DEPB scheme gets last extension to ensure smooth transition to new tax scheme

13 Jun 2011 Evaluate

The finance ministry has agreed to extend the Duty Entitlement Pass Book (DEPB) scheme beyond the June 30 deadline on the condition that this would be the last extension and a new scheme would replace DEPB scheme by that period. This extension in the DEPB has been approved to ensure a smooth transition to the new scheme and allow exporters extra time to work out their business modalities accordingly.

The Commerce & Industry Minister Anand Sharma said that “North Block had decided to extend the plan once more but this would be the final extension”. The decision to extend DEPB was taken at a meeting early this week between Finance Minister Pranab Mukherjee and Commerce Minister Anand Sharma. The two departments (commerce and finance) will now finalize a new scheme to replace DEPB.

The commerce ministry and industrial bodies where lobbying hard to get the extension in 14-year-old DEPB scheme. However, there is no clarity on the extension period of the tax refund scheme, on the other hand the finance minister was opposing the extension of the DEPB scheme, because of revenue loss of $ 1.8 billion and saying that the scheme is inappropriate with the World Trade Organization’s (WTO) principles.

In the DEPB scheme, exporters get duty free entitlements, which they can use to pay import duties. The entitlements are based on the value of goods exported and can be trade freely. The government fixes the rates of incentives. Exports are also allowed to claim for the excise duty they pay on these domestic inputs. Last year, the tax refund scheme cost the exchequer Rs 8520 crore in 2010-11, over 60 % of which was enjoyed by the large engineering and chemical exports.