Govt to defer new exports scheme

Source: Financial Express, Dec 24, 2019

The government has decided to defer the introduction of a Rs 50,000-crore exports programme — which was supposed to replace its flagship, but WTO-incompatible, Merchandise Exports From India Scheme (MEIS) — to the next fiscal from the proposed date of January 1, 2020, official and trade sources told FE.

Commerce minister Piyush Goyal is learnt to have acceded to exporters’ request to grant them more time to prepare for a transition from the MEIS to the new scheme called Remission of Duties and Taxes on Export Product (RoDTEP), given the operational challenges. Also, the next foreign trade policy, which will contain broad contours of the RoDTEP, will only be rolled out from April 2020, as the current one is in effect up to March.

The new scheme is supposed to reimburse all taxes and duties paid on inputs consumed in exports in sync with the WTO norms. Since potential revenue forgone in the current MEIS is around Rs 40,000 crore a year, RoDTEP is expected to cost the government an additional Rs 10,000 crore annually.

The decision to defer the RoDTEP roll-out comes at a time when the WTO’s appellate body remains paralysed. So India is spared the trouble of having to fast restructure some of its contentious trade schemes, as its November 19 appeal against a ruling of the WTO’s Disputes Settlement Body (DSB) in favour of the US against New Delhi’s export “subsidies” is still pending. The fate of all such appeals remains uncertain, as the US has refused to relent on its move to block the appointment of appellate members. According to the WTO rules, unless appeals are heard and settled, the findings of the DSB won’t be binding on the losing party.

Welcoming the latest plan to defer the roll-out of RoDTEP, Engineering Export Promotion Council vice-chairman Arun Garodia said the MEIS would remain in force till March 31, 2020, due to “operational difficulties being faced by exporters for the switchover”.

The roll-out of RoDTEP from January 2020 was one of a raft of measures — including easier priority-sector lending norms for exports, greater insurance cover under ECGC and lower premium for MSMEs to avail of such cover — announced by the government in September to help reverse a slide in exports.

Though the goods and services tax (GST) regime has subsumed a plethora of levies, some still exist (petroleum and electricity are still outside the GST ambit, while other levies like mandi tax, stamp duty, embedded central GST and compensation cess etc remain unrebated).

The MEIS, exporters have persistently complained, doesn’t offset all the taxes, so the new scheme will be beneficial to them when it’s implemented.

The proposed transition to the new scheme came after the US dragged India to the WTO, claiming that New Delhi had offered illegal export subsidies and “thousands of Indian companies are receiving benefits totalling over $7 billion annually from these programmes”.However, Indian officials have rejected such claims and repeatedly stated that the entire allocation or potential revenue forgone on account of various such schemes (including MEIS) doesn’t qualify as export subsidies, as in most cases, they are meant to only soften the blow of imposts that exporters have been forced to bear due to a complicated tax structure. Exports are supposed to be zero-rated, in sync with the best global practices, they have argued.