New drawback scheme proposed
The Government of India will shortly be notifying the schedule of AIR (All Industry Rates) of duty drawback for the year 2011-12. In this regard, the Government had constituted a Committee in January 2011 under the chairmanship of Shri Saumitra Chaudhuri, Member, Planning Commission for formulation of AIR of Duty Drawback.
In view of the Government's decision to bring the DEPB scheme to an end by 30th September this year, the Committee had also been entrusted with the added responsibility of recommending drawback rates for those commodities which have traditionally been exported under DEPB (Duty Entitlement Passbook) Scheme.
The Committee has had wide ranging discussions with various export councils to gain a better understanding of the issues involved. A number of export councils and associations have submitted data to the Committee which has been carefully examined and considered. The Committee has since submitted its report to the Government along with a Schedule of recommended Drawback rates. The recommendations of the Committee form the basis for the rates being notified.
The DEPB Scheme has been in existence since 1997. Presently, there are 2130 line items covered under this scheme. Incorporating these items within the drawback schedule and assigning appropriate duty drawback rates for these items was a challenge both from a product classification perspective as well as from a drawback rate perspective. Consequently, the new Drawback Schedule will incorporate an additional 1100 line items (approx.) which are being taken from the DEPB list. With this, the total number of items in the drawback schedule will number approximately 4000 line items, as against the present 2835 line items.
Broadly speaking, most of the items which are already covered under the duty drawback schedule will suffer a minor reduction in the existing drawback rates. The reduction is mainly on account of the reduction in basic customs duty on crude petroleum from 5% to Nil as well as a reduction in central excise duty on diesel from Rs 4.40 per litre.to Rs 2.40 per litre. Crude petroleum enters into the product chain of various products as petrochemical inputs and diesel is also consumed in captive DG power plants in a majority of industries.
Further, there has been a steep reduction in import duty on silk yarn from 30% to 5%. This has resulted in an adverse impact on the duty drawback rates for the silk fabric, silk garments and silk carpet industries for which imported silk yarn is the main input. The extent of reduction has been limited to 30% to 50% . While, there would be a minor reduction in duty drawback rates for most other items, due care has been taken to ensure that this reduction is capped at 10% of existing duty drawback rates, wherever the reduction in percentage terms actually works out to be much more, so as to minimize the hardship faced by exporters. In certain items namely leather garments and leather bags, the duty drawback rates have actually increased.