India is considering phasing out the Merchandise Exports from India Scheme (MEIS). This is in response to the US’ having challenged India’s export subsidy programs at the World Trade Organization (WTO). So India may roll out WTO-compliant schemes that will offset both state and central levies on inputs consumed in exports. Already, a scheme for the remission of state and central levies has been implemented in garments and made-up exports; this will be expanded gradually to include all key sectors.
MEIS was announced in 2015 by merging five different schemes. Under this, exporters, especially in labor-intensive sectors, are provided duty credit scrip at two per cent to five per cent of their export turnover, depending upon products and shipment destinations. Though GST has subsumed a plethora of levies, some still remain (petroleum and electricity are still outside the GST ambit, while other levies like mandi tax, stamp duty, embedded central GST and compensation cess etc remain unrebated).
India’s logistics costs make up for as much as 16 per cent of the consignment value (against ten per cent in developed countries). India’s export growth has remained subdued at an average of just 3.2 per cent in the past six months through April.