Dematerialisation may not be restricted to just shares or TDS certificates.

The finance ministry has now proposed issuing DEPB credit to exporters in a dematerialised form. The move is aimed at reducing transaction time and checking extensive misuse of the scheme.

As of now, DEPB credit - which is transferable - is issued to exporters by the director-general of foreign trade (DGFT) in physical form. According to senior finance ministry officials, dematerialisation of DEPB credit would have procedural advantages since all custom houses are networked and verification of the pass book can be done through the electronic data interchange (EDI).

The DEPB scheme is intended to offset the customs duty incidence on the import content of the export product. The neutralisation is provided by extending duty credit against the export product. Under the scheme, exporters are granted credit on the basis of the f.o.b value of exports.

The credit is available at rates specified by the DGFT for import of raw materials, components, parts, packaging material and so on. The average DEPB credit disbursal is around Rs 7,000 crore per annum and over 50% of the country's exports are through the DEPB facility.

The scheme has managed to survive year after year, despite the government's intention to scrap it. Some of expert committees - including the task force on implementation of the fiscal responsibility and budget management act - have recommended merger of the DEPB scheme into the duty drawback scheme.

Exporters acknowledge that DEPB clearances can be speeded up if the customs department honours the credit, issued by the DGFT, through electronic verification. As of now, the customs department carries our physical verification to check misuse and plug revenue leakage in the DEPB scheme. It takes two days for the DGFT to issue the licence and five to six days for the customs department to verify it.

Currently, sales tax is paid when DEPB credit is sold. After dispute with state governments in various courts, exporters are now paying sales tax in most states except a few like Uttar Pradesh. It is widely expected that the DEPB scheme would be wound up at the end of the current financial year and exporters would have to shift to the duty drawback scheme under which taxes paid on inputs for export products are reimbursed by the government.