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RoDTEP scheme: Government’s RoDTEP scheme could face legal challenges, warn tax experts

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MUMBAI: The Remission of Duties or Taxes on Export Products (RoDTEP) scheme, which is being put in place following a dispute with the US at the WTO, is set to face issues as several companies have reached out to the government for clarity around the tax rates and exemptions.

RoDTEP was introduced in India after other schemes— such as advance authorisation—were challenged by the US at the World Trade Organisation (WTO).

Interestingly, even the advance authorisation scheme is under litigation after goods and services tax (GST) was introduced and the tax department refused to extend benefits to exporters.

Many companies and exporters had sought that the government extend some of the existing schemes till there is more clarity around RoDTEP.

The government has now extended schemes such as Merchandise Export from India Scheme (MEIS) by about three months this year.

Tax experts said many exporters are already facing a lot of trouble and with some of the existing schemes already under litigation, even RoDTEP could present legal challenges for the government.

“Benefits under advance authorisation have been subject to judicial review on various occasions after the introduction of GST and any restriction under the new RoDTEP scheme will have to cross the barrier of constitutional validity as well,” said Abhishek A Rastogi, partner at Khaitan.

Under the advance authorisation scheme, which was prevalent under the erstwhile tax regime, exporters could get an authorisation to import raw materials used for manufacturing exported goods without payment of taxes on imports based on past exports.

Under the GST framework, however, the government’s stand was that exemptions in any part of the value chain would distort the system and, hence, shouldn’t be allowed.

The government had amended the foreign trade policy to that effect.

Tax experts pointed out that in many cases, exporters continued to do business as they were doing prior to GST and the amendment, resulting in the notices.

Many exporters want the government to continue allowing them the benefits they have been getting all along. “Benefits under advance authorisation scheme are in line with the global framework and, hence, appropriate provisions should be incorporated to allow this benefit, which will substantially help the importers to address working capital issues,” said Rastogi.

ET had earlier reported that the indirect tax department has also started questioning several importers on certain transactions and is looking to slap an additional duty on that.

Importers say the tax department has started levying this even on raw materials imported by them which are eventually used to manufacture goods that are exported. India tends to levy additional duty on certain imports. This is mainly done to protect domestic manufacturers, say industry experts.



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