Exporters of various raw materials and finished goods have urged the government to extend the Duty Entitlement Passbook Scheme (DEPB) until the final introduction of the proposed goods & service tax (GST). Originally, the 14-year old DEPB was to come to an end next month-end — on September 30.
Indian Exporters Forum (IEF), the country-wide representative trade body of over a 1,000 of leading exporters, said withdrawal of DEPB will discourage exporters of various products, including the smaller ones, in many industries. In a letter written to the ministries of commerce and finance, it noted the scheme has benefited all strata of manufacturing industries, including textile, consumer goods and gems & jewellery.
IEF president Harshad Bhayani, in the letter, further said it would not be possible to fix duty drawback rates individually for all products in place of existing DEPB rates in “such a short span of time”.
He noted that experts could avail three schemes: DEPB, Advance Authorisation and Duty Drawback Scheme. Out of these, DEPB was the “most preferred scheme to the exporters due to its various benefits and advantages as compared to other two schemes”.
The DEPB Scheme was exporter-friendly not only to manufacturing exporters, but also to merchant exporters. Even export houses preferred it to avoid various problems, including those with supporting manufacturers. As the benefits under DEPB scheme were availed after completion of export obligation, there was no possibility of any misuse or litigation with customs or licensing authorities. Thus, the exporters and government “are very safe” under the scheme.
The view found support from the apex jewellery export promotion body. The Gems & Jewellery Export Promotion Council said the jewellery industry “desperately needs” an extension of DEPB. This, according to its chairman Rajiv Jain, was especially so given that “exports are facing threat from overseas, mainly because of unfavourable uneconomic environment”.
The withdrawal of the DEPB will hit overall jewellery exports from India badly, he added.
Jewellery constitutes nearly 13 per cent of India’s overall merchandise exports.
DEPB, Jain noted, was “particularly friendly” to small manufacturers who could not afford to import bulk quantity under advance authorisation scheme (like import from China is generally on a full container basis). Fixation of duty drawback rate was not only time-consuming but a lengthy procedure. Hence, it is “economically not viable in many cases”. Thus, he pointed out that the DEPB scheme facilitated the small manufacturers to opt for indigenous material for their export product and still avail benefit of DEPB Scheme.
Unlike the advance authorisation scheme, where dependence was on import of duty free raw materials or supporting manufacturers, the DEPB Scheme permitted all types of exporters to procure raw materials indigenously, thereby boosting local production of raw materials and employment generation in the country. Thus, various exporters procuring raw materials indigenously always preferred DEPB and not advance authorisation. The local purchase of raw materials augmented the government revenue such as octroi, excise duty, service tax, value added tax under this scheme.
Nemish Sayani, ex-head of The Plastic Export Promotion Council, said an exporter needed to get brand rate of drawback fixed for each and every export product, even with a slight variation in the input of the final export product. The process of fixation of brand rate of drawback, he noted, has been not only time consuming but cumbersome.
“Therefore,” he added, “many exporters opted to export under DEPB Scheme rather than under duty drawback scheme. There have been various types of pharmaceutical, engineering and chemical companies who have been using different raw materials from product to product, as per their buyers’ requirements. It was physically impossible for these companies to approach for fixation of brand drawback rates and they necessarily preferred to export under DEPB scheme.”
Under the DEPB scheme, exporters get the reimbursement from Centre for the taxes paid on the import content of their export products. An Empowered Committee of State Finance Ministers on GST, under its new chief, Sushil Modi, is set to meet on Friday to discuss various issues related with the roll out of the ambitious indirect tax regime.
