Term Duty Drawback Scheme under Indian Tax

Meaning of Duty Drawback Scheme under Indian Tax


Duty Drawback Scheme

The details about Duty Drawback Scheme are explained here. Different types of Duty Drawback Scheme



The Duty Drawback Scheme seeks to rebate duty or tax chargeable on any imported / excisable materials and input services used in the manufacture of export goods. The duties and tax neutralized under the scheme are (i) Customs and Union Excise Duties in respect of inputs and (ii) Service Tax in respect of input services. The Duty Drawback is of two types: (i) All Industry Rate and (ii) Brand Rate.


The All Industry Rate (AIR) is essentially an average rate based on the average quantity and value of inputs and duties (both Excise & Customs) borne by them and Service Tax suffered by a particular export product. The All Industry Rates are notified by the Government in the form of a Drawback Schedule every year (normally after the announcement of Union Budget to factor the changes in the duty structure etc.) The legal framework in this regard is provided under Sections 75 and 76 of the Customs Act, 1962 and the Customs and Central Excise Duties and Service Tax Drawback Rules, 1995 (henceforth referred as Drawback Rules).


The Brand Rate of Duty Drawback is allowed in cases where the export product does not have any AIR of Duty Drawback or the same neutralizes less than 4/5th of the duties paid on materials used in the manufacture of export goods. This work is handled by the jurisdictional Commissioners of Customs & Central Excise. Exporters who wish to avail of the Brand Rate of Duty Drawback need to apply for fixation of the rate for their export goods to the jurisdictional Central Excise Commissionarate. The Brand Rate of Duty Drawback is granted in terms

of Rules 6 and 7 of the Drawback Rules,1995.



All Industry Rate (AIR) of Duty Drawback:


The AIR of Duty Drawback are notified for a large number of export products every year by the Government after an assessment of average incidence of Customs, Central Excise duties and Service Tax suffered by the export products. The AIR are fixed after extensive discussions with all stake holders viz. Export Promotion Councils, Trade Associations, and individual exporters to solicit relevant data, which includes the data on procurement prices of inputs, indigenous as well as imported, applicable duty rates, consumption ratios and FOB values of export products. Corroborating data is also collected from Central Excise and Customs field formations. This data is analysed and forms the basis for the AIR of Duty Drawback. The AIR of Duty Drawback is generally fixed as a percentage of FOB price of export product. Caps have been imposed in respect  of many export products in order to obviate the possibility of misuse by unscrupulous exporters through over invoicing of the export value.


Notification No.68/2011-Cus(N.T.) dated 22.09.2011 as amended by Notification No.75/2011-Cus(N.T.) dated 28.10.2011 is relevant for ascertaining the current AIR of Duty Drawback for various export products. These Notifications are further amended vide Notification No. 92/2012-Custom (N.T.) dated 5-10-2012


Brand Rate of Duty Drawback:

Where the export product has not been notified in AIR of Duty Drawback or where the exporter considers the AIR of Duty Drawback insufficient to fully neutralize the duties suffered by his export product, he may opt for the Brand Rate of Duty Drawback. Under this scheme, the exporters are compensated by paying the amount of Customs, Central Excise duties and Service Tax incidence actually incurred by the export product. For this purpose, the exporter has to produce documents/proof about the actual quantity of inputs / services utilized in the manufacture of export product along with evidence of payment of duties thereon.


The exporter has to make an application to the Commissioner having jurisdiction over the manufacturing unit, within 3 months from the date of the ‘Let Export’ order. The application should include details of materials/components/input services used in the manufacture of goods and the duties/taxes paid on such materials/ components/input services. The period of 3 months can be extended up to 12 months subject to conditions and payment of requisite fee as provided in the Drawback Rules, 1995.


In terms of Rule 6 of the Drawback Rules, 1995 on receipt of the Brand Rate application, the jurisdictional Commissioner shall verify the details furnished by the exporter and determine the amount/rate of Drawback. Where exporter desires that he may be granted Drawback provisionally, the jurisdictional Commissioner may determine the same, provided the exporter executes a general bond, binding himself to refund the Drawback amount granted to him, if it is found later that the Duty Drawback was either not admissible to him or a lower amount was payable. The Brand Rate letter is thereafter issued to the exporter. The Custom House of the port of export is also given a copy to facilitate payment of Drawback to the exporter.

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ALOK KUMAR GHOSH: Our organisation is a publishing house and we are dealing with books which we import from overseas. As per RBI permission we are allowed for trading activity. Now my question on duty drawback are: 1. Since as per customs tarrif custom duty applicable is 5.5% how much duty drawback we can claim. 2. Since we are allowed only for trading activity under which category we fall,Merchant exporter or normal exporter. 3. Under which organisation we need to register 4. If we do not do any value addition e.g. CD insertion, change in jacket under which section we fall sec 74 or sec 75 under customs act. 5. In case of manufacturing unit or merchant exporter which form is applicable ARE1 or ARE2. 6. Please share guideline of RBI as well as customs act under which as a branch we can operate.

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