The Duty Drawback scheme, under the administration of the Central Board of Indirect Taxes and Customs (CBIC) in India, plays a crucial role in promoting exports and supporting exporters. By neutralizing the tax burden on exported goods, this scheme ensures that Indian exports remain competitive in the global market.
Understanding the Three Categories of Duty Drawback:
There are three main categories under the duty drawback scheme, each catering to different exporter preferences and requirements:
All Industry Rate (AIR) of Duty Drawback:
- The AIR of Duty Drawback is an average rate calculated based on the quantity, value of materials, and duties borne by each class of materials used in the manufacturing process of export goods. This rate is reviewed annually by the Drawback Committee. Medium and small exporters prefer this method due to its simplicity, end-to-end electronic processing, and elimination of the need for separate documentary evidence.
Brand Rate of Duty Drawback:
- The Brand Rate allows exporters to claim a specific rebate rate on the actual duty incurred during the manufacturing of export products. It becomes applicable when the export product lacks an AIR or when the available AIR neutralizes less than 80% of the duties paid on materials used. Local Customs Commissioners fix the Brand Rates, and provisional rates can be allowed upon request.
Duty Drawback on Re-Export of Imported Goods:
- This option allows exporters to claim Duty Drawback on duty-paid imported goods that are subsequently re-exported. Up to 98% of the import duty paid can be claimed on such exports, provided proper proof of duty payment and identification of the export goods as previously imported are provided. Duty Drawback upon 98% of duty paid is available on goods re-exported within a specified time, under Section 74. Duty Drawback at a specified percentage is available for partly used capital goods and re-exported.
Refund Provisions under the Customs Act, 1962:
The refund provisions for duty drawback fall under Section 74 and Section 75 of the Customs Act, 1962:
- Section 74: Enables exporters to claim a refund of customs duties paid on imported goods re-exported without being used in the country for any manufacturing or processing.
- Section 75: Grants duty drawback for exported goods made from imported materials or components, allowing for the refund of customs duties on the imported materials used in the manufacturing or processing of the final exported product.
Eligibility Criteria for Duty Drawback:
To qualify for duty drawback, exporters must meet the following conditions:
- Provide sufficient proof of export through customs documentation such as bills of entry, shipping bills, and export declarations.
- File the duty drawback claims within the specified time frame from the date of export.
- Comply with all relevant customs regulations and procedures.
- Engage in authorized operations and export goods via sea, air, land, or post.
- Consider specific end-use cases, as certain uses may affect eligibility.
The duty drawback scheme is a vital incentive program that fuels international trade, supports domestic industries, and enhances the competitiveness of Indian exporters. Exporters can choose between the industry rate and brand rate methods based on their individual circumstances. By meeting the eligibility criteria and adhering to customs regulations, businesses can take full advantage of this scheme and contribute to the growth of international trade.
At Andees, we excel not only in understanding the nuances of the Duty Drawback Scheme including, Brand Rate fixation of duty drawback, and AIR (All Industry Rate) related matters. Our expertise lies in navigating the complexities of these categories, ensuring that our clients receive the maximum benefits they are entitled to under this essential scheme.
From large metro projects to power plants, and from the production of garments to food items, the Duty Drawback Scheme, specifically Section 75 under the Customs Act, 1962, offers substantial savings. It becomes a valuable financial lever for businesses engaged in these diverse sectors, allowing them to optimise their operations, reduce costs, and enhance their global competitiveness.
By harnessing the advantages of Section 75 duty drawback, companies in these sectors can reinvest the saved resources into innovation, expansion, and furthering their contributions to both India’s economy and international trade.
Role of Andees Team:
Andees team has been assisting clients with the whole process of Drawback for the last more than 20 years. Since the team is Tech-Savvy, we maintained all the data on the cloud and give real time updates on their work to the client with software. With sound knowledge of Policy & Procedures along with a very qualified and experienced team, Andees has handled complicated matters related to Drawback, saving crores for clients that are MNCs, Indian Corporates, or PSUs. While proper planning during the entire life cycle has helped smooth operations, several complicated matters even at the last stage have been saved by Andees team from substantial liabilities.