Being one of the most sought-after export promotion incentives provided by the Government of India, the Duty Credit Scrips Scheme encourages exports. Issued under the Foreign Trade Policy, the Duty Credit Scrips Scheme aims at incentivizing exporters to maximize the inflow of foreign exchange to India.
Consulting And Compliance
Duty Credit Scrips Scheme
What is a Duty Credit Scrip
Duty credit scrips are issued to exporters of goods and exporters of services as well, by the Director General of Foreign Trade (DGFT). With the duty credit scrips, the holder can pay various duties or taxes to the central government.
The Duty Credit Scrips are applicable to be issued through various schemes under the Foreign Trade Policy. Below mentioned are the schemes under which Duty Credit Scrips can 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)
The worth of Duty Credit Scrip would be different under different schemes. Its value would vary depending on the products and country as well. However, in most cases, the scrip value ranges from 2% to 5% of the realized Free On Board (FOB) value.
Due to the high potential of the export industry in employment generation, the Government of India has put forth this incentive. Thus, Duty Credit Scrips are issued to the exporters by the Government of India to encourage exports. As exports along with bringing the foreign exchange to our country, also result in job creation on a large scale.
However, there’s another motive behind issuing the Duty Credit Scrips which is to counterbalance the infrastructural inefficiencies and related costs included in the export of items produced or manufactured in India. Further, this would also contribute effectively to the Make in India campaign launched by the Government of India.
Benefits of Duty Credit Scrip
The holder of Duty Credit Scrip can use the scrip for payment of basic customs duty, safeguard duty, transitional product-specific safeguard duty, and anti-dumping duty.
Previously, these Duty Credit Scrip were eligible to be used for making payment of all duties of customs, excise, and service tax. However, after GST has been implemented, it has subsumed the excise duty as well as the service tax. Thus, these Duty Credit Scrips are not applicable to be used for payment of GST.
There is a wide range of goods and services that are now under the ambit of GST, however, there still are various items that are free from GST. The items on which GST is not levied are mentioned in the Fourth schedule to the central excise act, 1944 which covers specified petroleum products, tobacco, etc. Duty Credit Scrips are also eligible for paying duties of excise, CVD/SAD.
How to get Duty Credit Scrip
- Under MEIS
An exporter willing to obtain Duty Credit Scrips under the MEIS shall apply within 12 months from the date of Let Export Order (LEO) or within three months from the date of uploading the EDI shipping bills to the DGFT server by the customs or printing/ release of shipping bills for Non-EDI Shipping Bills.
- Under SEIS
Scrips can be obtained through SEIS by applying within 12 months from the end of the financial year with reference to the claim period. The applicant has to mention the port of registration in their application. 3% to 5% of incentives are given to all the service providers by the government of India to the organizations abroad. SEIS grants duty credit scrips for 5% of the net foreign exchange obtained.
- Under EPCG
The EPCG duty credit scrip is issued to the exporters intending to import capital goods by making payment of duties through cash. These EPCG scrips get availed post-export. The basic customs duty paid for capital goods is remitted as freely transferable duty credit scrips. However, the duty remission has to be in proportion to the fulfilled EO.
Validity period of Duty Credit Scrips
The Duty Credit Scrips have a certain specified period of validity and can be utilized for the above mentioned purposes within the validity period. If unable to use within time, the scrips expire and thus, cannot be used further.
Here is the validity period of various schemes:
- Duty Credit Scrips issued under the MEIS- 18 months from the date of issuance
- Duty Credit Scrips issued under SEIS- 18 months from the date of issuance
- Duty Credit Scrips issued under EPCG Scheme- 18 months from date of issuance
Transferability of Duty Credit Scrips
Duty Credit Scrips are freely transferable and there are no complications or conditionalities involved in these scrips. If the Duty Credit Scrips holder does not intend to use these scrips for any appropriate and legitimate purpose, they can sell them to any other exporter. If the holder is unable to use the scrip within the specified validity period, it can get transferred to any other exporter willing to purchase it.
How does Duty Credit Scrip work?
If the Duty Credit Scrip holder is unable to use the scrip for a valid purpose or within the validity period, it can be transferred to any other party in the open market. However, such scrips are sold and purchased at a discount to their face value. These scrips can be sold directly to the other party or even through an agent who helps you to get in contact with the willing buyer.
Here’s an example to simplify the concept.
For instance, a duty credit scrip has a value of Rs 20 lakh, the holder can utilize the scrip to make the payment of duties or taxes equivalent to Rs. 20 lakh. But if the holder of the duty credit scrip doesn’t intend to use it, they may sell it to another willing party.
Now, the buyer of the scrip won’t be paying the same face value for these scrips, i.e, Rs. 20 lakh. He will buy the scrip at a discount. Thus, instead of Rs. 20 lakh, the buyer may purchase the scrip for Rs.19,50,000.
Also, the new holder had bought the scrip for Rs.19,50,000, but the scrip will still be worth Rs. 20 lakh and can be conveniently utilized for paying duties or taxes equivalent to the amount.
Thus, the buyer gets a benefit of a certain amount that has been saved through a discount. The seller also saves his Rs. 19,50,500 which would have been wasted if not used before the validation period.
MEIS License Sale
Merchandise Exports from India Scheme (MEIS) is an incentive scheme introduced under Foreign Trade Policy (FTP). Incentive schemes entitle the exporters to duty credit scrips subject to various conditions. The duty credit scrips are freely transferable, they can be sold in the markets without any complexities. If the duty credit scrip holder doesn’t intend to import inputs against the scrip, it can be transferred easily.
MEIS license Sale broadly aims to minimize inefficiencies caused due to lack of infrastructure and costs incurred in exporting products manufactured in India, especially those that have a high export capacity, a good potential for employment, and are capable to enhance India’s export competitiveness.
SEIS License Sale
Previously termed as Served from India, SEIS is another incentive scheme introduced in the Foreign Trade Policy. This scheme aims at encouraging exports of notified services from India. All the service providers of eligible services in India get rewarded through SEIS.
These scrips can be transferred freely in the open market directly or through an agent if the holder is unwilling to use them. These can be sold at an average of 95% to 100% to the importers for the payment of customs duties.
RODTEP License Sale
The RODTEP scheme is an incentive through which refunds of duties and taxes are made for those who are currently not getting reimbursed under any other schemes. The scheme is compliant with the norms of WTO. However, the percentage of value on products is not yet notified.
These scrips are issued as transferable duty credit or through electronic scrips which are maintained by means of an electronic ledger.
Why DGFT Gurus?
DGFT Guru is a team of highly qualified and experienced consultants, expertise comes along with these qualities. We aim at maintaining transparency with our clients at every stage and maximizing our client’s satisfaction. You’ll be receiving a customized plan as per your desires with the regular assistance of our experts. From documentation to application, everything will be conducted smoothly through the experienced DGFT Consultants, all you have to do is contact us and the rest is our responsibility.
30+ Years of Experience, dedicated team of DGFT Experts
FAQ
A scrip that can be used to pay Customs Duty is called a “Duty Credit Scrip” (which was earlier allowed to be used to pay Service Tax & Excise.) Following the different plans detailed in the Foreign Trade Policy, these scrips are granted to both goods and services exporters.
Duty-free scrips are paper authorizations that exclude the bearer from paying import tariffs on inputs used in manufacturing exported items or machinery used in producing such goods up to the value stated on the scrips.
Many courts have ruled that Duty Credit Scrips constitute a taxable supply since they are goods. Scrips for Duty Credit that fall within HSN 4907 are not subject to VAT 13.10.
To help businesses take advantage of incentives like RoDTEP (Remission of Duties and Taxes on Exports of Products) and RoSCTL (Rebate of State and Central Taxes and Levies), ICEGATE, CBIC have created the Escrip module.
DGFT issues Duty Credit Scrip, which can be used to remit various Central Government levies. Both Goods Exporters and Services Exporters might receive one of these. Depending on the program, the product, and even the country, scrip can have a wide range of values.
