The duty drawback scheme has been advised for a large number of export goods by the Government after a valuation of the average extent of Central Excise duties, Service Tax, and Transaction Charges born by the export goods. This scheme aims to offer a refund for custom and excise duties recompensed on raw materials and service tax reimbursed on the input services employed in making export products.
This post explains some of the important things to consider about the duty drawback scheme.
What is Duty Drawback?
Receiving drawbacks requires knowledge of the drawback procedure and rules. However, it is among the least known and most underused Customs programs accessible to exporters.
The primary step to better use this significant program is to understand its meaning. It is a compensation of certain taxes, duties, and fees gathered next to the import of products once the commodity is exported or devastated. The drawback is known as an export incentive program. Customs refunds the import duties and charges to accomplished exporters, who can obtain a refund of duties in definite conditions.
For example, XYZ Inc. pays a five percent duty fee to import a device to make a new machine, then after that, exports the finished machine to a different country. That company can file a claim for drawback to have import duties reimbursed for the device.
What are the Benefits of the Duty Drawback Scheme?
1. Increasing Earnings and Cash Flow
Duty drawback provides important financial growth, specifically for businesses running in global markets. The refunds increase liquidity and provide retroactive claims for the previous three years.
2. Supporting International Competitiveness
By successfully removing customs duties on exported products, manufacturers can compete on an international level.
3. Retroactive Repayments
Businesses can ask for claims for exports within the previous three years, allowing them to reclaim duties even if they originally missed filing.
4. Interchangeable Drawback Rights
Suppliers can interchange their drawback requests or rights to exporters, making sure everybody in the supply chain can gain from duty resumption.
Which Products are Eligible for Duty Drawback?
The following are the products qualified for drawbacks:
1. To export items shipped into India.
2. To export products shipped into India after having been used.
3. To export items manufactured out of shipped material.
4. To export products manufactured out of original material.
5. To export items manufactured out of shipped or original materials.
Different Types of Duty Drawback
Customs offers three main types of drawback returns.
1. Unutilised Merchandise Drawback
This return is applicable when companies bring in a product and then send out the same one without modifying it. For example, the company brings in bicycle seats and then ships them without altering them. The company is eligible to receive a refund for duties reimbursed when they send out the seats.
2. Manufacturing or Production Drawback
When a business imports an item and then produces it into another item, it can be eligible for drawback. This is applicable if the company, for instance, imports cycle seats and then exports finished cycles with the seats. Here, the importer can be eligible for a reimbursement of the duty compensated for the seats.
3. Rejected or Dropped Merchandise Drawback
Companies can apply for drawbacks when merchandise does not reconcile to specifications or samples, transports them without permission, or is faulty at the time of import. For example, if the company gets faulty cycle seats, they can apply for drawback on exportation or elimination of the faulty cycle seats.
Who Gets Reimbursed Back with Duty Drawback?
The party that obtains the repayment from a duty drawback relies on customs documents and contracts made for import. It can be the exporter, importer, or intermediary party within the drawback deals.
As drawbacks need essential administrative work (and generally the help of a company or broker, which signifies additional fees), it is significant to weigh the charges returned with the charge of carrying out a drawback program.
What is the Eligibility Criteria?
Below are the minimum eligibility criteria for processing claims for a drawback.
1. Any person should be the legal holder of the products at the time the products are exported.
2. You should have reimbursed customs duty on imported items.
3. Duty drawback is accessible on most items on which customs duty was compensated on import and which has been exported.
Documents Needed for Claims
The following documents are needed to process claims for a drawback.
1. A triplet copy of the shipping bill.
2. A copy of the bill of entry.
3. Import statement or invoice.
4. Payment proof of duty paid on the goods’ import.
5. Consent from the RBI for re-exports of products.
6. A copy of the airway bill or bill of lading.
7. A copy of the bank-approved invoices.
8. Six copies of AR-4.
9. Packing list and export invoice.
10. Insurance and freight certificate.
11. A copy of the test report of products.
12. Modvat declaration.
13. A worksheet representing the drawback sum to be claimed.
14. License copy and DEEC book wherever applicable.
15. Certificate of transshipment, where applicable.
16. A duplicate blank acknowledgment card.
17. Pre-receipt for drawback sum on the reverse of the shipping invoice effectively signed on the revenue stamp.
Final Words
Getting reimbursements from the duty drawback scheme is significant, specifically if you have paid the taxes assessed during a claim process earlier. Raising an appropriate invoice while keeping a consistent stock of goods to be sold remains an important feature of tracking repayments. Moreover, going through the details posted on government portals can assist you to a huge extent.
We hope this post gives enough details related to the scheme. To learn more about it, you can join the best e-commerce export program and take your export business to a new height.