Duty Entitlement Passbook Scheme (DEPB)

Last Updated at: October 23, 2019
834

Notified on 1/4/1997 Duty Entitlement Passbook Scheme (DEPB) is an export incentive scheme which initially 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).

The objective behind the scheme is to give incentives in Import and export policy and neutralize the rate of basic customs duty on the import content of the goods exported.

Within the scheme, an exporter of the goods is entitled to claim credit which would be a fixed percentage of the value of the goods that are exported and is available at a rate of exported product which is decided and notified by the Director-General of Foreign Trade (DGFT).

It should be noted that the credit amount that is made available to the exporters can only be used to pay off the amount of customs duty that they are liable to pay and cannot be used to adjust it with any other liability nor can it be withdrawn. However, there is no restriction on trading the amount, i.e., it can be transferred to another person and then can thereafter be transferred from him to another person.

DEPB allows the import of any items except those that are prohibited such as Gold pen, Gold Nibs, Gold watched, etc. Though such articles fall under the generic description of writing instrument and component of writing instrument, watches, etc these are still not eligible to avail the benefit of DEPB Scheme

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Rate of DEPB

The rate of DEPB is based on either on FOB value of the value cap whichever is found to below. To fall under the ambit of the scheme the exporter has to produce documents showing that the goods exported are having an extraneous material of up to 5% by weight. In a situation like this, an extraneous material of up to 5% will be ignored and the rate of DEPB (actual rate) for the product to be exported will be taken into account.

It is made mandatory of the Custom houses to keep a separate record of the goods that will be or are exported under the DEPB scheme.

PROVISIONAL RATES 

To encourage the export of new products and encourage diversification provisional rate is available. However, these rates are valid only for a limited period and are to be produced during export and import for the regular fixation of the rates

HOW TO DETERMINE THE RATE

Before determining the DEPB rate, the Government of India will first look at the Export-Import Data on the FOB value of exports and the Cost Insurance Freight (CIF) value of the inputs that are used on the exported products, as per SION. The Government will have to apply to the Export Promotion Council for obtaining the required data and information to decide the DEPB rate.

DEPB RATES IMPLEMENTATION

Facilities for the implementation of the scheme include:

  1. The rates are rationalized to the account to make a change in the custom duties
  2. Through the cap is fixed on certain items, no verification is available for the Present Market Value of those items.
  3. The ports have been pre-added in the DEPB scheme
  4. There is no threshold limit to fix the new DEPB rates.

CREDIT UNDER DEPB AND PRESENT MARKET VALUE

For the goods that are eligible to avail credit under the scheme come to 10% or more, the amount of such credit cannot exceed or cannot be more than 50% of the Present Market Value (PMV). While exporting goods, the exporter is required to present a shipping bill that falls under the scheme and have to show that the benefit availed is not more than 50% of the Present Market Value of the goods that is exported. However, it is not required to present the PMV declaration on the goods/products that have a value cap regardless of the DEPB rate of the product.

PORT OF REGISTRATION

For availing the scheme, export and import can be done from selected ports only which would include seaports, airports, ICDs, LC’s and SEZ areas.

The state or district falling under the respective head is provided by the department.

DEPB UTILIZATION

The credit availed under the scheme can be used to pay off the Indian Custom Duty and on the payment of capital goods that are free to import.

RE-EXPORT OF THE IMPORTED GOODS

Where the imported goods are found to be defective, they are exported to the concerned person. In such a situation, 98% of the amount that is credited will be debited against the DEPB for the export of goods. The Commissioner concerned will issue a certificate in this regard which would mention the amount that is generated and the details of the original DEPB and a new DEPB is then issued by the DGFT regional authority that is authorised to do so. The new DEPB will have the same validity period as that mentioned in the original DEPB and will be having the same port of registration.

Duty Entitlement Passbook Scheme (DEPB)

834

Notified on 1/4/1997 Duty Entitlement Passbook Scheme (DEPB) is an export incentive scheme which initially 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).

The objective behind the scheme is to give incentives in Import and export policy and neutralize the rate of basic customs duty on the import content of the goods exported.

Within the scheme, an exporter of the goods is entitled to claim credit which would be a fixed percentage of the value of the goods that are exported and is available at a rate of exported product which is decided and notified by the Director-General of Foreign Trade (DGFT).

It should be noted that the credit amount that is made available to the exporters can only be used to pay off the amount of customs duty that they are liable to pay and cannot be used to adjust it with any other liability nor can it be withdrawn. However, there is no restriction on trading the amount, i.e., it can be transferred to another person and then can thereafter be transferred from him to another person.

DEPB allows the import of any items except those that are prohibited such as Gold pen, Gold Nibs, Gold watched, etc. Though such articles fall under the generic description of writing instrument and component of writing instrument, watches, etc these are still not eligible to avail the benefit of DEPB Scheme

Start Your Own Business

Rate of DEPB

The rate of DEPB is based on either on FOB value of the value cap whichever is found to below. To fall under the ambit of the scheme the exporter has to produce documents showing that the goods exported are having an extraneous material of up to 5% by weight. In a situation like this, an extraneous material of up to 5% will be ignored and the rate of DEPB (actual rate) for the product to be exported will be taken into account.

It is made mandatory of the Custom houses to keep a separate record of the goods that will be or are exported under the DEPB scheme.

PROVISIONAL RATES 

To encourage the export of new products and encourage diversification provisional rate is available. However, these rates are valid only for a limited period and are to be produced during export and import for the regular fixation of the rates

HOW TO DETERMINE THE RATE

Before determining the DEPB rate, the Government of India will first look at the Export-Import Data on the FOB value of exports and the Cost Insurance Freight (CIF) value of the inputs that are used on the exported products, as per SION. The Government will have to apply to the Export Promotion Council for obtaining the required data and information to decide the DEPB rate.

DEPB RATES IMPLEMENTATION

Facilities for the implementation of the scheme include:

  1. The rates are rationalized to the account to make a change in the custom duties
  2. Through the cap is fixed on certain items, no verification is available for the Present Market Value of those items.
  3. The ports have been pre-added in the DEPB scheme
  4. There is no threshold limit to fix the new DEPB rates.

CREDIT UNDER DEPB AND PRESENT MARKET VALUE

For the goods that are eligible to avail credit under the scheme come to 10% or more, the amount of such credit cannot exceed or cannot be more than 50% of the Present Market Value (PMV). While exporting goods, the exporter is required to present a shipping bill that falls under the scheme and have to show that the benefit availed is not more than 50% of the Present Market Value of the goods that is exported. However, it is not required to present the PMV declaration on the goods/products that have a value cap regardless of the DEPB rate of the product.

PORT OF REGISTRATION

For availing the scheme, export and import can be done from selected ports only which would include seaports, airports, ICDs, LC’s and SEZ areas.

The state or district falling under the respective head is provided by the department.

DEPB UTILIZATION

The credit availed under the scheme can be used to pay off the Indian Custom Duty and on the payment of capital goods that are free to import.

RE-EXPORT OF THE IMPORTED GOODS

Where the imported goods are found to be defective, they are exported to the concerned person. In such a situation, 98% of the amount that is credited will be debited against the DEPB for the export of goods. The Commissioner concerned will issue a certificate in this regard which would mention the amount that is generated and the details of the original DEPB and a new DEPB is then issued by the DGFT regional authority that is authorised to do so. The new DEPB will have the same validity period as that mentioned in the original DEPB and will be having the same port of registration.

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A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.