Date: 21/12/2022

Relevance: GS-3: Indian Economy and Trade, mobilization of resources, growth, development; Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.

Key Phrases: RoDTEP council, foreign trade, Remission of Duties and Taxes on Exported Products (RoDTEP) scheme, e-scrips, Merchandise Export from India Scheme (MEIS), Rebate of State and Central Levies and Taxes (RoSCTL) Scheme

Context:

• Recently, a Parliamentary Standing Committee on Commerce has recommended setting up a RoDTEP council, along the lines of the GST Council.

Key Highlights:

• The RoDTEP council envisages to review refund rates under the Centre’s Remission of Duties and Taxes on Exported Products (RoDTEP) scheme for exporters.
  • Also, lay out a road map for short- and medium-term changes in rate structure.
• But the fact that RoDTEP coverage has been controversial and rates are being flagged for revision is affecting the trade and exports.
  • It is of great concern because like the GST rates there are too many chopping and slicing of products and there is no consistency in the rates.

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

• About
  • The RoDTEP scheme was launched in March, 2020.
  • It has been implemented since 1 January 2021 to reimburse exporters for various levies.
• Objectives
  • It is a scheme for exporters to reimburse taxes and duties paid by them which are not getting exempted or refunded under any other existing mechanism.
  • Taxes and duties included in RoDTEP include value added tax, coal cess, mandi tax, electricity duties and fuel used for transportation.
• WTO Compliant
  • The RoDTEP scheme is in line with the WTO rules unlike the Merchandise Export from India Scheme (MEIS) that was found to violate the World Trade Organization Rules.
  • It also looks set to subsume Rebate of State and Central Taxes and Levies (RoSCTL), a similar package focused on apparel and other such exports.
• Benefits of the RoDTEP Scheme

Rationale behind the RoDTEP

• The basic argument behind the RoDTEP is that the products free of domestic tax burdens will be much more competitive in export markets.
• The GST system which lets exporters claim input credits and custom duties on imported raw materials through Advance-Authorization and Duty-Drawback schemes to make manufacturing and exports business friendly and more competitive.
  • They are all aimed at cost-relieving effects and part of our official effort to cheapen local production for a better shot at global markets.
• Similarly, RoDTEP was designed to refund export units that shell out money on various other central and local levies, like fuel excise duties, mandi-level and value-added taxes, coal cess, etc.

Issues with the RoDTEP Scheme

• Riddled with complexities and a work in progress
  • Similar to many other initiatives of the government with the interface of private parties, the RoDTEP is riddled with complexity, and constant work-in-progress i.e. there is constant chopping and changing of rules, products included and various rates in the Scheme.
• No fixed eligibility criteria
  • In its first year of operation, RoDTEP had about 8,730 eligible items under it which has been enlarged to cover 10,342 items.
  • The newly added notable inclusions are pharmaceutical, chemical and steel export products.
• Range of refund rates
  • The scheme’s refund rates vary in a range of 0.5% to 4.3% of an export item’s freight-on-board value.
  • Also there are provisions of unit-price caps acting as item-wise limits on grossly inflated claims.
• Uneconomical refunds
  • Refunds are awarded in the form of ‘e-scrips’, which are credits in a ledger run by the Central Board of Taxation and Customs that can be transferred or used to settle custom bills.
  • Although the system seems convenient, it costs huge money (~ ₹14,245 crore was earmarked in 2022-23) to the Government for running such a scrip system.

Way Forward

• Need to address residual issues
  • There needs to be quicker resolutions of the residual issues for which a mechanism can be established.
  • A commerce ministry notification which sought to address “residual issues” of RoDTEP by an inter-ministerial panel chaired by the directorate general of foreign trade (DGFT) should be taken up quickly.
• The parliamentary panel’s proposal of a RoDTEP council can help in rationalizing and tackling the unanticipated issues in time.
• Rationalization of various rates
  • There are many issues with the Rate lists issued by the DGFT including the refunds amounts which need to be rationalized.
  • For instance shipments of Atlantic and Danube salmon can claim 2.5% of their on-board value with some specified caps but exports of Pacific salmon can ask for only 0.5%, with no cap specified.

Conclusion

• The Indian policies have been plagued with micro multiplicity, overlapping and proliferation of unnecessary rates over the years.
• The need of the hour is to push for an easy, simplistic rates ecosystem which may be harder to conceive but yield better results in the future.

Source: Live Mint

Mains Question:

Q. There have been talks of establishing a RoDTEP council in line with the GST council to minimize multiplicity of tax rebates for Indian export items, does India really need it? Suggest measures to establish a simplistic tax rebate framework for exports which is not plagued with the rate complexity. (250 words).