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CAG pulls up DGFT on export sops, suggests automated foolproof system for trade promotion schemes


NEW DELHI: The Comptroller And Auditor General Of India (CAG) on Wednesday hauled up the Directorate General of Foreign Trade (DGFT) for giving export benefits worth Rs 172.72 crore in cases where services were misclassified under the Service Exports from India Scheme (SEIS) and for delaying export benefits worth Rs 5.52 crore to e-commerce exports by almost four years under the Merchandise Exports from India Scheme (MEIS).

It asked the directorate to review the procedure of granting MEIS/SEIS scrips and lay down an appropriate checklist for grant of scrips both electronically and in manual environment. It suggested the entire system of administration of Foreign Trade Promotion schemes to be automated by rolling out a fool proof system, duly mapped to Scheme provisions and also leveraging information already available in linked /base systems such as ICES, SEZ online so that it becomes Single Source of Truth.

Under the two schemes, the government provides duty benefits depending on product and country and rewards under the schemes are payable as duty credit scrips which can be transferred or used for payment of a number of duties.

As per a CAG report on the performance of the two export schemes, exporters got rewards worth Rs 172.72 crore in cases where the services were misclassified though actual services rendered were not specified in 37 cases, by placing reliance on Chartered Accountant (CA) certificates.

CAG suggested DGFT to insist on CA certificate on exact classification of service with Central Product Classification (CPC) code and the mode under which it falls, rather than simply stating the serial number of the list of eligible service so as to avoid ambiguity and bring in more clarity on eligible services.

“Invoking penal provisions may be made mandatory on shortcomings found in applicant’s declarations and CA certificates,” it said and favoured a mechanism wherein Jurisdictional Development Commissioners verify the validity of classification of service being reported by the service providers to different authorities (DGFT, RBI, Customs) for the same exports

The classification of services by various agencies (DGFT, RBI, Customs etc.) needs to be aligned to the Central Product Classification (CPC) code of UNSD to avoid any misuse of incentives which is based on CPC codes, it said.

In case of MEIS, it said the extension of the benefits to e-commerce exports worth Rs 5.52 crore was delayed by almost four years due to delay in amending the regulations and operationalization of e-commerce module.

“The substantial delays in issue of MEIS and SEIS scrips indicated failure of the automated system in achieving the objective of simplification of procedures and ease of doing business,” CAG said in its report and suggested DGFT to develop an inbuilt system for grievance redressal for ease of doing business.

It also suggested DGFT to commission a mid-term evaluation study of the achievements of such schemes introduced vis-à-vis the main objectives of the scheme.

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