Levy of GST on Duty Credit Scrips

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Category : Articles

After GST rollout on 1st July 2017, one of the key factors which impacted exports mostly was a reduction in the usability of duty credit scrips such as: Merchandise Export from India Scheme (MEIS) and Services Exports from India Scheme (SEIS) etc. These were the direct monetizable incentives given as a percentage of realised exports proceeds and hence impacted the cash flow management of exporters.


These incentives, in fact, faced a double blow, one their usage was significantly reduced and second, they were not included in the list of GST exempted goods leaving confusion over GST rates on them. Then after a few weeks of GST rollout, DGFT, via a tweet, unofficially announced that GST rates to be 18% on these scrips. Later it came in the public that it is 12% officially. In September 2017 after receiving a proposal from various industry bodies officially the rate was reduced to 5%, then on October 13, 2017 these scrips were made GST exempted by an official notification.

On October 13, 2017, Ministry of Finance through its Department of Revenue, on the recommendation of GST council, issued some amendments in the original list of goods exempted from whole of the Integrated GST and Central GST. This amendment contained inclusion of “Duty Credit Scrips” (ITS HS 4907) in the list of exempted goods eventually setting GST on Duty Credit Scrips as Nil, w.e.f. from 13.10.2017.

Similarly, the usability of these scrips is also reinstated to almost the previous levels restoring exporters interest in applying for these scrips. Although uncertainty in the usability and instability of GST rates prevailing for almost 5 months corroded the exporters’ interest in these scrips, it has been successfully restored by the Govt in the last few announcements. Mid-Term review of FTP announced in December first week is one instance. To restore Exporter confidence Govt did not just repaired the loss of interest but walked an extra mile by raising these incentive rates by 2% across the board for labour intensive sectors and services. Presently, MEIS and SEIS have again become a hot commodity rolling back in the market with almost old discounted rates of 3-4%.

Currently, there is Zero GST on the supply of these scrips and can be used to pay customs duties, composition fee, application fee under FTP etc.

We, being, a SEIS-MEIS consultant mentioned in one of our seminar held on 13th July 2017 in Delhi that, these rates would soon increase due to various factors and some of which got right. Also, we had highlighted that GST on DFIA should also be clarified however one of the court case consider DFIA in DCS.

We mentioned that in the coming days due to industry pressure, usability net of these scrips would have to be expanded as rendering such export promotion schemes meaningless, would be detrimental in every aspect to India’s trade. And it will be contradictory to the overall objective of GST, Ease of Doing Business, and Make in India. We also recommended that such scrips should be allowed for making the payment of Integrated Tax and Compensation Cess on imports and for making payment of CGST, SGST and IGST on domestic procurements.

To know the history as well as to get the notification etc. on GST rates on Duty credit scrips like MEIS SEIS please contact with Andees team

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