Government may Extend Tax Refund Scheme for Exports

The government is expected to prolong the extended duty remission plan for exporters beyond the September deadline, offering help to the medicines, steel, and chemicals industries, as per the officials familiar with it.

The Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme has been expanded in December of last year to include pharmaceuticals, chemicals, and some steel items.

The commerce department indicated that tax refunds would be available for the extra products until September 30, 2023. The department sought to know if it had enough budgetary resources to fund the tax remmission for the whole financial year 2023-24.

According to officials, the government now believes the budgetary allocation would be sufficient for the entire financial year 2023-24.

“At the moment, monthly refund claims under the RoDTEP scheme total around 1,200 crore. As a result, the planned allocation of Rs 15,069 crore for FY24 should be sufficient to continue extending this benefit to the sectors that were added subsequently,” a senior official on condition of anonymity.

However, if the government decides to broaden the scheme to encompass the entire iron and steel sector, an extra Rs 1,000 crore will be required for this financial, according to the official.

The scheme received 13,699 crore from the government in 2022-23. As per the official, the government will assess the proposal by September 30 and notify its decision.

The initiative, which goes into effect on January 1, 2021, recovers central, state, and municipal levies incurred in the manufacture and export of products that are not covered by any other incentive scheme.

The move will help exporters of these goods compete for orders as demand in important developed markets slows. According to official figures, exports of chemicals, medicines, and certain steel items totaled $61 billion till February of the financial year, accounting for around 15% of total merchandise despatches.

The Foreign Trade Policy 2023, which was announced last week, highlighted timely tax remission for exporters as part of a shift away from any incentive-based approach. The RoDTEP plan complies with World Trade Organization (WTO) standards.

The extended RoDTEP system now covers 10,342 export products, up from 8,731 previously. The concept is founded on the widely understood principle that exports can be tax-free and levies can be reimbursed.

Remission scheme, according to experts, is vital to enhancing the country’s export competitiveness and meeting the $1 trillion merchandise export objective by 2030 from $447 billion in 2022-23.