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In a relief for exporters, the government on Tuesday finally announced rates for the new input duty remission scheme that was introduced on January 1 this year, replacing the popular older scheme that was incompatible with WTO norms.
The new scheme, Remission of Duties and Taxes on Exported Products (RoDTEP), however, may fall short of expectations of many sectors. The refund rates, ranging from 0.5 per cent to 4.3 per cent, are generally lower than the rates under the older scheme. RoDTEP will be applicable from January 1, 2021.
There are also certain items kept out of the scope of the scheme. Major among them are chemicals, steel and pharmaceuticals, Commerce Secretary BVR Subrahmanyam said at a press conference on Tuesday. “These items have done quite well without incentives. It was felt that there was no need to include them (in the scheme),” Subrahmanyam said.
MEIS scrapped
The Merchandise Export from India Scheme (MEIS), which was replaced by RoDTEP, offered refunds at the rate of 2 per cent, 3 per cent and 5 per cent of the value (f.o.b) of exports. The MEIS had to be scrapped as it was not directly linked to input taxes and levies that went into the production of the exported item and was hence held by the WTO as incompatible with multilateral trade norms.
The total outgo under the RoDTEP scheme and RoSCTL, a similar scheme for garments and made-ups notified last week, will be around ₹19,400 crore for the current fiscal. Of this, ₹ 12,454 crore has been allocated to RoDTEP. The new scheme covers 8,555 product lines of a total of about 11,000 traded items. MEIS, on the other hand, had an annual outlay of over ₹40,000 crore while it covered about 8,000 items.
Relief for exporters
Despite the low rates, exporters are relieved that the period of uncertainty is over and they can now avail the benefits and price their products accordingly. FIEO, the exporters’ body, expects the government to quickly upload the rates in the system so that exporters may generate their scrips instantly for utilising the same either for duty free imports or transferring it to increase their cash flow.
“The RoDTEP rates, which provides zero rebating of exports, are WTO compatible and thus will continue for a long time until all the products and services are brought within the ambit of GST and embedded incidence is completely neutralised,” FIEO said.
Subrahmanyam said the RoDTEP scheme will be subject to periodic review, and if needed, changes would be made in response to change in the ground situation. “The simple goal of the scheme is to ensure that all taxes borne by exporters are not exported. It should be reimbursed. It also includes taxes collected by States and local governments,” he said.
The overall outlay for the RoDTEP scheme will be finalised by the Finance Ministry in consultation with the Department of Commerce, taking into account all factors, according to the notification released by the Directorate General of Foreign Trade.
Pivotal sectors left out?
“One of the biggest setbacks is the fact that products of pivotal export sectors like steel and pharma are not included in the list. Even the products / sectors for which rates are being notified are much lower than the MEIS rate and do not cover the embedded tax cost included in these products.. Companies now, may need to re-evaluate the export benefits availed by them and whether it will really make sense to opt for RoDTEP scheme,” said Rohit Jain and Gourav Sogani, Partners at ELP.
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