The Micro, Small, Medium Enterprises (MSME) sector has recently been voicing a need for clarity around the new export policy – Remission of Duties or Taxes on Export Product (RoDTEP). This upcoming change, slated to be implemented from the 1st of January, 2020, has sparked discussions about its expected impact on increasing Indian exports.
Remission of Duties or Taxes on Export Product: A Look at the New Scheme
The RoDTEP scheme is set to replace the existing Merchandise Exports from India Scheme (MEIS), introducing a fully automated route for an Input Tax Credit (ITC) in the Goods and Services Tax (GST). The goal of this replacement is to give a significant boost to exports from India.
RoDTEP aims to sufficiently stimulate exporters by reducing the duties charged on exports and organizing the refund of various taxes to exporters. The ITC, provided to offset tax payment on the procurement of raw materials and services used in manufacturing, helps prevent double taxation and the rippling effect of taxes.
The Benefits of Adopting RoDTEP
Embracing the RoDTEP scheme provides several advantages for Indian exporters. For one, it enables them to meet global standards for exports as affordable testing and certification will be available domestically, eliminating reliance on international organizations. Additionally, under RoDTEP, tax assessment will become fully automatic for exporters. Businesses can also expect prompt access to GST refunds via an automatic refund-route, increasing the economy for the nation and the working capital for the enterprise.
| Benefits | Description |
|---|---|
| Affordable Testing & Certification | Testing and certification are available within the country, negating the need for international organizations. |
| Automatic Tax Assessment | Tax assessment for exporters is set to become fully automatic under RoDTEP. |
| Prompt GST Refunds | Businesses can access GST refunds via an automatic refund-route, boosting the working capital for enterprises. |
RoDTEP and Its Compliance with World Trade Organization (WTO) Rules
RoDTEP isn’t just about enhancing exports; it’s also in line with the World Trade Organization (WTO) efforts to minimize post-production transaction costs for exporters. The scheme is expected to provide a production-oriented process in cooperation with the WTO, potentially boosting the productivity of SMEs and MSMEs.
RoDTEP is a WTO-consistent scheme that allows indirect taxes on inputs consumed in the production process. In general, as per WTO principles, indirect taxes on exports are reimbursed. Several indirect taxes, including import tariffs and GST, are already reimbursed for exports in India and most other countries. Now, RoDTEP intends to cover central and state indirect taxes that are currently unreimbursed, thereby complying with WTO rules.
The Transition from MEIS to RoDTEP
The previous export scheme, the Merchandise Export from India Scheme (MEIS), was not compliant with WTO rules. Introduced in the Foreign Trade Policy (FTP) 2015-20 effective from 1st April 2015, the objective was to compensate for infrastructural inefficiencies and associated costs involved in exporting goods/products produced/manufactured in India, including products produced/manufactured by the MSME Sector. Now, RoDTEP seeks to build upon the objectives of MEIS, while ensuring WTO consistency.