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Exporters seek longer extension of tax refund scheme
June, 20th 2011

The central government's decision to extend the validity of Duty Entitlement Pass Book (DEPB) scheme, a tax refund system for exporters, for only three months has not gone down well with the Indian export community.

While a section of exporters feels that the scheme should have been extended till the introduction of the Goods and Services Tax (GST), others say its short-term extension would create uncertainty.

The government has recently extended the validity of the DEPB scheme till Sep 30 after exporters called for a continuation of the popular sop.

Earlier, the government had indicated that the scheme would be withdrawn at the end of this month.

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.

The scheme has been continuing for the last 14 years, covering nearly 52 per cent of exports.

The government has apparently set up a committee that would seek to replace DEPB with the duty drawback scheme.

"The replacement of DEPB with the duty drawback scheme is ok. But for this, rates of around 2,750 items should be calculated. It is not easy to calculate all these things in only three months," Ramu Deora , president of the Federation of Indian Export Organisations (FIEO), said over phone from Mumbai.

"If it is possible within three months then it is all right. If not possible, then the DEPB scheme should be there till the GST is introduced," Deora said.

He said that the duty drawback scheme should incorporate customs duty, indirect tax, sales tax and other transportation costs.

"Members of chambers of commerce should be included in the committee which will work on the replacement of the DEPB with a duty drawback scheme," Deora added.

The present foreign trade policy of India is from 2009 to 2014.

The government's reasoning for a five-year trade policy was to provide exporters with a stable policy regime, which would enable them to factor in the benefits of various export incentive schemes into their financial workings.

According to exporters, the DEPB scheme has served India's export growth well.

Rakesh Shah, former chairman of the Engineering Export Promotion Council (EEPC), said the short-term extension of the scheme will lead to uncertainty.

"DEPB was very popular with the exporters' community. It was offsetting some of the cost disadvantages which the Indian exporters face," Shah said.

"The duty drawback scheme is a very complex exercise and the number of products it would cover is very few. Especially small and medium enterprises will not be able to take full advantage of this," he pointed out.

According to Shah, if the government wanted to target $500 billion export by 2014, then the continuation of the DEPB was essential.

"Whatever item was under the DEPB, it should also be in the duty drawback scheme," he added.

Congratulating the government for extending the DEPB scheme for three months, Sanjay Budhia, chairman of the Confederation of Indian Industry ( CII ))'s national committee on exports, said the scheme should be extended till March 31, 2012, or till the GST was introduced.

"The government should take into account how the exporters will be compensated for high rate of interest, port charge and electricity charge. the duty drawback scheme should take care of other cost disadvantages of Indian exporters," he said.

According to him, China was currently giving 12 to 17 percent export rebate.

"Whatever scheme the government introduces, it must take care of cost disadvantages faced by the Indian exporter," Budhia added.

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