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Duty credit scrips for exporters: Meaning, benefits, and uses

Duty credit scrips are promoted by the Indian government to boost exports, offset export costs, and more. Learn more about duty credit scrips in the blog.

The Government of India offers various schemes and incentives to encourage exports from the country. Among these, duty credit scrips stand out as an attractive benefit for exporters. These scrips serve as credits that exporters can utilize to offset specific taxes and duties owed to the government.¹ In this blog post, we will discuss what duty credit scrips are, and outline their characteristics, advantages, and the application process.

What are duty credit scrips?

A duty credit scrip is an export incentive offered by the Government of India that can be used by exporters to offset their import duties. They can be issued to exporters of goods and services, in accordance with specific schemes outlined in the Foreign Trade Policy. The value of the duty credit scrip varies from scheme to scheme, and is also based on the type of goods and country. However, it is generally between 2% and 5% of the realized Free On Board (FOB) value.²
Duty credit scrips are issued by the Directorate General of Foreign Trade (DGFT), under the Ministry of Commerce and Industry. If an exporter does not have a foreseeable use for the duty credit scrip within its validity period, they may transfer it to someone else who can use it to offset their tax liabilities.³

What are the uses of duty credit scrips?

The Foreign Trade Policy offers duty credit scrips under three schemes. These are as follows:

● Merchandise Exports from India Scheme (MEIS) for merchandise exporters (now replaced by the Remission of Duties and Taxes on Exported Products or RoDTEP scheme).
● Service Exports from India Scheme (SEIS) for service exporters.
● Export Promotion Capital Goods Scheme (EPCG Scheme).⁴
Duty credit scrips can be used by exporters to pay import taxes and duties, including necessary customs duties, safeguard duties, transitional product-specific safeguard duties, and anti-dumping duties. However, duty credit scrips cannot be used to offset GST, compensation cess, or education cess.⁵

How do duty credit scrips (DCS) work?

Duty credit scrips ease the financial burden of import duty payments. This helps exporters preserve essential working capital for fulfilling export orders.

Let us consider this scenario: An exporter secures an export order and needs to import raw materials in order to start production. Naturally, the exporter needs money for both production and shipping. In this situation, if they had to pay heavy import duties for the purchase of raw materials, it would strain their working capital. This is where duty credit scrips can help.

Benefits of using duty credit scrips

The following are some of the key benefits of duty credit scrips:

● They can be used to pay various taxes and duties, including basic customs duty, safeguard duty, anti-dumping duty, and transitional product-specific safeguard duty. This preserves the exporter’s working capital, which can be used to fund production and shipping expenses.
● Duty credit scrips are freely transferable. This enables exporters with no immediate need for them to pass them on to others who can utilize them to settle tax obligations.⁷

Documents required to apply for duty credit scrips

The following are some of the documents that the DGFT requires to process applications for duty credit scrips:

● Copy of the foreign inward remittance certificate
● Importer Exporter Code (IEC)
● CA certificate
● Registration Cum Membership Certificate
● Copy of invoice
● Copy of foreign exchange earned
● List of directors (required for companies)
● Board resolution⁸

How to apply for duty credit scrips?

1. Apply for duty credit scrips under MEIS

Exporters who want to obtain duty credit scrips under MEIS must apply within 12 months of the Let Export Order (LEO) date or within 3 months from the date of uploading EDI shipping bills to the DGFT server by customs, or within 3 months from the printing/release of the shipping bills for non-EDI shipping bills.

2. Apply for duty credit scrips under SEIS

To obtain duty credit scrips through SEIS, one must apply within 12 months from the end of the financial year, taking into account the claim period. The application must specify the port of registration.

3. Apply for duty credit scrips under EPCG

The EPCG duty credit scrip is issued to exporters planning to import capital goods by paying duties in cash. These EPCG scrips become available after export. The basic customs duty paid for capital goods is refunded as transferable duty credit scrips, but the refund amount must match the fulfilled export obligation.⁹

What is the validity period of duty credit scrips?

Duty credit scrips are valid for a specific time period and expire if they are not utilized within the time frame. The validity periods for duty credit scrips under the three schemes mentioned above are as follows:

● MEIS: 18 months from the date of issuance.
● SEIS: 18 months from the date of issuance.
● EPCG: 18 months from the date of issuance.¹⁰

How to sell duty credit scrips?

Duty credit scrips are freely transferable. This means that if an exporter does not have any use for their scrip within its validity period, they may transfer it to another person who can use it to offset their tax liabilities.

Duty credit scrips can be exchanged interpersonally or with the help of any reliable online marketplace.

Sale of duty credit scrip under GST

According to the Goods and Services Tax (GST) Act, duty credit scrips are categorized as goods. Initially, the sale of these scrips incurred GST. However, in 2017, the regulations were revised, and the sale of duty credit scrips was exempted from GST as it was deemed redundant to tax a tax-based incentive.¹¹

Conclusion

In conclusion, duty credit scrips are a highly attractive and valuable incentive extended by the Government of India to exporters. Their ability to offset import duties and taxes, coupled with their transferable nature, provides exporters with much-needed flexibility and financial relief.
For e-commerce exporters, duty credit scrips can play a crucial role in optimizing cash flow, enabling them to allocate resources efficiently and competitively engage in global markets. For additional support on key aspects of e-commerce exports from India, exporters can avail the tools and services offered by programs like Amazon Global Selling.

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If you are a business owner and you want to sell your products to the world, Amazon Global Selling enables you to list and sell ‘Made in India’ products on 18 Amazon global marketplaces. As an e-commerce exports program, Amazon Global Selling provides support and guidance at every step of your exports journey – documents and licenses, logistics, payments, advertising, and more.

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Frequently Asked Questions

Are duty credit scrips taxable?

Duty credit scrips are exempt from GST.

Is RoDTEP a duty credit scrip?

The RoDTEP scheme enables exporters to obtain refunds on taxes and duties not covered by any other scheme. RoDTEP refunds will be issued as transferable e-scrips, maintained in an electronic credit ledger by the Central Board of Indirect Taxes and Customs (CBIC). These scrips can be used to pay basic customs duty on imported goods or may be electronically transferred to another party.¹²

Are duty credit scrips transferable?

Duty credit scrips are transferable. This means that exporters who do not foresee any use for a scrip within its validity period can transfer or sell them to another person who can use it to offset their tax liabilities.

Published on May 28, 2024.

Sources:
1. https://www.dgftguru.com/duty-credit-scrips-scheme/
2. https://www.dgftguru.com/duty-credit-scrips-scheme/
3. https://www.dripcapital.com/en-in/resources/blog/duty-credit-scrip
4. https://scripbox.com/pf/scrip/
5. https://www.dutyexchange.com/understanding-duty-credit-scrips-meaning-and-how-to-sell-them/
6. https://www.dutyexchange.com/understanding-duty-credit-scrips-meaning-and-how-to-sell-them/
7. https://www.dripcapital.com/en-in/resources/blog/duty-credit-scrip
8. https://www.dripcapital.com/en-in/resources/blog/duty-credit-scrip
9. https://www.dgftguru.com/duty-credit-scrips-scheme/
10. https://www.dgftguru.com/duty-credit-scrips-scheme/
11. https://www.dutyexchange.com/understanding-duty-credit-scrips-meaning-and-how-to-sell-them/
12. https://www.indiantradeportal.in/vs.jsp?lang=0&id=0,55,23222

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