Government approves tax reimbursement scheme for exporters

Commerce and Industry Minister said duties/taxes/levies not refunded in any other scheme will be refunded under this new scheme, which will be rolled out soon by the Department of Revenue. The move assumes significance as a WTO dispute resolution panel has ruled that MEIS was not in compliance with the global trade norms.

The government on Friday approved a scheme for reimbursement of taxes and duties, which were not refunded previously, to exporters with a view to give boost to the country’s dwindling outbound shipments.

It is proposed to digitally refund to exporters, duties and taxes levied at the Centre, State and local levels.(Bloomberg File Photo)

A decision to approve the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme was taken in a Cabinet meeting chaired by Prime Minister Narendra Modi here.

The reimbursement of taxes such as duty on power charges; VAT on fuel in transportation, farm sector, captive power generation; mandi tax; stamp duty on export documents; CGST and compensation cess on coal in power production; central excise duty on fuel used in transportation would make Indian products competitive in global markets, Commerce and Industry Minister Piyush Goyal told reporters.

Finance Minister Nirmala Sitharaman in September last year had said this scheme will incentivise exporters at an estimated cost of Rs 50,000 crore to the exchequer.

These measures are compliant with the WTO (World Trade Organisation) norms. India is a member of WTO, which frames norms for global trade, since 1995.

Goyal also said sectors and products under RoDTEP scheme will be notified in a phased manner and the MEIS benefits for those sectors and items will be withdrawn. This scheme was announced by Sitharaman in her Budget speech on February 1.

Goyal said with the rolling out of this new scheme, the Merchandise Export Incentive Scheme (MEIS) will be “phased out”.

It is proposed to digitally refund to exporters, duties and taxes levied at the Centre, State and local levels.

Goyal said duties/taxes/levies not refunded in any other scheme will be refunded under this new scheme, which will be rolled out soon by the Department of Revenue. The move assumes significance as a WTO dispute resolution panel has ruled that MEIS was not in compliance with the global trade norms.

Under the WTO rules, certain duties like state taxes on power, oil, water, and education cess are allowed to be refunded.

Further, the commerce minister said as India has graduated from the category of the least developed countries, it cannot give subsidies for exports.

So far, exporters have been getting refund under duty drawback and GST paid on raw materials or intermediates. The scheme, he said, will help in providing a level playing field to domestic exporters in the international markets.

The ministry will hold a detailed consultations with stakeholders concerned for inclusion of products, which would avail refund.

The Department of Revenue will priorities and soon fix RoDTEP rates for different goods/sector and will notify in a phased manner and accordingly MEIS will be rolled back for those items.

“It will be given to exporters through transferable scrips. All the process will be online to minimise human interface,” he said.

“Stakeholders meeting will be held for fixing the rates. We will take data and see what all cost they bear,” Goyal said adding “We will use the next 6-8 months to talk to the industry, work out the input taxes which do not get refunded”.

A monitoring and auditing mechanism will be put in place.The country’s exports contracted for a sixth month in a row by 1.66 per cent in January to USD 25.97 billion.

During April-January 2019-20, exports slipped 1.93 per cent to USD 265.26 billion, while imports declined 8.12 per cent to USD 398.53 billion, leaving a trade deficit of USD 133.27 billion. Undet thr scheme, a mechanism would be created for reimbursement of taxes/ duties/ levies, at the central, state and local level, which are currently not being refunded under any other mechanism, but which are incurred in the process of manufacture and distribution of exported products. An official statement said that an inter-ministerial Committee will determine the rates and items for which the reimbursement of taxes and duties would be provided. Transferable duty credit/electronic scrip will be issued as part of refund to the exporters, which will be maintained in an electronic ledger. “The refunds under the RoDTEP scheme would be a step towards ‘zero-rating’ of exports, along with refunds such as Drawback and IGST,” it said.

It added that at present, GST taxes and import/customs duties for inputs required to manufacture exported products are either exempted or refunded. However, certain taxes/duties/levies are outside GST, and are not refunded for exports. “The sequence of introduction of the scheme across sectors, prioritization of the sectors to be covered, degree of benefit to be given on various items within the rates set by the Committee will be decided and notified by the Department of Commerce ,” it said.

The rebate would be claimed as a percentage of the Freight On Board (FOB) value of exports.

A monitoring and audit mechanism, with an Information Technology based Risk Management System (RMS), would be put in to physically verify the records of the exporters. “As and when the rates under the RoDTEP Scheme are announced for a tariff line/ item, the MEIS benefits on such tariff line/item will be discontinued,” it said.