Duty Scrip
Introduction
Duty credit scrip is a certificate (or scrip) that can be used by its holder for the payment of import tariff (customs duties) Or in other words, it is a pass that allows the holder to import commodities by not paying a specified amount in import duties.
Duty Scrips issued to exporters by the Director General of Foreign Trade and CBIC (Central Board of Indirect Taxes and Customs).
The scrip value or tax reduction is expressed as a percentage of export turnover of the exporter.
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 producing certain identified goods and exporting it to specific markets (the goods and markets are specified in the EXIM Policy).
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 and the value of scrips.
MEIS and SEIS scrips are valid for a period of 12 months from the date of issuance of the scrips. The limited validity of scrips means delays in realizing its value could mean loss of complete value of the license.
Types of Scrip
How the duty credit Scrip works
MEIS/ SEIS and RoDTEP scrips are freely transferable and are usable for payment of Customs Duty (BCD), Anti-Dumping Duty (ADDs) and Safeguard Duties. The duty credit scrips cannot be used for payment of IGST (Integrated Goods and Services Tax) and GST compensation cess in imports, and CGST, SGST, IGST and GST compensation cess for domestic procurement.
The exporter gets a scrip of 2% to 5% (of his export value) depending upon the EXIM Policy regulations. For example, if the scrip value is 2%, an exporter having an export turnover of $100 need not pay import tariff (customs duty) worth of $2 while he is importing a commodity.
Most importantly, exporters who gets this scrip when they make exports, can transfer them to other persons (understandably to importers). In return, the importer gives a price to the exporter for the scrip. That is the advantage of transferability of the scrip. Understand that the exporters don’t need imports every time. So, they usually sell the scrips to importers for a fee.