The Interest Equalisation Scheme (IES) has come as a boon for exporters, especially the MSMEs, since the Commerce Ministry launched it in 2015.
Through this scheme, exporters get access to reduced cost of capital. This makes it a popular scheme among the country’s exporting community.
Industry reports say the scheme has provided some breathing space to a large number of SME exporters who saw their working capital shrink considerably in the wake of the pandemic. Given the rising level of Covid-induced woes for the exporting sector, the government has budgeted Rs 1,900 crore for the scheme for FY22, against Rs 1,600 crore (revised estimate) for FY21, the Commerce Ministry has earlier stated. Notably, RBI on 8th March, has extended the interest equalisation scheme for pre and po ..
The interest equalisation scheme covers mostly labour-intensive and employment generating sectors. Among the leading foreign exchange earners covered under the scheme are:
-Processed agriculture/food items
-Handicrafts, handmade carpet and handloom products
-Coir and coir-based manufacturers, yarn and other jute manufacturers
-Readymade garments
-Fabrics of all types
-Toys, sports goods, paper and stationery
-Cosmetics and toiletries, leather goods and footwear enterprises
-Ceramics and allied products industry, glass and glassware
-Medical and scientific instruments, optical frames, lenses, sunglasses
-Auto components, bicycles and parts thereof
Who’s Eligible to Apply
The Commerce Ministry has laid out certain rules for manufacturing firms and merchant exporters to be eligible to apply under this scheme.
Vinay Thadani, CFO of Vishal Fabrics Ltd, says to fulfill the eligibility requirements, the goods exported must meet the criteria of minimum processing in order to qualify as “originating from India”.
“These are laid down in the Rules of Origin (Non-Preferential) of the Handbook of Procedures of the Foreign Trade Policy (FTP) 2015-20. The goods must be manufactured by the exporter as per the definition of ‘manufacture’ of the FTP. Also, in the case of the use of imported inputs, the export products will be classified as originating in India only if they undergo significant processing or operation,” he says.
The interest equalisation benefit will be available from the date of disbursement up to the date of repayment or up to the date beyond which the outstanding export credit becomes overdue. However, the interest equalisation will be available to the eligible exporters only during the period the scheme is in force.
Procedure for Claiming Reimbursement
The general practice is that an eligible exporter has to submit a certification of the external auditor to the bank concerned to claim this benefit. Banks provide benefits to the exporters and claim reimbursement from the Reserve Bank of India based on the external auditor’s certification furnished by the exporter, adds Thadani.
According to the rules of this scheme, the banks are responsible for deciding if an exporter is eligible and the lenders will credit the beneficiary’s account with the eligible amount of interest equalisation. After that, the banks concerned will reduce the interest rate charged on the eligible exporters according to the interest equalisation provided by the government.
To ensure that exporters’ applications for interest equalisation are treated favourably by the officials, the exporters have to do the due diligence required for the paperwork and follow certain good industry practices. One of the common advices for exporters is to always maintain a good business track record, says Jatin Arora, Partner, Phoenix Legal. "Maintaining proper records, undertaking timely compliance under GST and income tax is an added advance.
Source Name:-Economic Times