The Remission of Duties or Taxes on Export Products (RoDTEP) scheme was strategically implemented by the Indian government to replace the earlier Merchandise Exports from India Scheme (MEIS), primarily to ensure India's trade practices align with the regulations set forth by the World Trade Organization (WTO). For Indian exporters navigating the complexities of global trade, the RoDTEP scheme offers a streamlined pathway to claiming refunds on various duties, taxes and levies incurred during the export process.
By establishing this WTO-compliant mechanism for rebating embedded taxes and duties that were previously non-refundable, RoDTEP enhances the cost-competitiveness of Indian exports in the global market, offering a vital boost to the exporting community. This read will delve into the intricacies of the RoDTEP scheme, providing a clear understanding of its purpose, and the significant advantages it brings to Indian businesses aiming for international expansion.
What is the RoDTEP scheme?
The RoDTEP scheme serves as a key government initiative designed to refund various duties, levies, and taxes that exporters incur during the production and distribution of goods, but who do not receive refunds through other existing mechanisms. This aims to alleviate the financial burden on exporters by effectively ensuring that these indirect taxes are not embedded in exported goods' prices.
In fact, many unseen shipping charges are built into the export value chain, encompassing costs like state taxes on inputs, electricity duties, and levies on transportation fuels, which were often outside the purview of previous refund schemes. RoDTEP directly tackles these by providing rebates through tax refunds, duty credit scrips or transferable electronic scrips (E-Scrips). This neutralization of previously unaddressed costs enhances the price competitiveness of Indian products in the global marketplace and provides a significant advantage to domestic exporters.
Who is eligible for RoDTEP?
A wide range of exporters are eligible to benefit from the RoDTEP scheme. This includes manufacturer exporters, who produce the goods being shipped, and merchant exporters, who trade goods produced by others. Importantly, no specific turnover threshold determines what exporters need to meet to claim benefits under this scheme. The primary requirement for eligibility is that the exported products must have their country of origin as India.
However, certain categories of exporters and exports are excluded from the RoDTEP scheme, including:
SEZ Units and EOUs: Units located in special economic zones (SEZs) and 100% Export-Oriented Units (EOUs) are generally not eligible to claim benefits under the RoDTEP scheme. These entities often operate under different incentive structures and duty exemption regimes.
Exporters using duty exemption schemes: Exporters who are already availing benefits under other duty exemption or remission schemes, such as the Advance Authorisation Scheme (AAS) or the Duty-Free Import Authorisation (DFIA) scheme, are typically excluded from claiming benefits under RoDTEP for the same export. This is to avoid a double benefit on the exported goods.
Deemed exports and non-manufactured goods: Certain categories of supplies considered "deemed exports" (supplies to specific projects or entities within India) are not eligible for RoDTEP. Additionally, the scheme primarily focuses on incentivizing the export of manufactured goods, so non-manufactured goods may also be excluded.
How does the RoDTEP scheme work?
The RoDTEP scheme primarily operates through a digital platform, providing a streamlined process for exporters to receive duty credits. Here's a step-by-step breakdown:
Step 1: Declaration in the shipping bill: Exporters must indicate their intention to claim RoDTEP benefits for each eligible export item in the shipping bill. Accurate declaration, including correct HS codes and descriptions are crucial for the claim to be processed.
Step 2: Customs verification and approval: Once this has been filed, the customs authorities will verify the details provided in the shipping bill. This validation process ensures that the claimed exports meet the criteria for RoDTEP benefits.
Step 3: Issuance of duty credit e-scrips: Upon approval by customs, the admissible amount of the RoDTEP rebate is generated and made available in the exporter's account on the ICEGATE portal as an electronic scroll. Exporters can then create a RoDTEP credit ledger account under the "Credit Ledger" tab on ICEGATE.
Step 4: Utilization and transfer of e-scrips: After the e-scrips are generated, exporters can utilize the available credit in their ledger to offset the payment of basic customs duty on their imports. These e-scrips are also transferable electronically for sale to other Importer Exporter Code (IEC) holders who have a RoDTEP ledger account.
It's important to note that the RoDTEP scheme, as well as its related licenses and procedures, are subject to updates and changes by the Indian government. Therefore, before making any claims, exporters should always verify the latest guidelines and regulations on the official ICEGATE portal and the DGFT website.
Benefits of the RoDTEP scheme
The RoDTEP scheme offers significant advantages to Indian exporters, directly impacting their profitability and global competitiveness. Here's a closer look at the key benefits:
Reduces export costs: The scheme refunds previously unreimbursed hidden taxes and duties, such as those on fuel and electricity used in manufacturing. By offsetting these costs, RoDTEP directly lowers the financial burden on exporters.
Boosts competitiveness: By refunding these embedded taxes, RoDTEP makes Indian goods more price-competitive in the global market, allowing exporters to offer more attractive pricing to international buyers.
Simplifies compliance: RoDTEP offers a transparent and automated duty remission process through the ICEGATE portal. This reduces bureaucratic hurdles and potentially speeds up the refund process for exporters.
Encourages sectoral growth: RoDTEP's increased profitability can stimulate growth in key export sectors across India, making them more attractive for investment and expansion.
Impact of RoDTEP on key export sectors
Through refunding previously un-reimbursed duties and taxes, the RoDTEP scheme potentially boosts the competitiveness of various key export sectors in India. This includes:
Textiles and apparel: Lower input costs due to refunded taxes on dyes, chemicals, and electricity enhance the global competitiveness of Indian textile and apparel manufacturers, potentially leading to increased export volumes.
Agriculture and marine products: A reduction in international logistics and processing costs, which often include significant tax components, make Indian agricultural and marine exports more price-attractive in international markets.
Leather and footwear: Tax rebates on inputs like tanning chemicals and machinery decrease the production costs for leather and footwear products, making the industry more competitive globally and boosting export potential.
Engineering and auto components: Cost savings on raw materials and energy, such as reduced duties on imported steel components and rebates on electricity used in manufacturing, allow the engineering and auto components sectors to offer more competitive prices in the global market.
Challenges and limitations of RoDTEP
While the RoDTEP scheme offers significant benefits, it also faces certain challenges and limitations that exporters should be aware of. These aspects can impact the effectiveness and reach of the scheme:
Delayed issue of e-scrips: Exporters have reported instances of delays in the issuance of the e-scrips. These delays can lead to cash flow issues for businesses, particularly smaller enterprises that rely on timely refunds.
Sector-specific rate variations: The rates of rebate under the RoDTEP scheme vary across different sectors. Some sectors may receive lower benefits compared to others, which can lead to dissatisfaction and concerns about equitable distribution of support.
Exclusion of SEZ and EOU units: A significant limitation is the exclusion of exporters operating under SEZs and EOUs from the RoDTEP scheme for a certain period. This leaves out a considerable portion of the exporting community.
Limited awareness among SMEs: Many Small and Medium Enterprises (SMEs) may face difficulties in fully understanding the complexities of the RoDTEP scheme and the procedures for claiming benefits, potentially limiting their ability to utilize it effectively.
How to maximize benefits under RoDTEP
To fully leverage the advantages offered by the RoDTEP scheme, Indian exporters should heed the following advice:
Best practices for documentation and compliance:
Ensure you are registered on the ICEGATE portal with a Digital Signature Certificate (DSC) to manage your RoDTEP credit ledger and generate scrips.
Maintain accurate and organized records of all export-related transactions, including shipping bills and invoices.
Ensure correct declaration of RoDTEP claims in the shipping bill on the ICEGATE portal.
Regularly update your knowledge of the latest RoDTEP guidelines and any amendments issued by the DGFT and CBIC.
Additionally, avoiding these common pitfalls during the claim process is also crucial for maximizing the received benefits:
Common mistakes to avoid when claiming RoDTEP benefits:
Avoid errors in HS code classification and ensure the declared Free on Board (FOB) value is accurate.
Avoid any delayed filings after your shipment has been processed.
If your total RoDTEP claim exceeds INR 1 crore in a financial year, don’t forget to file the Annual RoDTEP Return (ARR) by the specified deadline to prevent denial of benefits.
RoDTEP: Your guide to duty remission on exports
The RoDTEP scheme represents a significant step in bolstering India's export ecosystem, by providing a mechanism for duty remission on exported products, enhancing their global competitiveness. While challenges such as delayed e-scrip issuance and sector-specific variations exist, understanding the scheme’s framework and adhering to best practices in documentation and compliance are key to maximizing its benefits for your business.
Navigating the intricacies of RoDTEP can also be streamlined with the right support. DHL Express, with their expertise in worldwide shipping and their understanding of customs regulations, can be a valuable partner for Indian exporters. By providing guidance on export documentation, as well as additional solutions such as express courier services and the ability to track your shipments, DHL Express helps businesses focus on growth while ensuring smooth and compliant international shipping.
So, ready to simplify your export processes and leverage the benefits of RoDTEP? Open a DHL Express business account today to start utilizing their global shipping services!!
Share
