Govt Looking at Higher Outlay for RoDTEP Scheme for Exporters

ABS News Service dated 3^rd December 2020

For adequate coverage of products and embedded duties, expenditure needs to be pushed beyond the earlier estimate of ₹10,000 crore proposed by NITI Aayog

The government is examining the possibility of expanding the outlay for the new Remission of Duties or Taxes on Export Products (RoDTEP) scheme, from the estimate of ₹10,000 crore made by the NITI Aayog earlier this year, to ensure that a larger number of sectors are offered the benefit when the scheme replaces the popular Merchandise Export from India Scheme (MEIS) in the new year.

“Since the reimbursement scheme for the textiles sector, RoSCTL, will get subsumed in RoDTEP once it is launched, an estimated outgo of ₹7,500 crore will have to be set aside for it. If the outlay for RoDTEP is limited to ₹10,000 crore, as earlier estimated, that would just leave ₹3,000 crore for all the remaining sectors. The Centre is now feeling the need to expand the outlay in order to ensure a wider coverage of the new scheme, and there are discussions underway,” a government official said.

The Finance Ministry may now be looking at an outlay of ₹16,000 crore-₹17,000 crore for the RoDTEP scheme, or more, but a final decision has not yet been taken, the official added.

The RoDTEP is designed to reimburse the input taxes and duties paid by exporters, including embedded taxes, such as local levies, coal cess, mandi tax, electricity duties and fuel used for transportation, which are not exempted or refunded under any other existing scheme.

With Indian exports down 19 per cent in the April-October 2020 at $150.14 billion, exporters are anxiously awaiting the new scheme that will replace the MEIS, a popular incentive scheme. The MEIS was challenged at the World Trade Organisation by the US on the ground that it was an export subsidy, and a dispute panel ruled that India should revoke it. “As the RoDTEP scheme is based on actual taxes paid on inputs by exporters, it is being hoped that it will pass muster with the WTO,” the official said.

A three-member RoDTEP Committee, under former home and commerce secretary GK Pillai, was constituted in July 2020 to work out the modalities for calculation of taxes at the Central, State and local levels, borne on the exported product. This will include prior-stage cumulative indirect taxes on goods and services used in the production and distribution of exported products.

“The RoDTEP Committee had been asked to fix rates for three sectors to begin with, which includes garments and made-ups, auto and steel, and the idea is to gradually expand the exercise to other sectors,” the official added.

Exporters have expressed concern from time to time that the RoDTEP scheme may not be as beneficial for them as the MEIS but Finance Minister Nirmala Sitharaman assured earlier this year that the new scheme will adequately compensate and incentivise exporters, even more than all the existing schemes put together.

When the NITI Aayog, in August this year, proposed an annual outlay of ₹10,000 crore for the RoDTEP scheme, exporters expressed concern that the coverage may not be adequate as an earlier estimate was to the tune of ₹50,000 crore. Now, with the Centre looking at a higher outlay for the scheme, exporters definitely stand to benefit, the official said.