Duty Entitlement Passbook Scheme (DEPB)

The DEPB Scheme is in place to encourage exports of commodities and came into existence in 1997. The main purpose of the scheme is to provide monetary incentives to import-export businesses. DEPB uses a credit scheme to incentivize those involved in such business to enhance the commodity business in India.

Wed Jun 29 2022 | Business Law | Comments (0)

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Duty Entitlement Passbook Scheme is an export encouragement scheme instituted by the Government of India in the. This scheme earlier constituted of 2 parts:

  1. Pre- export DEPB- got abrogated in 2000 and
  2. Post- export DEPB- issued after the exports

In post-export DEPB scheme, the exporter is given a DEPB at a pre-decided credit on the Freight on Board Value (FOB).

The fundamental aim behind this scheme is to provide incentives in import and export policy of India and to nullify the basic custom duty rates on the import content of the commodities exported.

Under the DEPB scheme, an exporter of the commodities is empowered to demand credit, which can be a  pre-decided  settled percentage of the value of the commodities that are exported and are available at a rate of exported good which is determined and notified by the Director General of Foreign Trade (DGFT).

It must be kept in mind that the credit amount which is made available to the exporters can only be utilized to pay off the amount of customs duty which is liable to be paid and the same cannot be utilized to adjust it with any other liability nor can it be withdrawn. Although, there is no restriction on trading the amount, i.e., it can be transferred to another person and then can thereafter be transferred to another person from him.

The DEPB scheme permits the import of any commodity, excluding those commodities that are banned, for instance, Gold pens, Gold Nibs, Gold watches, etc. Although, these goods constitute the generic description and component of writing instrument, watches, etc these are still not allowed to claim the benefit from the DEPB scheme.

What is the rate of DEPB?

The DEPB rates are based on either the FOB value or the value cap, whichever value is minimum. For instance, if a commodity’s  FOB value is Rs. 1000/-, and the cap value is Rs. 600/-, then the DEPB rate shall be applied on Rs. 600/-.

What is the advantage of the DEPB rate?

Now, to make the cut within the ambit of the scheme, the exporter must display documents proving that the commodities exported comprises of an irrelevant material of up to 5% by weight. In such a scenario, an irrelevant material of up to 5% will be disregarded and the rate of DEPB, which is the actual rate for the commodity to be exported, will be kept in mind.

The government has made it compulsory for  Custom houses to maintain exclusive record of the commodities that are, or will, be exported under the DEPB scheme.

What are the provisional rates? 

To motivate the export of new commodities and further motivate multiplicity, provisional rates are available. But these provisional rates are only applicable  for a set period of time and are to be displayed during import and export for the regular fixation of the rates.

How to determine the rate?

The Government of India, before determining/ calculating the DEPB rates, will first consider the import - export data on the FOB value of the exports and the Cost Insurance Freight (CIF) value of the inputs that are used on the exported commodities, as per SION.

In addition, the Indian government will also have to apply to the Export Promotion Council to get the necessary information as well as data to determine the DEPB rate.

How are the DEPB rates implemented?

The following are the facilities available for the implementation of the DEPB scheme:

  1. The DEPB rates are rationalized to the account to create a change in the custom duties.
  2. The caps are explicit on certain specific commodities, even though no verification is obtainable for the Present Market Value (PMV) of those commodities.
  3. A lot of ports have been pre-added in the DEPB scheme to benefit from the Duty Exemption Scheme (DES).
  4. Earlier, the threshold limit to fix new DEPB rates was Rs. 200 million, which now has been removed, thus making it completely limitless.

What is the credit under DEPB and the Present Market Value (PMV)?

For the commodities that are eligible to benefit from credit under the DEPB scheme comes to 10% or more, the credit amount of such export commodity must not surpass 50% of the Present Market Value (PMV).

Besides this, while exporting commodities, the exporter is required to furnish a shipping bill which falls under the DEPB scheme and  must prove that the benefit obtained does not exceed 50% of the Present Market Value of the commodities that are exported. Although, it is not absolutely necessary to submit the Present Market Value declaration on the products/ commodities/ items  that have a value cap irrespective, of the DEPB rate of the commodity.

What are the different ports of registration?

To avail the DEPB scheme,  import-export from can only be made from the following chosen ports:

  • Airports- Delhi, Mumbai, Bangalore, Kolkata, Jaipur, Nagpur, Ahmedabad, Srinagar, Varanasi, Chennai, Coimbatore, Hyderabad, Trivandrum, Bhubaneshwar.
  • Seaports- Mumbai, Chennai, Kolkata, Mangalore, Surat, Vishakhapatnam, Tuticorin etc.
  • Integrated Child Development Services- Delhi, Bangalore, Pune, Nagpur, Ludhiana, Kanpur, Nashik, Bhatinda, Jodhpur, Madurai, Udaipur, Rewari, Amritsar, Surat, Agra, Ahmedabad, Jaipur, Vadodara, Varanasi, Meerut, Pondicherry, Jalandhar, Kota, Faridabad, Guwahati, Nainital etc.
  • Low Contact Stress- Singhabad, Mahadipur, Ranaghat, Jogbani, Raxaul, nautanva, Petra pole etc.
  • Special Economic Zone- Noida, Santa Cruz, Chennai, Kochi, Surat, Kandla, Vishakhapatnam.

Utilization of the DEPB credit

The credit, which is available under the DEPB scheme, can be utilized to pay-out the Indian Customs Duty, which can further include the payment of capital goods that are free to import.

Re-export of imported goods under the DEPB scheme

Under the Export Import (EXIM) guidelines of the Government of India (Department of Revenue), the defective imported commodities that are unfit to utilize and ultimately have to be returned and shall be exported back once again to the concerned person.

In such cases, 98% of the credited amount will be debited against the DEPB for the export of commodities.

The Commissioner of Customs, who is the concerned authority, will then furnish a certificate pertaining to this, which would mention the total amount that is generated and the complete details of the original DEPB, and ultimately the new DEPB is then furnished by the Directorate General of Foreign Trade (DGFT) regional authority that is authorised to do so.

The furnished DEPB certificate must have the same port of registration and must be valid for a specific period of time, which is identical to the balance period which is available on the date of import of the defective commodities which are unfit to use.

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