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The Finance Ministry can fix a rate of up to 3 per cent lower for the new duty drawback scheme that will replace the Duty Entitlement Pass book (DEPB) scheme from October 1.
Sources told Business Line that the Ministry has already received recommendations from the Saumitra Chaudhuri panel in this regard. Now, work is under way to finalise the scheme.
The panel has also suggested capping of new duty drawback rates at 5.5 per cent, the sources added. Currently corporates get DEPB benefit on an average rate of 9 per cent. On the other hand, average duty drawback rates when the Cenvat facility is used are 13-14 per cent.
Despite this, DEPB is considered more attractive as the exporters get duty-free scrips or entitlements based on the value of goods exported to pay for import duties. Although the assumption is that all the inputs have been imported, exporters are allowed to use up to 50 per cent domestic inputs.
Thus, first the exporters can get credit for the excise duty paid on domestic inputs, even as they get entitlement on the basis of the total value of the export. Second, the duty draw back rates neutralise customs and excise duties on the inputs used for products that are exported.
The Commerce Ministry is still pushing for an extension of the DEPB scheme. This was discussed during a meeting between the Finance Minister and the Commerce Minister. But the Finance Ministry is in no mood to oblige.
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