RoDTEP Scheme

RoDTEP stands for Remission of Duties and Taxes on Exported Products. It is an export incentive scheme launched in January 2021 to reimburse exporters for embedded taxes and levies paid on inputs used in the production of exported goods that are not otherwise refunded or remitted. RoDTEP replaced the earlier MEIS (Merchandise Exports from India Scheme).

What Is the RoDTEP Scheme?

When Indian exporters produce goods for export, they pay various state and central taxes, duties, and levies during the production process that are not currently covered by other export incentive schemes. These include taxes on electricity, fuel used in manufacturing, transportation levies, and mandi taxes.

RoDTEP reimburses a percentage of the Free on Board (FOB) value of exports as a credit, which exporters can use to pay their basic customs duty or transfer to other importers.

How RoDTEP Works

Exporters receive a credit as a percentage of the declared FOB value of their exports. This credit is:

– Issued as a transferable electronic scrip (not cash)
– Valid for use against basic customs duty payments
– Tradeable: exporters who do not need to import can sell the scrip to other importers in the market

The rates vary by product category, typically between 0.5% and 4.3% of FOB value.

RoDTEP vs MEIS

MEIS was found to be a subsidy by the World Trade Organization (WTO), which made India vulnerable to disputes from trading partners. RoDTEP is designed as a duty remission scheme (not a subsidy), making it WTO-compliant since it only refunds taxes already paid rather than providing additional financial incentives.

Key Sectors Covered

RoDTEP covers virtually all exported goods, including textiles, engineering goods, chemicals, agricultural products, and marine products. Services exports are not covered.

Practical Example

A textile exporter in Surat ships Rs 1 crore worth of fabric to Germany. The RoDTEP rate for the product is 1.2%. The exporter receives a credit of Rs 1.2 lakh (1.2% of Rs 1 crore FOB value). Since the exporter has limited import requirements, they sell the RoDTEP scrip in the secondary market to an importer who uses it to pay customs duty.

Key Takeaways

– RoDTEP reimburses exporters for embedded taxes not covered by other refund mechanisms
– Credits are issued as transferable electronic scrips, usable against customs duty
– It replaced MEIS and is designed to be WTO-compliant
– Rates vary by product category and are announced periodically by the government
– Promotes export competitiveness by reducing the residual tax burden on exported goods