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In India, the Central Board of Indirect Taxes and Customs or CBIC is responsible to provide guiding policies regarding collecting customs duties and excise charges. To ensure businesses can have a financially beneficial endeavour when shipping out products overseas, the board introduced schemes regarding duty drawbacks on export.
In simpler terms, duty drawback refers to the amount an exporter can claim to have a refund of that he or she had spent as customs duty when shipping in that product in question, its raw materials, or its substitute.
Parameters set forth by Sections 74 and 75 of this country’s Customs Act of 1962 have clearly stated these regulatory parameters under which this kind of transaction can take place. This scheme had proved itself to be a lucrative offer to businesses of this country, with 60% of India’s total exporters having signed on for these services in this financial year of 2021 – 2022.
Notably, based on the relation between imported and exported products, different kinds of duty drawbacks on export schemes are applicable. These include:
Certain companies are known for shipping different kinds of raw materials in order to manufacture goods which will be exported by them afterwards. Such exporters are able to claim a duty drawback for the import tariff they have originally paid for these raw materials.
Companies can also claim a duty drawback on export if products they are shipping abroad are of a similar kind and quality of goods that they have imported beforehand. Additionally, as per laws, if these imported goods were not used altogether for the end product getting shipped out, an exporter can still claim the rebate.
A business is eligible to make a claim for custom duty repayment under this scheme if it is exporting a hitherto unused item that it had previously imported.
A company might have exchanged a set of imported products with another similar set shipped in by paying adequate custom duty. So, this business can claim a refund if it exports this second set of goods if those have never been in use.
In order to receive duty drawbacks, claimed sum has to be more than set threshold of minimum duty drawback percentage and amount. Moreover, the 3 factors to calculate the allowed duty drawback are as follows:
Now, you can also receive the allowed duty drawback amount with this formula mentioned below:
Export Value of Products x [Minimum Duty Drawback Percentage/100] ≥ Drawback Claimed By Company
A sample is taken for the sake of example, where a product is exported at the value of ₹50000 and the minimum percentage of duty drawback is 1. So, if a business will have to claim a duty drawback on export, then it has to be equal to:
₹50000 x [1/100] = ₹ 500
Some crucial aspects that determine the duty drawback on export include the following:
When applying for duty drawback on export, one has to keep in mind that:
The success of duty drawback on export schemes has been apparent in recent times. For instance, in the financial year of 2021-2022, a lump sum of ₹ 23,920 Cr had been disbursed to the exporters as a drawback refund. Therefore, such fundraising opportunities can be highly effective in cementing the sustainable growth of a business in the long run.
Exported goods are not under the purview of GST.
Exported goods are not under the purview of GST.
An exporter can check the details of his duty drawback information from the official portal of the Indian Customs Electronic Commerce/Electronic Data Interchange (EC/EDI) Gateway or ICEGATE.
An exporter can check the details of his duty drawback information from the official portal of the Indian Customs Electronic Commerce/Electronic Data Interchange (EC/EDI) Gateway or ICEGATE.
The validity period of duty drawback is within 2 years from the date of payment of duty on the importation. However, it can be extended on sufficient cause being shown by the Board.
The validity period of duty drawback is within 2 years from the date of payment of duty on the importation. However, it can be extended on sufficient cause being shown by the Board.
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Author: Team Digit
Last updated: 19-09-2024
CIN: U66010PN2016PLC167410, IRDAI Reg. No. 158.
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