The term drawback is applied to a definite amount of duties of Central Excise. To entitle goods to drawback, they must be exported to a foreign port. For Custom purpose, a drawback means the refund of duty of customs and duty of Central Excise that are accountable on imported and indigenous materials used in the manufacture of Exported goods.
Duty Drawback is an export incentive plan where the duties or taxes paid on any input services or imported materials which are used in the processing any operations on the goods that are exported outside India is allowed as the refund to the exporter.
Goods eligible for Duty Drawback
Duty drawback provisions are given as per the section 74 and 75 of the Customs Act, 1962. If the goods/products are re-exported by the importer, Section 74 allows a drawback upto 98% of the import duty paid on goods. The importer is allowed to drawback subject to the fulfilment of the following conditions.
This scheme applies to
- Export goods imported into India as such.
- Export products imported into India( after having been taken for use).
- Export goods manufactured/produced out of imported material.
- Export goods manufactured or produced out of indigenous material.
- Export goods manufactured/produced out of imported or and indigenous materials.
Drawback on re-export of duty paid goods -[Section 74]
Duty Drawback is authorized of Custom Duty paid on goods imported into India and which are subsequently re-exported. The allocation of Section 74 are as follows.
- Drawback only on duty-paid imported goods: Only imported goods on which duty has been paid on importation are eligible for drawback.
- Order for exportation: The goods imported must have been entered for exportation in the following cases.
- Under Section 51.
- Under Section 77 as baggage.
- Under Section 82 of the post.
And an order for permitting clearance of goods for exportation must nade by the proper officer. As per Section 16, goods shall be deemed to have been entered for export on the date concerning which the rate of duty is calculated.
- The drawback is allowed equal to 98% of the import duty: If the goods are transported out of India without being put to use, the drawback of 98% import duty paid is allowed. In case the goods are utilized and then exported, duty drawback shall be authorized at notified rates as per the section 74(2).
- The goods should be capable of being easily identified: Such goods are identified to the satisfaction of the Assistant or Deputy Commissioner as the goods which were imported.
- Re-export within 2 Years: The goods must be entered for export within two years from the date of payment.However, the extension can be granted by the Board on sufficient cause been shown. In the case of goods computed to duty provisionally as per the section 18, the date of payment of the provisional duty shall be deemed to be the payment of duty.
For the purpose of this section Re-export of Imported Goods( drawbacks of Customs Duties) Rules, 1995 has been framed by the Central Government.
Duty Drawback Rates – Central Government
Let us take a look at Rates of Drawback notified by the Central Government. The Central Government has notified the drawback rates in respect of goods taken into use after importation.
|S.no||Length of period from the date of clearance for home consumption and the date when the goods are placed under Customs control for export||% of import duty to be paid as Drawback|
|1.||Not more than three months.||95%|
|2.||More than 3 months but not more than 6 months.||85%|
|3.||More than 6 months but not more than nine months.||75%|
|4.||More than 9 months but not more than 12 months..||70%|
|5.||More than 12 months but not more than 15 months.||65%|
|6.||More than 15 months but not more than 18 months.||60%|
|7.||More than 18 months.||NIL|
Goods of which no duty drawback is allowed
The goods in respect of which no drawback of import duty shall be allowed for export. If these goods have been used in India after importation, are as follows.
- Tea Chests.
- Wearing apparel.
- Unexposed photographic films, paper & plates, and X-ray films.
- Exposed Cinematograph film passed by the board of Film Censors in India.
Drawback on material used in the manufacture of exported goods [Section 75]
Drawback means the rebate of duty or tax, as the case may be paid on any imported materials or input services which are used in the manufacture of the goods exported outside India.
The provisions regarding drawback in case of imported materials used in the manufacture of products, which are exported as follows.
Notified Goods: Drawback is allowed on goods which are notified by Central Government.
Order for exportation by the proper officer: Such goods must have been entered for exportation and the order permitting loading thereof has been made by proper officer u\s 51, or they must have entered for export by post u\s 82 and in respect of which proper officer has made an order permitting clearance for exportation.
Manufacturing process or other operations must be performed: Such goods must either be processed or manufactured or in respect of which any operation must have been carried out in India.
Duty Drawback of custom duties to be allowed: The drawback of duties of customs chargeable on any imported materials of a class or description, which is used in the manufacture or processing or in carrying out any such operation on such goods shall be allowed.
No drawback to being allowed in case of negative value addition: If the export value of such goods or class of goods is less than the value of the imported materials used in the manufacturing, processing of such property or carrying out any operation on them, then no drawback shall be allowed.
Minimum value addition: If the export value of such goods is not more than such percentage of the value of the imported materials used in their manufacture etc., as specified by the Central Government, no drawback shall be allowed.
Sale proceeds to be realised within the period as specified in FEMA: The sale proceeds in respect of such goods on which the drawback has been allowed, have to be received by the exporter or by any person on his behalf within the period as specified in the FEMA, 1999. If such sale proceeds are not received within the said time limit, such drawback shall be deemed never to have been allowed, and procedure for recovery or adjustment of the drawback amount will be initiated.
Rules framed: Customs, Central Excise Duties, and Service Tax Drawback Rules, 1995 has been framed by Central Government in accordance of which duty drawback will be allowed.
Power to give drawback with retrospective effect: The Central Government has the power to give drawback with retrospective effect from a date not earlier than the date of changes in the rates of duty on inputs used in the export goods.