CAG pulls up govt for irregular grant of MEIS, SEIS benefits with revenue impact of Rs 725 cr

New Delhi, Dec 18 (PTI) Government auditor CAG on Thursday pulled up the Commerce Ministry and the customs department for irregular grant of MEIS and SEIS benefits under Foreign Trade Policy 2015-20, having a revenue implication of Rs 725 crore.

The report of the Comptroller and Auditor General (CAG) on Customs and Directorate General of Foreign Trade (DGFT) under the Commerce Ministry for the period ended March 2023 found that even after discontinuance of the schemes, "substantial" number of licences issued under both the schemes and involved outflow of incentive by way of duty credit.

In total, an audit of the internal control mechanism and implementation of two schemes of the Foreign Trade Policy 2015-20 - MEIS and SEIS -- found revenue implication of Rs 724.96 crore.

"DGFT may instruct the RAs (Regional Authority) to initiate appropriate recovery action wherever duty credit under MEIS was granted after discontinuance of the scheme particularly in respect of Apparels and Made-ups sector, which are eligible for duty credit under RoSCTL," the CAG recommended.

FTP 2015-20 introduced two new schemes, namely Merchandise Exports from India Scheme (MEIS) for export of specified goods to specified markets and Services Exports from India Scheme (SEIS) for increasing exports of notified services.

According to CAG, in the case of the MEIS scheme, the audit observed irregular grant of MEIS benefits of about Rs 132.21 crore because of allowing benefits to ineligible products, misclassification of exported products, adoption of incorrect incentive rate, non-realisation of export proceeds or realisation of export proceeds in Indian Rupees.

Similarly, in the case of the SEIS scheme, benefits were incorrectly permitted aggregating revenue of Rs 406.90 crore attributable to inadmissible services, services rendered in eligible manner, misclassification of services, incorrect computation of foreign exchange earnings, non-exclusion of government taxes while granting SEIS benefits and incorrect adoption of exchange rates.

Systemic issues like irregular issue of scrips to firms in the 'Denied Entity List' and to firms whose names did not match with the names in the respective unique identifier were found to have a revenue implication of about Rs 185.85 crore.

The CAG report recommended that the revenue department should achieve automation of the entire workflow process of issuing licences, mapped with the business rules, to eliminate manual intervention, minimise process delays and to ensure consistency in application of schemes.

"The classification of services by various agencies has to be uniformly aligned to avoid misuse of incentives," the CAG said.

The department should strengthen validation controls in the automated system as well as strengthen its process of verification and sanctioning of FTP schemes to ensure that duty scrips/benefits are provided as envisaged, it added. PTI JD MR