POSTPONEMENT of a decision on the extension of the duty entitlement pass book (DEPB) scheme, the popular import duty reimbursement scheme for exporters, by the Cabinet on Thursday, has exporters worried. Since the scheme is scheduled to lapse in four days time, exporters are clueless about what the government expects them to do.
“We don’t know whether we should wait for the government to extend the scheme or move on to the duty drawback scheme,” Subhash Mittal from Fieo said. Exporters are reluctant to switch to the duty drawback scheme as they are comfortable with the DEPB scheme which gives them higher rates for about one-fifths of products.
About 80% of products covered under DEPB have similar rates also under the duty drawback scheme. However, for 20% of the products, the rates are lower. Switching to a new scheme also has additional problems as exporters have to apply to the government and go through all the bureaucratic procedures.
The DEPB scheme which seeks to neutralise the import duties paid on inputs by exporters through transferable scrips on the basis of predetermined rates, has been challenged at the World Trade Organisation a few times by the EU for being non-transparent. Since they can be sold in the market, they are prone to disputes.
The finance ministry has been trying to persuade the commerce ministry to agree to merge the DEPB scheme with the 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.
Speaking to ET, a commerce department official said that even if the March 31 2008 deadline was breached, the government could still extend the scheme with retrospective effect.
However, as Mr Mittal points out, it would be difficult for exporters to first switch to one scheme and then switch back. “We want clarity in policies. And decisions to be taken on time,” he said.