India plans to hold discussions with the US to convince it about the WTO compatibility of the popular Remission of Duties and Taxes on Exported Products (RoDTEP) scheme following Washington’s recent announcement of countervailing duties (anti-subsidy levies) on three items exported from India as retaliation against the scheme, official sources have said.

“RoDTEP is a perfectly WTO compliant scheme where we are not giving any incentive to our exporters but are only providing them a level playing field by remitting certain local levies and taxes on inputs. We are willing to hold discussions on the issue with the US and have already directed our team to do so. I think we should be able to convince them that RoDTEP doesn’t violate any WTO principle,” a senior government official told businessline.

Simultaneously the Directorate General of Foreign Trade (DGFT) and the Directorate General of Trade Remedies (DGTR) will also work with exporters on the documentation to maintain to “satisfy” US officials and avoid penalties, the official added.

The RoDTEP scheme, announced in January 2021, refunds embedded duties and taxes, such as VAT on fuel used in transportation, mandi tax and duty on electricity used during manufacturing of the exported items. It replaced the WTO-incompatible MEIS scheme, which was not transparently determined and had faced several challenges from partner countries. 

Remission rates

Since the remission rates under the RoDTEP scheme, mostly in the range of 0.3 per cent to 4.3 per cent, have been “meticulously’’ calculated by a special team, the government is confident that it meets WTO norms.

However, recently the US and EU countervailed the RoDTEP scheme in their countervailing investigations against certain Indian exports. In a Lok Sabha reply on December 13, Minister of State for Commerce and Industry Anupriya Patel said the products for which countervailing investigations have been conducted and a final determination of CVD made include paper file folders, common alloy aluminum sheet and Forged Steel Fluid End Blocks by US Certain graphite electrode systems by European Commission (EC).

Although the CVD attributable to RoDTEP is not high, it needs to be addressed urgently as it could have greater implications in the future, the official added. 

While imposing the CVD, the US argued that there was a need for a reasonable and effective system to confirm inputs, consumption amount and imposed indirect taxes.

“What the US authorities want is a highly technical kind of report from those who are under investigation. So, the DGFT, in association with the DGTR or the team, is now trying to sensitise exporters about the kind of documentation which they need to maintain to satisfy the US investigating authorities,” another official said.