Govt to overhaul tax refund schemes for exporters, sets up two panels
The move follows a recommendation by the expenditure finance committee late last month for better targeting and optimal use of funds
New Delhi: The government is looking to overhaul two flagship schemes that refund domestic taxes and levies paid by exporters, seeking to make payouts more targeted and funds better spent at a time when global uncertainties are weighing on Indian shipments. Two panels have been set up to review and reframe these schemes that help Indian goods stay competitive overseas, three people close to the development told Mint.
The move follows a recommendation by the expenditure finance committee (EFC) late last month for better targeting and optimal use of funds, after the commerce and textiles ministries sought a total of nearly ₹2 trillion for the next five years for the Remission of Duties and Taxes on Exported Products (RoDTEP) and Rebate of State and Central Taxes and Levies (RoSCTL) schemes. The schemes were rolled out with the objective of keeping exports zero-rated, in sync with global best practices, where exports are not to carry domestic taxes.
The refunds cover embedded central and state levies outside the goods and services tax (GST) regime—including those on fuel and electricity, stamp duty and mandi tax—which are paid on inputs consumed in the production of exported goods. While the RoDTEP scheme covers a range of sectors, including exporters in special economic zones and bonded warehouses, RoSCTL is largely focused on garments. The panel on RoDTEP has been set up under Director General of Foreign Trade Lav Agarwal, while the RoSCTL one is headed by additional secretary in the textiles ministry Arti Kanwar, with both having senior government officials and industry executives as members.
Recommendations of both the panels are likely to be discussed during the upcoming Union budget deliberations and could form the basis of the revamped frameworks for the two critical programmes. The proposed overhaul of these marquee schemes comes when exporters, grappling with the West Asia and Ukraine wars and other external headwinds, are seeking timely and adequate refunds of taxes and levies paid on inputs used in exported products.
Currently, a committee set up by the revenue department recommends refund rates under the schemes after examining official and industry data on various levies and taxes paid by exporters. It also assesses representations by export bodies and consults government officials and other stakeholders. Following the EFC’s recommendation for better targeting, this system may be revamped to move towards a more precise, evidence-based mechanism to reflect the embedded taxes and duties actually paid.
Mint had last month reported that the commerce ministry has sought over ₹1.3 trillion under RoDTEP for the next five years, up 70% from the previous five years, while the textiles ministry wanted the RoSCTL outlay to go up by a half to about ₹65,000 crore. The EFC, an interministerial body under the expenditure secretary, evaluates major central sector schemes and projects before they are placed before the Cabinet for clearance.
Eligible exporters currently receive refunds ranging from 0.3% to about 4.7% of the free-on-board value of consignments under RoDTEP, and 1.7-8.2% under RoSCTL, depending on the product. The commerce and textile ministries have maintained that the schemes are compliant with the World Trade Organization rules. Timely reimbursements unlock liquidity blocked in taxes and help Indian exporters compete better against counterparts from countries where such embedded taxes are lower or fully refunded.
Queries on the plan emailed to the secretaries of expenditure, commerce and textiles, and to the Directorate General of Foreign Trade (DGFT), remained unanswered until press time. Exporters received ₹18,233 crore under RoDTEP in the financial year ended March 2026 and another ₹10,100 crore under RoSCTL. The validity of both schemes was extended last month from 30 September to 31 December, pending a final decision on their extension for the next five years.
“Any better targeting mechanism is welcome. But the panel will have a tough task at hand. It will be very difficult to precisely identify and gather data on all the duty incidences at every stage because there are multiple stages and industries like textiles and garments are highly dispersed," said D.K. Nair, textiles expert and former secretary-general of the Confederation of Indian Textile Industry.
"So, some level of averaging of levies is inevitable in these kinds of industries.” Ajay Sahai, director-general and chief executive of the Federation of Indian Export Organisations (Fieo), had last month told Mint that the continuation of both the schemes with adequate allocation for another five years “would be extremely important, as it signals policy stability at a very challenging time for exporters”.
The demand for higher allocations also reflects expectations that exporters will ramp up shipments in the coming years, taking advantage of India's recent free trade agreements with the UAE, the UK and the EU once the ongoing West Asia conflict abates. India’s merchandise exports rose 18.5% year-on-year to $260 billion in the first half of FY27 as global demand remained strong. Textile and garment exports, however, grew just about 2.4% during the period that saw flare-ups in West Asia and uncertainties over US tariffs.
