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Home / IAS Preparation / Government Schemes of India / Rodtep Scheme

RoDTEP Scheme - Objectives, Features, Eligibility, Benefits, Significance, Working & Importance

Last Updated on Oct 19, 2023
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RoDTEP full form is Remission of Duties and Taxes on Exported Products. It was announced in 2019 and launched on 1st January 2021 by the Ministry of Commerce and Industry. Under this scheme, the exports will get the refund of embedded central, state, and local duties or taxes that were not rebated or refunded yet. This will be a major boost to India’s export and the domestic sector as it will provide Indian competitors with a level playing field with the global competitors.

Government schemes and initiatives related to the economy can be seen as a part of Paper IV of GS Mains of UPSC examination along with the current affairs section in the preliminary. Candidates can check this article to learn in detail about the Remission of Duties and Taxes Scheme on Exported products for the UPSC IAS exam. We will learn about its objectives, functions, operation, benefits, and significance in this article.

Candidates can read about the Minimum Alternative Tax (MAT) here!

Latest News About RoDTEP Scheme

RoDTEP scheme was in News As

  • The government left out sectors that were already booming in the pandemic while announcing RoDTEP which are Iron and Steel, Chemical and Pharma

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What is RoDTEP Scheme?

The scheme Remission of Duties on Extort and Taxes was introduced on 1st Jan 2021, which is applicable to export products of countries. With the introduction of the RoDTEP scheme, it is expected that the taxes on export products will be reduced and a major boost will be provided to the Indian export sector.

India’s export subsidy was challenged in the World Trade Organisation by the USA, and thus, RoDTEP was introduced, which was World Trade Organisation compliant. Two schemes of GOI that were merged with this scheme were the Merchandise Export from India Scheme (MIES) and the Rebate of State and Central Taxes and Levies Scheme ( RoSCTL), which are WTO compliant.

Some of the Schemes that were recommended to be withdrawn were.

  • Merchandise Exports From India Scheme
  • Export-Oriented Unit Scheme
  • Electronics Hardware Technology Park Scheme
  • Scheme for Bio Parks of Technology
  • Capital Goods System of Export Promotion
  • Scheme for Special Economic Zone
  • Duty-Free Import program For Exporters

Some Key Features of Remission of Duties and Taxes on Exported Products Scheme

Overview of RoDTEP Scheme

About RoDTEP Scheme

1st Jan 2021

About RoDTEP Scheme

Ministry of Commerce and Industry

About RoDTEP Scheme

0.5% to 4.3%

About RoDTEP Scheme

Steel, Organic, Chemical, and Petrochemical

About RoDTEP Scheme

Employment-oriented sectors such as Maine, Agriculture, Leather, Gems and Jewellery are its prime target.

About RoDTEP Scheme

12454 Cr

About RoDTEP Scheme
  • VAT and Excise duty on the fuel used in self-incurred transportation costs
  • the fuel used in the generation of electricity via power plants or DG Sets
  • on the fuel used in running machinery/plant
  • Electricity duty on the purchase of electricity
  • Mandi Tax/ Municipal Taxes/ Property Taxes
  • Stamp duty on export documents; etc

Read about the Balance of Payments here!

Objectives of RoDTEP Scheme

The main objective of this scheme is to give a boost to the export sector, which was poor in volume. Other key objectives are as follows

  • To access the availability of easy refunds of various taxes to exporters
  • To reduce the cascading effect in taxes, i.e., tax on tax, by providing an automatic refund route
  • To help exporters meet international standards and improve the quality of exports
  • Another objective was to make it more exhaustive by adding taxes that were previously excluded, such as education cess, and state taxes on power, oil, and water.

Read about Trade Facilitation Agreement Here!

Features of RoDTEP Scheme

Some of the features of the RoDTEP scheme include the following:

  • The RoDTEP scheme provides for the remission of duties and taxes paid on goods exported from India. This includes central, state, and local levies, as well as embedded taxes.
  • The RoDTEP scheme uses an automated system to provide credit to exporters. This system is designed to be quick and efficient. It minimizes the paperwork required.
  • The RoDTEP scheme uses digitization to verify the eligibility of exporters for credit. This process is quick and efficient, and it helps to reduce fraud.
  • The RoDTEP scheme is a multi-sector scheme. This means that it covers a wide range of goods exported from India. This includes both manufactured goods and agricultural products.
  • The RoDTEP scheme is WTO compliant. This means that it does not violate any international trade agreements. This ensures that the scheme will not be challenged by other countries.

Fig: Features of the RoDTEP Scheme

Read About the Economic Reforms of 1991 Here!

Benefits of RoDTEP Scheme

Here are the benefits of the RoDTEP scheme:

  • The RoDTEP scheme will help to make Indian exports more competitive in global markets. This is because the scheme will reimburse exporters for the duties and taxes that they have paid on imported inputs. 
  • The RoDTEP scheme will help to reduce the cost of production for exporters. It reimburses them for the duties and taxes that they have paid on imported inputs. 
  • The RoDTEP scheme is expected to boost exports from India by making Indian exports more competitive in global markets.
  • The RoDTEP scheme is expected to create jobs in India by boosting exports from India.
  • The RoDTEP scheme is a simplified and automated scheme. This will make it easier for exporters to avail the benefits of the scheme. This will improve the ease of doing business in India, making it more attractive for foreign investors.
  • The RoDTEP scheme will benefit a wide range of exporters. This will help to promote inclusive growth in India.

Read about the Free Trade Agreement here!

Eligibility for RoDTEP Scheme
  • The RoDTEP scheme is open to all exporters of goods from India. This includes both manufacturer exporters and merchant exporters.
  • The RoDTEP scheme covers a wide range of goods exported from India. This includes both manufactured goods and agricultural products.
  • The goods must have India as their country of origin. This means that the goods must have been manufactured in India or have undergone substantial transformation in India.
  • The goods must be classified under a tariff heading at the 8-digit level. This means that the goods must be classified under a specific category of goods.
  • There is no minimum turnover requirement for the RoDTEP scheme. This means that exporters of all sizes can avail of the benefits of the scheme.

Working of RoDTEP Scheme

Here are the steps on how the RoDTEP scheme will operate:

  • Exporters will make a claim for RoDTEP in the shipping bill by making a declaration.
  • Based on the declarations in the Shipping Bill, the eligible RoDTEP will be processed by Customs.
  • The RoDTEP benefit will be credited to the exporter's account. This will be done in the form of a transferable duty credit scrip.
  • The exporter can use the scrip to pay for future imports or to transfer it to another exporter.
  • The scrip will be valid for a period of three years.
  • The RoDTEP scheme will be implemented through digitization of the rebate amount in the form of transferable duty credit scrip. Such scrip would be maintained in an electronic ledger by the CBIC for its utilization.

Fig: Evolution of Export Promotion Schemes in India

Need for RoDTEP Scheme

Remission on Duties and Taxes on Exported Products was launched to address US claims in the World Trade Organisation. It was ruled that the provisions set up by India’s export violated norms set up by WTO. Thus RoDTEP was launched so that India remains compliant with the WTO norms.

RoDTEP Rates
  • The RoDTEP scheme offers remission of duties and taxes paid on goods exported from India. This includes central, state, and local levies, as well as embedded taxes.
  • The RoDTEP scheme rates are updated on a regular basis. The latest rates can be found on the website of the Directorate General of Foreign Trade (DGFT).
  • The rates of remission vary depending on the product and the country of export. Here are some examples of the RoDTEP scheme rates:
    • Textiles: 2.4% for exports to the United States
    • Chemicals: 1.4% for exports to the European Union
    • Machinery: 1.0% for exports to all countries
    • Agricultural products: 0.5% for exports to all countries
  • The maximum rate of remission under the RoDTEP scheme is 4%. This means that exporters can get a maximum refund of 4% of the value of the goods exported.

Read about Gross Domestic Product Here!

Freight on Board Value 

  • It is termed to define liability in the event of damage or destruction of goods.
  • FOB origin- Risk is with the buyer.
  • FOB destination- seller is at risk.
  • FOB also affects the liability of the buyer as it increases the inventory cost too.

Significance of RoDTEP Scheme

During British times India was a major export hub with an abundance of raw materials. India had a global trade share of 22%, Indian textile industry was world-class. At present times India has a global trade share of only 2%. Various schemes are being implemented by GOI, such as Make in India which are aimed at boosting the domestic sector.

It has been observed that India’s service sector has shown positive growth over the years, whereas the merchandise industry is running at a trade deficit. Some of the reasons for the low export potential of India is due to

  • Inadequate infrastructure
  • Low credit access
  • Document- Heavy process
  • Trade Barriers

Remission of Duties and Taxes on Exported products in one such scheme aimed at boosting domestic export along with allowing domestic exporters to provide world-class products.

Read About the Deduction and Collection of Tax at the Source Here!

Issues Related to RoDTEP Scheme
  • Lower Rates: Many exporters expressed disappointment with the scheme due to significantly reduced rates and a limited budget allocation. The rates fail to consider taxes embedded in raw materials, particularly in cases involving engineering products and steel.
  • Deprive Large Sectors: Major industries like steel and pharmaceuticals, as well as exports under Advance Authorisation, EOU, SEZ, and others, seem to be excluded from these benefits. This exclusion could negatively impact the competitiveness of Indian exports and foster a sense of dissatisfaction among exporters.
  • Freight on Board (FOB): FOB, or Free on Board, determines liability for goods damaged during shipping. "FOB origin" means the buyer assumes responsibility once the seller ships the product. "FOB destination" means the seller remains liable until the goods reach the buyer. These FOB terms impact the buyer's inventory cost, as taking on liability for shipped goods increases costs and reduces net income.

MEIS Vs. RoDTEP

Let us look at some differences between the Merchandise Export for India Scheme and the Remission of Duties and Taxes on Exported Products schemes.

MEIS 

RoDTEP

Incentives are in the form of transferable scrips

Rebate of central and state taxes in the form of duty credit scrips

Currently under dispute whether it is a WTO complaint or not

Complaint with WTO norms

Incentives are 2-5% of realized FOB value of exports or the Export value of FOB goods as per shipping bill, whichever is lower.

Product-based percentage way of reward

issued in the form of transferable scrips in physical copy

Issues in the form of transferable scrips in digital mode

Transferable in an open market

Transferable in an open market

Read about Tax Planning here!

RoDTEP Scheme: Facts and Figures for UPSC

Some Key Points Related to the Remission of Duties and Taxes on Exported Products are

  • Under this scheme, several fees, including mandi fee, coal cessation, and Central Excise duty on fuel, shall be reimbursed.
  • The refunds will be represented in the form of transferable electronic scripts, which are maintained in the ledger by the Central Board of Indirect Tax and Customs.
  • The acceptance of refunds will now be done much faster with the introduction of digital programs.
  • Almost all industries are included in the RoDTEP scheme. A dedicated committee is also set up to decide the implementation of the scheme across different sectors to maintain consistency
  • The tax refund process is set to be fully automated under this scheme for exporters.
  • Refunds would be claimed as a percentage of the Freight On Board (FOB) value of exports under the Remission of Duties and Taxes on Exported Products

Concluding Remarks

The RoDTEP Scheme was approved by the Union Cabinet Ministry of Commerce and Industry chaired by Mr. Piyush Goyalon on 13th March 2020, and it came into effect on 1st January 2021 and will be until 2025. In 2018 US challenged five export subsidy schemes of India in WTO, leading to which WTO ruled that these schemes were inconsistent with the terms and conditions of WTO. Eventually, in Oct 2019, the panel recommended the Indian government withdraw these schemes.

On 17th August 2021 government released guidelines and benefits under the Remission of Duties and Exported Products scheme for 8555 tariff lines.

The remission of Duties and Taxes on Exported Products can be seen as a major step towards a boost in the export sector of the country, along with merging the schemes such as MIES and the RoSCTL scheme, which were not WTO compliant. It is expected that the international competitiveness of India will be significantly affected by the launch of this scheme in the next 5-10 years.

We hope all your doubts regarding the “Remission of Duties and Taxes On Exported Products Scheme ” are addressed after going through this article. Testbook provides comprehensive notes and online classes for UPSC, including different competitive examinations. It has always assured the quality of its product, like content pages, live tests, GK and current affairs, mocks, and so on. Ace your preparation with the Testbook App!

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RoDTEP Scheme - FAQs

RoDTEP Scheme was launched by the Ministry of Commerce and Industry to boost the export sector by merging two Schemes of Merchandise Export from India Scheme (MIES) and the Rebate of State and Central Taxes and Levies Scheme ( RoSCTL) which are WTO compliant.

The RoDTEP scheme was launched by Union Cabinet on 13th March 2020 and it came into effect on 1st January 2021.

Manufacturer exporters and merchant exporters (traders) are both eligible for the benefits of this scheme. There is no particular turnover threshold to claim the RoDTEP. Re-exported products are not eligible under this scheme.

The RoDTEP scheme covers employment-oriented sectors like marine, leather, gems and jewellery, agriculture, etc. It will also support other sectors like electrical/electronics, automobiles, machinery, plastics, etc

The notified rates under the RoDTEP scheme for several sectors include the rates at 0.5%, 1.4%, 2.4% and 4%. However, the government is yet to notify a fixed quantum of rebate per unit for certain export items.
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