Changes in taxation: the order of the day?

The Indian tax and regulatory regime governing cross-border transactions has recently undergone several changes. While amendments to the foreign direct investment policy initially restricted exit rights (in the nature of options) for investments into India and have been quickly backtracked on, the realm of indirect taxes has witnessed significant developments, a few of which are captured below.

DEPB subsumed into DBK

The foreign trade policy earlier provided for two duty remission schemes: duty drawback (DBK) and duty entitlement passbook (DEPB). While the DBK scheme neutralizes customs duty and excise duty on inputs used for products exported, the DEPB scheme provided duty-free scrips based on the value of goods exported which could be used for paying import duties on subsequent procurements. From 1 October, the DEPB scheme has been subsumed into the DBK scheme and as a result importers no longer have a choice: 2,130 items under the DEPB scheme have been incorporated into the DBK schedule, and in some cases, the rates of benefit were reduced.

Post clearance audit

Until now customs law, unlike central excise and service tax laws, did not provide for audits in premises of importers and exporters. The Finance Act, 2011, introduced self-assessment to the Customs Act, 1962. Thereafter, on 4 October, the On-site Post Clearance Audit at the Premises of Importers and Exporters Regulations, 2011 (OSPCA), were notified. The self-assessment scheme, coupled with the mechanism for post-clearance audit, aims for faster clearance of goods.

Economic Laws Practice is a full-service law firm headquartered in Mumbai with offices in New Delhi, Pune and Ahmedabad. Ranjeet Mahtani is a senior associate at the firm and Anuradha Mohanty is an associate.