Depb Scheme Fuels Fears Of Unprecedented Duty Evasion

An unprecedented hike of 50-60 per cent in duty evasion is expected as a result of the duty entitlement passbook scheme for exporters announced in the new export-import policy, say revenue department officials. The scheme has become effective from April 1, 1997.

The steep anticipated hike in evasion roughly translates into a yearly loss of Rs 5,000-6,000 crore to the national exchequer, said the officials. The passbook scheme allows exporters to export their merchandise. A credit rating is fixed for the exporters against the value of the export consignment. They can use the credit limit to import goods, not necessarily goods related to the exports. According to officials in the revenue department, the scheme also creates a dichotomy between two important revenue departments of the government namely the directorate general of foreign trade and the customs authority as regards the implementation and regulation of the scheme, which is a serious deterrent to the success of the scheme. The passbook scheme, which has been a step forward in liberalising the regulations for exporters, has evoked mixed reactions from the revenue department. It has replaced other schemes like Vabal and Qabal which have been dropped for being regressive. The scheme allows the DGFT officials to fix the credit rating for exporters against the value of their consignments.However, the fixing of credit limits should logically be assigned to customs officials who are more geared towards tasks such as export evaluation, emphasise revenue officials.

 

By allowing the DGFT officials to fix credit limits for exporters on one hand and making the customs department responsible for duty evasion on the other, the policy creates a dichotomy between the two department, instead of making them collaborate, say the officials.

Moreover, the passbook scheme allows exporters to import any goods against the credit limit fixed against the exports. This has led to adverse repercussions since exporters are importing any merchandise, not only from the OGL but also from the SIL which includes consumer goods and electronics, the officials point out.

For example, an exporter of machine tools could be importing video recorders by using the passbook scheme. The extent of over- or under-invoicing which is possible in this scheme is unimaginable and hence the duty evasion is expected to increase steeply, they said.