Exports from special economic zones (SEZs) and export oriented units (EOUs) can take a hit if the new Remission of Duties or Taxes on Export Products (RoDTEP) scheme, to be applicable from January 1, is not extended to units in the zones and may lead to their relocation in other countries, the Export Promotion Council for EOUs and SEZs (EPCES) has stated.
In letters addressed to Finance Minister Nirmala Sitharaman and Commerce & Industry Minister Piyush Goyal, the council also proposed that till RoDTEP rates are announced, the older incentive scheme, Merchandise Export from India Scheme (MEIS), should be continued.
“The implementation mechanism makes it clear that RoDTEP benefits may not be available to the exporters from SEZ units and EOUs. This needs to be revisited immediately. SEZs and EOUs contribute about 30 per cent of the country’s total exports,” Bhuvnesh Seth, Officiating Chairman, EPCES, wrote in letters to Sitharaman and Goyal.
The Finance Ministry, in a notification on December 31, announced the implementation of the RoDTEP scheme from January 1 and stated that the rates for input duty remission for individual sectors would be notified soon. It added that the notified rates, irrespective of the date of notification, shall apply with effect from January 1 to all eligible exports of goods.
The RoDTEP scheme has replaced the MEIS scheme, which expired on December 31 2020. The MEIS was withdrawn as it had been identified as an export incentive in violation of World Trade Organization rules by a dispute settlement panel.
Units in SEZs and EOUs also procure domestic inputs and bear the taxes and duties covered under the new scheme. There is no justification for depriving the SEZ and EOU exporters from the benefit of RoDTEP as MEIS benefits will anyway not be available from January 1 2021, the letter pointed out. “Therefore, not covering SEZ units and EOUs under RoDTEP would put such exporters to great disadvantages and may lead to shifting of such units abroad and would be against the ‘Atmanirbhar Bharat’ initiative of the Prime Minister,” it said.
Further, it would be desirable that RoDTEP rates should be announced well in advance so that it could be factored by the exporters while finalising or quoting new orders contracts, the Council proposed. “Till then, MEIS should be continued in such sectors where RoDTEP rates are not announced,” the letter added.
Since the remission rates under RoDTEP are based on actual input taxes paid by each sector at various stages of production, the calculation is proving to be time consuming.