India has a number of exporters selling different products and is leaving its mark in the global market. In the ever-growing world of exports, the Indian government actively identifies the importance of empowering and supporting these exporters. Thus, it offers many export incentives that profit their businesses.
What are Export Incentives, and How Do They Work in India?
Export incentives are offered to exporters as a thank-you for generating foreign cash and covering the charges and infrastructure challenges they face. The various incentives offered by the government via the Directorate General of Foreign Trade (DGFT). The government accumulates less tax for the exported products to increase competitiveness in the international market. The incentives offered ensure an increased reach of the local product and the development of the Indian export businesses.
Moreover, incentives are offered by keeping in mind the accessibility of the specific product. These incentives are modified based on the product’s lack and abundance. (1)
Types of Export Incentives in India
The Indian government offers various export incentives to keep local products competitive internationally. Some of the most normal incentives involve direct payments, export subsidies, tax rebates on export profits, less costly loans, and government-backed global advertising.
Let’s discuss various export incentive schemes in detail:
1. Advance Authorisation Scheme
In this scheme, businesses are permitted to import input into the country without needing to pay duty if this input is for the manufacturing of an export product. Furthermore, the consenting authority has set the value of the extra export products to not less than 15%. This plan generally has a validity of 12 months for imports and 18 months for executing the Export Obligation (EO) from the issuing date.
In this scheme, an exporter also gets the charges of fuel, inputs, or packaging material used in making an export product. Furthermore, the amount of input for a provided product depends on specific criteria, which may involve the waste produced in the manufacturing procedure.
2. Advance Authorisation For Annual Requirement
In this export plan, exporters are permitted to import duty-free inputs, which are substantially integrated into the export goods. Moreover, only exporters who have had a previous export performance for two consecutive financial years can benefit from this scheme.
3. Service Exports from India (SEIS) Scheme
In the condition of specified output services for export products, the government offers rebates on service tax to exporters. This scheme was introduced to support sellers who export advised services.
In this scheme, service exporters can apply for a government rebate for the amount they reimbursed as service tax on various products and services. Yet, this incentive varies between 3 to 7% of the net forex earnings.
4. Duty Drawback Scheme (DBK)
It is a time-tested scheme governed by the Central Board of Indirect Taxes and Customs (CBIC) to support exports. This scheme provides a repayment in the customs and central excise duties collected on imported and excisable products when employed as inputs for products to be shipped.
If the Duty Drawback plan is not specified in the export schedule, exporters can reach the tax officials to get a brand rate in this scheme.
5. Duty-Free Import Authorization Scheme (DFIA)
The government has introduced this scheme by mixing the DEEC and DFRC to help exporters obtain free imports of definite products. This scheme permits exporters to make common allowances for fuel, wastage, energy, catalysts, etc.
6. Post Export EPCG Duty Credit Scrip
In this scheme, exporters who are not sure about paying the export liability can get an EPCG license and reimburse the customs authorities for their duties.
This scheme is issued to exporters who import capital products by paying duties in cash. Once they furnish the export duty, they can claim a rebate of the taxes reimbursed.
7. Niryat Rin Vikas Yojna Scheme (NIRVIK)
This scheme aims to ease the claim settlement procedure for exporters. It was established by the ECGC (Export Credit Guarantee Corporation of India) to offer high insurance cover, expedite loan lending, and decrease premiums for small exporters. With this scheme, various small-scale exporters were easily disbursed credit. (2)
Benefits of Export Incentives for Indian Exporters
Here are some of the benefits of export incentives that an exporter can avail of:
1. Foreign Exchange
Exports yield foreign exchange. Growth in the export segment can essentially attract foreign direct investment (FDI). Every country should keep a forex reserve to ease global trade transactions and pay for imports or debt. By providing incentives, governments support businesses to improve exports, which assists the country in increasing its foreign reserves and fulfilling all its foreign liabilities.
2. Job Development
A growth in exports helps companies grow, which generates employment. Export-oriented businesses create various jobs, uplifting financial activity and income.
Companies that export products are also more oriented towards meeting global quality norms, which improves innovation and employee skill growth, increasing competitiveness between companies.
3. Increased Wages
An increase in exports generates higher wages, specifically for experienced, skilled, and urban workers. Improved exports could also lead to a change in workers, specifically low-skilled, from informal to formal sector jobs with improved wages and benefits.
4. Diversification
Increased export incentives will support more exports. These incentives assist businesses in reaching different countries, reducing the risks linked to fluctuations.
Increased exports will also let the country diversify the market and decrease the trustworthiness of a single market or industry.
5. Improved Profits
The biggest benefit of export incentives in India is profitability. Exporting provides you access to an international market of buyers, which signifies increased profits and sales.
Reaching prospective customers all over the world has always been tough. However, with the growth in the eCommerce sector, getting market access and selling your products overseas has become simpler. It has become even more effortless with e-commerce platforms like Amazon Global Selling. Thus, you can grow sales by using this platform to reach customers in various countries. (2)
Final Words
India’s export industry is boosted with the support of government-backed export incentives. These incentives are important in reassuring exporters to add to the country’s export development and competitiveness in the international market. By using these incentives, exporters can use different schemes to decrease costs, get tax rebates, and increase their whole export performance.
