Govt rolls out 1% additional ad-hoc incentive for garments and made-ups

The government has introduced a scheme for additional ad-hoc incentive of 1 per cent of free on board (FOB) value for garments and made-ups. This comes at a time when benefits under the Merchandise Exports from India Scheme (MEIS) for exports of such items were withdrawn.

Exporters said the incentive would be added if rebate of state and central taxes and levies scheme (RoSCTL) is less than remission of state levies (RoSL) plus MEIS. 

The government issued the notification for the incentive in mid-January, and has now issued the guidelines. This is mainly to compensate for the loss, if any, after removal of MEIS retrospectively from March 7, 2019.

As RoSL and MEIS were simultaneously available along with RoSCTL, many exporters factored in both in their costing. Exporters said the government had at no point issued any notification on this.

The government notified RoSL to mitigate the incidence of state value-added tax (VAT) and other state taxes on export of garments and made-ups. As certain state and central levies did not have rebate, in March 2019 the Ministry of Textiles (MoT) notified RoSCTL for rebate on various state and central taxes and levies on export of the products.

In January 2020, Directorate General of Foreign Trade (DGFT) decided to withdraw benefits under MEIS after the introduction of RoSCTL.

Under RoSL, which was in operation till March 2019, the rebate was provided in the exporter’s bank account. However, under RoSCTL and additional ad-hoc incentives schemes, the rebate will be granted in the form of electronic duty credit scrips, similar to those issued under MEIS.

The benefit under the two schemes will be given in a single electronic scrip to be utilised for payment of Customs duties and central excise. The scrips issued under the schemes will be freely transferable.

The benefit of RoSCTL will be available for export of garments and made-ups with ‘let export order’ (LEO) dates from March 7, 2019, to March 31, 2020, while for additional ad-hoc incentive scheme, the benefit shall be available for exports with LEO dates from March 7, 2019, to December 31, 2019, the MoT notification said. 
 

According to industry sources, the garment sector has pending dues of around Rs 7,000 crore from the government under the RoSL, GST, and Technology Upgradation Fund schemes.