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Modi govt just expanded scheme to give exporters tax refunds. Why steel industry isn’t cheering

RoDTEP gives refunds to exporters on embedded taxes & duties. But, Indian Steel Association says govt's move doesn't cover sector, which remains weighed down by 4-12% of levies.

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New Delhi: The central government has expanded the list of items that fall under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme to include chemicals, pharmaceuticals and iron and steel products.

The move, however, has left Indian steel exporters unsatisfied. 

According to a government statement released Wednesday, the expanded list of eligible export items will increase from 8,731 to 10,342, and this will come into effect on 15 December.

Under RoDTEP, certain exporters receive refunds on embedded taxes and duties such as mandi tax, VAT, coal cess, central excise duty, etc. These reimbursements are issued in the form of transferable electronic scrips (e-scrips), which are monitored by the Central Board of Indirect Taxes & Customs (CBIC) through an electronic ledger.

Since e-scrips are transferable, exporters can use them to pay basic customs duty on import of goods or transfer electronically to another party.

Federation of Indian Export Organizations (FIEO) director general and chief executive officer Ajay Sahai welcomed the move, saying it would bolster India’s exports in the face of “global headwinds”. 

FIEO is the apex trade promotion organisation under the Ministry of Commerce & Industry. 

Meanwhile, Alok Sahay, secretary general of New Delhi-based Indian Steel Association (ISA) an industry body representing major public and private sector steel enterprises said the recent expansion of the scheme is not applicable to steel exporters. 

The RoDTEP scheme came into effect last January to replace the Merchandise Exports from India Scheme (MEIS), which courted controversy in the World Trade Organisation (WTO) for being inconsistent with the international trade norms. Boosting labour-intensive sectors like textiles and leather was a priority when the RoDTEP was first rolled out.  

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‘Won’t help steel exporters’

Last year, Indian merchandise exports crossed the $400 billion-mark for the first time in the country’s history. In contrast, exporters are hit this year by global recessionary trends in developed markets as well as supply chain disruptions brought on by the Ukraine war.

“This is a welcome and extremely timely step which will provide zero rating of chemicals, pharma and of iron and steel products. It will impart further competitiveness to their exports as our exports are facing headwinds due to global factors,” Sahai said. 

But, domestic steel players appear dissatisfied with the scheme.

Sahay, the ISA secretary general, said the scheme is not applicable to products under Chapter 72 of the Indian Trade Clarification (ITC) based on Harmonized System (HS) schedule of items, which refers to steel exported by domestic players. 

The ISA represents around 60 per cent of crude steel production in India, according to its website

“Steel exporters have not been included in the expansion of the RoDTEP scheme. Steel is covered under Chapter 72, and the new expansion covers Chapter 73, which mainly comprises engineering goods. Therefore, this is not helping steel exporters as has been communicated by some media,” Sahay said.

The recent expansion of the scheme applies only to Chapters 28, 29, 30 and 73. 

Steel exporters continue to be weighed down by 4-12 per cent of levies and duties not subsumed by GST and high freight costs, making them less competitive than South Korean and Chinese steel players, Sahay added.

(Edited by Anumeha Saxena)

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