The government's decision to cap export incentives under MEIS scheme at Rs 2 crore per exporter on outbound shipments made during September-December, 2020 is going to "seriously" affect traders, FIEO said on Wednesday.

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Federation of Indian Export Organisations (FIEO) President Sharad Kumar Saraf said exports that will be made during September-December, 2020 are based on the orders, which have already been negotiated much earlier, factoring the existing Merchant Export from India Scheme (MEIS) benefit.

These benefits are part of the export competitiveness and therefore the sudden change will affect the exporters' financially as buyers are not going to revise their prices upward, he added.

"However, the sudden imposition of a cap of Rs 2 crore per IEC (Import Export Code), on MEIS benefit of exports made during September 1 to December 31, 2020, is going to seriously affect exporters, whose numbers may not be very large, but their contribution to exports warrant a revisit to the imposition of the cap," Saraf said.

The government on Tuesday capped export incentives under the scheme at Rs 2 crore per exporter on outbound shipments made during the period from September 1 to December 31, 2020. He also expressed concern over the financial outlay of Rs 5,000 crore given for exports during September-December, 2020 with the condition that if claims exceed this limit, the ceiling may further be revised downwards.

"This will create huge uncertainty as those eligible for a cap of Rs 2 crore will not be able to factor even such benefits in their exports. Clarity is also required whether any change in the MEIS rate will be notified for those who are not affected by the cap if the amount of Rs 5,000 crore is exhausted," Saraf said. Further, he urged the government to extend the MEIS till March 31, 2021, coterminous with the existing Foreign Trade Policy.

The RoDTEP (Remission of Duties or Taxes on Export Product) committee has started the work, but the industry is facing challenges in providing the data due to frequent local lockdowns, non-availability of transport and non-functioning of auditors. "Moreover, fixation of rate for over 10,000 items at 8 digits would be a time-consuming exercise, particularly as it has to meet the discipline of WTO," Saraf noted.

The extension in the MEIS Scheme till March 2021 will help in a smooth rolling of the RoDTEP scheme as well since the scheme is going to stay for zero-rating of exports, he said. .