Indian Economy
Remission of Duties and Taxes on Export Products Scheme
- 18 Apr 2022
- 4 min read
For Prelims: Remission of Duties and Taxes on Export Products (RoDTEP) scheme, Merchandise Export from India Scheme (MEIS)
For Mains: Export Promotion, Government Policies & Interventions
Why in News
Recently, the government had left out sectors such as iron and steel, chemicals and pharmaceuticals, from the Remission of Duties and Taxes on Export Products (RoDTEP) scheme.
- These sectors were omitted from the scheme, as iron and steel were ‘already booming’ and the pharma industry’s business had also increased during the pandemic.
What is the RoDTEP Scheme?
- About:
- The RoDTEP scheme would refund to exporters the embedded central, state and local duties or taxes that were so far not been rebated or refunded and were, therefore, placing India’s exports at a disadvantage.
- The rebate under the scheme would not be available in respect of duties and taxes already exempted or remitted or credited.
- Launch:
- It was started in January 2021 as a replacement for the Merchandise Export from India Scheme (MEIS), which was not compliant with the rules of the World Trade Organisation.
- The MEIS scheme provided additional benefits of 2% to 7% on the Freight On Board (FOB) value of eligible exports.
- For garment exporters, the Rebate of State and Central Levies and Taxes (RoSCTL) Scheme has been notified separately.
- It was started in January 2021 as a replacement for the Merchandise Export from India Scheme (MEIS), which was not compliant with the rules of the World Trade Organisation.
- Rates:
- The tax refund rates range from 0.5% to 4.3% for various sectors.
- The rebate will have to be claimed as a percentage of the Freight On Board value of exports.
- Issuance:
- Rebates will be issued 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 and Customs (CBIC).
What is the Significance of the RoDTEP scheme?
- Enhance India’s Competitiveness:
- The reimbursement of taxes such as duty on power charges, Value-Added Tax on fuel in transportation, Farm Sector etc. will make Indian products competitive in global markets.
- It is expected to significantly impact India's competitiveness, trade flows and export numbers over the next 5-10 years.
- Par with International Standards:
- Indian exporters will be able to meet the international standards for exports as affordable testing and certification will be made available to exporters within the country instead of relying on international organizations.
- This would increase the economy of the country and the working capital for the enterprise.-
- Automated Tax Assessment:
- Also under it, tax assessment is set to become fully automatic for exporters.
- Businesses will get access to their refunds for GST (Goods and Services Tax) via an automatic refund route.
Freight on Board
- Also called Free on Board (FOB) is a term used to indicate who is liable for goods damaged or destroyed during shipping.
- "FOB origin" means the buyer is at risk and takes ownership of goods once the seller ships the product.
- "FOB destination" means the seller retains the risk of loss until the goods reach the buyer.
- The terms of FOB affect the buyer's inventory cost, adding liability for shipped goods increases inventory costs and reduces net income.
