Duty Drawback Scheme and GST

By Ranjeet Mahtani and Suhasini Joshi

The Duty Drawback Scheme introduced for incentivizing and facilitating exports has been continued under the GST regime. This drawback scheme is an export beneficiation where either a part, or in some cases the entire customs and central excise duties levied on inputs used in manufacturing export goods and Service tax on services used for export of such goods are refunded by the Central Government to the exporter.

The exports that are eligible under this scheme are:

• export of goods which were imported into India as such, or
• export of goods which were imported into India for use for identified purposes and
• export of goods which are manufactured or produced out of materials which were either imported or indigenously procured.

Under this scheme, an exporter can avail benefits by opting for either All Industry Rate (AIR) or Brand Rate of Duty Drawback. AIR is an average rate for exports measured on the basis of the average quantity and value of inputs and duties (both Customs and Excise) borne by the exporters and Service tax on services used for export of such goods. The AIR for all exports is fixed as a percentage of Free on Board (FOB) price of the exports and is notified by the government annually after assessing the Customs and Central Excise duties levied on the inputs used in manufacturing the exported goods and Service tax on services used for export of such goods. The said rates are tabulated under Schedule of AIR of Duty Drawback (‘Schedule’) and are subjected to the fulfillment of certain conditions, as set out in Notification No. 131/2016-Cus. (NT) dated 31.10.2017.

Under this notification, in terms of an amendment made to it, a condition was introduced which required exporters to submit a certificate (issued by the Jurisdictional GST officer) stating that credit of GST on inputs and input services used for export goods or goods used to manufacture export goods was not availed, and that no refund of IGST paid on exports will be claimed.

The intention to this amendment was to prevent undue gain because of availing credit and refunds as well as obtaining drawback, it created difficulties for exporters. One such aspect was regarding the GST officer having jurisdiction over the specific drawback claim (i.e. who is the officer required to issue the certificate). Other important issue included the considerable time taken for obtaining the certificate from the said officer, and the time gap between the export of goods and filing of the requisite returns under GST.

Acknowledging and appreciating the difficulties and time constraints involved, the requirement of obtaining the certificate from the GST officer has been done away with by the Central Government vide Notification No. 73/2017-Cus. (NT) dated 26.07.2017. With effect from 1st July 2017, exporters can claim Duty Drawback rate based on a self-declaration. A clarification (Circular No. 609/64/2017-DBK) by the Central Board of Excise and Customs (CBEC) has explained this position.

In terms of the said clarification, for all exports made from July1, 2017, the rate of drawback duty as per columns (4) and (5) of the Schedule can be claimed by way of submission of a self-declaration in the form prescribed. It has also been provided that for exports made prior to July 1, 2017 which are covered under the past shipping bills and for which Let Export Order has been issued, the duty drawback benefit is available to exporters upon submission of a single declaration irrespective of any certificate or declaration that may have been given by the exporters in the past. The said amendment however, is not applicable to exports which were cleared from a factory or a warehouse prior to 1st July 2017 but for which no Let Export Order has been issued.

The amendment is welcome and has streamlined the practice by bringing about the much-needed simplifications in compliance formalities under the GST regime.