The Centre may decide to extend the popular Merchandise Export from India Scheme (MEIS) for exporters by another three months, till the end of this fiscal, as the new Remission of Duties or Taxes on Export Products (RoDTEP) scheme is not yet ready for all sectors.
“The rates under the new RoDTEP scheme are being worked out for a handful of products at a time. Since it is a labourious process, it is taking time. The government is therefore, weighing the option of extending the MEIS scheme till the end of the on-going fiscal so that the RoDTEP committee has some more time to work out the rates,” an industry official tracking the development told BusinessLine.
A final decision is yet to be taken, the official added.
The Centre had fixed a timeline of doing away with the MEIS by December 31, 2020, and introducing the new RoDTEP scheme on January 1, 2021.
The MEIS is being withdrawn by the government as a dispute settlement panel at the World Trade Organisation ruled against it following a complaint by the US. The scheme was highlighted as one flouting WTO rules as it was identified as an export subsidy (as payments under the scheme were not strictly calculated on the basis of input taxes) and the dispute panel stated that India should revoke it.
The RoDTEP scheme is expected to be more acceptable at the WTO as the reimbursement rates are based on actuals and is minutely linked to all input taxes and duties paid by exporters. These include embedded taxes, such as local levies, coal cess, mandi tax, electricity duties and fuel used for transportation, which are not exempted or refunded under any other existing scheme.
A three-member RoDTEP Committee, under former home and commerce secretary GK Pillai, was constituted in July 2020 to work out the modalities for calculation of taxes at the Central, State and local levels, borne on the exported product. Auto, textiles and steel were the three sectors the committee initially focussed on.
“As Indian exporters are continuing to face a rough time worsened by Covid-19 disruptions in global demand and increased protectionism, a continuation of the MEIS for some more time could give them a little comfort,” the official said.
The new five-year Foreign Trade Policy is to be implemented from April 1, 2021, and introducing the RoDTEP at that time could be a good idea, he added.
Adequate funding for the new RoDTEP scheme is another area of concern for the government at the time of the on-going pandemic.
India’s exports declined by 17.76 per cent to $173.66 billion in April-November 2020-21 compared to the same period last year.