Indian Auto Group Seeks Alternative to Current Duty Scheme

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TC Malhotra contributes to MetalMiner from New Delhi.

India’s nodal agency for the auto component industry, the Automotive Component Manufacturers Association of India (ACMA) has welcomed the government’s move to extend the Duty Entitlement Pass Book (DEPB) scheme till September 30, 2011. However, ACMA has sought an alternative to the DEPB scheme before the deadline, according to a Hindu Business Line report.

The DEPB scheme, a popular government-run tax refund scheme for Indian exporters that came in force in June 1997, was due to end on June 30, 2011. The Indian finance ministry has said that duty drawback would take its place after DEPB is phased out.

Indian exporters received a major relief with deciding to extend the DEPB benefits, as the government is still working on an alternative plan.

Srivats Ram, ACMA’s president, was quoted by the report as saying that if the alternative scheme to be launched is shared with exporters before September 30, it will help iron out issues and also save disruptions usually found when a new scheme is launched.

Ram highlighted that India’s auto component exports were running at higher costs compared with countries like China, Brazil and Thailand due to power deficit and infrastructures constraints.

ACMA’s active involvement in trade promotion, technology upgrading, quality enhancement and collection and dissemination of information has made it a vital catalyst for this industry’s development. Its other activities include participation in international trade affairs, sending trade delegations overseas and bringing out publications on various subjects related to the automotive industry.

ACMA is also represented on a number of panels, committees and councils of the Indian government, and helps in the formulation of policies pertaining to the Indian automotive industry.

For ease of information exchange and especially cooperation in trade matters, ACMA has signed a Memoranda of Understanding with its counterparts in 21 countries, among them Australia, the US, Canada, Germany, Japan and Uzbekistan.

ACMA represents more than 600 companies, whose production comprises a majority of total auto component output in the organized sector. In the domestic market, they supply components to vehicle manufacturers, Tier-1 suppliers, state transport undertakings, defense establishments, railways and even to the replacement market. A variety of components are being exported to many countries.

Experts say that the benefit of DEPB schemes is dependent upon the export products having extraneous material up to 5 percent by weight. In such cases, extraneous material up to 5 percent shall be ignored and the DEPB rate as notified for that export product is allowed.

The main objective behind the provisional DEPB rates is to encourage diversification and to promote export of new products. However, provisional DEPB rates would be valid for a limited period of time during which the exporter would furnish data on export and import for regular fixation of rates.

Credit given under DEPB schemes is utilized for payment of Indian customs duty including capital goods, which are free to import.

In case of any returned exported goods, which have been found defective or unfit for use, they may be exported again according to the exit guidelines as mentioned by the Department of Revenue.

In such cases, 98 percent of the credit amount debited against DEPB for the export of such goods is generated by a commissioner of customs in the form of a certificate, containing the amount generated and the details of the original DEPB.

On the basis of certificate, the Directorate General of Foreign Trade (DGFT) regional authority issues a fresh DEPB. It is important to note that the issued DEPBs have the same port of registration and shall be valid for a period equivalent to the balance period available on the date of import of such defective/unfit goods.

–TC Malhotra

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