RoDTEP Export Incentive to Substitute MEIS on Last Leg for Notification

· Commerce Demands Rs 20,000 crore Budget to give Incentive to All 11000 Tariff Lines, DoR Offers Money for only 7000 Lines

· New Drawback Rates to be Declared after RoDTEP

[ABS News Service/16.06.2021]

The Department of Commerce (DoC) has recommended increasing the budget of the Remission of Duties and Taxes on Export Products (RoDTEP) scheme to Rs 20,000 crore to cover all 11,310 tariff lines and allay any legal concerns that it is a mere replacement of the WTO non-compliant Merchandise Export Incentive Scheme (MEIS).

The Department of Revenue had set the annual financial outlay at Rs 13,000 crore to include 7,910 tariff items, which were covered under MEIS.

“This risks RoDTEP scheme being dragged to the World-Trade Organisation (WTO) ab-initio,” the department wrote in its recommendations to the committee of secretaries for RoDTEP.

Limiting the outgo of the scheme to Rs 13,000 crore would have required either imposition of cap per exporter per annum, as was done under MEIS last year, or exclusion of certain sectors or scaling down the remission rates.

A cabinet note is likely to be floated this week and the final announcement may be made in 15 days, people close to the matter said.

DoC has suggested increasing the financial outlay by Rs 7000 crore will provide benefits to all the 11,310 harmonized system (HS) code lines including companies approved under the Production-Linked Incentive (PLI) scheme, advance authorization beneficiaries, special economic zones and export-oriented units without putting a large fiscal pressure on the government. HS is a code assigned for every single item which is traded, from components to finished goods.

This would fully delink RoDTEP with MEIS and allay any legal and technical concerns that trading partners may have and best serve the interests of small exporters in a fair and non-discriminatory manner, the recommendations said. This would also support the exporters to overcome the challenges of post-Covid recessionary world.

RoDTEP, effective from January 1, 2021, is a tax refund scheme which remits the taxes and levies borne by exporters as percentage of value of goods exported. The simple principle is ‘taxes and duties should not be exported’.

It was formed after the WTO ruled against India that the MEIS is incompatible with world trade norms and must be pulled out.

According to industry sources, mobile phone exporters are likely to be assigned a remission rate between 0.5% and 0.8%, which is sharply less than the 4% which MEIS used to offer. This will impact the cash flows of PLI-approved companies like Apple phone makers Foxconn and Wistron besides Samsung, which have huge export targets, said experts.

Overall, given that the budget of RoDTEP at Rs 13,000 crore is modest compared to Rs 50,000 crore of MEIS, all export sectors are likely to get very low compensation rates, they added.