Remission of Duties & Taxes on Export Products (RoDTEP) – Rates Announced

BACKGROUND

The RoDTEP scheme was announced and implemented from January 1^st, 2021. For India Inc. to opt for RoDTEP, they were expected to mention so in their shipping bills. The rates applicable for RoDTEP have been notified as of today, 17^th August 2021. The Ministry of Commerce and Industry have also notified guidelines for the RoDTEP scheme along with the annexure setting out the applicable rates vide Notification No. 19/2015-2020 dated 17.08.2021.

PROVISIONS UNDER THE NOTIFICATION

As was widely expected the narrative of RoDTEP has been incorporated as a part of the Foreign Trade Policy 2015-20 where additions have been made in chapter 4 of the policy to incorporate the provisions for RoDTEP with immediate effect. The important pointers of the guidelines are summarised as follow:

1. The RODTEP Scheme will take effect for exports from 1st January 2021 with the exception of 3 categories for which the implementation shall be decided on a later date. (Exports under Authorisation, 100% EOU, FTZ, EPZ or SEZ)
2. The main objective of the scheme is to refund duties and taxes which are currently non-refundable such as the Central and State levies on the exported products including prior stage cumulative indirect taxes on goods and services used in the production of the exported products and other indirect levies in respect of distribution of the same.
3. The rebate under the RoDTEP scheme shall not be available in respect of duties and taxes already exempted or remitted or credited.
4. No provision for remission of arrears is permissible under the Scheme to be carried over to the succeeding financial year.
5. Rebates under the scheme 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, wherever required, on export of items which are categorized under the notified 8 digit HS Code. The annexure already released elaborately sets out the percentage of RoDTEP scrip along with the tariff heading, description of the goods with the RoDTEP entry number as well as the upper cap the same can be claimed.
6. For certain export items, a fixed quantum of rebate amount per unit may also be notified.
7. Necessary changes on review of RoDTEP rates shall be made on an annual basis to ensure that the revised rates are announced in advance before the beginning of a financial year.
8. The rebate so issued is subject to time prescribed under the Foreign Exchange Management Act, 1999, non-compliance of which shall deem the rebate as never been allowed. However, a scrip can be opted for even without receipt of Foreign exchange at the time of application.
9. The exporter is required to keep records substantiating claims made under RODTEP to facilitate the department to conduct physical verification
10. RODTEP Policy Committee chaired by DGFT shall make decisions on any residual issues that may arise which shall be binding.

ISSUANCE OF REBATE AND ITS NATURE

1. The rebate is issued in the form of Electronic Transferable Duty credit or Scrip which would be maintained in an electronic Ledger by the CBIC.

2. The e-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. It can not be used for any other duties of customs or GST for that matter.

INELIGIBLE EXPORT ITEMS UNDER THE RODTEP SCHEME

1. Export of imported goods covered under paragraph 2.46 of Foreign Trade Policy. It pertains to goods imported for the purpose of export, shall not be entitled for any specific incentives per se. continuing the same trend, RODTEP is not made available to the class of exporter who have imported for export.
2. Exports through trans-shipment, meaning thereby exports that are originating in third country but trans-shipped through India.
3. Export products which are subject to Minimum export price or export duty. When there is a levy of export duty, usually it is an extreme step taken to safeguard scarce sovereign resources or in absolute public interest and hence the RoDTEP scheme benefits are not extended.
4. Products which are restricted for export under Schedule-2 of Export Policy in ITC (HS)
5. Products which are prohibited for export under Schedule-2 of Export Policy in ITC (HS).
6. Deemed Exports are not entitled for RoDTEP scheme. Deemed exports are considered as exports for many purposes but are not physically exported out of India. RoDTEP as a scheme is meant for produce that are physically exported out of India
7. Supplies of products manufactured by DTA units to SEZ/FTWZ units
8. Products manufactured in EHTP and BTP. A major attributable reason to this would be that the units are mandatorily obligated to export.
9. Products manufactured partly or wholly in a warehouse under section 65 of the Customs Act, 1962 (52 of 1962)
10. 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
11. Products manufactured or exported by a unit licensed as hundred per cent Export Oriented Unit (EOU) in terms of the provisions of the Foreign Trade Policy. A major attributable reason to this would be that the units are mandatorily obligated to export.
12. Products manufactured or exported by any of the units situated in Free Trade Zones or Export Processing Zones or Special Economic Zones. A major attributable reason to this would be that the units are mandatorily obligated to export.
13. Products manufactured or exported availing the benefit of the Notification No. 32/1997- Customs dated 1st April 1997 i.e., goods imported into India for execution of an export order and in basic parlance, cross border job work.
14. Exports for which electronic documentation in ICEGATE EDI has not been generated/ Exports from non-EDI ports
15. Goods which have been taken into use after manufacture. While it has an element of ambiguity and clarification is expected on this, probably refers to export of used goods or goods that have been put to use.

TIME AND MANNER TO BE NOTIFIED BY CBIC

1. Rules and procedure regarding grant of RoDTEP including manner of application, time period for application and other matters including export realization, export documentation, sampling procedures, record keeping etc.

2. Provisions for recovery of rebate amount where foreign exchange is not realized, suspension/withholding of RoDTEP in case of frauds and misuse and imposition of penalty.

NOVELLO COMMENTS

Some of the Agri-produce have been given the highest effective RoDTEP rates of 3-4%. In fact, it is only on Agri produce that 4% scrips have been extended.

While at least the industry expectation was a RoDTEP rate of about 2-3%, the average rate appears to be only in the region of 1-2%.

It is pertinent to mention that RoDTEP is applicable and extended only to produce and not to services.

While Minerals, Gems and precious metals, pharmaceuticals, machinery, organic chemical, vehicle, iron and steel, are the major contributors to the valuable foreign exchange, the RoDTEP scrip rate is minimal.

While it was largely expected that finished goods may carry a higher RoDTEP rate, considering the importance of Aathma Nirbar Scheme it is rather surprising that the alignment of RoDTEP rates are practically the same for both inputs and finished goods.

The time and manner of application for the scrips is expected soon. It is also hoped that the procedural guidelines do not take away the substantial benefit brought in as a part of the notification.

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