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Govt looks to revamp key exports incentive scheme for services sector

Date: 25-11-2020
Subject: Govt looks to revamp key exports incentive scheme for services sector
NEW DELHI: The government is looking to revamp a key exports incentive scheme for the services sector, the hardest hit by the Covid-19 pandemic. The proposed revamp could see some widening of the scheme to bring in more beneficiaries and sectors, said an official aware of the development.

The Service Export from India Scheme (SEIS) covers nine broad sectors, including business services, communication, construction and tourism.

“We are looking at a new form of SEIS and what could be the upper limits, new beneficiaries and new services to be included in the scheme,” said the official, requesting not to be named.

SEIS was launched in 2015 to boost services exports. It offers incentives of 5-7% of net foreign exchange earned.

Under the scheme, benefit is extended in the form of duty credit scrip which enables the holder to import all goods which are freely importable without payment of basic customs duty.

The scrip and the goods imported against the scrip are freely transferable.

“There are talks of capping the incentive under the scheme due to limited budget and the government does not want only the big players to benefit,” said an industry representative.

The review comes ahead of the formulation of next foreign trade policy.

"The service exports require incentives to overcome the disabilities vis-a-vis other exporting countries and while SEIS was successful in countering these disabilities, a similar incentive is required in the new FTP for all sectors and all types of exporters," said Bipin Sapra, partner at Ernst &Young.

Sapra explained that since the current cost disabilities for most sectors like travel and education are more than 10%, multiple incentives may be required, some of which can be linked to employment generation or additional foreign exchange earnings each year.

While the government has replaced the Merchandise Export from India Scheme (MEIS) with Remission of Duties and Taxes on Exported Products (RoDTEP) from next year, as it was not compliant with the global trade norms, service exporters are awaiting clarity on SEIS as the notification of benefits for 2019-20 is yet to be issued.

"Though there is RoDTEP for goods, a similar scheme will be difficult to implement in services becasue they are varied but services should be treated on par with manufacturing . We have commenced a study on the matter,”said Maneck E Davar, chairman, Services Export Promotion Council.

The council has also proposed that the notification should be issued on April 1 of each financial year as it is valid for one full financial year.

“Travel and tourism, medical-value tourism and education are the three sectors that require support in these times. Moreover, we are still awaiting the SEIS for 2019-20,” Davar said.

In 2018-19, a total of 6,376 scrips were issued under SEIS by regional authorities worth Rs 4,262.8 crore.

In 2019-20, India's services exports rose 4.3% to $214.61 billion.


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