Govt stops DEPB scheme

“The tax rebate scheme for exporters under DEPB will come to end from June 30,” the Revenue Secretary Sunil Mitra indicated here. “All exports will be zero-rated after DEPB scheme ends. This will save revenue for the government,” he said. As per an estimate the government sacrifices revenue to the tune of Rs 8,000 crore under the DEPB, which seeks to neutralise the incidence of basic and special customs duty on import content of export product.

The DEPB scheme was introduced in 1997, allowing exporters to earn duty credit at a notified percentage of the Freight on Board (FOB) value of exports. The DEPB rates are notified based on an assumption that the exporter has used duty-paid imported inputs, whether or not he actually does. This assumption brought in an element of subsidy.

Apart from revenue loss, the government was also under pressure to do away with the DEPB as it is considered to be non-compliant with the World Trade Organisation rules. The thinking in the Finance Ministry seems to be that in recent months the global economy has recovered and exports have shown robust growth, exceeding the 2010-11 target.