RoDTEP Scheme & Rates: Is It a Fit Case for Invoking Writs?
The New Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme and Rates announced by The CBIC on 17th August in place of the MEIS Scheme has not lived up even to minimum expectations of Trade & Industry. The Rates of Merchandise Export from India Scheme (MEIS) which was being dragged down over the years, saw tremendously spiral downwards under RoDTEP. This was after most associations had provided a detailed study on the calculation of the rates in Form R1, R2 & R3 and represented before the Committee on Drawbacks. To understand the grievance of Trade & Industry on the low RoDTEP Rates, let us understand the Scheme.
Objectives and Understanding of RoDTEP:
RoDTEP is a reform, based on the globally accepted principle that taxes and duties should not be exported, and taxes and levies borne on the exported products should be either exempted or remitted to exporters. The Scheme is expected to boost our exports & competitiveness in the global markets and Increase Employability.
As per Para 4.54 of The Foreign Trade Policy (FTP), The Scheme’s objective is to refund –
i. Currently un-refunded Duties/ taxes/ levies, at the Central, State & local level, borne on the exported product.
ii. Prior stage cumulative indirect taxes on goods & services used in the production of the exported product
iii. Indirect Duties/ taxes/ levies in respect of the distribution of exported products.
The scheme is to be implemented by Customs through a simplified IT System. Rebate will be issued in the form of a transferable duty credit/ electronic scrip (e-scrip) which will be maintained in an electronic ledger by the Central Board of Indirect Taxes & Customs (CBIC). The tax refund rates range from 0.5% to 4.3% for various sectors, on FOB Value. Such rate and quantum have been notified in Appendix 4R at the 8-digit HS code level.
Effective Date for Implementation of the Scheme:
The Scheme would be Effective from 1.1.2021 other than products on which Advance Authorization or DFIA or Special Advance Authorization is taken/ Products manufactured or exported by 100% EOU/ FTZ/EPZ/SEZ. For such categories, the Scheme will be effective later
Mechanism of Issuance/Utilization of RoDTEP Scrips/Credit & Safeguards:
a. Issuance of RoDTEP Scrips/Credit will be in the form of a transferable duty credit/electronic scrip (e-scrip) maintained in an electronic ledger by CBIC
b. manner of application, time period for application, and other matters including export realization, export documentation, sampling procedures, record keeping, etc. would be notified by the CBIC going forward.
c. provisions for recovery of rebate amount where foreign exchange is not realized, suspension/withholding of RoDTEP in case of frauds and misuse, as well as the imposition of penalty will also be built suitably by CBIC.
d. Scrips would be used Only for payment of duty of Customs leviable under the First Schedule to the Customs Tariff Act, 1975 viz. Basic Customs Duty.
e. There is no provision for remission of arrears or contingent liabilities under the Scheme, to be carried over to the next financial year.
Ineligible Supplies/ Items/Categories under the Scheme:
i. Export of imported goods covered under paragraph 2.46 of FTP
ii. Exports through trans-shipment
iii. Export products that are subject to Minimum export price or export duty
iv. Products that are restricted for export under Schedule-2 of Export Policy in ITC (HS)
v. Products that are prohibited for export under Schedule-2 of Export Policy in ITC (HS).
vi. Deemed Exports
vii. Supplies of products manufactured by DTA units to SEZ/FTWZ units
viii. Products manufactured in EHTP and BTP
ix. Products manufactured partly or wholly in a warehouse under section 65 of the Customs Act, 1962
x. Products on which Advance Authorization or DFIA or Special Advance Authorization taken
xi. Products manufactured or exported by 100% EOU
xii. Products manufactured or exported by any of the units situated in FTZ/EPZ/SEZ
xiii. Products manufactured or exported availing the benefit of the Notification No. 32/1997-Customs dated 1st April, 1997.
xiv. Exports for which E- document in ICEGATE EDI has not been generated/ Exports from non-EDI ports
xv. Goods which have been taken into use after manufacture.
Remission of Duties and Taxes on Exported Products (RoDTEP)
Rights of The Government Going forward as per the Scheme:
a. Finalize the Overall budget/outlay for the RoDTEP Scheme not finalized as yet.
b. Revise rates during the year, based on Budget.
c. Deciding the sequence of introduction of the Scheme across sectors.
d. Prioritization of the sectors to be covered.
e. Deciding on the Degree of benefit to be given on various items within the rates set by the Committee and within a ceiling as may be prescribed
f. Deciding on the per item/total overall benefit amount permissible, within the overall budget/ outlay finalized
g. Right to modify any of the categories as mentioned above for inclusion or exclusion under the scope of RoDTEP, at a later date
h. Notifty the effective date for products on which Advance Authorization or DFIA or Special Advance Authorization taken/ Products manufactured or exported by 100% EOU/ FTZ/EPZ/SEZ Scheme will be effective later
i. Conduct a broad level monitoring through an Output Outcome framework.
j. The efforts would be made to review the RoDTEP rates on an annual basis and to notify them well in advance before the beginning of a financial year
ISSUES IN THE SCHEME AND POINTS FOR THE MINISTRY TO PONDER UPON:
i. Unjust Rates:
The objective of the Scheme, which is clearly laid out is to reimburse embedded taxes in export products. These embedded Taxes are those at the Central, State & local levels for manufacturing products and even incurred at the prior stage level. Even taxes on distribution expenses are to be reimbursed. However, the rates notified do not even come close to reimbursement of such taxes.
At least a Clarification on how the rates are calculated should be given to Trade & Industry and consultations should be held to see whether such calculations are actually done correctly.
For Example The following are the items that are common to almost all Sectors for embedded rates. Even if these are taken into account, the rates of RoDTEP would seem unjust –
Index of Calculation Sheets
|Sl No||Embedded Tax (%) of||Rate|
|1||Diesel – Excise & VAT||47.39%|
|2||Diesel – Other than Excise & VAT||1.22%|
|5||Electricity – Other than Electricity Duty||13.02%|
|6||Petrol – Excise & VAT||54.83%|
|7||Petrol – Other than Excise & VAT||1.22%|
|10||Fertiliser (For Agri Products)||13.98%|
|17||Hospital (For Labour Intensive Sector)||8.26%|
|18||Protective Equipment (For Hazardous Sector)||0.43%|
ii. The Scheme said to be subject to budgetary constraints. The point to note here is that where is the question of budget when the Scheme is to reimburse the taxes already collected by the Government.
The budgetary constraints specified at several places in the scheme seem to be in conflict with the objects and the intent of the scheme itself.
iii. Some sectors like steel, chemicals, etc have totally been left out of the scheme. Is this not against the WTO Norms that taxes and duties should not be exported?
iv. Exports for which E- document in ICEGATE EDI has not been generated/ Exports from non-EDI ports, have been made ineligible for availing the benefits of the scheme. Hence certain exports to Nepal, Bhutan and in some cases Bangladesh would be left out.
Why should Trade suffer due to the delay on the part of The Government to make these ports EDI Ports.
v. Exports under Advance Authorisation, Duty Free Import Authorisation, 100% Export Oriented Units, Export Processing Zones, Special Economic Zones, and products manufactured in a customs bonded warehouse, are ineligible. These schemes have existed for quite some time as export enablers and their exclusion from RoDTEP benefits could rob them of some popularity, considering there was no such exclusion under the earlier MEIS scheme.
If the above points are not considered by The Ministry, then certainly we could see the Writ Jurisdiction come into play for invoking the Rights of Exporters, especially those whose survival in the International markets depends upon the reimbursement of these taxes.
BRIEF ABOUT THE AUTHOR :
Vivek Jalan, from Tax Connect, is a Chartered Accountant & a qualified L.LM (Constitutional Law) & LL.B. He is The Chairman of The Ease of Doing Business Committee therein. He is the Conveynor- Indirect Tax Core Group of The Confederation of Indian Industries (CII) . He is the Member of The Consultative Committee of The Commissioner of SGST. He is also The Member of The Regional Advisory Committee of The Chief Commissioner of CGST. He is advising Large MNCs, PSUs & PAN India Organizations in GST & Income Tax and has offices in Kolkata, Delhi, Bangalore, Mumbai & now Surat.
He is a regular Columnist and guest expert in Economic Times, Times of India, Dalal Street Journal, Money Control, Live mint, CNBC, Hindustan Times, Zee Business, Financial Express, other dailies and business magazines like Business Today, etc. He is also a guest expert on Taxation matters in All India Radio and other media platforms. He is the Editor of Weekly Bulletin TAX CONNECT, a publication on Indirect Taxes and Direct Taxes which reaches more than 70000 professionals.
He is also a visiting faculty for Taxes in The Confederation of Indian Industries (CII), The Institute Of Chartered Accountants of India, Institute of Cost Accountants of India, Indian Institute of Foreign Trade, The Bengal Chamber of Commerce and Industry, The Indian Chamber of Commerce and other Business Forums. He has also delivered Lectures at various Government Taxation Forums including the CGST & SGST Departments across the country.
He has worked as a Finance Manager in ITC Ltd. and Chief Compliance Officer with IntraSoft Technologies Ltd. He has more than 15 years of experience in the field of Indirect & Direct Taxation. He was also an All India Rank holder in CA Final Examination conducted by the Institute of Chartered Accountants of India.
His Books on taxation include the following –
- COMMENTARY ON UNION BUDGET 2021 – Feb 2021
- SECTION-WISE COMPENDIUM ON GST – Oct 2020
- INTEGRATED APPROACH TO GST E-INVOICE, E-WAYBILL & RETURN E-FILING – Oct 2020
- COMMENTARY ON UNION BUDGET 2020– Feb 2020
- COMMENTARY ON DIRECT TAX VIVAAD SE VISHWAS SCHEME – Feb 2020
- SECTION-WISE COMMENTARY ON GST – SEPTEMBER 2018
- HOW TO HANDLE GST-TDS, GST-TCS, GST AUDIT & GST ANNUAL RETURN – NOVEMBER 2018
- COMMENTARY ON UNION BUDGET 2019 – July 2019
- WITHDRAWAL OF LEGAL TENDER 2016
- COMMENTARY ON UNION BUDGET 2017
- A COMPENDIUM ON GST W.E.F. 1ST JULY 2017
- GST MODEL LAW (NOVEMBER 2016) & BUSINESS PROCESSES – A TECHNICAL COMMENTARY
- GST MODEL LAW (JUNE 2016) & BUSINESS PROCESSES – A TECHNICAL COMMENTARY
- “SERVICE TAX AND VAT IN WORKS CONTRACT: A COMPREHENSIVE TECHNICAL GUIDE”.
He is a regular speaker at various professional forums on the various key areas in Indirect & Direct Taxes and has delivered more than 300 lectures on various topics under GST, Customs, Foreign Trade Policy of India, Income Tax, etc.