What is RoDTEP?
The Government of India (Commerce Ministry of India), with an aim of boosting and promoting exports to increase competitiveness in the global market, announced the RoDTEP (Refund of Duties and Taxes on Exported Products) in September 2019.
This export promotion scheme (with effect from January 1, 2021) replaces the former export incentive scheme called Merchandise Exports from India (MEIS). MEIS has been discontinued after a WTO ruling (in 2019) that stated that the scheme violated the agency’s rules by providing direct subsidies on exports.
RoDTEP therefore, is based on the globally accepted principle that export of taxes and duties should not take place, rather those taxes that are levied on the exported products should be exempted or payed back to exporters.
The new scheme aims ‘to refund to the exporters the embedded central, state and local duties and taxes paid on inputs that were so far not refunded or rebated.’ Certain duties that are outside the GST, and are not refunded to exporters, such as value-added tax on transportation fuel, mandi tax and duty on electricity for manufacturing, will be covered under this scheme, which would account for 8555 tariff lines.
The RoDTEP rates will vary from 0.5-4.3%.
The government has announced a Rs 12,400 crore outlay for this scheme.
Sectors included under this scheme are as follows- marine, agriculture, leather, gems and jewellery, automobile, plastics, electrical, electronics and machinery.
Exporters of the sectors like steel, pharmaceutical, chemicals are not included as beneficiaries here. The products that are manufactured or exported at export-oriented units and special economic zones (SEZs) are also excluded.
How will it work?
The rebate or repayment under the scheme would be claimed as ‘a percentage of the Freight on Board value of exports.’
(Freight on Board (FOB) or also called ‘Free on Board’ is a shipping term that indicates who is responsible and liable for the goods during shipping, the seller or the buyer. Generally, the seller is only responsible for the freight charges to the port or shipping destination, and the buyer, thereafter pays the transportation costs from warehouse to their store or vendors.)
It is being informed that the rebate on a few items can be subjected to value cap per unit of the exported product.
The scheme is to be implemented by Customs through a simplified IT System. The rebate will be granted in the form of a transferable duty credit/ electronic scrip (e-scrip) which further, will be maintained in an electronic ledger by the Central Board of Indirect Taxes & Customs (CBIC).
There are also provisions for verification of records of the exporters through a monitoring and audit mechanism, which will be completed with the help of an information technology-based risk management system.
Opinions and arguments
According to the Commerce Secretary, the RoDTEP would give a boost to the Indian exports, and increase their competitiveness globally.
It has been observed that the government’s focus is on products that are relatively poor in export volume, but those carry a good amount of potential to perform in the international market.
Some exporters on the other hand are not satisfied with these incentives and consider them to be ‘below their expectations.’ They are also unhappy about the benefits being not made available to major export industries such as steel, pharma, etc. This they believe may generate adverse impacts on the exports. According to them, the engineering goods consists of approximately a quarter of all exports. They also compete with the processed petroleum and are the largest foreign exchange earning sector.
But, the government is of the opinion that these sectors have ‘done well without incentives.’
Conclusion
The government is very optimistic, and is confident that this new scheme will be able to generate a significant impact on India’s competitiveness in the coming 5-10 years.
It is also seen as another step to attaining the vision of ‘Aatma-nirbhar Bharat.’
References-
- The Economic Times
- The Hindu
- businessstandard.com
- livemint.com
- moneycontrol.com
- pib.gov.in
Image sources-
- apparelresources.com
- thehindubussinessline.com
- papertyari.com
(19 September 2021, Sunday)