There has been lot of apprehensions in the industry about the new scheme – RoDTEP ( Remission of Duties and Taxes on Exported Products) which is going to replace MEIS (Merchandise Exports Incentive Scheme). One of them is - which scheme is better for exports?
What is MEIS?
FTP introduced MEIS for the period 2015-2020 as an incentive scheme for the export of goods. Exporters get the rewards by way of duty credit scrips to exports. With WTO controversies and lack of incentives on certain taxes,duties on state & local levels, cabinet approved RoDTEP in 13 March 2020.
What is RoDTEP?
India is losing to US over the export subsidies. The introduction of RoDTEP will replace MEIS scheme. The RoDTEP scheme will cover the levies that are currently non-reimburse in nature and make exports zero-rated in sync with the best global practices along with certain taxes/duties/levies outside GST. With the taxes during manufacturing such as getting refund for exports, such as, VAT on fuel used in transportation, Mandi tax, Duty on electricity used during manufacturing etc. RoDTEP Scheme will cover such taxes for reimbursement.
Let's check Existing Scheme vs New Scheme in brief (MEIS vs RoDTEP) :
| Aspect | MEIS | RoDTEP |
|---|---|---|
| Schema of Incentive | Additional incentive on export of goods apart from other refunds and drawbacks available on undertaking the said exports. | Refund of indirect taxes on inputs used in the manufacture of exported product which is currently not being reimbursed by any existing schemes. |
| WTO Compliance* | Non-compliant with WTO trade norms. | Compliant with WTO trade norms. |
| Incentive Percentage | 2% to 5% of FOB** value of exports. | Product based percentage way of reward- Expected to be lesser than the existing MEIS (rates to be declared later) |
| Mode of Issuance | Issuance in the form of transferable scrips. | Issuance in the form of transferable duty credit/electronic scrip which will be maintained in an electronic ledger. |
| Transferability | Freely transferable. | Freely transferable. |
*As per the SCM Agreement, the gross national product should be less than $1000.
**FOB stands for Free On Board or Freight On Board which is the value of goods excluding carriage, insurance and freight, i.e. domestic price of the goods in their country of origin.
However, the moot question here is can refund under RoDTEP be adequate to compensate rewards under MEIS, when the reward/refund determining mechanism under both the schemes are very different : MEIS – for promoting manufacture & export of notified products, whilst under RoDTEP – for compensation of tax costs.
Primarily it seems RoDTEP may not adequately compensate against the existing MEIS scheme. Hence, this is the time to compare incentive rates and make a representation to the government for your product, under MEIS vs. RoDTEP i.e. using current product costing so, that missing gaps can be filled up.
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