Exim Matters: Rodtep rates cut as remissions rise amid flat export growth

Govt halves Rodtep benefits to rein in rising payouts amid stagnant exports, tighter Budget allocations, while exempting agriculture and pushing exporters to improve compliance with annual returns

Last Monday, the government restricted the entitlements under the Remission of Duties and Taxes on Export Products (Rodtep) scheme to 50 per cent of the notified rates and value caps with immediate effect. Next day, a corrigendum clarified that the restriction will not apply to agriculture and allied products falling under Chapters 1 to 24 of the classification scheme. Naturally, the exporters are unhappy with the abrupt reduction in the entitlements that compress their margins on contracts already negotiated. Yet the rate cuts must be seen in the context of rising disbursements under the scheme amid flat merchandise export growth, reduced budgetary allocations for next year and low compliance in filing the annual Rodtep returns (ARR).   

The disbursements (in ₹ crore) under the scheme in the years 2022-23, 2023-24 and 2024-25 are 13,175, 15,018 and 18,313, respectively.  This year’s estimate is 18,233. The export figures for these years are (in $ billion) about 451, 437, 438 and 367 (Apr-Jan). When remissions rise but exports stagnate, fiscal sustainability becomes difficult. Therefore, the Budget 2026-27 has already cut the allocation to 10,000. In fact, a Budget note says that it is proposed to converge the Rodtep and RoSCTL (Remission of State and Central Taxes and Levies) schemes as part of the Export Promotion Mission after appraisal and approval. So, a cut in Rodtep rates was expected. However, in case of the RoSCTL scheme, applicable for textiles sector, where similar trend was noticed and the allocation was cut from ₹ 10,010 crore (2025-26 estimate) to ₹ 5,000 crore (for 2026-27), the rates are not yet cut, perhaps keeping in view its labour-intensive nature. 

The Rodtep scheme seeks to refund unrebated duties/taxes/levies, at the Central, State and local level, borne on the exported product, including embedded indirect taxes across the value chain in the production and distribution of exported product. The Foreign Trade Policy clearly says that the scheme will operate in a budgetary framework for each financial year and necessary calibrations and revisions shall be made, as and when required, so that the projected remissions for each financial year are managed within the approved budget of the scheme. 

The rates are based on recommendations by a committee in the department of revenue with suitable representation from the department of commerce and line ministries and experts on the sectors prioritised by these ministries/departments. The nature of the scheme is that some exporters will benefit more than the others. To review the rates, the Director General of Foreign Trade (DGFT), in October 2024, prescribed ARR to be submitted by the exporters who had received more than ₹ 1 crore Rodtep benefit in the previous year. Few such exporters had filed the returns and so the last date for furnishing the ARR has been repeatedly extended, the latest being the end of March this year. 

Undoubtedly, the ARR format is intricate and demands detailed cost break-ups that many firms do not maintain in a readily extractable form. However, they must appreciate that in the absence of granular data on embedded taxes, consumption patterns and certification, it is difficult to ensure that remission corresponds to actual unrebated levies. In a climate of tightening fiscal space and increasing global scrutiny of export-linked incentives, remission policy cannot rest on assumptions. Stability in entitlements ultimately depends as much on compliance as on allocation.

 

Email: tncrajagopalan@gmail.com