DEPB to Drawback - Overall Impact - Less duty Forgone
REVENUE Secretary RS Gujral and CBEC Chairman Dutt Majumder on 16th September outlined the contours of the new DEPB–merged Drawback Scheme. The Federation of Indian Export Organisations has welcomed the new scheme. The FIEO President Ramu Deora said that even if the new drawback rates are little less, the saving on account of transaction time and cost will offset the disadvantage as Duty Drawback benefit will directly be credited to exporters' bank account while DEPB involves paper work and the same is subject to VAT as well on its sale/purchase. The FIEO Chief added that exporters are by and large happy with the announcement. He also appealed to exporters to continue with their good work in promoting exports, as he is confident that they will be financially better off under new scheme.
But the Chairman of CII, Karnataka said that withdrawal of DEPB Scheme could not have been more ill timed.
The general highlights of the Scheme as already reported by us (and of course rest of the media) are:
++ The 2835 items under drawback and 2130 items under DEPB will be merged into the new Drawback with around 4000 items.
++ There will be a minor reduction in the present drawback rates due to reduction in Customs and Excise duties on petroleum. There will however be a cap of ten percent on reduction of rates.
++ Since there will be a substantial reduction in the new drawback rates compared to the existing DEPB rates, as a transitional measure, the drawback rate will be capped at 5.5% for one year, which may be reviewed next year.
++ AIR for passenger cars.
++ No value cap where the duty drawback is less than or equal to 3 percent.
TIOL spoke to CBEC Chairman Dutt Majumder, who said that the overall impact would be that the duty foregone would be less. The Chairman informed that the scheme would be notified latest by 23rd September and after that the Revenue Secretary and the Chairman would interact with trade chambers, so that the scheme is smoothly launched on 1st October.
It seems earlier 60 percent of the DEPB benefits were for the Engineering sector including auto, chemicals and Pharma sectors. Bajaj Auto, Hero Motors, Reliance, Dr. Reddy's etc, maybe some of the affected megacorps.
Directorate of Drawback to regain lost glamour ? With over 1100 items migrating from DEPB to AIR of Drawback, the Directorate of Drawback is sure to regain some of its lost glory, with long queues of hopeful applicants for consideration of All India Rates. Even the workload in the Customs will increase with more drawback payments to be made. Is the CBEC ready for this additional work or will payments be delayed? Maybe they can get a few more posts under the proposed cadre review for this work.