India working on tax refund scheme after action by US, EU

An institutional mechanism is being worked on by the Indian government’s Finance Ministry and the Commerce Ministry industry for the verification of tax refunds provided to exporters under key duty remission scheme of the government to steer clear of countervailing duties imposed by major importing countries like US and EU.

Following an anti-subsidy investigation, the US and EU slapped countervailing duties on common alloy aluminum sheet, paper file folders and forged steel fluid last year. Tariffs on imported goods known as countervailing duties are levied in an effort to support homegrown industries by offsetting government subsidies provided by the exporting nation.

After the US demanded clarification on India’s process for confirming the rates given to exporters under the government’s Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme, a new verification technique became necessary. The Commerce Ministry determines the RoDTEP rates by considering the recommendations of a committee led by the former Home Secretary and Commerce GK Pillai. 

A government official said, “The US does not recognize the GK Pillai Committee. They are asking if India has an official verification system in place or not. So we need to have an official verification mechanism to ascertain or verify that the rate which the exporters are getting is actually within the level of duty which they are paying.”

“The commerce ministry is consulting with the Department of Revenue (DoR) to formulate a verification mechanism to validate the RoDTEP rates. There will be format and teams will be deployed at the field level. Details such as who will comprise the team and what will be the do’s and don’t is being worked out. There will be a joint system involving Directorate General of Trade Remedies (DGTR) as well,” the official further added.

Announced in January 2021, the RoDTEP system refunds embedded duties and taxes, including the mandi tax, electricity duty, and VAT on fuel used for transportation. It took the place of the Merchandise Exports from India Scheme (MEIS), which was incompatible with the WTO and had been challenged on multiple occasions by WTO members.

The RoDTEP program is funded by the government, and for FY 23–24, Rs 15,070 crore was set aside to increase exports of items including pharmaceuticals, chemicals, both organic and inorganic, and iron and steel commodities, among other things.