Better coordination needed on duty payback scheme: CAG

CAG raises questions on incorporation of DEPB into Duty Drawback Scheme

The Comptroller and Auditor General has recommended better co-ordination and implementation of incentives given to exporters under the Duty Entitlement Passbook Scheme (DEPB).

The scheme gives back to exporters the duty charged on raw-material goods imported by them for making an product for export. The export incentive was discontinued from September 2011 and was incorporated into the Duty Drawback Schedule from October 1, 2011.

DEPB was formulated to neutralise the Customs duty on the deemed import content of the export product.

In its report, the CAG has highlighted some “implementation issues and cases of operational malfunction” in the utilisation of the DEPB scheme by the exporters.

“DEPB credits were not related to the actual incidence of duty and despite earlier CAG reports, the scheme implementation was mired in familiar policy misinterpretations and malfunctions. DGFT has not carried out any outcome assessment of the efficacy of the scheme with regard to its performance nor had a revenue impact assessment of the import duty neutralisation been done before implementing the scheme,” the report stated.

 

The CAG has, therefore, suggested an impact assessment study on the scheme by the Department of Commerce and Department of Revenue by taking into account the overlapping components of similar scheme based rewards and incentives such as those laid out in the free trade agreements

 

The CAG has also raised questions on the incorporation of DEPB into the Duty Drawback Scheme, which is a duty remission scheme and the rates for Drawback Scheme are calculated on the basis of actual inputs used in manufacturing of the export product.

 

According to the CAG, some products that are based on DEPB rates were fixed at higher rates and they were not commensurate with the actual incidence of duties and hence resulted in excess revenue forgone of Rs.5,858 crores in 2011-12.