Duty credit scrip is the most important export promotion incentive provided by the government at present to exporters. The approach of the scheme is to promote exports by giving tax incentives to the exporters.
The duty credit scrip is a pass that allows the holder to import commodities by not paying a specified amount in import duties. Following are the main features of duty credit scrip:
- They are issued to exporters
- The scrip allows duty deduction (non-payment of taxes) of a specified amount in the scrip. The scrip value or the amount of tax deduction will be specified in the scrip.
- The scrip value or tax reduction is expressed as a percentage of export turnover of the exporter.
- The scrip value usually varies between 3 per cent to 5 per cent under Foreign Trade Policy 2015.
Basically, duty free scrips are paper authorizations that allow the holder to import inputs that go into manufacture of products that are exported or machinery used for producing such goods without paying duties equivalent to the printed value. The scrips are given to exporters for meeting certain goods and exporting it to specific markets. Main objective of the scrip is to incentivize the exporters to make more exports of specific commodities/services and those to specific markets. The FTPs (Foreign Trade Policies) usually mention the schemes eligible for scrips.
It is also used to reimburse duties on imported inputs under schemes such as the export promotion capital goods scheme, the duty free import authorisation scheme and the advance authorisation scheme.
Working of the scrip
For example, if duty free scrip is valued at Rs 10 lakh, the holder can use it to import such goods without paying duties up to Rs 10 lakh. It is issued to the exporter allowing him to import a given percentage of his export value without levying any import duty. The scrip value can be deducted from import duty.
As per the new FTP (2015), the scrip can be transferred to other persons. This means that an exporter can transfer the scrip he obtained to the importer.
The Duty Credit Scrip is granted from Regional Offices of DGFT, spread all over the country. The duty free scrip can also be utilised for payment of excise duty on such “inputs” that are permitted for imports foreign trade policy.