In international trade, customs duties play a crucial role in regulating the movement of goods across borders. To facilitate and promote export activities, governments often offer various schemes to mitigate the impact of customs duties on exporters. One such scheme in India is the Brand Rate Fixation under the Duty Drawback Scheme. This process allows exporters to claim a refund of the customs duties paid on imported goods used for manufacturing exported products. In this article, we will dive deeper into the Brand Rate Fixation process and the Duty Drawback of Customs Duty, explaining their importance, benefits, and the procedure involved.

What is Duty Drawback?

A duty Drawback is a refund of the customs duties paid on imported goods that are subsequently exported. The scheme aims to ensure that exporters do not bear the burden of customs duties on imported materials used in the production of goods that are meant for export. By offering this benefit, the government encourages export activities, making Indian products more competitive in the global market.

Duty Drawback is generally available in two forms:

All Industry Rate (AIR): This is a fixed rate set by the government for different products. It applies universally to all exporters.

Brand Rate: This is a special rate applicable to individual exporters based on their specific requirements. If an exporter’s goods do not qualify for the AIR, or if they need a higher refund, they can apply for a Brand Rate under the Duty Drawback scheme.

What is Brand Rate Fixation?

Brand Rate Fixation refers to the process where an exporter can apply for a specific rate of Duty Drawback that corresponds to the exact composition of their exported product. This is especially useful for exporters whose products use unique raw materials or have a different manufacturing process compared to the standard products for which an All Industry Rate (AIR) has been set.

In simple terms, if the goods manufactured by the exporter do not fall under the AIR or if the AIR is not adequate to cover the duties paid on the imported inputs, the exporter can apply to the Directorate General of Foreign Trade (DGFT) for a Brand Rate. The Brand Rate is determined based on the actual duties paid on the imported materials used in the production of the exported goods.

Key Features of Brand Rate Fixation

Custom Application: The Brand Rate is tailored to specific exporters and their products. It ensures that exporters can recover the exact amount of customs duty that they paid on imported inputs.

Specific to Products: The brand rate applies to a particular brand or product type. This ensures that the refund is accurate and in line with the actual inputs used.

Refund Calculation: The rate of drawback is based on the amount of customs duty paid on the imported raw materials used in manufacturing the exported goods. The exporter must provide documentation proving the customs duties paid to support the claim for the Brand Rate.

Higher Refunds: The Brand Rate often results in a higher duty drawback than the standard AIR. This is particularly advantageous for businesses that use complex or costly inputs in their production process.

Procedure for Brand Rate Fixation

The process for applying for Brand Rate Fixation involves several steps. Below is a detailed look at the steps an exporter needs to follow:

Application to DGFT: The first step is for the exporter to submit an application to the Directorate General of Foreign Trade (DGFT). The exporter needs to apply under the Duty Drawback Scheme and request a Brand Rate.

Details of Import and Export: In the application, the exporter must provide details about the imports used in the production of the exported goods. This includes a detailed bill of entry, import invoices, and proof of customs duties paid on the inputs.

Product Details: The exporter needs to describe the product in detail, including the manufacturing process, the ingredients or raw materials used, and any additional factors that may affect the duty drawback claim.

Verification by Authorities: The DGFT or the Customs department will then verify the details provided in the application. This might involve an inspection of the company’s premises and documentation to confirm the quantity and value of imported goods used in the export.

Brand Rate Fixation: After the verification process, the DGFT will decide on the appropriate Brand Rate for the exporter. This rate will then be communicated to the exporter.

Claiming the Duty Drawback: Once the Brand Rate has been fixed, the exporter can claim the refund based on the rate and the volume of exports made. The claim can be made while filing the Shipping Bill or any other relevant export documentation.

Read More: GST Refund Process, Claim, and Time Limit  

Benefits of Brand Rate Fixation

Customised Refund: The Brand Rate ensures that exporters get a duty drawback that accurately reflects the customs duties paid on the materials they imported. This provides a more equitable solution than the standard AIR, especially for businesses with unique production processes.

Increased Export Competitiveness: By recovering the full duty paid on imports, exporters can lower their overall production costs. This makes their products more competitive in international markets.

Financial Liquidity: Duty drawback refunds provide liquidity to exporters, enabling them to reinvest the money into their operations, expand their business, or improve cash flow.

Encouragement of Exports: The Brand Rate mechanism encourages businesses to engage in international trade by reducing the financial burden associated with import duties.

Conclusion

Brand Rate Fixation and Duty Drawback of Customs Duty are important components of India's foreign trade policy that aim to reduce the tax burden on exporters and make Indian products more competitive globally. By offering exporters the opportunity to recover the customs duties paid on imported goods used in manufacturing exported products, the government helps businesses maintain profitability and grow in international markets. While the process for Brand Rate Fixation may require detailed documentation and approval, the benefits of the scheme make it a vital tool for businesses looking to maximize their exports and reduce costs.