The Rebate of State and Central Taxes and Levies (RoSCTL) scheme, which at present is available on export of garments and made-ups, will now be extended to all exports in a phased manner. The new scheme will replace the extant Merchandise Exports from India Scheme (MEIS), which was challenged by the US last year in WTO.
The new scheme will allow reimbursement of duties on export inputs and indirect taxes through freely transferrable scrips. Scrips are incentives that can be used to pay duties. “We wanted RoSCTL to be the template for all schemes,” said an official in the know of the details.
In March, the Cabinet, approved the RoSCTL scheme to rebate all embedded state and central taxes for apparel and made-ups, through an IT-driven scrip system, and replace the existing Rebate of State Levies (RoSL) scheme that provided rebate of only certain state taxes.
The RoSCTL rebates the embedded taxes include central excise duty on fuel used in transportation, embedded CGST paid on inputs, purchases from unregistered dealers, inputs for transport sector and embedded CGST and compensation cess on coal used in the production of electricity. While the MEIS will be withdrawn in phases, the scrips’ rate would be fixed three months after the Cabinet’s approval.
As per the official, the revenue foregone would be monitored by the department of revenue, and the commerce and industry ministry. TIMING CRUCIAL The new scheme is crucial as the US has challenged India’s export schemes under the WTO’s Agreement on Subsidies and Countervailing Measures.
Pegging the quantum of subsidies at $7 billion, the US has dragged India to WTO for violating commitments under the Agreement on Subsidies and Countervailing Measures (ASCM) in five of its most used export promotion schemes — the export-oriented units scheme and sector-specific schemes including electronics hardware technology parks scheme, MEIS, export promotion capital goods scheme, special economic zones and duty-free import authorisation scheme.
The agreement envisages the eventual phasing out of export subsidies and provides eight years for graduating countries (least developed and developing), which cross the $1,000 mark at 1990 exchange rate to phase out export subsidies. India had crossed this threshold in 2015 and it became known when the WTO Secretariat produced its calculations in 2017.
Under existing WTO rules, a country can no longer offer export subsidies if its per capita GNI has crossed $1,000 for three years in a row. In 2017, the WTO notified that India’s GNI was $1,051 in 2013, $1,100 in 2014 and $1,178 in 2015.