In order to regulate imports and protect the domestic industry by providing a level playing field to the domestic players, the government charges import duty on the imported goods. However, import duties can result in overpricing of goods if they are meant for re-export or for consumption in the production of goods meant for export. In such cases, the government has placed provisions relating to duty drawback.
What is Duty Drawback?
The duty drawback is a provision for a refund of the import duty paid at the time of import of such goods. This ensures that the exporters are able to remain competitive in the international markets. The following are the two important provisions in this regard:
- Section 74 of the Customs Act, 1972: Here, the duty drawback shall be available to the exporters upon re-exporting the imported goods when such goods are easily identifiable.
- Section 75 of the Customs Act, 1972: Here, the duty drawback shall be available to the exporters in cases where the imported goods are used in the production of goods meant for export.
The customs law also specifies the methodology to calculate the duty drawback amount. One of the most significant ways is the brand rate in duty drawback.
What is Brand Rate?
The duty drawback rates in India are associated with All Industry Rates (AIRs) in most cases. However, All Industry Rates (AIR) is one of the mechanisms of determining the duty drawback, the other one being the brand rates. The AIR is based on the average volume of inputs being consumed, duties, wastages and outputs. It is determined by the government. In case the products do not have AIR, then the brand rate under customs is used.
The exporters can apply for fixation of brand rates in case the exported product is not notified in the AIR schedule or if the AIR neutralizes less than 80% of the duties paid on the materials that are used in the manufacturing of the exported goods.
How to Fix Brand Rate?
The exporters who need to fix brand rate need to make an application with the jurisdictional Principal Commissioner or Commissioner of Customs within 60 days from the date of export of such goods. The enclosures shall include the data relating to the consumption of the inputs used in the manufacturing of the export goods as well as the duties paid to the department. Further, they are also required to file statements relating to the stock of the imported and domestic materials for the specified period.
Till the time the brand rate is fixed and the final duty drawback is determined, the exporters can apply for provisional duty drawback. The application for provisional duty drawback shall be filed with the Principal Commissioner or Commissioner of Customs. In such cases, the provisional duty drawback shall be granted to the exporter till the final drawback is determined. However, there are certain conditions subject to which the provisional duty drawback shall be allowed.
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The Principal Commissioner of Customs or Commissioner of Customs may require the exporter to enter into a bond for an amount not exceeding the amount of duty drawback claimed by the exporter. The exporter shall be required to refund the amount of provisional duty drawback in case such duty drawback is not admissible. In case the final duty drawback determined is lower than the provisional duty drawback granted, then such excess amount shall be refunded by the exporter.
In a Nutshell
Brand rate under customs is not only the determinant of the duty drawback amount where AIR is not available, but it also acts as a remedial measure for those exporters who are not satisfied with All Industry Rates. The above simple procedure can help the exporters apply for brand rates and claim an appropriate amount of refund of the import duties. In case you need any assistance with brand rate fixation under customs, feel free to contact the Exim Advisory.