The government on March 13 approved a scheme for reimbursement of taxes and duties, which were not refunded previously, to exporters with a view to give a boost to the country’s dwindling outbound shipments.

A decision to approve the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme was taken in a Cabinet meeting chaired by Prime Minister Narendra Modi.

Finance Minister Nirmala Sitharaman had said in September this scheme will incentivise exporters at an estimated cost of Rs 50,000 crore to the exchequer. This scheme was announced by Sitharaman in her Budget speech on February 1.

How will the scheme be implemented?

Under the scheme, 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.

Taxes that will be reimbursed are…

* Duty on power charges.

* VAT on fuel in transportation, farm sector, captive power generation.

* Mandi tax.

* Stamp duty on export documents.

* CGST and compensation cess on coal in power production.

* Central excise duty on fuel used in transportation.

Commerce Minister Piyush Goyal said sectors and products under the RoDTEP scheme will be notified in a phased manner and the MEIS benefits for those sectors and items will be withdrawn. It is proposed to digitally refund to exporters, duties and taxes levied at the Centre, state and local levels.

An official statement said that an inter-ministerial committee will determine the rates and items for which the reimbursement of taxes and duties would be provided.

Transferable duty credit / electronic scrip will be issued as part of refund to the exporters, which will be maintained in an electronic ledger.

The rebate would be claimed as a percentage of the Freight On Board value of exports.

A monitoring and audit mechanism, with an information technology based Risk Management System, would be put in to physically verify the records of the exporters.

Features of the scheme

The refunds under the RoDTEP scheme would be a step towards “zero-rating” of exports, along with refunds such as Drawback and Integrated Goods and Services Tax (IGST). This would lead to cost competitiveness of exported products in international markets and better employment opportunities in export oriented manufacturing industries.

At present, GST taxes and import/customs duties for inputs required to manufacture exported products are either exempted or refunded. However, certain taxes / duties / levies are outside GST and are not refunded for exports. These would be covered for reimbursement under the RoDTEP scheme.

So far, exporters have been getting refund under duty drawback and GST paid on raw materials or intermediates. Goyal said the scheme will help in providing a level playing field to domestic exporters in the international markets. The ministry will hold detailed consultations with stakeholders concerned for inclusion of products, which would avail refund.

These measures are compliant with the WTO (World Trade Organisation) norms. India is a member of WTO, which frames norms for global trade. The move assumes significance as a WTO dispute resolution panel has ruled that the Merchandise Export Incentive Scheme (MEIS) was not in compliance with the global trade norms. Under the WTO rules, certain duties like state taxes on power, oil, water, and education cess are allowed to be refunded. The commerce minister said as India has graduated from the category of the least developed countries, it cannot give subsidies for exports.

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