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Indirect Tax Alert - FTP: Effective date of Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme

04 January 2021

Government of India had designed various export benefit schemes such as Merchandise Exports from India Scheme (MEIS), Service Exports from India Scheme (SEIS), Export Promotion Capital Goods (EPCG) Scheme, etc. to compensate for various infrastructural bottlenecks experienced by Indian exporters and to promote exports. In the year 2019-20, the Dispute Resolution Panel of WTO on petition filed by US, had ruled that some of the export benefit schemes designed by India is giving undue advantage to Indian exporters and violate the WTO’s Subsidies and Countervailing Measures (SCM) Agreement, which prohibits subsidies that are based on export performance. India has appealed against the ruling, which is pending at the appellate forum.

The Government of India in the meanwhile has decided to replace the existing schemes and introduce a new scheme, which would be far more transparent and compliant with WTO norms.

The Ministry of Finance, vide Press Information Bureau, has issued a Press Release dated 31 December 2020, announcing the Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme, to benefit the exporters in place of MEIS, with effect from 01 January  2021, covering all goods exported from India.

The RoDTEP scheme would refund to exporters the embedded Central, State and local duties/taxes that were so far not being rebated/refunded and were, therefore, placing our exports at a disadvantage.  The scheme is in conformity with WTO trade norms and best global practises. There are certain taxes/duties/levies that are outside Goods and Services Tax (GST) and are not currently refunded on exports, such as, VAT on fuel used in transportation, Mandi tax, Duty on electricity used during manufacturing, Stamp duty, etc. These taxes would be considered for the benefit under RoDTEP. The rebate shall be claimed as a percentage of Free on Board (FOB) value of exports. The new scheme is estimated to have an outlay of INR 500bn per annum.

The refund would be credited in an exporter’s ledger account with Customs and used to pay Basic Customs duty on imported goods. The credits can also be transferred to other importers.

The RoDTEP rates would be notified shortly by the Department of Commerce, based on the recommendation of a Committee chaired by Dr. G.K. Pillai, former Commerce and Home Secretary. The final Report of the Committee is expected shortly. An exporter desirous of availing the benefit of the RoDTEP scheme shall be required to declare his intention for each export item in the shipping bill or bill of export. The RoDTEP shall be allowed, subject to specified conditions and exclusions.  The notified rates, irrespective of the date of notification, shall apply with effect from 01 January 2021 to all eligible exports of goods.

BDO Comments

Though the RoDTEP, which is an end-to-end digitised scheme with proper monitoring and audit mechanisms, is expected to make Indian exports competitive in international markets, the transition phase where there is lack of clarity on the list of eligible products, quantum of benefits, conditions, is likely to adversely affect Indian merchandise exports.

[Press release dated 31 December 2020]