Commerce ministry to extend benefits under RoDTEP scheme to SEZ units

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These zones are treated as foreign entities in terms of provisions related to customs

The commerce ministry has decided to extend export benefits under the RoDTEP scheme for companies in the special economic zones (SEZs) and export oriented units (EOUs).

This decision was communicated to the Director General of Foreign Trade (DGFT) on February 16.

The DGFT may issue a formal notification soon amending the foreign trade policy on the same.

“Post rolling out of ICEGATE (Indian Customs Electronic Data Interchange Gateway) in SEZs, the RoDTEP scheme may also be extended to SEZs,” according to an office memorandum of the commerce ministry.

The government in August 2021, announced the rates of tax refunds under export promotion scheme — Remission of Duties and Taxes on Exported Products (RoDTEP), for 8,555 products such as marine goods, yarn and dairy items.

As SEZs and EOUs were kept out of the scheme in the list notified that time, the industry was demanding to include them in the scheme.

Under RoDTEP, various central and state duties, taxes, and levies imposed on input products, among others, are refunded to exporters. The current RoDTEP rates are in the range of 0.3 per cent to 4.3 per cent.

ICEGATE is the national portal of Indian Customs of Central Board of Indirect Taxes and Customs (CBIC) that provides e-filing services to the trade, cargo carriers and other trading partners electronically.

It serves as an interface between trade users and the customs department and acts as a hub for exchanging information with external trading partners involved in international trading.

The primary goal of RoDTEP is to refund taxes and duties that are not rebated under any other scheme. This includes various central, state, and local duties/taxes/levies that are incurred in the process of manufacturing and distribution of exported products but are not refunded through schemes like GST (Goods and Services Tax) or Duty Drawback scheme.

RoDTEP does not include all exports. Exports under certain categories are currently excluded from RoDTEP benefits and that includes products exported from SEZs, EOUs, Electronic Hardware Technology Parks (EHTP), Biotechnology Parks (BTP), and Customs bonded warehouses; exports under Advance Authorisation (which allows duty-free imports of inputs for export production); re-exported imported goods.

The list also includes exports subjected to minimum export price or export duty; restricted export or import products; and supplies from Domestic Tariff Areas (DTAs) to SEZ/Free Trade and Warehousing Zones (FTWZ) units.

Commenting on the development, economic think-tank Global Trade Research Initiative (GTRI) said RoDTEP may lead to overcompensation for import intensive exports from SEZs.

The decision may be a disproportionately “high bonanza” for high import intensive exports from SEZs, it said.

However, the decision overlooks exports from other categories that are in a similar situation as SEZs, it added.

GTRI said for large-scale exports from SEZs, such as electronics, petroleum products, and jewellery, which have high import content, RoDTEP could represent a significant incentive.

It said that a lot of big exports from SEZs, like electronics (including smartphones), petroleum products, diamonds, and gold jewellery, add less than 10 per cent of their value in India.

“This means over 90 per cent of what makes up these products comes from imports, which do not have to pay duties. If these exports get a 3 per cent incentive from the RoDTEP scheme, it means they earn an extra USD 30 for every USD 100 they make. If we add other incentives like PLI (production-linked incentive), the figure will be very high,” the GTRI said.

GTRI Founder Ajay Srivastava said sending goods from the domestic market to SEZs is treated as exporting, these transactions do not qualify for RoDTEP benefits.

“However, they are strong candidates to be included in the RoDTEP scheme,” he said, adding “a significant concern is the limited budget for RoDTEP, which could mean reduced rates for all if more exports are included, especially since these rates are already lower compared to the previously available Merchandise Exports from India Scheme (MEIS) rates”.

These zones are treated as foreign entities in terms of provisions related to customs.

So far, the government has given formal approvals to over 420 SEZ developers, out of which over 375 are operational. Exports from these zones stood at USD 155.8 billion (USD 61.6 billion merchandise and USD 94.2 billion services) in 2022-23.

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Pooja Gupta

CA Pooja Gupta (CA, ISA, having 15 years of experience. Educator and Digital Creator

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CA Pooja Gupta (CA, ISA, having 15 years of experience. Educator and Digital Creator

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