Centre holds inter-ministerial meetings to fix boundaries under RoDTEP

Amiti Sen New Delhi | Updated on June 22, 2021

Details of the scheme for remitting input duties to exporters may be announced soon

The Centre is holding top-level inter-ministerial meetings to give a final shape to the much-awaited Remission of Duties and Taxes on Exported Products (RoDTEP) scheme for exporters and take the crucial decision on the ceilings or exclusions to be woven in so that finances are not over-stretched, said an official close to the development.

“It is clear that the government does not want to exclude any particular sector and is considering all 11,000 tariff lines for coverage under RoDTEP. But to keep expenditure in check, it has to make some exclusions.

“Options may be to put some sort of a ceiling on the payouts or favour smaller units over the larger ones,” the official told BusinessLine.

VAT on fuel

The RoDTEP scheme, announced on January 1 with the simultaneous withdrawal of the popular Merchandise Export from India Scheme (MEIS), seeks to refund exporters the embedded duties/taxes that are not rebated under other schemes. These include VAT on fuel used in transportation, mandi tax, and duty on electricity used during manufacturing.

“As it has been more than five months since the scheme was announced and the Commerce and Finance Ministries were been finding it difficult to arrive at an agreement on the product coverage and rates, the matter is now being discussed at the inter-ministerial level with participation at the highest level, including the PMO,” said the official.

The final scheme is expected to be announced soon once all the loose ends are tied up, the official added.

Higher payouts

The problem is that while the rates of remission under RoDTEP were calculated diligently by an expert committee under GK Pillai, former Secretary for Home and Commerce, taking into account all input taxes that go into a particular export, the payouts on the basis of the recommended rates were turning out to be much higher than what the budgeted amount of ₹13,000 crore per annum could provide for.

“There is now an understanding that the annual outlay for the budget could be increased to about ₹17,000 crore or a little higher, but that may not be enough to provide remission on all input taxes to all units across sectors. Some lines need to be drawn, and that is what the inter-ministerial meetings are discussing,” said the official.

The initial amount budgeted for RoDTEP was around ₹50,000 crore, which was on a par with the amount budgeted in the past for the MEIS scheme that covered a little more than 8,000 items and provided refunds at 2-4 per cent of the export value. Some industry sources say that to cover 11,000 items under RoDTEP scheme, a much higher amount than the allocated ₹ 17,000 crore would be needed.

India’s exports are back on the growth track, rising 116 per cent in April-May 2021 to $62.89 billion, after declining 7.26 per cent in 2020-21 to $290.63 billion due to Covid-19 pandemic disruptions.

“The Commerce and Finance Ministries were earlier considering limiting the product coverage, but it turned out to be a very politically sensitive issue. The government may finally decide to provide some kind of a ceiling on the payouts made under the scheme as it may also be difficult to restrict the scheme to just the small units. Whatever the decision is, it will probably be taken soon,” said the official.

Withdrawal of MEIS

The MEIS scheme had to be withdrawn as it was identified by the WTO as an export subsidy since the reimbursements could not be directly linked to the input duties paid by exporters.

Published on June 22, 2021

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