Restrictions by way of software changes counter-productive

A few weeks ago, I had written how the government had moved with great alacrity to streamline many processes using information technology, thus making life easier for importers, exporters and other taxpayers, and bringing in greater efficiency, quicker movement of goods and less corruption. Today, I write about how the government is misusing the same technology for bringing about schemes/restrictions that are not sanctioned by law.

The introduction of the Remission of Duties and Taxes on Export Products (RoDTEP) scheme, through an advisory in the portal icegate.gov.in is a good example. The Commerce Ministry, mandated by law to formulate and notify or amend the Foreign Trade Policy, has not yet notified the RoDTEP scheme. The RoDTEP rates are not yet notified. No notification has been issued under Section 51B of the Customs Act, 1961, that provides the legal framework for maintaining duty credit account in the customs automated system in the form of an electronic duty credit ledger. No regulations have been notified under Section 157 of the said Act that empowers the government to prescribe the manner in which the electronic duty credit ledger shall be maintained. No amendments have been made to the regulations dealing with shipping declarations or forms.

Yet, the Finance Ministry has implemented the scheme through amendments in software that require the exporters to furnish RoDTEP declarations.  The advisory says that if a RoDTEP declaration is not filed, the benefit of the scheme will not be available. In case of exports by export oriented units (EOU), special economic zone (SEZ) units and exports in discharge of obligation under advance authorisation, the system does not accept RoDTEP declaration. Some Export Promotion Councils have represented that the objective of RoDTEP scheme is to refund the duties and taxes that are not rebated or exempted through schemes for duty drawback, advance authorisation, EOU etc. that allow duty-free import of inputs required for export production.  However, the system now allows filing of RoDTEP declaration for exports under the Export Promotion Capital Goods scheme.

In July, the Director General of Foreign Trade disenabled filing claims under Merchandise Exports from India Scheme (MEIS) for shipping bills filed after March 31, 2020. Thereafter, the facility of filing MEIS claims for exports made during 2019-20 was also disenabled. There is no legal backing to do so. 

There are some issues with the Goods and Services Tax electronic portal also but they are too technical to warrant detailed discussions here. 

What happens when the government uses the software to impose restrictions that are not sanctioned by legal provisions is that the Courts strike down such restrictions as invalid. This is similar to a situation, where the Rules dealing with procedures are amended without carrying out the requisite amendments in the Acts that specify substantial rights and obligations. When faced with such judgements, what the government does is to amend the laws with retrospective effect, causing problems to the taxpayers as well as the administrators.

Another problem is that the advocates, chartered accountants and consultants advise their clients on the basis of the law as it exists but the clients find that the system functions in a very different way, resulting in confusions at the operating level.

So, the government must align the software to the legal provisions, so that confusions, litigation and retrospective amendments are avoided.

Email : tncrajagopalan@gmail.com