Basics Information Regarding Drawback and Duty Drawback

Do you know you can claim back the duty paid on imports? Are you aware that government allows rebate of custom duty or excise duty to traders, to motivate them to import or export certain item? If not, you need to consult corporate tax consultants.

Duty drawback is a term that has a complicated meaning. There are many other terms that are used in commerce and international trade and they are important for your business. You should be aware of the import items that can be re-exported and which items are eligible for drawback refund.

You can consult with corporate tax refund services that offer duty drawback refund consultants & services to improve your knowledge about how to claim refund of the duty paid on imported items on which you have been given a drawback. Meanwhile, you can refer to the text below to have basic understanding about drawback.

What is Drawback?

According to the law in commerce, draw back means: Paying back the amount of duty that was previously paid on export of excisable items or on re-export of foreign goods. The purpose of drawback is to allow traders to export such goods that are subject to taxation within the country, and sell them to a foreign country where they are untaxed.

Difference Between Drawback and Bounty

Drawback is not a bounty. A bounty is a term referred to government’s allowance on exporting goods to foreign countries at a price less than actual cost price.

What is Duty Drawback?

Duty Drawback is a relaxation or rebate of chargeable duty on imported items. Such items may include, materials used to manufacture, or in the manufacturing of goods that are to be exported. On the part of exporter or excise item, he may claim drawback or refund and custom duty which has been paid by the supplier. The last exporter of goods can claim the drawback of material that was used for manufacturing of the product. The drawback can be claimed on the re-import of goods.

Examples of Drawback

Few examples of drawback include:

  • Custom duty paid on inputs that have been imported, including the excise duty that was paid on indigenous input.
  • Duty which has been paid on packing material

Business tax consultants can guide you on the items that have been made eligible for drawback, and they’ll inform you about the eligibility criteria to claim your refunds.

When Drawback is Not Allowed

Drawback will not be refunded on inputs that were imported without paying any custom or excise duty. If either custom duty or excise duty, or both, have been paid partially, the claim must be made on the paid amount.

Condition for Rebate

  • If goods are being re-exported, they must be re-exported within 2 years after the date of paying the duty when the items were imported.
  • 99% of the duty will be allowed as drawback refund, and the refund will be made only after inspection.
  • If, in case, the re-imported goods have been used before they were to be re-exported, the percentage of drawback will be reduced.

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