 39 per cent in US Dollar terms.

“Doubling the incentives would be beneficial but getting back the lost markets will still take more time,” said Ashok Rajani, Chairman, of the ministry of commerce and industry-supported, Apparel Export Promotion Council (AEPC).

Rajani and other trade members of AEPC had earlier met Chief Economic Adviser Arvind Subramanian, representing the various issues faced by garments producers.

“It was during those meetings we discussed that the least the government could do is raise the incentive rates for garments exports which is dwindling. We told him (Subramanian) that this is the least we expected from the government,” said Rajani, reacting to the Rs 2,743 crore export incentives announced for the garments export sector in the Foreign Trade Policy midterm review.

For small and medium exterprises, too, the benefits of the recent export assistance announced by the government seem to have come in too little and too late. “All the consignments for Christmas festival have already been dispatched. Had the sops been announced in mid-November at least many exporters could have seen some immediate benefits,” said Ganesh Kumar Gupta, President, Federation of Indian Export Organisation (FIEO).

Now, he believes that exporters will be able to realise the benefits of the incentives only from next quarter onwards. Reacting on the quantum of incentives, Gupta said, “we have Rs 18,000 crore stuck with the government as GST refund, compared to which the MEIS incentive hike is just a fraction.”

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Topics : #trade | #Export | #GST

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