Cabinet to consider new export tax refund scheme soon

An alternative WTO-compatible mechanism for refunding taxes to exporters could be in place soon, with the commerce ministry circulating a Cabinet note proposing to merge the popular Duty Entitlement Pass Book (DEPB) scheme with the drawback scheme.

Of all the views sought by the commerce ministry, feedback from the revenue department in the finance ministry will be of utmost importance, given the tug-of-war between the two ministries over a host of sops meant for rupee-hit exporters.

"We are expecting feedback by October 10, after which we would send the note for Cabinet approval," a senior commerce ministry official said.

The DEPB scheme was to expire this year but has been extended till March 31, 2008. However, an alternative scheme was to be worked out, which would neutralise all levies, customs and excise duties along with state levies, while being WTO compatible at the same time.

"DEPB would be merged with the drawback scheme and all items under the scheme would be included into the new mechanism. The new scheme would reimburse state level taxes," the official said. The new arrangement would be operationalised from April 1, 2008, and reimbursement would be given on rates as prevalent on April 1, 2007.

In another move that could bring some more relief to exporters facing the brunt of a strengthening rupee, the commerce ministry has sent a list of 18-20 more services to be included in the ambit of service tax exemption.

"While service tax exemption was notified on a few services, it provided only partial relief to exporters. We have sent a list of 18-20 services on which tax refund would be provided," the official said.