By Krishna Barad, Abhishek Singhania
Remissions of Duties and Taxes on Exported Products Scheme (RoDTEP) has been a much-awaited scheme notified by the Government of India after phasing out the Merchandise Exports from India Scheme (MEIS). In 2018, the United States challenged certain export incentives schemes implemented by India before the Dispute Settlement Body of the World Trade Organisation (WTO). These schemes, including the MEIS, were found violative of the WTO guidelines, and India was given six months to withdraw these non-compliant subsidy schemes. While challenging the above order, India replaced MEIS with the new RoDTEP, which meets the WTO guidelines.
The Government framed the new scheme to provide for remissions of taxes/duties/cess at the Central and State levels, that are not reimbursed (such as Stamp Duty, Electricity Tax, Mandi Fee, Tax on Fuel, etc.) under any of the Foreign Trade Policy/Customs laws schemes.
RoDTEP seeks to neutralise the cost impact of duties and taxes in the supply chain, not otherwise offset through duty drawbacks, tax credits/refunds, or similar mechanisms. The new scheme is based on the classification of the products at an 8-digit level of the Customs Tariff classification and the benefit is available for 8,555 tariff items. The benefit under the scheme ranges between 0.5% to 4.3% of the FOB value of exported products, subject to a cap (value cap) at a certain sum per unit of the export commodity.
RoDTEP, which has come into effect retrospectively from 01 January 2021, requires the exporters to indicate their intention to claim RoDTEP in their export shipping bill. However, many exporters have missed indicating their intention to claim this benefit as the final list of HS Codes eligible for benefits and the corresponding rates were unknown until 17 August 2021. Lack of awareness about this requirement was also one of the reasons for non-compliance.
The Central Board of Indirect Taxes and Customs (CBIC) clarified that no RoDTEP benefit would accrue to the exporters if they have not inscribed their intention to claim it in the shipping bill, even if the items are present in the finally notified list. Further, the Government has not issued any clarity to fix this defect. This is likely to cause hardship to exporters due to the procedural non-compliances, which were viewed liberally by the courts in the context of various other export incentive schemes in the past.
The industry response to the RoDTEP suggests that the scheme has not met the expectations of the exporters. Many export products which enjoyed benefits under MEIS are now kept outside the scheme’s ambit and the rates notified are too low, in comparison to the erstwhile MEIS scheme.
Exporters in the Pharmaceutical/ Steel/ Chemical sectors have been kept outside the scope of the new scheme. Further, Special Economic Zones (SEZ), Export-Oriented Units (EOUs), Advance Authorization holders, Operators under MOOWR schemes, etc. are excluded from the scheme benefits. The Government appears to be weighing the need of conferring the benefits of the schemes to them in the future.
Exporters have also expressed their concerns and have felt that the rates declared require an immediate review. Few exporters cited their inability to submit details/data, as required by the Government, due to the current situation caused by the pandemic. Shippers who have missed including the requisite declaration in the shipping bill are expecting suitable guidelines to help them avail the benefits, which is likely to be denied for want of procedure compliance. This would also require suitable representation before the Government.
The export community has been comparing the benefits under both the MEIS scheme and the RoDTEP and they are drawing a gloomy picture. While MEIS compensated infrastructural bottlenecks, the RoDTEP merely remits/compensates the tax/duty costs embedded on export products and hence is not comparable with MEIS.
To make goods originating from Indian internationally competitive, and to alleviate the concerns of the trade community, the Government may initiate immediate measures for redressal by including excluded sectors, revisiting rates, clarifications about a remedy for correction for past procedural non-compliance, etc. However, the industry must voice its concerns before the policymakers.
Industry representatives believe that the Government must introduce suitable schemes that will serve the twin objective of rewarding the exporters and meeting the WTO mandates. As the scheme is just introduced and is expected to stabilise in the coming days, one can only wait and watch to see how it evolves in the coming times.
(Krishna Barad,Partner and Abhishek Singhania, Director – Customs and International Trade, BDO India. Views expressed are the author’s own.)