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Countervailing Duties Imposed on Indian Products

Context:

The United States and the European Union have levied countervailing duties (CVDs) on four Indian products in response to the introduction of the Remission of Duties and Taxes on Export Products (RoDTEP) scheme for outbound shipments in January 2021. The U.S. concluded countervailing investigations, resulting in CVD determinations for items such as paper file folders, common alloy aluminum sheet, and forged steel fluid end blocks. Simultaneously, the European Commission investigated specific graphite electrode systems, leading to countervailing duties.

Relevance:

GS III: Indian Economy

Dimensions of the Article:

  1. Countervailing Duty (CVD) Explained
  2. Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme

Countervailing Duty (CVD) Explained:

  • Countervailing Duty (CVD):
    • Tariffs imposed on imported goods to offset subsidies provided to producers in the exporting country.
  • Leveling the Playing Field:
    • Intended to equalize competition between domestic and foreign producers of the same product, addressing the advantage foreign producers gain from government subsidies.
WTO’s Role and SCM Agreement:
  • WTO Permission:
    • The World Trade Organization (WTO) permits member countries to impose countervailing duties.
  • SCM Agreement:
    • The WTO’s Agreement on Subsidies and Countervailing Measures (SCM Agreement) regulates subsidies and countervailing measures against injury from subsidized imports.
Multilateral Regulations:
  • Subsidy Rules:
    • Multilateral disciplines establish rules on subsidy provisions, enforced through the WTO dispute settlement mechanism.
  • Unilateral Imposition:
    • Countervailing duties are unilaterally imposed by a member country after investigation and meeting criteria under the SCM Agreement.
Defining Subsidies:
  • SCM Agreement Definition:
    • “Subsidy” is defined as a financial contribution by a government conferring a benefit.
  • Specificity Criteria:
    • Specificity determines whether a subsidy applies to a particular enterprise, industry, or region.
Subsidy Categories:
  • Prohibited and Actionable Subsidies:
    • Subsidies are categorized as prohibited (e.g., export subsidies, local content subsidies) and actionable (subject to challenge or countervailing measures).
  • Potential Harm:
    • Actionable subsidies can cause injury, prejudice, or nullification of benefits.
Transition Rules:
  • Exemptions and Phasing Out:
    • Transition rules provide exemptions or extended periods for developing countries and those transitioning to market economies to phase out certain subsidies.

Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme

  • The RoDTEP Scheme allows exporters to receive refunds on taxes and duties that are not exempted or refunded under any other scheme.
  • Under the scheme, exporters receive refunds on the embedded taxes and duties previously non-recoverable.
  • The chief aim of the scheme is to boost the export of goods that were poor in volume.
  • The scheme basically replaces the Merchandise Export from India Scheme (MEIS).
  • The scheme provides for rebates of Central, State and Local duties/taxes/ levies which are not refunded under any other duty remission schemes.
  • The RoDTEP scheme can be said to be a combination of the MEIS and the Rebate of State and Central Taxes and Levies (RoSCTL).
  • Under this scheme, refund would be claimed as a percentage of the Freight On Board (FOB) value of exports. 
Features of RoDTEP Scheme
  • It covers duties and taxes levied at the central, state and local levels that are not reimbursed under any other mechanism. Items that were under the MEIS and the RoSCTL are shifted to the RoDTEP.
  • Refunds will be issued to exporters as transferable duty credit/electronic scrips and maintained in an electronic ledger. This is keeping in line with the Digital India mission. This can be used to pay basic customs duty on imported goods. The credits can also be transferred to other importers.
  • Faster clearance through a digital platform will be facilitated through a monitoring & audit mechanism, with an IT-based risk management system that would physically verify the exporters’ records.
  • The scheme is applicable across all sectors.

RoDTEP Benefits

  • Being WTO-compliant, the RoDTEP scheme can make available from the government benefits to the exporters seamlessly.
  • The scheme is more exhaustive in that certain taxes that were not covered under the previous scheme are also included in the list, for example, education cess, state taxes on oil, power and water.
  • It will add more competitiveness in the foreign markets, with assured duty benefits by the Indian Government.
  • It will also help exporters meet international standards and promote business growth.
  • Also under RoDTEP, tax assessment is set to become fully automatic for exporters, hence, Businesses will get access to their refunds for GST via an automatic refund-route.

-Source: The Hindu


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