Status of RoDTEP Scheme and US Anti-subsidy Duties
- January 23, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Status of RoDTEP Scheme and US Anti-subsidy Duties
Subject: Economy
Section: External Sector
- Scheme Overview:
- The popular Remission of Duties and Taxes on Exported Products (RoDTEP) scheme for exporters in India is not set to be reworked by the Centre.
- US Antisubsidy Duties Imposition:
- Despite the US government imposing ant subsidy duties against the RoDTEP scheme, Indian officials clarify that the issue is not related to the World Trade Organization (WTO) compatibility of the scheme.
- Documentation Challenge:
- The challenge lies in the inability of exporters to provide adequate documents to US investigating teams, not the compliance of RoDTEP with WTO regulations.
- Directorate General of Foreign Trade (DGFT) and Directorate General of Trade Remedies (DGTR) are collaborating to educate exporters on the documentation process.
- WTO Compliance and Transparency:
- RoDTEP is asserted to be fully WTO compliant and transparent in its determination of refund rates.
- The scheme, introduced in January 2021, replaced the WTO-incompatible MEIS scheme, addressing transparency issues raised at the WTO.
- Design of RoDTEP:
- RoDTEP was designed carefully to ensure transparency, with refund rates based on embedded duties and taxes such as VAT on fuel, mandi tax, and duty on electricity used in manufacturing exported items.
- Imposition of Antisubsidy Duties:
- Both the US and the EU imposed countervailing (antisubsidy) duties on certain Indian products benefiting from RoDTEP payments.
- The affected products include paper file folders, common alloy aluminum sheets, forged steel fluid end blocks (by the US), and specific graphite electrode systems (by the EU).
- Documentation Streamlining Efforts:
- Efforts are underway to familiarize exporters with the documentation process, emphasizing that RoDTEP payments are remissions and not incentives.
- Exporters are urged to demonstrate that RoDTEP payments are in lieu of input taxes not covered by other schemes and are not export subsidies.
- Steps are being taken for general awareness building among exporters to ensure clarity on the nature of RoDTEP payments and proper documentation.
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:
- 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.
- Zero Rating of Exports:
- Aims to achieve zero rating of exports by ensuring that domestic taxes are not exported.
- 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.
- 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.
- Rates vary based on the product category. For example:
- 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.