What is Scrip?
Scrip is a substitute or alternative to the legal tender. A bearer who holds a scrip authorises such holder to receive something in return. Scrips can be in many different forms, basically in the credit form, with the document certifying the debt.
Another reference to the term ‘scrip’ is in the stock market. The listed companies on a stock exchange can sometimes pay dividends in the form of additional shares/stock instead of money. Scrips also denote a temporary document to acknowledge the fractional shares arising from a split or spin-off.
Alternatively, they may depict currency issued by a private company, such as the airline miles. Since they are used as currency substitutes, scrips are useful in studying about money and monetary economy.
Moreover, the term scrip has reference in India’s Foreign Trade Policy as ‘duty credit scrips’. Duty credit scrip is the most attractive export promotion incentive granted by the government to exporters.
The purpose of such schemes is to encourage exports by giving concessions to import tariff to exporters. Under the scrip, exporters can get import duty concessions to a fixed percentage of their export value.
Origin of Scrip
Scrips were designed to pay or compensate employees of truck companies. The truck system began during the Industrial Revolution also meant that employees were compensated in kind with commodities, vouchers, tokens, or any other form rather than cash.
It benefitted the employer and not the employee. Scrips have also been extensively applied in localised commerce when the conventional currency was not available or short in supply.
Features of Duty Credit Scrip
The following are the salient features of a duty credit scrip:
They are allotted to exporters by the Director-General of Foreign Trade (DGFT).
The scrip provides duty deduction or non-payment of taxes for a specified amount in the scrip.
The scrip value or the tax deduction amount is specified in the scrip.
The scrip value or tax reduction amount is shown as a percentage of export turnover of the exporter.
The scrip value varies typically between 3 per cent to 5 per cent under Foreign Trade Policy, 2015.
As per the FTP (2015), the scrip is transferable to other persons. Therefore, an exporter can transfer the scrip he obtained to the importer too.
