Duty Drawback Scheme for Exporters

Duty Drawback Scheme is a government incentive program designed to promote exports by refunding customs duties and taxes on imported inputs used to manufacture exported goods. This scheme is intended to neutralize the tax burden on exporters and make their products more competitive in the international market.

What is the Purpose of the Duty Drawback Scheme?

• To encourage exports and boost the country’s economy.
• To make Indian products more competitive globally by offsetting imported inputs’ costs.
• To promote value-added exports and reduce dependence on raw material exports.

How does the Duty Drawback Scheme Work?

1. Import of inputs: Exporters import raw materials, components, or machinery required to produce their goods.
2. Payment of duties: Customs duties and taxes are paid on these imported inputs.
3. Export of goods: The manufactured goods are exported to foreign markets.
4. Claim for drawback: The exporter submits a claim for a refund of the duties and taxes paid on the imported inputs.
5. Verification and approval: The customs authorities verify the claim and the export documents. If everything is in order, the claim is approved.
6. Refund of duties: The exporter receives a refund of the duties and taxes paid on the imported inputs.

What are the types of Duty Drawback schemes?

There are three main types of Duty Drawback schemes:

• All Industry Rate (AIR): This scheme provides a fixed drawback rate for all export products within a specific category.
• Brand Rate: This scheme allows exporters to claim a specific drawback rate for their unique export products based on the actual duty incidence suffered.
• Drawback on Re-export of Imported Goods: This scheme provides a drawback for imported goods re-exported without any significant value addition in India.

What are the Eligibility Criteria for Duty Drawback Schemes?

• The exporter must be registered with the Directorate General of Foreign Trade (DGFT).
• The exported goods must be manufactured or produced in India.
• The exporter must have paid customs duties and taxes on the imported inputs used in the manufacturing process.

What are the Documents Required for Duty Drawback Schemes?

• Import documents (Bill of Entry, Customs Declaration Form, etc.)
• Export documents (Shipping Bill, Invoice, etc.)
• Proof of payment of customs duties and taxes
• Other relevant documents, as required by the Customs authorities

What is the Process for Claiming Duty Drawback?

• Submit the claim form to the Customs authorities within a specified period after the export.
• Provide supporting documents as required.
• Undergo verification and scrutiny by the Customs authorities.
• Receive the refund after the claim is approved.

What are the benefits of the Duty Drawback scheme for exporters?

The Duty Drawback scheme offers several benefits to exporters, including:

• Reduced costs: The scheme helps exporters reduce production costs by refunding the duties paid on imported inputs.
• Enhanced competitiveness: The scheme enables exporters to compete more effectively in the global market by neutralizing their tax disadvantage compared to exporters from other countries.
• Increased exports: The scheme can encourage exporters to increase their exports by making them more profitable.
• Improved cash flow: The scheme can help exporters improve their cash flow by providing them with a refund of the duties paid.

What are the challenges faced by exporters in India under the Duty Drawback scheme?

Despite its benefits, the Duty Drawback scheme also faces some challenges, including:

• Complex procedures: Claiming the drawback can be complex and time-consuming, requiring exporters to submit significant documentation.
• Delays in refunds: Delays in processing drawback claims can negatively impact exporters’ cash flow.
• Limited awareness: Some exporters may not know the Duty Drawback scheme or understand how to avail it.

The Duty Drawback Scheme is a valuable tool for Indian exporters. It gives them a competitive advantage and encourages them to expand their businesses into international markets. However, exporters must know the scheme’s complexities and requirements to maximize its benefits.