Indian Exporters have been waiting for last 8 months for the announcement of the benefits under RoDTEP (Remission of Duties and Taxes on Exported Products) Scheme. Ministry of Commerce & Industry under Department of Commerce has finally come out with the Scheme Guidelines by issuing the Notification No. 19/2015-2020 dated 17th August 2021 providing for the contonur of the Scheme. It has also provided for the rate of benefit applicable on various products presently 8555 tariff lines being exported from India.
The authors have prepared some FAQs based on first hand reading of the Scheme document. Please note that the views expressed in the FAQs are not the authoratitative pronouncement by Ministry or any other regulatory body and is merely understanding of the authors presented in simpler form for ease of understanding. The answers to FAQs may undergo changes once other aspects under the Scheme are notified by the Ministry of Finance and Ministry of Commerce.
Ans: RoDTEP scheme is notified for the remission of duties, taxes and other levies at the Central, State and local level which are borne on the exported goods manufactured in India. It also include incidence of taxes suffered post manufacturing of the goods i.e. in respect of the distribution of exported goods.
The benefit is not available in respect of those duties or taxes which are otherwise exempted or remitted or credited.
The benefit is given as percentage of FOB or fixed amount per unit of measurement as prescribed in the Appendix 4R to the Notification.
Ans: MEIS was given under chapter 3 of the FTP i.e. Exports from India Scheme, as an incentive whereas the RoDTEP is announced under chapter 4 of FTP i.e. duty exemption and remission scheme, which is in compliance with the global trade norms of WTO. The objective of the MEIS was to incentivize the export of the goods from India whereas the objective of RoDTEP is neutralize the taxes and duties suffered on exported goods which are otherwise not credited or remitted or refunded in any manner. Important distinguishing features of the MEIS viz a viz RoDTEP could be tabulated as below:
Benefit given as export incentive under FTP
Benefit given as duty exemption and remission scheme under FTP
Almost all the products were covered under MEIS benefit.
There are few sectors i.e. pharmaseuticals, chemical, steel etc. are important sectors which have not been covered in the Scheme.
The average rate of benefit under MEIS was between 2% to 7*%
The benefit ranges between0.01 to 4.3% of FOB. However, in majority of the products, benefit under RoDTEP is substantially lower (may be less than 50%) than MEIS benefit.
MEIS was broad based scheme which was available to SEZ, EOU, MOOWR, advance authorization holder etc.
RoDTEP is very restrictive and SEZ, EOUs, advance authorization holders, MOOWR etc have been covered in the ineligible categories with an option for some of these to confer benefit in future.
The quantum of benefit depended upon the country of exports. Exports to some of the countries were not entitled for benefit.
There are no country specific restrictions. Exports to all the Countries are covered in the Scheme benefit.
The benefit under MEIS for majority of sector was significant compared to RoDTEP and helped a lot to exporters to become competitive in the international market.
The benefit under RoDTEP is very restrictive and, in many sectors, may have adverse impact on the export competitiveness of the Indian Exporters.
Ans: RoDTEP scheme is notified by the Department of Commerce. The Scheme shall be fully administered by the Department of Revenue.
A separate committee has been constituted comprising of Department of Revenue with suitable representation of the Department of Commerce/DGFT, line ministries and experts on the prioritized sectors. The committee shall be responsible for the determination of rge ceiling rates under the Scheme.
- Whether RoDTEP is available on all the products or on selective products? Further, whether there is any country specific restrictions or permission in RoDTEP?
Ans: RoDTEP scheme is notified based on the classification of the products as per tariff heading at 8 digit level. The benefit is given for 8555 tariff items. However, there are some sectors i.e. steel, pharmaseuticals, chemical, textiles (covered by ROSCTL) etc which have not been given benefit under the Scheme. One need to examine the Appendix 4R to assess if their products covered under the Scheme.
The benefit is available in respect of exported goods to any of the Countries without any specific restrictions or permissions based on the country.
Ans: The scheme intends to compensate the duties/taxes/levies at the Central, State and Local level borne on the exported product including prior stage cumulative indirect taxes on goods and services used in the production and distribution of the exported product. Illustrative taxes would be as follows:
- VAT and Excise duty on the fuel (5 goods) used in self-incurred transportation costs;
- VAT and Excise duty on the fuel used in generation of electricity via power plants or DG Sets;
- VAT and Excise duty on the fuel used in running of machineries/plant;
- Electricity duty on purchase of electricity;
- Mandi Tax/ Municipal Taxes/ Property Taxes;
- Stamp duty on export documents;
- Un-creditable CGST/ SGST/ IGST/ Compensation Cess on items falling under Section 17 (5) [passenger transportation vehicles, food and beverages, rent-a-cab, works contract services, etc.]
- Un-creditable CGST/ SGST/ IGST/ Compensation Cess which normally gets lost due to defaults by suppliers, e.g. GSTR 2A default, Section 16 (2) default, Section 16 (4) default
Ans: Looking at the rates notified, it appears that the due considerations have not been given to the above taxes which are becoming cost for the exporters. For eg. Mobile phone are eligible for Rs. 24.5 per piece against 4% MEIS earlier. Similarly, precious metal and jewelleary sector has got 0.01% of benefit. Many sectors have been excluded from the benefit though they suffer the very high taxes burden. Thus, it appears that the Scheme has not fully considered the impact of these taxes and fail to neutralize the impact of taxes in most of the products.
- Whether Scheme is applicable only to the manufacturer and exporter of goods or to all type of exporters?
Ans: The benefit under the Scheme is available to all exporters irrespective of their status in respect of the goods manufactured in India. Further, there is no turnover limit criterion for claiming the benefit under the Scheme.
- What would be manner of claiming benefit of RoDTEP? Whether there would be need of filing separate application similar to MEIS or it would be directly available as Duty Drawback?
Ans: The scheme is very restrictive as many supplies or items or categories under the Scheme have been disentitled for the Scheme as provided in para 4.55. Following are ineligible categories:
- Exports of imported goods as per para 2.46 of FTP i.e. Import for Export
- Exports through transhipments, meaning exports originating in third country but transshipped through India
- Export products subject to minimum export price or export duty
- Products restricted for exports under Schedule 2 of Export Policy in ITC (HS)
- Products prohibited for exports under Schedule 2 of Export Policy in ITC (HS)
- 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 Customs Act, 1962 (i.e. MOOWR etc)
- Products manufactured or exported in discharge of export obligation against advance authorisation or DFIA or special advance authorisation issued under a duty exemption scheme of relevant FTP
- Products manufactured or exported by 100% EOU
- Products manufactured or exported by any of the units situated in FTZ, EPZ or SEZ
- Products manufactured or exported availing the benefit of Notification No 32/1997- Customs (i.e. jobbing transactions)
- Exporrs for which electronic documentation in ICEGATE EDI has not been generated or exports from Non EDI port
- Goods which have been taken into use after manufacture (i.e. second hand goods)
- What is the rationale for covering SEZ, EOU, FTWZ, MOOWR etc under the ineligible categories?
Ans: The RoDTEP is intended to neutralise the tax impact of all taxes which are not creditable/ remittable or refundable. It appears that while drafting the scheme, the focus of policy makers have been shifted to the customs duty exemptions enjoyed by these units and thus not extended the benefit of RoDTEP. The entire objective of the Scheme is lost in the process as the RoDTEP intends to refund the non-exempted/remitted/credited duties,taxes,levies at the Central,State, Local level and not confined to the customs duty. By not providing the RoDTEP benefit to these units, they have been placed at disadvantagenoues position by not remitting the other domestic taxes borne by these units viz a viz DTA manufacturers and thereby affecting the overall relevancy of these units to remain as SEZ, EOU etc.
Though the Scheme provides that the exporters under the categories of SEZ, EOU, Advance Authorisation etc would be covered by the Scheme at a later date, it is desirable that these units are also given the benefit with retrospective effect immediately to ensure viability of these units.
- Can I claim the unlimited benefits on goods exported as per applicable rates or are there any overall ceiling for claiming the benefit?
Ans: The Scheme is within overall annual budget outlay to be determined based on budgetary allocation. The Scheme makes provision for determination of total overall benefit amount permissible under the Scheme for the year. This indicates that there could be ceiling on the maximum benefit within overall budget outlay. More clarity would emerge in future on overall ceiling aspect.
- What is the need and role of realisation of foreign currency for the RoDTEP benefit? Whether benefit is available even if the consideration is received in INR instead of convertible foreign exchange? What if FEMA compliance violated.
Ans: The rebate is allowed subject to receipt of sale proceeds within the timeframe allowed under the Foreign Exchange Management Act, 1999 failing which such rebate shall never be deemed to have been allowed. It is to be noted that there are no restrictions on realization of amount in INR and the exporters can claim the benefit of the Scheme.
The Scheme further provides that the rebate would not be dependent on the realization of export proceeds at the time of claim of rebate. However, in case the amount is not received as per timeframe, adequate safeguard measures by way of withdrawal of rebate along with interest and penalty, if any, (to be notified) has been provided in the Scheme.
- I have been importing the raw material under advance authorisation and making exports of the goods against such authorisation. What are implications of the RoDTEP on my business?
Ans: Unfortunately, the Scheme at present, provides that goods manufactured or exported in discharge of export obligations under Advance Authorisation is not entitled for the Scheme. It is to be noted that the restriction is only for the goods exported against advance authorisation. If the exporter is exporting other goods, there are no restrictions in claiming the benefit. The exporters would be required to:
- Determine the element of customs duty benefit availed on import of raw material viz a viz benefit available under RoDTEP on export of FG
- Ensuirng that the shipping bills are filed carefully w.r.t. RoDTEP and AA benefit disclosures.
- In respect of the past transaction under AA, if SB had been filed under claim of RoDTEP, ensure that the claim is surrendered.
It is to be noted that there could be possibility of introduction of RoDTEP benefit for AA holder in future, hence this aspect should be considered while evaluating for the Scheme.
The present Scheme is adverseial compared to MEIS where such holder could have claimed both the benefit simultaneously.
- My factory has got MOOWR license. How would I claim the benefit of RoDTEP?
Ans: Products manufactured partly or wholly in a warehouse under section 65 of the Customs Act are covered in the ineligible category. Unlike SEZ, EOU etc, there is no provision for inclusion of these units in the Scheme in future also, thereby denting the overall popularility and success of the Scheme.
As the MOOWR license is taken on factory basis, the restriction under the Scheme is only in respect of such products which have been manufactured, fully or partially, in such warehouse. Hence, if the goods have been manufactured by the exporter in some other factory where MOOWR is license is not held, the benefit can be claimed.
There could be possibility of MOOWR warehouse importing goods on payment of BCD also. However, once the status of MOOWR is taken for that premise, the benefit under the Scheme may not be permitted. In fact, if the job work is done by a job worker operating through warehouse u/s 65, the benefit may not be available under the Scheme to principal manufacturer. Appears very regressive steps to deny the benefit.
- I have been making export of goods directly to outside India as well as merchant exporter @ 0.1.% under GST. Can I claim RoDTEP?
Ans: Benefit of RoDTEP could be claimed in respect of the goods directly exported from India to outside India in respect of goods manufactured in India. In respect of goods cleared on payment of GST @ 0.1%, no RoDTEP benefit would be admissible to the person making physical exports of goods, not to the merchant exporter.
Ans: There are no restrictions as of now in the GST provisions to restrict the benefit of making export of goods on payment of GST simultaneous to claiming benefit of RoDTEP.
- Capital goods have been imported under EPCG license to neutralise the BCD cost. What would be implications on my business under RoDTEP?
Ans: The restriction under Scheme does not cover the capital goods under imported EPCG Scheme. Thus, you may continue to claim the benefit of EPCG and RoDTEP simultaneously.
- What is the effective date of claiming the RoDTEP? When do I expect that the benefit of RoDTEP credited to my account for the first time?
Ans: RoDTEP has been made effective from 1st January 2020 in respect of those exports where intention to claim the benefit has been manifested on the shipping bills. In respect of EOU, SEZ, AA etc., the benefit of RoDTEP may be implemented in future at the date to be decided by appropriate authority.
- Whether RoDTEP would be awarded in my bank account similar to duty drawback?
Ans: RoDTEP would be issued in the form of transferrable scripts which could be used for paying Basic Customs Duty on import of goods or may be transferred electronically to other party. The benefit will not be in the form of direct credit to the bank account.
- How would I be able to use the RoDTEP scripts? Whether therse are transferrable scripts?
Ans: Yes, scrips issued under the RoDTEP are the transferable duty credit/ electronic scrip (e-scrip) which will be maintained in an electronic credit ledger by the CBIC. In other words, these e-scrips would be transferable.
Based on the previous advisory issue by ICEGATE and the press release by Ministry of Finance, the following could be inferred - The owner of the scrip (either the original exporter beneficiary or any other IEC to whom the scrip was transferred on ICEGATE portal) will be able to use the scrip in the Bills of Entry the same way as any other duty credit scrips issued by DGFT, by giving the details in the license table of the Bill of Entry. The scheme code to be used for these scrips would be “RD” along with the applicable Notification Number. The scrip can used for the purpose of payment of Basic Customs Duty.
However, the rues and procedures to implement the scheme is yet to be issued by the Department of Revenue.
- If I have not been able to mention the option of claiming RoDTEP in shipping bills in respect of the past transactions, what should I do now?
Ans: W.e.f. 01.01.2021, it is mandatory for the exporters to indicate in their Shipping Bill whether or not they intend to claim RoDTEP on the export items. However, since the final list of HS codes eligible for RoDTEP scheme and the corresponding rates were not notified by the Government for the period between 01.01.2021 to 17.08.2021, this declaration might have been missed by few exporters.
Although, it has been categorically specified by the CBIC that, if RODTEPY is not specifically claimed in the Shipping Bill, no RoDTEP would accrue to the exporter i.e., even though the items and rates are not notified the Government for RoDTEP yet, the exporters must indicate their intent for claim at the time of Shipping Bill filing itself and that cnce the rates are notified, system would automatically calculate the RoDTEP amounts for all the items where RODTEPY was claimed. It has also been categorically provided that no changes in the claim will be allowed after the filing of the EGM.
Since the detailed rules and procedure regarding the grant of the RoDTEP claim and implementation issues including the manner of documentation etc. are yet to be notified. It is expected that due care would be taken in the rules to provide for belated declarations in respect of the past exports.
However, in case no such benefit is provided, then the exporter needs to firstly check the possibility of making changes in the details of the claim indicated in the export doucmnetations already filed and based on which whether the system is automatically calculating the RoDTEP amounts for all the items where RODTEPY was claimed. In case the same is barred by the placing the system restrictions, then the matter needs to be represented before the authorities or one can consider filing a writ petition before the jurisdictional High Court challenging such a restriction.
- If the option of claiming RoDTEP was opted in the past export transactions but considering the various restrictions, it is no longer beneficial for me for eg. AA holder, MOOWR license holder . What should I do now?
Ans: It could be possible that an exporter considers to opt for the other beneficial schemes such as Advance Authorization, MOOWR, EOU, Jobbing etc. instead of RoDTEP. In this case, it is expected that there would be some checks built in the system to disallow RoDTEP benefit where the benefit of certain other schemes like Advance Authorization, EOU, Jobbing etc. has been availed. While some checks would be built in within the system at the time of filing the Shipping Bill i.e., the exporter (or the authorized Customs Broker) has to submit the statement as mentioned in para 2(b) with the Shipping Bill that no undue benefit would be availed.
However, despite such declaration or otherwise, if the e-scrips are credited to any exporter which the said exporter does not intend to claim either due to that being not more beneficial than the other schemes or it being ineligible, then the exporter must immediately remit back the benefit received by making the payment through an online challan or any process which could be provided in the rules and procedures notified by Department of Revenue.
Ans: The broad procedure of claiming the benefit of these scrips is as under:
- To avail the scheme exporter shall make a claim for RoDTEP in the shipping bill by making a declaration.
- Once EGM is filed, claim will be processed by Customs.
- Once processed a scroll with all individual Shipping Bills for admissible amount would be generated and made available in the users account at ICEGATE,
- User can create RoDTEP credit ledger account under Credit Ledger tab. This can be done by IECs who have registered on ICEGATE with a DSC.
- Exporter can log in into his account and generate scrip after selecting the relevant shipping bills.
- How can one create an e-credit ledger?
Ans: RoDTEP Credit Ledger can be used by the Importer/Exporter/CHA only after creating a successful credit ledger account at ICEGATE. Below are the steps to create a RoDTEP Credit Ledger Account with ICEGATE.
Step 1: User can select the option of RoDTEP (credit ledger) account creation by clicking on the “RoDTEP” tab under the “Our Services” section of https://www.icegate.gov.in/ as indicated.
Step 2: User will be directed to the login page. After log in using valid credentials, user will be able to see the Credit Ledger option on the left panel as shown below. If user is not registered they can get themselves registered as per advisory through this link: https://icegate.gov.in/Download/JavaSetupForDSC.pdf
Step 3: Since the user has not created a credit ledger account initially, the following page will be displayed. The user can select the scheme name from the drop-down as RoDTEP.
Step 4: After Credit Ledger account creation is done by the user, a grid view with the following details will be displayed to the user.
User can perform various operations mentioned as follows from this Home Page:
- Scroll Details
- Scrip Details
- Transaction Details
- Transfer Scrip
- Approve Scrip Transfer
- How a user can claim the benefit of the scheme in the Shipping Bill?
Ans: Based on initial advisory issued by ICEGATE following could be inferred, however conclusion could be made only after the notification of rules and procedures by Department of Revenue:
In order to claim the benefit of the RoDTEP, The exporter will have to make following declarations in the SW_INFO_TYPE Table of the Shipping Bill for each item:
INFO TYPE = DTY
INFO QFR = RDT
INFO CODE = RODTEPY - If RoDTEP is availed
RODTEPN – if not availed.
INFO MSR = Quantity of the items in Statistical UQC as per the Customs Tariff Act for that item RITC INFO UQC = UQC for the Quantity indicated in INFO_MSR
Additionally, for every item where RODTEPY is claimed in INFO CODE, a declaration has to be submitted in the Statement Table of the Shipping Bill as below.
STATEMENT TYPE = DEC STATEMENT CODE = RD001
Submission of the above statement code for RoDTEP availed items would indicate that the exporter has made the necessary declaration, while claiming RoDTEP benefit.
Based on the above declarations, system would process the eligible RoDTEP. Options have been made available in system for officers to generate RoDTEP scrolls. Once the scroll is generated, the respective amounts would be available with the exporter as credits on the ICEGATE portal. Scrips once generated will reflect in the exporter’s ledger and will be available for utilization in paying Basic Customs Duty during imports or for transfer to any other entity having IEC and a valid ICEGATE registration.