Exporters cry foul over change in benefit calculation under SFIS

Under Served From India Scheme benefit will be calculated based on net free foreign exchange earned

Even as the government attempted to soothe exporters’ nerve by doling out incentives under the annual supplement to the Foreign Trade Policy (FTP) 2009-2014, a closer look at some of the measures such as the benefits given under the Served from India Scheme (SFIS)  do not reveal much happiness.

The government, in the FTP, had announced that under SFIS the benefit will be calculated based on net free foreign exchange earned, meaning after deducting foreign exchange spent from the total foreign exchange earned.

Earlier the entitlement was calculated based on 10% of total free foreign exchange earned during a fiscal. This is expected hit those services industry where the import intensity is high like the hotels industry.

“Change in criteria for calculation of benefit under Served from India Scheme which will hit status holders and Service Sectors badly, particularly the hotel industry which is also feeling the pinch with drop in occupancy rate,” said Rafeeque Ahmed, president, Federation of Indian Export Organisations (FIEO).

The SFIS was introduced in 2007 in order to give a fillip to services export in order to create a ‘Served from India’ sort of a brand globally. This scheme is available to such service providers who have free foreign exchange earning of at least Rs.10 Lakhs in preceding financial year.

The incentive is given in the form of a duty credit under the scheme. These duty credits can be utilized in for importing capital goods or for payment of excise duty for domestic procurement to encourage manufacturing, value addition and employment.

During its proposal to the government prior to the release of FTP, Indian industry under the Confederation of Indian Industry (CII) had asked the government to allow import of major materials such as steel, cement and other construction material required for establishing new hotels and expansion of the existing one under the duty credit scrip in SFIS.

“Now with this sudden change of policy, the hotel industry will be badly hit. Inflow of foreign tourist will see a gradual decline. The main ethos of the scheme which is to promote ‘Served from India Brand’ will be adversely impacted,” said a senior representative of a New Delhi-based hotel, who did not wish to be named.