New Delhi, Bangalore : After complaints from industry that the scheme is reducing their margins, the government is looking to overhaul an all-new tax exemption scheme for exporters eight months after its launch, two officials aware of the matter said. .
The Remission of State and Central Taxes and Levies (ROSCTL) scheme, launched in October, provides exemptions against taxes and levies already paid on inputs by exporters. The exemption is not given in the form of cash but in the form of tradable scrip, which can be sold by exporters to importers. Thereafter, importers can use these scrips to pay customs duty instead of paying in cash. However, exporters complain that these shares are trading at 20% discount, defeating the purpose of the scheme.
As of now, these scrips can be traded even before the export realization, with the obligation on the importers. The government feels that the shares are trading at a discount due to this risk factor, and plans to make them tradable only after the full export payment is received, which will eliminate the risk factor. There is also a possibility of increasing the eligibility of these shares from 12 months to 24 months.
“We are aware of the issues being faced by the exporters under the RoSCTL scheme and the fact that they are not able to fully benefit from the scheme. We are analyzing the causes and discussing options to deal with them. Suitable changes will be made in the existing scheme after consultation and review, a government official said on condition of anonymity.
Another official said one option is to allow transfer of shares only after export receipts, to address the issue of liability on importers who buy these shares.
“If the trade takes place only after receipt of exports, the eligibility period of the scrip can be increased from 12 months to 24 months. In this way, the expenditure of the government will also be spread over two years.”
The Apparel Export Promotion Council (AEPC) said in a statement that the scheme in its present form is reducing the export margins of the domestic textile industry. Garment units say they are incurring losses Discounts on tradable shares increased from 3% to about 20%, benefiting importers taking undue advantage at the expense of exporters.
Representatives of the Federation of Indian Export Organizations, the apex body of exporters, met Finance Minister Nirmala Sitharaman a few weeks ago to request changes in the RoSCTL scheme.
FIEO Director General and CEO Ajay Sahai said that the government is looking into the issue and it is likely to be resolved soon. “It is logical to allow trading after export receipts. In this way, the government will also not have to monitor the foreign exchange. The scrips should not be allowed before receipt,” he said. Export payments are generally received in two to three months.
In a letter to Textiles Secretary UP Singh, AEPC Chairman Naren Goenka said the main objective of the scheme was to refund central and state taxes and levies embedded in the value chain to exporters. However, the implementation of the scheme has caused “undue hardship to the exporters” in the matter of distribution of discount in the form of scrips against cash refunds.
The AEPC said that since state and central levies are collected in cash, the reimbursement or exemption on such levies should also be made in cash. The letter also stated that the shares are being traded at a discount of 15-20% due to which the exporters are not getting the desired price under the scheme. “Because of this, the importers are availing all the benefits of the scheme at the expense of the exporters,” the letter seen by Mint said. Goenka recommended that the provision in the scheme which allows the importer or buyer to recover or excess realized by a non-exporter should be abolished.
“The said provision should be removed for already existing scrubs. It has been suggested that a mechanism may be devised to support the already issued scrubs on the basis of exporter presenting proof of realization of export proceeds. To be.”
Questions emailed to the Department of Commerce remained unanswered as of press time.