Rattled by anti-subsidy duties imposed last year by the US and the EU on certain Indian exports benefiting under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme especially designed to be WTO compatible, the government is putting in place a verification process to establish that only input duties have been remitted under the scheme whenever investigations are sought by an importing country on alleged payout of subsidies, officials have said.

“A verification team with officials from the Department of Revenue and DGFT will hold random inspections of manufacturers when any complaint is made by an importing country, for instance the US, on alleged subsidy payouts for particular products. All input taxes paid by the selected manufacturer will be tallied with the RoDTEP payments received to satisfy the importing country that only duties and taxes paid during production have been remitted,” an official tracking the matter told businessline.

The Merchandise Export from India Scheme (MEIS) was replaced by RoDTEP scheme in January 2021 as the former had had faced several challenges from partner countries at the WTO as it did not clearly establish the connection between the amount paid to exporters and the input taxes paid by them.

RoDTEP was designed carefully by a team of senior officials and experts to ensure that it was totally transparent and the refund rates were based on 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.

Anti-subsidy duties

Despite the clear connection established between the remission rates and the input taxes, the US and the EU imposed countervailing (anti-subsidy) duties on some Indian products against RoDTEP payments availed. These include paper file folders, common alloy aluminium sheet and forged steel fluid end blocks by the US and certain graphite electrode systems by the EC. 

“The anti-subsidy duties were imposed not because there is a problem with the RoDTEP scheme. It is mainly because exporters were not able to clearly establish the connection between the RoDTEP benefits received and the input taxes they had paid when exporting countries came for inspection. The verification committee will be in a better position to establish the connection in its random checks and hopefully satisfy the importing countries,” the official added.

The DGFT is simultaneously working with the Directorate General of Trade Remedies (DGTR)  on familiarising exporters with the entire process of documentation so that they can on their own prove that RoDTEP payments are in lieu of input taxes not remitted under any other scheme and were not export subsidies, the official said.