RODTEP SCHEME - GOVERNMENT SCHEME

News: Booster shot: pharma, chemicals, iron, steel exports added to tax refund scheme

 

What's in the news?

       With India’s exports momentum hit by waning global demand, the government on Wednesday decided to extend the Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme to the pharmaceuticals, chemicals and iron & steel sectors with effect from December 15.

 

Key takeaways:

       The RoDTEP scheme, introduced in January 2021 to replace an earlier merchandise export incentive scheme, is meant to provide ‘zero rating’ of exports or ensure that no domestic taxes are added to goods meant for export.

       However, these sectors had been excluded from the scheme so far due to fiscal constraints as well as on the grounds that their exports were doing well even without such benefits.

       India’s goods exports contracted by more than 16% in October this year, slipping below the $30-billion mark for the first time in 20 months.

       Engineering goods, the mainstay of India’s exports in recent years that also include steel products, dropped over 21% to $7.4 billion. Drugs and pharma exports had fell more than 9% in October, while chemical exports slid by a steeper 16.4%.

 

RoDTEP:

       RoDTEP stands for Remission of Duties and Taxes on Export Products.

       It is a new scheme that is applicable with effect from January 1st, 2021, formed to replace the existing MEIS (Merchandise Exports from India Scheme).

       The scheme will ensure that the exporters receive the refunds on the embedded taxes and duties previously non-recoverable.

       The scheme was brought about with the intention to boost exports which were relatively poor in volume previously.

 

Features:

       To enable zero rating of exports by ensuring domestic taxes are not exported, all taxes, including those levied by States and even Gram Panchayats, will be refunded under the scheme.

       The rebates under RoDTEP are WTO-compliant as per legal advice, ranging from 0.5% to 4.3% of the Free On Board value of outbound consignments.

       The lowest rate is offered on items like chocolates, toffees and sugar confectionery, while yarns and fibers have been granted the highest rate.

       Now, the sectors such as pharmaceuticals, chemicals and iron & steel sectors were added to the scheme to promote their exports.

 

Eligibility

       All sectors, including the textiles sector, may enjoy the benefits of the RoDTEP Scheme.

       Labor-intensive sectors that enjoy benefits under the MEIS Scheme will be given a priority.

       Manufacturer exporters and merchant exporters (traders) are both eligible for the benefits of this scheme.

       There is no particular turnover threshold to claim the RoDTEP.

       Re-exported products are not eligible under this scheme.

       To be eligible to avail the benefits of this scheme, the exported products need to have the country of origin as India.

       Special Economic Zone Units and Export Oriented Units are also eligible to claim the benefits under this scheme.

       Where goods have been exported via courier through e-commerce platforms, RoDTEP scheme applies to them as well.