RoDTEP Scheme under FTP

The RoDTEP, which stands for Remission of Duties and Taxes on Export Products, is a new scheme that came into effect on 1^st January 2021, replacing the existing MEIS (Merchandise Exports from India Scheme). This Scheme is notified by the department of commerce. The Scheme shall be fully administered by the department of revenue. A separate RoDTEP Policy Committee chaired by DGFT is constituted to address the residual issues related to the scheme. The primary objective of RoDTEP is to neurtralize the taxes and duties suffered on exported goods which are otherwise not credited or remitted. By doing so, the scheme aims to uplift the export sector, which had been facing challenges with relatively low export volumes before the introduction of this initiative. In this article we will discuss such RoDTEP scheme in details.

The broad procedure for claiming the benefit under the RODTEP scheme is provided below:

(a) To avail of the benefits under RoDTEP scheme exporter has to make a claim for RoDTEP in the shipping bill by making a declaration. It is mandatory for the exporters to indicate in their Shipping Bill whether or not they intend to claim RoDTEP on the export items. Unlike Drawback, there will be no need to declare any separate code or schedule serial number for RoDTEP.

(b) Based on the declarations in the Shipping Bill, the eligible RoDTEP will be processed by Customs.

(c) Post filling of Gateway EGM (Export general Manifest) in respect of the processed shipping bills, the RoDTEP Scrolls with all individual Shipping Bills for admissible amount would be generated and made available in the users account at ICEGATE

(d) The IEC holder who has registered on ICEGATE with the help of DSC can create a RoDTEP credit ledger account under the Credit Ledger tab.

(e) Exporter can log into his account and generate Scrip after selecting the relevant shipping bills.

Duty Credit Scrip of RoDTEP:
The benefit under RoDTEP scheme would be in the form of transferable duty credit scrip, or it may be in the form of electronic scrip which will be maintained in the electronic ledger. Further according to the para 4.56 of chapter 4 of FTP 2023, the e-scrips of Rodtep would be used only for payment of duty of Customs leviable under the First Schedule to the Customs Tariff Act, 1975 i.e., Basic Customs Duty. In other words, it cannot be utilized towards payment of any other taxes like IGST, Compensation Cess etc. upon the import of goods.

Rate of benefit under RoDTEP Scheme:
The eligible RoDTEP export items, rates and per unit value caps, are given in Appendix 4R and for exports of products manufactured by AA holders (except Deemed Exports), EOU and SEZ units, the eligible RoDTEP export items, rates and per unit value caps, are given in Appendix 4RE.

The rebate is allowed subject to receipt of sale proceeds within the timeframe allowed under the Foreign Exchange Management Act, 1999 failing which such rebate shall never be deemed to have been allowed. It is to be noted that there are no restrictions on realization of the amount in INR and the exporters can claim the benefit of the Scheme. The Scheme further provides that the rebate would not be dependent on the realization of export proceeds at the time of the claim of rebate.

However, in case an amount of duty credit has been allowed to an exporter but the sale proceeds in respect of such export goods have not been realized by the exporter in India within the period allowed under the Foreign Exchange Management Act, 1999, the exporter shall, himself or on demand by the proper officer, repay the amount of duty credit, along with interest, at the rate as fixed under section 28AA of the Customs act, 1962 for the purposes of that section, within fifteen days of expiry of the said period.

Where the exporter fails to repay the duty credit amount within the said period of fifteen days, the said duty credit shall be deemed never to have been allowed and it shall be recovered, along with the said interest, in the manner as provided in section 142 of the Customs Act, 1962.

Further, as per para 4.55 of chapter 4 of FTP 2023, the following categories of export/exporters are not eligible for rebate under RoDTEP Scheme:

(i) Export of imported goods covered under paragraph 2.46 of FTP.

(ii) Exports through trans-shipment, meaning thereby exports that are originating in third country but trans- shipped through India.

(iii) Export products which are subject to Minimum export price or export duty.

(iv) Products which are restricted for export under Schedule-2 of Export Policy in ITC (HS).

(v) Products which are Prohibited for export under Schedule-2 of Export Policy in ITC (HS).

(vi) Deemed Exports.

(vii) Supplies of products manufactured by DTA units to SEZ/FTWZ units.

(ix) Products manufactured partly or wholly in a warehouse under section 65 of the Customs Act, 1962.

(xiii) Products manufactured or exported availing the benefit of the Notification No. 32/1997-Customs dated 1st April, 1997.

(xiv) Exports for which electronic documentation in ICEGATE - EDI has not been generated/ Exports from non-EDI ports.

(xv) Goods which have been taken into use after manufacture.

RoDTEP Scheme for Goods Only:
Generally a question arises among taxpayers that whether such the benefit of RoDTEP would be available in case of export of services outside India. In this regard it is to be noted that the benefit under the scheme can be claimed only in respect of the duties/ taxes/ levies etc. borne on the exported product either used for production of the exported product or for its distribution. Therefore, the present scheme does not allow the benefit in case of service exports outside India.

The another common question that usally arised that whether other benefits can be claimed simultaneously along with RoDTEP like if a person is importing raw material under advance authorisation and making exports of the goods against such authorisation. What are implications on the RoDTEP in such cases?. In this respect it is important to know that goods manufactured or exported in discharge of export obligations under Advance Authorization are not entitled to the Rodtep Scheme.

GST on supply of RoDTEP Scrips:
As we know that GST is applicable on supply of goods or supply of services. However in case of transfer of duty credit scips an exemption has been provided vide serial number 122A of Notification 02/2017 CT(R). Accordingly, GST would not be applicable on transfer of scrips of RoDTEP.

DGFT FAQs:
For providing the clarification about the RoDTEP Scheme the DGFT has also issued FAQs for RoDTEP Scheme. Some important FAQs are as follows;

Whether RoDTEP would be credited in exporters" bank account similar to duty drawback?
Ans: No, RoDTEP would be issued in the form of transferrable e-scrips which will be maintained in an electronic credit ledger by the CBIC and could be used for paying Basic Customs Duty on import of goods or may be transferred electronically to other party. The benefit will not be in the form of direct credit to the bank account.

Can a textile exporter claim ROSCTL along with RoDTEP?
Ans: It is pertinent to note that RoSCTL Scheme is eligible for the export of apparels and made-ups only, i.e., the textile goods covered under Chapter 61, 62 & 63 of the HS Tariff Code. Hence, for exports of apparels and Made-ups RoDTEP is not available, if such products are covered under the RoSCTL. For other textile items, RoDTEP may be claimed at the prescribed rates.

Whether there is concept of special rate fixation under RoDTEP similar to the special brand rate of drawback?
Ans: No, as per the DGFT Notification No. 19/2015-2020 dt. 17.08.2021, it is seen that presently there is no mechanism to fix a brand rate as in the case of drawback based on the actual cost incurred by the exporters on account of various taxes and levies. As per the present understanding of the scheme, only a standard percentage is prescribed either as a rate to be derived on the FOB value along with a value cap in some cases or as a fixed quantum of rebate amount per unit. Different rate, value cap, etc. have been provided for different products. Further, since the claim processing is automated based on the details submitted in the shipping bill, it looks that presently no option is provided for the exporter to compute the benefit on a brand rate basis of the actual cost.

Whether e-commerce exports will be eligible for RoDTEP benefit?
Ans: The benefit of the scheme may be eligible provided there is a physical export of the goods from an EDI port. Also, the corresponding shipping/ Airway bill must be in the name of the exporter.

How would a person claim the benefit of RoDTEP if his factory has got MOOWR license?
Ans: Products manufactured partly or wholly in a warehouse under section 65 of the Customs Act are covered in the ineligible category. As the MOOWR license is taken on a factory basis, the restriction under the Scheme is only in respect of such products which have been manufactured, fully or partially, in such a warehouse. Hence, if the goods have been manufactured by the exporter in some other factory where MOOWR is license is not held, the benefit can be claimed. There could be the possibility of MOOWR warehouse importing goods on payment of BCD also. However, once the status of MOOWR is taken for that premise, the benefit under the Scheme may not be permitted. In fact, if the job work is done by a job worker operating through warehouse u/s 65, the benefit may not be available under the Scheme to the principal manufacturer.

Capital goods have been imported under EPCG license to neutralise the BCD cost. What would be implications on my business under RoDTEP?
Ans: The restriction under Scheme does not cover the capital goods under the imported EPCG Scheme. Thus, the benefit of EPCG and RoDTEP may be claimed simultaneously.

We have exported samples from India to outside India. Can we claim the benefit of RoDTEP?
It is pertinent to note that the benefit of RoDTEP scheme is allowed subject to the receipt of sale proceeds within the time allowed under the Foreign Exchange Management Act, 1999 failing which such rebate shall be deemed never to have been allowed. Although the rebate would not be dependent on the realization of the export proceeds at the time of issuance of the rebate, however, adequate safeguards would be put in place to avoid misuse on account of non-realization of the export proceeds. Since, in the case of issuance of samples on a FOC basis, no export proceeds are realized in the convertible foreign exchange, therefore the exporter would not eligible for the RoDTEP benefit in respect of goods issued as free samples.

What is the role of classifications of the goods for the purpose of claiming the benefit of RoDTEP?
Ans: Correct classification of goods at a proper 8-digit HS code level plays a very important role under the RoDTEP scheme as the entire rate/ value structure of the scheme is derived based on the HS Code system. In other words, if one has to identify the rate/ value of rebate available to their product, then the same can be done based on the corresponding 8-digit level HS code assigned to the product. Therefore, it is suggested that the exporters thoroughly review their HS codes for various products that are exported by them and reassure the correctness of the claim under the scheme. E.g., automobile parts classifiable under general-purpose items under chapter 73 are not eligible for RoDTEP whereas other automobile parts covered in chapter 87 are entitled to the benefit of RoDTEP.

Whether RoDTEP benefit can be claimed on the export of goods, exempted from levy of GST?
One of the essential features of the scheme is that the benefit is available in the case where the goods are physically exported out of India to a place outside India. Further, no restriction is carved out in cases where the goods exported are exempted from GST. In other words, even if the goods exported outside India are exempted from GST, still the benefit of RoDTEP can be claimed as long as the said goods are physically exported outside India and all other conditions provided in the scheme are satisfied.

Whether RoDTEP benefit can be claimed on the goods exported through e-commerce operator?
Ans: The sale of goods through an online platform by way of e-commerce is now very common and the same is not an exception for transactions that are undertaken in the course of international trade and commerce. If any goods are sold based on the orders placed by the customers outside India through an online platform, then the benefit of the scheme should be eligible provided there is a physical export of the goods from an EDI port. Also, the corresponding shipping/ Airway bill must be in the name of the exporter.

After discussing the RoDTEP Scheme in details, I am going to conclude this article.

Conclusion: The RoDTEP scheme came into force w.e.f 01.01.2021. This Scheme is the replacement of MEIS. The RoDTEP scheme is introduced to enhance the export sectors. The scheme intends to compensate the duties/taxes/levies at the Central, State and Local level borne on the exported product including prior stage cumulative indirect taxes on goods and services used in the production and distribution of the exported product. The Benefit under this scheme is available in form of scrips which can be transferable and no GST would be leviable on such transfer and such scrips can be used for payment of BCD at the time of import.

Disclaimer:  The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.