The Pharmaceuticals Export Promotion Council of India is planning to request the government to include the plant inspection and licensing fee under the Remission of Duties or Taxes on Export Products (RoDTEP). It has requested the industry to submit the data of all levies and taxes including embedded taxes.
The new RoDTEP scheme will replace the Merchandise Export from India Scheme (MEIS) scheme as the latter violated the WTO norms. Under the new scheme, the incentives will not be directly paid on the value of exports but will be limited to credit against the tax on items such as power, logistics, fuel and toll etc.
Under the MEIS scheme, the pharma sector was one of the biggest beneficiaries as it exported close to $20 billion worth of products. As per the scheme, pharma products received three per cent incentive on Free – on – Board (FOB) value for exports to Category A countries (US, Canada, Europe) and Category B countries (Emerging markets such as Russia, CIS etc.), while exports to category C countries did not get any incentives.
Dr Dinesh Dua, Chairman, Pharmexcil and Executive Director, Chairman, Committee Lifesciences, CII North, said, “Pharmexcil is planning to make a representation to the RoDTEP committee, highlighting the need of incorporating plant inspection and licensing fee under the RoDTEP scheme.”
He also informed that the RoDTEP committee, which is headed by Gopal Pillai, Ex-Finance Secretary is open to the industry’s suggestion. “The committee is liberal in its approach and open to include all kinds of taxes in its calculation and that too without any ceiling. Now the onus is on us to give appropriate cost sheet/data/details of various sectors which could be taken as a benchmark. It is likely that the committee would recommend the rates to the government shortly,” he added.
Commenting on the scheme’s outcome, Dr Kunal Dhamesha, VP- Institutional Equities- pharma analyst, Systematix group, expressed, “We estimate the change in the MEIS scheme to impact the earnings of large-cap pharma universe negatively by low to mid-single-digit in FY21 as incentives for September to December 2020 is capped to Rs two crores per exporter and the new scheme (RoDTEP), which will replace MEIS from Jan 1, 2020, could lead to some disruptions initially. However, once companies acclimatise with the new scheme, overall incentives are expected to come back to normal levels. Therefore, we believe that incentives under the new scheme will be at a similar level to the MEIS scheme given that the government has allocated up to Rs 50,000 crore for the new scheme vs. expected outgo on MEIS at ~Rs 45,000 crore in FY20.”
The Government has notified that it will cap the incentive under the MEIS to Rs two crore per exporter for the period of Sep 1, 2020, to December 31, 2020. The incentive ceiling could be further revised downwards to ensure that the total claim under the scheme doesn’t exceed the allocated Rs 5,000 crore for the scheme.
Pharmexcil has asked its member companies to furnish the following details, to make its representation to the RoDTEP committee:
- Embedded taxes per rupee of road transportation cost. Embedded taxes on diesel and items
like tyres can be taken into account.
ii. Embedded taxes per rupee of rail transportation.
iii. Embedded taxes per unit of electricity consumed. This may include taxes paid on coal,
transport of coal to power generating units, electricity duty and tax on sale/consumption of power generated by power plants.
The said worksheets should show the effect of embedded tax on accounting of each item and the legislation involved if any. Detailed notes on the calculations involved in these working sheets must also be provided.