RoDTEP: Remission of Duties and Taxes on Export Products

Preamble:

The scheme’s aim is to refund, currently unrefunded duties/taxes/levies, at the Central, State, and local level, borne on exported products consisting of prior stage cumulative indirect taxes on goods and services utilized in the making of the exported product and such indirect duties/taxes/levies towards the distribution of export.

Need for Introduction of the RoDTEP Scheme

The RoDTEP Scheme came into existence because USA filed a complaint against India at the World Trade Organization (WTO) claiming the existing scheme harms the American workers. USA argued that export subsidies like the MEIS scheme (The Merchandise Exports from India Scheme) given by GOI distorted trade by providing direct subsidies to Indian exporters and is against the WTO rules.

A dispute panel in the WTO ruled against India, stating that the export subsidy scheme that was provided by Government of India violated the provisions of WTO’s norms. Hence, the Finance Minister announced this scheme in replacement of the MEIS scheme.

The scheme was approved by the Union cabinet and came into effect from 1st January 2021 and will be until 2025. The Ministry of Commerce and Industry notified about the RoDTEP scheme on 17th August 2021. This is a much-awaited scheme notified by the GOI after phasing out the MEIS scheme.

• The scheme will cover 8,555 export products (Notification No. 19/2015-2020, Dated 17th August 2021).
• All the eligible products with the benefit rates given under Appendix 4R of Notification.
• The tax refund rates range from 0.5 percent to 4.3 percent for different sectors. Rebates under the scheme shall not be available in respect of duties and taxes already exempted or deposited or credited.
• The scheme would operate in a budgetary framework for each financial year and a Rs. 19,400 crore outlay has been announced for the FY 2021-22 under the RoDTEP Scheme and RoSCTL scheme (Rebate of State and Central Taxes and Levies) where RoDTEP scheme’s budget would be Rs. 12,454 crores and the remaining Rs. 6,946 crores is for RoSCTL.
• Currently, three sectors – steel, chemicals and pharmaceuticals would not get the benefit of RoDTEP.
• The RoDTEP scheme is primarily a replacement of MEIS scheme.
• The scheme covers export areas which are relatively lower in volume.
• The automated refund system in the form of transferable duty credit/electronic scrips, which will be maintained in an electronic ledger.

Refunds of Embedded Duties and Taxes:

Under the scheme, various central and state duties, taxes, and levies imposed on input products such as duty levied by the state on electricity used for manufacturing, VAT on fuel in transportation, farm sector, captive power generation, Mandi tax, stamp duty and central excise duty on fuel used in transportation, among others, would be refunded to exporters as a percentage of F.O.B Value of exports. The scheme will ensure that our export products do not contain any incidence of taxes and duties, and exporters only export goods and services, and the scheme would cover all indirect Central and State taxes that are not reimbursed/collected.

Ineligible Supplies / Items / Categories Under the Scheme

The transactions mentioned as not eligible for the RoDTEP scheme through the DGFT Notification are listed below. The mentioned class of exports or exporters will not be liable for the levied benefit of the RoDTEP scheme:

1. Export of imported goods included under paragraph 2.46 of FTP.
2. The exports via trans-shipment, direct that the exports which are introduced in the 3rd country are shipped from India.
3. The export product is subjected to a minimum export price or export tax.
4. The product gets restricted for the export beneath “Schedule-2 of Export Policy in ITC (HS)”.
5. Products that are banned for export beneath “Schedule-2 of Export Policy in ITC (HS)”.
6. “Deemed Exports”.
7. Supplies of products manufactured through DTA units to SEZ/FTWZ units.
8. “Products manufactured in EHTP and BTP”.
9. “Products manufactured partly or wholly in a warehouse beneath section 65 of the Customs Act, 1962 (52 of 1962)”.
10. The products made or exported to realize the obligation with respect to the advance Authorization or tax-free Import Authorization or Special Advance Authorization circulated beneath a duty privilege policy of concern Foreign Trade Policy.
11. Under the provisions of the foreign trade policy the product made or exported through the unit licensed as a hundred per cent export-oriented unit (EOU).
12. The products made or exported through any of the units held “in Free Trade Zones or Export Processing Zones or Special Economic Zones”.
13. The products built or exported claiming the advantage of the Notification No. 32/1997- Customs dated 1st April 1997.
14. The exports for which the electronic documentation in ICEGATE EDI is not to be made or exports from non-EDI ports.
15. Post to produce the goods is used.

How to Avail the Benefits Under the Scheme?

The steps to avail the benefits under RoDTEP Scheme are as follows –

Mechanism of Issuance of Rebate

• Under the scheme, a rebate would be granted to eligible exporters at a notified rate as a percentage of FOB value with a value cap per unit of the exported product, wherever required, on export of items which are categorized under the notified 8-digit HS code. Rate of rebate/value cap per unit under RoDTEP is notified in Appendix 4R.
• The rebate allowed is subject to the receipt of sale proceeds within time allowed under the Foreign Exchange Management Act, 1999 (FEMA) failing which, such rebate shall be deemed never to have been allowed.
• The scheme would be implemented through end-to-end digitization of issuance of rebate amount in the form of a transferable duty credit/electronic scrip (e-scrip).

Monitoring, Audit and Risk Management System (RMS)

Exporters would be required to keep records substantiating claims made under the scheme.

For the purpose of audit and verification, a monitoring and audit mechanism with an IT based Risk Management system (RMS) would be put in place by the CBIC, Department of Revenue to physically verify the records of the exporters on sample basis. Sample cases for physical verification will be drawn objectively by the RMS, based on risk and other relevant parameters.

Budgetary Framework & Strict Financial Discipline:

As per the notification, the scheme will operate in a Budgetary framework for each financial year and necessary calibrations and revisions shall be made to the scheme benefits, as and when required, so that the projected remissions for each financial year are managed within the approved budget of the scheme. No provision for remission of arrears or contingent liabilities is permissible under the scheme to be carried over to the next financial year.

Detail	MEIS	RoDTEP
Incentive scheme	Incentive on exports of goods in form of transferable scrips	Refund of Indirect taxes on Inputs used in the manufacture of exported product which is not being currently reimbursed by any other existing schemes
WTO Compliance	Non-Compliant with WTO trade norms	Compliant with WTO trade norms
Incentive Percentage	2% to 5% of FOB value of Exports	Product-based % (0.5% to 4.3%)
Mode of Issuance	Issuance in the form of transferable scrips (Hard copy/downloadable)	Issuance in the form of transferable duty credit/electronic scrip which will be maintained in electronic ledger

References

1. Notification No. 19/2015-2020, Dated 17th August 2021
2. News articles