Foreign Investment

DGFT Extends RODTEP Benefits to EOU, AA and SEZ Units

The Directorate General of Foreign Trade (DGFT) has extended the benefit of the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme to Advance Authorization (AA) holders, Export Oriented Units (EOUs), and Special Economic Zones (SEZ) units via Notification No. 70/2023 dated 08 March 2024. This action is a major step toward creating a more welcoming and favourable atmosphere for exporters in various industries.

Introduction to DGFT Extends RODTEP Benefits

The Central Government announced the RoDTEP scheme to replace the Merchandise Exports from India Scheme (MEIS) to increase exports and support the Made in India initiative. The scheme’s goal is to reimburse the duties and taxes that were previously unrefunded during the production or distribution of exported goods. A refund is given to qualified exporters under this plan at a rate announced as a percentage of FOB value. Under the aforementioned plan, several significant taxes, fees, and levies will be refunded, including:

  • State Value Added Tax (VAT) and Excise Duty on fuel used in the inward and outward transportation of raw materials, spares and consumables to manufacture export products.
  • Mandi tax paid on agricultural products.
  • Electricity duty is paid on electricity used in the manufacture of goods.
  • Embedded CGST, SGST and GST Compensation Cess on coal used in electricity production.
  • Embedded CGST and SGST paid on procurement from unregistered suppliers.
  • Embedded CGST and SGST are paid on inputs used in the production of agricultural products.
  • Documents for export that have stamp duty paid.

The scheme was previously announced by Notification No. 19/2015-2020, dated August 17, 2021, and it excluded units operating under the SEZ and EOU schemes from its benefits.

Key Highlights of the Notification

There are certain key highlights of the said notification discussed below for your better insight:

1. Modifications to the Scheme Provisions and Eligibility

As stated in Paragraph 4.55 of the Foreign Trade Policy 2023, several goods and/or categories that were previously excluded from the RoDTEP scheme are now eligible as of March 11, 2024.

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A new appendix (Appendix 4RE) contains additional information for exports by Advance Authorization (AA) holders, Export Oriented Units (EOUs), and Special Economic Zones (SEZ) units. The scheme’s provisions have been amended to provide eligible exporters with a rebate as a percentage of FOB value at a notified rate.

2. Dates of Extension and Implementation

The programme has been expanded to cover SEZ units, EOUs, and AA holders (but not Deemed Exports), with particular implementation terms and conditions set forth for each group. It should be noted that the integration of SEZ units with the Customs Automated System (ICEGATE), which is anticipated to be live on April 1, 2024, is a prerequisite for their implementation.

3. Rate and Budgetary Adjustments

Changes, such as additions or deletions, could be made to guarantee that the plan’s total cost stays within the authorised spending limit. Additionally, updated RoDTEP rates for 25 HS codes are released by the RoDTEP Committee’s recommendations.

4. Extending the RoDTEP Programme

Additionally, the announcement extends the RoDTEP scheme’s total term until September 30, 2024, from the originally scheduled deadline of June 30, 2024.

Proposal for Inclusion of SEZ Units & EOUs under the RoDTEP Scheme

Because SEZ units and EOUs play a crucial role in India’s export landscape, the Export Promotion Council for EOUs and SEZs (EPCES) brought up this issue with the Departments of Commerce (DoC) and Revenue (DoR), working with its knowledge partner Grant Thornton Bharat LLP (GTBLLP). EPCES then submitted a proposal to include SEZ units & EOUs under the RoDTEP scheme. The following important points were made for consideration:

  • Significant domestic purchases of capital goods and inputs by SEZ units and EOUs
  • Embedded taxes on these purchases; the export of such unrebated or unrefunded taxes and tariffs, which makes SEZ units and EOUs less competitive
  • Immediate and long-term effects on SEZ units and EOUs.

Proposal Submission to RoDTEP Committee by EPCES & GTBLLP

The RoDTEP Committee, DGFT, DoC, and DoR received a comprehensive proposal from EPCES and GTBLLP that included important facts about the contribution provided by SEZ units and EOUs, a cost analysis, the rationale for inclusion, and the impact on SEZs and EOUs resulting from non-inclusion.

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A RoDTEP committee was then established to examine whether units operating under the SEZ and EOU schemes qualified for the RoDTEP incentive. To do this, the committee requested data in a certain format from all export promotion councils nationwide.

To raise awareness about the information needed and to collect, compile, and analyze data, GTBLLP established connections with several units under the SEZ and EOU schemes.

A group of GTBLLP experts led many workshops for the units, assisting them with the information needs set forth by the Committee and addressing their concerns in conjunction with EPCES. This group served as a liaison between the industry participants and the RoDTEP committee.

Impact of RoDTEP Benefits for EOUs, AA Holders & SEZs

SEZs will have to wait until their IT systems are integrated with the automated ICEGATE system of the Customs division, even though benefits for EOUs and AA holders will start on March 11. According to the Ministry of Commerce, these benefits are being given out by budgetary allotments and are expected to last until September 30, 2024, with potential extensions.

Although the RoDTEP scheme’s incorporation of EOUs and SEZs is unquestionably a positive move, its effective execution hinges on a number of players, including exporters, governmental organisations, and regulatory organisations.

In addition to resolving long-standing complaints, the government has set the groundwork for faster expansion and competitiveness by providing these organisations with duty and tax refund benefits.

Conclusion

To sum up, the RoDTEP programme is an essential instrument in India’s attempts to grow its exports and solidify its place in the world. Expanding RoDTEP benefits to hitherto unexplored industries like AA, EOU, and SEZ units has created a surge of excitement and hope in India’s export industry. This growth helps exporters overcome global obstacles while strengthening India’s export environment.

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Additionally, the RoDTEP’s inclusion of EOUs and SEZs is expected to encourage investment in these zones, expand manufacturing capacity and technical innovation, and promote industrial growth. This will, therefore, spur economic growth and the creation of jobs in the areas where these zones are situated.

FAQs

  1. Can SEZ Units apply for RoDTEP Benefits?

    According to a government announcement, the Remission of Duties and Taxes on Exported Products (RoDTEP) programme benefits are now available to units in special economic zones (SEZs), Export-Oriented Units (EOUs), and Advance Authorization holders.

  2. How is the RoDTEP scheme beneficial?

    The goal of the RoDTEP programme is to offset taxes and tariffs paid on exported items that would not otherwise be credited, remitted, or reimbursed in any way. According to the guidelines in Appendix 4R to the Notification, the benefit is awarded as a fixed amount per unit of measurement or as a percentage of FOB.

  3. Who cannot be eligible for the RoDTEP?

    All exporters are eligible for the RoDTEP programme if their goods are produced in India. There are, however, a few exclusions from this eligibility, such as goods produced or exported by an organisation recognised by the Foreign Trade Policy (FTP) as a 100% Export Oriented Unit (EOU)

  4. Is it possible to claim both the RoDTEP and duty drawback?

    Yes, exporters can claim both RoDTEP and duty drawback. They must declare their intention to claim RoDTEP and select the specific shipping bills to generate the RoDTEP Scrip. Since duty drawback and RoDTEP cover different duties and taxes, exporters can receive both benefits without overlap.

  5. What is meant by the EOU?

    The Export Oriented Units concept was implemented in 1980 to generate extra production capacity to facilitate exports and boost the nation's foreign exchange earnings. To be designated as an EOU, a unit must be committed to exporting all its manufactured commodities.

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