India govt notifies RoDTEP rates, guidelines

The commerce ministry of India announced on last Tuesday guidelines and rates of the long pending Remission of Duties and Taxes on Exported Products (RoDTEP) scheme for 8555 export items for a cost of ₹12500 crore to the exchequer.  

Though the scheme for exporters which replaced the ongoing Merchandise Exports from India Scheme (MEIS) came into effect on 1 January, the rates had not been finalized yet. According to commerce ministry, the RoDTEP rates will vary from 0.5-4.3% of export value and will include sectors like marine, agriculture, leather, gems and jewellery, automobile, plastics, electrical, electronics and machinery. However, exporters in sectors like steel, pharmaceutical, chemicals have been kept out of the scheme. Products manufactured or exported at export-oriented units and special economic zones have been excluded from the scheme for the time being.  

The government last week separately notified Rebate of State and Central Levies and Taxes (RoSCTL) Scheme for garment exporters. Both RoDTEP and RoSCTL will remain in effect for three years till March 2024.  Both the schemes together will cost the government ₹19,400 crore for FY22. Government has budgeted ₹13,000 crore for both the schemes in FY22 budget announced in February. 

The scheme disappointed many exporters as the rates are much lower than MEIS rates with lesser budget allocation. Engineering Export Promotion Council of India chairman Mahesh Desai said while it is a relief that the RoDTEP rates have been announced, the rates have not taken into account the taxes embedded in their raw material like steel in the engineering products in a large number of cases. “RoDTEP rates, therefore, only partially compensate for the un-rebated taxes while a huge portion of the taxes on the raw-material stage will be exported abroad," he added.  

Abhishek Jain, tax partner at EY India said the notification specifies that value capping per unit of export product may be prescribed if required and would operate under the overall budget ceiling. “The export industry would hope seamless transition into new scheme with equitable benefit," he added.  

According to existing rules, goods and services tax (GST) and customs duties for inputs required to manufacture export products are either exempted or refunded. However, certain duties are outside the ambit of GST, and are not refunded to exporters, such as value-added tax on transportation fuel, mandi tax and duty on electricity for manufacturing. 

RoDTEP has created a mechanism to reimburse such central, state and local taxes, which are not being refunded under any other scheme. The refund would be credited to an exporter’s ledger account with the customs, and will be used to pay basic customs duty on imported goods. The credits can also be transferred to other importers. The rebate will have to be claimed as a percentage of the Freight On Board value of exports. A monitoring and audit mechanism, with an information technology-based risk management system has been put place in to physically verify the records of the exporters. 

RoDTEP is based on the principle that taxes and levies borne on exported products must either be exempted or remitted to exporters. The new scheme is not like the MEIS, which was an export incentive scheme, and is considered to be in violation of multilateral trade rules and has been challenged by the US at the World Trade Organization.