Duty is a tax levied by the government on the import, export, or manufacture of goods. In international trade, it usually means a customs duty, charged when goods cross a national border. Duties raise government revenue, protect domestic industry from foreign competition, and regulate the flow of trade. They may be ad valorem (a percentage of value), specific (a fixed amount per unit), or compound. Common types include import duty, export duty, anti-dumping duty, countervailing duty, and safeguard duty. In India, duties are imposed under the Customs Act, 1962 and the Customs Tariff Act, 1975, and are administered by the CBIC. Importers pay duty along with IGST at the time of customs clearance.
Duty drawback:
Duty drawback in India is classified by how the refund amount is determined and by the type of duty being rebated. The system is administered by the CBIC under Section 75 of the Customs Act, 1962 and the Drawback Rules, 1995. The main types follow.
1. All Industry Rate (AIR) Drawback
AIR drawback is a fixed percentage of the FOB value (or a fixed amount per unit) notified by the government for each export product. It is based on the average duty incidence across the industry, covering customs duty on imported inputs and, in some cases, central excise duty on domestic inputs. Rates are published in the Drawback Schedule, and the exporter simply declares the tariff item in the shipping bill. No input-wise proof is needed, so it is quick and widely used, though it may undercompensate firms with higher input duties.
2. Brand Rate Drawback
Brand Rate applies when the exporter’s actual duty paid exceeds the AIR, or when no AIR is fixed for the product. The exporter applies to the jurisdictional Commissioner of Customs with details of inputs, quantities, duty paid, and production norms. After verification, a rate specific to that exporter and product is fixed. It compensates more accurately than AIR but needs detailed documentation and takes longer. It is available only where AIR is below a prescribed share of actual duty incidence, as the rules require.
3. Special Brand Rate Drawback
Special Brand Rate is available under Rule 7 of the Drawback Rules where the AIR is less than 80 percent of the actual duty incidence on the export product. The exporter applies to the Commissioner, or to the Regional Authority in some cases, showing the shortfall with supporting cost data. If approved, a rate based on actual duty paid is fixed for the product. It protects exporters whose input duties are far higher than the industry average, though it involves close scrutiny of costs and production records.
4. Drawback on Customs Duty Only
Some AIR entries cover only the customs duty component paid on imported inputs. The exporter then claims a lower rate, since central excise or other domestic taxes are not included. This option arises where domestic taxes are refunded through other mechanisms, such as RoSCTL or RoDTEP, to avoid double benefit. Customs-only drawback keeps refund logic clear and WTO-consistent, as only duties actually borne on inputs are rebated, while other embedded taxes are handled by separate schemes.
5. Drawback on Customs and Central Excise Duty (Combined)
Under earlier arrangements, AIR covered both customs duty on imported inputs and central excise duty on domestic inputs. After GST was introduced in 2017, excise on most goods was subsumed, so the central excise portion shrank and applies mainly to a few items such as petroleum and tobacco. Combined drawback still exists in a reduced form. This explains why newer schemes like RoDTEP were introduced to cover residual embedded taxes that drawback no longer reimburses.
6. Drawback on Re-export of Imported Goods
Under Section 74 of the Customs Act, 1962, goods imported and then re-exported in the same condition qualify for refund of 98 percent of the customs duty paid, provided re-export occurs within two years of the Customs clearance for import, extendable by the Board. The goods must be identified through documents and inspected at export. This helps in cases such as returned consignments, exhibition goods, or rejected shipments, and avoids penalising trade where the import did not lead to domestic consumption.
Export Facilitation Measures:
Export facilitation covers the policies, procedures, and infrastructure that make it easier, faster, and cheaper for firms to sell abroad. Unlike direct incentives, it focuses on reducing transaction costs, delays, and information gaps. In India, these measures are led by the DGFT, CBIC, RBI, and export promotion bodies under FTP 2023. The key measures follow.
1. Simplified Registration and Digital Processing
Exporters need only a one-time Importer Exporter Code (IEC), issued online by the DGFT and linked to PAN. Most applications for authorisations, certificates, and schemes are filed through the DGFT portal, with digital signatures and online payment of fees. Paperless processing reduces visits to offices, cuts costs, and gives applicants a trackable record. FTP 2023 expanded automatic approvals and reduced compliance requirements, helping first-time exporters and MSMEs who earlier struggled with complex procedures.
2. Customs Facilitation and Single Window
Customs clearance has been simplified through ICEGATE, electronic shipping bills, risk-based inspection, and the Single Window Interface for Facilitating Trade (SWIFT), which lets exporters submit one online form for multiple agencies. Faster clearance reduces port dwell time and storage costs. The Authorised Economic Operator (AEO) programme gives trusted traders quicker clearance and fewer inspections. Measures follow the WTO Trade Facilitation Agreement, which India has ratified, and have improved India’s logistics and customs performance.
3. Duty and Tax Remission Schemes
Schemes ensure that exporters do not bear taxes on inputs. Duty Drawback, RoDTEP, and RoSCTL refund embedded duties and taxes, while Advance Authorisation and EPCG allow duty-free import of inputs and capital goods against export obligations. Exporters also get GST refunds on inputs, or may export under bond or Letter of Undertaking without paying IGST. These measures keep exports competitive and release working capital, in line with WTO rules against export subsidies.
4. Export Finance and Credit Support
Timely finance is essential for exporters. Banks provide pre-shipment and post-shipment credit in rupees or foreign currency, often at concessional rates under the RBI’s priority sector norms and interest equalisation support for selected sectors. The Export Credit Guarantee Corporation (ECGC) insures against buyer default and political risk, and helps exporters obtain bank finance. These measures reduce risk, ease liquidity constraints, and encourage small firms to take on overseas orders.
5. Infrastructure and Special Economic Zones
Export-oriented infrastructure includes Special Economic Zones (SEZs), Export Oriented Units (EOUs), export promotion industrial parks, container freight stations, and dedicated freight corridors. SEZs offer duty-free inputs, simplified procedures, and tax benefits, while port modernisation under programmes such as Sagarmala lowers logistics costs. Better connectivity cuts transit time and improves reliability. The Districts as Export Hubs initiative targets local infrastructure gaps, spreading export capacity across regions.
6. Market Access and Trade Promotion
Export Promotion Councils, the Trade Promotion Organisation (ITPO), and Indian missions abroad organise trade fairs, buyer-seller meets, and market studies. Schemes such as the Market Access Initiative support participation in overseas exhibitions and branding. India’s FTAs and CEPAs, with partners such as the UAE and Australia, lower foreign tariffs for Indian goods. These steps help exporters find buyers, enter new markets, and diversify beyond traditional destinations.
7. Information, Quality, and Capacity Support
Exporters receive information through the Trade Connect platform, DGFT helpdesks, and commodity boards, covering market data, tariff rates, and standards. Bodies such as the Export Inspection Council and BIS provide certification and testing support, helping goods meet foreign quality, sanitary, and phytosanitary norms. Training programmes build skills in documentation, logistics, and compliance. Such support is especially valuable for MSMEs, which often lack expertise to handle foreign regulations.
8. Dispute Resolution and Grievance Redressal
Facilitation also includes mechanisms to resolve problems quickly. The Amnesty Scheme in FTP 2023 lets exporters regularise old, unmet export obligations without heavy penalties. DGFT offers online grievance redressal, and an Appellate Authority hears appeals on licensing decisions. Trade remedy advice, and diplomatic support through the Ministry of Commerce, help with foreign barriers and payment disputes. Efficient redressal builds trust and encourages exporters to continue and expand overseas activity.
