Committee for determination of RoDTEP ceiling rates established
Background
- Last year, Finance Minister Nirmala Sitharaman announced the introduction of the Remission of Duties or Taxes on Export Products (RoDTEP) scheme for exporters. This new scheme would replace the existing FTP schemes, including the MEIS scheme, and it’s said to reimburse the embedded taxes and duties already incurred by exporters. In line with the same, with effect from 23 July 2020, DGFT has blocked the MEIS module from accepting new applications for shipping bills with Let Export Order (LEO) beginning 1 April 2020.
- In order to determine the burden of embedded taxes and formulate incentive rates to be given under the proposed scheme, the Ministry of Commerce and Industry had issued a format on 31 October 2019, inviting product-wise data/information from manufacturing units/exporters. Export promotion councils (EPCs), commodity boards, trade, and industry associations, were requested to seek product-wise data from the exporters in a prescribed format and submit it to the designated RoDTEP committee.
- On 13 March 2020, the Union Cabinet chaired by Prime Minister Narendra Modi had granted its approval for introducing this new scheme
Further, owing to the COVID-19 pandemic, the validity of FTP 2015 - 20 has been extended till 31 March 2021. However, the benefits under MEIS would be available only up to 31 December 2020. It has been clarified that the sectors and products under the RoDTEP scheme will be notified in a phased manner, and benefits under the MEIS for those sectors and items will be withdrawn.
RoDTEP Committee
In line with the above developments, CBIC has now constituted the RoDTEP Committee comprising a panel of 4 members and supported by the Drawback Division of Customs. The primary objective of this committee would be to determine the ceiling rates under the RoDTEP scheme. For discharging their duties, the following action plan is recommended–
- Interact with ministries, EPCs, commodity boards, trade bodies, and other stakeholders to obtain their views on RoDTEP rates;
- Work out the modalities for calculation of embedded taxes on exported goods and recommend the ceiling RoDTEP rate - item/sector-wise;
- Provide supplementary report/recommendations – if any.
Further to achieve the above objectives, the following shall fall under the scope of work for the RoDTEP committee –
- Determine the methodology of calculation of embedded taxes;
- Decide the mode of holding discussions and meetings with relevant stakeholders;
- Conduct field visits and examine the production process in detail, wherever required;
- Submit full-fledged back up (documentation, workings & calculation) supporting the suggested RoDTEP rates.
Timelines
- As a next step, the government will identify and prioritize sectors/item to be taken up by this committee;
- The RoDTEP should submit the primary report to the government within three months from the identification and prioritization of sectors/item;
- Any supplementary report may be submitted within another two months of the submission of the primary report.
New R1, R2 and R3 Formats Issued
Given the strict deadlines, the newly formed committee has taken over the charge and has issued an updated R1, R2, and R3 format for the preparation of detailed data that is required to be submitted to the drawback division within two weeks. Even though the new format is based on the earlier one issued in October 2019, the key changes that should be noted are as follows –
- The data is now required to be submitted for exports made during the period 1 October 2019 to 31 March 2020 (Earlier it was required for the period 1 January 2019 to 30 June 2019);
- The data provided should pertain to manufactures/manufacturer exports in Domestic Tariff Area (DTA) only (earlier data relating to DTA, SEZ, EOU, FTWZ and warehouse under section 65 was also required);
- Now, details of blocked GST credit (e.g., Inverted duty structure, ineligible GST credit, reversals, etc.) can be submitted in R3 format.
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Our Comments
The withdrawal of the MEIS module, the constitution of RoDTEP committee, and setting strict timelines to complete the activity indicate that the government is keen to introduce the RoDTEP scheme by early 2021. The EPCs, trade bodies, and exporters should expedite the preparation and submission of appropriate data to the RoDTEP committee. Exporters who do not furnish information in the prescribed formats may lose out if the rates fixed are lower than the burden of taxes actually suffered.
In the circular issued earlier, on 31 October 2019, the responsibility of determining and recommending RoDTEP rates was handed over to the existing Sectoral Norms Committees structure in DGFT headquarters to function as sectoral RoDTEP committee. Now, the government has taken a further step to formulate a dedicated RoDTEP committee for this purpose. It is not clear whether both committees will work together under the new mechanism, or the newly formed committee will take up the entire task.
However, with increased efforts of the government to launch the RoDTEP scheme by early next year, it is crucial that the exporters, trade bodies and the RoDTEP committee work hand in hand to meet the targeted deadline.
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