DEPB likely to be extended beyond Dec 31

NEW DELHI: The popular tax incentive to exporters, duty reimbursement on imported inputs going into exports, is likely to be extended beyond the end of the year to at least till the time the proposed goods and services tax, or GST, is rolled out.

The commerce department could also seek continuation of the duty entitlement pass book scheme, or DEPB scheme, after the GST is introduced as the import duty paid on inputs used by exporters is not covered by the new tax.

“It is more or less clear that the DEPB scheme would stay beyond December 31 2010. However, we do not yet know what will be its fate once the GST is in place,” a commerce department official told ET.

The GST, a single indirect tax levy that will replace a plethora of indirect taxes including sales tax, is expected to be rolled out from the next fiscal. Most cesses, charges and local taxes would also be subsumed under this tax.
The commerce department has had discussions with the finance ministry over continuation of DEPB till the GST is implemented, the official added.

The DEPB scheme is popular amongst exporters as it reimburses customs duty paid by them on inputs through duty-free scrips that can be sold freely in the market. Since the reimbursement rates are pre-determined , based on the value of exports, exporters don’t have to necessarily import inputs. In that sense, it is a kind of subsidy for exports.

The government has been considering replacing it with a new scheme that would reimburse state taxes, as in the current DEPB scheme the reimbursement is not directly related to imports by exporters. However, due to legal complications and disagreement between state governments and the Centre over who would hand out the reimbursements , the new scheme could not take off. The scheme has, therefore, been extended on a piecemeal basis, the latest extension effective till December 31, 2010.

The official said that since the GST will only reimburse excise duty and local levies and not basic customs duty, there was a clear case for continuing with the DEPB even when GST is in place.