RoDTEP Scheme (Remission of Duties and Taxes on Exported Products)

RoDTEP scheme is a newly implemented scheme to replace the existing MEIS (Merchandise Exports for India Scheme) for providing refunds to the exporters for the duties and taxes that were previously non-refundable that would make Indian products competitive in global markets.

RoDTEP is implemented through Notification No. 19/2015-20, Dated- 17^th August 2021 and will be applicable from 01^st January, 2021.

Timelines of RoDTEP implementation –

Why are Export Incentives so important?

There are multiple reasons because of this export incentives are so important, few of them are listed below:

Exports bring foreign exchange; Countries require foreign exchange reserves to facilitate international trade, pay for imports, repay foreign loans, and protect against economic collapse, currency depreciation, and other similar events, among other things.
They reduce a country’s current account imbalance, which occurs when it imports more than it exports. In the last decade, India’s current account deficit has averaged 2.2 percent of GDP (approximately $15 billion in July-September 2020).
Export incentives contribute to overall economic growth of the country.

India’s Export Incentives –

Export Promotion Scheme –

RoDTEP (Remission of Duties and Taxes on Exported Products)
SEIS (Promotes Service Exports)
MEIS (Scheme for Merchandise exports, now it is replace by RoDTEP)
EPCG (Helps in zero-duty import or domestic procurement of capital goods)

Duty Exemption/Remission Scheme –

Advance Authorization (It facilitates in Duty-free import of inputs for export production)
Advance Authorization for Annual Requirement (Same as Advance Authorization but on annual basis and only for select group of exporters)
DFIA (Exemption of basic custom duty on import of inputs used in manufacturing of the export products)
Duty Drawback (Refund of custom duties, taxes, fees pain on import of inputs)
RoSCTL (Tax Rebate Scheme available for textile and apparel industry, to be merged with RoDTEP Scheme)

EOU/EHTP/STP/BTP Scheme

Available for the units undertaking to export their entire production of goods and services.

Why is RoDTEP introduced?

What is WTO and SCM Agreement –

WTO was established on January 1, 1995, as a successor to the GATT, to ensure free trade between its members. On 1 January 2020, it has completed 25 years. Approximately 164 Countries are the members of the WTO.
The Subsidies and Countervailing Measures Agreement (SCM) specifies the remedies and processes available to WTO members in the event of damaging subsidization.
In the WTO’s 25 years of existence, 500 disputes have been brought to it, with approximately 350 rulings.
WTO has 3 key functions – (a) Dispute Resolution (b) Negotiation for market taxes (c) Monitoring
Further Dispute Resolution has 2 stages – (a) At first stage panel is formed to hear the case and decide the matter (b) At second stage Appellate Body
In case of Indian Subsidies US challenged the subsidy provided by India are inconsistent with Articles 3.1(a) and 3.2 of WTO’s SCM agreement.

Article 3.1(a) or 3(2) of SCM –

3.1 Except as provided in the Agreement on Agriculture, the following subsidies, within the meaning of Article 1, shall be prohibited:

(a) Subsidies contingent, in law or in fact, whether solely or as one of several other conditions, upon export performance, including those illustrated in Annex I;

(b) Subsidies contingent, whether solely or as one of several other conditions, upon the use of domestic over imported goods.

3.2 A Member shall neither grant nor maintain subsidies referred to in paragraph 1.

Decision of DRP

Appeal has been filed by India against the ruling of DRP with Appellate body but due to availability of only one functional judge (among 3 judges 2 retired, minimum requirement is 3 judges and maximum is 7 Judges in Appellate Body) appellate body has become dysfunctional.

Timelines –

Status of Subsidy challenged and not challenged till now –

Subsidies Challenged at WTO –

Export Promotion Capital Goods (EPCG) Scheme
Special Economic Zones (SEZ Units)
Export Oriented Units (EOU) Scheme, EHTP Scheme and BTP Scheme
Duty-Free Imports for Exporters Scheme (DFIS)
Merchandise Exports from India Scheme (MEIS)

Subsidies Not Challenges in WTO

Service Export India Scheme (SEIS)
Advance Authorization Scheme

List of Embedded Duties and Taxes, which will be benefited now with RoDTEP implementation –

Mandi Tax
Electricity Duty
GST on URD purchases
Road Tax
Excise and VAT on petroleum Product
Property Tax
Stamp duty on export documents
Embedded SGST paid on inputs such as pesticides, fertilizers etc. used in production of agriculture goods

Way of Passing RoDTEP Benefit –

CBIC will implement the scheme by digitizing the entire process of issuing rebates in the form of a transferable duty credit/electronic scrip (e-scrip), which will be kept in an electronic duty credit ledger. Further, it can be used by the person himself to whom it is issued or can be transferred to another person who can use the same.

Quantum of Benefit:

A rebate would be granted to eligible exporters at a notified rate as a percentage of FOB value with a value cap per unit of the exported product.
However, for certain export items, a fixed quantum of rebate amount per unit may also be notified.
Rates of rebate / value cap per unit under RoDTEP is notified in Appendix 4 R.
RoDTEP rates will be reviewed on an annual basis
The same will be notified before the beginning of a financial year.

Conditions for availing the Benefit

The rebate allowed is subject to the receipt of sale proceeds within time allowed under FEMA.
In case non-receipt of sale proceeds within time such rebate shall be deemed never to have been allowed. The rebate would not be dependent on the realization of export proceeds at the time of issue of rebate.
Drawback Scheme, IGST and other GST refunds relating to exports would also be applicable for claims made under the RoDTEP Scheme

Ineligible Supplies/ Items/Categories under the Scheme:

Below are the list of ineligible Supplies/Items/Categories against which benefit is not allowed –

Products manufactured or exported in discharge of export obligation against an Advance Authorization or Duty Free Import Authorization or Special Advance Authorization issued under a duty exemption scheme of relevant Foreign Trade Policy
Products manufactured or exported by a unit licensed as hundred percent Export Oriented Unit (EOU) in terms of the provisions of the Foreign Trade Policy
Products manufactured or exported by any of the units situated in Free Trade Zones or Export Processing Zones or Special Economic Zones
Products manufactured or exported availing the benefit of the Notification No. 32/1997Customs dated 1st April, 1997.
Exports for which electronic documentation in ICEGATE EDI has not been generated/ Exports from non-EDI ports
Goods which have been taken into use after manufacture
Export of imported goods covered under paragraph 2.46 of FTP
Exports through transshipment, meaning thereby exports that are originating in third country but transshipped through India
Export products which are subject to Minimum export price or export duty
Products which are restricted for export under Schedule-2 of Export Policy in ITC (HS) [ i.e. Restricted and prohibited goods]
Deemed Exports
Supplies of products manufactured by DTA units to SEZ/FTWZ units
Products manufactured in EHTP and BTP
Products manufactured partly or wholly in a warehouse under section 65 of the Customs Act, 1962 (52 of 1962)

Process of claiming RoDTEP Scheme –

Step-1 Login (www.icegate.gov.in)

Step-2 Credit Ledger creation (RoDTEP tab under the “Our Services”, After Login Credit Ledger option)

Step-3 Script Management Module (Credit ledger Home Page select Scroll Details Tab for scrip generation).

Step-4 Transaction Details (Credit ledger Home Page select Transaction details tab)

Step-5 Script Transfer (Credit ledger Home Page select “Transfer scrip” tab)

Step-6 Approve Script Transfer Request (Credit ledger Home page select “Approve Scrip” tab)

Step-7 File Declaration (As a part of shipping bill/Bill of Export)

There are still some challenges that can arise –

What about duty drawbacks?
What if exporters have not mentioned intention to claim benefit?
What about Product Description not covered in APPENDIX 4R?
Whether rates notified will compensate or adequate to cover embedded taxes?

Sources –

Scheme Guidelines – Notification No: 19/2015-2020

Appendix 4R – APPENDIX 4R – Notified on 17.08.2021 under Notification No. 19/2015-20