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Export Chambers seek RoDTEP revision to include SEZ & EOU products

 –         Inclusion will help achieve $400 billion economic target this fiscal

As India embarks on its Aatmanirbhar Bharat journey at breakneck speed, a key element behind fulfilling that dream is the exports sector. The country’s merchandise exports rose to a record high of $35.2 billion in July 2021, the highest-ever monthly figure ever in the country’s history, according to data by the Ministry of Commerce. But this is far from the immense potential and the economic promise the Indian exporters are capable of delivering when encouraged with adequate support. Right now, just becoming a global manufacturing hub similar to China, will not be sufficient as Indian exporters also needs to be globally competitive vis-à-vis major exporter countries in the international markets. Globally the Government support to enhance cost-competitiveness of exports by way of various incentives/subsidies for raw materials, tax benefits & tax incentives are prevalent, majorly in China, GCC countries and other manufacturing majors, and India also needs similar push to boost exports.

The exporters community was desperately waiting for notification of RoDTEP rates for over last eight months since its announcement on 31.12.2020. However, there is high uncertainty arising for a large segment of exporters as the notified guidelines have excluded various key export segments from the purview of the RoDTEP Scheme, such as the exports from SEZs/EOUs, against Advance Authorization, DIFA, from non-EDI ports and bonded warehouses u/s 65 of Customs Act, 1962 which are crucial for Indian economy.

Meanwhile, the erstwhile MEIS (Merchandise Exports from India Scheme) regime was also applicable on such exports and entailing the cost-competitiveness to Indian exporters. In fact, MEIS scheme gave the necessary impetus to Indian exporters to compete in the global market, resulting in net increase of exports in last couple of years.

Contrary to the benefits available for the aforementioned exports category, the ambit of RoDTEP Scheme provides a much wider coverage with remission of embedded Central, State and local duties/taxes that are not being rebated/refunded other than the Basic Custom Duties. Thus, RoDTEP and other export schemes intend to provide different benefits for exporters and are mutually exclusive. Therefore, there is no justification for depriving the benefit for the aforementioned segments of exporters by exclusion from RoDTEP Scheme post withdrawal of MEIS, which creates a double whammy for such exporters. As the benefit of MEIS has also been withdrawn for exports for these units from 01.01.2021 onwards, their exclusion from RoDTEP Scheme comes as a huge set-back and will render Indian exports to huge disadvantage as the industry is struggling to retain its cost-competitiveness vis-à-vis global players in international markets.

It is to be noted that when the RoDTEP announcement was made by the government some eight months ago, SEZ/ EoU were included in the instructions.  SEZ/EOUs contribute to over 30% of the country’s exports and are bearing the high unrebated taxes and duties. All exporters of these, now excluded product groups even made shipments under RoDTEP and got notional RoDTEP rates in their shipping bills. Their exclusion now is a deep blow to the exports sector. This is in stark contrast to the fact that the previous MEIS regime was applicable to these export categories and assured cost-competitiveness to Indian exporters Additionally, since most SEZ/EOU locations are operating as non-EDI ports as of date, such exports through non-EDI ports also may be considered as part of the RoDTEP scheme.

While some of the categories are doing well, many units in these categories while having an impressive top line, are struggling with their bottom-line. FIEO, EEPC, FIMI, ISA, AAI are a few bodies who have appealed to the government to correct the anomaly. keeping in view that singling out manufacturers from SEZ’s will make India’s exports uncompetitive. They need the support of RoDTEP to survive and be a successful contributor to the economy. If the rates are revised, then these export categories can help the economy achieve the target of $400 billion this fiscal and further the target of $ 1 trillion by 2025.

 The Advance Authorization scheme only provides relief w.r.t Basic Custom Duty on import of inputs which are physically incorporated in export products and does not provide complete zero-rating of the exports. Even after availing of this scheme, the exporters still have to incur several costs, mainly in the form of direct taxes for electricity, freight, fuel etc which will get embedded with the exporter’s cost if not remitted under RoDTEP.

It should be borne in mind that while RoDTEP has excluded crucial sectors from its ambit, it is still a step towards offering level playing parity to the Indian exporters in compliance with the WTO provisions. RoDTEP is one of those few WTO compatible measures to support exports therefore WTO compatible measures need to be fully and effectively utilized to support exports.  RoDTEP eliminates the extra burden of the embedded non-creditable taxes and duties. It is for these very reasons that RoDTEP’s umbrella needs to be cast further to include vulnerable export categories to make the dream of Make In India real.

About Mahender Bansal

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