What is a Duty Drawback Scheme? #
Duty drawback schemes for Indian exporters are government initiatives aimed at promoting and encouraging the country’s exports. The schemes provide financial incentives to exporters in the form of refunds of customs duties paid on imported inputs and excise duties paid on indigenous inputs used in the manufacture of exported products. The incentives help make Indian goods more competitive in the global market and increase the country’s exports.
There are several types of duty drawback schemes available for Indian exporters. In this article, we will discuss the major schemes along with their benefits, eligibility criteria, and application process.
All Industry Rate (AIR) Duty Drawback Scheme #
The All Industry Rate (AIR) duty drawback scheme is the most common and widely used scheme in India. Under this scheme, the government fixes a standard rate of drawback for various export products, which is based on the average quantity and value of inputs used in the production of the exported goods. The rate of drawback is fixed on an annual basis and is announced by the government in the form of a notification. The AIR scheme is applicable to all eligible exporters irrespective of their turnover, product, or export destination.
The benefits of the AIR scheme are that it provides a simple and transparent method of calculating the drawback amount, and the rates are reviewed periodically to ensure that they remain competitive. The drawback amount is generally credited to the exporter’s bank account within a few weeks of filing the claim.
To be eligible for the AIR scheme, the exporter must submit the relevant export documents to the customs department and file a claim for drawback within the prescribed time limit. The exporter must also provide proof of payment of duty on inputs and the export of the finished goods.
Brand Rate Duty Drawback Scheme #
The Brand Rate duty drawback scheme is available to those exporters who have a significant brand presence in the global market. Under this scheme, the exporter is allowed to claim a drawback on the actual amount of duty paid on the inputs used in the production of the exported goods. The drawback rate is calculated based on the actual quantity and value of the inputs used and is subject to the approval of the government.
The benefits of the Brand Rate scheme are that it provides a higher rate of drawback than the AIR scheme and allows exporters to claim a refund on the actual duty paid on inputs. This scheme is particularly beneficial for exporters who use high-value inputs or have a significant brand value.
To be eligible for the Brand Rate scheme, the exporter must demonstrate that they have a significant brand value in the global market and provide evidence of the actual duty paid on inputs. The exporter must also submit a detailed application to the government along with supporting documents.
Duty-Free Import Authorization (DFIA) Scheme #
The Duty-Free Import Authorization (DFIA) scheme allows exporters to import inputs required for the production of exported goods without paying any customs duty. The exporter is then eligible for a refund of the duty paid on the inputs used in the manufacture of the exported goods.
The benefits of the DFIA scheme are that it provides a cost-effective method of sourcing inputs and allows exporters to claim a refund on the duty paid on the inputs used. This scheme is particularly beneficial for exporters who use high-value inputs or those who have a significant brand value.
To be eligible for the DFIA scheme, the exporter must submit a detailed application to the government along with supporting documents. The exporter must also demonstrate that the imported inputs are used for the manufacture of exported goods and that the finished products are exported within the prescribed time limit.
Export Promotion Capital Goods (EPCG) Scheme #
The Export Promotion Capital Goods (EPCG) scheme allows exporters to import capital goods required for the production of exported goods at a concessional rate of customs duty. The exporter is then required to fulfill certain export obligations, after which they become eligible for a refund of the customs duty paid on the imported capital goods.
The benefits of the EPCG scheme are that it provides a cost-effective method of sourcing capital goods and allows exporters to claim a refund on the customs duty paid on the imported goods. This scheme is particularly beneficial for exporters who require high-value capital goods for their production processes.
To be eligible for the EPCG scheme, the exporter must submit a detailed application to the government along with supporting documents. The exporter must also fulfill certain export obligations within a prescribed time limit, failing which they may be required to pay the full customs duty on the imported capital goods.
Special Advance Authorization Scheme #
The Special Advance Authorization Scheme allows exporters to import inputs required for the production of exported goods without paying any customs duty. The exporter is then required to fulfill certain export obligations, after which they become eligible for a refund of the customs duty paid on the imported inputs.
The benefits of the Special Advance Authorization Scheme are that it provides a cost-effective method of sourcing inputs and allows exporters to claim a refund on the customs duty paid on the imported goods. This scheme is particularly beneficial for exporters who use high-value inputs or have a significant brand value.
To be eligible for the Special Advance Authorization Scheme, the exporter must submit a detailed application to the government along with supporting documents. The exporter must also fulfill certain export obligations within a prescribed time limit, failing which they may be required to pay the full customs duty on the imported inputs.
Conclusion #
Duty drawback schemes for Indian exporters provide significant financial incentives to promote and encourage the country’s exports. The schemes offer a range of benefits to eligible exporters, including refunds of customs duties paid on imported inputs and excise duties paid on indigenous inputs used in the manufacture of exported products. The major schemes available to Indian exporters include the All Industry Rate (AIR) scheme, Brand Rate scheme, Duty-Free Import Authorization (DFIA) scheme, Export Promotion Capital Goods (EPCG) scheme, and Special Advance Authorization Scheme.
Each scheme has its own eligibility criteria and application process, and exporters must carefully evaluate their options before choosing the scheme that best suits their needs. The government of India regularly reviews and updates the schemes to ensure that they remain competitive and relevant in the changing global trade environment.
In conclusion, duty drawback schemes for Indian exporters play a critical role in promoting and encouraging the country’s exports. By offering financial incentives to eligible exporters, the schemes help make Indian goods more competitive in the global market and increase the country’s exports.