Duty Drawback Scheme in India

So let us not talk about the different types of incentive schemes which are available to the exporters in India, and it makes a lot of sense to start with the duty drawback because this is one of the most important incentive scheme, which is very direct in nature and which is very significant also for the exporters.

We will discuss about other incentive scheme also, but let us start with drawback. So objective of this lesson would be that what are the different incentive schemes which are available in India and what are the different types of incentives which are available for exports in India and how these schemes encourage exports? That is our idea of this article.

So friends Let us first talk about the duty drawback scheme.

What is duty drawback scheme?

Duty drawback is the refund of the import duty paid on the inputs, which are used in the manufacture of the products for exports. So it’s a post export refund of the import duty, which is in the form of the credit, duty credit, which is extended by the Customs Department in India. So exported goods may use either the entire amount of the imported goods or the partial amount, which means that it is not necessary that the goods which are imported has to be fully used for the export purpose. But this drawback will be available only on that portion, which is actually used for the export purpose, and it is also available for the goods which are destroyed under a supervised authorized person. The Government Functionary Department. So if some goods for some reason have been destroyed for the safety reasons or for whatever, maybe the cause, the unused goods which are destroyed, the duty drawback can be claimed on that also. So the imported goods, which we are talking about, which would attract the drawback, should be clearly identifiable with the exported goods. It should be very clearly physically used for the goods which are being exported. So that should be very clear. There shouldn’t be any dispute. Basically, this provision of the duty drawback comes from the Section 74 of the Indian Customs Act of 1962, which allows for the 98 percent refund of the import duty for the goods which are exported and they are exported within two years of the date of the import duty paid, not from the date of the actual import, when the duty has been that particular date and this two year can be extended in special circumstances with permission. So if permission is granted, then this time can be extended by the Customs Department. And this refund, as I have just mentioned to you, is made in the form of the duty credit for the future use. to claim the duty exemption later.

This is the duty drawback, direct duty drawback of the goods, which are identified and which are declared to the custom that they are being imported for the export purpose. So this particular description matches for that kind of goods. So there are certain goods which are imported without the prior knowledge that they will actually be used for the export purpose. For example, the exporters of ready made garments, they use buttons, they use threads, they use dyes which are procured from the open market, and many of these goods are actually imported. So those are not actually covered in this kind of drawback. So there are separate provisions for such kind of imports, which are indirectly used in the export production. There also duty drawback is available, so that is a separate method of doing it. So I’ll just tell you about it.

So as I have just mentioned to you, that in the directly used goods, the customs need to be made aware. So it means the goods when they are being imported, they should be declared that they are being imported for the export purpose. For other imported inputs, which I just mentioned, which are indirectly used, which were not already declared to the customs for the export purpose that they are being imported for the export purpose. A separate schedule of drawback rates are there, which is announced by Government of India, and the exporters can claim that drawback rate for a specific item as per of the list. As per the rates available as incentives for the goods which are listed in that particular schedule, drawback rate, schedule. And these rates, which are mentioned there are according to the items like ready made garments or bicycles or many other items. These rates are decided by the competent authority. Government authority taking into several factors like the importance of the industry where the goods belong to, their contribution to the exports, the product input output norms, technical calculations, estimates and many other factors, which are WTO compliant. World Trade Organisation compliant. So that is how the drawback rates are estimated and announced.

Now what are the documents which are required to claim the duty drawback, either direct duty drawback or the indirect duty drawback, which I just mentioned to you. You need documents like

Certified shipping bill of the exported goods, the goods against which the drawback is being claimed.

The bill of entry of the imported goods, if it is the direct credit of the goods, which are directly imported for export purpose.

So bill of entry is required and the import as well as the export invoice.

So invoice of the goods which are imported and the invoice of the goods which are exported, therein manufactured using those goods. That export invoice has to be provided.

Then duty payment receipt. As I told you that in the case of direct drawback, which means the goods which are directly used for exports and imported for the purpose of exports, the duty payment receipt be available, so that is required,

and the export packing list. Export packing list gives you the physical description of the complete shipment.

So these are required.

And the EDI facility, electronic data interface, which is between the exporter and the customs. This facility is available for this process of filing the duty drawback claims. So this facility is available.

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