Even after 45 days of rolling out the new scheme to refund taxes and duties paid by exporters, the finance ministry is yet to decide on the rates, amid a slugfest with the commerce department, which is keen to ensure that the new mechanism does not impact those shipping out goods from the country.
The delay in rates has not gone down well with exporters, who are complaining about the lack of certainty in negotiating contracts at a time when business remains muted in the midst of the pandemic, which is still impacting demand in Europe, the US and other parts of the world.
The finance ministry is being accused of using the WTO case against India’s earlier export promotion schemes to restrict the scope of duty refunds. The government had decided to move to a scheme called Remission of Duties and Taxes on Exported Products (RoDTEP) to refund levies at the central, state and local level.
While a committee under former commerce secretary G K Pillai had been tasked with finalising product-specific rates, the commerce department is unhappy with the coverage being restricted to around 2,000 tariff lines or products, which means that several goods will not be able to compete favourable as taxes will have to be added to the price. “Ideally, all the tariff lines should be covered, we are discussing the issues with the finance ministry,” said a government source.
Another bone of contention is the finance ministry’s insistence that the rate of refund under RoDTEP should not exceed what was being offered under Merchandise Exports from India Scheme, which has now been discontinued.
Similarly, there is a dispute over value caps being proposed by the revenue department, which does not want to make payouts beyond a certain level even if exports are higher. This, it believes, is critical to ensure that exporters do not get an open-ended regime.
Further, exports from special economic zones (SEZs) and those under the advance authorisation scheme are proposed to be kept out, which the commerce department believes will not be fair.
Industry bodies such as Fieo have also argued that SEZ units and export-oriented units face embedded levies and face taxes on fuel for inward and outward transmission, which needs to be refunded. It has also suggested that the scheme should not be restricted by budget constraints.
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