EoUs and SEZs to get RoDTEP sops until September 30

EoUs and SEZs to get RoDTEP sops until September 30

Subject: Economy

Section: External sector

The announcement made by the Centre regarding the Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme includes the eligibility of outbound shipments from Special Economic Zones (SEZs) and Export Oriented Units (EOUs) for tax refunds. This move is significant as SEZs and EOUs collectively account for about a quarter of India’s total exports.

1. Scope of Eligibility:
   • Outbound shipments from SEZs and EOUs will now qualify for tax refunds under the RoDTEP Scheme.
   • This extends the benefit of the RoDTEP Scheme to these entities, recognizing their substantial contribution to India’s export landscape.
2. Advance Authorisation (AA) Scheme:
   • Exporting firms utilizing the Advance Authorisation (AA) scheme will also be covered under the RoDTEP Scheme.
   • The AA scheme allows duty-free import of inputs that are physically incorporated into the exported products.
   • By including AA scheme users, the RoDTEP Scheme aims to incentivize and support exporters who rely on duty-free imports for their manufacturing processes.
3. Objective:
   • The RoDTEP Scheme is designed to promote exports by refunding duties and taxes incurred on the export of goods.
   • By providing tax refunds, the scheme aims to make Indian exports more competitive in the global market and boost the country’s overall export performance.
4. Commerce and Industry Minister’s Statement:
   • Commerce and Industry Ministry announced the extension of the RoDTEP Scheme to SEZs, EOUs, and AA scheme users.
   • This move is part of the government’s efforts to support and promote the growth of India’s export sector, particularly in key areas such as SEZs and EOUs.
5. Significance:
   • SEZs and EOUs play a crucial role in India’s export ecosystem, offering various benefits and incentives to businesses operating within these zones.
   • By including these entities under the RoDTEP Scheme, the government aims to further encourage exports from these zones, thereby driving economic growth and employment.

About SEZs:

• An SEZ is a designated territory within a country that operates under special economic regulations and incentives.
• Purpose: SEZs are established to encourage investment, boost exports, create employment opportunities, and enhance ease of doing business.
• Evolution in India:
  • Asia’s first Export Processing Zone (EPZ) was set up in Kandla, Gujarat in 1965.
  • India shifted from EPZs to SEZs in 2000 to address infrastructural and bureaucratic challenges.
  • The Special Economic Zones Act was enacted in 2005, with the rules coming into effect in 2006.

Current Status of SEZs in India:

• Number and Location:
  • India presently has 378 notified SEZs, out of which 265 are operational, as on March 2021
  • The majority of SEZs, about 64%, are located in five states: Tamil Nadu, Telangana, Karnataka, Andhra Pradesh, and Maharashtra.
• Apex Body: The Board of Approval, headed by the Secretary of the Department of Commerce, oversees SEZs.
• Baba Kalyani Committee:
  • In 2018, the Ministry of Commerce and Industry formed the Baba Kalyani-led committee to evaluate and suggest improvements to the SEZ policy.
  • The committee aimed to align the SEZ policy with global best practices and make it WTO-compatible.

Major Incentives and Facilities:

• Duty-free import or domestic procurement of goods for SEZ units’ development, operation, and maintenance.
• Exemption from various taxes such as Income Tax and minimum alternate tax.
• External commercial borrowing by SEZ units up to US $500 million annually.
• Single window clearance for approvals at the Central and State levels.

Challenges Faced:

• Underutilized Land:
  • Lack of demand for SEZ space, exacerbated by disruptions caused by the pandemic.
• Multiple Economic Zone Models:
  • Challenges in integrating various models like SEZs, coastal economic zones, industrial corridors, etc.
• Competition from ASEAN Countries:
  • ASEAN countries’ policies attracting global investments to their SEZs, leading to increased competition.

About Export Oriented Units (EoUs)

EOUs, or Export Oriented Units, are industrial plants or facilities set up for the purpose of producing goods or services primarily for export. These units are established under the Export Oriented Unit (EOU) Scheme which is governed by the Directorate General of Foreign Trade (DGFT) in India.

Purpose:

• Export Focus: EOUs are dedicated to producing goods and services specifically for export markets.
• Boost Exports: The main objective of EOUs is to promote exports from India by providing certain incentives and facilities to manufacturers.

Benefits and Incentives:

• Duty-Free Imports: EOUs can import raw materials, components, and capital goods without paying customs duties.
• Tax Benefits: Exemption from Central Excise duty on goods procured domestically for production.
• Foreign Exchange: EOUs can retain and utilize 100% of foreign exchange earnings.
• Infrastructure Support: Access to infrastructure facilities like customs clearance, banking, and security services.
• Simplified Procedures: Single-window clearance for various approvals and licenses.

Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme:

The RoDTEP scheme, introduced to replace the Merchandise Export from India Scheme (MEIS), has been notified by the Government of India, outlining rates and norms to support exporters.

Objective: To refund embedded central, state, and local duties or taxes that were not previously rebated, addressing the non-compliance issues with the World Trade Organization (WTO) rules.

Key Features:

1. Scope:
   • Covers 8,555 tariff lines, constituting around 75% of traded items and 65% of India’s exports.
   • Budgetary allocation of ₹12,454 crore for the fiscal year 2021-22.
2. Zero Rating of Exports:
   • Aims to achieve zero rating of exports by ensuring that domestic taxes are not exported.
3. Refund Mechanism:
   • Refunds encompass all taxes, including those levied by states and local bodies.
   • Refund rates, considered WTO-compliant, range from 0.5% to 4.3% of the Free On Board (FOB) value of outbound consignments.
4. Rate Variation:
   • Rates vary based on the product category. For example:
     • Lowest rates for items like chocolates, toffees, and sugar confectionery.
     • Highest rates for yarns and fibers.
     • Exclusion of certain sectors like steel, pharma, and chemicals.

5. International Standards and Automatic Refunds:
   • Enables Indian exporters to meet international standards for exports.
   • Provides affordable testing and certification within the country, reducing dependence on international organizations.
   • Facilitates automatic tax assessment and refunds for GST, streamlining the process for exporters.

The RoDTEP scheme aligns with India’s efforts to facilitate a conducive environment for exporters, promoting economic growth and enhancing the country’s position in the global market.

About Advance Authorization Scheme

The Advance Authorization Scheme, implemented by the Directorate General of Foreign Trade (DGFT) under the Foreign Trade Policy, is a encouraging program for exporters in India.

Overview:

The Advance Authorization Scheme allows for the duty-free import of inputs that are necessary for the production of export goods. These inputs can include raw materials, components, parts, packaging materials, fuel, oil, and catalysts that are used or consumed in the manufacturing process of export products.

Purpose:

The main objective of the scheme is to promote exports by enabling exporters to import inputs without paying duty. This reduces the cost of production for export goods, making them more competitive in the global market.

Benefits:

• Simplified Process:
• Shorter Turnaround Times:
• Ease of Doing Business:
• Reduced Compliance Burden:
• Validity: An Advance Authorization is typically valid for 12 months from the date of its issue. During this period, the authorized holder can import the specified quantity of duty-free inputs for use in the production of export goods.

Conclusion:

The Advance Authorization Scheme is a valuable tool for Indian exporters, offering them the opportunity to import necessary inputs without incurring duty costs. The creation of a searchable norms database by the DGFT further enhances the scheme’s efficiency, enabling exporters to benefit from shorter processing times, reduced compliance burdens, and improved competitiveness in international markets. This trade facilitation measure aligns with the government’s efforts to promote exports and boost the country’s economic growth.