APRIL 20, 2020

By S Murugappan, Advocate

THE Foreign Trade Policy and the Handbook of Procedures which were valid up to 31st March 2020 have been extended this month by one more year up to 31 st March 2021. In the backdrop of the country's fight against the spread of coronavirus infection, Government of India has extended the policy without much changes or any new schemes. However, a slew of significant measures have been taken so that the exporters are not put to difficulties during these abnormal times.

Exemption from payment of IGST at the time of import under Advance Authorisations, EPCG and EOU schemes which was available up to 31st March 2020 has been extended up to 31st March 2021. Corresponding notifications have been issued by the Ministry of Finance in this regard and the exporters are saved from paying this tax and blocking their finances. In respect of Advance Authorisations and EPCG Authorisations where the validity period for import or completion of export obligation is to expire between 1st February 2020 and 31st July 2020, automatic extension has been provided by six more months. There is no need for any endorsement or issue of amendment letters in this connection. In respect of EPCG authorisations, where the period of six months for submission of installation certificate for capital goods imported or locally procured, expires between 1st February 2020 and 31st July 2020, the same is extended by a further period of six months from the initial due date. Similarly, wherever the export obligation period under the EOU scheme expires between March 2020 and June 2020, the same is deemed to be extended up to September 2020.

The time limit for filing applications for claiming benefits under Merchandise Export from India Scheme (MEIS) has been increased to 15 months from 12 months. In respect of Service Exports from India Scheme (SEIS) applications for exports made during 2018 - 19, can be filed up to 31st December 2020. For realisation of export proceeds, the policy now permits additional six months over and above the time limit permitted as per guidelines that may be issued by RBI. Time limits for filing deemed export drawback as well as refund claims and applications for grant of replenishment authorisations also have been extended.

Benefits under MEIS scheme for exports have been extended up to 31.12.2020 in terms of a Trade notice No. 3/2020-21 issued on 15th April 2020.

These measures should help in easing the difficulties faced by the exporting community. But these may not be sufficient enough to provide suitable relief.

Already the coronavirus pandemic has almost brought to a standstill all economic activities across numerous countries in the world. Federation of Indian Export Organisations has estimated that exports from India can be hit to the extent of US $ 1 billion. Exports relating to gem and jewellery, handicrafts, leather goods etc. come from labour-intensive industries and the lockdown has affected production schedules. Secondly India's major exports are to US, UK, UAE, Saudi Arabia, Germany, Italy, Spain and China. In January 2020, out of US$ 25.88 billion exports, these countries alone accounted for US$ 11.23 billion (provisional figures). These countries have been badly affected by the virus already and there are hardly any future export orders and orders already placed are getting cancelled or put on hold.

As per the Commerce Ministry's statistics, merchandise exports during April 2019 - February 2020 is US$ 292.91 billion compared to US$ 297.36 billion during the previous corresponding period, thus showing 1.5% negative growth. Key sectors like gem and jewellery, dairy products, leather goods, textile goods and minerals have shown negative growth well before the pandemic affected economic activities. After the pandemic broke out, now, the International Monetary Fund has reduced the growth rate forecast for India for the current fiscal year from 5.8% to 1.9%.

The corona virus has crippled the economies of several countries by lockdown, disruption of cross-border trade and collapse of supply chain. The threat of recession looms large. The impact caused on the economy by this virus will reverberate for a long period to come. The calamity inflicted is so enormous that, in the coming months, several nations' economies have to struggle to show positive growth, not to speak of robust exports.

Added to this bleak outlook, as far as India is concerned, it is a known fact that majority of the exporters depend on various export incentives to a great extent. Last October, the WTO's Dispute Settlement Body gave a ruling to the effect that India's export incentive schemes like MEIS, SEIS, EPCG, EOU and SEZ violate the WTO agreement on 'Subsidies and Countervailing Measures' (SCM) and, therefore, ought to be withdrawn. India has already filed an appeal before the WTO appellate body which is dysfunctional as of now. The appellate body is required to give its report within three months of appeal but several appeals are pending before that forum for lack of members (in the appellate body) and certain procedural objections raised by the US. Thus, there is no immediate threat to these schemes.

But with the continued uncertainty regarding the fate of the above schemes coupled with the devastation caused by the pandemic, it becomes important that India provides alternate measures or incentives to Indian exporters expeditiously and also comes out with other appropriate relief measures for the loss caused to the exporters because of the lockdown as well as loss of export opportunities.

In principle, a new scheme called 'Remission of Duties or Taxes on Export Product' (RoDTEP) has been approved by the government, which should be compliant with the WTO agreement. This scheme is to reimburse taxes, duties and other levies for which refund or drawback benefits are not otherwise available. The Trade notice No. 3/2020-21 dated 15th April 2020 referred to earlier also states that the detailed operational framework for RoTEP Scheme will be notified separately and further that in case an export product is notified under RoDTEP Scheme, then it will be removed from MEIS. In a recent press conference, Commerce Minister Piyush Goyal has asked the Industry to come up with specific data for arriving at the rates at which the reimbursements or remission can be granted for various export products. A lead time of six to eight months is contemplated for this exercise.

It is also necessary that, for the other schemes such as EPCG, EOU and SEZ found by the WTO Dispute Resolution Body as not permissible, the government explores the possibilities to find alternate schemes which are compliant with the WTO agreement on 'Subsidies and Countervailing Measures' (SCM).

China is back to normal and Chinese industries are in full steam producing goods. Already Thailand, which was not much affected by the virus, is exporting rice to African markets where Indian exporters were originally operating. Thus there is a danger of Indian exporters losing their markets permanently in this fluid situation.

All these call for innovative measures from the government not only to revive the economy and the export markets but also to sustain the export momentum. Now, exporters can restart manufacturing operations with reduced labour force subject to the conditions for relaxation of lockdown. Several industries and export organisations have pleaded for a tax holiday for specified periods, measures to boost credit availability, lower interest rates, across the board reduction of GST rates and other similar stimulus packages.

Such relief measures coupled with a quick implementation of RoDTEP Scheme is the need of the hour. Further, the present extension of six months given for import or for completion of export obligation under various types of authorisations and for EOUs will not be sufficient as the restarting of the manufacturing operations will be staggered and will require time to get stabilised with return of full workforce. Thus there is a dire need to extend these time limits further.

Only these steps will enable the exporters to survive this grave crisis, maintain their units afloat, stabilise their operations and keep the exports from India going.

[The views expressed are strictly personal.]