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India Developing Mechanism to Verify Tax Refunds for Exporters


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The Finance Ministry and the Commerce and Industry Ministry of India are collaborating to establish an institutional mechanism for verifying tax refunds granted to exporters. This initiative aims to prevent countervailing duties imposed by major importing countries like the European Union (EU) and the United States (US). A government official shared this information.

Countervailing Duties Imposed by the US and EU

The US and EU had previously imposed countervailing duties (CVDs) on certain items, including paper file folders, common alloy aluminium sheet, and forged steel fluid. These duties were imposed as a result of an anti-subsidy investigation. CVDs are tariffs imposed on imported goods to counterbalance subsidies provided by the exporting country’s government, thereby safeguarding the domestic industry.

Need for a New Verification Method

The need for a new verification mechanism arose when the US sought clarification regarding India’s method of verifying the rates offered to exporters under the government’s Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme. The RoDTEP rates are determined by the commerce ministry based on the recommendations of a committee led by former Commerce and Home Secretary GK Pillai.

The US expressed skepticism about recognizing the GK Pillai Committee and inquired whether India had an official verification system in place. Therefore, an official verification mechanism is required to ensure that the rates received by exporters align with the actual duty levels they are paying.

Formulating a Verification Mechanism

The Ministry of Commerce is currently collaborating with the Department of Revenue (DoR) to develop a verification mechanism that can validate the RoDTEP rates. This mechanism will include a specified format, and teams will be deployed at the field level for verification purposes. The specifics, such as the composition of the teams and the guidelines to be followed, are currently being determined. The Directorate General of Trade Remedies (DGTR) will also be involved in this joint system.

Overview of the RoDTEP Scheme

The Remission of Duties and Taxes on Exported Products (RoDTEP) scheme was introduced in January 2021. It provides refunds for embedded duties and taxes, such as value-added tax (VAT) on fuel used in transportation, mandi tax, and duty on electricity. The RoDTEP scheme replaced the Merchandise Exports from India Scheme (MEIS), which was incompatible with the World Trade Organization (WTO) regulations and faced challenges from WTO members.

Allocations for the RoDTEP Scheme and Trade Partners

The RoDTEP scheme operates within a budgetary framework, and for the fiscal year 2023-2024, an allocation of Rs 15,070 crore was made to boost exports of various items, including pharmaceuticals, organic and inorganic chemicals, and articles of iron and steel.

It is worth noting that the EU and the US are among India’s largest trade partners. In the fiscal year 2023-2024, India’s exports to the US amounted to $77 billion, while exports to Europe reached approximately $86 billion.

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