The government has decided to extend two key tax exemption schemes aimed at exports: Reimbursement of Duties and Taxes on Exported Products (RoDTEP) and Refund of State and Central Taxes and Fees (RoSCTL). The extension is for three months, and both schemes will be valid until December 31.
These schemes were originally set to expire on Wednesday. Under these programs, the government compensates exporters for non-refundable central, state, and local fees paid when purchasing raw materials. RoSCTL applies specifically to textile exports, while RoDTEP covers all other types of products.
The principle underlying these schemes is that taxes should not be exported. The goal of these measures is to ensure a zero rate for exports, which promotes the competitiveness of goods.
In a press release, the government stated that this extension will ensure policy continuity and predictability for exporters while supporting the competitiveness of the clothing and finished goods sector based on labor intensity and added value amid an increasingly tough global trade environment.
Expert Opinion on the Need for a Longer Extension
Nevertheless, experts believe that these schemes deserve a longer period of validity. Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI) analytical center in Delhi, noted that such short extensions negate the main purpose of the schemes. He explained that exporters complete orders months before shipment and cannot factor in tax refunds into pricing without knowing the program's continued existence.
Srivastava clarified that RoDTEP is not a subsidy or an export incentive; it is a refund of taxes already paid during the production process, including state fuel taxes, electricity charges, and mandatory fees that would otherwise not be refundable.
These two flagship tax exemption schemes have been extended multiple times previously, often simultaneously. The last extension of both schemes was granted by the government in March for six months to support exporters amidst the conflict in the Middle East.
The expert insists that the government should announce a five-year extension to give exporters confidence, help them form competitive prices for orders, and avoid losing contracts due to policy uncertainty. He emphasized that such stability is particularly important in the current difficult export climate, where exporters need any cost advantages to sustain their business.
The Ministry of Trade had also requested a five-year extension for these schemes. The final decision on this matter remains with the Ministry of Finance.
