Duty drawback office to regain importance

The duty drawback directorate on the fourth floor of Jeevandeep building on Parliament Street wears a deserted look. Not many visitors, unlike the finance ministry’s other wings in North Block. Even the department of financial services on the third floor of the same building sees more footfalls in a day than the drawback office, that used to witness long queues in the 1990s.

The drawback directorate lost its sheen with the introduction of the Duty Entitlement Passbook (DEPB) scheme in 1997. DEPB, operated by the commerce ministry, became hugely popular with exporters, as it gave benefits not provided under duty drawback. With DEPB to come to an end in September, the focus will again shift to the drawback office, run by a handful officers under a joint secretary.

To address industry’s woes on discontinuation of the DEPB scheme, the finance ministry will launch a revamped duty drawback scheme on October 1. Though it won’t give ‘double benefits’ as under the DEPB scheme, the ministry is trying to make it hassle-free for exporters in applying for tax refunds. More items are likely to be brought under the proposed drawback scheme to help exporters availing tax benefits in the DEPB scheme.

Finance ministry officials said they were in discussion with the commerce ministry and the industry to understand their concerns and address these, wherever possible, in the new scheme.

The revenue department is trying to make the system “fairly efficient”, with little interaction needed for exporters. This would mean exporters may not have to queue before the drawback office to get their refunds.

With the DEPB facility, exporters get credit for customs duty paid on inputs used in making export goods. Under duty drawback, they receive duty-free scrips which can be used to pay import duties. DEPB is based on the assumption that the exporter has used duty-paid imported inputs. Duty drawback, on the other hand, neutralises levies paid on inputs.

CHANGES
The advent of technology has also changed the way the drawback office deals with exporters. Unlike the earlier system, where exporters would make a beeline here to get orders for their refunds at the earliest, the payments are now made through the commissionerates to the applicant’s bank account.

“One does not have to pay money now to get his refund. All transfers are automatic. The main worry of exporters now is that the kind of benefits they were getting in DEPB will not be given in drawback, but they are coming to terms with that,” said an official.

The drawback rates are likely to be announced on October 1 this year, unlike July 1 in previous years. The delay has been caused due to a three-month extension given to the 14-year scheme after its expiry in June. However, from next year onwards, the finance ministry may switch to July 1 for announcing rates. This is about four months after the Budget was tabled in Parliament. The finance ministry holds discussions with the industry after the Budget is passed and a decision on rates then taken.

The revenue outgo towards the DEPB scheme has increased over the years, while it has come down for duty drawback scheme. In 2008-09, the government paid exporters Rs 12,120 crore under duty drawback, whereas the outgo towards DEPB was Rs 7,092 crore. In 2009-10, the drawback payment came down to Rs 9,231 crore, whereas for DEPB it increased to Rs 8,027 crore. The government has paid a little over Rs 8,000 crore towards DEPB in 2010-11.