The big question now a days is whether the export incentives are going to be scrapped?

India lost the case against United States of America (USA) in World Trade Organisation (WTO). USA alleged that India is violating the provisions of Subsidies and Countervailing Measurers Agreement (SCM) by giving export rewards to its exporters in form of various schemes. India needs to withdraw all the export schemes where it is rewarding the exporters through various schemes like Merchandise Export from India Scheme, Export Promotion Capital Goods, Special Economic Zone, Duty Free Imports for Exporters, EOU/BTP/EHTP Schemes etc.

SCM doesn’t permit the countries to give rewards to exporters where the per capita income is more than USD 1000 consecutively for three years. India has crossed this threshold in Year 2015. In 2017, the WTO notified that India’s GNI was $1,051 in 2013, $1,100 in 2014 and $1,178 in 2015.

However, India has filed an appeal against this decision with WTO appellate tribunal and the bench is not working due to lack of quorum.

It is pertinent to note that Service Export from India Scheme and Advance Authorisation Scheme has not been challenged by USA.

Indirect tax rebate schemes, drawbacks are allowed if these does not exceed to amount of such taxes actually levied on inputs that are consumed in the production of the exported product.

Then what is the fate of these export incentive schemes?

Government of India has announced scheme of Remission of Duties and Taxes on Exported Products (RoDTEP) to compensate the exporters.  It will allow reimbursement taxes and duties paid by them such as value added tax, coal cess, mandi tax, electricity duties and fuel used for transportation, which are not getting exempted or refunded under any other existing mechanism but are incurred in the process of manufacture or distribution of exported products. It seems to be India government is doing its own preparation before the decision of tribunal by giving cabinet approval to this scheme on 13th March, 2020.

RoDTEP seems to be replacement of Merchandise Export from India Scheme (MEIS) that was found to violate the World Trade Organization Rules. However, picture will be clearer once the draft of scheme come into existence.

(Author can be reached at gaauravarya@gmail.com)

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