The government has come out with modified duty drawback rates for exporters, evoking a sharp reaction from the apparel industry which will witness a reduction in tax refunds. The new all industry GST New Duty Drawback Rates, the return of duties on imported inputs for export items, has come into effect from 1st October 2017.
GST New Duty Drawback Rates
The new refund rate for garments has come down to 2% as compared to the 7.7% drawback earlier. With the precipitous decline in the drawback support, over 7 thousand small & medium businesses in the apparel tradings will be crippled and doomed in uncertainties. The revenue department has notified the GST New Duty Drawback Rates for a host of items, including toys, furniture, musical instruments, aircraft, and vehicles, valid from 1st October 2017.
The export of goods or services is considered to be a zero-rated supply. GST is not levied on export of any products or services. Under GST, the duty drawback is only available for the customs duty paid on imported inputs or central excise paid on specific petroleum or tobacco products used as inputs or fuel for captive power generation.
G.S.R. (E)–In application of powers conferred by section 75 (2) of the Customs Act, 1962 and section 37 (2) of the Central Excise Act, 1944, read with the rules 3 and 4 of Customs and Central Excise Duties Drawback Rules, 2017 (hereinafter referred to as the said rules) as well as in supersession of the notification of Government of India in Ministry of Finance (Department of Revenue) No. 131/2016-Customs (N.T.), dated 31st October, 2016, published vide number G.S.R. 1018(E), dated 31st October, 2016, except as respect to the things done or prohibited to be done before such supersession, the Central Government hereby defines the rates of drawback as mentioned in the Schedule annexed hereto (hereinafter referred to as the said Schedule) subject to following notes and conditions, namely:
1) The tariff items and specifications of goods in the stated schedule are aligned with the tariff items and specifications of goods in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) at the four-digit level only. The description of goods given at the six-digit or eight digits or altered six or eight digits in the said Schedule are in some cases not aligned with the specifications of goods presented in the First Schedule to the Customs Tariff Act, 1975.
2) The standard rules for the interpretation of the 1st Schedule to the Customs Tariff Act, 1975 shall, mutatis mutandis, apply for arranging the export goods listed in the said Schedule.
3) Notwithstanding anything contained in the said Schedule;
i) all art-ware or handicraft items are classified under the heading of art ware or handicraft (of the constituent element) as mentioned in the relevant Chapters;
ii) any identifiable able to use machined part or ingredient predominantly made of iron, aluminum or steel, made by casting or forging method, and not explicitly stated at six digit level or more in Chapter 84 or 85 or 87, besides those classifiable under heading 8432 or 8433 or 8436, may be classified under relevant tariff item (depending upon material composition and making process) under the heading 8487 or 8548 or 8708, as the case may be, irrespective of the classification of such part or component at the four-digit level in Chapter 84 or 85 or 87 of said Schedule;
iii) Sports gloves mentioned below the heading 4203 or 6116 or 6216 should be listed under that heading, and all the other sports gloves should be listed under heading 9506.
4) The figures are shown in column (4) in the said Schedule, which refers to a rate of the drawback expressed as a percentage of the free on board value or rate per unit quantity of the export goods, as the case may be.
5) The figures are shown in column (5) in the said Schedule, which refers to the highest amount of drawback that can be availed of per unit specified in column (3).
6) An export product followed with the tax invoice and forming a part of the project export (including supplies or turnkey export ) for which no figure is shown in column (5) in said Schedule, shall be so declared by the exporter and the maximum amount of drawback that can be availed under the said Schedule shall not exceed the amount computed by applying ad-valorem rate of drawback shown in column (4) to one and half times the tax invoice value.
7) The rates of drawback defined against the various tariff items in a said Schedule in specific terms or on ad valorem basis, unless otherwise explicitly provided, are inclusive of the drawback for packing materials used if any.
8) The drawback at the rates specified in the said Schedule shall be applicable only if the procedural requirements for claiming drawback as defined in rule 12, 13 and 14 of the said rules, unless otherwise relaxed by the competent authority, are satisfied.
9) The rates of drawback specified in the said Schedule shall not apply to export of a commodity or product if such commodity or product is;
i) manufactured partly or wholly in a warehouse under section 65 of the Customs Act, 1962 (52 of 1962)
ii) produced or exported in discharge of export obligation against an Advance Authorization or Duty-Free Import Authorization issued under the Duty Exemption Scheme of the relevant Foreign Trade Policy :
Provided that where exports are done against Special Advance Authorization issued under paragraph 4.04A of the Foreign Trade Policy 2015-20 in discharge of export obligations in terms of Notification No. 45/2016-Customs, dated 13th August, 2016, the rates of drawback specified in the said Schedule shall apply as if in the said Schedule, the entries in columns (4) and (5) against the Tariff items in the said Schedule below all Chapters, except Chapter 61 and 62, are NIL, and those in Chapters 61 and 62 are as specified in the Table annexed hereto;
iii) manufactured or exported by a unit licensed as hundred per cent Export Oriented Unit regarding the provisions of the relevant Foreign Trade Policy;
iv) produced or exported by any of the units situated in Free Trade Zones or Export Processing Zones or Special Economic Zones;
v) Manufactured or exported availing the benefit of the notification No. 32/1997-Customs, dated 1st April 1997.
10) Whenever a composite object is exported for which any specific rate is not provided in a said Schedule, the rates of the drawback applicable to various constituent materials can be extended to the composite object as per the net content of such materials on the basis of a self-declaration to be provided by the exporter to this effect and in case of the doubt or if there is any information contrary to the declarations, the proper officer of customs shall cause a verification of such disclosures.
11) The name ‘article of leather’ in Chapter 42 of a said Schedule means any article wherein (a) 60% or more of outer visible surface area; or (b) 60% or higher of outer and inner surface area taken together, except handles or shoulder straps or fur skin trimming if any, is of leather notwithstanding that such an article is manufactured of leather and any other material.
12) The term “dyed,” anywhere used in the said Schedule about textile supplies, includes yarn or piece dyed or colored or predominantly printed in the body.
13) The term “dyed” about fabrics and yarn of cotton, shall include “bleached or mercerized or printed or melange.”
14) The term “dyed” about textile materials in Chapters 54 and 55 shall include “printed or bleached or melange.”
15) In respect of tariff items in Chapters 60, 61, 62 and 63 of a said Schedule, the blend containing man-made fibre & cotton means that content of man-made fibre in it should be higher than 15%, but less than 85% by the weight and the combination containing wool and man-made fibre means that content of man-made fibre in it should be less than 85% but more than 15% by weight. The garment or made-up of wool or cotton or human-made silk or fiber shall mean that the content present in it of the respective fiber is 85% or more by weight.
16) The term “shirts” about Chapters 61 and 62 of the said Schedule shall include “shirts with hood.”
17) In respect of tariff items appearing in Chapter 64 of a said Schedule, boots or half boots, leather shoes, for adult shall comprise the following sizes, namely;
i) French point or Paris point or Continental Size above 33
ii) English or UK adult size 1 & above; and
iii) American or USA adult size 1 & above
18) In respect of the tariff items appearing in Chapter 64 of a said Schedule, boots or half boots, leather shoes for children shall comprise the following sizes, namely;
i) French point or Paris point or Continental Size up to 33
ii) English or UK children size up to 13; and
iii) American or USA children size up to 13.
19) The drawback rates specified in a said Schedule against tariff items 711301, 711302 and 711401 should apply only to the goods exported by airfreight, post parcel or authorized courier through the Custom Houses as mentioned in Para 4.72 of Hand Book of Procedures, 2015-2020 published vide Public Notice No. 1/2015-2020, dated 1st April, 2015 of the Indian Government in the Ministry of Commerce and Industry, after inspection by the Customs Appraiser or Superintendent for ascertaining the quality of silver or gold and the quantity of net content of silver or gold in the silver articles or silver jewelry or gold jewelry. The free on board value of a consignment through authorized courier shall not exceed rupees twenty lakhs.
20) The drawback rates mentioned in the said Schedule against tariff items 711301, 711302 and 711401 are not applicable to goods produced or exported in discharge of export obligation against any of the Scheme of relevant Foreign Trade Policy of the Indian Government which provides for duty free import or replenishment or procurement from the local sources of gold or silver.
21) “Vehicles” of Chapter 87 of the said Schedule shall comprise the wholly built unit or semi knocked down (SKD) unit or wholly knocked down (CKD) unit.
2. All claims for the duty drawback at the rates of drawback notified herein shall be filed concerning the tariff items and specifications of goods shown in columns (1) & (2) of a said Schedule respectively. In the case where, in respect of the export product, the rate of drawback mentioned in the said Schedule is zero or not applicable, the rate of drawback may be fixed, on an application by an individual producer or exporter by the said rules. Where the claim for duty drawback is filed concerning the tariff item of an announced Schedule, and it is at a rate of drawback mentioned herein, the application, as referred in rule 7 sub-rule (1) of stated rules should not be admissible.
3. The amount mentioned in sub-rule (3) of rule 7, of the said rules, relating to provisional drawback amount as may be specified by Central Government of India, shall be equivalent to a drawback rate and drawback cap shown in column (4) and (5) in a said Schedule for the tariff item corresponding to the export products, if applicable, and determined as if it was a claim for the duty drawback filed with reference to such rate and cap.
4. This notification has come into effect on the 1st day of October 2017.
GST New Duty Drawback Rates