EXPORTERS MAY HAVE TO
PAY TAX ON DEPB LICENCE SALE
Exporters may have to pay tax on the income
arising out of the sale of Duty Entitlement Pass Book (DEPB)
licences this year. The DEPB benefit is an incentive given
to exporters by the government, whereby exporters are given
a licence to import goods duty free in proportion to their
exports. And this licence is saleable. On February 17, the
Central Board of Direct Taxes (CBDT) issued a circular which
said that the IT department could restart the assessment process
which was halted earlier on income arising out of the sale
of DEPB licences.
The exporters and the government have
been locked in a dispute for several months over whether the
income arising out of the sale of DEPB licences was taxable.
The process of taxing DEPB benefits had been kept in abeyance
since August '03, when a committee was appointed by the CBDT
to examine the issue. The committee was appointed soon after
the I-T department began taxing DEPB benefits on the face
of complaints from the exporters. The assessments were then
halted until November 30, after which the date was extended
till February 17, '04.
However, the CBDT's latest circular said
that it is not possible for it to intervene in the matter.
This means that the I-T department can now levy tax on DEPB
benefits. This could put exporters in a fix, as many of them
receive DEPB benefits worth several crores, which has now
become taxable.
Tax consultant Jitendra Sanghavi told ET, "The issue
should have been kept in abeyance till a clear decision is
arrived (at) on the subject." Another senior tax consultant,
TP Ostwal, said, "While making a commercial decision,
the exporters calculate the DEPB benefits too. In order to
bring certainty to the tissue govt must decide on it."
The issue has been a matter of contention
between the tax authorities and exporters, the latter claiming
that the tax benefits are one of the factors taken into account
while making an export decision.
Exporters are eligible for tax benefits,
under 80 HHC of the Income-tax Act. However, the I-T department
began taxing the DEPB benefits from '02-03, triggering the
dispute.
