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Home >Politics >Policy >Tax refunds for exporters: Will the new scheme help?

The commerce ministry has released details of a new scheme to help exporters stay competitive and increase exports, at a time global demand for Indian goods has risen due to revival in economic activities in the developed economies. Mint looks at the blueprint:

What is RoDTEP scheme?

The Remission of Duties and Taxes on Exported Products (RoDTEP) scheme reimburses central, state and local taxes that are not refunded under any other scheme to exporters. Under existing rules, goods and services tax (GST) and customs duties for inputs required to manufacture export products are either exempted or refunded. However, certain duties are outside the ambit of GST and are not refunded to exporters, such as value-added tax on transportation fuel, mandi tax and duty on electricity for manufacturing. RoDTEP has replaced the earlier Merchandise Exports from India Scheme (MEIS).

What are the features of the scheme?

The scheme came into effect on 1 January, but since guidelines and rates for export items were not announced, exporters were unable to benefit from it. The commerce ministry notified RoDTEP rates on 17 August. The scheme, with a budget of 12,454 crore for FY22, will be available for 8,555 export items in sectors such as marine, agriculture, leather, gems and jewellery, automobiles, plastics, electrical and electronics, and machinery. The government has announced a separate Rebate of State and Central Levies and Taxes (RoSCTL) scheme for garment exports with a budget outlay of around 6,946 crore for FY22.

The blue print
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The blue print

Are some sectors excluded from RoDTEP?

Yes; exporters in sectors like iron and steel, mineral products, pharmaceuticals and chemicals have been kept out of the scheme because the Centre thinks the sectors are doing well on their own and given the tight fiscal situation, it won’t be possible to cover these sectors in FY22. Products manufactured in export-oriented units and special economic zones are also not covered.

How does the new scheme work?

The refunds for the taxes paid by exporters under the scheme would be credited to an exporter’s ledger account with the customs, and can be used to pay basic customs duty on imported goods. The credits can also be transferred to other importers. The rebate will have to be claimed as a percentage of the freight-on-board value of exports. For certain export items, a fixed quantum of rebate amount per unit may also be notified. A monitoring and audit mechanism has been put in place to physically verify the records on a sample basis.

What do exporters think of the scheme?

While most exporters have welcomed the notification of rates, they are unhappy with the low rates under the scheme which will give them much fewer benefits than MEIS. Sectors which have not been covered under the scheme have called for a review. Exporters in sectors like engineering and electronics, which use iron and steel as inputs, are unhappy because they can’t claim benefits for their inputs. The low budget allocation means rebates may be exhausted on a first-come-first-served basis.

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