The continuation of the scheme for a proposed duration of 2 years would establish a stable policy regime crucial for long-term trade planning.
Prime Minister Narendra Modi, chaired a Union Cabinet meeting where approval was granted for the extension of the Scheme for Rebate of State and Central Taxes and Levies (RoSCTL) for the export of Apparel/Garments and Made-ups until March 31, 2026.
It was emphasised that the continuation of the scheme for a proposed duration of 2 years would establish a stable policy regime crucial for long-term trade planning, especially in the textiles sector where orders could be placed well in advance for extended delivery periods.
The extension of RoSCTL was seen as a measure to ensure predictability and stability in the policy regime. It aimed to alleviate the burden of taxes and levies, fostering a level playing field with the principle that “’oods are exported and not domestic taxes.’
Initially approved by the Union Cabinet until March 31, 2020, further approval was granted for the continuation of RoSCTL until March 31, 2024. The recent extension until March 31, 2026, was expected to enhance the export competitiveness of the garments and made-ups sectors, making these products cost-competitive and aligning with the principle of zero-rated export. For textile products not covered under RoSCTL (excluding Chapter 61, 62, and 63), eligibility was extended to avail benefits under RoDTEP along with other products.
The primary objective of the scheme was to compensate for State and Central Taxes and Levies, in addition to the Duty Drawback Scheme, on the export of apparel/garments and made-ups through rebates. The rationale behind this approach was based on an internationally acceptable principle that taxes and duties should not be exported, creating a level playing field in the international market for exports. Thus, not only indirect taxes on inputs were to be rebated or reimbursed, but also other un-refunded State and Central taxes and levies were eligible for rebates.
The Rebate of State Taxes and Levies included VAT on fuel used in transportation, captive power, farm sector, mandi tax, duty of electricity, stamp duty on export documents, and embedded SGST paid on inputs such as pesticides and fertilizers used in the production of raw cotton, purchases from unregistered dealers, coal used in the production of electricity, and inputs for the transport sector. The Rebate of Central Taxes and Levies comprised central excise duty on fuel used in transportation, embedded CGST paid on inputs such as pesticides, fertilizer, etc., used in the production of raw cotton, purchases from unregistered dealers, inputs for the transport sector, and embedded CGST and Compensation Cess on coal used in the production of electricity.
RoSCTL has been a significant policy measure, contributing to enhancing the competitiveness of Indian exports of apparel and made-ups, which are value-added and labour-intensive segments of the Textile Value Chain. The continuation of the scheme for an additional 2 years was anticipated to provide a stable policy regime essential for long-term trade planning, particularly in the textiles sector where orders could be placed well in advance for extended delivery periods.