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The Remission of Duties and Taxes on Exported Products (“RoDTEP”) scheme was announced by Government of India to allow reimbursement of taxes and duties, which are not exempted/refunded under any other scheme. This was in response to World Trade Organization (WTO)’s ruling that the existing MEIS scheme violated it’s norms it being pure subsidy scheme. Though the scheme is fundamentally different, RoDTEP is kind of a combination of the current Merchandise Export from India Scheme (MEIS) and Rebate of State and Central Taxes and Levies (RoSCTL) in it’s operational form.
The scheme was initially proposed to be notified from April 2020. However, due to Covid 19, the Government extended the Foreign Trade Policy 2015-20, for one more year, the MEIS benefit was allowed to continue up to 31st Dec. 2020 and RoSCTL until the same is merged with RoDTEP. The scheme (RoDTEP) is expected to be notified w.e.f. January 2021.
While the Govt has announced an outlay of 50,000 cr for RoDTEP, it appears that it would be severely curtailed in the initial period due to resources constraints. It appears that in the beginning only 3 sectors- Iron and Steel, Auto and Readymade garments would get the benefit with the outlay of Rs. 10,000 cr. It will be interesting to see how will other sectors be compensated specially when MEIS is supposed to phased out in December. With MEIS already curtailed, Exporter are going to have tough time in the near future.
The remissions under the RoDTEP scheme would be a step towards “zero-rating” of exports, along with refunds such as Drawback and IGST and most importantly, it will be WTO compliant. At present, embedded duties and taxes, which are not refunded under any other scheme falls in the range from 1-5%, and these would be the rates for the products.
A primer on the differences and similarity between MEIS & RoDTEP are as follows:
|Description of scheme||Its an INCENTIVE based scheme to exporters on Exports of goods in addition to Exemptions, Refunds and drawbacks on the basis of HSN Code.||Its a REMISSION of actual Indirect taxes on Inputs used in the manufacturing of exported products which are not being currently reimbursed by any other existing schemes e.g. local taxes, coal cess, mandi tax, Toll tax & stamp duty on the import-export documentation, electricity duties and fuel used for transportation.|
|Incentive or Refund in %||At a specified rate, which varies from product-to-product between 2% to 20% of FOB value of Exports.||At a specified rate as in the case of MEIS as a percentage of FOB value of exports. – Expected to be lesser than the existing MEIS Incentive scheme [Rates are expected in the last week of December]|
|Coverage||Product and HSN specific, for most of the sector and products.||Product and HSN specific, for most of the sector and products including textiles. A dedicated committee shall decide the sequence of introduction of the scheme across sectors, prioritisation of the sectors and degree of benefit to be given to various items.|
|Claim Procedure||Issuance in the form of transferable duty credit scrips.||Expected to be in the form of transferable duty credit/ electronic scrip maintained in the electronic ledger|
The following are the expected features of RoDTEP scheme:
What preparations you can do in the meantime?
For finalization of rates, the Government with the constituted committee are reviewing and analysing the data provided by the exporters/manufacturer through export promotion councils and trade organizations. Therefore, we advise you to approach your respective export promotion council or the trade organisations eg. EEPC, AEPC, FIEO, PHDCCI, CII etc. and provide them with indicative data of the taxes & duties embedded on your export products, so that you can get a fair rate of refund for your export products.
If you miss this information, there might be a possibility that the lesser rates than your actual incidence are announced.
MEIS benefits would be discontinued on such tariff line/item for which benefit under RoDTEP Scheme is announced.
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