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Duty Drawback and Marine Insurance

Duty Drawback and Marine Insurance

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Published by imad rehman

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Published by: imad rehman on Apr 03, 2011
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Duty Drawback ByDr. A.K. Sengupta(Formal Dean, IIFT)
Duty drawback is defined as the rebate of duty chargeable onany imported or excisable material used in the manufacture of goods exported.
It is also admissible for re-exports of goods on which import dutyhas been paid..
Drawback rates are drawn up annually and released soon afterthe annual budget.
The rates are based on parameters, including prevailing prices of inputs, standard input-output norms published by DGFT, share of imports in total input .
In most cases, the drawback is less than 100% of the import dutypaid.
The rates are expressed as a percentage of the fob value of exports.
The drawback rates are fixed, either for any class of productsmanufactured, known as “all industryrates or for a productmanufactured by a particular manufacturer, known as “Brand”rates.
All-industry Rates
These are published in the form of notification by thegovernment every year and are normally valid for one year.
All-industry rates are calculated on the basis of broadaverages of consumption of inputs, duties and taxes, quantity of wastage and fob prices of export products.
The rates are on quantity basis.(eg. Per kg, or per tonne) orpercentage of fob. Value.
The rates are revived and revised periodically.
It is estimated that “all-industry” rates neutralize around 70-80 per cent of the total duty paid on the inputs for exportproduction.
Brand Rate
If all-industry rates are unavailable or if it is felt that dutydraw back provides inadequate compensation for import dutypaid on inputs, the exporter may request for theestablishment of “special brand rates”
Special brand rates are envisaged to neutralize upto 90-95percent of total tax paid on inputs
All industry rates are based on average rates of consumptionof inputs and rates of duty paid-special brand rate scheme isproduct-and-exporter specific, requiring detailed submissionof proof of duty paid by the exporter.
Availability of drawback 
Drawback is available on the following items:
Materials and components used in the process of manufacture irrecoverable wastage which arises in themanufacturing process.
Material used for packing the finished export products
Finished products
Drawback on Re-export
Drawback is also allowed on goods originally importedinto India and exported in the two years form paymentsof import duty.
For goods exported without being used, 98% of theimport duty is refunded.
For goods exported after use, the % age of dutyrefunded varies depending on the period betweenimport and export of the product.
The rates range form 85% of the import duty for goodsthat remain in the country for upto 6 months, to 30% forgoods that remain in the country of between 30-36months.
The rates of duty drawback are paid by the directorateof Duty drawback under ministry of finance, generallythree months after the budget is introduced in theParliament.

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