UNIT-3 Import and Export Procedure (401) SPPU Study Notes

1. UNIT 4
Duty Drawback and
Remittance Scheme.
By
PROF. PRIYANKA PUNJABI
Assistant Professor
Sanjivani arts commerce and science college Kopargaon
Maharashtra

2. Syllabus
• Advance License
• Replenishment License
• Special Interest License
• DEPR Scheme ( Duty Entitlement Pass Book Scheme
• DFRC Scheme ( Duty Free Replenishment Certificate)

3. Duty Drawback Scheme:
The duty drawback scheme has been notified for a large number of export
products by the Government after an assessment of the average incidence of
Customs, Central Excise duties, Service Tax, and Transaction Costs suffered by
the export products.
The duty Drawback Scheme aims to provide the refund/ recoupment of custom
and excise duties paid on inputs or raw materials and service tax paid on the input
services used in manufacturing export goods.

4. • Customs Act, 1962
• The Duty Drawback provisions are described under Section 74 and Section 75 under the
Customs Act, 1962. This Act laid down the various restrictions and conditions to claim
drawback of duties under certain situations.
• Section 74: As per section 74, if the re-exports of imported goods are identified quickly and
within two years from the date of payment of duty on the importation. Then an exporter can
claim 98% of the duty paid by him as a drawback under section 74.
• Section 75: As per section 75, if the export of goods manufactured or processed out of imported
material with value addition, a drawback of customs duties chargeable on any imported
materials of a class or description should be allowed. If sale proceeds are not received within the
stipulated period, a drawback is to be reversed or adjusted. Duty Drawback under section 75 can
be claimed either as a fixed percentage depending upon the value of goods exported.

5. The benefit of the Duty Drawback Scheme
• The Duty Drawback Scheme (DBK) is a crucial program to help exporters offset some of
the costs accrued during the export process, particularly in the supply or value chain.
• The key benefit of the scheme is that it gives rebates on Customs and Central Excise
chargeable on any imported or excisable materials used to manufacture goods meant for
export.
Goods Eligible for Drawback
• The following are the eligible goods for the duty drawback.
• To export goods imported into India
• To export goods imported into India after having been taken for use
• To export goods manufactured/produced out of imported material
• To export goods manufactured/produced out of indigenous material
• To export goods manufactured /produced out of imported or indigenous materials.

6. • Primary components of the Duty Drawback Scheme
• The scheme, administered by the Department of Revenue, has two primary
components:
• All Industry Rate (AIR)
• Brand Rate
• One way to grant the duty drawback is to check the rates specified in the
Schedule of All Industry Rate of Drawback, usually announced on June 1 or
three months after the budget.
• If the product is not mentioned in the AIR schedule or the exporter claims it
is inadequate, the exporter can claim duty drawback by applying for Brand
Rate fixation.

7. Procedure for Claiming Duty Drawback
• An exporter has to file the shipping bill in an electronic data interchange (EDI) for
the export.
• The electronic shipping bill itself will be treated as the claim for drawback, and
there is no need to file separate drawback claims.
• All ports with EDI can process these claims except for DBK claims relating to re-
exporting imported goods under Section 74 of the Customs Act, 1962.
• In the EDI system, exporters must open their accounts with a bank that is either
nominated by a customs house or has a core banking facility to transfer funds
through NEFT/ RTGS.
• This has to be done to enable direct credit of drawback amounts to their accounts,
obviating the need for the issue of cheques.

8. Advance License
• Why government provide License as these many licenses government provide like
Advance License, Duty Free Import License, EPCG etc.
• Government wants to maximum export by exporters, so that Indian Economy will be
strong so govt provide license.
• Advance Authorization is a license issued under Chapter 4 of Foreign trade Policy
2015-20.
• This Advance Authorization enables that your company can import raw materials for
exporting goods.
• As per government, company can import raw material like chemical tin free plastic
wrapper without paying duty.
• No need to pay duty for importing raw materials but we need to take advance license.

9. Fulfillment of Export Obligations:
Here the Export obligations means the license holder has to export the goods/
products which are manufactured by using these inputs/ raw materials imported
under the Advance Authorization Scheme .
The holder’s Advance License has to fulfill the export obligation within
prescribed time limit.
Whatever we have imported in the same way everything we have to export.
After this we have to keep record of all documents like Invoice Bill, Bill of entry
while importing the raw material. These are set of Doc as a proof for Export.
And after manufacturing that raw material to finished goods then we have a to
prepare another set of documents for exporting purpose.
We have to submit this documents to Government after which govt will provide
redemption letter.

10. • Advance License for Intermediate Supply:
Advance license may be issued for intermediate supply to a manufacturer-exporter
for the import of inputs required in the manufacture of goods to be supplied to the
ultimate exporter/deemed exporter holding another advance license.
• Advance License for Deemed Export:
Advance license can be issued for deemed export to the main contractor for import
of inputs required in the manufacture of goods to be supplied to the categories
mentioned in the policy. An advance license for deemed export can also be availed by
the sub-contractor of the main contractor to such project. The licenses shall be
exempted from basic customs duty, surcharge, and additional customs duty only.
• Amendments to the Advance License Scheme :
The Advance License Scheme has been expanded and liberalized with the
amendments made to the DXOM Policy, announced on 31st March 1995.

11. Replenishment License
• Replenishment (REP) licenses are the earliest and still the principal methods of giving
incentives to exporters Combined with duty drawback and Cash Compensation (CCS)
REP licenses permit the exporter to import certain restricted raw materials and
components, that is, raw materials and components appearing on the lists of limited
permissible and canalized items in the Import-Export Policy Refunds can be claimed
through the Duty Drawback Scheme.
• The exported products for which REP licenses can be obtained along with the foreign
exchange value of the REP license, expressed as a percentage of the FOB value of the
export are listed in the Import-Export Policy.

12. • During the 1960s and 1970s, because of import controls and foreign
exchange rationing, REP licenses often could be sold at premium prices in
the open markets These provided an adequate export incentive provided the
materials incorporated in the exports actually could be obtained at a
reasonable cost .
• However REP premiums declined during the 1980s and particularly after
1985 most probably due to the steadily increasing level of customs duties,
some relaxation of import contr0ls, and the increased domestic production of
many raw materials.

13. Special Interest License
• Exporters, export-oriented units, units located in STP. EHTP, EPZ are
granted recognition for their previous export performance by being certified
as an export house, trading house, star trading house, superstar trading house,
etc.
• The eligibility for the different gradings depends on the FOB value of goods
exported or net foreign exchange earned by the unit in the preceding
three/one licensing year.
• Exporters who have applied and been granted such certification are eligible
for a special import license which will be valid for import of a number of
items mentioned in the ITC (HS) classification of imports .
• While this license is freely transferable, import under this license is subject
to normal customs duty

14. DEPR Scheme ( Duty Entitlement
Pass Book Scheme
• DEPR Scheme is an export incentive
• According to the DEPB scheme, an exporter is eligible to claim import duty credit
as a specified percentage of the FOB value of exports made in freely convertible
currency DEPB provides post export incentives of duty remission on inputs used in
export .
• The exporter can use this credit to pay for the import duty on the import of inputs
whether required for the manufacture of the export product or not The DEPB is
valid for 12 months from the date of its issuance.
• The claim for the import duty credit is admissible only after the realization of the
export proceeds.

15. • Both the merchant-exporter and manufacturer-exporter are eligible for the
benefit under the DEPS scheme.
• The import duty credit granted under the DEPB scheme or the materials
imported against it are freely transferable. The transfer of DEPS shall
however, be for import at the port specified in the DEPS which shall be the
port from where exports have been made.
• An application for grant of import duty credit under DEPS should be made to
the licensing authority The applicant may file one or more applications
subject to the condition that each application shall contain not more than 25
shipping bills The DEPB shall be issued with single port of registration,
which will be port from where the exports have been affected.

16. • Notified on 1st April 1997, the DEPB Scheme consisted of :
• 1 Post-export DEPB and
• 2. Pre-export DEPB .
• The pre-export DEPB scheme was abolished we.t. 1st April, 2000
• .Under the post-export DEPB, which is issued after exports, the exporter is given
a Duty Entitlement Pass Book Scheme at a pre-determined credit on the FOB
value The DEPB rates allow import of any items except the items which are
otherwise restricted for imports Items such as Gold Nibs Gold Pen Gold watches
etc. though covered under the generic description of writing instruments
components of writing instruments and watches are thus not eligible for benefit
under the DEPS scheme.

17. • The DEPS Rates are applied based on FOB free-on-board) value or value cap
whichever is lower.
• For example, if the FOB value is 700/ per piece and the value Cap is 500/-
per piece, the DEPB rate shall be applied on Rs.500/ -
• The DEPB Scheme is issued only on a post-export bass and the pre-export
DEPS scheme has been discontinued.

18. Some core points related to DEPB are as follows:
• Benefits of DEPB Rates:
The benefit of DEPB scheme is available on the export products having
extraneous material up to 5% by weight. In such cases, extraneous material up
to 5% shall be ignored and the DEPB rate as notified for that export product is
to be allowed.
• Review of DEPB Rates:
The Government of India reviews the DEPB rates after getting the appropriate
export import data on FOB value of exports and CIF (Cost Insurance and
Freight. value of inputs used in the export product, as per SION Such data and
information s usually obtained from the concerned Export Promotion
Councils.

19. DFRC Scheme (Duty Free
Replenishment Certificate)
Duty remission schemes consist of
(a) DFRC (Duty Free Replenishment Certificate) (b) DEPB (Duty Entitlement
Passbook) and
(c) DBK (Duty Drawback Scheme).
Duty Free Replenishment Certificate (DFRC): DFRC is issued to a merchant exporter or
manufacturer exporter for the duty free import of inputs such as raw materials,
components, intermediates, consumables, spare parts, including packing materials to be
used for export production.
The Regional Authority while issuing Duty Free Replenishment Certificate shall
mention the technical characteristics, quality and specification in respect of such
inputs :Alloy steel including Stainless Steel, Copper Alloy, Synthetic Rubber, Bearings,
Solvent, Perfumes/ Essential Oil/ Aromatic Chemicals, Surfactants, Relevant Fabrics,
Marble.

20. The schemes can be classified into
the following categories
• Incentives for Export Performance
• Incentives for Marketing of Export Goods
• Fiscal Incentives
• Import Facilitation for Exports
• Export Financing
• Foreign Currency Retention

21. I) Incentives for Export Performance:
1) Duty Drawback
2) Duty Free Import Authorization
3) Duty Entitlement Pass Book scheme
4) Special Import License

22. II) Incentives for marketing of Export Goods:
a) Market Development Assistance (MDA):
The Ministry of Commerce and Industry has a scheme of MDA,
which was launched in 1963 to stimulate and diversify the export
trade, along with the development of marketing of Indian products
and commodities abroad.
.

23. b) Market Access Initiative:
• Market Access Initiative scheme is intended to provide financial assistance
for medium-term export promotion efforts with a sharp focus on country and
product.
• The MAI Scheme is a Plan scheme that is intended to act as a catalyst in
promoting India's exports on a sustained basis. The Scheme is based upon
the focus concept Le. focus product and focus market.
• Under the scheme assistance is extended to the Departments of Central
Government and Organisations of Central/State Governments, Export
Promotion Councils Registered Trade Promotion organizations Commodity
Boards recognized Apex Trade Bodies, recognized Industrial Clusters and
Individual Exporters

24. C) Fiscal Incentives:
Exporters are eligible for fiscal incentives such as Sales Tax Exemption and
Income Tax Exemption.
Exporters can claim exemption from the levy of sales tax on the supplies
taken by them for the manufacture of goods meant for production of export
product or supplies of goods for exports against specific export orders.
This facility is available to the exporters both under the Central Sales Tax
Act.1956 and under the Local Sales Tax Acts of the specific states .
The exporters are required to give Form H to the suppliers of goods/materials
from another State and the exemption prescribed by the Sales Tax Department
of the State.

25. d) Import Facilitation for Exports:
The facilities provided are the Export Promotion Capital Goods Scheme, Duty
Exemption Scheme, advance license, DEPB etc.
(i) Export Promotion Capital Goods Schemes (EPCG) :
An importer of capital goods has to pay the applicable import duty. It an exporter
imports capital goods against payment of import duty, then the cost of capital goods
will certainly increase by the amount of import duty and it would increase the cost of
production .
As a consequence the cost competitiveness of the export products would be adversely
affected Though the primary responsibility of the exporter to ensure cost effectiveness
yet the Government of India in the EXIM Policy 1997-2002 has introduced Export
Promotion Capital Goods Scheme (EPCG) to promote cost competitiveness of India's
exports Under this scheme, an exporter is allowed to import new capital goods against
payment of import duty of 5%.

26. (ii) Duty Exemption/ Remission Scheme:
The EXIM Policy has introduced Duty Exemption/Remission Scheme in
addition to the EPCG scheme to promote the competitiveness of India's
exports.
e). Export Financing:
The exporters in India have the facility to obtain both the long-term funds and
the short term funds Export-Import Bank of India (EXIM Bank) and the All
India financial institutions a well as State level financial institutions provide
long-term funds to the industry.
Post shipment finance can be extended up to 100% of invoice value of goods
It can be granted up to a period of 180 days at the concessional rate of interest
in the case of cash exports.

27. F) Foreign Currency Retention:
According to the liberalized exchange rate management system announced in 1994-95,
the exporter would be permitted to maintain foreign currency balance in separate foreign
currency account known as Exchange Earners Foreign Currency Account (EEFC).
EEFC account can be maintained by any exporter with any designated branch of
$8!/Public Sector Banks of India.
It can be maintained in the form of current or savings account and in any of the permitted
currencies No credit facility is allowed Funds held in this account can be freely converted
into Indian currency at the market determined rates.

28. THANK YOU