Duty Entitlement Pass Book Scheme (DEPB) facilitates Exporters to neutralize the amount of Customs Duty paid for the import of Inputs, which will be used in making Export Products. Also, DEPB enables exporters to import raw material which will be exempted from Customs duty without routing in Advance Authorization.
Introduction
Many Schemes provide benefits to Exporters of Certain goods and Services. One of the Schemes is the Duty Entitlement Pass Book Scheme (DEPB) prescribed under Chapter 4 of Foreign Trade Policy (FTP). This scheme facilitates Exporter to offset the amount of Customs Duty paid for the import of Inputs which will be used in making Export Products. Under the DEPB, an exporter may apply for credit, as a specified percentage of FOB value of exports made in freely convertible currency. The neutralization shall be provided by way of a grant of duty credit against the export product. This scheme is useful for those exporters, who are not desirous of going through the Authorization route, an optional facility is provided under Duty Entitlement Pass Book Scheme (DEPB).
Initially, the scheme consisted of two parts: (a) Post-export DEPB and (b) Pre-export DEPB. However, pre-export was abolished in the year 2000. In Post-export DEPB, the exporter is given a DEPB at a pre-determined credit on the Freight on Board Value (FOB).
FOB stands for Free on Board, it is the price of goods at the time of loading at the domestic port paid and does not include loading, shipment, and insurance cost.
Contents of this article
- Introduction
- Overview of DEPB Rates
- Determining DEPB Rates
- Discharging DEPB Credits
- Port of Registration under DEPB
- Maintenance of Records under DEPB
- Re-export of goods imported under DEPB Scheme
- Period for obtaining Duty credit under DEPB Scheme
- Credit under DEPB and Present Market Value
- Wrapping Up
Overview of DEPB Rates
The DEPB rates allow the import of any items except the items which are otherwise restricted for imports. For Example, Items such as Gold Nibs, Gold Pen, Gold watches, etc. are not eligible for benefit under the DEPB scheme.
The DEPB Rates are applied based on FOB value or value cap whichever is lower. For example, if the FOB value is Rs.700/- per piece, and the value cap is Rs.500/- per piece, the DEPB rate shall be applied on Rs.500/-. However, no exports shall be allowed under DEPB scheme unless DEPB rate of the concerned export product is notified.
Determining DEPB Rates
Duty credit under the scheme shall be calculated by taking into account deemed import
inputs of the said export product as per SION. Value addition achieved by the export of such product shall also be taken into account while determining the rate of duty credit under the
scheme.
For determining Duty, The Government of India reviews the DEPB rates after getting the appropriate export-import data on FOB (shipping) value of exports and Cost, Insurance, and Freight (CIF) value of inputs used in the export product, as per SION. Such data and information are usually obtained from the concerned Export Promotion Councils.
To encourage diversification and to promote the export of new products, DEPB Committee would be empowered to notify provisional DEPB rates. However, such DEPB rates would be valid for a limited period during which exporter would furnish data on export and import for regular fixation of rates.
Discharging DEPB Credits
The amount of credit received by an exporter under DEPB scheme can be utilized to offset Custom Duty pain on Imports of Inputs in freely Convertible Currency. The credit shall be available against such exports products and at such rate as may be specified by the Directorate General of Foreign Trade. The exports under the DEPB shall not be entitled to drawback and the same cannot be utilized to adjust it with any other Duties paid. The holder of DEPB shall have the option to pay additional Customs duty in cash as well. DEPB credits are freely transferable it means the holder of Duty Credit can transfer the same to another person or company to avail the benefit of nullifying the Custom duty paid on Inputs for Import.
DEPB scrips can also be utilized for payment of Duty against imports under EPCG scheme. Further, DEPB scrips can also be used/debited towards payment of customs duty in case of EO defaulters for authorization issued. However, Penalty/interest shall be required to be paid in cash.
Duty Credit scrips are financial pieces of paper of a stated value that can be used to pay Customs Duty, Excise Duty, and Services tax. If the holder does not require to pay any tax then he/she can transfer it to another entity. The other entity would pay money to the holder for such transfer.
Worksheet for Computation of DEPB Rates
| FOB value per unit quantity of export product ( in Kg./MT etc.) | Description of import items allowed as per SION | Quantity of import items allowed for each of the input as per SION (Kg./MT etc.) | CIF value per unit quantity (Kg./MT etc.) of each of the items allowed for import in SION (In Rs./US$) | CIF value of each of the inputs allowed for import in SION [Column (3) X Column (4)] (In Rs/US$) | Rate of basic Customs Duty against each of the inputs allowed for import in SION | Rate of SAD against each of the inputs allowed for import in SION | Effective basic Customs duty against each of the input allowed for import in SION Column (5) X {Column (6)+ Column (7)} (In Rs./US$) |
| (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) |
| Total CIF (In Rs./US) | Total Customs Duty (In Rs./US$) |
Port of Registration under DEPB
The exports/imports made from the specified ports given shall be entitled to DEPB.
Sea Ports: Mumbai, Kolkata, Cochin, Dahej, Kakinada, Kandla, Mangalore, Marmagoa, Mundra, Chennai, Nhavasheva, Paradeep, Pipavav, Sikka, Tuticorin Vishakhapatnam, Surat (Magdalla), Nagapattinam, Okha, Dharamtar, and Jamnagar.
Airports: Ahmedabad, Bangalore, Bhubaneshwar Mumbai, Kolkata Coimbatore Air Cargo Complex, Cochin, Delhi, Hyderabad, Jaipur, Srinagar, Trivandrum, Varanasi, Nagpur, and Chenna
ICDs: Agra, Ahmedabad, Bangalore, Bhiwadi, Coimbatore, Daulatabad, (Wanjarwadi and Maliwada), Delhi, Dighi (Pune), Faridabad, Guntur, Hyderabad, Jaipur, Jallandhar, Jodhpur, Kanpur, Kota, Ludhiana, Madurai and the land Customs station at Ranaghat Mallanpur, Moradabad, Meerut Nagpur, Nasik, Gauhati (Amingaon), Pimpri (Pune), Pitampur (Indore), Rudrapur (Nainital), Salem Singanalur, Surat, Tirupur, Udaipur, Vadodara, Varanasi, Waluj, Bhilwara, Pondicherry, Garhi-Harsaru, Bhatinda, Dappar, Chheharata (Amritsar), Karur, Miraj, and Rewari.
LCS: Ranaghat, Singhabad, Raxaul, Jogbani, Nautanva (Sonauli), Petrapole, and Mahadipur. The exports made to the following Special Economic Zones (SEZ) are also entitled to DEPB
SEZ: Santacruz, Kandla, Kochi, Vishakhapatnam, Chennai, FALTA, Surat, NOIDA
Maintenance of Records under DEPB
Under the DEPB Schemes, Custom houses at ports are mandated to maintain a separate record of details of exports made under DEPB Schemes.
Re-export of goods imported under DEPB Scheme
Goods imported under DEPB scheme, which are found defective or unfit for use, maybe re-exported, as per guidelines given in paragraph 3.11.6 of Handbook of Procedure (HBP) v1.
Period for obtaining Duty credit under DEPB Scheme
Application for obtaining credit shall be filed within twelve months from the date of exports or the date of uplinking of EDI shipping bill details in the DGFT website, or within three months from the date of printing/release of shipping bill, whichever is later, in respect of shipments for which claim has been filed.
Credit under DEPB and Present Market Value
During export, the exporter shall declare on the shipping bill that benefits under DEPB Scheme would not exceed 50% of PMV of the export product. In respect of products where the rate of credit entitlement under DEPB Scheme comes to 10% or more, the amount of credit against each such export product shall not exceed 50% of the Present Market Value (PMV) of the export product. However, PMV declaration shall not be applicable for products for which a value cap exists irrespective of the DEPB rate of the product
Wrapping Up
Duty Entitlement Pass Book (DEPB) scheme is a good option for people who don’t want to proceed with Advance Authorisation or this can be done from a chartered accountant services providing company. This scheme enables exporters to utilize Duty scrips to offset Duties paid on the Import of raw materials. Duty scrips are transferable which means they can be transferred to another entity or person to offset his/her Duties.