1. One of the important feature proposed in the Budget 2020 under Customs Law is the implementation of the system of Duty Credit Ledger. Sec. 51B is proposed to be inserted in the Customs Act, 1962 to implement the same. Said provisions reads as under:

“51B. (1)The Central Government may, by notification in the Official Gazette, specify the manner in which it shall issue duty credit,––

(a) in lieu of remission of any duty or tax or levy, chargeable on any material used in the manufacture or processing of goods or for carrying out any operation on such goods in India that are exported; or

(b) in lieu of such other financial benefit subject to such conditions and restrictions as may be specified therein.

(2) The duty credit issued under sub-section (1) shall be maintained in the customs automated system in the form of an electronic duty credit ledger of the person who is the recipient of such duty credit, in such manner as may be prescribed.

(3) The duty credit available in the electronic duty credit ledger may be used by the person to whom it is issued or the person to whom it is transferred, towards making payment of duties payable under this Act or under the Customs Tariff Act, 1975 in such manner and subject to such conditions and restrictions and within such time as may be prescribed.”

2. Hence as per the proposed amendment the financial benefits to the exporters by way of remission of any duty or tax (e.g. drawbacks) or such other financial benefit would be granted by way of credits in the Duty Credit Ledger maintained on the portal. Said credits can be used by the person towards making payment of duties payable under the Customs Act or the Customs Tariff Act, 1975 (e.g. basic duty, IGST on imports, etc.). Said credits can also be transferred to other persons who may also in turn use it for paying the duties. Also the restrictions, conditions and the detailed procedure would be notified in due course when the said system is made operational.

3. It also appears from the perusal of the proposals that the person in question would not be able to transfer the credits in terms of money in the bank account. It is therefore suggested that such transfer should be facilitated to avoid any dilution in the benefits.

4. It may also be noted that Sec. 28AAA of the Customs Act, 1962 is also proposed to be amended to include such duty credit as an “instrument” liable for recovery if the same has been obtained fraudulently and used by a person other than the one to whom it has been issued.

5. To conclude we submit that the proposal of Duty Credit Ledger is a step in the right direction to streamline the processes of availment of export benefits by removing the physical interface and also usher transparency by avoiding fraudulent claims. Also the said move is in line with the earlier reforms under the Customs Law in the form of introduction of the electronic cash ledger, phasing out of physical MEIS, etc.

6. As the rules and procedures are notified, the same would have to be understood by the trade and industry to understand the practicalities of the new system.

(views are strictly personal)


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April 2021