Dispute Resolution Panel (DRP) of World Trade Organisation (WTO) ruled that India’s export subsidy schemes violate global trade norms and has been asked to withdraw some export subsidy programmes, since subsidy schemes run by the Indian government were giving undue advantage to Indian businesses. Indian Government has appealed to the appellate body of WTO, challenging the decision of DRP. Currently the appeal is pending before the dysfunctional appellate body of WTO which provides time to Indian Government time to replace the present subsidy schemes. Meanwhile, Indian government decided to discontinue existing export incentive schemes which are in compliant with global trade rules.
The affected subsidy schemes of Indian Government due to the ruling of DRP of WTO are:
In this article, we would discuss about the progression of MEIS to the exporters of goods in India.
Forthcoming from Indian Government
Indian Government has come up with a WTO compliant proposed scheme called ‘Remission of Duties or Taxes on Export Products’ (RoDTEP) to replace the present scheme of MEIS.
RoDTEP is a new scheme to replace the existing MEIS scheme for exports of goods from India, which aims to reimburse the taxes and duties incurred by exporters such as local taxes, coal cess, mandi tax, electricity duties and fuel used for transportation, which are not getting exempted or refunded under any other existing scheme. The rebate would be claimed as a percentage of the Freight On Board (FOB) value of exports.
The Indian government has recently approved this scheme and will be notified in a phased mannerand accordingly Items will be shifted fromexisting scheme MEIS to RoDTEP with propermonitoring &audit mechanism.
This scheme will incentivise exporters at an estimated cost of Rs. 50,000croreto the exchequer.
Evolution of RoDTEP
Schema of Incentive
|Additional Incentive on Exports of goods apart from other refunds and drawbacks available on undertaking the said exports.||Refund of Indirect taxes on Inputs used in the manufacture of exported product which is not being currently reimbursed by any other existing schemes.|
|WTO Compliance||Non-Compliant with WTO trade norms||Compliant with WTO trade norms|
|Incentive Percentage||2% to 5% of FOB value of Exports.||Product based % way of reward – Expected to be lesser than the existing MEIS Incentive scheme
[To be notified later]
|Mode of Issuance||Issuance in the form of transferable scrips (Hardcopy/ downloadable)||Issuance in the form of transferable duty credit/ electronic scrip which will be maintained in electronic ledger.|
|Transferability||Freely Transferable||Freely Transferable|
It is too early to comment on the RoDTEP scheme, since the incentive rates are not yet fixed. Implementation of RoDTEP replacing MEIS would make India a compliant exporter in the international market. However, Indian Government has to ensure that the new scheme should not reduce the benefits of present scheme at a shot. Further, recent amendment in GST Act to restrict the valuation of goods by exporters which impacts the working capital of the business. Further, reducing the incentives to the exporters would whack the exports by India.
Special thanks to Venkatnarayana G M (Advocate) and CA Spudarjunan for their valuable inputs& suggestions.
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