So finally after almost 8 months, the government on have announced rates of tax refunds under the export promotion scheme RoDTEP for 8,555 products. Now, That’s what we expected? No!
1. The Cabinet Committee on Economic Affairs, chaired by Prime Minister has given its approval on 13th March 2020 for introducing the Scheme for Remission of Duties and Taxes on Exported Products (RoDTEP).
2. ‘Remission of Duties or Taxes on Export Products’ (RoDTEP) to replace the schemes of MEIS & RoSCTL.
3. Under this scheme, a mechanism would be created for reimbursement of taxes/ duties/ levies, at the Central, State, and local level, which are currently not being refunded under any other mechanism, but which are incurred in the process of manufacture and distribution of exported products.
4. A three-member RoDTEP Committee, under former Home and Commerce secretary GK Pillai, was constituted in July 2020 to work out the modalities for calculation of duties/taxes/ levies at the Central, State, and local level, borne on the exported product.
5. Now, as the scheme is bound by Budget, Rs 19,400 crore would be available for 2021-22 for both the RoDTEP and the Rebate of State and Central Taxes and Levies (RoSCTL).
6. The RoSCTL scheme was announced for the export of garments and apparel.
7. For the RoDTEP scheme, the amount is Rs 12,454 crore, and the remaining Rs 6,946 crore for RoSCTL.
8. As the RoDTEP scheme came into effect from January 1 this year, additional funds will be provided on a pro-rata basis for the period Jan-March 21.
9. Since then there the exporters are filing Shipping Bills with necessary disclosures for claiming the incentive.
Guidelines for RoDTEP
The government has finally issued Notification 19 dated 17th August 2021, amending the FTP 2015-20 through inserting sub-para (e) in para 4.01 and para 4.54 to 4.59 stating various guidelines in respect of the scheme.
Let’s Decode the general rules!
Under the Scheme, a rebate would be granted to eligible exporters at a notified rate as a percentage of FOB value with a value cap per unit of the exported product, wherever required, on the export of items that are categorized under the notified 8 digit HS Code.
- The rebate shall not be available in respect of those duties and taxes, which are exempted/remitted/credited.
- Ceiling rates under the Scheme will be done by a Committee in the Department of Revenue/Drawback Division with the suitable representation of the DoC/DGFT.
- As the scheme is limited by the budget, the budget will be finalized by the Ministry of Finance in consultation with the DoC.
- The rebate allowed is subject to the receipt of sale proceeds within the time allowed under the Foreign Exchange Management Act, 1999 failing which such rebate shall be deemed never to have been allowed.
- Important to note that, adequate safeguards to avoid any misuse on account of non-realization and other systemic improvements as in operation under Drawback Scheme, IGST and other GST refunds relating to exports would also be applicable for claims made under the RoDTEP Scheme.
Mechanism of Issuance of RoDTEP Rebate
- The scheme would be implemented through end-to-end digitization of issuance of rebate amount in the form of a transferable duty credit/electronic scrip (e-scrip), which will be maintained in an electronic ledger by the Central Board of Indirect Taxes & Customs (CBIC).
- Necessary rules and procedures regarding grant of RoDTEP claim under the Scheme and implementation issues would be notified by the CBIC, Department of Revenue on an IT-enabled platform to end digitization.
- Necessary provisions for recovery of rebate amount where foreign exchange is not realized, suspension/withholding of RoDTEP in case of frauds and misuse, as well as the imposition of penalty will also be built suitably by CBIC.
- However, for exports made by categories under Para 4.55 (x) (Advance Authorization/DFIA), (xi)(EOU), and (xii)(Free Trade Zones/Export Processing Zones/SEZs), the implementation date will be decided later as per provisions of Para 4.55B i.e. To be decided by the RoDTEP Committee later on.
Ineligible Supplies/ Items/Categories under the RoDTEP Scheme
- Export of imported goods covered under paragraph 2.46 of FTP. (Export of Repaired Goods)
- Exports through trans-shipment, meaning thereby exports that are originating in the third country but trans-shipped through India.
- Export products that are subject to Minimum export price or export duty.
- Products that are restricted for export under Schedule-2 of Export Policy in ITC (HS).
- Products that are prohibited for export under Schedule-2 of Export Policy in ITC (HS).
- Deemed Exports
- Supplies of products manufactured by DTA units to SEZ/FTWZ units.
- Products manufactured in EHTP and BTP.
- Products manufactured partly or wholly in a warehouse under Section 65 of the Customs Act, 1962 (52 of 1962). (MOOWR Scheme)
- Products manufactured or exported in discharge of export obligation against an Advance Authorization or Duty-Free Import Authorization or Special Advance Authorization issued under a duty exemption scheme of relevant Foreign Trade Policy
- Products manufactured or exported by a unit licensed as a hundred percent Export Oriented Unit (EOU) in terms of the provisions of the Foreign Trade Policy.
- Products manufactured or exported by any of the units situated in Free Trade Zones or Export Processing Zones or Special Economic Zones.
- Products manufactured or exported availing the benefit of the Notification No. 32/1997- Customs dated 1st April 1997.
- Exports for which electronic documentation in ICEGATE EDI has not been generated/ Exports from non-EDI ports.
- Goods that have been taken into use after manufacture.
- I should start by stating that if we see the allocation towards the scheme, which is way smaller compared to MEIS that had a Budget allocation of Rs 39,097 crore for FY 20.
- The reimbursement rate of taxes and duties on eligible export items vary from 0.01% to 4.3% of the Free on Board (FOB) value. (With maximum Cap)
- Items such as gems & jewelry would have a refund rate of 0.01% whereas items such as shirt fabrics are at 4.3%.
- Sectors such as steel, pharma, and chemicals are kept out of the RoDTEP scheme. (DON’T KNOW WHY!)
- Also, we await the decision on exports on account of Advance Authorizations, by EOUs & by SEZs.
- Looking at the rates of incentive and intents of the scheme which provide zero rebating of exports, are WTO compatible and thus will continue for a long time until all the products and services are brought within the ambit of GST and the embedded incidence is completely neutralized.
Disappointed with the RoDTEP rate! What to do now?
- TaxTru was actively involved in the preparation of various representations and Performas (R1, R2 & R3) given by the RoDTEP Committee to various trade bodies/houses for calculation of the Rates.
- But it seems (not surprisingly), the government has not taken into account such suggestions and came out with their assumptions and presumptions while giving out the rate of incentives.
- Since this scheme is applicable from 1st January, we should closely monitor the mechanism through which the availment mechanism will be implemented.
- Now, if see Para 4.54 & Para 4.55A, the RoDTEP Committee and DoC/DGFT have the power to modify the rates. Hence, in case the rates given are not conforming with what, the entity/ industry is suffering can still submit their representation for review.