To retain a competitive edge, every country’s tax policy guarantees that when an export is made, only the products and services are exported and none of the tax paid during the manufacturing process is exported.
India also compensated the indirect and invisible taxable exports paid during the manufacturing and exporting process under the Merchandise Exports from India Scheme (MEIS). Under MEIS, exporters were reimbursed 5-7 percent of the quantity exported as an incentive against taxes levied by the state government and the Centre on purchases of diesel, electricity, and other indirect taxes.
The MEIS programme was set to expire in 2020 since it was not WTO compatible, therefore the Centre introduced RoDTEP (Remission of Duties and Taxes on Exported Products), which went into force in January 2021. However, the rates were set in August at 0.5 percent of the export value.
“We are surprised that in the textile made-up sector, the rates of RoDTEP for yarn and fabric have been fixed at 3.8 percent and 4.3 percent, respectively, whereas quilts and comforters that use yarn and fabric as their raw material have been pegged at 0.5 percent,” said Atul Poddar, president of the Federation of Rajasthan Exporters. It indicates that we are supporting raw material exports while opposing completed product exports, which have a higher value for exporters.”
According to Poddar, several of our neighbouring nations, including Bangladesh, Pakistan, Vietnam, and Cambodia, have duty-free access to the US and European markets, whereas Indian exports are subject to import taxes.
“The reduction in reimbursements will increase the price of Indian items in American and European markets. We would have had a better opportunity of competing and increasing our market share in international markets if we had received valid reimbursements under the RoDTEP system. The government’s action has deprived us of our chances of survival, let alone growing exports to meet the prime minister’s $400 billion target,” Poddar remarked.
According to Poddar, the handicraft sector would approach the Centre to evaluate and restore reimbursement rates to the levels provided under the MEIS.
