Context: Recently US imposed CVD on Indian file folders, rejecting arguments from the Indian government regarding the WTO compliance of RODTEP. Several months earlier, the EU similarly concluded that certain graphite electrode systems from India were subsidized through RODTEP, leading to the imposition of countervailing duties.
Key features of RoDTEP scheme:
- The scheme provides refund of duties and taxes which are levied at central, state and local level and are not refunded under any other mechanism. They include:
- Central and State Excise Duty on fuel for transportation of export goods (petrol, diesel, CNG, PNG, etc.)
- Coal cess or duty levied by States on electricity consumed for manufacturing of export goods
- Mandi tax levied by APMCs
- Toll tax and stamp duties on import-export documentation
- Value added tax (VAT) wherever applicable
- Refunds under the scheme would be issued in the form of transferrable e-scrips which could be used for paying Basic Customs Duty on import of goods or may be transferred electronically to other party. The benefit will not be in the form of direct credit to the bank account.
When the RoDTEP scheme was introduced, sectors like pharmaceuticals, chemicals and iron & steel were excluded from the scheme due to fiscal constraints as well as on the grounds that their exports were doing well even without such benefits.
However, with India’s exports momentum hit by waning global demand, government decided to extend the scheme to these sectors as well.
Countervailing Duty(CVD): Countervailing duties or CVDs are tariffs on imported goods that are imposed to offset subsidies given by the exporting country's government. WTO’s agreement on subsidies and countervailing measures(SCM) allows the importing countries to impose CVD against such subsidies which injures the domestic industry of importing country.