Shift from MEIS to RoDTEP, Are we Ready Yet ?

The Union Cabinet in March approved the Remission of Duties or Taxes on Export Products (RoDTEP), a scheme for exporters to reimburse 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.

It will replace the Merchandise Export from India Scheme (MEIS) that was found to violate the World Trade Organization rules as it was export focused. MEIS will be phased out.

With the issue of No: 30 /2015-2020 dated 01.09.2020, the government has initiated a step towards the phasing out of the MEIS Scheme and introduction of RoDTEP.

The said notification highlights the following points:

“3.04 A

The total reward which may be granted to an IEC holder under the Merchandise Exports from India Scheme (MEIS) shall not exceed Rs. 2 Crore per IEC on exports made in the period 01.09.2020 to 31.12.2020 [period based on Let Export Order (LEO) date of shipping bill(s)]. Any IEC holder who has not made any export with LEO date during the period 01.09.2019 to 31.08.2020 or any new IEC obtained on or after 01.09.2020 would not be eligible for submitting any claim for benefits under MEIS for exports made with effect from 01.09.2020. The aforesaid ceiling may be subject to further downward revision to ensure that the total claim under the Scheme for the period (01.09.2020 to 31.12.2020) does not exceed the allocation prescribed by the Government, which is Rs 5,000 Cr.

3.04 B

Benefits under MEIS shall not be available for exports made with effect from 01.01.2021.”

Effect of this Notification:

A limit on total reward under MEIS has been imposed so that for exports made in the period 01.09.2020 to 31.12.2020 the total reward which can be claimed by an IEC holder does not exceed the ceiling of Rs. 2 Cr. Further, it has also been notified that any IEC holder who has not made any exports for a period of one year preceding 01.09.2020 or any new IECs obtained on or after the date of publication of this Notification would not be eligible for submitting any claim under MEIS.

In addition, it has been notified that MEIS Scheme is withdrawn with effect from 01.01.2021. The aforesaid ceiling will be subject to further downward revision to ensure that the total claim under MEIS for the period (01.09.2020 to 31.12.2020) does not exceed the prescribed allocation by the Government, which is Rs. 5,000 Cr.

Further on a practical level, the application for MEIS benefits for exports made after 01.04.2020 is not being accepted by the portal and it shows an error that fresh applications shall be accepted after sufficient funds are available.

These steps clearly show the shortage of funds with the government departments wherein specific limits are being set for Incentive available to the exporter and delay in application processing for such incentives.

Most exporters in India, take into account the amount of incentive that is receivable for undertaking exports, while calculating cost/margins for each order. Such sudden imposition of limits will de-motivate large exporters, result in increased costs and make our exports less competitive.

RoDTEP – The Solution or is it ??

The government after approving the new scheme – remission of duties and taxes on export products (RoDTEP) – in March this year had stated that MEIS will be phased out after rolling out of this new scheme.

But the phasing out stage of MEIS has begun without taking into account the current position of the new scheme.

The rates for the new scheme are yet to be notified. Even after publishing, the rates are expected to be lower than MEIS. Considering this fact, the MEIS Scheme should be allowed for staged phase out only after the rates are notified under RoDTEP so that the exporters can adapt to the changed fiscal benefit accordingly.