WTO-compliant remission of tax scheme
The Cabinet Committee on Economic Affairs on 13 March 2020 approved a World Trade Organisation (WTO)-compliant scheme for reimbursement of taxes and duties to exporters. This would replace the existing scrip-based scheme. The decision is aimed at giving a boost to the country’s dwindling exports. At present, goods and services tax (GST) and Customs duty on inputs required to manufacture exported products are either exempted or refunded. However, certain taxes are outside GST and are not refunded for exports. These include value-added tax on fuel used in transportation, mandi tax and duty on electricity used during manufacturing. These taxes would be covered for reimbursement under the remission of duties and taxes on export products (RoDTEP) scheme.
- The taxes to be reimbursed under RoDTEP would also include those on the farm sector as well as captive power generation. It would also include stamp duty and central excise duty on fuel used in transportation.
- The sectors and products, under the scheme, would be notified in a phased manner. Benefits under the existing Merchandise Exports from India Scheme (MEIS) for those sectors and items will be withdrawn.
- Under the scheme, an inter-ministerial committee will determine the rates and items on which the reimbursement of taxes and duties would be provided.
- In line with “Digital India”, refund under the scheme, in the form of transferable duty credit or electronic scrip, will be issued to exporters. This will be maintained in an electronic ledger. The scheme will be implemented with end-to-end digitisation.
- Briefing the media about this decision, commerce minister Piyush Goyal said the scheme is going to provide a level-playing field to Indian producers in the international market. This will ensure that domestic taxes are not exported.
- The scheme would hit the exchequer by Rs 50,000 crore. Refunds, under the RoDTEP scheme, along with refunds, such as drawback rates and integrated GST (IGST), would be a step towards zero-rating of exports. Zero rating refers to zero taxes on inputs of final products.
- The move assumes significance as a WTO dispute resolution panel had ruled that MEIS was not in compliance with global trade rules.
- Under WTO rules, certain duties like state taxes on power, oil, water, and education cess are allowed to be refunded. The country’s exports contracted for a sixth month in a row by 1.66 per cent in January to $25.97 billion. Exports slipped 1.93 per cent to $265.26 billion during April-January 2019-20.
- The scheme for reimbursement of taxes and duties to exporter would replace the existing scrip-based one
- The decision is aimed at giving a boost to the country's dwindling exports
- The taxes to be reimbursed under the scheme will also include those on the farm sector as well as captive power generation
- It will also include stamp duty and central excise duty on fuel used in transportation