States may be asked to help find DEPB replacement
The Centre plans to devise an alternative scheme to reimburse input taxes paid by exporters in discussion with states.
By Amiti Sen, ET Bureau |
NEW DELHI: The Centre plans to devise an alternative scheme to reimburse input taxes paid by exporters in discussion with states. The proposed model will replace the existing export incentive scheme, known as Duty Entitlement Pass Book (DEPB), which will be phased out by 2010, a government official said.
���Commerce department has asked the finance ministry to get the empowered committee of state finance ministers to take up the issue of an alternative duty reimbursement scheme for exporters. Since a large component of taxes paid by exporters are levied by state governments, they will have an important say in any broad-based input duty reimbursement scheme,��� a commerce department official, who did not wish to be named, told ET.
The new scheme will replace the existing incentives, such as the DEPB and the duty drawback schemes (which reimburse exporters a part of the input taxes paid by them), to ensure that exporters are not losing their competitiveness by paying taxes on inputs. However, existing schemes do not reimburse all taxes, especially those paid at the local levels.
The DEPB scheme, which was recently extended by the government till the end of 2010, is not recognised as a legitimate incentive by multilateral trade body. The DEPB scheme, which reimburses the Customs duty component, is also not compliant with World Trade Organisation (WTO) norms since the way it is calculated and disbursed is non-transparent.
���The government has been trying to look for an alternative scheme for a few years now. Since the empowered group of state finance ministers have finance ministers from all states, we are hopeful that they will come up with some useful suggestions,��� the official added.
Some time back, a committee set up by the Centre had come up with a scheme that sought to reimburse both Central and state taxes paid by exporters on their inputs. However, due to some legal and other complications about who would foot the bill for the reimbursements of state level taxes, the proposal had to be given up.
���The empowered group of state finance ministers is already working on the GST structure and road-map. It is, therefore, in a good position to recommend the input tax reimbursement scheme which would be in line with the GST scheme,��� the official said.
A committee was also set up under Planning Commission member Anwarul Hoda to propose an alternative input tax reimbursement scheme for exporters. The committee was unable to come with an alternative scheme due to differences between the commerce department and the finance ministry on how the scheme would be financed and had recommended a continuation of the DEPB scheme for some time.
���Commerce department has asked the finance ministry to get the empowered committee of state finance ministers to take up the issue of an alternative duty reimbursement scheme for exporters. Since a large component of taxes paid by exporters are levied by state governments, they will have an important say in any broad-based input duty reimbursement scheme,��� a commerce department official, who did not wish to be named, told ET.
The new scheme will replace the existing incentives, such as the DEPB and the duty drawback schemes (which reimburse exporters a part of the input taxes paid by them), to ensure that exporters are not losing their competitiveness by paying taxes on inputs. However, existing schemes do not reimburse all taxes, especially those paid at the local levels.
The DEPB scheme, which was recently extended by the government till the end of 2010, is not recognised as a legitimate incentive by multilateral trade body. The DEPB scheme, which reimburses the Customs duty component, is also not compliant with World Trade Organisation (WTO) norms since the way it is calculated and disbursed is non-transparent.
���The government has been trying to look for an alternative scheme for a few years now. Since the empowered group of state finance ministers have finance ministers from all states, we are hopeful that they will come up with some useful suggestions,��� the official added.
Some time back, a committee set up by the Centre had come up with a scheme that sought to reimburse both Central and state taxes paid by exporters on their inputs. However, due to some legal and other complications about who would foot the bill for the reimbursements of state level taxes, the proposal had to be given up.
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While the common goods and services tax (GST), which is supposed to be in place by next year, might take care of a substantial part of the problem as the Centre can straightaway reimburse the Central GST component to exporters, there is still a lack of clarity on how the state-level GST will be reimbursed.���The empowered group of state finance ministers is already working on the GST structure and road-map. It is, therefore, in a good position to recommend the input tax reimbursement scheme which would be in line with the GST scheme,��� the official said.
A committee was also set up under Planning Commission member Anwarul Hoda to propose an alternative input tax reimbursement scheme for exporters. The committee was unable to come with an alternative scheme due to differences between the commerce department and the finance ministry on how the scheme would be financed and had recommended a continuation of the DEPB scheme for some time.
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