Duty Drawback Scheme For Exporters | Eligibility, How to Apply (Full Guide)
The Duty Drawback Scheme is a government initiative in India that allows exporters to claim a refund on customs duties and taxes paid on imported inputs used in manufacturing export products. This helps reduce production costs and makes Indian goods more competitive in international markets.
What is the Duty Drawback Scheme?
The Duty Drawback Scheme allows exporters to get a refund on the customs duty, central excise duty, and service tax paid on imported raw materials or inputs used in producing export goods. This refund helps reduce the cost of manufacturing, enabling Indian products to compete better globally.
Types of Duty Drawback
- All Industry Rate (AIR):
- This is a fixed percentage rate determined by the government for specific export products.
- It is calculated based on the average duties paid on inputs used in manufacturing.
- Exporters can claim this rate without showing detailed proof of duties paid.
- Brand Rate:
- If the All Industry Rate is not enough to cover the actual duty paid, exporters can apply for the Brand Rate.
- In this case, they need to provide detailed proof of duties paid on inputs used.
- The Brand Rate is calculated based on the actual duty paid for manufacturing the export product.
Who Can Apply?
The Duty Drawback Scheme is available to:
- Manufacturer Exporters: Those who produce goods for export.
- Merchant Exporters: Traders who buy from manufacturers and export the products.
It can be used for:
- Physical Exports: Goods shipped outside India.
- Deemed Exports: Supplies to special projects within India that are treated as exports under government policy.
Duty Drawback Scheme Eligibility Criteria
To claim the Duty Drawback, the following conditions must be met:
- The exported goods must have been manufactured using imported inputs on which customs duties were paid.
- The export products should not have availed of any other duty exemption or refund scheme for the same inputs.
- The claim must be made within a specific period from the date of export, usually within one year.
- Exporters must submit all necessary documents, including shipping bills, export invoices, and proof of duty payment.
What Duties Can Be Refunded?
Under the Duty Drawback Scheme, exporters can get a refund for the following duties:
- Basic Customs Duty paid on imported raw materials.
- Central Excise Duty on goods used in manufacturing.
- Service Tax paid on input services used in export production.
Latest Duty Drawback Incentives Rates For Different HS Code Wise
We also have other blogs related to Advance Authorization and RODTEP that you can check out for more insights on export benefits, as well as to learn how to claim refunds, boost cash flow, and enhance your competitiveness in the global market.
How to Apply For Duty Drawback Scheme?
- Get an Importer Exporter Code (IEC):
This is required to carry out import-export activities in India. - Prepare Necessary Documents:
Gather the following documents:- Shipping Bill
- Export Invoice
- Bill of Entry for imported inputs
- Proof of duty payment (challans)
- File the Claim:
- Submit the Duty Drawback claim through the Indian Customs Electronic Data Interchange (EDI) system.
- If EDI is not available, the claim can be filed manually with the Customs Department.
- Verification and Approval:
- The Customs Department verifies the documents and checks the eligibility.
- Once approved, the refund is credited to the exporter’s bank account.
Under this scheme, the imported inputs must be used by the person who received the authorisation. They cannot be sold or transferred to others. However, the finished products made using these inputs can be sold in India after fulfilling the export requirements.
Example of Duty Drawback Calculation
Company B exports cotton shirts and uses imported fabric to make them. Let’s see how the Duty Drawback works:
- CIF Value of Imported Fabric: ₹2,00,000
- Customs Duty Paid on Import: ₹20,000
If All Industry Rate (AIR) is 5% of FOB Value:
- FOB Value of Exported Shirts: ₹3,00,000
- Duty Drawback Claim: 5% of ₹3,00,000 = ₹15,000
Since the duty paid (₹20,000) is more than the AIR (₹15,000), Company B can apply for the Brand Rate to get a full refund of ₹20,000 by providing proof of duty paid.
FAQ’s: Duty Drawback Scheme
1. What is the Duty Drawback Scheme?
The Duty Drawback Scheme allows exporters to get a refund on customs duties, excise duties, and service tax paid on imported inputs used in manufacturing export products.
2. Who is eligible to apply for the Duty Drawback Scheme?
Both Manufacturer Exporters and Merchant Exporters can apply. It is also available for deemed exports and intermediate supplies.
3. What is the difference between All Industry Rate and Brand Rate?
All Industry Rate (AIR): A fixed percentage rate set by the government for specific products.
Brand Rate: Calculated based on the actual duty paid if the AIR is insufficient. Exporters need to provide proof of duties paid.
4. Can the imported materials be sold or transferred?
No, the imported inputs must be used by the person who received the authorization (Actual User Condition). They cannot be sold or transferred.
5. How to apply for Duty Drawback?
Exporters can apply through the Indian Customs Electronic Data Interchange (EDI) system or manually at the Customs Department by submitting necessary documents like Shipping Bills, Export Invoices, and proof of duty payment.
If you want to learn import-export from basics to advanced, including company formation, import-export documents, product research in exports, finding foreign buyers, pre-shipment and post-shipment documentation, GST in exports, payment terms, Incoterms, and more, then watch this 7-hour video by Mr. Keshav Dimri, a successful exporter and brilliant marketer working since 2017.
