The Impact of GST on Raw Materials Imports and Exports: Exploring MEIS, SEIS, and Duty Drawback

Introduction

The implementation of the Goods and Services Tax (GST) in India has had a profound impact on various industries, including those related to raw materials imports and exports. This article delves into the effects of GST on the export and import sectors, with a specific focus on the Merchandise Exports from India Scheme (MEIS) and the Services Exports from India Scheme (SEIS). Additionally, we will explore the duty drawback scheme and how it can benefit both large and small exporters.

The Consolidation of Export Schemes

With the advent of GST, several export incentive schemes such as MEIS and SEIS have been consolidated and are set to continue. These schemes play a significant role in fostering the growth of the export industry in the country. The MEIS and SEIS, which fall under the umbrella of the Micro, Small, and Medium Enterprises (MSME) registration framework, have been designed to provide substantial support to exporters. The key benefit of these schemes is that they allow exporters with a certain level of turnover to claim duty credit scrips, which can be used to offset the duties paid on the import of raw materials.

The Duty Credit Mechanism

Developed to enhance the competitiveness of Indian exporters, the duty credit scrips are explicit in their benefits. A percentage of the total turnover of the exporter is exempted, leading to increased benefits for the exporters. According to the current framework, exporters who meet the specified turnover threshold can apply for these scrips. The duty credit scrips act as a financial cushion, ensuring that exporters do not face the strain of high duties on imported raw materials. This, in turn, allows for more efficient operations and better financial planning for export-oriented businesses.

The Role of the Duty Drawback Scheme

The duty drawback scheme is another lifeline for exporters in India. Under this scheme, exporters are entitled to a refund of customs and excise duties paid on the imported items. This is a significant relief for export-oriented businesses as it helps in reducing their overall tax burden. However, it is important to note that the GST legislation has certain limitations on the duty drawback scheme. For instance, only specific imported items are eligible for the drawback. This means that exporters can still obtain refunds of the taxes paid on both imported and domestic inputs, which is particularly advantageous for small exporters in remote areas.

Tax Credits and Refunds Under GST

In the new tax regime, the GST paid during the import process can be claimed as a credit in the "Import and Sale" model. This means that the duties paid on imported raw materials can be offset against other export-related costs, thereby reducing the overall tax liability. Furthermore, under the Indian law, exporters who comply with the necessary rules can claim a refund of the Special Additional Duty (SAD) paid on imported raw materials. This refund facility ensures that exporters are not burdened by the additional costs associated with the import of raw materials, thereby facilitating smoother operations and increased export activities.

Conclusion

The implementation of GST has brought about substantial changes in the export and import sectors in India. By consolidating existing schemes such as MEIS and SEIS and enhancing the duty drawback scheme, the government aims to support and promote exports. The benefit of the duty credit scrips and the ability to claim refunds under the duty drawback scheme are significant for both large and small exporters. These measures not only alleviate the financial stress on exporters but also encourage the growth of the export industry, making it more competitive in the global market.