Maximizing Export Incentives under GST, FTP and Customs Law: A Comprehensive Guide

Introduction

For Indian exporters, maximizing export incentives is crucial for maintaining competitiveness in global markets. Under the Goods and Services Tax (GST) and Customs law, various refund schemes enable businesses to recover duties, taxes, and GST paid on inputs and exports.

This comprehensive guide explores key refund mechanisms, including Remission of Duties and Taxes on Exported Products (RoDTEP), Duty Drawback, and GST Refunds on Exports, and provides insights on how businesses can effectively claim these benefits.

1. Remission of Duties and Taxes on Exported Products (RoDTEP)

Background

Introduced in January 2021, the RoDTEP scheme replaced the Merchandise Exports from India Scheme (MEIS) after a World Trade Organization (WTO) ruling deemed MEIS non-compliant with international trade norms.

Scope & Benefits

• Applicable to all export goods, except textiles covered under RoSCTL.
• Covers exports by Advance Authorization holders, Export-Oriented Units (EOUs), and SEZ units.
• Refunds unutilized duties and taxes like VAT on fuel, local taxes, and electricity duty.
• Scrips are issued at predefined rates based on the Free on Board (FOB) value.

Exclusions

• Products subject to export duties or minimum price restrictions.
• Deemed exports and supplies from Domestic Tariff Areas (DTA) to SEZs/FTWZs.

Claiming Process

• Declare RoDTEP claim in the Shipping Bill or Bill of Export.
• Scrips granted can be used for Basic Customs Duty (BCD) payments.
• Unused scrips can be sold in the open market.

Key Considerations

• Annual RoDTEP Return: Exporters claiming ₹1 crore+ in scrips annually must file a return by March 31 (grace period till June 30 with late fees).
• Foreign Exchange Realization: Refund must be repaid with interest if forex earnings are not realized within 9 months.
• Scrip Trading Risks: Due diligence is crucial before purchasing RoDTEP scrips from third parties.

2. Duty Drawback Scheme

Purpose

The Duty Drawback scheme refunds customs duties paid on imported goods used in manufacturing export products.

Types of Duty Drawback

1. Section 74 of the Customs Act

• For re-exported imported goods in original condition.
• Refund includes Basic Customs Duty (BCD), Customs Cess, and IGST.
• Up to 98% duty refund based on the time lag between import and re-export.

Eligibility & Process

• Re-export of imported goods must occur within two years.
• Claims must be filed within three months of export.
• Documents Required:
  • Import invoice, duty payment proof.
  • Export invoice, packing list, bill of lading.

2. Section 75 of the Customs Act

• Applicable to imported inputs used in manufacturing export goods.
• Refund covers Basic Customs Duty and Customs Cess.

Drawback Rates

1. All Industry Rate (AIR): Fixed refund percentage based on HSN classification.

2. Brand Rate: For cases where AIR is unavailable, the exporter applies for a custom-set rate.

3. Special Brand Rate: Used when AIR refund is <80% of actual duty paid.

Key Considerations

• Non-Eligibility:EOUs, SEZs, or negative value-addition cases.
• Forex Realization Clause: Refund must be repaid if forex earnings are not realized within 9 months.

3. GST Refund on Exports

Two GST Refund Options

1. Export under Bond/LUT (Without GST Payment): Claim refund of accumulated Input Tax Credit (ITC).

2. Export with Payment of GST: Claim refund of GST paid on exports.

Option 1: Export Under Bond/LUT

• Refund Formula: Net ITC × (Export Turnover / Total Turnover).
• Capital Goods ITC is excluded.
• Turnover Calculation:
  • For Services: Based on forex realization.
  • For Goods: Capped at 1.5× local sale value.

Option 2: Export With GST Payment

• GST paid on exports can be offset using ITC.
• 100% GST refund on exports is claimable.
• Restrictions:
  • Not applicable for concessional 0.1% GST rate purchases.
  • Certain items like pan masala and tobacco are excluded.

Refund Claim Process

For Exported Goods

1. File Shipping Bill or Bill of Export with Customs.

2. File GSTR-1 and GSTR-3B.

3. Ensure Customs data matches GST returns for smooth processing.

For Exported Services

1. Refund can be claimed after forex realization.

2. Application via RFD-01.

Processing Timeline

• Acknowledgment within 7 days (deficiency memo if required).
• 90% provisional refund within 7 days.
• Full refund within 60 days (interest applicable for delays).

Conclusion

To maximize export incentives under GST, businesses must ensure compliance with eligibility conditions, documentation requirements, and timelines. Choosing the right refund scheme—whether RoDTEP, Duty Drawback, or GST Refund—can significantly improve cash flow and export profitability.