Tax refund: Govt likely to raise allocation for key export scheme

The Pillai committee was tasked with the job of recommending charges for the Remission of Duties and Taxes on Exported Merchandise (RoDTEP) scheme.

The federal government will possible increase the allocation for its flagship export tax refund scheme from the budgetted Rs 13,000 crore for FY22, as the present outlay is predicted to fall manner in need of the quantity required to implement suggestions of the GK Pillai panel, an official supply informed FE.

Whereas the income division will take a ultimate name on the hike, sources stated complete allocation for FY22 could lastly soar to about Rs 25,000-30,000 crore.

The Pillai committee was tasked with the job of recommending charges for the Remission of Duties and Taxes on Exported Merchandise (RoDTEP) scheme. It’s purported to reimburse numerous embedded levies (not subsumed by the GST) paid on inputs consumed in exports. The options are being vetted by each the income and commerce departments. The RoDTEP charges are anticipated to be introduced in two weeks.

Nonetheless, the RoDTEP outlay is predicted to be a lot decrease than that for the Merchandise Exports from India Scheme (MEIS), which was changed by this scheme. The federal government has authorized Rs 39,097 crore for MEIS for FY20. After all, each the schemes should not strictly comparable. Whereas RoDTEP is an export levy refund scheme, MEIS was sometimes an incentive programme.

In March, Pillai, who was previously commerce secretary, had informed FE that “low funds outlay” was unlikely to be a constraint for significant implementation of the scheme. “The finance minister has already indicated that sufficient funds can be made obtainable…,” he had added.

Since exporters themselves haven’t any fool-proof information and even full information of all taxes embedded within the export merchandise, the committee has had a tough activity of figuring out the RoDTEP charges for as many as 8,000 tariff traces. The train has been achieved in a fashion as complete as potential in step with precept that taxes should not meant to be exported, Pillai had stated, however added the scheme may nonetheless take 2-3 years to stabilise.

Sections of the exporters’ group, nevertheless, apprehend that the federal government may cut back the RoDTEP charges or the protection of the scheme to restrict the associated fee to the exchequer. Any such transfer, they’ve warned, will delay a restoration in exports, which have began to surge from March after sustaining a roller-coaster journey within the wake of the Covid-19 outbreak. The federal government, they stated, ought to hold the RoDTEP outgo open-ended and never curtail the charges to restrict refunds to a sure annual budgetary outlay, if the concept is to maintain exports actually zero-rated in sync with international greatest practices.

The RoDTEP changed the “WTO-incompatible” MEIS from January 2021 however the refund charges are but to be declared. Below MEIS, most exporters had been getting scrips amounting to 2-5% of the freight-on-board worth of the cargo.

Merchandise exports surged a document 196% year-on-year in April, pushed primarily by a beneficial base. Nonetheless, even in absolute time period, exports in April stood at $30.6 billion, up nearly 18% from the identical month in 2019 (earlier than the pandemic struck), primarily on the again of improved order movement.

The federal government has now set an formidable goal of $400 billion for FY22, towards $291 billion final fiscal. For this to be achieved, the federal government ought to attempt to deal with the liquidity woes of exporters, who’ve been awaiting the discharge of tens of 1000’s of crores underneath the MEIS, exporters have stated.

For its half, the federal government, confronted with a useful resource crunch and the pressing requirement of boosting healthcare spending to combat Covid-19, has already began processing the MEIS advantages, a senior official lately stated.