The Government has proposed a new scheme called Rebate of State and Central Taxes and Levies (RoSCTL) which seeks to grant rebate of all embedded State and Central Tax/levies meant for exports and is aimed at replacing the current schemes of Merchandise Export of India Scheme (MEIS) and Services Export from India Scheme (SEIS) and other export incentives under SEZ. This scheme is currently available on export of garments and made-ups and is proposed to be extended to all exports in a phased manner.
This move is said to be consequent to the objection raised to the existing export incentive scheme before the World Trade Organisation by the international community. It is said that the current scheme will be compliant with the WTO norms.
The key features of this scheme are as follows: –
- ¨ The scheme is said to be implemented through a freely transferable scrip and the scrip rate for each product will be determined by the drawback committee;
- ¨ The benefits under the scheme would be in the nature of reimbursement of actual taxes incurred;
- ¨ The scheme provides for refund of unrebated central and state taxes and levies for inputs consumed on exports. These unrebatable taxes may include taxes levied on fuel, electricity duty, mandi tax etc.
- ¨ The major shift from the existing SEIS and MEIS scheme is that the existing schemes allows rebate as a percentage of the net export realisation without regard to the amount of the un-rebatable taxes borne. Thus, there would be a stark difference between the quantum of benefits under the current MEIS/SEIS benefits and the RoSCTL.
- ¨ Since rebate of GST is provided under the GST Act it may not be a part of the unrebated taxes that is granted as a benefit under the RoSCTL and may not be included in the un-rebated taxes to be claimed.
The MEIS and SEIS schemes have paid a crucial role in making India’s products competitive in the global market as the main intention of these schemes have been to offset the infrastructural inefficiencies and associated costs in India. It is also to be seen as to how the scheme would operate in conjunction with other incentives under the Foreign Trade Policy such as Advance Authorisation scheme, EPCG scheme etc. Similarly, there is no clarity as to whether customs duty will be treated as an unrebated tax when other benefits under the FTP have not been availed for claiming refund of customs duty.
While there are contrary opinions on how beneficial the new scheme would be, it becomes pertinent for businesses to evaluate the existing benefits vis-à-vis the new scheme and also increase the preparedness for liquidating the existing export benefits. It may also have to be evaluated if other export related incentives under the FTP will be more beneficial as against RoSCTL. Further, there may be changes which are required in accounting systems to record un-rebatable taxes other than GST for the purpose of this scheme such as excise & VAT on fuels, electricity duty etc.
(The writer is Manager, BDO India LLP)