NEW DELHI: The government plans to extend its controversial but popular import duty reimbursement scheme—the
DEPB scheme—till the end of the financial year as it looks to bail out the export industry, which employs roughly 150 million people.
Indian exporters have been hit hard by the global recession that has seen demand drying up in the US and Europe—their largest markets. They have been demanding the continuation of incentives on import of inputs, at least till the unified goods & services tax (GST) is in place.
While the DEPB scheme was extended till December-end in the interim budget, exporters were wary of an abrupt discontinuation of the scheme, which could hit them at a time when countries such as China, Pakistan and Bangladesh were giving huge incentives to exporters.
“There is certainly a case for extending the DEPB scheme till the end of the financial year and we will take it up with the finance ministry. We will try to get it done as part of the foreign trade policy (FTP), which will be announced next month,” said a commerce department official, who asked not to be named.
The DEPB scheme reimburses Customs duty paid on inputs by exporters. Exporters are given duty-free scrips, which exempt them from paying import duty on any product (except the ones restricted by the government) up to a specified limit. Since the scheme is also for exporters who use domestic inputs or import substitutes, the duty-free scrips can be sold by them to other importers.
Although the industry has demanded a five-year extension of the scheme, it looks improbable. Once GST (which will subsume most of the local levies at both the central and state levels) is in place next year and the government puts in place a mechanism for its reimbursement to exporters, a lot of existing schemes will have to be scrapped.
“Since the finance ministry has been pushing for the discontinuation of the scheme for a long time, the chances of the scheme continuing once GST is in place are remote,” the official said.
The finance ministry has been trying to do away with the DEPB scheme for a long time on the ground that lack of transparency makes it actionable at the World Trade Organisation (WTO). The government, however, has not yet been able to find an alternative.
Pressure from the industry, which favours the DEPB scheme to the alternative duty drawback scheme as the rate of reimbursement under the scheme is higher and exporters don’t have to wait long for realisation, has also played a role in giving the scheme a prolonged life.
Source : The Economic Times