ADD 5% TO YOUR PROFIT
Recently, I met one of my old clients with whom I have a special relationship. We have not been bumping across each other for quite some time. I decided to get out of my cubicle just to meet him. After the exchange of pleasantries we got down to find out what were the mileposts that we passed through. We were very happy that both of us were doing well for ourselves in our respective domains.
Just as I was about to leave, I causally asked to him whether he was getting all the export incentives that the government is providing? He said yes and after a pause continued that since he is utilizing input tax credit of GST in his exports, he is not eligible for any thing else. I was aghast. How can he come to such a conclusion? Then I asked to share his details of HS code of his product and promised to get back to him soon.
On return to my office, I perused the data sent by him and checked both drawback schedule and MEIS rates book of the DGFT. To my pleasant surprise, I found that he is eligible for a drawback of 1.9% and MEIS of 3%. So, all put together he is eligible for 5% on his export turnover. This income is without even lifting extra tool by his workers. A legitimate income, at that!
Then, I sent a mail explaining the rationale behind GST, its utilization and Refunds in exports. One can utilize Accumulated Input tax credit either in his domestic sales or exports if he wants to avail refunds later on. This is because technically, against export no taxes are leviable. This is the worldwide dictum.
Usage of GST has nothing to do with duty drawback provided by the Ministry of Finance and administered by the jurisdictional customs authority. Similarly, DGFT’s regional formations provide scrip under Merchandise Export from India scheme (MEIS). These are available in the form of scrips and can be used either by the exporter himself against the discharge of customs duties for his imports or if he has no use, these scrips are freely transferable. This means that these are as good as cash or demand drafts. The transferee can utilize these scrips much like the original exporter who availed the scrips as an incentive for the exports that he made.
So, what should you do now? Please check the drawback schedule and MEIS rate finder if you are exporting and not availing them. If you are already availing make sure you are getting the right amount.
– MR R.R. PADMANABHAN
Principal Consultant, Exim Consultants