FinMin:~Citing 8kcr Revenue Hit, FM Rules Out Extending DEPB~

Citing 8kcr Revenue Hit, FM Rules Out Extending DEPB

Despite intense industry lobbying, the finance ministry has said it will not give any extension to the popular export incentive scheme, the Duty Entitlement Passbook scheme, or DEPB. The scheme is to come to an end on June 30. It will be phased out on June 30. That is the finance ministry's decision, "revenue secretary Sunil Mitra told reporters. Many large Indian companies such as Bajaj Auto, TVS, Reliance Industries and Bharat Forge are significant beneficiaries of this scheme. Mitra said the government faced an estimated annual revenue loss of over.Rs.8, 000 crore currently from of the DEPB, which was first announced in 1997. "We really feel that we are rewarding exports on one hand and losing revenue on the other hand, "Mitra said. In April, the government rolled back a 2% interest subsidy paid to exporters as part of measures to rein in fiscal deficit estimated at 4. 6% of gross domestic product in 2011-12. The record 36. 7% rise in exports in 2010-11, the finance ministry feels, has further weakened the case for export incentives. The commerce ministry had sought an extension for this scheme. ET had reported on May 4 that the finance ministry does not intend to give an extension to this scheme. Under the DEPB scheme, exporters receive dutyfree scrips, or entitlements, based on the value of goods exported that can be used to pay import duties. The government sets the rate at which the incentive is to be provided for different goods exported. These scrips can be traded freely, making the scheme a favourite of exporters, but the scheme is highly unpopular with the revenue authorities. They have argued that the scheme allows double benefit to exporters instead of just neutralising levies on inputs. The scrips are provided on the assumptions that all inputs are imported but exporters are allowed to use domestic inputs up to 50% under DEPB. Exporters can claim credit for the excise duty they pay on these domestic inputs and they also receive duty-free scrips giving them additional benefit. The finance ministry has proposed to move all the exporters to drawback scheme, which is a duty neutralisation scheme. Under drawback, the government neutralises levies paid on inputs with rates fixed annually. Exporters are apprehensive as withdrawal of interest subvention has already eroded their competitiveness and the withdrawal of DEPB scheme would be a double blow, said Ramu S Deora, President, Federation of Indian Export Organisations. India's merchandise exports rose 37. 5% to about $246 billion in the last fiscal year, surpassing the initial target of $200 billion. The commerce and industry ministry has now set a target of $500 billion by 2014. -