Import, Export, Trade for MSMEs: The non-implementation of the new export advantage scheme Remission of Duties and Taxes on Export Products (RoDTEP) is hurting exporters creating them uncompetitive in the international marketplace.
Earlier exporters had been offered a wide array of input tax rewards such as Merchandise Exports from India Scheme (MEIS) and other individuals. These had been all withdrawn by the government final year, and a single export advantage scheme RoDTEP that was applicable on all export goods was introduced, effective from January 1st, 2021.
RoDTEP is a remission of duties and taxes paid to exporters on production inputs such as electrical energy tax, diesel tax, panchayat tax, stamp duty. The thought is to enhance exports and make the Indian exporter competitive in the international marketplace.
However, the subsidy has been in location for the final 3 months but the government has not notified the prices. The exporters nonetheless do not have inkling on regardless of whether they will get a advantage of two per cent or 5 per cent, restricting their capability to cost items competitively.
“The rates are important for the industry because whatever the benefits the exporter gets from the government they factor it in their product’s prices, passing a part of it to the buyer,” says Ajay Sahai, Director General, Federation of Indian Export Organisation (FIEO).
“While it impacts each and every exporter, it hits the exporters in the commodities business the most as they operate on wafer-thin margins and are largely dependent on government’s benefits,” says Sahai. It has brought an element of uncertainty in trading and in the absence of prices several exporters are reluctant to finalise their contracts, he adds.
By June 2020, quite a few export promotion councils which includes FIEO and Plastics Export Promotion Council (PLEXCONCIL) had submitted information to the government that exporters will need to be compensated to the tune of 2-5% based on the location of manufacturing.The manufacturing units situated close to the port have much less percentage versus these set ups that are farther inland.
Also, there is confusion in how the subsidy will be implemented, says Ravish Kamath, CEO of Big Bags International and previous Chairman PLEXCONCIL. As of now the RoDTEP technique does not enable the exporters to apply for the export advantage if they have availed duty no cost inputs against sophisticated import licences (the advantage for import of duty no cost material).
He explains, when an exporter uploads the shipping bill in the technique to avail the RoDTEP advantage, there is a column that asks if they have taken an ‘advanced import licence’ for import of raw material. If an exporter replies in affirmative, then they can’t avail it.
On an typical, an exporter in a year ends up with a profit of 5-8 per cent pre-tax. So, if the subsidy of say 4 per cent is withdrawn, it impacts just about half of their profit.
The government has been introducing quite a few measures to enhance exports from the nation but delaying such incentive schemes will place the nation on a back foot. “India has been talking about the stability of the policy regime to attract investment but that can’t happen unless it starts rolling out schemes that are complete with all its nuts and bolts in place so there is no element of uncertainty for the industry,” says specialists.