The new Duty Entitlement Passbook Scheme to replace the popular duty neutralisation benefit scheme, will reimburse indirect taxes to exporters, including duties paid on electricity, sales tax, entry tax or octroi, and duties paid on fuels such as petrol and diesel. It is likely to be called the Duty Neutralisation Scheme.
Officials told Business Standard that the new scheme would shift from the existing procedure of reimbursing Customs duty paid on deemed imports under the DEPB. The DEPB covers about 52 per cent of the country's exports.
"Customs duties paid on deemed imports would be covered by the duty drawback scheme, which is being re-worked by the finance ministry. In order to make the new scheme compatible with the World Trade Organisation, the focus would be on reimbursing any indirect taxes borne by the exporter," an official said.
Officials, however, said the value-added tax would not be a part of the new scheme as exporters could claim VAT credit.
"The VAT system, if implemented, allows for reimbursement of VAT to the exporters, so if at any stage an exporter pays VAT he will be out of the purview of the new scheme," an official said.
The commerce and industry ministry has mandated the National Council for Applied Economic Research and the Rajiv Gandhi Foundation along with the Mumbai-based Economic Law Practice to work on the new scheme.
The two agencies are expected to submit their recommendations to the government soon. The Foreign Trade Policy stated that the government would continue with the DEPB scheme until it was replaced by a new scheme, which would be drawn up in consultation with exporters.
The DEPB is a reimbursement of basic and special Customs duty paid by an exporter on an imported input used in the export product. The benefit is given by way of a grant of duty credit against the export product at specified rates.
According to data compiled by the revenue department, the government had to forgo Rs 11,500 crore (Rs 115 billion) in 2003-04 owing to the DEPB benefit.
© 2025