The government can consider giving refunds to exporters in cash instead of scrips for tax remission schemes, as it would immediately improve cash flow for them, economic think tank GTRI said on Tuesday.
At present, the refund under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme and the Rebate of State and Central Taxes and Levies (RoSCTL) scheme is issued as a scrip, which can be used to pay basic customs duties at the time of import.
The scrip can be sold to other importers, who can later use the scrip instead of cash for payment of basic customs duty.
These schemes refund select central and state levies to Indian exporters.
"Refund RODTEP and ROSCTL dues to exporters in cash and not in the form of scrips. This will immediately improve the cash flow of thousands of exporters facing a weak export outlook for 2024," the Global Trade Research Initiative (GTRI) said.
The RoSCTL refunds taxes for apparel and made-up sectors. RoDTEP covers most of the remaining products covered under about 8,500 tariff lines or product categories.
It said that since the average RoDTEP rate is low at about 2.5 per cent, it is suggested that the refund amount can be transferred in cash to exporters' bank accounts post-export, as done in the case of the duty drawback scheme.
Both the RoDTEP and duty drawback schemes refund unrefunded duties and are similar.
Also, most small exporters do not import and have to sell the scrips to large importers who buy the scrips at varying discounts of up to 10 per cent of the scrip value, it added.
"Many small value scrips remain unutilised also. The small exporter thus gets less than the announced incentive," GTRI Co-Founder Ajay Srivastava said.
He added that the cash refund will help thousands of exporters in employment-oriented sectors like marine, leather, gems and jewellery, agriculture, and other sectors like electrical/electronics, automobiles, machinery, and plastics.
"Cash refunds would immediately improve the financial stability of exporters. Direct cash disbursements would eliminate the need for discounted scrip sales, ensuring that exporters receive the full value of their refunds," Srivastava added.
Small firms, which form a significant part of India's export economy, would be particularly advantaged by this, helping them to compete more effectively on a global scale, he said.