Delve into an in-depth analysis of the RoDTEP Scheme (Remission of Duties and Taxes on Exported Products) designed to empower textile exporters. Discover the advantages that the RoDTEP scheme brings to textile exporters, including cost competitiveness, improved working capital, and reduced financial burden.
The RoDTEP (Remission of Duties and Taxes on Export Products) is a transformative scheme introduced on January 1, 2021, to replace the existing Merchandise Exports from India Scheme (MEIS). The primary goal of the RoDTEP scheme is to ensure exporters receive refunds on embedded taxes and duties that were previously non-recoverable. This scheme is a crucial component of India’s strategy to enhance export volumes and competitiveness globally.
Need for the RoDTEP Scheme
The inception of RoDTEP was prompted by a challenge posed by the United States against India’s key export subsidy schemes at the World Trade Organisation (WTO). The U.S. argued that these schemes adversely affected American workers. A WTO dispute panel ruled against India, asserting that the existing export subsidy programs violated WTO norms, recommending their withdrawal. Consequently, the RoDTEP Scheme was introduced to align India with WTO regulations and address concerns raised by the international trade community.
Substituting Challenged Export Subsidy Programs:
Several export subsidy programs faced scrutiny and were recommended for withdrawal by the WTO dispute panel. The RoDTEP Scheme effectively replaced these programs, ensuring compliance with international trade norms. Some of the key schemes recommended for withdrawal include:
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Merchandise Exports from India Scheme (MEIS):
MEIS was a prominent export subsidy program providing incentives to exporters. RoDTEP took over its role, offering a revamped and WTO-compliant framework.
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Export Oriented Units Scheme:
The Export Oriented Units Scheme, which supported designated export-oriented units, was among the programs slated for withdrawal and replacement by RoDTEP.
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Electronics Hardware Technology Parks Scheme:
RoDTEP encompasses the electronics sector, taking over the role of the Electronics Hardware Technology Parks Scheme to promote exports in this domain.
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Bio-Technology Parks Scheme:
Supporting the biotechnology sector, RoDTEP ensures that the benefits of the Bio-Technology Parks Scheme are sustained under the new scheme.
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Export Promotion Capital Goods Scheme:
RoDTEP incorporates provisions to support capital goods exports, taking over from the Export Promotion Capital Goods Scheme.
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Special Economic Zones (SEZ) Scheme:
The SEZ Scheme, which provided a conducive environment for export-oriented businesses, has been succeeded by RoDTEP.
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Duty-Free Imports for Exporters Scheme:
RoDTEP scheme addresses the concerns of duty-free imports for exporters, ensuring continuity in supporting businesses engaged in international trade.
Objectives of the RoDTEP Scheme:
This Scheme has several key objectives:
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WTO Compliance:
Ensuring alignment with WTO regulations and addressing concerns raised by international trade bodies.
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Boosting Exports:
Stimulating export volumes by providing refunds on embedded taxes and duties, making Indian products more competitive globally.
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Replacing MEIS:
Substituting the existing MEIS with a revamped and WTO-compliant RoDTEP framework.
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Sustaining Sectoral Support:
Continuing support for specific sectors like electronics, biotechnology, and capital goods to promote their exports.
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Promoting Competitiveness:
Enhancing the overall competitiveness of Indian exports by addressing challenges posed by international trade disputes.
Features of the RoDTEP Scheme
Additional Allocation:
The Government of India (GOI) has allocated an additional INR 50,000 crores from the GOI corpus to enhance the benefits provided by the RoDTEP scheme.
Refunds in Transferable Duty Credit/Electronic Scrip:
Exporters will receive refunds in the form of transferable duty credit/electronic scrip, which will be maintained in an electronic ledger.
Automated Refund Module:
The Ministry of Finance (MoF) has announced the creation of a fully automated refund module for the manufacturing and service sectors through Form GST RST-01. This automation aims to reduce double taxation, streamline claims for deemed exports, facilitate the claiming of GST tax refunds, and serve as an authentic source for international entities such as the UN, WTO, and foreign embassies.
Time-Bound Duty Refunds:
This scheme is designed to provide exporters with time-bound duty refunds, ensuring a swift and efficient process for claiming benefits.
Enhanced Fund Allocation:
The allocation of an additional INR 50,000 crores signifies the government’s commitment to supporting exporters and promoting international trade.
Transferable Duty Credit:
The transferable duty credit received by exporters can be utilized for various purposes, contributing to the growth and sustainability of their businesses.
Reduction of Double Taxation:
The automated refund module is expected to reduce instances of double taxation, providing exporters with a more transparent and simplified process.
International Recognition:
The authentic source status of the automated refund module enhances its credibility on the international stage, facilitating interactions with entities such as the UN, WTO, and foreign embassies.
RODTEP Scheme Eligibility Criteria
The Remission of Duties and Taxes on Exported Products (RoDTEP) scheme aims to benefit a wide range of sectors, with a focus on labor-intensive industries that currently enjoy benefits under the Merchandise Exports from India Scheme (MEIS). Here are the eligibility criteria:
Inclusion of All Sectors:
The RoDTEP scheme includes all sectors, giving priority to labor-intensive industries that receive benefits under the MEIS scheme at 2%, 3%, or 5% of the export value, effective from January 1, 2021.
Eligibility for Merchant and Manufacturer Exporters:
Both merchant exporters (traders) and manufacturer exporters are eligible to claim benefits under the scheme.
SEZ Units and EOU Units Eligibility:
Special Economic Zone (SEZ) units and Export Oriented Units (EOU) are also eligible to claim benefits under the scheme.
No Minimum Turnover Criteria:
There are no minimum turnover criteria to claim RoDTEP benefits, making the scheme accessible to exporters of all scales.
E-Commerce Platform Export Eligibility:
Goods exported through e-commerce platforms via courier are eligible for benefits under the RoDTEP scheme.
Country of Origin Requirement:
The country of origin of the exported products must be India. Re-exported products are not eligible for RoDTEP benefits.
Benefits of the Rodtep scheme
The Remission of Duties and Taxes on Export Products (RoDTEP) scheme carries a host of advantages aimed at bolstering India’s international trade. Here are the key benefits:
- Cost Neutralization: RoDTEP acts as a crucial tool for cost neutralization by providing rebates on various hidden central and state-level taxes. This helps exporters mitigate the financial burden associated with exporting goods.
- Rebates on Hidden Costs: The scheme extends rebates on a range of hidden costs, including duties and taxes that exporters would traditionally bear. By alleviating these financial burdens, RoDTEP enhances the overall competitiveness of Indian goods in the global market.
- Promotion of International Trade: RoDTEP plays a pivotal role in promoting international trade by making Indian products more attractive to global buyers. The scheme’s financial incentives encourage businesses to actively engage in exporting goods and services beyond India’s borders.
- Boost to Exporters: Exporters stand to benefit significantly from RoDTEP as it directly addresses their concerns regarding embedded taxes and duties. This financial relief enhances the profitability of export-oriented businesses.
- Competitive Edge: The RoDTEP scheme provides Indian exporters with a competitive edge in the global market. By alleviating financial burdens, RoDTEP ensures that Indian goods remain cost-competitive, facilitating increased market share on the international stage.
- Addressing WTO Compliance: RoDTEP’s structure ensures compliance with World Trade Organisation (WTO) norms. By aligning with international trade regulations, the scheme contributes to maintaining India’s standing in the global trade community.
- Incentivizing Diverse Sectors: RoDTEP extends its benefits across various sectors, including electronics, biotechnology, and capital goods. This ensures that a wide spectrum of industries receives the necessary support to thrive in international markets.
- Encouraging Export Growth: The rebates provided by the RoDTEP scheme act as a powerful incentive for exporters to increase their export volumes. This growth is not only beneficial for individual businesses but also contributes to the overall economic development of the country.
- Sustainable Sectoral Support: This scheme ensures the sustainability of sectoral support programs, previously provided under schemes like MEIS. This continuity is essential for the growth and development of specific industries.
- Facilitating Global Competitiveness: By neutralizing hidden costs and providing financial incentives, RoDTEP contributes to enhancing the global competitiveness of Indian products. This is instrumental in securing a strong position for India in the global trade landscape.
Rodtep scheme vs Meis:
- Incentive Nature: Provides additional incentives on the export of goods, distinct from other available refunds and drawbacks for exported products.
- Refund Scope: Offers refunds for indirect taxes on inputs used in the manufacturing of exported products, which may not be reimbursed by other existing schemes.
- WTO Compliance: Historically, MEIS was deemed non-compliant with World Trade Organisation (WTO) trade norms, leading to the need for a replacement scheme.
- WTO Trade Norms: Non-compliant with current WTO trade norms, prompting the introduction of the RoDTEP scheme.
- Incentive Percentage: Provides incentives ranging from 2% to 5% of the Free on-board (FOB) value of exports, varying based on the category of goods.
- Issuance Format: Scrips are issued in the form of transferable documents, available in hard copy or downloadable formats.
RoDTEP (Remission of Duties and Taxes on Export Products)
- Incentive Nature: Offers additional incentives for the export of goods, beyond existing refunds and drawbacks.
- Refund Scope: Aims to refund indirect taxes on inputs used in the manufacture of exported products, not currently reimbursed by other schemes.
- WTO Compliance: Compliance with current WTO trade norms, ensuring adherence to international trade regulations.
- WTO Trade Norms: Introduced to replace non-compliant schemes like MEIS, aligning with WTO trade norms.
- Incentive Percentage: Adopts a product-based percentage system, with specific percentages expected to be lower than the existing MEIS scheme (to be notified later).
- Issuance Format: Offers issuance in the form of transferable duty credit/electronic scrip, which will be maintained in an electronic ledger.
While MEIS offered a fixed percentage incentive, RoDTEP adopted a product-based percentage, highlighting adaptability. Moreover, the move towards electronic issuance also reflects a commitment to modern, efficient practices in line with the evolving landscape of global trade.
Rodtep Status Check
The RoDTEP status check can be performed through government portals such as ICEGATE, DGFT and the National Government Services Portal.
Rodtep Rates
The RoDTEP (Remission of Duties and Taxes on Exported Products) rates for different categories of export items have been notified by the Central Government of India. Here’s an overview:
- Pharmaceutical Products: The RoDTEP rates for pharmaceutical products range from 0.5% to 4%
- Garments: The RoDTEP rates for garments range from 0.5% to 4%
- Leather Products: The RoDTEP rates for leather products range from 0.5% to 4%
- Chemicals: The RoDTEP rates for chemicals range from 0.5% to 4%
- Steel: The RoDTEP rates for steel range from 0.5% to 4%
Rodtep Claim Process
The RoDTEP claim process involves making a declaration in the shipping bill and processing the claim through the officer or facilitated by RMS. The shipping bill will be available for the generation of scrips after processing.
The RoDTEP scheme is implemented through end-to-end digitization of the issuance of rebate amounts in the form of a transferable duty credit/electronic scrip (e-scrip), which will be maintained in an electronic ledger by the Central Board of Indirect Taxes & Customs (CBIC).
