Export tax refund scheme may be extended beyond September

The government is likely to extend the expanded exporter tariff relief program beyond the September deadline, taking pressure off the pharmaceutical, steel and chemical sectors, officials said.

The Scheme for Exemption from Duties and Taxes on Exported Products (RoDTEP) was extended to pharmaceuticals, chemicals and selected steel products in December last year.

The Department of Commerce had determined that the additional products would be eligible for a tax refund through September 30, 2023. The ministry wanted to assess whether it had sufficient budgetary spending to fund the tax break for the full fiscal year 2023-24.

According to officials, the government now believes that the budget allocation would be sufficient for the whole of 2023-24.

“Currently, monthly reimbursement entitlements under the RoDTEP program are approximately 1,200 crore. So the budgeted allocation of ₹15,069 crore for FY24 should be sufficient to continue to extend this benefit to the later included sectors,” a senior official told ET on condition of anonymity.

However, if the department decides to further expand the program to include the entire iron and steel segment, an additional Rs 1,000 crore will be needed for this fiscal year, the official said.

In 2022-23 the Government had disbursed £13,699m through the scheme.

The government will review the program before September 30 and announce its decision, the official said.

Launched on January 1, 2021, the system reimburses central, state and local levies incurred in the manufacture and export of products that are not covered by any other incentive scheme.

The move will help exporters of these commodities as they compete for orders amid weakening demand in key developed markets. Exports of chemicals and pharmaceuticals and selected steel products totaled US$61 billion through February last fiscal year, accounting for about 15% of total goods shipments, official data show.

The Foreign Trade Policy 2023, announced last week, heralded a timely tax break for exporters as it seeks to move away from any incentive-based regime. The RoDTEP scheme conforms to World Trade Organization (WTO) standards.

The expanded RoDTEP system includes 10,342 export products compared to 8,731 previously. The system is based on the globally accepted principle that exports can be exempted from taxes and levies can be reimbursed.

Experts see the enactment system as crucial in improving the country’s export competitiveness and reaching the goods export target of US$1 trillion by 2030 from US$447 billion in 2022-23.

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