Exporters welcome RoDTEP but uncertainty on rates cause concerns

The Centre has announced the implementation of the much awaited new Remission of Duties or Taxes on Export Products (RoDTEP) scheme from January 1, 2021, but, with the rates of reimbursement yet to be finalised, exporters are worried about how to cost their products and fix prices.

“There is uncertainty for exporters as they will not know how to book their orders without knowing the rates. There is also a lack of clarity on transitional times...we may need to recall some shipping bills already in transit,” Sharad Kumar Saraf, President, Federation of Indian Export Organisations (FIEO) told BusinessLine.

Fieo is set to make a presentation to the Centre this week to point out its concerns and request for early action.

Last year, the Finance Ministry announced the new RoDTEP scheme to replace the popular Merchandise Export from India Scheme (MEIS) from January 1, 2021, as the MEIS was ruled by a World Trade Organisation panel to be against multilateral trade norms.

The Ministry, in a statement issued on December 31, said that the RoDTEP rates will be notified shortly by the Department of Commerce, based on the recommendation of a Committee chaired by G K Pillai, former Commerce and Home Secretary, which will submit its report soon.

“The RoDTEP shall be allowed, subject to specified conditions and exclusions. The notified rates, irrespective of the date of notification, shall apply with effect from 1st January, 2021 to all eligible exports of goods,” the statement said.

As even a target date for announcement of the RoDTEP rates has not been fixed, things are in a greater state of flux. “If a date, say January 31, was fixed for declaration of rates, exporters would have happily waited for a month without complaining,” said Saraf.

Calculating work

The three-member RoDTEP Committee was set up 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, including embedded taxes.

Since the RoDTEP rates are based on actual input taxes paid by each sector at various stages of production, the calculation is proving to be time consuming.

“The government’s announcement on RoDTEP is good news because implementation is from January 1, 2021. But it is a cause of concern as in the absence of rates, exporters will not know how to fix cost of their exports,” said Rafeeque Ahmed, a Tamil Nadu based leather goods exporter.

Ahmed said that the RoDTEP committee has been working in close coordination with the industry and exporters hoped that the rates would be finalised soon.

The uncertainty on the rates also stems from the fact that while expenditure under RoDTEP was initially pegged at ₹50,000 crore annually, subsequently there have been indications that the actual outlay may be much less because of financial constraints.

Sectors like gems & jewellery and meat, that were not benefitting from MEIS, have their fingers crossed over inclusion in RoDTEP. “If included in RoDTEP, it could be a game-changer for the gems & jewellery sector,” said Colin Shah, Chairman, Gems & Jewellery Export Promotion council.

India’s goods exports declined 17.76 per cent in April-November 2020-21 to $173.66 billion due to a fall in global demand hit further by the Covid-19 pandemic. Exporters are hopeful of better performance in the next fiscal as the order book position for many has started improving.