Somatirtha Purohit

The Union Cabinet, chaired by Prime Minister Narendra Modi, has granted approval 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. 

This two-year extension aims to establish a consistent policy framework crucial for strategic trade planning, particularly in the textiles sector, known for advanced order placements and long-term deliveries.

The continuity of RoSCTL is expected to bring about predictability and stability in the policy landscape, alleviating the tax and levy burden and fostering a fair competition principle of "goods are exported and not domestic taxes." 

Initially approved until March 31, 2020, with subsequent extensions until March 31, 2024, this latest extension until March 31, 2026, enhances the export competitiveness of the garments and made-ups sectors. 

It promotes cost-competitiveness in apparel and made-up products and aligns with the zero-rated export principle. Other textile products, excluding those in Chapters 61, 62, and 63, not covered by RoSCTL, can benefit from the Remission of Duties and Taxes on Exported Products (RoDTEP) along with other products.

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The scheme's objective is to offset State and Central Taxes and Levies, along with the Duty Drawback Scheme, for the export of apparel, garments, and made-ups through rebates. This is based on the globally accepted notion that taxes and duties should not be exported, ensuring a level playing field in the international export market. The scheme goes beyond rebating or reimbursing indirect taxes on inputs to include un-refunded State and Central taxes and levies.

Rebates for State Taxes and Levies cover various components such as VAT on transportation fuel, captive power, agricultural sector, market tax, electricity duty, stamp duty on export documents, and embedded State Goods and Services Tax

(SGST) on inputs like pesticides and fertilizers used in raw cotton production. Rebates for Central Taxes and Levies encompass central excise duty on transportation fuel, embedded Central Goods and Services Tax (CGST) on inputs for raw cotton production, purchases from unregistered dealers, inputs for the transport sector, and embedded CGST and Compensation Cess on coal used in electricity production.