The GOI (Government of India) has recently introduced RoDTEP( Remission of Duties or Taxes on Export Product) scheme to replace the existing MEIS (Merchandise Exports from India Scheme) and built a fully automated path for ITC(Input Tax Credit) in the GST for help to increase the exports in India.
The Union Cabinet in March approved the RoDTEP scheme for exporters to reimburse taxes and duties paid by them like mandi tax, electricity duties, VAT (value added tax), coal cess etc. which are not getting refunded/exempted under any other existing scheme.
It will replace the Merchandise Export from India Scheme (MEIS) that was found to violate the WTO (World Trade Organization) rules as it was export focused. MEIS will be phased out.
RoDTEP will take place of MEIS With the issue of No: 30 /2015-2020 dated 1 September 2020, the government has initiated a step towards the phasing out of the MEIS Scheme and introduction of RoDTEP.
What are the Highlights of the Notification?
The total reward which may be granted to an IEC holder under the MEIS shall not exceed INR 2 Crore per IEC on exports made in the period 1st September 2020 to 31st December 2020. Any Import Export Code holder who has not made any export with Late Export Order date during the period which is 1st September 2019 to 31st October 2020 or any new IEC obtained on or after 1st September 2020 would not be eligible for submitting any claim under MEIS for benefits for exports made with effect from 1st September 2020.
Points described above may be subject to further downward revision to ensure that the total claim under the Scheme for the period (1st September 2020 to 31st December 2020) does not exceed the allocation fixed by the Government i.e. INR 5,000 Crore.
Benefits under MEIS will not be available for exports made w.e.f. 1st January 2021.
A Brief on RoDTEP Scheme
Ministry of Finance (MoF) will monitor the RoDTEP scheme. The scheme provides an additional export credit of up INR 68,000 crores and the projected forgone revenue will be up to INR 50,000 crores.
These are the Other Announcements Made on RoDTEP
- Items will be shifted step wise from existing scheme MEIS to RoDTEP with proper auditing mechanism and monitoring.
- Create a fully automated procedure for Input tax credit in GST to avoid double taxation.
- Applicable Incentive of up to 2% of MIES will be replaced with RoDTEP scheme for Privileged Textile and other export sectors.
- MoF has allocated a budget of INR 1,700 crore to provide higher insurance cover through ECGC (Export Credit Guarantee Corporation), to increase the lending opportunities from banks.
What are the Effects of This Notification?
- A limit on total reward under MEIS has been imposed so that for exports made in the period 1st September 2020 to 31st December 2020 the total reward which can be claimed by an IEC holder does not exceed the ceiling of INR 2 Cr. Additionally, it has also been notified that any Import Export Code holder who has not made any exports for a period of 1year proceeding 1st September 2020 not eligible for submitting any claim under MEIS.
- In addition, it has been notified that MEIS Scheme is withdrawn w.e.f. 1st January 2021. Points described above may be subject to further downward revision to ensure that the total claim under the Scheme for the period (1st September 2020 to 31st December 2020) does not exceed the allocation fixed by the Government i.e. INR 5,000 Crore.
- Further on a practical level, the application for MEIS benefits for exports made after 1st April 2020 is not being accepted by the portal and it shows an error that fresh applications may be accepted after sufficient funds are available.
- Such sudden imposition of limits will de-motivate large exporters, result in increased costs and make our exports less competitive since Most exporters in India take into account the amount of incentive that is receivable for undertaking exports, while calculating cost/margins for each order.
The government after approving the new scheme – RoDTEP this year in March, had stated that MEIS the rates for the new scheme has not cleared and notified. The RoDTEP rates are expected to be lower than MEIS. Considering this fact, the MEIS Scheme need to be allowed for staged phase out only after the rates are notified under RoDTEP so that the exporters can adapt to the changed fiscal benefit accordingly.
What are the Objectives of RoDTEP scheme?
- To boost exports Scheme for enhancing Exports to Global Markets
- To make Indian exports cost competitive and built a level playing field for Indian exporters in global market
- To give a boost to employment generation in various sectors
- Boost dwindling outward shipments
What are the Features of RoDTEP?
- In present only 30% of total actual indirect taxes incurred by the exporters are refunded by current MEIS scheme
- Under the World Trade Organization rules, certain duties like state taxes on water, education cess, power, oil are allowed to be refunded
- RoDTEP scheme has been made according to the WTO guidelines which reimburse the taxes/ duties/ levies, at the central, state and local level, which are currently not being refunded under any other mechanism, but through RoDTEP it will get refunded.
- Incentives are provided as transferable Scrips earlier, but after RoDTEP scheme which aims at creating an Electronic credit ledger in the customs system which enables digital refund to exporters, duties and taxes levied at the centre level, state level and local levels.