The Duty Credit Scrips Scheme, one of the most popular export promotion incentives offered by the Indian government, promotes exports. The Duty Credit Scrips Scheme, which is offered under the Foreign Trade Policy, is designed to encourage exporters to increase the amount of foreign currency that comes into India.
What is a Duty Credit Scrip?
The Director General of Foreign Trade (DGFT) issues duty credit scrips to exporters of products as well as exporters of services. The holder of the duty credit scrips can pay different duties or taxes to the federal government.
The Foreign Trade Policy allows for the issuance of Duty Credit Scrips under several different systems. The following are the programmes that allow Duty Credit Scrips to be issued:
- Merchandise Exports from India Scheme (MEIS) for merchandise exporters
- Service Exports from India Scheme (SEIS) for the service exporters
- Export Promotion Capital Goods Scheme (EPCG Scheme)
Under various regimes, Duty Credit Scrip will have a variable value. The products and the country would also affect their worth. The scrip value, however, typically falls between 2% and 5% of the realised Free On Board (FOB) value.
The Indian government has proposed this incentive since the export sector has a great deal of potential to create jobs. Therefore, the Indian government issues Duty Credit Scrips to exporters to promote exports. Not only do exports provide foreign cash to our nation, but they also lead to a significant increase in employment.
Nevertheless, the purpose of the Duty Credit Scrips is to offset the costs associated with the export of goods made or produced in India, as well as the inefficiencies in the infrastructure. Additionally, this would positively support the government of India’s Made in India effort.
What are the Benefits of Duty Credit Scrip?
Duty Credit Scrip holders can utilise their scrip to pay anti-dumping, safeguard, transitional product-specific, and basic customs duties.
These Duty Credit Scrips were previously accepted as payment for all customs, excise, and service tax charges. But with the introduction of the GST, both the service tax and the excise charge were absorbed. Therefore, it is not possible to use these Duty Credit Scrips to pay GST.
There are still many things that are exempt from GST, even though a large number of commodities and services are now subject to it. The Fourth Schedule to the Central Excise Act of 1944 lists the goods—which include tobacco and specific petroleum products—that are exempt from GST. Duty Credit Scrips can also be used to pay excise, CVD, and SAD duties.
How to Obtain a Duty Credit Scrip?
Through MEIS
For non-EDI shipping bills, an exporter may apply Duty Credit Scrips under the MEIS within three months of the date the customs uploads the EDI shipping bills to the DGFT server or printing/release of the shipping bills, or within 12 months from the date of the Let Export Order (LEO).
Through SEIS
Application for Scrips through SEIS must be submitted within 12 months beginning with the claim period following the conclusion of the fiscal year. The port of registration must be specified in the application documents. The Indian government offers a range of 3% to 5% incentives to service providers engaged in international business. 5% of the net foreign exchange acquired is allocated to duty credit scrips by SEIS.
Through EPCG
Exporters who prefer to import capital products using cash as the method of duty payment are provided with EPCG duty credit scrip. After exportation, these EPCG scrips become available. As freely transferable duty credit credits, the fundamental customs duty paid on capital products is remitted. The obligation remission, nevertheless, must be proportional to the accomplished EO.
Validity Period of Duty Credit Scrips
Duty Credit Scrips possess a predetermined period of validity during which they may be employed for the aforementioned objectives. If not utilised within the specified time frame, the scrips will expire and become unusable.
The validity periods of various schemes are as follows:
- Scrips for Duty Credit issued according to the MEIS: eighteen months from the date of issuance.
- Duty Credit Scrips issued under SEIS are valid for eighteen months from the issuance date.
- Episcopal Duty Credit Scrips are valid for eighteen months from the date of issuance.
How does a Duty Credit Scrip work?
The person who owns a Duty Credit Scrip can sell it on the open market to anyone else if they can’t use it for a good reason or within the time limit. But these scrips are bought and sold for less than their face value. You can either sell these scrips directly to the other person or through an agent who helps you find a buyer.
Here’s an example to make the idea easier to understand:
One example is a duty credit ticket that is worth 20 lakh rupees. The person who owns it can use it to pay 20 lakh rupees in duties or taxes. The person who owns the tax credit scrip can sell it to someone else if they don’t want to use it.
The person who buys the scrip won’t pay the full face value of Rs. 20 lakh for these scrips. He’s going to get the cash for less money. This means that the buyer can get the scrip for Rs.19,50,000 instead of Rs.20 lakh.
Additionally, the new owner paid Rs.19,50,000 for the scrip, but it will still be worth Rs.20 lakh and can be easily used to pay the same amount in taxes or fees.
The person who buys something benefits by saving a certain amount of money. The seller also keeps the Rs. 19,50,500 that he would have lost if he had used it before the expiration date.