The plan could not have come at a more appropriate time. India’s overall exports (merchandise and services) for April-July 2021 are estimated to be $ 204.97 billion, 47.87% more than the same period last year and 15.35% over as of April-July 2019. The trade balance for this period, at -9.74%, is also an improvement of -36.32% in 2019. Merchandise exports alone amount to a whopping $ 130.82 billion during April-July 2021, and have grown substantially from $ 107.15 billion for the same period last year. The plan should ease the liquidity situation of exporters and provide much-needed relief.
It covers more than 8,500 tariff lines and has rates ranging from 0.01% (for high-value fountain pens and ballpoint pens) to 4.3% (for a whole range of fabrics containing 85% or more cotton and that weigh no more than 200 g per year). square meter). Generally, RoDTEP would not extend to GST-listed products where exports are zero-rated. However, it would be extended to products that have an unreduced implicit tax element, such as in the cases of fuel use, mandi tax payment, stamp duty and electricity charges, all of which are outside the GST.
While the trade, especially in the textile sector, will be happy with the tariffs, the sectors that have been omitted, such as pharmaceutical, steel and chemical, have reason to be upset. These are sectors that are doing well and the additional support would have boosted their performance. However, it should be noted that RoDTEP rates cannot be compared with rates that existed under the Merchandise Export Incentive Plan (MEIS), which was an export promotion plan and did not comply with the WTO.
Rates are expressed as a percentage of the value free / freight on board (FOB) with a limit of value per unit in many cases, prescribing a limit of value as a measure to control the overvaluation of exports, sometimes used by exporters without scruples. The reimbursement would be granted immediately, but would be subject to receipt of the export earnings within the timeframes prescribed in the Foreign Exchange Management Law (Fema).
The refund will be granted in the form of a transferable credit card. The vouchers can be used for the payment of basic customs duties. To this extent, customs revenue would be affected. What this would mean is that the revenue impact due to export promotion schemes (the waived tariff), which according to the latest budget was estimated to be around Rs 62,757 crore for 2020-21, would increase.
GoI’s budget provision for RoDTEP is Rs 12,454 crore.
As Indira Rajaraman pointed out Recently, given the ambitious merchandise export target of $ 400 billion, the budget provision is “woefully small.” The scheme is applicable as of January 1, 2021, and exports having performed well, a huge burden would have already accumulated. GoI would have to increase the budget allocation sooner rather than later.
In addition, it is important that there is close coordination between the General Directorate of Foreign trade‘s (DGFT) IT portal and ICEGATE (Indian Customs and Central Excise Electronic Commerce Gateway), the customs electronic commerce portal, to ensure the smooth transfer of scripts from the DGFT portal and their smooth use by importers . The fees having been notified, the finer outlines of the scheme implementation should be urgently finalized.
Exporters would have to ensure that they can benefit from the various refund and referral schemes extended by the government and make their products competitive in the world market. The emphasis should be on reducing costs without compromising quality. It should also take advantage of the market access provided by the various free trade agreements (FTAs).
India expects a lot from its exporters. They have a critical role to play in reviving and growing the economy.