India developing verification mechanism for tax refund scheme after anti-subsidy action by US, EU

This comes after the US and EU last year imposed countervailing duties on paper file folders, common alloy aluminium sheet and forged steel fluid following an anti-subsidy investigation.

The RoDTEP scheme, announced in January 2021, refunds embedded duties and taxes, such as VAT on fuel used in transportation, mandi tax and duty on electricity. (Representational image)

The Finance Ministry and the Commerce and Industry Ministry are working on an institutional mechanism to verify tax refunds given to exporters under the government’s key duty remission scheme to steer clear of countervailing duties imposed by top importing countries such as the European Union and the US, a government official said.

This comes after the US and EU last year imposed countervailing duties (CVDs) on paper file folders, common alloy aluminium sheet and forged steel fluid following an anti-subsidy investigation. CVDs are tariffs on imported goods that are imposed to offset subsidies given by the exporting country’s government, aimed at protecting the domestic industry.

The need for a new verification method emerged after the US sought clarity on India’s method for verification of the rates provided to the exporters under the government’s Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme. The RoDTEP rates are decided by the commerce ministry based on the recommendation made by a committee headed by former Commerce and Home Secretary GK Pillai.

“The US does not recognize the GK Pillai Committee. They are asking if India has an official verification system in place or not. So we need to have an official verification mechanism to ascertain or verify that the rate which the exporters are getting is actually within the level of duty which they are paying,” the official quoted above said.

“The commerce ministry is consulting with the Department of Revenue (DoR) to formulate a verification mechanism to validate the RoDTEP rates. There will be format and teams will be deployed at the field level. Details such as who will comprise the team and what will be the do’s and don’t is being worked out. There will be a joint system involving Directorate General of Trade Remedies (DGTR) as well,” the official said.

The RoDTEP scheme, announced in January 2021, refunds embedded duties and taxes, such as VAT on fuel used in transportation, mandi tax and duty on electricity. It replaced the WTO-incompatible Merchandise Exports from India Scheme (MEIS) scheme, which had faced several challenges from WTO members.

The RoDTEP scheme operates under a budgetary framework and for FY 23-24, Rs 15,070 crore was allocated to boost exports of items such as pharmaceuticals, organic and inorganic chemicals and articles of iron and steel among other items.

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Europe and the US are among India’s largest trade partners. India’s exports to the US in FY24 stood at $77 billion and about $86 billion to Europe.

Ravi Dutta Mishra

Ravi Dutta Mishra is a Principal Correspondent with The Indian Express, specializing in economic policy and financial regulations. With over five years of experience in business journalism, he provides critical coverage of the frameworks that govern India's commercial landscape. Expertise & Focus Areas: Mishra’s reporting concentrates on the intersection of government policy and market operations. His core beats include: Trade & Commerce: Analysis of India's import-export trends, trade agreements, and commercial policies. Banking & Finance: Covering regulatory changes and policy decisions affecting the banking sector. Professional Experience: Prior to joining The Indian Express, Mishra built a robust portfolio working with some of India's leading financial news organizations. His background includes tenures at: Mint CNBC-TV18 This diverse experience across both print and broadcast media has equipped him with a holistic understanding of financial storytelling and news cycles. Find all stories by Ravi Dutta Mishra here ... Read More