DEPB rate for exports tied to market value

The Drawback Commissioner has fired another bombshell on the DEPB scheme. In a circular issued on September 9, he says that the present market value (PMV) will form the basis of DEPB export valuation in all cases. The 10% cut off point in the Handbook of Procedures released by the commerce ministry for triggering PMV will not be honoured by the customs. The new system means that wherever the PMV, which includes retail margins and excise duty, is less than fob value, the DEPB will be restricted to half the PMV. For example, the DEPB rate on sports vests is 12%. The exporter is able to realise Rs 80 per piece in the foreign market. However, market investigations may show that the article is available on the footpath for Rs 15. In such cases, the exporter cannot get more than Rs 7.50 per piece even when his entitlement is Rs 9.60 per piece at the 12% rate. The department says that high value addition can be rewarded only up to a point. The circular empowers the customs field officers to override the DGFT Handbook. He is now duty-bound to start market enquires in all cases where the PMV is perceived to be less than declared fob price. This is regardless of the fact that the price is actually realised from the buyer as verified by the DGFT and the bank. The DGFT Handbook requires PMV declaration only when the DEPB rate is 10% or more. The PMV is not triggered where a value cap on the fob price limits the amount of DEPB. As of now, an exporter may declare a PMV lower than the fob value but the customs can still start market enquiries to establish an even lower value. The market value enquiry will be conducted by the Special Intelligence and Investigation Branch of the Customs House to prevent the bias of the assessing officer who examines the consignment for the let export order. This, exporters fear, will mean more delay and harassment. In the first circular on PMV issued in June â€™97, the PMV investigations were to be concluded within 30 days failing which the exporters declaration of fob value was accepted as final. Now the Commissioner can prolong the enquiry indefinitely after recording the reasons in writing. The fear of getting into an endless investigation will force exporters to push their CHAs to get the let export order ``at any costâ€™â€™. Special provisions for ``fraud, collusion, wilful misrepresentation and suppression of factsâ€™â€™ may result in an order for recovery of import duty and reopening of even five-year-old cases. In other words, an innocent importer who buys the freely transferable DEPB from the market is at risk for five years for the possible over-valuation of goods by somebody else. The current circular on extending the PMV scope is on top of the bombshell fired five months ago, on April 22, in which the Special Additional Duty (SAdd) exemption was withdrawn on DEPB. The exporters with the support of the commerce ministry have asked for revision of DEPB rates or restoration of the exemption but the department of revenue refuses to budge. Our own feeling is that the current measure is part of a campaign to kill the DEPB scheme. We may well find a circular soon which says that the DEPB rate should be applied on the PMV itself on the lines of MRP-based assessment followed in excise and import valuation, after allowing for a rebate for the taxes and retail margin. The cut-off point for DEPB entitlement at 50% of PMV is far too high. CBEC chairman M K Zutshi, while addressing the EPCH meet on shipping problems recently, said that exporters can expect compensation only to the extent their product faced a disadvantage in terms of a lower price in the foreign market compared to the domestic market. An incentive on the export price should make up for the loss on comparative sales to the domestic market. In a situation where the export price is more than that in the domestic market, the government is out of the picture. The exporter should get the margin from the foreign buyer. In any case, India does not need dollars any more, over-supply of the greenback is resulting in the killing of exports. Sixty per cent of the customs revenue is eaten away by export incentives, he said. Exchange control: The Reserve Bank is on a liberalisation spree. A set of four circulars were issued on September 12 to make life easier for general users and traders. Authorised dealers can now issue payments up to $500 without getting the client to fill out the tedious A2 form. Of course, the dealer must convince himself that the transaction is permissible, remittances for stock market speculation, lottery, tickets subscription to pornographic websites etc are not allowed. Cash payments will not be accepted for the forex remittance to prevent money laundering and tax dodging. Medical treatment abroad too is easier now. Estimates from doctors or hospitals are not required for release of exchange for up to $50,000, a simple declaration of purpose and payment by cheque is all that is required. The public sectorâ€™s monopoly on insurance has been broken. Now all companies registered with IRDA (Insurance Regulatory and Development Authority) can open accounts abroad and make remittances for re-insurance and claims. Reserve Bank permission is not required in most cases, the ADs (Authorised Dealers) can take their own decisions on the basis of guidelines. However, direct insurance with an entity outside India is not permitted, an IRDA-registered agency must come into the picture. Capital transfer in a limited way is allowed now. Foreign nationals can remit amounts up to $100,000 per year from legitimately acquired assets in India after discharging the income tax liability. NRIs and PIOs too can remit $100,000 per year from inherited property. The FEMA regulations too were amended to allow capital transfer. Agri Export Zones: The DGFT has notified four more agri export zones bringing the total number in the country to 32. The list now covers apples from Himachal, basmati rice from the Punjab, flowers from the Nilgiris in Tamilnadu and mangoes from Krishna district in Andhra Pradesh. By another notification, the period for retirement of export obligation in the Agri Export Zones was extended to 12 years. The Agri Export Zone scheme and the related Food Park scheme have been taken up by the states enthusiastically. The hope is that they will result in substantial business for the farmer and trader. (Academy of Business Studies)

DEPB rate for exports tied to market value

The Drawback Commissioner has fired another bombshell on the DEPB scheme. In a circular issued on September 9, he says that the present market value (PMV) will form the basis of DEPB export valuation in all cases.

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