RoDTEP stands for Remission of Duties and Taxes on Export Products. It is a new system in effect from January 1, 2021. It took the place of the previous MEIS (Merchandise Exports from India Scheme). The initiative ensures that exporters obtain reimbursements on previously unrecoverable taxes and levies. It was implemented with the purpose of increasing exports, which had previously been rather low in volume. This blog gives an overview of the RoDTEP Scheme in a complete guide.
The RoDTEP Scheme Guidelines have been notified by the Directorate General of Foreign Trade (DGFT) and various Central and State tariffs, taxes and levies imposed on input products, among other things, will be repaid to exporters under the RoDTEP scheme.
Benefits of the RoDTEP Scheme for Exporters
The RoDTEP scheme gives a range of advantages to exporters, contributing to their growth and enhancing India’s global trade positioning, including:
Cost Reduction and Competitiveness
One of the central benefits of the RoDTEP scheme is its ability to restrain production costs for exporters. By reimbursing the taxes and duties incurred on exported products, the scheme directly contributes to cost reduction. This reduction in production expenses creates enhanced competitiveness of the products in the international market. Exporters can offer their goods at more competitive prices, positioning them favourably against global counterparts.
Boosting Exports and Economy
Under the RoDTEP scheme, as exporters benefit from reduced costs, the scheme directly boosts the volume of exports. This translates to a tangible enhancement in foreign exchange earnings, expanding the nation’s economic reserves. Additionally, as exports thrive, the scheme creates a ripple effect by generating job opportunities, thereby contributing to economic growth and prosperity.
Need for the RoDTEP Scheme
The necessity for the RoDTEP Scheme stems from the essential of maintaining World Trade Organisation (WTO) compliance. This strategic initiative emerged as a response to a WTO panel’s verdict on India’s export subsidy programs.
Trade Dispute and WTO Ruling
The backdrop for the RoDTEP Scheme’s emergence is a trade challenge posed by the United States within the World Trade Organisation. The contention centred on India’s key export subsidy schemes, with the US alleging adverse effects on its workforce. Following a comprehensive review, a WTO dispute panel ruled against India, asserting that the export subsidy programs implemented by the Government of India contravened the established norms of the trade body.
Required Compliance
In the wake of the WTO ruling, the panel stipulated that the export subsidy programs found to be non-compliant must be discontinued. This ruling created a pressing need for India to recalibrate its export support framework to align with international trade standards. The RoDTEP Scheme was conceived as a strategic response to this imperative, aimed at rectifying the inconsistencies highlighted by the WTO panel and ensuring India’s adherence to global trade regulations.
Covering Multiple Subsidy Programs
The RoDTEP Scheme signifies the departure from various export subsidy programs that were deemed non-compliant by the WTO. The listed programs, including the Export Oriented Units Scheme, Merchandise Exports from India Scheme, Bio-Technology Parks Scheme, Electronics Hardware Technology Parks Scheme, Special Economic Zones (SEZ) Scheme, Export Promotion Capital Goods Scheme and Duty-Free Imports for Exporters Scheme, were recommended for withdrawal. This transition emphasises India’s commitment to a WTO-compliant approach, helping equitable trade practices and international cooperation.
Features of the RoDTEP Scheme
The RoDTEP Scheme includes three distinct features that collectively contribute to its effectiveness and impact. These are:
1. Tax and Duty Remission
The primary aim of the RoDTEP Scheme revolves around tax and duty remission. This strategic initiative aims to refund taxes that were not covered by the previous scheme, the Merchandise Exports from India Scheme (MEIS). The scope extends to various taxes, including central excise duty, state taxes on electricity and product-specific levies. By addressing these previously unremitted taxes, the scheme ensures a more comprehensive support system for exporters.
2. Fully Digital Process
Efficiency is a basis of the RoDTEP Scheme. A significant feature lies in its complete digitisation, simplifying the procedural landscape. The elimination of paperwork reduces complexities and helps a transparent process. The adoption of digital mechanisms minimises confusion and enhances the overall user experience, marking a significant departure from traditional administrative practices.
3. Sectoral Coverage
The RoDTEP Scheme extends its coverage to multiple sectors. Notably, emphasis is placed on sectors that hold significant potential for job creation. This strategic alignment reflects the scheme’s commitment to encouraging economic growth and enhancing employment opportunities, thereby creating a more inclusive and resilient economy.
Eligibility to Obtain Benefits of the RoDTEP Scheme
The RoDTEP Scheme extends its benefits across diverse sectors, with a focus on inclusivity and priority for labour-intensive industries. Understanding the eligibility criteria is essential for potential beneficiaries and it covers:
Inclusive Sectoral Coverage
The RoDTEP Scheme casts its benefits widely, including all sectors, including the textiles sector. The scheme’s reach extends across the economic landscape, underlining its commitment to helping growth and support for various industries.
Priority for Labour-Intensive Sectors
Sectors that exhibit labour-intensive characteristics, previously beneficiaries of the Merchandise Exports from India Scheme (MEIS), are accorded precedence under the RoDTEP Scheme. This prioritisation aligns with the government’s intent to strengthen job creation and promote industries integral to the workforce.
Manufacturer Exporters and Merchant Exporters Eligibility
The RoDTEP Scheme extends its benefits to both manufacturer exporters and merchant exporters (traders). This comprehensive approach ensures that a diverse range of export-oriented businesses can utilise the advantages offered by the scheme.
No Turnover Threshold
Unlike certain schemes, the RoDTEP Scheme does not impose a specific turnover threshold for claiming benefits. This provision widens the scope for various scales of exporters to access the scheme’s advantages.
Country of Origin as India
To be eligible for RoDTEP benefits, the exported products must bear India as the country of origin. This criterion highlights the scheme’s alignment with promoting indigenous products and reinforcing India’s export potential.
Special Economic Zone Units and Export Oriented Units
Special Economic Zone (SEZ) Units and Export Oriented Units (EOUs) are integral components of the export ecosystem and are eligible to avail benefits under the RoDTEP Scheme. This inclusivity highlights the scheme’s support for diverse export-oriented business models.
E-Commerce Platforms and Courier Exports
Even goods exported through e-commerce platforms via courier fall within the purview of the RoDTEP Scheme. This acknowledges the evolving landscape of international trade and extends the scheme’s benefits to this sector as well.
Working of the RoDTEP Scheme
The RoDTEP scheme is a strategic governmental endeavour in India aimed at reviving the export sector through incentivisation. This scheme emerges as a successor to the erstwhile Merchandise Exports from India Scheme (MEIS), which has been phased out by the Indian government.
Incentivising Exporters
At its core, the RoDTEP scheme is a proof of the government’s commitment to create a competitive and thriving export landscape. By offering financial incentives, the scheme empowers exporters to recover taxes and duties that were once absorbed as part of their export transactions. This reimbursement mechanism contributes to strengthening the economic viability of exporting ventures.
Reimbursement of Taxes and Duties
The essence of the RoDTEP scheme lies in its ability to redress the financial burden borne by exporters. It achieves this by refunding the taxes and duties paid by exporters during the export process. These refunds effectively enhance the exporters’ financial liquidity and operational resilience, providing them with the resources to further invest in their businesses.
MEIS Transition to RoDTEP
The RoDTEP scheme succeeds the MEIS initiative, representing an evolved approach to incentivising exports. With the discontinuation of MEIS, the RoDTEP scheme fills the void, offering a contemporary and holistic framework to empower exporters. This transition highlights the government’s adaptability and responsiveness to the evolving needs of the export community. The difference between the two schemes is given below:
| Aspect | MEIS | RoDTEP |
| Incentives | – Incentives on exported goods.- Based on FOB value. | – Refund of unreimbursed duties and taxes.- WTO compliant. |
| WTO Compliance | – Not fully aligned, leading to disputes. | – Fully aligned with WTO norms. |
| Quantum of Benefits | – 2%-5% of FOB value, varies by sector. | – Product-based percentages. |
| Form of Incentives | – Physical transferable scrips. | – Transferable duty credit or electronic scrips.- Maintained via electronic ledger. |
Future Prospects and Economic Impact of RoDTEP Scheme
The scheme holds immense promise for the Indian economy, with potential far-reaching implications. Its effective implementation has the capacity to bring in a transformative impact on multiple fronts. By enhancing the competitiveness of Indian exporters, the scheme stimulates manufacturing and export-centric activities. This, in turn, aligns with the ambitious goal of propelling India into a $5 trillion economy by the year 2025. The scheme emerges as a vital component of India’s strategic roadmap for economic growth and global trade leadership.
Final Thoughts
The RoDTEP Scheme emerges as a strategic solution to enhance India’s export competitiveness while ensuring compliance with WTO norms. Its features, eligibility criteria and mechanism indicate a strong effort to bolster economic growth through incentivised exports.
By bridging the gap left by MEIS, RoDTEP promises to empower exporters, reduce production costs and increase India’s global trade positioning. As the scheme’s implementation progresses, it has the potential to contribute significantly to the Indian economy, helping in job creation and driving the nation closer to its ambitious economic goals.
