DEPB termination will hurt exports in absence of an alternative plan: CII

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Lobbying hard for continuation of DEPB, industry body CII today said the termination of export incentive scheme will hurt exports in the absence of an alternative plan to neutralise local taxes on overseas shipments. 

"Export margins are in single digit 6-7 per cent. It is a volume game," CII Chairman on National Committee on Exports Sanjay Budhia said, adding, overseas buyers have become very demanding in the wake of tough competition. 

The tax rebate scheme, Duty Entitlement Pass Book (DEPB), is due to end on June 30. The 14-year old scheme has been extended many times by the finance ministry on the recommendation of the Commerce Ministry since 1997. 

The exporters across different sectors particularly the engineering segment are lobbying hard with the government for continuation of the DEPB on which the government spends Rs 8,000 crore. 

Budhia said the government's suggestion to exporters to avail the tax refund through the duty drawback instead of DEPB would encourage imports because the benefit would be available only on imported raw material. 

He said while the government was not able to usher in tax reforms through Goods and Services Tax (GST), it is ending the DEPB. At least it should have waited for the introduction of GST. 

Ideally, DEPB should be co-terminus with the foreign trade policy, that is till 2014. 

"We have already contracted for three years. They (buyers) will leave us," he said. 

DEPB offers more reimbursement of around 9 per cent against 5 per cent under Duty drawback of the Free On Board value.

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