The government has raised the allocation for its flagship tax remission scheme for exporters by 10% in the Budget for FY24 from the revised estimate for the current fiscal, as it aims to ensure timely refund of imposts to help exporters cope with a demand slowdown in key markets.
It has budgeted Rs 15,069 crore for theRemission of Duties and Taxes on Exported Products (RoDTEP) scheme for FY24, against Rs 13,699 crore this fiscal. FE had first reported on a possible 10% hike in the RoDTEP allocation for FY24 on December 8.
Recently, the government last month acknowledged “anomalies” in case of 432 products under RoDTEP scheme. Consequently, the effective refunds will rise for most of them. Under the scheme, eligible exporters used to get refunds in the range of 0.3% to 4.3% of the freight-on-board value of the exported products.
The commerce ministry has expanded the scope of the RoDTEP scheme by including sectors like steel, pharmaceuticals and chemicals from December 15. It will be applicable up to September, after which a fresh review of the scheme will be done to gauge if any calibration in the RoDTEP benefits is warranted to keep the offtake within the budgeted amount for FY24, according to sources.
Merchandise exports shrank 12.2% in December 2022 from a year before to $34.5 billion, the second contraction in three months, thanks to a slowdown in demand from key markets in the wake of aggressive rate hikes by major central banks and unfavourable base.
The World Trade Organization had in October warned of a “darkened 2023”, as it has slashed the global trade volume growth forecast to just 1% for 2023 from 3.5% in 2022.
Analysts have argued that sustained and adequate remission of taxes, in addition to structural reforms, remain critical to India’s efforts to scale up goods exports to the targeted $1 trillion by FY30.