Govt asks exporters to live without tax refund DEPB scheme

Commerce Ministry today send out a message to exporters that their "noise" over discontinuation of tax refund scheme-DEPB from June is not likely to be heard by the government.

However, it will take up with the Finance Ministry a proposal for increasing export incentives under different initiatives, Commerce Secretary Rahul Khullar said here.

He said that on demand from exporters, a proposal was made to the Ministry of Finance for further extension of the Duty Entitlement Passbook (DEPB) Scheme.

Under it, exporters are given refunds of tax incidence on the import content of their export products.

"Yes, there is a proposal made to the Ministry of Finance. But to the best of my understanding it has very little traction at this point of time," Khullar told reporters while releasing trade data.

Charging exporters with "waking up" at the last hour, he said there was a merit in the Finance Ministry's argument that when exporters are doing so well "where is the need to continue sustaining them by throwing money at them."

The government payout on account of DEPB to exporters is worth Rs 8,000 crore per annum.

The 14-year-old scheme is the most popular among exporters, especially in the engineering including automobiles sectors.

The tax refund mechanism is to end on June 30, as it was considered to be non-compliant with the World Trade Organisation rules.

Khullar said the exporters can always draw the tax rebates through other windows like Duty Drawback Scheme.

However, the rates of refund in the drawback scheme is much lower than those available under DEPB.

President of the Federation of Indian Export Organisations (FIEO) Ramu S Deora had cautioned on Tuesday that exports after touching $246 billion in 2010-11 would drop to less than $200 billion, if DEPB is withdrawn.

Rebutting Deora's argument, the Commerce Secretary said, "exporters get used to the idea that once you get subsidy scheme...If you make sufficient noise just around the time when its going to be sunsetted (end) you might be able to avert the possibility... I don't think DEPB on its own is responsible for huge exports growth".

He said exporters have been told as early as August 2009 that curtains would draw on DEPB on June 30 this year.

Asked whether the Indian exporters would not be put at disadvantage as compared to their competitors from China, Khullar said, "I have fiscal problem, China does not have so China can throw money I cannot."

Exports in April have grown by over 34%.