India’s Directorate General of Foreign Trade (DGFT) has announced that the total tax rebate received by an exporter under the Merchandise Export from India Scheme (MEIS) cannot exceed INR 20 million ($272,643) during the September-December period. The tax refund scheme in question will be withdrawn as of January 1, 2021. The government is preparing a new scheme to replace the MEIS, but the details are not clear yet.
Exporters whose overseas sales have contracted sharply over the past five months due to weak demand amid the coronavirus will be hit hard by this decision. Exporters who have not exported from India for one year preceding September 1, 2020 are ineligible as regards submitting any MEIS claim, as SteelOrbis understands.
This limitation of benefits is for all exporters in India, including steel producers. According to sources, it will reduce price competitiveness of Indian exports, as suppliers will have to increase prices, risking reduction of sales. SteelOrbis learned from sources, that the current benefit under the MEIS to each contract was 1.9 percent, which is expected to be cut significantly due to new limitations and at the end of the day it will be fully lifted and other benefits to exporting companies will stay at 1.6 percent.