Common mistakes while filing RoDTEP Annual Return

If the RoDTEP claim of an exporter exceeds Rs. 1 crore, he is required to file the ARR within 31st March of the subsequent financial year. For FY 2023-24, the due date to file this return is extended till 30 June 2025^[i]. Since this is a new return and involves estimations and assumptions, the exporters and consultants are still familiarizing themselves with the process and computation methods. This increases the chances of inadvertent errors, and wrong filings which may lead to a situation of refund or surrender of RoDTEP claims. This article summarizes few common mistakes the exporters could make while making the estimates and assumptions required for filing the ARR.

FEW COMMON MISTAKES WHILE FILING RODTEP RETURNS

Allocation of duties and taxes:

1. Not all duties and taxes (D&T) that are part of cost of production (neither refunded nor eligible as credit) can be considered for the ARR.

These D&T shall be allocated into the following three categories, relating to:

(a) Other than exports,

(b) Exports on which RoDTEP benefit is not claimed, and/or

(c) Exports on which RoDTEP benefit is claimed.

Only Category-C shall be considered for the purpose of ARR.

Number of RoDTEP Returns to be filed:

1. It is not one ARR for one entity/ one IEC. Once the RoDTEP claim exceeds Rs. 1 crore per financial year, filing of the ARR is mandatory. The number of RoDTEP returns to be filed is dependent on the amount of RoDTEP claims per HSN (8-digit^[ii]) and whether the entity has DTA and AA/EOU/SEZ^[iii] units that have claimed the RoDTEP.

Calculation of excise duty and VAT on fuel and related disclosures

1. Excise duty on fuel is leviable as a fixed amount per litre. Therefore, while calculating the excise duty cost embedded in the product, per litre value should be adopted. Also consider Agriculture Infrastructure and Development Cess and Road and Infrastructure Cess, while calculating duties or taxes levied on petrol or diesel.
2. VAT on fuel shall be calculated on percentage basis. Since VAT rates vary from State to State, it can be difficult to identify where each truck refueled its tank. In such case, if feasible, use the VAT rate applicable in the State where the supplier is located. If this is not possible, then use the VAT rate of that State in which the exporter is located.
3. Once the VAT rate is determined, it should be computed on cum-tax basis and not to be applied on the diesel cost. Applying VAT rate on the diesel cost would inflate the taxes paid on fuel used in transportation. Let us understand this with an example. Assume diesel price is Rs. 100/litre, excise duty on the same is Rs. 17/litre, and VAT rate is 20%. Since, base price of diesel without taxes is not known assuming the same as ‘x’. In such case, VAT is calculated as follows:

1

x +17 +(x+17) *20% = 100

2

x+ 17+ 0.2x+ 3.4 = 100

3

1.2x = 79.6

4

x = 66.33 (base price)

5

VAT at 20% on base price and excise duty will be: (66.33 + 17) * 20% = 16.67/litre

If the exporter applies, VAT on Rs. 100 (diesel cost), then the VAT would be Rs. 20. Therefore, this miscalculation increases the duty by Rs. 3.33/litre.

1. If the fuel is purchased for own trucks which are used in transporting goods, it can be considered in RoDTEP return but needs to be reported in Table 10 rather than Table 14.
2. In case the exporter purchases any fuel, it is required to determine the reason for purchasing that fuel. If the fuel is used for motor vehicles of the company, it shall not be considered for the purpose of RoDTEP return. If the fuel is used for captive power in manufacturing, it shall be considered appropriately.

Calculation of electricity duty

1. Electricity duty should be calculated only for units involved in production or warehousing of goods. Electricity consumption related to office premises shall not be considered.

Calculation of GST embedded in purchases from unregistered dealers

1. When considering GST embedded in purchases from unregistered dealers, only goods directly used in manufacturing should be included, for the reason that services generally do not come with embedded tax costs i.e. the unregistered person providing the services would generally not incur GST cost on its procurements.
2. Also, all unregistered purchases of goods shall not be considered. Only those goods which are directly related to production shall be considered. For example, raw material purchased from unregistered dealers will form part of this. However, purchase of stationery, water cans, office furniture etc., shall not be considered.

Ineligible GST

1. Ineligible Input Tax Credit may be included only if the related purchases are directly linked to the exported products. For example, ineligible ITC on construction or repair of factory buildings shall not be taken into account because they are directly not related to export product.

It should be noted that while the figures reported in the return are not required to be accurate, nevertheless they should be based on a reasonable and justifiable method of calculation. The backup workings for the ARR filed should be kept with the exporter to ensure the figures disclosed in the ARR can be justified when asked for by the authorities.

During scrutiny, if the concerned authority finds that the exporter has not provided a valid basis for the reported values or is not satisfied with the mechanism adopted, the authority may direct the exporter to refund or surrender any excess RoDTEP claim^[iv]. Therefore, the exporter should exercise caution while preparing the return. The backup workings should justify the duties and taxes borne on the exported product during the scrutiny.

[i]Public Notice No. 51/2024-25 dated 19.03.2025

[ii]Paragraph 3.1 of Help manual & FAQs issued by DGFT on ARR

[iii]Paragraph 2 of Help manual & FAQs issued by DGFT on ARR (https://content.dgft.gov.in/Website/RoDTEP_User_Guide.pdf)

[iv]Paragraph 6 of Public Notice No. 27 /2024-25 dated 23.10.2024

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The views expressed are strictly personal and cannot be regarded as an opinion. For any queries or feedback please write to [email protected] or [email protected]