The government announced lower tax incentives for exporters from October 1 and said on Friday that it will replace the popular 14-year old Duty Entitlement Pass Book (DEPB) scheme, with a new regime from next month.
In the transitory scheme, exports of 1,100 items will be entitled to lower tax refunds from the beginning of next month."As a transitory arrangement, these items will suffer a modest reduction in the existing DEPB rate to the extent of 1-3%," said RS Gujral, finance secretary.
The objective of the DEPB was to neutralise the incidence of customs duty on the import content of the export product.
Last year, the government had spent given refunds worth R8,700 crore under the DEPB scheme to engineering, chemical, pharma, textile and marine products among others.
The 1,100 items on which the tax incentives have been lowered will be entitled to sops under a duty drawback scheme (DDS).
There would be a ceiling of 5.5% tax refund rate on 660 items. The ceiling would not apply to 340 items such as worsted woollen yarn, blanket, nylong twine, cut polished chat stones, polyester metallised film.
President of the Federation of Indian Export Organisations (FIEO) Ramu Deora said that the expansion of duty drawback scheme from 2,835 items to approximately 4,000 items, adding 1,100 from the DEPB schedule, will make it "all encompassing without leaving any product from the existing DEPB rates."
Industry sources said the reduction in tax incentives amounted to withdrawal of stimulus package given to exporters during 2008-09 to tide over the world economy’s worst crisis in eight decades.