The Road Travelled Till Date Since Commencement Of The RoDTEP Scheme¹

The Remission of Duties or Taxes on Export Product (“RoDTEP”) Scheme was notified vide Notification No. 19/2015-20 dated 17.08.2021 (“RoDTEP Notification”) under Chapter 4 of the Foreign Trade Policy 2015-2020 (“FTP”)². The scheme has been introduced with effect from 01.01.2021.

RoDTEP had replaced the erstwhile Merchandise Exports from India Scheme with the intent to refund, currently un-refunded duties/taxes/levies, at the Central, State and local level, borne on the exported product³, including prior stage cumulative indirect taxes on goods and services used in the production of the exported product and distribution of the same⁴. The rebate under RoDTEP shall not be available in respect of duties and taxes already exempted or remitted or credited⁵.

It’s been two years since the RoDTEP scheme was brought into effect. Since then, the stakeholders have been facing certain issues and practical difficulties. With this article, we are highlighting the issues and difficulties that are being faced by the stakeholders in the succeeding paragraphs.

Re-determination of ceiling rates under the RoDTEP scheme

The ceiling rates for export products has been determined by the RoDTEP Committee based on the analysis of the data submitted once till date by the stakeholders (industry as a whole)⁶. The rates for the different sectors are fixed on the basis of the industry mean and the duties actually paid on the goods manufactured by a particular exporter are not relevant. However, there may be an instance wherein due to certain market/economic factors, the incidence of unrefunded duties/taxes/levies borne on exports (product wise) by an industry/sector as a whole has changed. Even otherwise, if the incidence of unrefunded duties/taxes/levies on an individual exporter has changed, the said exporter may intimate the relevant data regarding the inputs used in manufacture of a particular export product. Para 4.54(vii) of the FTP, inter-alia¸ provides that efforts would be made to review the RoDTEP rates by the RoDTEP Committee on an annual basis and to notify them well in advance before the beginning of a financial year. However, no mechanism has been prescribed wherein the stakeholders can approach the RoDTEP Committee/other departments for submitting the relevant data for re-determination of ceiling rates such that suitable benefits can be provided in consonance with the objective of RoDTEP scheme.

Removal of discrepancies in Appendix-4R and addition of certain export products under the same retrospectively

Under Appendix-4R, the ceiling rates have been notified for export goods under a specific CTI “X”. However, inadvertently, another CTI “Y” has not been mentioned under Appendix-4R which covers goods similar to the export goods mentioned therein. The only difference between the two goods is in relation to physical characteristics like weight etc. Since there is no intelligible differentia in excluding goods under CTI “Y” from the Appendix – 4R, it is unfair that the RoDTEP benefit on such goods falling under CTI “Y” is denied whereas the other products of the same kind are enjoying such benefits. Therefore, suitable action may be taken by the stakeholders by filing of representation such that CTI “Y” may be retrospectively added in the Appendix – 4R so as to ensure that exports are viable for the exporter in the foreign market.

Eligibility of certain categories of exports for availing benefit under the RoDTEP scheme

RoDTEP scheme has prescribed certain categories for which currently benefit cannot be availed under the said scheme⁷. The RoDTEP Committee had requested for data for the exports made during the period 01.10.2019 to 31.03.2020 from the relevant stakeholders for determination of RoDTEP rates for the said three categories⁸. In case the benefit is allowed retrospectively (w.e.f. 01.01.2021) for the three categories, at a later date, the exporters are advised, as a matter of caution, to declare their intent of claiming benefit under the RoDTEP scheme on all the shipping bills filed on/after 01.01.2021.

Inclusion of additional items under Appendix 4R

Under the RoDTEP scheme, the rates of rebate/value cap per unit of export products have been notified in Appendix 4R. Export items under Chapter 28, 29, 30 & 73 have been added under Appendix 4R for exports made only from 15.12.2022 till 30.09.2023⁹. The stakeholders who are engaged in export of the said products must keep a cautious eye on the last date till which the benefit can be availed. In case, if there is no extension provided, the stakeholders may file suitable representation with RoDTEP Committee/DGFT explaining the reasons for seeking extension well before the expiry.

Realisation of export proceeds in Indian Rupees

Para 2(7) of NN 76/2021 envisages benefit under the RoDTEP scheme for exports made to Nepal, Bhutan and Myanmar when the realization of sale proceeds is in terms of irrevocable letters of credit in “freely convertible currency”¹⁰ established by importers in Nepal, Bhutan and Myanmar in favour of Indian exporters.

Para 2.52(d)(ii) of the FTP provides that Indian exporter, undertaking exports of goods and services, shall be paid the export proceeds in INR from the balances in the designated Special Rupee Vostro account of the correspondent bank of the partner country. It is important to note that the realization/international trade settlement of export proceeds in INR is not a blanket benefit and can be availed only if the modalities prescribed in Para 2.52(d)(ii)¹¹ of the FTP read with RBI's A.P. (DIR Series) Circular No. 10 dated 11.07.2022 are complied with¹². It is to be noted that export proceeds realized in INR as per Para 2.52(d)(ii) are permitted to avail exports benefits including that of RoDTEP under the FTP¹³.

The invoicing, payment, and settlement of exports in INR is an “additional arrangement” such that the conditions mentioned in Para 2.52 (a) and (b) of FTP have not been amended i.e. the option of earning foreign exchange is still kept open. Therefore, the stakeholders must take into consideration all the above discussed aspects before opting for realization of export proceeds in INR.

Supplementary claims

The rebate under the RoDTEP scheme is granted to eligible exporters at a notified rate as a percentage of FOB value with a value cap per unit of the exported product¹⁴. It may be the case that an exporter is eligible for additional RoDTEP benefit due to an increase in the FOB value of the goods subsequent to export or the notified rate has been enhanced with a retrospective effect for certain HS codes for past exports. However, the scheme is silent on the eligibility of supplementary claim and requisite procedure to be followed for availing supplementary claims¹⁵ and provides no clarification. The stakeholders may seek to file representation with the DGFT/CBIC seeking suitable amendments/ clarifications permitting supplementary claim.

Dispute over RoDTEP benefit and manner of treatment of future export consignments

There may be a scenario wherein the customs authorities have disputed claiming RoDTEP scheme on export of a consignment of a particular product and consequently have denied the benefit. For the future consignments, the exporter will not be allowed to declare its intent of claiming benefit under the RoDTEP scheme on the shipping bills filed therein, due to the ongoing dispute and will not be able to avail benefit under the RoDTEP scheme. However, in case at a later stage the matter is litigated in favour of the exporter, the benefit may be denied on the ground of non-mentioning of its intent of claiming benefit under the RoDTEP scheme on the shipping bills. For such scenarios, neither the RoDTEP scheme nor NN 76/2021 has laid down any guideline to ensure that the exporters can avail the benefit under the RoDTEP scheme in case the same is available once the matter has been litigated.

Ineligible supplies under the RoDTEP scheme

Certain categories of exports are not eligible for RoDTEP benefit viz., export products which are subject to Minimum export price/export duty and products which are restricted/prohibited for export under Schedule-2 of Export Policy in ITC (HS)¹⁶. However, Para 4.55 of the FTP needs more clarity as to whether the provisions are applicable to class of categories of goods or qua the consignment of the said goods that are being exported. This is more so when a particular consignment may satisfy the criteria by falling under exemption from levy of export duty or by falling under transitional provisions covered under Para 1.05. Therefore, the positions in these scenarios are ambiguous and the stakeholders may file suitable representation seeking clarifications on the scope of exported supplies covered therein under Para 4.55 of the FTP.

These insights from the practical hurdles faced by the stakeholders may be useful in structuring the supply chain of the export products for which benefit under RoDTEP scheme may be availed. Such intricate issues, if not taken into consideration will have rampant implications in the near future.

As a closing remark, it would be interesting to see how these issues are dealt with by stakeholders and tax authorities.