Govt sticks with DEPB, to make it simpler

NEW DELHI: The government has decided to persist with the darling of the export community, the Duty Entitlement Pass Book Scheme, despite the revenue department’s recommendation to scrap the incentive.
The government is also working on the simplification of the scheme. Since most other incentives, like tax exemption under Section 80 HHC of the I-T Act are being phased out, it is felt that scrapping DEPB would affect the morale of exporters, who apprehend dark days ahead if the US attack on Iraq drags on.
While the finance ministry has been pressing for merger of DEPB into the duty drawback scheme, the Kelkar committee had initially demanded that the scheme — which seeks to provide duty-free inputs to exports — should be wound up.
In its final report, however, the committee modified its opinion and suggested that the DEPB scheme could be continued for two years.
After weighing the pros and cons, the government has decided to simplify and retain the DEPB scheme, highly-placed officials said.
While the basic objectives of both DEPB and the duty drawback scheme are the same, exporters find the former attractive since their money does not get blocked. Under the drawback scheme, duty on inputs has to be paid during import and then reclaimed as drawback after exports take place.
The DEPB scheme is also flexible since the duty credit obtained through it can be transferred to other importers or used for a product of choice.
While the government is also of the view that drawback is better than DEPB in checking revenue leakage, the current juncture is not considered right for scrapping the popular scheme. It would continue for a couple of years in the current form and them be modified in a new fashion, the officials said.
Exporters are upset with the current government policies, they added. Upset with the phase out of I-T exemption, exporters have even formed an ‘action committee’ to save exports. They have sought export oriented unit status for all export companies shipping 100% of their goods to the international market. Exporters also want I-T exemption for at least 50% of their turnover.