New Requirements for Filing of Annual RODTEP Return (ARR)

The Director General of Foreign Trade (DGFT) has introduced new guidelines under Paragraph 4.94 in Chapter 4 of the Handbook of Procedures, 2023. These updates, effective as of October 2023, provide detailed requirements for exporters who benefit from the Remission of Duties and Taxes on Exported Products (RODTEP) scheme, mandating the filing of an Annual RODTEP Return (ARR)

Background of the RODTEP Scheme

The RODTEP scheme was launched to reimburse exporters for the embedded central, state, and local duties/taxes that were previously not refunded. This move is designed to make Indian products competitive in the global market by refunding embedded duties, taxes, and levies to exporters.

Filing Requirement for ARR

1. Purpose and Deadline for ARR Filing

Exporters claiming RODTEP benefits must file the ARR to assess the inputs used in export production, the duties incurred, and other applicable taxes. According to the updated guidelines:

• Deadline: ARR for a specific financial year must be filed on the DGFT portal by March 31st of the subsequent financial year.
• Example: RODTEP claims information for FY 2023-24 must be filed by March 31, 2025.
• Eligibility: This filing requirement begins with exporters whose RODTEP claims exceed Rs. 1 crore in a financial year across all 8-digit Harmonized System (HS) codes.

2. Consequences of Non-Compliance

• Denial of Benefits: Exporters failing to file the ARR within the stipulated period will face a denial of benefits under the RODTEP scheme. No additional claims for Shipping Bills (SBs) will be permitted at Customs after a grace period.
• Grace Period: A grace period of three months (until June 30) is provided for delayed filing with a composition fee of Rs. 10,000. Beyond this period, a composition fee of Rs. 20,000 applies until 45 days post-June 30, during which the API-based exchange with Customs will reinstate benefits.

3. Record-Keeping Requirements

All physical and digital records substantiating the duty remission claims filed in the ARR must be maintained for five years for review by relevant authorities.

4. Assessment and Scrutiny of ARR

ARR filings will be periodically reviewed by the RoDTEP Committee to ensure due diligence, including considerations for adjustments in RODTEP rates. Specific cases may be selected for further scrutiny using IT-assisted risk criteria, requiring exporters to refund or surrender excess claims if necessary.

Appendix-4RR: Data Submission Format for ARR

The DGFT has released a format for ARR data submission (Appendix-4RR). Each exported product must be reported individually, with the following data fields to be filled out.

Key Fields in the ARR Form

Special Fields for Farm Sector

For products derived from the farm sector, certain additional fields are included, such as:

• VAT on fuel used in the farm sector
• Embedded CGST and SGST on inputs like pesticides and fertilizers

Declaration and Certification by Exporters

Exporters must declare that:

1. The claim under RODTEP does not cover any duties, taxes, or levies that are exempted, remitted, or credited through other mechanisms.

2. The remission claimed under RODTEP for the specified period is limited to the actual duties, taxes, and levies incurred.

3. The information provided in the ARR is accurate.

Each ARR must be certified with the exporter’s name, place, and date of filing.

Implications of the New ARR Requirements

This new mandatory filing for RODTEP benefits will streamline the process of tax and duty remission for exporters, ensuring accurate claims and compliance with foreign trade policies. The implementation of ARR aims to:

• Increase transparency in export duty and tax reimbursement claims.
• Reduce misuse of the RODTEP scheme by implementing periodic and IT-based scrutiny.
• Improve compliance by establishing a detailed format and strict deadlines for exporters.

Exporters should ensure timely ARR filing and maintain meticulous records to avoid penalties or denial of benefits. With this structured approach, the DGFT hopes to refine the RODTEP scheme, enhancing India’s competitive edge in global markets while ensuring fair and efficient tax remission practices.

Example: Frozen Shrimp Export Company Filing ARR

Background: Let’s say Oceanic Shrimp Exports Pvt. Ltd. is a company based in India specializing in exporting frozen shrimp. Over the last financial year (2023-24), the company has claimed RODTEP benefits for taxes and duties incurred in the production and export of their shrimp products. The total RODTEP claim for this period is Rs. 1.5 crore, which exceeds the Rs. 1 crore threshold, making the company eligible for filing the ARR.

Step-by-Step Guide to Filing ARR for Oceanic Shrimp Exports

1. Deadline for Filing

• Due Date: The ARR for FY 2023-24 must be submitted by March 31, 2025. If they fail to file by this date, they risk losing benefits from the RODTEP scheme.
• Grace Period: If Oceanic Shrimp Exports cannot file by March 31, 2025, they have until June 30, 2025, to submit it with a composition fee of Rs. 10,000. Beyond June, a fee of Rs. 20,000 will be required for filing up to 45 days after June 30.

2. Preparing the ARR Form (Appendix-4RR)

The company needs to fill out a detailed ARR form, providing information about each shrimp product exported. Let’s break down some of the fields they would fill out:

3. Declaration and Certification

Oceanic Shrimp Exports Pvt. Ltd. must declare that:

i. The RODTEP claim does not include any exempted, credited, or remitted duties.

ii. The remission amount does not exceed the actual taxes paid for that period.

iii. All the data provided in the ARR is accurate and complete.

They sign the declaration with the place and date before submitting it.

4. Record-Keeping and Compliance

Oceanic Shrimp Exports must maintain all physical and digital records substantiating their ARR for five years. These records could be inspected by relevant authorities for compliance or rate adjustments.

5. Possible Review and Scrutiny

The company’s ARR submission may be reviewed periodically by the RODTEP Committee. If selected under IT-assisted risk-based criteria, Oceanic Shrimp Exports may undergo further scrutiny to ensure the nature of inputs and claimed duties are accurate. If discrepancies are found, they might need to refund any excess claims, potentially impacting future benefits.

Summary

For a frozen shrimp export company like Oceanic Shrimp Exports Pvt. Ltd., filing the ARR requires detailed tracking of all transportation costs, input taxes, and utilities used in production. By correctly filling out Appendix-4RR and declaring the actual duties paid, the company ensures compliance with RODTEP guidelines and secures its benefits under the scheme.

Author View

Filing the Annual RODTEP Return (ARR) is a significant regulatory step that aligns with the Indian government’s objective of transparency, compliance, and effective management of export benefits. Here are some key perspectives on this filing requirement:

1. Encourages Transparency and Accountability

• The ARR ensures that only the actual duties, taxes, and levies incurred during production are claimed under RODTEP. This detailed documentation discourages inflated claims and helps maintain a fair distribution of export benefits.
• By requiring specific data points on costs, duties, and taxes, the government promotes transparency, making it easier to verify and audit claims.

2. Streamlines the RODTEP Process and Supports Accurate Reimbursements

• This structured filing process creates a standardized approach for exporters to submit their data, helping reduce errors and inconsistencies in claims.
• It allows the Directorate General of Foreign Trade (DGFT) to assess the actual incidence of taxes and refine RODTEP rates periodically, ensuring that exporters are fairly compensated without overburdening the state.

3. Potential Burden for Small and Medium Enterprises (SMEs)

• For larger exporters with sophisticated accounting and compliance systems, ARR filing might not be too cumbersome. However, smaller exporters, especially those who may not have a robust finance team, could find the process resource-intensive.
• The extensive documentation, record-keeping requirements, and potential penalties for late filing (even with a grace period) could be a financial and administrative strain on SMEs.

4. Promotes Digital Record-Keeping and Long-Term Compliance

• The requirement to maintain records for five years pushes exporters toward better digital and physical record-keeping practices. This is positive for exporters who aim to have a transparent and auditable trail of their export activities.
• As global trade increasingly prioritizes traceability and documentation, adhering to these standards enhances an exporter’s credibility in international markets.

5. Risk of Non-Compliance and Loss of Benefits

• Failing to file the ARR on time can lead to the denial of future RODTEP benefits. Given that many exporters rely on these rebates for cost competitiveness, this could be a significant financial setback.
• The penalties for delayed filing, although reasonable, may still deter smaller exporters. Additionally, the requirement to refund or surrender excess claims following scrutiny imposes an added responsibility on exporters to ensure the accuracy of their filings.

6. Periodic Review and Adjustments Reflect Export Dynamics

• The possibility of a periodic review by the RODTEP Committee allows the government to keep the scheme dynamic. Adjustments to rates based on actual data can reflect changes in input costs, tax policies, and industry practices.
• For exporters, this means that their RODTEP rates may be updated to reflect actual duty burdens, providing a fairer reflection of export costs over time.

Conclusion

The ARR filing requirement is a proactive measure that balances the government’s need for accurate export benefit claims with the exporter’s interest in fair reimbursement of input taxes and duties. For exporters, the ARR can be beneficial if they establish efficient tracking and documentation systems, though it does present an initial compliance burden, especially for smaller players. Over time, as companies adjust to this requirement and digitalize their processes, the ARR could contribute to a more structured, fair, and transparent export rebate system in India.

In summary, while the ARR filing requirement may seem like an additional compliance step, it ultimately supports the long-term sustainability and credibility of the RODTEP scheme, benefiting both exporters and the government in fostering a competitive and transparent export environment.

Frequently Asked Questions (FAQ) on Annual RODTEP Return (ARR) Filing

1. What is the purpose of the Annual RODTEP Return (ARR)?

The ARR is a mandatory filing under the RODTEP scheme that requires exporters to submit details of actual taxes, duties, and levies incurred in the production and export of goods. This return ensures that RODTEP claims accurately reflect these costs, allowing the government to verify and reimburse eligible expenses.

2. Who is required to file the ARR?

Exporters claiming RODTEP benefits whose total annual RODTEP claim exceeds Rs. 1 crore across all 8-digit HS codes must file the ARR. This requirement is applicable for each financial year.

3. What is the deadline for filing the ARR?

The ARR must be filed by March 31st of the following financial year. For example, ARR for the financial year 2023-24 must be filed by March 31, 2025.

4. Is there a grace period for delayed ARR filing?

Yes, there is a grace period of three months (until June 30) for delayed filings, but this requires a composition fee of Rs. 10,000. If filed after June 30 but within 45 additional days, the fee increases to Rs. 20,000.

5. What are the consequences of not filing the ARR on time?

Non-compliance with the ARR filing deadline can lead to denial of benefits under the RODTEP scheme. No additional claims for Shipping Bills (SBs) will be processed after the grace period. Additionally, benefits will only resume once the required ARR is filed and any applicable composition fee is paid.

6. What information needs to be included in the ARR?

The ARR (Appendix-4RR) requires detailed information on the following:

• Exporter’s identification details (e.g., IEC/PAN)
• Description and HS code of the exported product
• Quantity and FOB value of the exported product
• Transportation, electricity, and fuel costs
• Taxes and duties paid on inputs used in production
• Any exemptions or rebates received on specific costs
• A declaration that claims do not include exempted or remitted duties

7. What records should be maintained for ARR compliance?

Exporters must maintain all digital and physical records that substantiate the ARR details for a period of five years. These records should be ready for inspection by authorities if required for verification.

8. Will the ARR filing impact future RODTEP rates?

Yes, ARR filings may be periodically assessed by the RODTEP Committee. Based on the data collected, the committee may revise RODTEP rates to ensure fair reimbursement. This process ensures that RODTEP rates reflect actual input costs and are adjusted as needed.

9. Are there any specific requirements for farm sector products in the ARR?

Yes, farm sector products have additional fields in the ARR. These include taxes and duties on inputs like fuel used in farm production, and embedded GST on inputs like pesticides and fertilizers used in agricultural production.

10. What is the penalty for incorrect information in the ARR?

Providing incorrect information in the ARR may result in penalties or a requirement to refund excess claims. Cases flagged for discrepancies may undergo further scrutiny, and exporters may be required to surrender any excess claims identified by the authorities.

11. Can I file the ARR for multiple products in a single submission?

No, Appendix-4RR requires a separate sheet for each exported product. Each product must have its own detailed filing, including all related data fields, HS codes, and associated costs and taxes.

12. How is the ARR different from the regular RODTEP claim submission?

The ARR is an annual submission that consolidates all RODTEP claims made throughout the financial year. While regular RODTEP claims are filed per Shipping Bill, the ARR provides a year-end summary of all claims, costs, and taxes incurred for the entire financial year.

13. What percentage of the FOB value accounts for taxes/duties/levies paid on exported products?

This is calculated as the ratio of the total taxes and duties paid on the exported product (as specified in Field 22 of Appendix-4RR) to the FOB value of the product (Field 8B). This percentage helps assess the RODTEP claim as a portion of the total export value.

14. How can exporters prepare for ARR filing?

Exporters should establish robust record-keeping practices, tracking all input costs, taxes, and duties throughout the year. Digital systems or accounting software can help manage this data, ensuring that all required information is ready for ARR filing.

15. What is the declaration required in the ARR?

Exporters must declare that:

• The RODTEP claim does not include duties, taxes, or levies that are exempted, remitted, or credited through other mechanisms.
• The amount claimed under RODTEP does not exceed the actual taxes incurred during the specified period.
• All information provided in the ARR is accurate and complete.

16. Where can I get assistance or further clarification on ARR filing?

For additional guidance, exporters can contact the Directorate General of Foreign Trade (DGFT) or consult with trade compliance professionals. DGFT may also release further clarifications and updates as needed.