The New Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme and Rates announced by The CBIC on 17th August in place of the MEIS Scheme has not lived up even to minimum expectations of Trade & Industry. The Rates of  Merchandise Export from India Scheme (MEIS) which were being dragged down over the years, saw tremendously spiral downwards under RoDTEP. This was after most associations had provided detailed study on calculation of the rates in Form R1, R2 & R3 and represented before the Committee on Drawbacks. To understand the grievance of Trade & Industry on the low RoDTEP Rates, let us understand the Scheme.

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Objectives and Understanding of RoDTEP:

RoDTEP is a reform, based on the globally accepted principle that taxes and duties should not be exported, and taxes and levies borne on the exported products should be either exempted or remitted to exporters. The Scheme is expected to boost our exports & competitiveness in the global markets and Increase Employability.

As per Para 4.54 of The Foreign Trade Policy (FTP), The Scheme’s objective is to refund –

i. Currently un-refunded Duties/ taxes/ levies, at the Central, State & local level, borne on the exported product.

ii. Prior stage cumulative indirect taxes on goods & services used in production of the exported product

iii. Indirect Duties/ taxes/ levies in respect of distribution of exported products.

Scheme is to be implemented by Customs through a simplified IT System. Rebate will be issued 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). The tax refund rates range from 0.5% to 4.3% for various sectors, on FOB Value. Such rate and quantum have been notified in Appendix 4R at 8-digit HS code level.

Effective Date for Implementation of RoDTEP Scheme:

The Scheme would be Effective from 1.1.2021 other than products on which Advance Authorization or DFIA or Special Advance Authorization is taken/ Products manufactured or exported by 100% EOU/ FTZ/EPZ/SEZ. For such categories, the Scheme will be effective later

Mechanism of Issuance/Utilization of RoDTEP Scrips/Credit & Safeguards:

a. Issuance of RoDTEP Scrips/Credit will be in the form of a transferable duty credit/electronic scrip (e-scrip) maintained in an electronic ledger by CBIC

b. manner of application, time period for application and other matters including export realization, export documentation, sampling procedures, record keeping etc. would be notified by the CBIC going forward.

c. 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 imposition of penalty will also be built suitably by CBIC.

d. Scrips would be used Only for payment of duty of Customs leviable under the First Schedule to the Customs Tariff Act, 1975 viz. Basic Customs Duty.

e. There is no provision for remission of arrears or contingent liabilities under the Scheme, to be carried over to the next financial year.

Ineligible Supplies/ Items/Categories under RoDTEP Scheme:

i. Export of imported goods covered under paragraph 2.46 of FTP

ii. Exports through trans-shipment

iii. Export products which are subject to Minimum export price or export duty

iv. Products which are restricted for export under Schedule-2 of Export Policy in ITC (HS)

v. Products which are prohibited for export under Schedule-2 of Export Policy in ITC (HS).

vi. Deemed Exports

vii. Supplies of products manufactured by DTA units to SEZ/FTWZ units

viii. Products manufactured in EHTP and BTP

ix. Products manufactured partly or wholly in a warehouse under section 65 of the Customs Act, 1962

x. Products on which Advance Authorization or DFIA or Special Advance Authorization taken

xi. Products manufactured or exported by 100% EOU

xii. Products manufactured or exported by any of the units situated in FTZ/EPZ/SEZ

xiii. Products manufactured or exported availing the benefit of the Notification No. 32/1997-Customs dated 1st April, 1997.

xiv. Exports for which E- document in ICEGATE EDI has not been generated/ Exports from non-EDI ports

xv. Goods which have been taken into use after manufacture

Rights of The Government Going forward as per RoDTEP Scheme:

a. Finalize the Overall budget/outlay for the RoDTEP Scheme not finalized as yet.

b. Revise rates during the year, based on Budget.

c. Deciding the sequence of introduction of the Scheme across sectors.

d. Prioritization of the sectors to be covered.

e. Deciding on the Degree of benefit to be given on various items within the rates set by the Committee and within a ceiling as may be prescribed

f. Deciding on the per item/total overall benefit amount permissible, within the overall budget/ outlay finalized

g. Right to modify any of the categories as mentioned above for inclusion or exclusion under the scope of RoDTEP, at a later date

h. Notifty the effective date for products on which Advance Authorization or DFIA or Special Advance Authorization taken/ Products manufactured or exported by 100% EOU/ FTZ/EPZ/SEZ Scheme will be effective later

i. Conduct a broad level monitoring through an Output Outcome framework.

j. The efforts would be made to review the RoDTEP rates on an annual basis and to notify them well in advance before the beginning of a financial year

ISSUES IN THE RoDTEP SCHEME AND POINTS FOR THE MINISTRY TO PONDER UPON:

i. Unjust Rates:

The objective of the Scheme, which is clearly laid out is to reimburse embedded taxes in export products. These embedded Taxes are those at Central, State & local level for manufacturing product and even incurred at the prior stage level. Even taxes on distribution expenses is to be reimbursed. However, the rates notified do not even come close to reimbursement of such taxes.

At least a Clarification on how the rates are calculated should be given to Trade & Industry and consultations should be held to see whether such calculations are actually done correctly.

For Example: The following are the items which are common to almost all Sectors for embedded rates. Even if these are taken into account, the rates of RoDTEP would seem unjust –

Index of Calculation Sheets
Sl No Embedded Tax (%) of Rate
1 Diesel – Excise & VAT 47.39%
2 Diesel – Other than Excise & VAT 1.22%
3 Natural Gas 29.67%
4 Coal 15.06%
5 Electricity – Other than Electricity Duty 13.02%
6 Petrol – Excise & VAT 54.83%
7 Petrol – Other than Excise & VAT 1.22%
8 Warehouse 10.92%
9 Ocean Freight 24.76%
10 Fertiliser (For Agri Products) 13.98%
11 Flight Charges 11.29%
12 GTA 12.69%
13 Brokerage 2.21%
14 LPG 0.58%
15 Car Rental 18.73%
16 Courier 3.72%
17 Hospital (For Labour Intensive Sector) 8.26%
18 Protective Equipment (For Hazardous Sector) 0.43%

ii. The Scheme said to be subject to budgetary constraints. The point to note here is that where is the question of budget when the Scheme is to reimburse the taxes already collected by the Government.

The budgetary constraints specified at several places in the scheme seem to be in conflict with the objects and the intent of the scheme itself.

iii. Some sectors like steel, chemicals, etc have totally been left out of the scheme. Is this not against the WTO Norms that taxes and duties should not be exported. 

iv. Exports for which E- document in ICEGATE EDI has not been generated/ Exports from non-EDI ports, have been made ineligible for availing the benefits of the scheme. Hence certain exports to Nepal, Bhutan and in some cases Bangladesh would be left out.

Why should Trade suffer due to the delay on the part of The Government to make these ports EDI Ports.

v. Exports under Advance Authorisation, Duty Free Import Authorisation, 100% Export Oriented Units, Export Processing Zones, Special Economic Zones, and products manufactured in a customs bonded warehouse, are ineligible. These schemes have existed for quite some time as export enablers and their exclusion from RoDTEP benefits could rob them of some popularity, considering there was no such exclusion under the earlier MEIS scheme.

If the above points are not considered by The Ministry, then certainly we could see the Writ Jurisdiction come into play for invoking the Rights of Exporters, especially those whose survival in the International markets depends upon the reimbursement of these taxes.

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Author Bio

Qualification: LL.B / Advocate
Company: Tax Connect Advisory Services LLP
Location: MUMBAI, Maharashtra, IN
Member Since: 10 Jan 2019 | Total Posts: 55
Mr. Vivek Jalan is a Fellow Member of the Institute Of Chartered Accountants of India (ICAI) & a qualified LL.B. He is the member of The CII- Economic Affairs & Taxation Committee. He is the Co Chairman of The Indirect Tax Committee of The Bengal Chamber of Commerce and Industry. He is also View Full Profile

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