What is credit scrip India?
Scrip is an alternative or substitute for a legal tender. The term scrip has reference in the Indian Foreign Trade Policy as ‘Duty Credit Scrips’. It is one of the export incentives that the government gives the exporters. Exporters can use it to pay various taxes/duties to the central government.
The Director-General of Foreign Trade (DGFT) issues Duty Credit Scrips. Exporters can use them to make the payment of Customs Duty. They are issued to both the exporters of goods as well as exporters of services, based on various schemes mentioned in the Foreign Trade Policy. Also, the value of the scrip varies from scheme to scheme. However, the value ranges between 2% and 5%.
The purpose of a duty credit scrip is to encourage exports by giving concessions to import tariffs to exporters. With this, exporters can get concessions on import duty. Also, the concession is usually a fixed percentage of the export value.
Furthermore, they provide duty deduction or non-payment of taxes for a specific. The scrip value or tax reduction amount is a percentage of the export turnover of the exporter. Also, as per the Foreign Trade Policy 2015, the scrip is transferable to other parties. Therefore, an exporter is free to transfer them to the importer.
What is SEIS scrip?
Service Exports from India Scheme (SEIS) aims to promote the export of services from India. It provides duty scrip credit for eligible exports. Under the scheme, Indian service providers are rewarded for all eligible export of services from India.
SEIS is a reward-based initiative from the Government of India. It aims to elevate exports by providing additional benefits for international transactions.
The service provider of notified services should be located in India. For instance, a service provider must have net free foreign exchange earnings of USD15000 in the preceding financial year to be eligible for duty credit scrips. Also, to be able to claim the reward under the SEIS scheme, the provider must have an active Import Export Code at the time of rendering such service.
Duty Credit Scrip Service providers of eligible services shall be entitled to these at notified rates on the net foreign exchange earnings. The scheme was earlier termed as Total Expenses of Foreign Exchange.
The formula for the calculation of net foreign exchange earnings under the SEIS scheme is:
Net Foreign Exchange = Gross Earnings of Foreign Exchange – Total Expenses or remittance or payment of Foreign Exchange
How do you use MEIS scrip?
Merchandise Exports from India Scheme (MEIS) was introduced for the period 2015-2020 in the Foreign Trade Policy (FTP). It is an incentive scheme for exporters. The scheme intends to offer incentives to export goods produced or manufactured in India. Therefore, the exporters receive incentives by way of duty credit scrips. Exporters can use MEIS scrips or duty credit scrips to pay customs duty on imports or inputs. They can also pay safeguard duty, anti-dumping duty, and any other Foreign Trade Policy 2015-2020 customs duty. Moreover, they are transferable. It can also be used to import goods against them.
The exporters can also request to split the scrip into at least INR 5 lakhs. Exporters can request for a split, even after its issue. However, the port of registration has to be similar to the original scrip.
The provision for slitting the scrip is available on Electronic Data Interchange (EDI) enabled ports. For non-EDI ports, it cannot be split after the issue. MEIS is an advanced incentive scheme that eliminates the structural inefficiencies of previous schemes.
How does scrip work?
Exporters can use a Duty Credit scrip in India to pay customs duty in India. The Director General of Foreign Trade (DGFT) issues them to exporters of goods and services. The Foreign Trade Policy offers them under various schemes. Following are the three schemes under which these are issued:
- SEIS Scheme for Service Exporters
- MEIS Scheme for Merchandise Exporters
- Export Promotion Capital Goods Scheme (EPCG Scheme).
The value of the scrip varies with goods, services, and countries. However, the value ranges between 2%-5% on the Free on Board (FOB), the value in free foreign exchange. These are freely transferable. And the exporters can use them to pay basic customs duty, safeguard duty, transitional product-specific safeguard duty, and anti-dumping duty. These have a validity period and have to be used within the same period.
In case the holder cannot use the scrips for paying any of the above charges, then they can sell them to any other person to use them for the same purpose. These usually sell at a discount to face value. For example, scrip is worth INR 5,00,000; then the buyer might only pay INR 4,50,000 for this scrip.