What is Duty Credit Scrip, Benefits and How to Sell them?

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A Duty Credit Scrip is a scrip which can be used for the payment of Customs Duty (were earlier allowed to be used for the payment of Service Tax & Excise as well.) These scrips are issued to both the exporters of goods as well as exporters of services under the various schemes mentioned in the Foreign Trade Policy.

These scrips have been in existence for the past few decades and are very popular amongst the exporters. The benefits of Duty Credit Scrips and how to use them have been mentioned below in this article.

What is Duty Credit Scrip

A Duty Credit Scrip is issued by the Director General of Foreign Trade (DGFT) and can be used to pay various duties/taxes to the Central Govt. These are issued to both Exporters of Goods as well as Exporters of Service.

These Duty Credit Scrips are issued under various schemes of the Foreign Trade Policy. The schemes under which the Duty Credit Scrips are issued have been mentioned below:-

  1. SEIS Scheme for Service Exporters
  2. MEIS Scheme for Merchandise Exporters
  3. Export Promotion Capital Goods Scheme (EPCG Scheme)

The value of scrip varies from scheme to scheme, product to product and country to country. However, the scrip value in most of the cases is in the range of 2% to 5% of the realised FOB Value (in free foreign exchange).

These scrips are issued to exporters as an incentive for them as the export industry has huge potential for employment creation in India. By offering these incentives, the govt is indirectly encouraging people to export as it not only brings foreign currency into India but also leads to massive Job Creations.

Moreover, another reason why these duty credit scrips are issued is to offset the infrastructural inefficiencies and associated costs involved in the export of goods/products which are produced/ manufactured in India. This would also give a boost to the Make in India campaign of the Govt.

Benefits and uses of Duty Credit Scrip

The exporter to whom the Duty Credit Scrip has been issued can use the Duty Credit Scrip for the payment of:-

  1. Basic Customs Duty
  2. Safeguard Duty
  3. Transitional Product specific safeguard duty
  4. Anti-dumping Duty

Earlier these scrips could be used for the payment of all duties of Customs, Excise & Service Tax as well. However, with the implementation of GST – Excise Duty and Service Tax have been subsumed in GST. (These scrips cannot be used for the payment of GST.)

Although a majority of the goods & services are now covered under ambit of GST, there are still items on which GST is not levied. These items on which GST is not levied are specified in the Fourth Schedule to the Central Excise Act, 1944 covering specified petroleum products, tobacco etc. The duty credit scrips can be also be used for the payment of duties of excise, CVD/SAD on these items.

Validity of Scrips

These Duty Credit Scrips have a validity period and can be used for any of the above mentioned purpose during the validity period. If the holder of the duty credit scrip is not able to use them for any of the above mentioned purpose during the validity period, these scrips will expire and therefore not usable.

  1. Scrips issued under MEIS Scheme – 18 months from the Date of Issue
  2. Scrips issued under SEIS Scheme – 18 months from the Date of Issue
  3. Scrips issued under EPCG Scheme – 18 months from the Date of Issue

These scrips are freely transferable and there is no conditionality attached with these scrips. If the holder of the scrip does not intend to use these scrips for any of the above mentioned purpose or is not able to use the duty credit scrips during the validity period, he may sell them to any other person interested in using them for any of the above mentioned purpose.

Sale of duty Credit Scrips

If the holder of these Duty Credit Scrips does not intend to use them for any of the above mentioned purposes, he may sell them in the open market. These scrips usually sell at a discount to their face value and can be sold either directly to a buyer or through an agent who will help you find a buyer.

For eg: If you have a Duty Credit Scrip worth Rs. 1,00,000, it means that it can be used to pay duties/ taxes equivalent to Rs. 1,00,000. If the holder of the scrip does not intend to use them – he may sell them.

The buyer of these scrip will not pay full face value for these scrips but will buy them at a discount. He may buy these scrips for Rs. 95,000 instead of Rs. 1,00,000. Although, he has purchased them for Rs. 95,000 – these scrips still have a face value of Rs. 1,00,000 and can be used for payment of duties/taxes equivalent to Rs. 1,00,000.

  1. Benefit of the Buyer – He saved Rs. 5,000 in the above mentioned transaction as instead of paying Rs. 1,00,000, he only had to pay Rs. 95,000.
  2. Benefit to the Seller – He got a benefit of Rs. 95,000 because if he would not have sold these scrips – they would have expired and therefore useless.

Other Relevant Points

  1. The holder of these scrips mainly use them either for payment of customs duty or sell them to an Importer in cash and the importer then uses these scrips for the payment of his own Customs Duty.
  2. The Duty Credit Scrips are issued under various schemes declared in the Foreign Trade Policy. The names and benefits allowed under these schemes may change from time to time.
  3. These Scrips are issued by the Regional Offices of the Directorate General of Foreign Trade (DGFT) which are in various cities in India.

Karan is CA by Qualification with the rare distinction of being awarded All India Rank 22. He is also the founder of this website and loves to help people with their Tax Queries.