WTO-proof: Cabinet approves major export scheme to replace MEIS

By: |
March 14, 2020 3:30 AM

The MEIS, exporters have persistently complained, doesn’t offset all the taxes, so the new scheme will be beneficial to them when it’s implemented.

The government had earlier decided to launch the RoDTEP scheme from January 1, 2020, but it deferred the roll-out to the next fiscal, as exporters cited operational challenges to seek more time for the transition. (Representative image)The government had earlier decided to launch the RoDTEP scheme from January 1, 2020, but it deferred the roll-out to the next fiscal, as exporters cited operational challenges to seek more time for the transition.
(Representative image)

The Cabinet on Friday approved a major export programme that will reimburse all taxes and duties paid on inputs consumed in exports, and replace in phases the government’s flagship – but WTO-incompatible – Merchandise Exports From India Scheme (MEIS) to help reverse a slide in outbound shipment.

Commerce and industry minister Piyush Goyal said the Remission of Duties or Taxes on Export Products (RoDTEP) scheme will cover levies that are not reimbursed currently and make exports zero-rated, in sync with the best global practices. These imposts include duty on electricity charges; VAT on fuel used in transportation, captive power generation and the farm sector; mandi tax and stamp duty on export documents; CGST and compensation cess on coal in power generation; central excise duty on fuel used in transportation; and CGST and any other levies that still remain unrebated. The new scheme is consistent with the World Trade Organisation (WTO) norms, the government has stressed.

The sectors and products under the RoDTEP scheme will be notified in a phased manner in consultations with industry and the existing MEIS benefit for those sectors and items will be withdrawn accordingly, he added. Also, while the government has refrained from announcing a strict deadline to fully implement the new scheme, sources said it would be done in FY21.

According to an initial estimate firmed up last year, the revenue foregone due to RoDTEP could be around Rs 50,000 crore a year once it’s fully operational. Since the potential revenue loss because of the MEIS is around Rs 40,000 crore a year, RoDTEP is expected to cost the government an extra Rs 10,000 crore annually. However, the government didn’t announce the potential revenue impact of the RoDTEP on Friday.

The MEIS, exporters have persistently complained, doesn’t offset all the taxes, so the new scheme will be beneficial to them when it’s implemented. Under the MEIS, the government offers incentives worth up to 7% of the freight-on-board (FoB) value of exports.

The roll-out of RoDTEP was one of a raft of measures – including easier priority-sector lending norms for exports, greater insurance cover under ECGC and lower premium for MSMEs to avail of such cover – announced by the government in September 2019 to help reverse a slide in exports. Later, the Budget for 2020-21 had also highlighted the RoDTEP.

The government had earlier decided to launch the RoDTEP scheme from January 1, 2020, but it deferred the roll-out to the next fiscal, as exporters cited operational challenges to seek more time for the transition.

The Cabinet approval comes at a time when the WTO’s appellate body remains paralysed. So India is spared the trouble of having to fast restructure some of its contentious trade schemes, as its appeal against a ruling of the WTO’s Disputes Settlement Body (DSB) in favour of the US against New Delhi’s export ‘subsidies’ is still pending.

Though the goods and services tax (GST) regime has subsumed a plethora of levies, some still exist (petroleum and electricity are still outside the GST ambit, while other levies like mandi tax, stamp duty, embedded central GST and compensation cess etc remain unrebated).

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