Step by Step process for RoDTEP Scheme -A step towards Zero Rating of exports- FTP

Background:

Foreign Trade Policy 2015-20 and other schemes provide promotional measures to boost India’s exports with the objective to offset infrastructural inefficiencies and associated costs involved to provide exporters a level playing field. Most of the incentive schemes like MEIS etc. implemented under FTP are not World Trade Organization (WTO) compliant as the rate of incentives provided under such schemes will not reimburse all of the State and Local levies which are still incorporated in the price of the goods exported. Due to which there is a deviation in the basic principles of foreign trade “Goods are exported, taxes are not”.

India being a member of WTO has to follow the guidelines/conditions specified in the WTO agreement. However, the United States has challenged the following export subsidy schemes given by the Indian Governments to their exporters as prohibited export subsidies, since  these schemes are inconsistent with the WTO agreements

  1. Merchandise Export from India Scheme (MEIS),
  2. Export Oriented Units (EOU),
  3. Electronics Hardware Technology Parks (EHTP)
  4. Special Economic Zone (SEZ)
  5. Export Promotion Capital Goods (EPCG)

The allegations were heard by the WTO’s dispute settlement panel and a final report was issued on 30 September 2019 ruling that these schemes are inconsistent with the WTO agreements. Considering the arguments against the existing export subsidy schemes, India has filed an appeal before the appellate forum stating that the panel erred in its ruling to find these schemes as export subsidies. Although the above matter is sub-judice, the Government of India on a pro-active basis, decided to revisit the existing structure and roll out a scheme compatible with WTO norms

To make incentive schemes WTO compliant, the Cabinet Committee on Economic Affairs, chaired by Prime Minister Shri Narendra Modi, has given its approval for introducing the scheme for Remission of Duties and Taxes on Exported Products (RoDTEP) under which 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. The following are the some of taxes /duties which are not refunded under the present mechanism.

  1. VAT on fuel used in the generation of captive power
  2. VAT on fuel used in farm sector (for production only)
  3. Mandi Tax
  4. Duty on electricity charges
  5. Stamp duty on export documentation
  6. Embedded CGST/SGST on purchase from unregistered dealers
  7. Excise duty on fuel used in transportation etc.

This scheme is going to give a boost to the domestic industry and Indian exports providing a level playing field for Indian producers in the International market so that domestic taxes/duties are not exported. RoDTEP is a combination of the current Merchandise Export from India Scheme (MEIS) and Rebate of State and Central Taxes and Levies (RoSCTL)

This scheme was made operational from 01.01.2021 through the press release and advisory by the Ministry of Finance (MoF) on 31.12.2020. However, rates for the RoDTEP scheme were not yet notified and Notification from DGFT for implementation of the said scheme was not yet issued. Further, the said scheme was not applicable for the exports made under Advance Authorization or made by Export orient unit (EoU) or by Jobbing.

Salient features of RoDTEP Scheme:

  1. Prior stage cumulative indirect taxes such as mandi tax, VAT, and central excise on fuel, etc. on goods and services used in the production of export products will be reimbursed through the RoDTEP scheme.
  2. The objective of Zero-rating of export products can be achieved through the implementation of the RoDTEP scheme.
  3. The rebate would be claimed as a percentage of the Freight On Board (FOB) value of export which will be issued to exporters in the form of transferable duty credit/ electronic scrips, which will be maintained in an electronic ledger.
  4. A monitoring and audit mechanism, with an Information Technology based Risk Management System (RMS), would be put in to physically verify the records of the exporters.

Step by Step process for claiming scrips under RoDTEP Scheme: 

Step 1: Creation of RoDTEP Credit ledger

  1. Exporters have to create a RoDTEP credit ledger in their ICEGATE Account by clicking on the “RoDTEP” tab under the “Our Services” section of https://www.icegate.gov.in
  2. The user will be directed to the login page. After login using valid credentials/class-3 DSC, the user will be able to see the RoDTEP option on the left panel. If the exporter is not registered, they can get themselves registered as per advisory through the link https://icegate.gov.in/Download/JavaSetupForDSC.pdf
  3. Exporters can select the scheme name from the drop-down as RoDTEP and create a ledger account
  4. User can perform various operations mentioned as follows
    1. Scroll Details
    2. Scrip Details
    3. Transaction Details
    4. Transfer Scrip
    5. Approve Scrip Transfer

Step 2: Declarations in shipping bills

  1. Mandatory w.e.f. 01.01.2021 for the exporters to indicate in their shipping bill whether or not they intend to claim RoDTEP on the export items.
  2. Unlike Drawback, there are no separate serial numbers based on a schedule for claiming RoDTEP. RoDTEP rates will be notified as per the RITC Code and therefore, there will be no need to declare any separate code or schedule serial number for RoDTEP
  3. The exporter will have to make the following declarations is the SW_INFO_TYPE Table of the Shipping Bill for each item
    • INFO TYPE = DTY
    • INFO QFR = RDT
    • INFO CODE = RODTEPY – If RoDTEP is availed and RODTEPN – if not availed
    • INFO MSR = Quantity of the items in Statistical UQC as per the Customs Tariff Act for that item RITC
    • INFO UQC = UQC for the Quantity indicated in INFO_MSR
    • For every item where RODTEPY is claimed in INFO CODE, a declaration has to be submitted in the statement table of the SB as below
      • STATEMENT TYPE = DEC
      • STATEMENT CODE = RD001

      Note:

  • It may be noted that if RODTEPY is not specifically claimed in the Shipping Bill, no RoDTEP would accrue to the exporter. However, a similar condition was there under MEIS still various High courts have held that substantial benefit cannot be denied for the procedural lapse. Thereby the said litigation may continue in RoDTEP Scheme also.
  • Even though the items and rates are not notified by the Government for RoDTEP yet, the exporters must indicate their intent for the claim at the time of Shipping Bill filing itself. Once the rates are notified, System would automatically calculate the RoDTEP amounts for all the items where RODTEPY was claimed
  • No changes in the claim will be allowed after the filing of the EGM.

Step 3: Processing of claims and generation of the scroll

  1. The Shipping Bills with RoDTEP and/or Drawback claim will now be routed for officer intervention based on Risk-based targeting by RMS
  2. All the Shipping Bills will be sent to RMS after the EGM is filed. Based on the input by RMS, Shipping Bills will either come to the officer for the processing of RoDTEP/DBK benefits or will directly be facilitated to the scroll queue without any officer intervention
  3. Once the Shipping Bill is processed for DBK and/or RoDTEP either by the officer or as per facilitation by RMS, it will move to the respective scroll queues
  4. In case a suspension is placed on any exporter/Shipping Bill for Drawback, the same will also be applicable to scroll out of RoDTEP benefits.
  5. Options have been made available in the System for officers to generate RoDTEP scrolls. However, till the final rates are notified by the Government, these options will remain disabled in System.
  6. Once the scroll is generated, the respective amounts would be available with the exporter as credits on the ICEGATE portal

Step 4: Claiming of credits, generation, and utilization of scrips

  1. Once the RoDTEP scroll is generated, the credits allowed will be available within their ICEGATE login of the exporter to claim and covert into a credit scrips
  2. A unique Scrip Number will be generated and tagged to every user. A credit entry will be made in the credit Ledger for that user. User can view scrip details after selecting from the following options in the scrip status dropdown
    1. Active– Scrip which is still in an active state
    2. Utilize– Scrip which is utilized by the user
    3. Transferred– Scrip for which the transfer request is approved by the transferee to whom the user has initiated the transfer
    4. Transfer Pending– Scrip which is transferred by the user to another IEC holder but the latter has not approved the transfer request
    5. Expired– Scrip which is expired
    6. Transfer Rejected– Scrip which is rejected by the transferor (who has initiated the scrip transfer request) or the transferee (to whom scrip transfer request is sent)
    7. All– All scrips generated
  3. The exporter will be able to club the credits allowed for any number of Shipping Bills at a port and generate a credit scrip for the same on the ICEGATE portal.
  4. Scrips once generated will reflect in the exporter’s ledger and will be available for utilization in paying eligible duties during imports or for transfer to any other entity having IEC and a valid ICEGATE registration

Procedure for transfer of scrips:

Any user who has created a credit ledger account in ICEGATE can transfer a scrip to another user. The user to whom the scrip is to be transferred also needs to have a valid credit ledger account.

The following steps to be followed to transfer scrips:

  1. select the “Transfer scrip” tab to transfer a particular scrip to any other user.
  2. The user can select the appropriate scrip to be transferred from the generated scrips. The list of the generated scrips is available in the drop-down menu along with the “Scrip Available” Option
  3. After appropriate scrip selection, the user can view the scrip amount and enter the IEC of the user to which the scrip is to be transferred. These details, of the IEC holder to whom the user wants to make a transfer, can be entered in the textbox alongside the “Enter Transferee” option
  4. OTP is generated and sent to the user who has initiated the transfer on the registered mobile number and email ID. It has to be entered by that user to transfer the scrip successfully. This OTP is valid for a window of 15 minutes only
  5. After successfully transferring the request, Scrip will be viewed in a grid on the same page. The user who has initiated the transfer scrip request can cancel the request at this stage using the cancel button as shown below
  6. An approval request is sent to the IEC for whom a transfer request has been initiated by the user. This IEC holder to whom the request has been sent can either approve or reject the request in the “Approve scrip transfer” tab.
  7. After clicking the Approve button, the transferee is directed to fill OTP which is sent to the transferee over the registered mobile number and email ID and is valid only for 15 minutes. The Scrip will be transferred to the transferee after successful OTP validation.

Conclusion:

RoDTEP being a WTO compliant scheme, Ministry has to ensure that the rates are notified at the earliest so that the exporters can compute the benefit under RoDTEP scheme and quote their products in international markets accordingly. Further, the government also has to consider the exports made by Advance authorization holders, EOU and SEZ units to be eligible under this scheme as they also suffer the incident of State and Central levies which are not available as refund under GST or by any other route.

(For any feedback/queries mail to ca.hemanthkumar@outlook.com)

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