Duty Credit Scrips is an initiative scheme introduced by the Government of India under the Foreign Trade Policy in 2015. Duty Credit Scrips were introduced to provide incentive to the Exporters to boost the inflow of forex in India. What these scrips are to exporters is same as for what vouchers are to shopaholics. These can be issues to Exporter of Goods as well as Services. Exporters get these scrips from the government for exporting goods or services outside India. These Scrips can be used to set off duties while importing to India.
The value of scrip varies from scheme to scheme, product to product and country to country. However, the scrip value in most of the cases is in the range of 2% to 5% of the realized FOB Value (in free foreign exchange). Validity of Duty Credit Scrips varies according to the nature of the scrips.
Exporters can use Duty Credit Scrips (DCS) for the payment of:
PURPOSE OF DUTY CREDIT SCRIPS
- Duty Credit Scrips can be used by the exporters to pay their tax liabilities on imports, if any.
- DCS are transferrable in nature. So, if the exporters do have enough imports to set off these scrips, Exporters can sell them to those who import and can set off against their own tax liabilities.
- Duty Credit Scrips can also be revalidated on special request to DGFT (Directorate General of Foreign Trade) under crucial circumstances.
- Duty Credit Scrips cannot be used to set-off CGST/SGST/IGST liability.
DOCUMENTS TO BE SHARED WITH AUTHORITY FOR OBTAINING DCS
- Copy relating to the foreign inward remittance certificate
- Copy of IEC code.
- CA certificate
- Copy of RCMC certificate, i.e. Registration cum membership certificate
- Copy relating to the invoice
- Copy of foreign exchange earned
- List of directors (in case of companies)
- Board resolution
WHAT IS REMISSION OF DUTIES AND TAXES ON EXPORT PRODUCTS (RoDTEP) SCHEME
A scheme designed to provide rewards to exporters to offset infrastructural inefficiencies and associated costs. The Duty Credit Scrips and goods imported/ domestically procured against them shall be freely transferable. The Duty Credit Scrips can be used for:
(i) Payment of Basic Customs Duty and Additional Customs Duty specified under sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 for import of inputs or goods, including capital goods, as per DoR Notification, except items listed in Appendix 3A.
(ii) Payment of Central excise duties on domestic procurement of inputs or goods,
(iii) Payment of Basic Customs Duty and Additional Customs Duty specified under Sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 and fee as per paragraph 3.18 of this Policy.
Objective of the RoDTEP scheme is to promote the manufacture and export of notified goods/ products. To apply for RoDTEP scheme, an IEC is required. Other pre-requisites as mentioned in the Chapter 3 of Foreign Trade Policy and Hand book of Procedures may be referred.
WHAT IS SERVICE EXPORTS FROM INDIA SCHEME (SEIS) SCHEME
Under the framework of the SEIS Scheme, under implementation since 01.04.2015, service exporters for eligible service categories, are granted benefits in the nature of transferable Duty Credit Scrips as a percentage of Net Foreign Exchange earned on export of the eligible services in a financial year. The Duty Credit Scrips can be used Payment of Basic Customs Duty and certain other duties as listed in para 3.02 of FTP 2015-20
Pre-Requisites for Applying for SEIS Scheme
All eligibility criteria are outlined in FTP and HBP however salient ones are:
- Should have an active IEC at the time of rendering services
- Should have certain minimum earnings
- Should have exported eligible services as notified in Appendix 3D/3E/3X (Appendix 3X will be applicable on claim for FY 2019-20 and Appendix 3D/3E will be applicable for other year claim)
- Does not fall under ineligible categories as in public notice 45 dated 05.12.2017
- Services provided under Modes 1 and 2 only are allowed for claim for eligible services
- Negative Net Foreign Exchange earnings (NFE) makes the entitlement under zero for the financial year
WHAT IS REBATE OF STATE AND CENTRAL LEVIES AND TAXES (RoSCTL) SCHEME
Scheme to rebate all embedded State and Central Taxes/levies for meant for exports of made-up articles & garments. Pre-Requisites for Applying for RoSCTL Scheme is that an IEC is required.
WHAT IS EXPORT PROMOTION CAPITAL GOODS (EPCG) SCHEME
The objective of the Export Promotion Capital Goods (EPCG) Scheme is to facilitate import of capital goods for producing quality goods and services and enhance India’s manufacturing competitiveness. EPCG Scheme allows import of capital goods for pre-production, production and post-production at zero customs duty. Capital goods imported under EPCG for physical exports are also exempt from IGST and Compensation Cess up to 31.03.2020. Alternatively, the exporter may also procure Capital Goods from domestic market in accordance with provisions of paragraph 5.07 of FTP. Capital goods for the purpose of the EPCG scheme shall include:
– Capital Goods as defined in Chapter 9
– Computer systems and software which are a part of the Capital Goods
– Spares, moulds, dies, jigs, fixtures, tools & refractories
– Catalysts for initial charge plus one subsequent charge
EPCG scheme covers manufacturer exporters with or without supporting manufacturer(s), merchant exporters tied to supporting manufacturer(s) and service providers.
WHAT IS TRANSPORT AND MARKETING ASSISTANCE (TMA) SCHEME
The “Transport and Marketing Assistance” (TMA) for specified agriculture products scheme aims to provide assistance for the international component of freight and marketing of agricultural produce which is likely to mitigate disadvantage of higher cost of transportation of export of specified agriculture products due to trans-shipment and to promote brand recognition for Indian agricultural products in the specified overseas markets.
To apply for TMA scheme, an IEC is required. Other pre-requisites as mentioned in the Chapter 7 of Foreign Trade Policy and Hand book of Procedures may be referred.
SALE OF DUTY CREDIT SCRIPS (DCS)
In case, the holder (Exporter) of these scrips is unable to use them for any reason, he/she can sell them in the market. Buyer (Any Importer) of the scrips would usually buy them at a discount on the face value. The buyer of the scrips would not pay the full value of the scrips.
For example: If a holder has a Duty Credit Scrip worth Rs.2,00,000 and he is unable to use them, he should sell it in the market. Since the buyer of these scrips would not pay the full amount, it should be sold at a discount. The buyer may buy these scrips at Rs.1,80,000 instead of Rs.2,00,000.
Although these scrips are sold for Rs.1,80,000, It would still have the face value of Rs.2,00,000 and can be used for the payment of duties equivalent to Rs.2,00,000. The Buyer of these scrips gets the benefit of Rs.20,000 by paying Rs.1,80,000 instead of Rs.2,00,000. And the seller benefits from the transaction by encashing at least Rs.1,80,000 because the scrip would have been useless until its validity if he wouldn’t have used it or sold it.