The Hindu Business Line : New scheme soon to compensate exporters for State-level levies

At a glance
The scheme is replacing the Duty Entitlement Passbook Scheme.
To only cover levies at the State level that remain unrebated.
Will be in place in a fortnight’s time; to be fully run by Centre.

G. Srinivasan

New Delhi, Sept. 29 The new scheme replacing the Duty Entitlement Passbook Scheme (DEPB) giving duty remission on imported inputs for exporters but providing reimbursement for State-level levies would be in place in a fortnight’s time after being cleared by the Union Cabinet, the Commerce Secretary, Mr Gopal K. Pillai, said.

Talking to Business Line here, Mr Pillai said once the DEPB scheme’s tenure is over by March 31, 2008, all the rates on DEPB would go to the existing duty drawback scheme. Meanwhile, the new scheme would run parallel with the DEPB till the end of the current fiscal.

The DEPB scheme was meant for reimbursement of customs duty, allowing the manufacturer to use partly or fully domestic inputs and giving refunds on the customs duty as if the domestic inputs had been imported, thus promoting the use of domestically produced inputs in the production of exported products.

While those availing the DEPB scheme were not entitled for payments under the drawback scheme operated separately by the Revenue Department for reimbursement of customs duty, the additional customs duty/excise duty paid in cash or through debit under the DEPB scheme was adjusted as CENVAT credit or duty drawback.

Popular scheme

The DEPB scheme was a very popular one and as much as 30 per cent of Indian exports availed of the benefits under the scheme. However, payments under the scheme were held to be an export subsidy by investigating agencies in some of the country’s major trading partners viz, the European Union (EU) and the United States, which slapped countervailing duties on a few products imported from India.

Since the DEPB scheme is not the one for reimbursement of customs duty paid for import of inputs either before the exports or after the exports (as in substitution drawback scheme) and is freely transferable, it was rightly treated as a subsidy by India’s trading partners.

In this regard, the Department of Commerce pointed out that since schemes for reimbursement/exemption are already in vogue as far as indirect duties and taxes imposed by the Centre are concerned, there is no need to have another scheme for remission/reimbursement/exemption of these taxes.

Tax charge

However, bowing to the build-up of pressure from the exporting community that there are several State taxes and charges that are levied on the inputs used in the manufacture of the export product such as electricity taxes and octroi, it has now been decided to rebate these taxes.

Stating that the proposed new scheme is only for covering levies at the State level that remain unrebated, Mr Pillai said that “today such levies are not getting reimbursed, and to the extent that they would be reimbursed it is a bonus for the exporters”.

He clarified that the scheme would be fully borne by the Central Government.

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New scheme soon to compensate exporters for State-level levies