All Fools Day rates basis for DEPB II

Reimbursement of state taxes to exporters under the new scheme replacing the duty entitlement pass book (DEPB) scheme — the popular yet controversial duty reimbursement scheme — will be on the basis of the rates prevailing on April 1, 2007. Although the Centre is in no mood to accommodate any increase in taxes which states bring about after April 1, any decrease in taxes will result in a downward revision of the reimbursement rates, senior government officials said. The replacement for DEPB is being worked out by the government now.

The Cabinet note on the new scheme is ready and is likely to be submitted to the Cabinet by October-end, sources said. The note is presently being examined by the revenue department. Under the new scheme, exporters who were claiming duty refunds under the DEPB scheme will be included in the existing duty drawback scheme.

Additionally, all exporters will get refund of state taxes like sales tax on petroleum products, central sales tax (CST), electricity duty, octroi, mandi fees, purchase tax, octroi, development tax and toll tax.

“We do not want states to increase their taxes just because the Centre is reimbursing exporters,” an official explained. On whether exporters who were claiming refunds under DEPB would be reimbursed at the same rate under the duty drawback scheme, the official said that some changes would be made by the finance ministry. “Some modifications will come,” he said.

While under the duty draw back scheme, exporters are refunded the customs duties and excise duties paid on inputs, like raw materials, and intermediates after the products are exported, the DEPB scheme, seeks to neutralise the incidence of customs duty on the import content of the export product by way of grant of duty credit against the export product. The DEPB scheme has found disfavour with the World Trade Organization as it is non-transparent and transferable.

The commerce department has been trying to look for a replacement scheme for the past two years. The DEPB scheme would continue in its current form at least till the end of the fiscal.