RoSCTL — Textile Export Incentive

The Rebate of State and Central Taxes and Levies (RoSCTL) scheme was notified by the Ministry of Textiles vide Office Memorandum F.No. 14/26/2016-TT dated March 7, 2019 and subsequently extended, providing rebate of embedded state and central taxes on export of apparel and made-up articles. The scheme covers garments (Chapter 61 and 62 of ITC-HS) and made-up articles (Chapter 63 of ITC-HS) that qualify as 'apparel and clothing accessories' and 'other made-up textile articles'; yarn, fabric, and fibre exports are outside the scope of RoSCTL (and are eligible under RoDTEP instead). The rebate rates are product-specific, notified in the RoSCTL rate schedule, and are expressed as a percentage of the FOB value of exports. With effect from January 1, 2021, RoSCTL benefits are administered through the ICEGATE duty credit ledger system identical to RoDTEP, replacing the earlier paper scrip mechanism.

RoSCTL and duty drawback can both be claimed simultaneously on the same shipment, but they cover mutually exclusive tax categories. The duty drawback rate for apparel under the All Industry Rate (AIR) notified under Section 75 of the Customs Act 1962 covers only the customs duty component on imported inputs (Schedule I rates), specifically excluding any state levy or embedded central tax component that is covered by RoSCTL. The Ministry of Textiles' RoSCTL notification explicitly carved out that the scheme covers state and central taxes not covered by drawback or GST refund. Exporters must declare on the Shipping Bill that they are claiming RoSCTL (not RoDTEP) on eligible textile products, and separately claim drawback under the appropriate AIR schedule. Claiming both RoSCTL and RoDTEP on the same Shipping Bill is not permitted as they are mutually exclusive for textile apparel items.

RoSCTL duty credits are credited to the exporter's Duty Credit Ledger on ICEGATE and can be used to pay Basic Customs Duty on any import or transferred to any other importer/buyer on the ICEGATE platform under Customs Notification No. 14/2021-Customs (N.T.) dated February 26, 2021. Once transferred, the credit cannot be re-transferred, making the buyer's due diligence important. For smaller exporters who do not import significant dutiable goods, the most practical monetisation route is selling the duty credit at a discount (typically 90–97% of face value) to importers, which is commercially well-established. The transfer is reflected in both parties' ledgers electronically; there is no physical document. Income from sale of duty credit scrips/credits is taxable as business income in the hands of the exporter, and any discounts received on purchase are taxable as business income for the buyer under Section 28 of the Income Tax Act 1961.

For apparel manufactured on job-work basis by a third-party unit and exported by the brand owner or merchant exporter, the Shipping Bill must be filed in the name of the exporter (the entity holding the export contract and title to goods). The exporter needs to maintain job-work agreements, invoices from the job-worker, and proof that fabrics/inputs were supplied to the job-worker, consistent with the records required under GST job-work provisions under Section 143 of the CGST Act 2017 and Rule 45 of the CGST Rules 2017 (maintaining Form GST ITC-04). For RoSCTL, the relevant ITC-HS classification and FOB value on the Shipping Bill determine the rate; there is no requirement to trace the job-worker's embedded taxes separately, as the RoSCTL rate is predetermined and administratively set. The exporter must ensure the job-worker's delivery challans and completion certificates are archived for potential customs audit under Section 17 of the Customs Act 1962.

RoSCTL was initially notified for March 2019 to March 2020, then extended multiple times, and is currently extended through the Foreign Trade Policy 2023 cycle (effective April 1, 2023 to March 31, 2028) under Ministry of Textiles communications. The scheme requires periodic government extension notifications, and rates are subject to revision; the rate schedule can be amended by the Ministry of Textiles in consultation with the Ministry of Finance, so exporters should monitor the official Gazette and Ministry of Textiles circulars. From a WTO compliance standpoint, RoSCTL is structured as a duty rebate (not a subsidy) since it aims to remit actual embedded costs, distinguishing it from prohibited export subsidies under the WTO Agreement on Subsidies and Countervailing Measures (ASCM) Article 1 read with Annex I; this legal basis supports its continuation. Exporters should build contingency pricing into long-term supply contracts given the scheme's renewability risk.