Forest Services
On April 2024, the Government of India, through the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry, notified the extension of the Remission of State and Central Taxes and Levies (RoSCTL) scheme for apparel and made-ups exports. This scheme, originally introduced under the Foreign Trade Policy (FTP) 2015-20, aims to refund embedded state and central taxes that are not refunded through other mechanisms, thereby enhancing the cost competitiveness of Indian exports. The extension is set to run for the next three years, continuing the government's strategy to boost export growth in a sector critical to manufacturing and employment.
UPSC Relevance
- GS Paper 3: Indian Economy – Export Promotion, Foreign Trade Policy, WTO Agreements
- GS Paper 2: International Relations – WTO compliance and trade agreements
- Essay: Role of export incentives in India’s economic growth and global trade competitiveness
Legal and Constitutional Framework of RoSCTL
The RoSCTL scheme is notified under the Foreign Trade Policy (FTP) 2015-20, implemented by DGFT using powers under Section 25 of the Customs Act, 1962. It provides remission of embedded state and central taxes and levies on export products, which are not refunded by any other mechanism. This remission is designed to comply with the World Trade Organization’s (WTO) Agreement on Subsidies and Countervailing Measures (ASCM) by offering duty remission rather than direct cash subsidies, thus avoiding trade disputes. The scheme replaced the earlier Remission of State Levies (ROSL) scheme and is more comprehensive, covering central taxes as well.
- Implemented by DGFT under Ministry of Commerce and Industry
- Operates under Customs Act, 1962, Section 25
- Complies with WTO-ASCM by providing duty remission, not direct subsidies
- Replaced ROSL scheme to include central taxes and levies
Economic Significance of RoSCTL Extension
The textile and apparel sector accounts for approximately 7% of India’s GDP and employs over 45 million people (Ministry of Textiles, 2023). India’s apparel exports reached USD 18 billion in FY 2022-23, growing at a CAGR of 8% over the last five years (Textile Ministry Annual Report 2023). The RoSCTL scheme offers remission rates up to 4.2% on the FOB value of apparel exports, directly lowering export costs and improving price competitiveness in global markets. The DGFT estimates that the scheme’s extension will support export growth of 10-12% annually over the next three years, reinforcing India’s position in the global textile trade.
- Textile sector contributes ~7% to GDP and employs 45 million (Ministry of Textiles, 2023)
- Apparel exports USD 18 billion in FY 2022-23, CAGR 8% over 5 years
- RoSCTL remission rates up to 4.2% on FOB value (DGFT Notification 2024)
- Expected export growth 10-12% annually post-extension (DGFT estimate 2024)
- INR 3,000 crore allocated for export promotion including RoSCTL (Union Budget 2023-24)
Institutional Roles in RoSCTL Implementation
The DGFT is the nodal agency for implementing the RoSCTL scheme, issuing notifications and managing claims. The Ministry of Commerce and Industry formulates export policies and oversees trade promotion initiatives. The Ministry of Textiles coordinates sectoral development and liaises with exporters to facilitate scheme uptake. At the international level, the WTO provides the regulatory framework ensuring that such export incentives comply with global trade rules to avoid countervailing measures.
- DGFT: Policy implementation and notification authority
- Ministry of Commerce and Industry: Policy formulation and oversight
- Ministry of Textiles: Sector coordination and export facilitation
- WTO: Regulates export subsidies under ASCM agreement
Comparative Analysis: India vs Bangladesh Apparel Export Competitiveness
| Aspect | India | Bangladesh |
|---|---|---|
| Global Apparel Export Share | 3.5% (UN Comtrade 2023) | 6% (World Bank 2023) |
| Annual Export Growth Rate | 8% CAGR (last 5 years) | 15% (post EBA scheme) |
| Export Incentive Scheme | RoSCTL (tax remission up to 4.2%) | Zero-duty access under EU’s Everything But Arms (EBA) |
| Employment in Textile Sector | 45 million (Ministry of Textiles, 2023) | ~4 million (World Bank 2023) |
| Trade Barrier | Embedded taxes, higher logistics cost | Tariff-free access to EU market |
The comparison highlights that while India’s RoSCTL scheme addresses embedded taxes, Bangladesh’s zero-duty access to the EU market under the EBA scheme offers a tariff advantage, driving higher export growth and larger global market share.
Critical Gaps in RoSCTL and Export Competitiveness
RoSCTL effectively refunds embedded state and central taxes but does not address structural challenges such as inadequate infrastructure, fragmented supply chains, and high logistics costs. These factors increase the landed cost of Indian apparel exports relative to competitors like Vietnam and Bangladesh. Without complementary reforms in infrastructure and logistics, the scheme’s impact on export competitiveness is limited. Additionally, the scheme excludes certain levies and does not cover indirect costs such as compliance and certification expenses.
- Does not compensate for infrastructural inefficiencies and high logistics costs
- Limited coverage of indirect export costs
- Structural bottlenecks reduce overall competitiveness despite tax remission
- Need for integrated policy combining RoSCTL with infrastructure reforms
Significance and Way Forward
The extension of RoSCTL reflects a calibrated policy effort to sustain export growth in a labour-intensive sector crucial for employment and manufacturing. It aligns with India’s broader objective to increase its share in global textile exports and reduce dependence on imports. However, to fully leverage the scheme’s benefits, the government must invest in port infrastructure, streamline logistics, and enhance supply chain efficiency. Further, expanding the scheme’s coverage to include more levies and integrating it with other export promotion measures like the Production Linked Incentive (PLI) scheme could amplify competitiveness.
- RoSCTL extension supports sustained apparel export growth and employment
- Complementary reforms in infrastructure and logistics are essential
- Expand scheme coverage to include indirect export costs
- Integrate RoSCTL with other export promotion and manufacturing incentives
- RoSCTL provides direct cash subsidies to exporters.
- It is notified under the Foreign Trade Policy and implemented by DGFT.
- RoSCTL covers remission of both state and central embedded taxes and levies.
Which of the above statements is/are correct?
- India’s apparel exports have a larger global market share than Bangladesh.
- RoSCTL scheme helps offset embedded taxes but does not address logistics costs.
- Bangladesh benefits from tariff-free access to the EU market under the EBA scheme.
Which of the above statements is/are correct?
What is the primary objective of the RoSCTL scheme?
The RoSCTL scheme aims to refund embedded state and central taxes and levies on apparel and made-ups exports that are not otherwise refunded, thereby improving cost competitiveness of Indian exports in global markets.
Under which legal provisions is the RoSCTL scheme notified?
RoSCTL is notified under the Foreign Trade Policy (FTP) 2015-20 and implemented by DGFT using powers under Section 25 of the Customs Act, 1962.
How does RoSCTL comply with WTO rules?
RoSCTL provides remission of embedded taxes rather than direct subsidies, aligning with WTO’s Agreement on Subsidies and Countervailing Measures (ASCM), thus avoiding classification as prohibited export subsidies.
What are the key economic benefits of extending the RoSCTL scheme?
The extension supports export growth estimated at 10-12% annually, sustains employment for over 45 million people in textiles, and enhances India’s share in global apparel exports by improving cost competitiveness.
What are the limitations of the RoSCTL scheme?
RoSCTL does not address infrastructural inefficiencies, high logistics costs, and indirect export expenses, which remain structural bottlenecks limiting India’s overall export competitiveness.
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