Over Rs 35,000-crore export aid held up amid trade recovery
Trade recovery, The RoDTEP plan is at a “concrete level” and with global best practices, so the government should not worry about challenges at the World Trade Organization, Sahay said.
The government is reaping export benefits of at least Rs 35,000 crore under the India Merchandise Export Program (MEIS), including the funds it obtains for FY15, according to trade sources. He said delays in releasing these funds could lead to a Kovid-induced liquidity shortage, limiting the ability of exporters to restrict supply as demand from key markets improves.
Likewise, the rates of return under the exemption from duties and taxes on the export product regime (RoDTEP), which replaced the MEIS from January 1, 2021, have not yet been notified. As exporters factor in tax exemptions as part of core programs while reorganizing contracts, the lack of clarity on RoDTEP rates exacerbates their woes, he said. Certainly, after notification of the rates, they will benefit from a retrospective refund (from January).
Under the MEIS, which expired on January 1, the government approved Rs 39,097 crore for FY15 and Rs 15,555 crore for the first three-quarters of FY15. Exporters said much of that amount has yet to be released, which is due to the center’s resource-gathering epidemic. Some exporters claim that Rs 20,000 crore has been released, mostly against FY2015 claims (although some claims are related to FY2019), but no amount has been transferred against FY2019 claims. the fiscal year 2015.
A senior official said the government would soon start processing MEIS benefits. Even RoDTEP tariffs will be announced soon.
However, a delay in withdrawing MEIS benefits is not uncommon. In previous years, these benefits were often delayed for reasons including erroneous claims or incorrect paperwork on the part of exporters, the official said. At that time, the epidemic largely contributed to the delay. “This is an unprecedented crisis, so some delay is inevitable. But the government is fully seized in this matter ”, he declared.
Under MEIS, most exporters received scrapings of up to 2-5% of the freight value onboard the shipment.
Importantly, at the World Trade Organization (WTO), the United States recently asked India to explain the RoDTEP program and its structure. But former Commerce Secretary GK Pillai, who headed a committee to recommend RoDTEP rates, told FE the new plan meets WTO criteria.
“RoDTEP is a system for refunding duties only on export products. Other countries are doing it. It is not an export promotion program. These questions are usually put to the WTO and the issue can be easily addressed.
The Pillai Committee presented its report in March, just 7-8 months after its inception, after an exhaustive practice of investigating the built-in levies on 8,000-9,000 tariff lines. The Department of Revenue is currently investigating the report. The scheme consists of reimbursing various integrated levies (not subscribed by the GST) paid on inputs consumed in exports.
Previously, the United States had successfully challenged the MEIS and some other export programs, claiming they were inconsistent with global trade standards. India has appealed the ruling of the WTO dispute settlement body and the verdict is yet to come. However, India replaced MEIS with the RoDTEP system.
The government has kept a budget of only Rs 13,000 crore for the RoDTEP program for the fiscal year 2012, but actual spending could be higher.
“Export orders are coming from major markets (like US and EU), but there is a big challenge on the supply side,” said Ajay Sahai, Managing Director, and CEO of the Federation of Indian Export Organizations (FIEO). If the benefits of MEIS are quickly approved and RoDTEP tariffs remain reasonable and announced quickly, exporters can increase supply, he said. Of course, any restrictions could potentially weigh on exports following the second wave of Kovid-19.
The RoDTEP plan is at a “concrete level” and with global best practices, so the government should not worry about challenges at the World Trade Organization, Sahay said.
Since in many cases the exporters themselves do not have infallible data or are fully aware of all the levies incorporated in the exported products, the Pillai Committee has an important task of determining the RoDTEP rates. According to Pillai, this was done keeping in mind the principle that it was not widely possible to export taxes. He expected that with the data being overrepresented by exporters, the plan would improve and could stabilize in 2-3 years.
The scheme proposes that GST (petroleum and electricity are still not covered by GST, while mandis are collected without tax, stamp duty, central GST integrated and clearing, etc.).
However, the 2121 export fiscal year has seen a roller coaster ride due to the outbreak, which will see a dramatic jump in outbound shipments in the coming months, given the favorable base effect. Of course, in absolute time, exports hit a record high of $ 34 billion in March, around $ 33 billion in the same month in 2019 (before the outbreak). However, for the medium-term growth rate, the exporters’ liquidity problem must be resolved immediately.