Uncertainty persists on RoDTEP benefits

The Directorate General of Foreign Trade (DGFT) has asked exporters, export promotion councils (EPC), and industry associations involved in export of items falling under chapters 86, 88 and 89 to urgently submit the data for their respective export items in the prescribed format so that the committee determining rates under the proposed Refund of Duties and Taxes of Export on Export Product (RoDTEP) scheme is able to work out suitable rates for those items. In the absence of data, the rates may not be notified, says the DGFT.

The RoDTEP scheme was announced by the finance minister in September 2019 to replace the Merchandise Exports from India (MEIS) scheme, and it was to come into effect from January 1, 2020. As the rates under the proposed scheme have not been determined till now, MEIS has continued. However, exporters have been unable to file their MEIS applications for exports made with from April 1. The commerce ministry says the new RoDTEP scheme will replace the MEIS from January 1, 2021.  The Federation of Indian Export Organisations (FIEO) wants the MEIS to continue till the end of the current financial year.

The RoDTEP scheme seeks to rebate the duties, taxes or levies of the central and state governments that are not rebated through the duty drawback, GST refund mechanisms. These include prior stage cumulative indirect taxes on goods and services used in the production and distribution of export products such as electricity duty, tax on fuel used in transportation and other embedded taxes. To determine such tax incidence on each export product, the government constituted the RoDTEP committee in August. The committee sought necessary data in specified format from the trade, industry associations and EPCs. It appears the government will be able to notify the rates only for a few sectors before this year end. For the garments sector, the government may replace the present Rebate of State and Central Taxes and Levies (RoSCTL) scheme with RoDTEP at the same prevailing rates.  

The reason why the DGFT has asked exporters of items falling under chapters 86, 88 and 89 to submit the data is not clear. The items falling under these chapters include railway or tramway locomotives, rolling-stock, railway or tramway track fixtures and fittings, mechanical (including electro-mechanical) traffic signaling equipment, aircraft, spacecraft, and parts, and ships, boats and floating structures. These items are manufactured and exported mostly by government-owned entities.

The finance minister had said the outlay under RoDTEP will be around Rs 50,000 crore. The actual outlay may be less than Rs 10,000 crore because the incidence of taxes or duties or levies on manufacture or distribution of export products are likely to be much less. In any case, exporters should not factor in the benefits under the MEIS or RoDTEP scheme in their prices. Uncertainties persist about when they will actually get the benefits.