Govt extends DEPB scheme by 3 months

The government has decided to give one last fresh lease of life to the Duty Entitlement Pass Book (DEPB) scheme by extending its validity till September 30, even as an alternative scheme is in the works.

The DEPB is a reimbursement of basic and special Customs duty paid by an exporter on an imported input used in the export product. The benefit is given by way of a grant of duty credit against the export product at specified rates.

“This is a three-month reprieve, within which time we will work out a mechanism that would ensure smooth transition from DEPB to duty drawback, because no matter what, this scheme will have to end by September. So, ideally, this is not an extension but a reprieve,” commerce secretary Rahul Khullar told Business Standard.

The Directorate General of Foreign Trade is expected to issue a notification soon on this.

The government has apparently set up a committee that would seek to replace DEPB with the duty drawback scheme. The government had lost revenue of around Rs 8,000 crore under the DEPB scheme, said finance and revenue secretary Sunil Mitra here today. The scheme is also considered to be against the World Trade Organisation rules, as it is a direct subsidy.

The 14-year DEPB scheme is extremely popular among exporters, covering nearly 52 per cent of exports.

The duty drawback, which reimburses the customs duty component, covers 15-20 per cent of exports.

Some major beneficiaries are engineering products, chemicals, plastics, leather, sports goods, food products, handicrafts, electronics and textiles. Steel Authority of India, Bajaj, Reliance Industries and Tata Steel are some companies getting huge benefits under the scheme.

“We have asked exporters to present a case before us, and we will analyse the needs on a case-to-case basis, instead of a single drawback rate for all. There can also be a fixed brand rate. Today, some industries are getting more in the DEPB scheme and less in the drawback. For some, it is just the reverse. This is the right opportunity for exporters to express their concerns. Because after this period, not once will the scheme be extended,” Khullar said.

Exporters had been urging extension of the scheme in the absence of an alternative option. The rates of refund in the drawback scheme are much lower than those available under DEPB, according to Ramu S Deora, president of the Federation of Indian Export Organisations.

Deora said DEPB should be extended till the introduction of goods and services tax, as it will not be possible to fix drawback rates for all the products for which DEPB rates exist for three months.

The main difference between DEPB and the duty drawback schemes is that DEPB is disbursed in the form of DEPB scrip, while the drawback is taken as cash. Further, DEPB is administered by the commerce and industry ministry, while the drawback is administered by the revenue department under the finance ministry.