The Mobile and Electronic Devices Export Promotion Council (MEDEPC) has asked the government to clarify whether benefits received under the Merchandise Exports from India Scheme (MEIS) should be taxed. Its concern is the treatment of incentives claimed in earlier years and the possible cost of tax disputes for exporters.

In a representation dated September 16, 2026, addressed to the Union Minister of Commerce and Industry, the council said MEIS was intended to compensate exporters for infrastructure-related inefficiencies and other cost disadvantages. It has sought an official clarification and asked the government to consider a legislative remedy.

The representation comes after a recent Mumbai Special Bench ruling of the Income Tax Appellate Tribunal (ITAT), which treated the MEIS rewards before it as taxable revenue receipts under the applicable provisions of the Income-tax Act, 1961. The decision has drawn attention to how the scheme’s policy purpose fits within the tax law.

Arun Goel, Director of the Academy of Business Studies in Delhi, has also raised concerns about the effect on exporters. Goel, who has around 45 years of experience in trade and regulatory affairs, believes the government should take the scheme’s original purpose into account when examining the issue.

How MEIS worked

MEIS was introduced under the Foreign Trade Policy 2015–20. Eligible exporters received transferable duty credit scrips, with the reward determined by the notified product, destination market and applicable rate. These scrips could be used to meet specified eligible liabilities or transferred to another business, subject to the scheme’s rules.

The scheme sought to address costs that made it harder for Indian exporters to compete overseas. Infrastructure and logistics expenses, along with supply-chain inefficiencies, could affect both prices and delivery. Exporters in India compete with businesses in countries such as China, Vietnam and Thailand, where production and infrastructure conditions differ.

MEDEPC’s argument rests on this purpose. It says the benefit was meant to offset infrastructural inefficiencies and associated costs, and that this should carry weight when deciding its tax treatment.

MEIS is no longer available for new exports. The dispute nevertheless matters to businesses that received benefits while the scheme was in operation.

Why the tax treatment is disputed

One of the provisions at issue is Section 2(24)(xviii) of the Income-tax Act, 1961. Introduced through the Finance Act, 2015, with effect from April 1, 2016, it widened the definition of income to cover specified government assistance. This includes subsidies, grants, cash incentives, duty drawbacks, waivers, concessions and reimbursements, subject to the statutory terms and exclusions.

The question is whether MEIS rewards fall within that provision and are taxable revenue receipts. The Mumbai ITAT Special Bench took that view in the matter before it. MEDEPC, however, has asked the government to examine the scheme’s design and the costs it was intended to offset.

The council says calling the benefit a “reward” describes how it was delivered; the label alone should not decide its tax character. It also points out that exporters did not have to set up a new factory, expand capacity or achieve a specified increase in exports as a separate condition for receiving it.

These are the council’s arguments. The tax outcome for an individual exporter still depends on the law, the facts of the case and the judicial decisions that apply.

Arun Goel on the purpose of export support

Goel’s concern is that taxation could reduce the value of assistance intended to help exporters meet structural cost disadvantages. In his view, that would weaken the practical benefit of the policy.

His comment calls for greater consistency between export policy and tax policy. It is a policy view, rather than a determination of whether MEIS benefits are taxable. That question remains governed by the relevant statutory provisions and judicial rulings.

What earlier claims could mean for exporters

According to MEDEPC, exporters completed their transactions under the Foreign Trade Policy in force at the time. They manufactured or procured goods, paid production and logistics costs, completed export formalities and realised the export proceeds before claiming the benefits available to them.

A dispute over the tax treatment years later may require those businesses to review their earlier tax positions. Depending on the circumstances and applicable law, they could face additional tax, interest, penalties or litigation costs. Any liability would depend on the taxpayer’s facts, the assessment year and the proceedings involved.

The council says this uncertainty can affect cash flow and make business planning harder. It has asked for measures to avoid unnecessary disputes over past benefits and to clarify how the law applies.

The ruling does not automatically reopen every completed assessment. Nor does it mean every exporter will have the same liability. Each case needs to be considered on its own facts and under the relevant legal rules.

The clarification MEDEPC is seeking

MEDEPC has asked the Ministry of Commerce and Industry to raise the matter with the Ministry of Finance and the Central Board of Direct Taxes (CBDT). It wants clarification recognising that MEIS was designed to offset infrastructural inefficiencies and costs associated with exports.

It has also asked the Directorate General of Foreign Trade (DGFT) to consider an authoritative clarification of the scheme’s original purpose. The council believes this could help tax authorities and courts when they examine the economic rationale behind MEIS.

Its representation goes further, proposing consideration of a legislative clarification or exclusion for export-policy measures principally intended to neutralise structural costs, duties, taxes and infrastructure disadvantages. It recommends a joint examination by the Department of Commerce, DGFT, the Department of Revenue and CBDT.

These proposals remain requests for government consideration. The representation does not say that a clarification or amendment has been approved.

A possible legislative response in Budget 2027

Goel has suggested a longer-term legislative solution, potentially through the Union Budget 2027. MEDEPC has likewise sought legislative clarity alongside administrative guidance.

An administrative clarification must stay within the issuing authority’s powers and be consistent with the statute and applicable judicial decisions. If the government chooses to amend the law, it would need to specify which benefits and years are covered, as well as the effect on completed assessments and pending proceedings. Any retrospective change would require careful drafting.

The discussion also raises questions about certainty across India’s export support framework. The Remission of Duties and Taxes on Exported Products (RoDTEP) scheme, for example, has a different structure from MEIS. Its tax treatment must be examined under the provisions that apply to it; the MEIS dispute does not settle the treatment of every export scheme.

For businesses, clarity matters when estimating export costs, choosing markets and planning investment. MEDEPC has put its requests for government guidance and a possible legislative remedy on record. Whether the government adopts either approach remains to be seen. Until then, the tax position in individual MEIS cases continues to depend on the applicable law and judicial decisions.