Discuss the implications of India's graduation from ASCM Annex VII for its export promotion architecture, including SEZs and EOUs.

The WTO Agreement on Subsidies and Countervailing Measures (ASCM) bans export subsidies. Annex VII had exempted low-income developing countries from this ban. In the US–India dispute DS541, the panel held that India had graduated from this special treatment and had no further transition period [1]. This forces India to move from export incentives to WTO-compatible tax remission.

Implications for the export promotion toolkit

• MEIS found unlawful: the panel ruled that MEIS, EPCG, DFIS and the EOU/EHTP/BTP schemes were prohibited subsidies, and set deadlines to withdraw them [1].
• Move to remission: RoDTEP was designed in line with ASCM. It refunds only embedded, un-rebated Central, State and local levies, and it replaced MEIS tariff line by tariff line [2].
• Bigger fiscal cost: RoDTEP was allocated ₹18,233 crore in FY 2025–26, covering about 10,780 HS lines [3].

Implications for SEZs and EOUs

• SEZ duty exemptions challenged: the panel gave the longest withdrawal deadline, 180 days, to the SEZ Scheme. This shows how deeply SEZ incentives were affected [1].
• Coverage withdrawn, then restored: RoDTEP for AA/EOU/SEZ exports was dropped for a period and restored only from 1 June 2025 [3]. SEZs make about 21% of India's exports [5], so the gap was costly.
• New role for zones: with tax incentives limited, SEZs must compete on infrastructure, logistics and single-window clearances.

Continuing challenges

• Countervailing duties (CVDs): settling DS541 by mutual agreement in July 2023 [1] did not end scrutiny. The US imposed a 172.08% CVD on Indian door springs and named RoDTEP as one of the subsidies [4].
• The amount test: ASCM allows a tax refund only if it is not more than the tax actually paid [7]. RoDTEP pays a common rate per product as a percentage of FOB value, so importers can argue that some exporters get back more than they paid [5].
• Unpredictability: short extensions, the latest only up to 31 Dec 2026 [6], make long-term export contracts harder to price.

In sum, graduation has turned India's export support from subsidy-led to compliance-led. The way forward is a multi-year RoDTEP framework, a published method for setting rates, and an option for exporters to claim their actual taxes, as Duty Drawback's brand rate allows [5]. Together with SEZ reforms focused on infrastructure, these would match the "export goods, not taxes" principle and India's export ambitions.