Export Incentives in India

Today, the competition is strong in the global economy, and a rapidly growing India has started placing increasing efforts on boosting exports. With the fifth largest economy in terms of nominal GDP and an expanding trading partner, India is key to the global supply chain. In supporting the growth of the sector in its exports, the Indian government has put in place several export incentives intended to improve the competitiveness of Indian goods and services in international marketplaces. These incentives offer financial relief and help exporters expand their business abroad.

This blog aims to understand export incentives in India, the benefits they provide to businesses, and finally, the types of schemes for exporters. Export promotion schemes to various financial assistance programs; we will cover all you need to know to take full advantage of these offerings.

What Are Export Schemes?

A number of government initiatives to give Indian exporters financial and procedural support are known as export schemes and incentives. These schemes are to encourage the production, export, and marketing of Indian goods and services in the global market. The government of India has developed these schemes to reduce the exporter’s burden, increase the exporter’s competitiveness, and ensure better access to the market.

For businesses engaged in exports of goods, these schemes could be tax rebates, exemptions from and payments of duties, assistance in financial terms, and simplified procedures. In doing so, India wants to provide an attractive environment for businesses to go global and grow both the economy as well as these companies.

Types of Export Schemes:

There are a number of such export promotion programs that India has on offer to address different aspects of the export process—pre-export to post-export. Now, let me talk about one of the major schemes.

Export Oriented Units (EOUs) Scheme:

The flagship policy to boost the export sector in India is the Export Oriented Units (EOUs) scheme. It is meant for production and export units of goods and services. In this scheme, ruled on by the EOC, the units are exempt from specific customs duties and taxes on goods that they export, raising the competitiveness of their products in the international market.

However, EOUs can import capital goods without paying customs duties if they export their entire production. The EOU scheme provides for duty free import of raw materials, easier entry into the international market, and exemption of many domestic taxes and levies.

Key Export Schemes for Cost Reduction and Financial Assistance

India has also implemented specially designed schemes to cut down on costs and provide financial help to exporters.

Market Access Initiative (MAI)

Under the Market Access Initiative (MAI) scheme, an initiative is taken for the promotion of the export of Indian goods and services by assisting exporters to explore new markets. This initiative aims to facilitate financial support to exporters in taking part in international trade fairs, establishing distribution networks, and carrying out market research.

Some benefits from the export promotion scheme covered under MAI are advertising, publicity and market development. The MAI helps exporters by providing them access to global markets which are currently untapped.

NIRVIK Scheme

To increase the availability of export credit to Indian exporters, the NIRVIK Scheme (Niryat Rin Vikas Yojana) was launched. Its goals are to deliver better insurance coverage, faster claim settlement, and lower premiums.

The reason for this scheme is that SMEs (Small and Medium Enterprises) have no access to credit in the international market. Under 'NIRVIK', export incentives benefits include enhanced insurance cover for exports and easier export credit access to exporters.

Interest Equalization Scheme (IES)

A US federal program — which ran from 1964 to 1969 — that restricted the amount of tax on interest income to ensure that economists and financial professionals could not utilize interest payments as a tax loophole.
Interest Equalization Scheme (IES) facilitates the exporters by giving them a subsidy on their interest rates on pre-shipment and post-shipment credit. It aims to cut down on credit costs and enhance the competitiveness of Indian products. Being a 3-5% subsidy to the interest rates of export loans, the IES relieves exporters of some of the financial strain and allows them to carry out their operations.

Export Authorization and Duty Exemption Schemes

In India, several schemes are focused mainly on reducing the customs duties on goods imported to produce exportable goods. These schemes aim to reduce the cost of production of the exporters.

Advance Authorisation Scheme

Exporters can import raw materials, intermediate goods, and components required for the production of final export products using the Advance Authorization Scheme without payment of customs duty. Under this scheme, raw materials have to be imported, which are used to manufacture goods for export out of India. But they also bring down the cost of raw materials to the exporters and encourage the exporters to produce goods for export instead of goods for domestic consumption.

Duty-Free Import Authorization (DFIA)

The Duty-Free Import Authorization (DFIA) scheme grants exemptions from customs duties on the import of capital goods and raw materials required for the manufacture of export products. The scheme brings in substantial savings in terms of import, particularly for high value goods exporting countries.

Companies involved in large-scale manufacturing particularly find the DFIA scheme beneficial as their production process is heavily dependent on imports of machinery, other inputs, etc. This helps in decreasing their operating expenditure and improving profitability on a bare minimum price of entry.

Export Promotion Capital Goods (EPCG) Scheme

Among the many export incentive schemes in India, The Export Promotion Capital Goods (EPCG) scheme is one of the most popular. The EPCG scheme allows exporters to import machinery or other capital goods on the basis of a commitment to using such goods for producing and/or exporting specific products of the foreign exchange earning nature within a specified period without payment of customs duty.

This scheme both reduces the capital cost of setting up export oriented production and improves productivity and quality of goods that are exported. The scheme of EPCG guarantees the availability of modern technology and machinery to the exporter, which in turn, the exporter utilizes to improve the quality and competitiveness of products in international markets.

Export Incentive Schemes for Business Growth

India's several export incentive schemes are designed to assist in the growth and expansion of businesses to perform better overseas.

Status Holder Certificates

The companies that have attained noteworthy export achievement are awarded the usual Status Holder Certificates. These include certificates of recognition awarded by the country’s Trade and Development Bank to the exporter in recognition of contribution to the trade of the country and confer benefits to the holder, including facilitation of quicker clearance of the goods, priority of access to financial facilities by the bank, duty exemptions, and others.

Economic Operator (AEO) Programme

The Economic Operator (AEO) programme is a measure of trade facilitation whose objective is to help exporters and importers to have quicker customs clearance. Having AEO status, exporters can be offered priority treatment in customs procedures, reduced inspection rates, and other benefits that lead to a drastic reduction of delays and costs in the supply chain.

How to Leverage Export Incentive Schemes for Success

Businesses in India need to be proactive in understanding and seeking the various schemes India offers them toward export. There are plenty of avenues available to companies to save on their costs and improve profitability, whether through the EPCG scheme for capital goods or the Advance Authorisation Scheme for duty-free imports.

Businesses can grow their export potential and access to new international markets by staying updated about various export schemes, participating in the relevant export promotion schemes, and staying compliant with the conditions of the scheme once it is implemented

How to Apply for Export Schemes: A Step-by-Step Guide

Identify the Relevant Scheme: Choose which scheme or combination of schemes best serves your business need for duty exemptions, credit support, or market access.

Gather Necessary Documents: Many schemes need some things, such as export records, financial statements, business registration details, etc.

Submit Application: Applicants can generally file applications for export schemes through the Directorate General of Foreign Trade (DGFT) or the concerned Export Promotion Councils.

Wait for Approval: After successfully filling out the application form, you should start waiting for approval and verification so that you can benefit from the scheme.

Conclusion:

India’s export promotion schemes and export incentives are significant in facilitating businesses to grow and reduce the cost of doing business while they operate in international markets. The Indian government's initiatives like duty exemptions and giving of financial support ensure that companies, principally SMEs, have the support that helps them compete globally.

For businesses to take advantage of these schemes successfully, they must know these benefits and processes and take the needed actions to apply. Having the proper guidance and resources, exporters can increase their potential to the fullest and help propel India’s growing presence on the world trade map.

Frequently Asked Questions (FAQs)

What is the export incentive?

An export incentive is a business incentive given by the government in the form of financial support or benefit to enhance the export of commodities and services. The incentives can be in the form of tax exemptions, subsidies, and preferential taxes on imported materials.

What are trade incentives?
If the incentives are financial, they can be in the form of support to the trader, tax breaks, or reductions, amongst others. They also cover measures to make the trade process as smooth as possible.

What are the benefits of exporting?
To access a more extensive customer base, access to more significant revenue potential, and a more diversified risk profile, exporting is the way to go. And it enables related companies to offer products or services in new markets and gain brand recognition abroad as well.

What is the subsidy on exports from India?
Indian subsidy on exports can differ according to the scheme and products exported from India. Involving the RoSCTL (Rebate of State and Central Taxes and Levies) and Duty Drawback, these programs offer rebates on taxes (State or central) and duties paid on such goods that are exported.

How much are export incentives in India?
In India, the benefits of India export incentives can be such as duty exemption, credit subsidies, market development assistance, etc., depending on the scheme.

How to claim export incentives in India?
Under export incentives schemes, the exporters can apply through the Directorate General of Foreign Trade (DGFT) or respective Export Promotion Councils according to the process explained by each scheme specifically.