Chamber Voice – August – September 2021

Other factors include easing supply constraints, strong kharif agricultural production and the revival of manufacturing and services sectors. The fact that inflation has not increased as expected has also boosted prospects of a quicker recovery. The Reserve Bank of India (RBI) also indicated that economic recovery is picking up pace after being disrupted by the second wave of the Covid-19 pandemic earlier this year, but warned that there are challenges in the form of global uncertainties, rising inflation and the possibility of future Covid infections. The report said: “The green shoots of revival have spilled out of the high frequency indicators and on to the headline metrics in a recovery that is progressively solidifying.”

The central bank’s Economic Activity Index suggested that the real GDP grew by 9.6 per cent in the July-September 2021 quarter.

It has also been found that other indicators of growth such as demand for real estate and other high value items are on the rise. This is an important indicator of strong economic growth.

Among other indicators, the RBI highlighted that services sector businesses are witnessing fresh growth after facing severe consequences during the second wave.

Having said this, there are certain risks that could spoil the momentum.

Some of the risks include a build up of global risks, including rising energy prices amid a power crisis. There are several other indications that global growth is slowing, especially in key nations like China.

The ongoing semiconductor shortage has also hit global economic growth and its impact is being felt across many industries in India. Shipping also remains a concern due to increase in freight rate.

Coming to our home state, the latest GST collection figures released by the Centre show that Kerala has clocked a higher growth in tax collection, during July and August than during the corresponding pre-COVID Months. The GST collection figures are also proof that the second wave, though catastrophic in terms of health, was mild on the economy. The GST Collection in Kerala in August 2019, before Covid struck, was Rs 1582 crore. This August it is Rs 1612 crore, a nearly two percent growth than pre-pandemic levels.

Kerala’s tourism was badly affected by the COVID-19 pandemic. As a sector that provides direct and indirect employment to 1.5 million people, the crisis has far-reaching consequences on the state’s economy. The revenue loss in the tourism sector is estimated to a tune of Rs 33,000 crore. However, now, Kerala tourism is on a path of revival. We are opening up slowly and getting ready to welcome tourists from all around the globe.

The Government also wants to project kerala as a desirable investment destination and I take this opportunity to congratulate the Kerala Government for constituting an External Committee to scrutinize all Laws, Rules and Regulations relevant to Businesses and to suggest measures to minimize the compliance burden and permit the provisions to enable investment and economic growth.

We wholeheartedly welcome the Kerala Industrial Single Window Clearance Board and Industrial Township Area Development (Amendment) Ordinance 2021 that was notified on 13th September 2021. The ordinance has resulted in the constitution of Industry Grievance Redressal Committees at the State and District levels.

In this context, Chamber has recommended the State Government to have an Industry representative in the Grievance Redressal Committee in the state and district level were in the committee in its current form has only representatives from the Government, Chamber believes that the representatives from industry and trade association will boost investor confidence. We also recommended the State Government to have a regular communication with the public and its stake holders, and upload the record transcript of the meetings in the public domain.

Moving on, I am pleased to inform you all that “The People First” , the CSR Initiative of the Cochin Chamber  was inaugurated  by Mr A P M Mohammed Hanish IAS, Principal Secretary – Department of General Education & Industry, Government of Kerala on 28 August 2021.

We also initiated “The India Forward “” talk Series where in thought leaders and opinion leaders speak to us on their vision of India Forward. Shri Jairam Ramesh, former Union Minister, author and a noted economist talked about the socio political perspectives during the Inaugural Session held on 16th September 2021.

A detailed report on this event and pictures from the session is added in this newsletter.

The fourth meeting of the CEO Forum’s 6th edition was held on 06th August 2021. Mr. T. Nandakumar IAS, Former Secretary to Government of India was the speaker. He spoke on the topic “Way forward for Kerala wherein he mentioned  about the formation of the committee and decision to get in touch with all the important trade bodies in Kerala to get specific suggestions.

The fifth edition of the CEO Forum meeting held on 04th September 2021, Mr Deven R. Choksey, Promoter, K R Choksey Group of Companies was the speaker, he spoke on the topic “Investing Growth vs Value”.

I am happy to inform you that the Cochin Chamber had an online interactive Session with Mr. Nanthapol Sudbanthad, Director Consul, Thailand Board of Investment on 02 September 2021 on “Doing Business in Thailand : Gateway to ASEAN”. The objective was to strengthen the trade relationship with companies in Kerala and to create an awareness about the business opportunities in Thailand.

As always, I wish you all the very best and exhort you all to stay safe

August:

• Cabinet approves Memorandum of Understanding between Institute of Chartered Accountants of India (ICAI) and Institute of Professional Accountants of Russia (IPAR)
• Cabinet approves Memorandum of Understanding between Permanent Mission of India to the WTO, Centre for Trade and Investment Law (Indian Institute of Foreign Trade) and Centre for Trade and Economic Integration (The Gradu…
• Cabinet approves Memorandum of Understanding (MoU) between India and Bangladesh on cooperation in the field of Disaster Management, Resilience and Mitigation. 
• Cabinet approves the Memorandum of Understanding between the Indian Council of medical Research (ICMR), India and the Foundation for Innovative New Diagnostics (FIND), Switzerland
• Cabinet approves Memorandum of Understanding between the Indian Council of Medical Research (ICMR), India and the GARDP Foundation on Antimicrobial Resistance Research and Innovation, Switzerland
• Cabinet approves Memorandum of Understanding between India and United States of America on cooperation in the field of Geology 
• Cabinet approves Ratification of Kigali Amendment to the Montreal Protocol on Substances that Deplete the Ozone Layer for phase down of Hydrofluorocarbons
• Cabinet approves implementation of National Mission on Edible Oils – Oil Palm 
• Cabinet approves continuation of Centrally Sponsored Scheme for Fast Track Special Courts for further 2 years
• Cabinet approves Memorandum of Understanding (MoU) between Indian Institute of Space science and Technology (IIST) and The Delft University of Technology (TU Delft), the Netherlands for research collaboration- reg

September:

• Cabinet approves major Reforms in Telecom Sector
• Cabinet approves Central Government guarantee to back Security Receipts issued by National Asset Reconstruction Company Limited for acquiring of stressed loan assets
• Cabinet approves Memorandum of Understanding (MoU) between India and Italian Republic on Cooperation in the field of Disaster Risk Reduction and Management
• Government has approved Production Linked Incentive (PLI) Scheme for Auto Industry and Drone Industry to enhance India’s manufacturing capabilities
• Cabinet approves Memorandum of Understanding between The Institute of Chartered Accountants of India (ICAI) and The Chamber of Auditors of the Republic of Azerbaijan (CAAR)
• Cabinet approves the Memorandum of Understanding on cooperation in field of Geosciences between the Joint Stock Company Rosgeologia, Russia and the Geological Survey of India (GSI), India
• Government has approved Production Linked Incentive (PLI) Scheme for Textiles. With this, India is poised to regain its dominance in Global Textiles Trade
• Cabinet approves Agreement on the recruitment of Indian citizens to work in the Portuguese Republic between India and Portugal

The next meeting of the CEO FORUM will be held on Saturday the 9th of October 2021 between 8:00 and 9:30 am on the Zoom Platform.

Prof. Krish Pillai, Former Information Technology & Management Consultant – USA, has agreed to speak on the topic “Emerging Technologies & Role of Cryptocurrencies Globally.”

Prof. Pillai has been in the forefront of information technology and business management,  for over forty years  in India and in United States.

Kindly register by clicking on the register icon and the programme details will be sent to you automatically.

“People First” is the CSR initiative of the Cochin Chamber where in we handed over 19 new smart Phones to a few needy children as an educational tool in the month of August 2021.

As a continuation of this initiative, we are happy to join hands with the Government of Kerala in improving the health care facilities in our Government hospitals.

The Chamber using this CSR Fund has bought a brand new Autoclave machine for Government Women & Children Hospital, Mattancherry. Mr. P Rajeev, Minister for Industries, Law and Coir has readily agreed to be our Chief Guest to handover the autoclave on 23rd October at 11.30 AM.

The Second virtual session under the India Forward Talk Series, “Gurumurthy Unplugged” is scheduled on the 23rd of October, 2021 between 06.00 p.m and 07.30 p.m.

Shri. S. Gurumurthy a Veteran Writer and Journalist will be the Guest Speaker at this session

Celebrated for his investigative journalism, Gurumurthy has ceaselessly campaigned against corruption at high places. A Chartered Accountant by profession, Gurumurthy is also a corporate advisor of high standing.

We look forward to seeing you all online for this milestone event of the Chamber.

CLICK HERE TO REGISTER FOR FREE

The Virtual Meeting of the CEO FORUM – August 2021 was held on Friday the 6^th of August 2021 between 8.30 am to 9:45 am.

Mr. T. Nandakumar IAS, Former Secretary to Govt of India, was the Speaker. He spoke on the topic, “Way forward for Kerala.”

Mr. K. Harikumar, President of the Chamber welcomed the participants and gave a quick introduction of the Guest Speaker.

Mr. Sanju, General Manager of Malabar Coast Recruitment Services Pvt. Ltd., who is a new Member of the Chamber, was invited to give a brief overview about his company and their services to the members of the Forum.

Mr. Nandakumar, started his talk by thanking the Chamber for giving him the opportunity to interact with the CEOs. In his opening remarks Mr. Nandakumar spoke about the formation of the Committee and the decision to get in touch with all the important trade bodies in Kerala to get specific suggestions. He also said that he expects to get papers from the associations on the matters concerning the State which they will go through and then decide as to whom they will go forward with meeting.

Talking about the way forward for Kerala, Mr. Nandakumar said that his advantage was that he looks at the State as an external person. This will help him not to get into a lot of details but rather look at issues on a broader angle so that he can try and make a few provocative suggestions. He highlighted the advantages of our state such as the Human Development Index, the Literacy Rate, the Public Education, the public Health System, Sanitation, Women empowerment etc.

He said that, somewhere along the line he felt certain verticals such as the education system in Kerala, which were well recorded earlier has started to crack. Even though Primary and Secondary Education in the State is doing okay, he doubts that the Higher Education is upto par when compared to the other states in our Country. He stated that this is probably because of the emphasis on good quality public education has been lost. Similar issues can be found in other sectors as well.

Mr. Nandakumar said, although our numbers are okay on a national level, if we need to sustain our efforts, we will need more economic growth.

Later in his address, Mr. Nandakumar pointed out several issues where intervention to improve and grow was needed.  He also spoke about plan funds and told that their major programmes are, -poverty reduction, social infrastructure development etc.

There are several issue that are faced by our State, a few of them such as the issue of managing expenditure of the Government, issues of Governance, Financial Discipline, Public Service Delivery Act, etc. were touched upon in Mr. Nandakumar’s Address.

He said he is concerned about the preparations our Government is making in order to upskill our future generations for future Jobs. “We need to understand what future jobs are and train our next generation accordingly so that they can be skilled workers in our country and abroad.” “This is one area where the Higher Education system in our state will need a serious Overhauling” he said.

Concluding his address, Mr. Nandakumar raised a though provoking question to everyone by asking the CEO’s to think to themselves as educated people, what is the contribution they have done to the state and if it is enough for us to grow as a community.

Following Mr. Nandakumar’s address, there was Q&A session.

Mr. P.M. Veeramani, the Vice President of the Chamber delivered the Vote of Thanks

The Chamber’s CSR Programme “The People First Initiative” to help the less fortunate in our society was initiated on the 28th of August. Mr. A.P.M. Mohammed Hanish IAS, Principal Secretary – Department of General Education & Industry, Government of Kerala was the Chief Guest.

As part of this initiative’s first event, we were able to successfully help buy Mobile Phones for educational purposes for 19 Students from various Schools and Colleges. The event was conducted in the Cochin Chamber’s Hall following all Covid -19 Protocols. Only a few students were invited to the Chamber to attend the event and for the rest, Mobile Phones were handed over to their respective Teachers and Relatives.

Mr. K. Harikumar, President of the Chamber welcomed the Students, Teachers and a few parents and relatives present at the function. He also welcomed Mr. A.P.M. Mohammed Hanish IAS, to the inaugural 1st event of the “People First Initiative” on the 28th of August, 2021. In his opening remarks, he thanked the GAC Shipping the sponsor for the event for contributing to the Chamber’s CSR Fund.

Mr. Hanish, addressed the students and their representatives encouraging them to study well and the teachers to promote new methods of teaching in order to help students develop their Mathematical and Science Skills. There after, 19 mobile phones were handed over to the respective students and their representatives.

Mr. Balagopal Warrier, General Manager – Accounts, GAC Shipping, Cochin, the main sponsor of the event addressed the audience after the phone distribution.

The programme concluded with a Vote of Thanks by the Vice-President of the Chamber, Mr. P.M. Veeramani.

The Chamber organised an online interactive session with the Thailand Board of Investment (BOI) on, “Doing Business in Thailand: Gateway to ASEAN” on Thursday the 2nd of September 2021 from 11.30hrs to 12.30hrs (IST). This meeting was held on Zoom Meeting Platform.

This session highlighted a presentation by Mr. Nanthapol Sudbanthad, Director Consul, Thailand Board of Investment.

Introduction of the Board of Investment, strengthening connections with companies in Kerala, and creating awareness about the business opportunities in Thailand were some of the major topics in this Session.

The programme started with the Welcome Address by the President of the Chamber, followed by the presentation by Mr. Sudbanthad.

Around 30 participants attended this session.

We conducted the monthly CEO FORUM Virtual Meeting on the 4th of September, 2021.

Mr. Deven Choksey, Promoter of KRChoksey Group of Companies, spoke on the topic “Investing | Growth vs Value”

Mr. K. Harikumar, the President of the Chamber delivered the Welcome Address and introduced Mr. Choksey to the CEOs.

Mr. Choksey took spotlight and spoke on the topic giving examples differentiating Growth and Value of and investment.

Mr. P. M Veeramani, Vice President of the Chamber, delivered the Vote of Thanks and wrapped up the session.

This CEO FORUM was attended by around 40 participants from accross the State.

The Cochin Chamber of Commerce & Industry conducted the first online session under the “India Forward” series featuring Mr. Jairam Ramesh, Member of Parliament (Rajya Sabha) as the Speaker on the 16th of September 2021 from 05.00 pm to 06.30 pm.

Mr. Jairam Ramesh spoke on the topic “India Forward — A Socio Political Perspective.”

Ms. Sandhya M Nair, a connoisseur of literature introduced Mr. Jairam Ramesh’s new book “The Light of Asia.”

Given the current pandemic situation we were constrained to have this organized on our Zoom Meeting App and only a few were invited to the Chamber hall to attend this Session.

E-contracts, as the name suggests, happens electronically. These contracts are legally recognized under Section 10A of the Information and Technology Act, 2000, (‘IT Act’), which states that:

“10A. Validity of contracts formed through electronic means. – Where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose”.

E-contracts can be broadly categorized into 2 types:

A) Shrink Wrap Agreement: Shrink Wrap agreements, are standardized contracts affixed to the product and are considered accepted, when the product is used by the parties. These contracts can only be read and accepted by the buyer, when he/she opens the particular product, for instance, installing software through a CD.

B) Clickwrap Agreement: Click Wrap agreement is an agreement utilized for websites and electronic media where the user needs to either click on ‘accept or decline’ to agree or reject an already formulated agreement.

E-contracts were brought within the ambit of the IT Act (by way of an amendment dated February 5, 2009). The purpose of bringing E-contracts within the ambit of the IT Act, was to ensure that an E-contract is enforceable and not void. However, the law is silent about recognising the type of E-contracts, their manner of execution, enforceability, novation, revocation, breach, etc., in an electronic form. Therefore, it is necessary to discuss the benefits of E-contracts in the light of their execution and legal challenges associated with them.

Briefly, traditional contracts are time-consuming and require parties to meet frequently to either make amendments to the contract or sign the contract, which consumes resources of the parties. On the other hand, the following features of E-contracts make it a beneficial option for parties.

2. Ease of enforceability: The enforcement of an E-contract does not involve physical presence of parties, which in itself, is a blessing for many parties. For instance, a company based in Britain can easily enter into a contract with another company in India without physical exchange of documents, and multiple meetings. It is beneficial for e-commerce as well because the consumers purchasing commodities online can easily enter into a contract with the seller through shrink wrap or clickwrap agreements, which are created by the businesses alone for the consumer to either accept or reject the same.
3. Saves Time: E-contracts are exchanged and negotiated over cloud, therefore the time involved in negotiating and enforcing such E-contracts is less compared to traditional contracts.
4. Integration of E-contracts to Customer Resource Management (CRM): An E-contract computer program provides for API (Applications Programming Interface) functions and processes that allow harmonizing the platform with Salesforce, Microsoft CRM (Customer Resource Management), or any other CRM or sale of goods software. This integration enables to widen the functionality of the existing CRM i.e., a process of interacting with customers using data analysis, and can simplify internal processes through technical means. Utilising CRM can enable efficiency to create, send, sign, and collaborate on documents, and you can complete tasks in fewer steps.
5. Higher Security: Traditional contracts can easily be tampered with. However, an E-contract with digital signature has an ability to decrease or avoid such tampering because a digital signature is a mathematical technique to authenticate the integrity of a digital document. These signatures have multiple security and authentication layers imbibed into them in addition to admissible court proof of transaction. The e-signatures can be verified through various ways such as comparison of e-mail address to the one entered in invitation or through access code, phone call or SMS.

Legal Issues and Challenges:

1. Capacity to Contract: The competence of parties is a major requirement for a contract to be valid as per Section 10 of the Indian Contract Act. In case the parties are not competent, the contract will be void. Therefore, it is necessary to ensure that the parties to the E-contract are legally competent to provide consent. For instance, for certain applications requires consent from users to gain access. Usually, such access is granted basis an age verification which at times, lead to ingenuine access, since users are free to disclose any age without verification (especially in a case that involves minors). Although most applications require consent from adults in a case involving minors, a majority of such applications can be accessed without supervision and control. This creates legal challenges on the host of the application, since there is no way of verifying the capacity to contract.
2. Free Consent: In a commercial E -contract, there exists no scope for negotiation. This is a huge drawback for consumers. These e-contracts have a “take it” or “leave it” option. When an individual does not have an alternative to use the application, he is required to accept the terms and conditions of the E-contract, which is taken without his free consent. This has overtime, been addressed by various jurisdictions, especially in so far as data is concerned, but this is still a pinch point for many in the Industry.
3. Jurisdiction of the Court: E-contracts provide wide scope for suits being filed at different geographical locations. However, the Supreme Court in the case of Bhagwandas Goverdhandas Kedia vs. Girdhari Lal Parshottamdas & Co, held that for the purposes of enforcement of a contract, it must be “at the place of proposer where the acceptance is received shall have the jurisdiction for enforcement of contracts entered into by means of computer internet”. 

Validity of digitally signed contracts

Digital Signature is defined under Section 2(p) of the IT Act, which means authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of Section 3 of the IT Act. Under Section 3A of the IT Act, a subscriber may authenticate any electronic record by such electronic signature or electronic authentication technique which is considered reliable or may be listed in the second schedule of the IT Act.

A valid digital signature must consist of the following:

1. The signature must be unique and must consist of a certificate based digital signature.
2. If a document is authenticated by a digital signature, any alterations to that document must be detectable.
3. The digital signature must be issued by a recognised certifying authority recognised by the Controller of Certifying Authority under the IT Act.

Under section 4 of the IT Act, electronic records are legally recognized, which states that any document that is required by law to be written, typewritten, or printed shall be regarded legitimate if it is rendered or made available in electronic form and can be accessed for future reference. In the case of Tamil Nadu Organic Pvt. Ltd. v. State Bank of India, it was held by the Madras High Court that “the contractual liabilities could rise by the way of electronic means and that such contracts could be enforced through law. Moreover, the court also stated that authentication of electronic records are usually made by affixing of digital signature as provided under section 3 of the IT Act and that section 10-A of the IT Act enables the use of electronic records and electronic means for the conclusion of agreements, contracts and other purposes”.

 Further, Section 5 of the IT Act recognizes electronic signature by stating that any law if requires the information or any other matter to be authenticated by the signatures, then such requirement is deemed to be satisfied, if the information is authenticated by electronic signature in the manner prescribed by Central Government.

The e-authentication approach using Aadhaar e-KYC services was implemented on January 27, 2015, by notification number GSR 61(E) issued by the Ministry of Communications and Information Technology. As a result, numerous institutions and organizations have begun to employ Aadhaar Electronic Signature to identify consumers and allow them to sign documents using Aadhaar-based electronic signatures.

E-signatures under the Indian Evidence Act, 1872:

 Section 65A of the Evidence Act, 1872 (‘Act’) recognizes the admissibility of electronic records as evidence whereas the contents of these electronic records should be proved as per Section 65B of the Act which provides for admissibility of electronic records.

Suggestions and Conclusion:

In India, though E-contracts and digital signatures are legally recognized under IT Act and accepted as evidence before Courts, however, the Courts still continue to face the challenges and issues like revocation of E-contracts, fulfilment of essentials of contract as per Section 10 of the Indian Contract Act, 1872, validity, and voidability of E-contracts, etc. There have been varied interpretations by Courts vis – a – vis such contracts, which leads to ambiguity. This begs the question – is India required to re-look the Indian Contract Act, 1872, viz., the changes and the technological advancements or should we have a separate legislation governing E-contracts. With the pandemic and the general trend of moving away from physical workspaces to e-workspaces, most contracts that have been signed between March 2020 till date, are E-contracts, through various applications including ‘docusign’. The need to relook E-contracts is significantly higher given the rate at which these contracts are being signed on a daily basis.

*The authors are Partner and Associate respectively, with Shivadass & Shivadass (Law Chambers). The Authors would like to acknowledge the contributions of Anika Sharma, a 3^rd Year law student from Maharashtra National Law University, Nagpur.

The contents and comments of this document do not necessarily reflect the views/position of Shivadass and Shivadass (Law Chambers) but remain solely of the author(s). For any further queries or follow up, please contact [email protected].

Introduction

The Ministry of Commerce and Industry has recently released a notification dated August 17, 2021, wherein the rates of eligible duty scrips were notified under the “Remission of Duties and taxes on Exported Products” Scheme (‘RoDTEP’). The core objective of RoDTEP was to remit the duties paid by industry players for products exported from India. This was expected to boost domestic manufacturing sectors since the duties and taxes including the ones that were not covered by any other scheme (specifically GST refund/ rebate or Customs drawback), were being remitted back to the taxpayers for the first time.

In this regard, it is discernable that despite the Government’s intention to incentivize and promote exports from India, the World Trade Organization (‘WTO’) imposed certain measures to restrain countries, whose threshold of development has surmounted the specified limit, from extending support vide various schemes to the exporters. The said restriction had been imposed vide ‘Subsidies and Countervailing Measures’ (‘SCM’) agreement introduced by the WTO. Owing to the SCM agreement, the Government of India began considering various alternatives which could boost export from India and be compliant with the WTO mandate simultaneously.

Although the scheme was met with public appreciation at the time of its announcement, the Notification above, was met with great disdain from the industry and has dampened the spirits of exporters primarily due to the following reasons:

1. Low rates of remission for duties and taxes paid on products intended for export;
2. Exclusion of various key industries like Pharmaceuticals, Steel, Chemicals, Export Oriented Units including Bio-tech parks, EHTP, SEZ, FTWZ and custom-bonded warehouses.

Issues with erstwhile MEIS scheme

 The current Foreign Trade Policy (2015 – 2020) has been extended till March 31, 2022, vide Notification dated September 28, 2021, the Merchandise Export from India Scheme (‘MEIS’) was also in effect until the introduction of RoDTEP. The primary reason for bringing RoDTEP into existence was due to various systemic issues faced during the MEIS scheme, some of which are as follows:

A) Substantial delay in issuance of MEIS scrips;
B) Deviation in the entitled value and the value of the scrip;
C) Erroneous adoption of foreign exchange rates;
D) Delayed operationalization of e-commerce module for MEIS.

In addition to the above issues, there was substantial delay in deploying the ‘Risk Management System’ under the MEIS scheme which was the core ground for replacing the MEIS scheme. The domino effect of such deployment delay was reflected in the issuance of scrips under MEIS, and all these systemic issues persisted despite various attempts to address the same. Combined with the absence of any refund for certain duties and taxes paid, it was clear that an overhaul was essential since repairs, even at a microscopic level, did not yield any substantial difference in the overall scheme of things.

In the present scenario, the newly introduced RoDTEP was expected to extend benefit to exporters by refunding such taxes/duties which were inbuilt in the cost of manufacturing, distribution, logistics, etc. of the product to be exported. Despite such jubilant hopes on RoDTEP, the notification dated August 17, 2021, had completely turned the tide for exporters expecting similar or better benefits for their business activities, than those extended under MEIS scheme. The major shortcomings in the scheme are as follows:

A) Reduction in eligible rates of remission

The rate of benefit under the erstwhile MEIS scheme were at 3% / 5% / 7% whereas the highest rate under RoDTEP hovers a little over 4% and goes all the way down to 0.1% which reduces motivation of the industry to hike the frequency and export. The substantial reduction in the rate of benefit has eroded the confidence of the industry sellers who intend to avail the benefit of the same.

B) Preclusion of various key sectors

The domestic sectors were confounded when the rates of remission were notified since certain key sectors were excluded from RoDTEP, which significantly contributed to the inflow of foreign exchange in the past. Much to the dismay of the industry, the benefit available during the erstwhile MEIS regime was not made available to Chapters 28, 29, 30, 61, 62, 63, 72, and 73 of Schedule I of the Customs Tariff Act, 1975. The aforesaid chapters of the Customs Tariff Act cover the following items:

Despite massive contributions by the aforesaid sectors, they have been excluded from receiving any benefit with respect to exports. However, benefits of RoDTEP have been conferred upon specific industries like Automobile, Plastics, Gems & Jewelry, electronics etc.

C) Restriction on mode of dispatch:

Under the erstwhile MEIS scheme, the mode of dispatch of the export products was not a condition for eligibility as the benefits were available irrespective of the mode in which they were transported. Under the said scheme, exports made through a post office or courier were eligible transactions for claiming benefits of duty credit scrips. However, under RoDTEP, exports made through courier or through a foreign post office are considered to be ineligible for claiming benefits.

The said ineligibility would render an exporter with no other option except to opt for alternative methods of transportation that would significantly reduce the amount of logistics traffic through government services like India post. Further, private players may occupy this space for logistics thereby causing an increase in the overall cost for the exporter. Ultimately, the impact of such increased cost would lead to higher cost of sale of exported goods.

D) Administrative difficulties to exporters during transitional period

The rates for RoDTEP have posed certain peculiar problems for the exporters and their customers. An export undertaken based on a pre-existing order, wherein the price negotiated after due consideration of the benefit available under MEIS scheme, would lead to a non-budgeted loss after the introduction of RoDTEP. Consequently, the parties will have to re-negotiate the price which may or may not be an adequate compensation for the importer. In the alternative, the exporter incurs a loss in respect of the price of goods which would be lower than the selling price.

Impact of the rate notification dated August 17, 2021

 With the waning pandemic and the gradual improvement in the trading sector, RoDTEP was a beacon of hope for exporters who witnessed a complete closure of borders back in 2020 which had eroded businesses. However, the Notification dated August 17, 2021, brought disappointment and a bleak outlook of trade. The exclusion of certain key sectors of the industry which are significant contributors to the country’s GDP and foreign exchange reserves, has not been appreciated by the industry.

Therefore, the current RoDTEP scheme, is an unmemorable scheme by the Government of India and it remains to be seen whether there would be any incentive for domestic manufacturing units. In the alternative, subject to the fact that there may not be any changes the RoDTEP scheme could remain thoroughly under-utilized and deter major manufacturers from setting up a unit manufacturing goods for export.

*The authors are Senior Associate and Associate respectively, with Shivadass & Shivadass (Law Chambers). The views expressed are strictly personal. The contents and comments of this document do not necessarily reflect the views/position of Shivadass and Shivadass (Law Chambers) but remain solely of the author(s). For any further queries or follow up, please contact [email protected].

Policy Developments Corner

• The Kerala Governor promulgates the Kerala Industrial Single Window Clearance Board and Industrial Township Area Development Ordinance 2021. The ordinance resulted in the constitution of Grievance Redressal Committees at the State and District level. Click here to read the ordinance.
• The Kerala Directorate of Industries & Commerce has launched a website ( http://schemes.industry.kerala.gov.in/public/index.php/schemes) exclusively for availing the benefits under the schemes launched by the Directorate. Click here for more details.
• The Directorate General of Foreign Trade has extended the current Foreign Trade Policy till 31.03.2022 vide Notification No.25/2015-20dated 28th September 2021.
• The Directorate General of Foreign Trade extended the date for the mandatory filing of the Non Preferential Certificate of Origin through the Common Digital Platform to 31st October.
• The Kerala Industries Minister P. Rajeeve has launched the meet-the-investor series of interactions with investors to promote new ventures in the State.
• The Kerala Industries Minister P. Rajeeve announced the government’s plan to set up Industry Clinics to help struggling industrial units with a special focus on MSMEs. The Cochin Chamber had strongly advocated for setting up MSME clinics in the last couple of years.

Click here