RoDTEP or Refund of Duties and Taxes on Exported Products is regarded as a flagship scheme for ensuring export promotion. It is a scheme belonging to the Commerce Ministry of India. The scheme is aimed at refunding to the exporters the involved local, state, and central duties as well as taxes that are paid on inputs that have not been rebated or refunded.
The government has decided to extend the overall benefits of RoDTEP Scheme to all commodities with effect from 1st January 2021. The RoDTEP scheme has been a highly awaited scheme that has been launched to replace the previous MEIS or Merchandise Exports from India Scheme.
Understanding MEIS and its Replacement by RoDTEP
MEIS or Merchandise Exports from India Scheme had been designed to incentivize exports in minimizing infrastructural inefficiencies along with the associated costs. MEIS was regarded as a subsidy. It was also declared as the violation of the rules of the WTO or World Trade Organization in 2019. The SCM or Subsidies and Countervailing Measures agreement by the WTO exercises prohibitions on a specific government -particularly nations above a certain development threshold, from offering financial benefits to exporters through incentives.
This made the Central Indian Government to bring forth alternative schemes that remained compatible with the mandate as put forth by the WTO. With the help of the RoDTEP scheme, exporters will not be compensated for the non-creditable tax costs or duty costs -including tax on fuel, electricity tax, mandi fee, stamp duty, and so more. These costs are usually embedded in the export commodities.
Implementation of the RoDTEP Scheme
The Government of India went ahead with implementing the RoDTEP Scheme with effective from January 2021. After skipping out on several deadlines, the Ministry of Commerce came up with the notification that rates and guidelines regarding the RoDTEP scheme were to be introduced in August 2021.
The announcement of the new remission rates under the scheme observe that exporters will be compensated for the included taxes -usually non-recoverable or non-refundable, and built-in price of the export good. This leads to immense competition in the international trade market.
Differences Between the RoDTEP Scheme and MEIS Scheme
- Under the provisions of the MEIS, an additional incentive was made available as a percentage of the total export price. This could be used for paying import duties. On the other hand, under the provisions of the RoDTEP Scheme, exporters are currently entitled to a specific percentage of the total export price in the form of a scrip -limited to the included taxes.
- The MEIS Scheme served to be an incentive in the form of transferable, physical scrips utilized for paying for different aspects of Customs duties. On the other hand, RoDTEP Scheme serves to be an electronic and transferable form of credit. This credit can be used for the payment of only the standard customs duty.
- The MEIS scheme has been quite controversial with respect to the WTO norms compliance. On the other hand, the RoDTEP Scheme has been designed by keeping in mind the respective WTO guidelines.
- The MEIS incentives were relatively higher. It is quite against the provisions put forth by the RoDTEP Scheme. The basis of such incentives is the actual duties or taxes that are included in the goods.
Under the RoDTEP Scheme, exporters are expected to benefit from the FOB value of 0.5 percent to 4.3 percent of the exported commodities that fall under the particular HS Codes. Moreover, the RoDTEP scheme benefits have also been capped at specific sum for every unit of the exported item.
What is the Response to the RoDTEP Scheme?
The exporters’ initial response to the RoDTEP Scheme suggests that the scheme was not successful in encouraging them. It was because the rate was quite lower than the overall expectations. Most sectors are disappointed at the respective remission rates. At the same time, some sectors are upset with the exclusivity of specific products or sectors from the scheme’s scope. The government has made the announcement that it will be reconsidering the excluded products or sectors in the coming times.
Exporters from sectors like chemical, steel, and pharma industries, SEZ (Special Economic Zone), export-centric units (like electronic hardware technology park, bio-technology parks, and so more), custom-bonded warehouses, free trade warehousing zone with respect to warehousing regulations are kept outside the domain of the all-new scheme. Most exporters have expressed the respective concerns while suggesting that the rates stated will require instant review. Some exporters reported their inability to submit relevant data or details -as required by the Government, because of the current situation existing in the country due to the global pandemic.
According to the reports of the government, it is estimated that the RoDTEP scheme serves to be an effective replacement of the MEIS scheme -despite no similarities between them. It is because MEIS has been based on incentives. On the other hand, the RoDTEP scheme is regarded as the remission of the costs of duties or taxes -finding their way into export pricing.
While the compliance of the government with the World Trade Organization mandate is quite understandable, the ongoing exporter community continues comparing the overall benefits of the MEIS with the RoDTEP Scheme. Therefore, the community ends up drawing a negative picture. Exporters might consider revisiting the export pricing strategies quite soon towards realigning the prices according to the all-new scheme.
The industry representatives feel the government should come up with the right schemes towards incentivizing exports. Still, the government continues discussing proper measures to launch the right structures for serving the twin motive of rewarding and benefitting the exporters. The government, at the same time, also aims at going through the tests of the World Trade Organization mandates.
As the RoDTEP scheme is in its testing stage, industry specialists are going through possibilities of introducing discussions with the right authorities. One is only expected to be patient and observe how the scheme will be evolving in the coming times. If you need assistance with RoDTEP and other schemes of the export industry, Amazon Global Selling can help. It offers insights into all you need to know about running an export business successfully.