The Hindu : Business : DEPB scheme extended further till March 31, 2008

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Saturday, Mar 31, 2007
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DEPB scheme extended further till March 31, 2008

Special Correspondent

WTO-compatible alternative scheme being worked out

NEW DELHI: The Central Government has issued a notification extending the Duty Entitlement Pass Book (DEPB) scheme, which serves over 50 per cent of India's merchandise exports, by another year to March 31, 2008. The notification issued by the Union Finance Ministry on Thursday ends uncertainty among exporters, as the scheme was to end on Saturday [March 31].

The step has been taken in view of doubts in official circles whether the scheme is compatible with trade regulations of the World Trade Organisation.

The Commerce Ministry has already asked the National Council of Applied Economic Research (NCAER) and the Economic Law Forum to work out an alternative scheme, said senior Commerce Ministry officials. There are other anomalies in the scheme that are being dealt with through inter-Ministerial consultations.

The scheme would be replaced by a WTO compatible scheme which would cover all taxes including cess and duties charged by states and the recently introduced value added tax.

Earlier the extension of the DEPB scheme was to be a part of the annual amendments to the Export Import Policy 2004-09. But the policy announcement has been delayed till the third week of April, said the sources.

Exporters had argued that any alternative scheme should be announced at least six months before withdrawing the existing DEPB scheme because exports are made with a long-term plan and prices quoted to customers must factor the duty drawback in the cost.

The DEPB scheme has had an uncertain existence ever since it was reintroduced in the foreign trade policy of 2004-09. A few months after the scheme was notified, Union Minister for Commerce and Industry Kamal Nath said that it would be replaced within six months. However, a few months later the Government said the scheme would be withdrawn at the end of the current fiscal year.

The objective of the DEPB is to neutralise the incidence of customs duty on the import content of the exported product. The neutralisation is provided by grant of duty credit against the export product. Under the scheme, exporters apply for credit, as a specified percentage of the FOB value of exports, made in freely convertible currency or payment made from the Foreign Currency Account of the SEZ unit in case of supply by a DTA unit to an SEZ unit.

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