1. Brief Description:-
Merchandise Exports from India Scheme is popularly known as MEIS Scheme. MEIS is a duty scrip given as a reward by the government to an exporter of goods. The value of the scrips is ranging from 2% to 5% of the FOB value of goods exported. There are more than 4000 tariff lines which are eligible for MEIS DGFT . The scrips can be used to offset import duties and are freely transferable against goods imported / domestically procured as per para 3.02 of Foreign Trade Policy (FTP).
First time exporters from SEZ are also covered under this initiative.
In recent years the government is aiming to increase the margin of export under the new Five-Year Foreign Trade Policy by providing incentives to the exporters of goods and services. The schemes like- MEIS scheme i.e. Merchandise Export Incentive Scheme and SEIS Scheme are introduced.
Duty Credit scrips are scrips given to exporters as “incentives” by the Government of India. Through Merchandise Exports from India Scheme (MEIS Scheme) scrips are given for goods exports and through Service Exports from India Scheme (SEIS Scheme ) scrips are given for services exports.
The value of the scrips is a percentage of the FOB value of goods/services exported and are freely transferable. The scrips can be used to offset customs duty while importing.
MEIS replaced the various export incentive schemes which gave different types of duty credit scrips namely, Focus Market Scheme (FMS), Focus Product Scheme (FPS), Vishesh Krishi Gramin Udyog Yojana (VKGUY), Market Linked Focus Product Scheme (MLFPS) and Agri Infrastructure incentive scheme. All duty credit scrips issued under the earlier incentive schemes were transferred to the MEIS.
MEIS was introduced in the Foreign Trade Policy (FTP) for the period 2015-2020. The MEIS was launched as an incentive scheme for the export of goods. The rewards are given by way of duty credit scrips to exporters. The MEIS is notified by the DGFT (Directorate General of Foreign Trade) and implemented by the Ministry of Commerce and Industry.
Recently, the government has removed the GST chargeable on sale of these scrip. The GST chargeable on sale of scrips is now ZERO!
To decide this, first, we intend to understand the meaning of Duty Credit Scrips, mentioned in the Exemption Notification No. 02/2017-C.T. (Rate) dated28.06.2017 as amended by the Notification No. 35/2017-C.T. (Rate) dated13.10.2017 vide which the entry, bearing heading 4907, and having the description as Duty Credit Scrips was inserted in the said exemption notification . It is observed that the definition or meaning of the Duty Credit Scrips is not provided under the GST law.
Therefore, we will resort to the Foreign Trade Policy (FTP) 2015-20 formulated by the DGFT, from where this term ‘Duty Credit Scrips’ has emerged and conceptualised.
As per the para 3.02 of the chapter 3 of the FTP, Duty Credit Scrips shall be granted as rewards under MEIS and SEIS. The Duty Credit Scrips and goods imported / domestically procured against them shall be freely transferable. The Duty Credit Scrips can be used for:
(i) Payment Of Basic Customs Duty and Additional Customs Duty specified under sections 3 (1), 3 (3) and 3 (5) of the Customs Tariff Act, 1975 for import of inputs or goods, including capital goods, as per DoR Notification, except certain specified items.
From this, it is clear that the duty credit scrips are the instruments to award incentives to the exporters with the objective of the export promotion by allowing them to set off the basic customs duty against it. It is also to be noted that the duty credit scrips are not allowed to set off the IGST/CGST/SGST liability.
Even the circular no 46/20/2018- GST dated 6 June 2018 issued by Technical officer Dr. Ajay K Chikara of Tax research Unit which vide para 6 Clarifies that duty paying scrips classifiable under chapter heading 4907 will attract NIL GST, and was, and are covered by Sr. No. 122A of Notification No. 2/2017 — Central Tax rate dated 28 June 2017 as amended vide notification No. 35/2017 Central Tax ( Rate) dated 13 October, 2017.
MEIS scrips are freely transferable and are usable for payment of Customs Duty (BCD), Anti-Dumping Duty (ADDs) and Safeguard Duties. The duty credit scrips cannot be used for payment of IGST (Integrated Goods and Services Tax) and GST compensation cess in imports, and CGST, SGST, IGST and GST compensation cess for domestic procurement.
A Duty Credit Scrip is issued by the Director General of Foreign Trade (DGFT) and can be used to pay various duties/taxes to the Central Govt. These are issued to both Exporters of Goods as well as Exporters of Service.
Scrips are freely transferable as per para 3.02 of FTP.
Payment of Customs Duty and fee as per paragraph 3.18 of this Policy.
The MEIS incentives are applicable from 1 April 2015 until the validity of the FTP 2015-20, which is 31 March 2020.
2. Objective of MEIS Scheme DGFT
Merchandise Exports from India Scheme (MEIS) aims to offset infrastructural inefficiencies and associated costs involved in export of goods or products produced as well as manufactured in the country, especially products of high export intensity, employment potential and to improve India’s export competitiveness in the world market
3. MEIS incentives
Under the FTP 2015-20, MEIS intends to provide incentive for exports of goods manufactured in India or produced in India. The incentives are for goods widely exported from India, industries producing or manufacturing such goods with a view to making Indian exports competitive. The MEIS covers goods notified for the purpose of the scheme.
The incentives under the schemes are calculated as a percentage ranging from 2 % to 5% , which is 2%, 3% or 5% of the realized FOB (free-on-board) value exports in free foreign exchange or FOB value of exports as per shipping bills in free foreign exchange.
The MEIS rate of your product is available here DGFT website. (DGFT notifies the goods eligible for MEIS from time to time)
The incentives are allotted through a MEIS duty credit scrip. The “free foreign exchange” will include foreign exchange earned through international credit cards and other instruments allowed by the Reserve Bank of India (RBI).
4. Apply criteria for MEIS
You should make an online application in Aayat Niryat form ANF 3A through a digital signature to claim duty credit scrip entitlements under MEIS. The applicant has to furnish hard copies of the application filed with DGFT, EDI (Electronic Data Interchange) shipping bills, Bank Realisation Certificate obtained electronically (e-BRC) and RCMC.
However, if the application is made through EDI ports, then the applicant is not required to submit hard copies, but only export promotion copies of non-EDI shipping bills and proof of landing.
The applicant shall file separate applications for each port. The applicant is not required to submit any documents in original but should retain the original documents for a period of three years.
There is a time limit .The application should be filed within a period of:
12 months from the LEO (Let Export) date or
3 months from the date of – uploading of the EDI shipping bills onto the DGFT server by customs, or printing of shipping bills for non-EDI shipping bills, whichever is later.
Interlink helps you to make an online application for claiming rewards under MEIS on exports other than Export of goods through courier or foreign post offices using e-Commerce. The applicant shall file separate application for each port of export.
The documents which are not required to be submitted in original, shall be retained by the applicant for a period of 3 years from the date of issuance of scrip.
Licensing Authority may call these documents in original at any time within 3 years. In case the applicant fails to submit the original documents on demand by Licensing Authority the applicant will be liable to refund the rewards granted along with interest.
5. Use MEIS incentive Scheme
The duty credit scrips can be utilised to pay customs duties on import of inputs or goods, safeguard duty, anti-dumping duty and any other customs duty under FTP 2015-20. The scrips can also be transferred as well as used for importing goods against them.
Exporters can request for a split of the duty credit scrip with a condition of each scrip valuing to at least Rs 5 lakh. The request can also be made after the issue of scrip, with the same port of registration as applicable for the original scrip. However, the procedure is applicable only in respect of EDI (Electronic Data Interchange) enabled ports. In the case of non-EDI ports, a duty credit scrip cannot be split after it is issued.
The scheme provides the flexibility of import and payment to exporters and has removed many structural inefficiencies of the earlier incentive schemes.
Basically, duty free scrips are paper authorizations that allow the holder to import inputs that go into manufacture of products that are exported or machinery used for producing such goods without paying duties equal to the printed value.
The scrips are given to exporters for meeting certain goods and exporting it to specific markets. Main objective of the scrip is to incentivize the exporters to make more exports of specific commodities/services and those to specific markets.
The FTPs (Foreign Trade Policies) usually mention the schemes eligible for scrips.
It is also used to reimburse duties on imported inputs under schemes such as the export promotion capital goods scheme, the duty free import authorization scheme and the advance authorization scheme.
For example, if duty free scrip is valued at Rs 10 lakh, the holder can use it to import such goods without paying duties up to Rs 10 lakhs. It is issued to the exporter so that it allows him to import a certain percentage of his export value without levying any import duty. The scrip value can be deducted from import duty.
As per the new FTP (2015), the scrip can be transferred to other persons. This means that an exporter can transfer the MEIS scrip he obtained to the importer.
The Scrip is granted from Regional Offices of DGFT, across the country and also the duty-free scrip can be used for payment of excise duty on such “inputs” that are permitted for imports foreign trade policy.
MEIS scrips are valid for a period of 18 months from the date of issuance of the scrips. The limited validity of scrips means delays in realizing its value could mean loss of complete value of the license
Export of goods through courier or foreign post offices using e-Commerce
(i) Exports of goods through courier or foreign post office using e-commerce, as notified in Appendix 3C, of FOB value upto Rs. 25000 per consignment shall be entitled for rewards under MEIS.
(ii) If the value of exports using e-commerce platform is more than Rs 25000 per consignment then MEIS reward would be limited to FOB value of Rs.25000 only.
(iii) Such goods can be exported in manual mode through Foreign Post Offices at New Delhi, Mumbai and Chennai.
(iv) Export of such goods under Courier Regulations shall be allowed manually on pilot basis through Airports at Delhi, Mumbai and Chennai as per appropriate amendments in regulations to be made by Department of Revenue. Department of Revenue shall fast track the implementation of EDI mode at courier terminals.
6. Ineligibility of benefits under MEIS
The sectors or segments mentioned below are not entitled to MEIS incentives:
As per para 3.06 of FTP, the subsequent exports categories /sectors are ineligible for Scrip entitlement under MEIS EOUs / EHTPs / BTPs/ STPs who are availing direct tax benefits / exemption Supplies made from DTA units to SEZ units
Export of imported goods covered under paragraph 2.46 of FTP
Exports through trans-shipment, meaning thereby exports that are originating in third country but trans- shipped through India
SEZ/EOU/EHTP/BPT/FTWZ products exported through DTA units
Items, which are prohibited or restricted for export under Schedule-2 of Export Policy in ITC (HS) unless specifically notified in Appendix 3B.
Beach sand and Red sanders
Export products which are subject to Minimum export price or export duty
Gold, Diamond, Silver, Platinum, other precious metal in any form including plain and studded jewellery and other precious and semi-precious stones
Ores and concentrates of all types and in all formations
Cereals of all types
Sugar (of all types and all forms)
Crude and petroleum oil / crude / primary and base products of all types and all formulations
Exporting of milk and milk products
Exporting of Meat and Meat Products
Articles which are studded with precious stones or Products wherein
precious metal/diamond are used
Exports made by units in FTWZ
POINTS FOR CONSIDERATIONS:-
> They are issued to exporters
> The scrip allows duty deduction (non-payment of taxes) of a specified amount in the scrip. The scrip value or the amount of tax deduction will be specified in the scrip.
> The scrip value or tax reduction is expressed as a percentage of export turnover of the exporter.
> The scrip value usually varies between 2 per cent to 5 per cent under Foreign Trade Policy 2015. (MEIS DGFT)
It is mandatory to get scrips registered at customs. Your CHA should be able to help you register your scrips at customs. In case of scrip applied under Service Exports from India Scheme, the applicant can choose any port as port of registration and mention it in the application at the appropriate column.
A Interlink Capital we buy or sell registered scrips
However unregistered scrips attract lesser rate, due to additional process burden on the buyer.
If you buy an duty credit scrip of a face value of Rs.5,00,000 at Rs.4,50,000, and you want to import goods which have a customs duty on them of say Rs.5,00,000, you will be able to pay the entire Rs.5,00,000 of the customs duty through your scrips. So, in this case you save Rs.50,000 by buying scrips. (Prices quoted above are for illustration purpose only).
Actual prices offered for the scrips are dynamic and are based on technical and market factors.
Remittances through Credit Card and other instruments for MEIS. Free Foreign Exchange earned through international credit cards and other instruments, as permitted by RBI shall also be taken into account for computation of value of exports.
Proof of Landing:
(a) Wherever the reward under MEIS is available to all countries, proof of landing shall not be required to be submitted for claiming the reward
(b) Uploading/submission of documents, as a proof of landing: As a measure of ease of doing business, documents as a proof of landing of export consignment in notified market can be digitally uploaded in the following manner:-
(i) Any exporter may upload the scanned copy of document as mentioned at paragraph 3.03 (c) (i) under his digital signature.
(ii) Status holders falling in the category of Three Star, Four Star or Five Star export house category may upload scanned copies of documents as mentioned at paragraph 3.03(c) (iv).
(iii) In all other cases the physical copy, in original, shall be filed by all categories of exporters.
(c) Applicant shall be required to submit or upload, as the case may be, any one of the following documents as a proof of landing of export consignment in notified Market:
(i) A self attested copy of import bill of entry filed by importer in specified market, or
(ii) Delivery order issued by port authorities, or
(iii) Arrival notice issued by goods carrier, or
(iv) Tracking report from the goods carrier (Shipping Line/Airline etc. or his accredited agent in India) duly certified by them, evidencing arrival of export cargo to destination Market, or
(v) For Land locked notified Market, Rail/Lorry receipts of transportation of goods from Port to Land locked notified Market,
(vi) Any other document that may satisfactorily prove to RA concerned that goods have landed in / reached the notified Market.
(d) In case of (iv) and (vi) above, the accredited agent of the Goods Carrier must certify that he is the accredited agent of the concerned Goods Carrier on the date of issuance of the tracking report / document.
(e) Further, in the case of issuance of any other document under (vi) above, the accredited agent must state that proof of landing of goods in relevant notified Market is given based on information available in the Goods Carrier’s backup database and he has verified the same and issued this document accordingly.
(f) In cases of exports using e commerce, exporter may submit express operator landing certificate/online web tracking print out indicating airway bill number as prescribed in enclosure (B) to ANF 3D.
Applications for Export of goods through courier or foreign post offices using e-Commerce
(a) Application shall be filed on line, using digital signature, in ANF 3D by exporter. The applicant shall submit the proof of landing in the manner prescribed under paragraph 3.03 of HBP.
(b) Applicant shall file separate application for each port of export.
(c) RA will manually examine the submitted documents before grant of scrip.
Port of Registration:
Credit Scrip (including splits) under MEIS shall be issued with a single port of registration which shall be the port of export.
Duty credit scrip needs to be registered at the port of exports. This is to be done prior to allowing usage of duty credit. Once registered at EDI port, scrip can be automatically used at any EDI port for import and at any manual port under Telegraphic Release Advise (TRA) procedure. In case port of registration is a manual port, TRA shall be required for imports at any other port.
In case of scrip applied under Service Exports from India Scheme, the applicant can choose any port as port of registration and mention it in the application at the appropriate column. RA will issue the scrip with such port of registration. Such Duty credit scrip needs to be registered at the port of registration of duty credit. Once registered at EDI port, scrip can be automatically be used at any EDI port for import and at any manual port under Telegraphic Release Advise (TRA) procedure. In case port of registration is a manual port, TRA shall be required for imports at any other port.
The author-CA (Adv.) Sikander Sachdeva, FCA is a Chartered Accountant in Practice from Delhi and can be contacted for any suggestions, rectifications, amendments and/or further clarifications in regard of this article at
8882370570 or via mail at [email protected]
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