Centre extends RODTEP to more sectors, but refund woes remain
In an overdue and welcome move, the commerce ministry has expanded the scope of RODTEP (Remission of Duties and Taxes on Exported Products) scheme by including the exports made from the chemical sector (Chapters 28 and 29) Pharmaceuticals sector (Chapter 30) and articles made of iron and steel (Chapter 73).
The RODTEP scheme refunds the duties/taxes/ levies at the central, state and local level, borne for the production and export of the notified items, other than the duties/taxes that are not exempted or refunded through the duty exemption or duty drawback or any other schemes.
Such duties/taxes/levies include taxes on fuel/coal used in captive power generation, mandi tax, electricity duty, stamp duty on export/import documents, embedded taxes on purchases from unregistered dealers, inputs for agriculture and fuel for transport and so on. The scheme is compatible with the disciplines under the agreements at the World Trade Organization.
The RODTEP scheme is in operation for exports made with effect from January 1, 2021, but the items under the chemicals, pharmaceuticals, and iron and steel sectors were not included in the list. Now, they have been included but the new list does not include iron and steel items (Chapter 72). The expanded list of eligible export items under the scheme now goes up from 8,731 to 10,342 at eight-digit tariff lines. The additional export items now added are eligible for RODTEP benefits for exports made from December 15, 2022, to September 30.
Exports under advance authorisation scheme and by export-oriented units, units in special economic zones and manufacturing goods in bonded warehouses are excluded from the scheme. There is no justification for such exclusions because even these units/items suffer the same types of duties/taxes/levies that other items/units bear.
The remission under RODTEP is granted as a percentage of the free on board (FOB) value of the eligible export products along with value caps for certain items or at specific value as notified under Appendix 4R of the Foreign Trade Policy. Soon after the export of notified item, the exporter gets duty credit in an electronic credit ledger maintained by the Customs. This credit can be transferred to any importer electronically. The duty credit can be utilised for payment of basic customs duty on imported goods. The manner of grant of duty credits, transfer and utilisation is much more efficient than the earlier system of issue of duty credits through tradable scrips issued by regional offices of the Directorate General of Foreign Trade. However, the very idea of allowing RODTEP credits to be utilised for payment of basic customs duties is irrational, to say the least.
The scheme does not rebate any Customs duties. The scheme refunds mainly the local taxes like valueadded tax, goods and services tax, stamp duty, etc. that do not enter the input tax credit chain under the goods and services tax regime and are not rebated or exempted through any other scheme. So, the refunds should be granted in cash and disbursed along with duty drawbacks. There is no reason to allow the refunds through duty credits that can be used to pay basic customs duty. Disbursement in cash will also obviate the need for maintenance of electronic ledger through which credits, transfers, and debits of duty credits are put through.