Duty Credit Scrips refer to export promotion benefits outlined in the Foreign Trade Policy (FTP) 2015-20, to encourage exporters to enhance the inflow of foreign currency into India. These scrips provide tax incentives on exports, helping exporters offset their import-related duties.
They are granted under schemes such as the Service Exports from India Scheme (SEIS), Merchandise Exports from India Scheme (MEIS), and the Export Capital Goods Scheme. The norms governing Duty Credit Scrips in India are specified in the FTP 2015-20. This scheme is initiated and overseen by the Ministry of Commerce and Industry and the Directorate General of Foreign Trade (DGFT).
What is the General Purpose of Duty Credit Scrips?
Duty Credit Scrips (DCS) serve as a tool to assist exporters in addressing their tax liabilities. These scrips can be utilized to offset active tax obligations arising from mandatory customs duty, safeguard duty, transitional specific safeguard duty, and anti-dumping duty. While Duty Credit Scrips are transferable, it’s important to note that they cannot be applied to circumvent GST, compensation cess, and education cess.
Furthermore, Duty Credit Scrips remain valid for 24 months from the date of issuance. They are transferrable, and when transferred to a third party, they continue to provide the same benefits as they did for the original recipient. In certain situations, individuals have the option to revalidate Duty Credit Scrips by submitting a special request to the Directorate General of Foreign Trade (DGFT).
Duty Credit Scrips under Various FTP Schemes
Duty Credit Scrips serve as exporter incentive instruments and are available under various schemes of FTP, as outlined below:
Under MIES
Duty Credit Scrips can be obtained within 12 months from the date of the Let Export Order (LEO) or within three months from the day EDI bills are submitted to the DGFT portal by Customs, whichever is later. Application filing is done through Ayat Niryat Form 3A, accompanied by shipment bills and eBRC.
DCS is facilitated upon realizing FBO valuation of exports in foreign exchange @ 2-5 per cent, based on the imported product. LEO is the final step in the compliance checklist for exporting goods from India.
Under SEIS
For SEIS scrips, the application must be filed within 12 months from the closure of the financial year of the claim period. The GOI grants incentives of 3-5 per cent to service providers from Indian Territory to entities abroad. The scheme, effective from 2015, has a validity period of five years. Duty Credit Scrip under SEIS is granted for 5 per cent of the overall foreign exchange earned.
Under EPCG
Post-Export EPCG Duty Credit Scrip Scheme:
This scheme is accessible to Indian exporters importing capital goods by paying the applicable duty in cash post-export. Basic Customs Duty on capital goods is refunded via DCS, similar to those granted under Chapter 3 of Foreign Trade Policy. Specific EO will be 85 per cent of the applicable EO under the EPCG scheme, with the average EO remaining unchanged. Duty remission aligns with fulfilled EO. Scrips granted under Chapter 3 of FTP cover post-export EPCG DCS, and all provisions of the existing EPCG Scheme apply unless inconsistent with this scheme.
Documents Required for Obtaining Duty Credit Scrip
- Copy of the Foreign Inward Remittance Certificate.
- Copy of the Importer Exporter Code (IEC) certificate.
- Chartered Accountant (CA) certificate.
- Copy of the Registration Cum Membership Certificate (RCMC).
- Copy of the invoice.
- Copy of the foreign exchange earned.
- List of directors (for companies).
- Board resolution.
In a 2019 notification by the Directorate General of Foreign Trade (DGFT), it was announced that hard copies of SEIS and MEIS DCS granted with Electronic Data Interchange port as the port of registration would be phased out. However, the scrip itself will continue to be transmitted digitally from DGFT to Customs.
Details such as Bill of Entry assessment, DCS registration, giving out of charge, etc., will be accessible to the respective officers in the Indian Customs EDI System (ICES). Exporters must register the scrips with the Customs Authority, a service that can be facilitated by a Customs House Agent.
Validity of DCS
Duty Credit Scrip remains valid for 24 months from the date of issuance. Despite expiration, the benefits persist, as DCS is transferable. Exporters can sell it to third parties or revalidate it by filing a special request under specific circumstances.
Sale of Duty Credit Scrips
DCS serves as a valuable tool for exporters to meet shipping obligations. If no export occurs, selling DCS before its validity expires is a prudent decision. Duty Credit Scrips can be sold on the open market at a price determined by the term of use and validity period.
For instance, a DCS with a face value of Rs. 2,00,000 can be utilized to pay duties and taxes of equivalent value. Purchasing at a discounted price does not impact the face value of the scrip.
Conclusion
Starting an import and export business in India involves substantial duties and taxes. Duty Credit Scrip becomes crucial in this context as it allows exporters to alleviate immediate financial obligations, including customs duty and additional customs duty, addressing their fiscal challenges.
Consequently, Duty Credit Scrip assumes a pivotal role in the shipping industry, serving as a valuable asset for exporters. Explore our article on obtaining an LMPC Certificate for importing pre-packaged goods in India for further insights.
