Pharma industry urges government to extend MEIS scheme till March 2021

The Indian pharma industry is requesting the government to extend the period of Merchandise Export from India Scheme (MEIS), which is effective till December 31, 2020, and will be replaced with the Remission of Duties or Taxes on Export Product (RoDTEP) scheme from January 2021.

Under the MEIS scheme, the pharma sector was one of the biggest beneficiaries as it exported close to $20 billion worth of products. As per the scheme, pharma products were, receiving three per cent incentive on FOB (Free – on – Board) value for exports to Category A (US, Canada, Europe) and Category B countries (Emerging markets such as Russia, CIS etc.), while exports to category C countries did not get any incentives.

And the government has also notified that it will cap the incentive under the MEIS to Rs 2 crore per exporter for the period of Sep 1, 2020, to December 31, 2020.

The new RoDTEP scheme will replace the MEIS scheme as the MEIS scheme violated the WTO norms. Under the new scheme, the incentives will not be directly paid on the value of exports but will be limited to, credit against the tax on items such as power, logistics, fuel and toll etc.

It is also assumed that the government is facing budgetary constraints. 

Addressing a query raised by Rameshbhai Dhaduk, Member of Parliament, of MEIS claims of the seafood industry, which are presently blocked in the Directorate General of Foreign Trade (DGFT), Piyush Goyal, Minister of Railway, Commerce Industry and consumer affairs, Food and Public Distribution responded, informing, ” The implementation of MEIS is subject to suitable budget allocation of funds from the Department of Revenue. On account of budgetary constraints, the Department of Revenue has placed certain restrictions on the issue of MEIS duty credit scrips in FY 2020-21. Therefore, at present MEIS applications for exports made only in FY 2017-18 and FY 2018-19 are being allowed for filling in the online module. As and when additional funds are made available by the Department of Revenue, MEIS claims for exports made in later years would also be released.”

Although, due to system upgradation, the Indian pharma industry could not avail the scheme benefit since April this year. And besides this, the government has also not yet disclosed the calculation and fixation of RoDTEP rates. Therefore, the pharma industry is urging the government to continue the MEIS scheme till March 31, 2021, and also open the script for the current financial year, so then the companies can get the benefit.

S V Veerramani, Past National President, IDMA, Chairman and MD, Fourrts (India) Laboratories said, “The Industry has been enjoying 2 to 5 per cent of the export value by way of MEIS scheme. Now, with the Government’s decision to do away with the MEIS scheme effective from January 2021, it will be a loss of incentive for the industry. But, the Government in turn has indicated that they will be introducing the RoDTEP scheme in lieu of the MEIS scheme to support the Exporters. This RoDTEP scheme involves the recovery of duties and taxes involved in Exports. The industry is in the process of computing the same to find out whether the scheme will be able to offset the loss due to the MEIS scheme. As the RoDTEP scheme has not yet been announced and may take a few months for implementation, we have also made an appeal to the Government to continue the MEIS scheme beyond December 2020, up to March 2021.”

Nipun Jain, Chairman, Small and Medium Pharma Manufacturers Association (SMPMA) expressed, “The coronavirus pandemic has severely impacted the business activities and with the stoppage of MEIS scrip, the pharma MSME players are financially hit very badly. And its adverse impact has been seen on companies’ cash flow management. As we do not have the complete clarity on the RoDTEP scheme yet, which is likely to become active from January 1, 2021, and it will take some time for rolling out. Hence, we request to the government that they should at least extend the MEIS till March 2021. And also if they can open the window for the filing of MEIS for the current year so that the MSMEs can avail the same and there will be less pressure on companies cash flow, which has been under stress because of COVID.”

Sandeep Modi, Secretary and Director, Federation of Pharmaceuticals and Allied Product Merchant Exporter and Director, Infugen Pharma, mentioned, “Exporters are unsure about their Incentives as Government has not yet declared procedures for new scheme RoDTEP nor it has extended MEIS which ends on 31/12/2020, with an increase in freights as well as various Input costs, Exporters are finding difficult to strategise their pricing and are losing to their competitors worldwide. RoDTEP is work in progress, so until it’s procedures are not laid down the MEIS should continue.”