Understanding the benefits of India's RoDTEP Scheme for European Exporters

For European companies engaged in trade with India, understanding the country’s export incentive mechanisms is crucial for optimizing supply chain costs and maintaining competitive pricing.

Since January 2021, India has implemented the RoDTEP scheme (Remission of Duties and Taxes on Export Products) a WTO-compliant program that fundamentally changes how Indian exporters recover embedded taxes and duties. Whether you’re importing Indian goods into the EU or working with Indian suppliers, this scheme directly impacts pricing, documentation, and overall trade dynamics.

What is RoDTEP and what does it mean for European importers?

RoDTEP represents India’s strategic response to international trade compliance requirements while supporting its export competitiveness. The scheme replaced the Merchandise Exports from India Scheme (MEIS) after the United States challenged India’s export subsidy programs at the World Trade Organization. A WTO dispute panel ruled that India’s previous export incentive schemes violated trade body norms and harmed international competition, recommending their withdrawal.

The introduction of RoDTEP ensures that Indian exporters can reclaim taxes and duties embedded in their production and distribution costs, expenses that were previously non-recoverable.

For European companies importing from India, this translates to potentially more competitive pricing from Indian suppliers who can now recover costs such as VAT on transportation fuel, electricity duties, stamp duties on export documentation, mandi taxes, and various embedded taxes on production inputs.

How RoDTEP Works: The Mechanics

Duty credit scrips

The RoDTEP process operates through a fully automated, end-to-end digital system that issues transferable duty credit scrips to exporters. When Indian suppliers ship goods internationally, they declare their RoDTEP claim in the Electronic Shipping Bill. After customs processing, the system generates a scrip on the ICEGATE portal, which is India’s electronic customs gateway.

These duty credit scrips can be transferred or utilized for payment of basic customs duty, creating flexibility for exporters:

1. Used by the exporter itself

: Duty credit scrips can be used to pay import duties when importing raw materials or equipment into India.

2. Sold/transferred to someone else: The exporter can sell the credit to another company that has to pay import duties. There is even a market for these credits: companies that do not export but do have to import can buy credits from exporters at a small discount.

Value of the duty credit scrips

The refund rates vary by product category according to HS codes and typically range from 0.5% to 4.3% of the FOB (Free on Board) value. The Indian Directorate General of Foreign Trade (DGFT) periodically notifies these rates, which are product-specific and designed to reflect the actual embedded costs in different sectors.

For European importers, understanding this mechanism helps in several ways, because it provides clarity on pricing structures from Indian suppliers and it affects documentation and certificate requirements. It also impacts timing and delivery schedules, as any delays in scrip issuance could affect supplier cash flows and pricing negotiations.

Key sectors and products covered

RoDTEP applies to all export sectors, with particular emphasis on MSMEs (Micro, Small, and Medium Enterprises) and labor-intensive industries. This broad coverage means European importers across diverse industries, from textiles and leather goods to pharmaceuticals and automotive parts, will encounter the scheme in their Indian sourcing operations.

Products eligible under RoDTEP:

• Textiles and Apparel
• Leather and Leather products
• Chemicals and Pharmaceuticals
• Engineering goods (Automotive components, machinery parts)
• Agricultural products
• Gems and Jewelry

However, certain exclusions exist. Products exported from Special Economic Zones (SEZs)  face restrictions in some cases, as these entities already benefit from other duty exemption schemes. European importers working with suppliers in these zones should verify RoDTEP applicability with their Indian partners.

What European companies need to know

Documentation and Compliance Considerations

When importing goods from India under the RoDTEP scheme, European companies should ensure their suppliers properly declare the RoDTEP claim in shipping documentation. While the scheme doesn’t directly change EU customs procedures, it does affect the commercial invoice values and cost breakdowns provided by Indian exporters.

The Certificate of Origin becomes particularly important, as it establishes the goods’ Indian origin and the legitimacy of any cost benefits passed along from RoDTEP refunds. For preferential tariff claims under any future EU-India trade agreements, clear documentation of the RoDTEP component ensures compliance with rules of origin requirements.

Pricing negotiations and cost structures

Understanding RoDTEP rates for specific product categories empowers European buyers in price negotiations. If your Indian supplier benefits from a 3% RoDTEP refund on embedded taxes, this should theoretically improve their competitiveness or provide room for negotiation. However, the practical impact depends on several factors:

• Timing of refunds: Delays in scrip issuance can affect supplier cash flows
• Transfer pricing: Whether suppliers pass savings directly to customers or retain them as margin
• Market dynamics: Competitive pressure may force price reductions that reflect RoDTEP benefits

European procurement teams should include RoDTEP considerations in total landed cost calculations, particularly when comparing Indian suppliers against competitors from other countries or evaluating make-versus-buy decisions for in-house production.

Strategic Implications for European Importers

The RoDTEP scheme represents more than a technical change in India’s export policy—it signals the country’s commitment to becoming a more competitive manufacturing hub while maintaining WTO compliance. For European companies, this creates several strategic considerations.

• First, India’s improved cost competitiveness through RoDTEP may make it a more attractive sourcing destination compared to other Asian manufacturers, particularly for labor-intensive products where embedded tax recovery has the greatest impact.
• Second, the scheme’s transparency and digital automation reduce compliance risks and administrative burdens in the supply chain.
• Third, RoDTEP’s alignment with WTO rules minimizes the likelihood of future trade disputes that could disrupt supply chains through countervailing duties or other trade remedies.

Understanding mechanisms like RoDTEP becomes essential for companies seeking to optimize their sourcing strategies in India. The scheme supports India’s Make in India and Atmanirbhar Bharat (self-reliant India) initiatives, which aim to boost domestic manufacturing and export competitiveness.