Exporters in international trade may be levied hidden duty and tax, which increase their total cost. To make Indian exports competitive at the international level, the Government of India launched the RoDTEP Scheme (Remission of Duties and Taxes on Exported Products). This program is a refund scheme for exporters with the objective of compensating the exporters for all the non-reimbursed duties and taxes under other mechanisms. By minimizing such cost pressures, the scheme promotes India’s tradability and contributes to the “Make in India” vision.
What is RoDTEP Scheme?
The RoDTEP Scheme for exports became operational from 1 January 2021 as a successor to the pre-existing MEIS (Merchandise Exports from India Scheme). While MEIS has been facing compliance with World Trade Organization (WTO) regulations, RoDTEP has been designed to be WTO-compliant.
Exporters are compensated under RoDTEP for several embedded duties and taxes that were hitherto non-recoverable. These include:
- Central and state taxes on fuel consumed during movement.
- Duties on electricity consumed during the production.
- Mandi tax, toll tax, and all types of local taxes.
- Stamp duty on the import-export documents.
- Embedded GST and other indirect levies.
Instead of direct cash refunds, the government gives customers electronic duty credit scrips (e-scrips), which the exporters can use to pay basic customs duty or transfer to other importers.
Advantages of the RoDTEP Scheme for Exporters
The refund scheme under RoDTEP has several advantages:
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Expenditure on Exports Reduced
Exporters are usually burdened with higher prices of products because of unpaid local duties. RoDTEP provides reimbursement for such charges, thus lowering the cost of exported products.
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Enhanced International Competitiveness
Through the reduction in the overall export burden, Indian products become price-competitive in the global market. This increases demand and augments India’s share in international markets.
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WTO Compliance
Unlike the MEIS scheme, which was criticized globally, RoDTEP has been designed in accordance with WTO specifications. This means Indian exporters still reap benefits without breaching global trade regulations.
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Digitization and Transparency
The scheme is executed through an online, computerized system tied to the Customs ICEGATE portal. This provides an equitable, transparent, and swift refund process.
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Covering All Export Sectors
The RoDTEP scheme is applicable to a broad spectrum of industries such as agriculture, textiles, leather, pharmaceutical, and engineering goods. Even small and medium exporters are included, thus boosting inclusive trade growth.
Implementation of RoDTEP Scheme in India
The execution of the RoDTEP scheme on behalf of exporters includes multiple steps towards effectiveness and transparency.
Eligibility
- All the sectors are covered, including merchant exporters and manufacturers.
- Advance authorization, Export Oriented Units (EOUs), and Special Economic Zone (SEZ) units are also covered.
- Some sectors such as steel, pharmaceuticals, and chemicals have been given special priority.
Rate and Value Caps
Remission rates in RoDTEP are product-specific and mostly in the range of 0.5% to 4.3% of the Free on Board (FOB) value of exports. For other products, a value cap is also required.
Issue of E-Scrips
When an exporter submits a bill of shipping on the ICEGATE portal and avails RoDTEP benefit, the rebate is automatically calculated in the system also. Once the export is finalized, the benefit is released as an e-credit scrips.
See Also: Importance of the Shipping Bill in the Export Business
Credit Utilization
- The e-scrips are utilized to set off basic customs duty.
- Exporters are able to transfer such scrips to other importers in case they do not require them anymore.
Technology-Driven System
The RoDTEP IT module is also connected to Customs and DGFT portals. This eradicates paperwork, diminishes human intervention needs, and opens up the claim system.
Key Challenges Faced in RoDTEP Implementation
Although the RoDTEP scheme is replete with gigantic advantages, there still exist a few implementation challenges:
- Lower Benefit Rates: RoDTEP has remission rates lower than MEIS, which is not satisfactory to some exporters.
- Sensitive Documentation: Exporters have to make proper declarations in bills of shipment, and otherwise benefits will be withheld.
- Delayed Credits: Delay in procedures in issuing the scrips at times impacts cash flows of the exporters.
- Awareness Gaps: The small exporters are not aware yet of how to avail the RoDTEP benefits effectively.
Future Outlook
The government shall periodically review and modify remission rates to suit the requirements of the industry. Industry associations are also seeking higher refund rates for industries which are labor intensive such as textiles, apparel, and handicrafts.
With growing digitization, the procedure will certainly gain pace and be easier to use. The ultimate goal is to offer complete remission of unpaid duties and taxes so that Indian exporters can play on a level-playing field across international trade.
Conclusion
RoDTEP scheme for exporters is a pioneering refund scheme for exporters. Refunding off-levies, it saves funds, makes companies competitive, and keeps them WTO-friendly. In spite of some issues, the technology-driven transparent roll-out of the scheme has the potential to turn India into a world export leader. For companies which is operating in international trade, it is crucial to know and implement RoDTEP in order to maximize returns and increase global outreach.
FAQs
1 What is the RoDTEP scheme for exporters?
RoDTEP is a scheme where the government provides refunds of disguised duties and taxes paid by exporters as electronic duty credit scrips.
2. Who is covered under the exporter’s RoDTEP refund scheme?
All exporters such as manufacturer exporters, merchant exporters, EOUs, and SEZ units are covered except those exempted by certain government notifications.
3. How are RoDTEP benefits transferred to exporters?
The exporters are issued e-scrips of electronic duty credit on the ICEGATE portal. They can use them to pay duty or transfer them to other importers.
4. How is MEIS different from RoDTEP?
MEIS had direct incentives but were challenged in the WTO. RoDTEP, however, is WTO-compatible and rewards only embedded taxes and duties, hence, legally acceptable.
5. Exporters, how do they access the RoDTEP benefit?
Exporters need to make claims for RoDTEP in shipping bills on the ICEGATE website. Remission benefit is credited automatically in the e-scrip ledger of the exporter at the time of processing export.
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