The imaginatively named, 8,555-product and 12,544 crore, Remission of Duties and Taxes on Exported Products (RoDTEP) scheme is neither efficient nor sustainable. Its stipulated goal is to remove embedded taxes from the value of exports. The scheme seeks to reimburse exporters the non-GST taxes and levies their exports bear central and state taxes, duties and cess on petroleum products and electricity the entirety of GST paid is claimed as input tax credit, because exports are zero-rated under GST.
A more efficient way is to bring all indirect taxes under GST. It will enable exporters who have paid embedded taxes in the value chain ending in export to claim a routine refund. This will also avoid any possible disputes over export incentive schemes at the WTO.
The reimbursement rates under RoDTEP range from 0.3% to 4.3%. Not all exporters are happy with the reimbursement rates. Already, mobile handset makers want the government to rework the capping of the reimbursement rates on mobile phones and printed circuit board assemblies, saying the rates are lower than the rates offered under the earlier Merchandise Exports from India Scheme (MEIS).
Demands such as these will vanish if complex incentive schemes are scrapped. Value-added tax on fuel used in transportation, mandi tax and duty on electricity used during manufacturing are covered for reimbursement under the RoDTEP. There is no reason why petro products or electricity duty should be kept out of GST, given that these break the GST chain and create systemic inefficiencies. The recent pick-up in exports due to economic recovery in key western markets augurs well for exporters. It is the right time for the government to widen the GST base and insulate exports from subsidy claims.