Agriculture Industry

Sugar Exporters Face Tax Query on Benefit Given under RoDTEP

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27 January 2023, New Delhi: Over $3 billion worth of sugar exports face a bitter tax pill with the customs authorities writing to companies to deposit, with penalties, refunds received under a neutralisation scheme. 

The industry has reached out to the government and is also contemplating legal action against the custom’s move to recover the Remission of Duties and Taxes on Exported Products (RoDTEP) benefits. 

Sugar exporters have argued that tax neutralisation was not any additional benefit and should be available to exports even after the government-imposed export quotas. 

Customs authorities contend that any restricted commodity is not eligible for export benefits. 

India regulates sugar exports through advance authorisation and fixed quota under the Open General License, or OGL. 

The government allowed 6 million tonnes of sugar exports for the 2022-23 marketing year (October-September). However, restrictions were imposed in the wake of the Russian-Ukraine war to ensure adequate domestic supply. 

Any export of sugar after June 1, 2022 was allowed only upon permission from the Directorate of Sugar. 

The industry maintains that sugar was under free export and the government placed it under quota to regulate its exports to keep domestic prices in check but the principle of zero rating of exports should apply in such cases and RoDTEP be allowed. 

Zero rating of exports means the entire value chain is exempt from tax. The industry has represented the matter to the commerce and industry ministry. 

Experts say taxes should not be allowed to be exported, as it undermines competitiveness. 

“The paradoxical interpretation of the amendment by the custom authorities to deny the statutory benefit is not only against the very objective and intention of the RoDTEP scheme but also against the policy of the government to export goods and not the taxes,” said Abhishek A Rastogi, founder of Rastogi Chambers. 

“Any narrow interpretation to deny benefits will lead to absurdity and be subject to judicial review. ”

Industry body Federation of Indian Export Organisations (FIEO) said zero rating of exports must continue. 

“While technically the stand of customs is correct as notification disallows RoDTEP on exports which are restricted for exports but the provision requires revisit as exports under restricted categories are eligible for Duty Drawback and GST refunds, which are basic instruments for zero-rating of exports. Why only deprive such exports of RoDTEP benefits,” said Ajay Sahai, director general, FIEO. 

Sugar production till January 15, 2023, in the current marketing year is 156. 8 lakh tonnes as against 150. 8 lakh tonnes in the corresponding period of the previous year.

Also Read: Agriculture in India

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