India’s electronics association ICEA, in collaboration with IKDHVAJ Advisers LLP, released a detailed report on RoDTEP for the electronics sector today. ICEA is proposing a base rate for RoDTEP of at least 1.5% in the electronics category, based on the minimum assumption of logistics and power costs in manufacturing. Beyond this, individual products with high export potential attract a higher RoDTEP rate, based on the level of domestic value addition.
Driven by the need to boost electronics manufacturing, attract GVCs and large scale export-linked FDI, the electronics sector has become a central focus of government’s manufacturing policy. However, India suffers several disabilities vis-à-vis competing destinations such as China, Vietnam and Thailand, which make India’s exports uncompetitive. RoDTEP, which replaces the MEIS Scheme, is key to ensuring that Indian electronics exports regain the competitive edge. ICEA aims to make electronics India’s top export by 2025.
Globally, electronics is a US$2 trillion industry, dominated by exports from China, Vietnam, Taiwan and Japan etc. Electronics is amongst the largest traded commodities after oil. It provides India with a tremendous opportunity to become a global leader in exports. RoDTEP is critical since the government is targeting US$1 trillion in exports by 2025 as part of the US$5 trillion GDP objective. No country has reached the US$5 trillion mark without exports contributing at least 18-20%. India is no different.
The Electronics RoDTEP Report represents an intensive study across six months for various products. It prioritizes electronics items based on current exports or future potential exports. Till recently, over 370 electronic items received MEIS between 2-4%.
Pankaj Mohindroo, Chairman ICEA said, “RoDTEP is critical to address India’s deep disabilities vis-à-vis its competitors for boosting electronics manufacturing and making it India’s number 1 export by 2025. This needs to be an ongoing exercise to address the adverse impact on India’s competitiveness, of high taxes which remain unremitted. An early finalisation of RoDTEP base rate and rates of priority products needs to be our immediate focus.”
The report also highlights the tremendous growth in electronics manufacturing and exports over the last three years. Electronics, which is India’s 9th largest exports, has shown the highest response (85% increase) to export stimulus between 2017-2020, from amongst the top 15 exports from India. The report further shows that several countries are already allowing remission of indirect taxes, levies and duties that are allowed under WTO. It identifies and unbundles indirect taxes for the purposes of remission. The rates estimated in the report identify the unremitted duties/taxes/levies at the Central, State and local level, borne by exported electronics products, including prior stage cumulative indirect taxes on goods and services used in the production of such products.
Based on credible inputs from the industry, the big ticket items considered for this study of RoDTEP in Electronics, are indirect taxes on transport and power, and embedded taxes on inputs. The IKDHWAJ team which conducted the study, was led by Dr. Jayant Dasgupta, former Indian Ambassador to the WTO, Dr. Harsha Vardhana Singh, Former DDG, WTO & former Economic Advisor and Secretary TRAI, and Dr. Veena Jha, Economist and former Coordinator of UNCTAD’s India program who has worked with several multilaterals such as EU, WHO and ILO etc.