RoDTEP: A Government Push to Improve India’s Export Competitiveness
August 18 2021 | Reading Time: 8 Minutes
The Government of India (GoI) has notified guidelines and rates for the Remission of Duties and Taxes on Export Products (RoDTEP) export scheme. The scheme will help boost India’s exports and competitiveness in global markets as the scheme aids in zero rating of exports.
The rates under RoDTEP for different sectors will be 0.5%, 2.5%, and 4.0% and will apply to 8,555 tariff lines. The scheme takes effect from January 1, 2021.
The government set aside Rs. 12,454 crore for refunds under RodTEP for the current fiscal. Commerce Secretary B V R Subrahmanyam said Rs 19,400 crore would be available for 2021-22 for the RoDTEP as well as the Rebate of State and Central Taxes and Levies (RoSCTL). The RoSCTL scheme was announced for the export of garments and apparel, covering Rs 6,946 crore under the scheme.
The scheme aims to refund to exporters duties and taxes paid, such as VAT and fuel used in transportation, Mandi tax, and duty on electricity used to manufacture, all of which were previously not refunded. Rebates under RoDTEP will be claimed as a percentage of Free on Board (FoB) on the board of value of exports; rebates on certain products will also be subject to the per-unit value of the exported product. The rebate under RoDTEP would not be available on duties and taxes already exempted, remitted, or credited.
- Agriculture
- Leather
- Gems and jewelry
- Automobile
- Plastics
- Electrical, electronics and machinery.
India’s share in global exports of cotton yarn shrunk 600bps to 23% in CY2020 from 29% in CY2015, while its share in exports of readymade garments (RMG) stagnated at 3–4% over the past decade. A lack of free trade agreements (FTAs) and significant improvement in peer competitiveness are the main reasons for this fall.
With the advent of RoSCTL and RoDTEP, the entire textile value chain is covered. Cotton yarn and fabrics were hitherto eligible only for duty drawbacks; now on, cotton yarn will receive 3.8% RoDTEP with a cap of Rs 11.40/kg and woven fabric, 4.3% with a cap of Rs 3.4/sq. m.
According to SIMA, RoDTEP will provide an impetus and opportunity for India to increase its exports, convert raw products into value-added goods, increase the influx of foreign exchange, and create jobs in the domestic economy.
Knitted fabric has only received 1% duty drawback. SIMA has requested the government to review the rate based on modular RoDTEP. Knitted fabric exports deserve higher benefit than yarn exports, which have been taken care of via RoDTEP for woven fabric.
India’s exports of electronics remained stagnant at around $6.4B from 2015-16 to 2017-18. After an addition al 2% merchandise export incentive scheme (MEIS) was notified in December 2017, the electronics industry grew 85% from 2017-18 to 2019-20. Exports from this industry in 2019-20 stood at $11.22B. Electronics exports as percentage of India’s total exports grew from 2.2% to 3.6% during that period[AS1] .
Thus, increase in MEIS rate has truly demonstrated a positive impact on exports of electronic goods over that period.
A similar trend can be expected in the textile segment as well if macro factors remain supportive in future. Non-ferrous metal exports also stand to benefit from RoDTEP
- Zinc – RoDTEP set at 2%; hence, MEIS scrips benefit is restored
- Copper – 0.3% in current regime versus 2% in the previous regime
- Aluminum – 2.2% currently; entire benefit increased from the earlier 2%
-Lead – 1.4% currently versus 2% earlier
- Pharmaceuticals
- Chemicals
The government believes the sectors mentioned above have already done well, without export incentives.
Products manufactured or exported at export-oriented units and special economic zones are currently excluded from the scheme.
- Fruits
- Vegetables
- Dairy products
- Oil meals
- Ayush and herbal products
- Paper, paper board products
- Technical textiles
- Sports goods
- Furniture and wood articles
RoDTEP would make India a WTO-compliant exporter in the international market. The process promised by the GoI seems to be a simpler, more transparent one for exporters, which also improves efficiencies in the collection of refunds. The MEIS scheme was not WTO-compliant.
SEIS was introduced in 2015 and is valid for five years, i.e., from 2015 to 2020.
The following types of service providers are eligible to claim incentives for service exports at the rates mentioned.
Eligible for 5% rate of reward:
o Professional services
o Research and development services
o Rental/ leasing services without operators
o Audiovisual services
o Construction and related engineering service
o Educational services
o Environmental services
o Health and social services
o Recreational, cultural and sporting services
o Transport and auxiliary services
Eligible for 3% or 5% rate of reward
o Tourism and travel services
The GoI has also assured a resolution of dues pending under the MEIS and SEIS schemes, by the first week of September 2021, through a ‘staggered’ mechanism.
The rates under RoDTEP for different sectors will be 0.5%, 2.5%, and 4.0% and will apply to 8,555 tariff lines. The scheme takes effect from January 1, 2021.
The government set aside Rs. 12,454 crore for refunds under RodTEP for the current fiscal. Commerce Secretary B V R Subrahmanyam said Rs 19,400 crore would be available for 2021-22 for the RoDTEP as well as the Rebate of State and Central Taxes and Levies (RoSCTL). The RoSCTL scheme was announced for the export of garments and apparel, covering Rs 6,946 crore under the scheme.
How RoDTEP will work
The scheme aims to refund to exporters duties and taxes paid, such as VAT and fuel used in transportation, Mandi tax, and duty on electricity used to manufacture, all of which were previously not refunded. Rebates under RoDTEP will be claimed as a percentage of Free on Board (FoB) on the board of value of exports; rebates on certain products will also be subject to the per-unit value of the exported product. The rebate under RoDTEP would not be available on duties and taxes already exempted, remitted, or credited.
Sectors included under the scheme
- Marine- Agriculture
- Leather
- Gems and jewelry
- Automobile
- Plastics
- Electrical, electronics and machinery.
RoDTEP a big boost for textile Industry
India’s share in global exports of cotton yarn shrunk 600bps to 23% in CY2020 from 29% in CY2015, while its share in exports of readymade garments (RMG) stagnated at 3–4% over the past decade. A lack of free trade agreements (FTAs) and significant improvement in peer competitiveness are the main reasons for this fall.
With the advent of RoSCTL and RoDTEP, the entire textile value chain is covered. Cotton yarn and fabrics were hitherto eligible only for duty drawbacks; now on, cotton yarn will receive 3.8% RoDTEP with a cap of Rs 11.40/kg and woven fabric, 4.3% with a cap of Rs 3.4/sq. m.
According to SIMA, RoDTEP will provide an impetus and opportunity for India to increase its exports, convert raw products into value-added goods, increase the influx of foreign exchange, and create jobs in the domestic economy.
Knitted fabric has only received 1% duty drawback. SIMA has requested the government to review the rate based on modular RoDTEP. Knitted fabric exports deserve higher benefit than yarn exports, which have been taken care of via RoDTEP for woven fabric.
The case of India’s electronics industry
India’s exports of electronics remained stagnant at around $6.4B from 2015-16 to 2017-18. After an addition al 2% merchandise export incentive scheme (MEIS) was notified in December 2017, the electronics industry grew 85% from 2017-18 to 2019-20. Exports from this industry in 2019-20 stood at $11.22B. Electronics exports as percentage of India’s total exports grew from 2.2% to 3.6% during that period[AS1] .
Thus, increase in MEIS rate has truly demonstrated a positive impact on exports of electronic goods over that period.
A similar trend can be expected in the textile segment as well if macro factors remain supportive in future. Non-ferrous metal exports also stand to benefit from RoDTEP
- Zinc – RoDTEP set at 2%; hence, MEIS scrips benefit is restored
- Copper – 0.3% in current regime versus 2% in the previous regime
- Aluminum – 2.2% currently; entire benefit increased from the earlier 2%
-Lead – 1.4% currently versus 2% earlier
Sectors excluded from RoDTEP
- Steel- Pharmaceuticals
- Chemicals
The government believes the sectors mentioned above have already done well, without export incentives.
Products manufactured or exported at export-oriented units and special economic zones are currently excluded from the scheme.
Merchandise Export Incentive Scheme (MEIS)
This scheme includes the following lines:- Fruits
- Vegetables
- Dairy products
- Oil meals
- Ayush and herbal products
- Paper, paper board products
- Technical textiles
- Sports goods
- Furniture and wood articles
RoDTEP would make India a WTO-compliant exporter in the international market. The process promised by the GoI seems to be a simpler, more transparent one for exporters, which also improves efficiencies in the collection of refunds. The MEIS scheme was not WTO-compliant.
Service Exports from India Scheme (SEIS)
Under the SEIS Scheme, the government will provide incentives of 3–5% to all service providers offering services from India to organizations outside the country.SEIS was introduced in 2015 and is valid for five years, i.e., from 2015 to 2020.
The following types of service providers are eligible to claim incentives for service exports at the rates mentioned.
Eligible for 5% rate of reward:
o Professional services
o Research and development services
o Rental/ leasing services without operators
o Audiovisual services
o Construction and related engineering service
o Educational services
o Environmental services
o Health and social services
o Recreational, cultural and sporting services
o Transport and auxiliary services
Eligible for 3% or 5% rate of reward
o Tourism and travel services
The GoI has also assured a resolution of dues pending under the MEIS and SEIS schemes, by the first week of September 2021, through a ‘staggered’ mechanism.
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