Duty drawback scheme
Under Duty Drawback Scheme (DBK) relief of Customs and Central Excise Duties suffered on the inputs/components used in the manufacture of goods exported is allowed to Exporters. The admissible duty drawback amount is paid to exporters by depositing it into their nominated bank account. Section 75 of the Customs Act, 1962 and Section 37 of the Central Excise Act, 1944, empower the Central Government to grant such duty drawback. Customs and Central Excise Duties Drawback Rules, 1995 have been framed outlining the procedure to be followed for the purpose of grant of duty drawback (for both kinds of duties suffered) by the Customs Authorities processing export documentation.
Under Duty Drawback Scheme, an exporter can opt for either All Industry Rate (AIR) of Duty Drawback Scheme or brand rate of Duty Drawback Scheme. Major portion of Duty Drawback is paid through AIR duty Duty Drawback Scheme which essentially attempts to compensate exporters of various export commodity for average incidence of customs and Central Excise duties suffered on the inputs used in their manufacture. Brand rate of duty drawback is granted in terms of rules 6 & 7 of Customs and Central Excise Duties Drawback Rules, 1995 in cases where the export product does not have any AIR or duty drawback rate, or where the AIR duty drawback rate notified is considered by the exporter insufficient to compensate for the Customs/Central Excise duties suffered on inputs used in the manufacture of export products. For goods having an AIR the brand rate facility to particular exporters is available only if it is established that the compensation by AIR is less than 80% of the actual duties suffered in the manufacture of the export goods.
Duty Drawback facilities on re-export of duty paid goods is also available in terms of Section 74 of Customs Act, 1962. Under this Scheme part of the customs duty paid at the time of import is remitted on re-export of the goods subject to identification and prescribed procedure being followed.
Limitations on drawback admissibility
The Customs Act lays down certain limitations and conditions which exporters claiming drawback have to meet/fulfill. Thus, no drawback is admissible under Section 75 if the market price is less than the amount of drawback claimed. Drawback is also not admitted if the claim is less than Rs.50/- in individual shipments. Government has also powers to deny or admit drawback claim subject to laid down conditions where there is likelihood of goods exported being smuggled back. These powers have been used for exports to Nepal where normal provisions of duty drawback are not applied. The Drawback Rules also further lay down in Rule 8 some further limitations, where rate is less than 1%, and this may be referred to. Government has also powers to deny drawback facility in such cases where export of goods if less than the value of imported material used in their manufacture. If necessary, certain minimum value addition over the value of imported materials can also be prescribed before granting drawback. It is also pertinent to note that the drawback is permitted to encourage exports and essentially there must be export proceeds repatriation. Though prior repatriation of export realization is not pre-requisite, the law prescribes that if sale proceeds are not received within the stipulated period, the drawback paid will be recoverable by the Government as per procedure laid down in drawback.
Important statutory provision, rules and circulars relating to drawback.
I. STATUTORY PROVISIONS
| S.NO | Section Nos | Subject |
|---|---|---|
| 1 | Section 74 of Customs Act, 1962 | Drawback on re-export of imported duty paid goods |
| 2. | Section 75 of Customs Act, 1962 | Drawback on input materials/services used for manufacture of export goods. |
II. DRAWBACK RULES, 1995
| S.NO. | Rule Nos | Subject |
|---|---|---|
| 1 | Rule 5 | Determination of date from which the amount or rate of drawback is to come into force and the effective date for application of amount or rate of drawback. |
| 2 | Rule 8A | Upper Limit of Drawback money or rate |
| 3 | Rule 13 | Manner and time for claiming drawback on goods exported other than by Post. |
| 4 | Rule 15 | Supplementary claim |
| 5 | Rule 16 | Repayment of erroneous or excess payment of drawback and interest. |
| 6 | Rule 16A | Recovery of amount of Drawback where export proceeds not realised. |
III. CIRCULARS:
| S.NO. | Public Notice Nos | Subject |
|---|---|---|
| 1 | Circular No. 57/97-Cus., dated 31-10-1997 [From F. No. 605/161/97-DBK] | Testing of goods exported under DEEC/ Drawback Pass Book Scheme. |
| 2 | Circular No. 2/2000-Cus., dated 5-1-2000 [From F. No. 609/221/95-DBK] | Amendment of Customs and Central Excise Duties Drawback Rules, 1995 to delegate powers to Commissioners of Customs for conversion of free Shipping Bills to Drawback Shipping Bills. |
| 3 | Circular No. 3/2001-Cus., dated 16-1-2001 F. No. 609/115/2000-DBK | All Industry Rates of Drawback n respect of man-made fabrics falling under Chapters 54, 55 and 58 of the Drawback Table. |
| 4 | Drawback Circular No. 5/2001 Cus. 19th January, 2001 F.No.609/74/2000-DBK | Drawback on Ready made Garments - Deduction for f.o.b. value on account of Imported/indigenous hangers - Reg |
| 5 | Circular No.06/2003-Cus. 28th January, 2003 F.NO.609/176/2002-DBK & Circular No. 04 /2004-Cus. 16th January, 2004 F.NO.609/176/2002-DBK | Sub: Conversion of free shipping bills into Advance License/DEPB/DFRC/ Drawback shipping bills and conversion of shipping bills from one export promotion scheme to another - reg. |
| 6 | Circular No.8 / 2003-Cus 17th February 2003 F.No.609/162/2002-DBK & Circular No. 65 / 2003-Cus 28th July, 2003. F.No.609/162/2002-DBK |
Sub: Acceptance of self-declaration as to the non-availment of Cenvat facility for extending the duty drawback |
| 7 | Circular No. 14/2003-Cus., dated 6-3-2003, F. No. 609/32/2003-DBK | Decentralization of the work relating to fixation of Brand Rate of drawback under Rule 6 and Rule 7 of the Customs and Central Excise Duties Drawback Rules, 1995 |
| 8 | Circular No. 19/2005-Cus., dated 21-3-2005, F.No. 609/13/2004-DBK | Admissibility of All Industry Rates of Duty Drawback on Export Goods Manufactured from out of Inputs, some of which are Non-Duty Paid |
| 9 | Circular No. 43/2007-Cus., dated 5-12-2007,F.No. 602/2/2002-DBK | Drawback on supplies from DTA units to SEZ - Authority for sanction and disbursement |
| 10 | 1/2008-Systems, dated 24-6-2008,F.No. IV(26)/33/2008-Systems | Drawback payment in exporter’s account in any core banking enabled branch anywhere in country - Procedure |
| 11 | Circular No. 5 / 2009-Cus, F.NO.609/167/2003-DBK | Systems Alert for Monitoring Realization of Export Proceeds in EDI - reg |