IN A last minute decision, the government, on Monday, extended the duty entitlement pass book (DEPB) scheme — the popular import duty reimbursement scheme — the day on which it was scheduled to lapse. While exporters are relieved by the extension, the uncertainty on the future of the scheme remains as the government notification states that the scheme has been extended till further orders. The DEPB scheme, reimburses basic and special customs duty paid by an exporter on an imported input.
The Cabinet meeting scheduled later this week is likely to take a decision on the period for which the scheme is to be extended. Sources said the scheme was likely to be extended for a year. “The Union Cabinet may decide to extend the scheme till the end of the new fiscal, or till the time a new scheme replacing DEPB is in place,” an official said.
Exporters, however, want the DEPB scheme to continue till 2010 when the common goods & services tax (GST) will kick in. “While we are relieved that the DEPB scheme has been extended, we want it to be extended for a two year period,” Fieo president Ganesh Kumar Gupta said.
Once GST is in place, reimbursement of input duties to exporters will be easy and transparent as the GST will be common across the country.
The DEPB has been challenged on some occasions by EU countries as it is seen as nontransparent. Since the reimbursement is given on the basis of pre-determined rates in the form of freely transferable scrips, the countries allege that is not directly linked to input taxes paid by exporters and is hence actionable at the World Trade Organisation.
The finance ministry has been trying to persuade the commerce ministry to agree to merge the DEPB scheme with the alternative duty drawback scheme, but the commerce department wants that state taxes should also be reimbursed if the merger is to happen. Since it has still not yet been decided how state governments would bear the burden of the duty reimbursements, the new scheme still hangs fire. Industry federation Ficci said that the DEPB scheme should be extended till a suitable replacement is found to the scheme.