Economy

Centre may cap RoDTEP benefits for exporters due to resource constraint

Amiti Sen New Delhi | Updated on November 01, 2020

The RoDTEP Committee, however, will give its recommendations based on actuals, say officials

The Centre may limit benefits for exporters under the new Remission of Duties or Taxes on Export Products (RoDTEP) scheme, the rates for which are being finalised on a priority basis for select sectors, owing to a resource constraint.

But the RoDTEP Committee set up by the Finance Ministry to calculate the rate of remission of duties on inputs, including embedded taxes, for exporters in various sectors will give its recommendations based on actuals, an official close to the development told BusinessLine.

“The RoDTEP Committee has been asked to calculate ceiling rates for refunding input taxes for exporters, including embedded taxes, on the basis of actuals. It will do exactly that. If caps have to be fixed because of paucity of resources, then it is the government which will do so,” the official said.

Last year, the Finance Ministry announced the new RoDTEP scheme to replace the popular Merchandise Export from India Scheme (MEIS). The MEIS was ruled by a World Trade Organization panel to be against multilateral trade norms. It is set to expire on December 31, 2020, if not further extended.

Although the RoDTEP scheme, designed to be fully WTO-compliant, is supposed to be in place from January 1, 2021, the RoDTEP Committee has been asked to work out the rates for just three sectors — ready-made garments and made-ups; automobiles and auto-parts; and iron and steel products — to begin with.

“The government has indicated that it may need to cap the RoDTEP rates if it has only ₹10,000 crore at its disposal, as per a calculation made earlier this year. Textiles itself will require ₹7,500 crore once the benefits under the present RoSCTL scheme are converted to RoDTEP. That will leave only ₹2,500 crore for the iron and steel and the auto and auto components sectors, that too, if the scheme is not expanded at the moment to bring in more products,” the official explained. Interestingly, the Finance Ministry had estimated an annual cost of ₹ 50,000 crore for the exchequer when it announced the scheme last year.

A three-member RoDTEP Committee, under former home and commerce secretary GK Pillai, was constituted in July 2020 to work out the modalities for calculation of duties/taxes/levies at the Central, State and local level, borne on the exported product. This will include prior-stage cumulative indirect taxes on goods and services used in the production and distribution of exported product.

The Centre may ask the Committee to fix rates for more products after it submits its first report, likely this month, but it may take a long time before all sectors are covered under the RoDTEP due to both a lack of resources and the complicated procedure of fixing rates, the official added.

Published on November 01, 2020

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