Mr. Anand Sharma (Commerce and Industry Minister) to plead case with FM for DEPB extension

With the aim of getting the Duty Entitlement Passbook Scheme (DEPB) extended, the Commerce and Industry Minister, Mr Anand Sharma, is set to hold talks with the Finance Minister, Mr Pranab Mukherjee.

DEPB, is a popular duty reimbursement scheme, was introduced 14 years ago and is set to end on June 30.

The scheme had been granted extensions on several occasions in the past due to demand from exporters.

Speaking on the sidelines of the India-Africa Forum Summit that concluded recently, Mr Sharma said, "We will be meeting the Finance Minister and his team soon to explain the concerns of the exporters. We will take up the issue of DEPB and also interest subvention.

It may be recalled that after the withdrawal of the interest subvention scheme by the government, the cost of credit had climbed to 11 per cent from 7 per cent. Besides, banks have also hiked their base rates, adding to exporters' concerns.

The Minister believes that withdrawing such incentives would hamper exports, hurt the economy and continue to widen the trade deficit.

Also, with oil prices having climbed to unprecedented levels, boosting exports was a necessity, according to Mr Sharma.

Presently, exporters shell out a slew of state-level and other kinds of taxes such as electricity tax, octroi, sales taxes, central sales taxes, none of which is rebated owing to the federal political structure and a convoluted tax structure. All of these taxes are expected to be subsumed in the proposed goods and services tax (GST).

A study conducted by the National Council of Applied Economic Research found that the impact of such taxes ranges anywhere between 1.5 and 12 per cent. Even the Ministry of Commerce and Industry has not succeeded in finding an alternative to the DEPB, though discussions have been on since five years.

Considering the high interest rates, the Minister feels that a differentiation needs to be made between amount of credit and cost of credit. "The situation is difficult though exports are growing at an impressive rate," Mr Anand Sharma avers. "We have had internal assessment within the Ministry and we are looking forward to a very substantive meeting with the Finance Ministry upon my return," he said.

Earlier this week, Revenue Secretary, Mr Sunil Mitra, had said that the government had taken the decision to discontinue the DEPB scheme in order to save revenue. The government currently reimburses duties worth around Rs 8,500 crore each fiscal under the scheme.

Considered a direct subsidy under the World Trade Organisation rules, trade partner countries have been putting pressure on the Indian government to do away with the scheme.

Lets Hope the Finance Minister Agrees to the Commerce Minister Plea.

Brand rate scheme to replace DEPB

PLANS are afoot to supplant the duty entitlement passbook (DEPB)
scheme, the popular tax remission scheme for exporters, with a new
one, where rates would be brand specific, government sources informed
recently.
In place of the industry-average norm being used under DEPB, benefits
would be quantified on the basis of actual consumption of imported
inputs by the manufacturer-exporter under the new scheme.
The government has made it clear that the DEPB scheme would cease to
exist after June 30, considering that it was perceived as being
WTO-incompatible due to its alleged subsidy component.
Large manufacturing firms, including automobile and metal majors, are
expected to welcome the move to supplant DEPB with a brand rate
scheme, but smaller firms may find the new scheme unappealing.
According to sources, all products (defined by the harmonised code
system) now falling under DEPB would also be incorporated into the
duty drawback scheme for the benefit of smaller companies.
Nonetheless, these firms, in particular from labour-intensive
industries such as textiles and leather, are unlikely to be pleased as
the drawback scheme is known for being more rigorous on rate fixation.
A Finance Ministry official affirmed that the government was keen to
shift from notional claims by exporters to actual ones, and hence
brand rate fixation scheme was one of its options. He said the Finance
Ministry and Commerce Ministry were still working out the details.
The official revealed that for fixing the brand rate, applicants have
to file with the Commissioner of Drawback, who will fix the rates
after getting the verified data from exporters. Importantly, the brand
rate scheme would be fully compliant with WTO's agreement on subsidies
and countervailing duties, the official assured, while admitting that
many things still needed to be resolved before shifting to the new
scheme.

DEPB scheme to end on June 30 – Mitra

Rejecting exporters' repeated pleas, the Finance Ministry today said the popular DEPB tax rebate scheme will come to an end from June 30, saving revenue for the government.

"All exports will be zero-rated after Duty Entitlement Pass Book (DEPB) scheme ends. Two similar kind of schemes cannot go on. It will save some revenue for the government," Revenue Secretary Sunil Mitra told reporters here.

The government spends about Rs 8,000 crore on rebating exporters for levies under the 14-year old DEPB scheme. After repeated extensions, the scheme is to end next month, but exporters are lobbying hard for its continuation.

Official sources said that exporters can avail a refund of local taxes through the alternative window of duty drawback.

The officials of finance ministry have declined the request to continue the DEPB scheme, now we awaits the Public Notice for the same.