RoDTEP Scheme - Remission of Duties or Taxes on Export Product (RoDTEP)

RoDTEP Scheme

RoDTEP Scheme – Remission of Duties or Taxes on Export Product (RoDTEP)

The Government of India (GoI) has introduced Remission of Duties or Taxes on Export Product (RoDTEP) scheme to replace the existing Merchandise Exports from India Scheme (MEIS) and create a fully automated route for Input Tax Credit (ITC) in the GST to help increase the exports in India.

Remission of Duties or Taxes on Export Product (RoDTEP)

The RoDTEP scheme will be monitored by the Ministry of Finance (MoF) and comes into effect from January 1, 2020. The scheme provides an additional export credit of up to Rs.68,000 crores and the projected forgone revenue will be up to Rs.50,000 crores. The following were the other announcements covered on RoDTEP:

  • The MEIS scheme will be applicable only until Procedure for December 31, 2019, replacing with RoDTEP
  • Create a fully automated procedure for ITC in GST to avoid double taxation
  • Privileged Textile and other export sectors that are applicable for an incentive of up to 2% of MIES shall be replaced with RoDTEP scheme
  • MoF has allocated a budget of Rs.1,700 crore to provide higher insurance cover through Export Credit Guarantee Corporation (ECGC), to increase the lending opportunities from banks

Click here to read about, Trade Promotion Scheme

MEIS and RoDTEP

Both MEIS and RoDTEP are schemes designed to incentivise exports to India by reducing duties paid on exports. Exporters in India avail between 2% and 7% of the free-on-board value and the MOF has informed that the rewards will be better than the existing MEIS scheme and the percentages. The rate of reward varies depending on the products of the country.

Qualities of MEIS and RoDTEP

  • Both MEIS and RoDTEP seek to free up working capital of exporters
  • An electronic refund module will be set up to automatically refund input tax credits
  • The new module will be usable by the end of September 2019
  • The move will increase bank credit to exporters under the Export Credit Insurance Scheme
  • Exporters will receive a higher insurance cover from banks that offer capital loans

Automated ITC

MoF has announced that the ITC will create a fully automated refund module to the manufacturing and service sector through Form GST RST-01. The automation shall reduce double taxation, claims for deemed exports, claiming GST tax refunds and acts as an authentic source to UN, WTO and other foreign embassies. The Form GST RST-01 shall be implemented by the end of September 2019.

Increase in Insurance Cover

To increase the loan availability for exporters, MoF has introduced through ECGC acting a guarantee for the loans availed. This would cover 60% of all loans to exporters and will be increased to 90%. With the credit flow to exporters going down by 35%, the move will help improve the amount of export credit by Rs.40,000 crores in the financial year 2020-2021 and Rs.5,000 crores in the financial year 2021-2022. The new initiative will set back the exchequer by Rs.1,700 crores per year and reduce the cost of export credit and bring down interest rates.

Other Features

  • Decrease in credit interest rates to MSMEs
  • An additional of up to Rs.68,000 crores as export credit will be released under RoDTEP

Changes to Free Trade Agreements

MoF has implemented changes in free trade agreements with other nations to create a platform to encourage collective demand for organised trade. India has signed a number of trade agreements and in the process of innovating the infrastructure for the exporters and manufacturers

  • Improved testing and certification infrastructure to meet international standards
  • Time-bound adoption of latest technical standards
  • Relax external commercial borrowing guidelines

Other Changes to The Export Sector

An inter-ministerial group will be set to implement the following changes by December 2019

  • Providing credit and incentives to Indian exporters, to make the sector more efficient and competitive.
  • Creating a digital platform for export clearances
  • Turnaround time in airports and ports to be benchmarked to meet international standards and publish the Actual turnaround time for export clearances

Resolution of WTO Deadlock

Apart from boosting the export sector of our country, RoDTEP will coordinate with WTO to reduce the post-production transaction costs for exporters. This will line up with countries such as the United States and Brazil has already implemented a number of export-promotion schemes similar to RoDTEP. The implementation of the scheme shall provide a production-oriented process along with WTO, which in turn boosts the production of SMEs, MSMEs.

Benefits to Indian Exporters

Timely adoption of all industry standards

By adopting to RoDTEP scheme, Indian exporters will be able to meet the international standards for exports. This would increase the economy for the country and working capital for the enterprise.

New Working Group on Standards

The MoF will establish a Working Group on Standards that will be responsible for laying down a roadmap for adoption of Standards, enforcement, and timelines. The group will also provide support to exporters, to deal with non-tariff barriers like slow testing and export clearance processes.

Affordable Testing

Affordable testing and certification will be made available to exporters, to get affordable certifications within the country instead of relying on international organizations. Testing and certification services are being developed in Public-private partnership (PPP) mode to help Indian exporters get access to internationally accepted tests.

Faster GST Refunds

Tax assessment is set to become fully automatic for exporters. Businesses will get access to their refunds for GST via an automatic refund-route. A digital platform will be set up by the end of September 2019.

Lower Turnaround Time at Airports and Ports

The MoF will be working towards reducing the clearance time at airports and ports decrease delays in exports. Exporters will be able to monitor the clearance status real-time via a digital platform.

Financial Benefits

Exporters will enjoy lower rates of interest on capital loans, higher insurance cover, financial incentives on exports. The details on financial incentives have not been finalized yet but they will be announced by December 31, 2019.

Notification on RoDTEP to increase exports

Edited pdf

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Post by Peter

Peter is a Senior Content Writer and Copy Editor in Finance specializing in GST and Import & Export. He has also written articles on Medical, Philosophy, and Literature and published research papers in international journals.