The commerce ministry has blocked the online system for exporters to apply for availing tax incentives under the MEIS scheme from July 23 as the department of revenue (DoR) decided to limit the benefits under the scheme at Rs 9,000 crore for April-December 2020.
According to an office memorandum of the Directorate General of Foreign Trade (DGFT), the Department of Revenue in May had conveyed that it may not be feasible to exceed MEIS (merchandise export from India scheme) allocation beyond Rs 9,000 crore for 2020-21 (up to December 2020).
It has also been suggested to review MEIS and coverage so that the benefit outgo remains within the allocation of Rs 9,000 crore in this period.
The commerce department has requested its revenue counterpart to reconsider its decision, and a communication has also been sent by Commerce and Industry Minister Piyush Goyal to Finance Minister Nirmala Sitharaman on July 21.
In the meanwhile, according to the office memorandum, the database for MEIS scrip issuance has been checked and it has been found that as on July 20, the scrips of value Rs 422.4 crore have already been issued to exporters for shipping bills with Let Export Order (LEO) since April 1 onwards.
"Since allocated funds at this stage for MEIS for 202-21 stand at Rs 9,000 crore and any additional allocation has not been conveyed by the department of revenue, the online MEIS module has been blocked on July 23 from accepting new application for shipping bills with LEO date April 1 onwards to limit the issuance of any more scrips," the memorandum dated July 27 said.
"DoR/CBIC (Central Board of Indirect Taxes and Customs) may take steps in such a situation and ask customs ports/field formations to stop registration of MEIS scrips with shipping bills with LEO date of April 1 and beyond," a deputy DGFT said in the memorandum.
Commenting on the development, Federation of Indian Export Organisations (FIEO) President S K Saraf said the government's intervention has been sought to resolve the issue as MEIS benefits are already factored by exporters in the prices and help in easing the liquidity of exporters which is severely impacted due to the COVID-19 pandemic.
Under the MEIS, the government provides duty benefits depending on product and country.
Rewards under the scheme are payable as percentage of realised free-on-board value and MEIS duty credit scrip can be transferred or used for payment of a number of duties including the basic customs duty.
The government has already announced a scheme for Remission of Duties or Taxes on Export Product (RoDTEP) to replace MEIS.