Government may widen SFIS scope to enable exporters trade tax incentives

The gov­ern­ment is like­ly to expand the scope of Served from India Scheme (SFIS) by allow­ing exporters to trade the tax incen­tives earned by them in a bid to spur ser­vices exports.

The incen­tives are in the form of duty cred­it scrips that can be used to pay the cus­toms duty on input imports of cap­i­tal goods or consumables.

If the incen­tives are made trad­able, exporters from sec­tors such as edu­ca­tion, health­care, health­care, con­sul­tan­cy and real estate that do not import much will be able to sell them in

We are try­ing to broad­en the scope of SFIS. The issue is that most sec­tors are not able to utilise the scheme as there are many con­di­tions attached. There­fore they should be allowed to sell it in the mar­ket. It will be a great relief for the exporters,” said a gov­ern­ment official.

The five-year for­eign trade pol­i­cy is set to be announced in the next two weeks, with the gov­ern­ment like­ly to set an export tar­get of $650–700 bil­lion by 2019.

At present, duty cred­it scrips equiv­a­lent to 10 per cent of free for­eign exchange earned are issued on actu­al user basis. “Main­ly hotels and tour oper­a­tors take advan­tage of the scheme right now. But what about the rest? Efforts are on from our side to allow exporters to give it to some­one else,” said the offi­cial, who did not wish to be named. The gov­ern­ment will also make SFIS scrips adjustable against 12 per cent ser­vice tax, besides increas­ing the over­all amount of the scheme.

Indi­a’s ser­vices exports stand at about $145 bil­lion, half of the mer­chan­dise exports of over $300 bil­lion. The rev­enue out­go under SFIS was Rs 1,000 crore in 2013–14. Once the scrips become trade­able, the out­go will expand tremendously.

To avoid that, the gov­ern­ment will lim­it the scheme to a few sec­tors. “The move will give a leg up to the ser­vices exports. Since the scheme can only be used for cap­i­tal goods imports and con­sum­ables, it has a very lim­it­ed scope,” said Ajay Sahai, direc­tor gen­er­al and CEO of the Fed­er­a­tion of Indi­an Export Organ­i­sa­tions (FIEO).

The gov­ern­ment may also prune the exist­ing pro­mo­tion­al schemes for mer­chan­dise exports like ‘focus prod­ucts’ and ‘focus mar­ket’, while giv­ing a big push to brand­ing ini­tia­tives. “We will be tar­get­ing only spe­cif­ic mar­kets, which will improve Indi­a’s com­pet­i­tive­ness where it is required, result­ing in high­er ship­ments,” said the official.

The share of exports to focus mar­ket coun­tries in total exports rose from 6.72 per cent in 2009-10 to 8.32 per cent in 2012–13, as per a study by FIEO. Indi­a’s share in Chi­na’s imports fell from 1.02 per cent to 0.74 per cent between 2005 and 2012. How­ev­er, the coun­try’s share in top import­ing nations of $100 bil­lion and above grew mar­gin­al­ly from 1.33 per cent to 1.49 per cent between 2009-10 and 2012–13, accord­ing to FIEO.

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