Remission of Duties or Taxes on Export Products: RoDTEP Scheme

Ashish M. Shaji

23 Jun, 2020

The Remission of Duties or Taxes on Export Products (RoDTEP) Scheme has been formed by the Indian government. It is a scheme that replaces the existing MEIS (Merchandise Exports from India Scheme) scheme for the export of goods from India.

It aims to reimburse the taxes and duties incurred by the exporters like the local taxes, coal cess, electricity duties, mandi tax, and the fuel used for transportation that is not exempted nor refunded under any other existing scheme. The rebate shall be claimed as a percentage of the FOB (Freight on Board) value of exports.

The government of India has approved this scheme recently, and it shall be notified in a phased manner, and accordingly, items shall be moved from the existing scheme of MEIS to RoDTEP with appropriate monitoring and audit mechanism. This scheme shall incentivize exporters at a cost of INR 50000 crore to the exchequer.

What are the objectives of the RoDTEP Scheme?

The main objectives of this scheme are as follows:

• Boosting exports scheme for enhancing exports to international markets;
• Making the Indian export cost-competitive and creating a level playing field for Indian exporters in the International market;
• Boosting the scope of employment generation in different sectors; and
• Advancing the dwindling outward shipment.

Some essential points to note regarding the RoDTEP Scheme

Some of the notable points of this scheme are as follows:

• Currently, only 30% of total actual indirect taxes incurred by the exporters are refunded by the existing Merchandise Exports from India Scheme.
• As per the WTO rules^[1], certain duties like state taxes on oil, power, water, and education cess are permitted to be refunded.
• In this backdrop, the scheme of RoDTEP was framed in accordance with the WTO guidelines that reimburse the taxes, duties, or levies at the Central, State or Local level which are presently not being refunded under any other mechanism but are incurred in the manufacture process and distribution of exported products.
• The taxes that shall be refunded through this scheme are VAT, Central excise duties on fuel used for transportation, electrical duties that are not exempted, or refunded under any other existing mechanism.
• Previously incentives were provided in the form of transferable scrip, but the new scheme looks to create an electronic credit ledger in the customs system, which allows digital refunds to exporters, duties, and taxes charged at the Central, state and local levels.

What are the benefits of the RoDTEP scheme to Indian exporters?

The benefits that are provided under the RoDTEP scheme to the Indian exporters are as follows:

• Timely adoption of industry standards

By adopting this scheme, the Indian exporters would be able to meet the international standards for exports. It shall help in increasing the economy of the country and working capital for the enterprise.

• New working group on standards

The Ministry of Finance shall establish a working group on standards that will lay down the roadmap for the adoption of standards, enforcement, and timelines. It will also provide support to the exporters in dealing with the non-Tariff barriers such as slow testing and export clearance process.

• Affordable testing

Exporters would be able to avail affordable testing and certification to get affordable certifications within the country rather than relying on international organizations. The services of testing and certification are developed in Public, private Partnership mode to help Indian exporters to have access to internationally recognized tests.

• Quicker GST Returns

Tax assessment may get fully automatic for the exporters. Businesses shall access their refunds for GST through an automatic refund route.

• Less turnaround time at the airport and ports

The Ministry of Finance has been working on minimizing the clearance time at the airports and ports in order to decrease delays in exports. Exporters shall be able to monitor real-time clearance status through a digital medium.

• Financial benefits

Exporters are set to enjoy lower rates of interest on capital loans and other financial benefits like higher insurance cover and financial incentives on exports.

What is the difference between the MEIS and RoDTEP scheme?

The scheme of MEIS and RoDTEP differ in the following aspects:

• Schema of Incentive

In case of MEIS, an additional incentive in exports of goods is available apart from other refunds and drawbacks on undertaking such export, whereas in case of RoDTEP refund of indirect taxes on the inputs used in the manufacture of exported products which is not presently reimbursed by any other existing schemes.

• WTO Compliance

MEIS is non-compliant with WTO trade norms, whereas RoDTEP is compliant with WTO trade norms.

• Incentive Percentage

2% to 5% of FOB value of exports in case of MEIS whereas Product based % way of reward in RoDTEP.

• Issuance Mode

In case of MEIS, issuance is in the form of transferable scrips such as hardcopy, etc. whereas in case of RoDTEP issuance is in the form of transferable duty credit or electronic scrip which shall be maintained in the electronic ledger.

• Transferability

As far as transferability is concerned, both MEIS, as well as RoDTEP, is freely transferable.

Conclusion

Our Recommendation: FEMA Compliance on Export of Goods and Services