Recently the Union Cabinet of India approved a new scheme, RoDTEP (Remission of Duties and Taxes on the Export Products) on 13th March 2020 replacing the existing MEIS (Merchandise Exports From India) Scheme. MEIS Scheme will be valid till 31st December 2020 and the RoDTEP will come into effect from 1st January 2021.
[As per the latest updates, the new RoDTEP scheme will initially be launched from 01st January 2021 only for 3 sectors namely automobiles, readymade garments, iron & steel. Rates for other sectors will be fixed subsequently as it is a lengthy process - Get full details here]
RoDTEP Scheme vs MEIS Scheme
The replacement of the MEIS scheme and introduction of the RoDTEP Scheme has raised many questions for the exporters who were relied on MEIS benefits until now, there is demand from many export companies for seeking clarification on the RoDTEP scheme.
Hence in this post, we have come up with the reason why the replacement of the scheme has been done and how the new RoDTEP Scheme differs from the existing MEIS Scheme.
[To Make sure not to lose benefits on any of the shipment under the MEIS Scheme visit our page on the “MEIS Scheme”]
Why Government replaced the MEIS Scheme with new RoDTEP Scheme
The Government introduced RoDTEP Scheme in the response to international pressure to discontinue its existing incentive scheme. The current MEIS scheme provided additional benefits of 2% to 7% on the FOB value of eligible exports. A complaint was filed against India at the WTO (World Trade Organization) by the USA stating that the benefits given to Indian exporters under the MEIS scheme give undue benefits that are against the WTO norms.
As per the WTO norms, a country can't give export subsidies like MEIS if Per capita income is above 1000 US $ and India’s Per Capita Income crossed above 1000 US $ in 2017. India subsequently lost the case at WTO and had to come up with a new WTO compliant scheme to help Indian exporters.
Advantages and disadvantages of RoDTEP Scheme over the MEIS Scheme
Advantages of RoDTEP Scheme over the MEIS Scheme
1) The RoDTEP scheme will reimburse all the taxes or duties which are charged directly or indirectly on the export goods by the Central/State/Local level and not refunded under any of the existing schemes.
The following taxes which are not refunded under MEIS Scheme will be refunded under RoDTEP Scheme –
- Central & state taxes on the fuel used for transportation of export products.
- The duty levied on electricity used for manufacturing.
- Mandi tax levied by APMCs.
- Toll tax & stamp duty on the import-export documentation. Etc.
2) RoDTEP Scheme is important for Indian exports to get a level playing field in the International Market.
3) 100% Refund of all Indirect taxes on export products.
4) More number of goods will be eligible for benefits as compared to the MEIS scheme.
5) Benefits to be given in the form of electronic scrip which will be maintained in an electronic ledger.
Disadvantages of RoDTEP Scheme
The benefits under RoDTEP Scheme are based on the duties/taxes paid by the exporters such as fuel used for transportation, electricity used in manufacturing, etc.
The exporters who are paying very low taxes/duties on their export goods will get a low benefit rate under RoDTEP Scheme as compared to the benefits availed by them under the MEIS Scheme.
Conclusion
As the benefit rates are not fixed it is not possible to comment on the benefit under RoDTEP Scheme, rates will be decided by the committee after consultation with the Industries/Export Promotion Councils/Export firms and will be notified by the department of commerce (DoC) soon.
Please find the below Image summarizing the difference between RoDTEP & MEIS Schemes.
[To know more about the upcoming RoDTEP Scheme, like What are the duties & taxes going to be refunded under the scheme? Expected Incentive rates? Who all are eligible to claim? It's application procedure; Read our article here - RoDTEP Scheme]
MEIS benefits can be claimed backdated for the last 3 years as well, so if you have already exported and yet didn’t claim the MEIS benefits please get in touch with us now.
Afleo Consultants is India's No. 1 Export Incentive Consultant. We study your entire business process and guide you for all the eligible export benefits in India that your Company can claim. Our only motto is to get maximum export incentives for our clients within the policy framework.
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