Duty Drawback: formula sheet

Key formulas

Section 74 drawback rate

Drawback = 98% × duty paid on importation

Applies to easily identifiable goods, subject to the Act's other provisions. Used goods get a different rate under Section 74(2).

Section 74 conditions

Goods identified to the officer's satisfaction + entered for export within 2 years from date of payment of duty

The Board may extend the 2 years on sufficient cause shown.

Used goods under Section 74(2)

Rate = as notified by the Central Government

Fixed having regard to duration of use, depreciation in value and other relevant circumstances.

Section 75 base

Drawback of customs duty on imported materials used in manufacture, processing or operation on exported goods

Allowed only where the Central Government notifies it and subject to the drawback rules.

Section 75 first proviso

No drawback if export value < value of imported materials used, or not more than a notified % of that value

Applies to goods the rules specify.

Section 75 second proviso

Sale proceeds not received within FEMA time → drawback deemed never allowed

Exceptions apply as the Central Government specifies by rule.

Date of entry for export

Date used to calculate rate of duty under Section 16

Section 74(4)(a). For provisional assessment under Section 18, the date of payment of provisional duty is treated as the date of payment of duty.

Drawback on unused goods

Drawback = 98% × customs duty paid on importation

Applies only if both conditions in section 74(1) are met: identification and entry for export within two years.

Time limit

Entry for export ≤ 2 years from the date of payment of duty

The Board may extend for a further period on sufficient cause shown (proviso to section 74(1)).

Used goods

Rate = as notified by the Central Government (section 74(2))

Fixed having regard to duration of use, depreciation in value and other relevant circumstances. The Act gives no fixed percentage.

Date of entry for export

Date of entry for export = date used for rate of duty under section 16

Section 74(4)(a). For provisional assessment under section 18, the date of payment of provisional duty is the date of payment of duty (section 74(4)(b)).

Refund route for drawback

Drawback under sections 74 and 75 is paid to the applicant (section 27(2) first proviso, clause (e))

Section 27 does not make drawback go to the Fund; drawback is paid to the applicant.

Drawback on unused goods (Section 74(1))

Drawback = 98% × Customs duty paid on importation

Applies only if goods are identified as the imported goods and entered for export within two years from the date of payment of duty (extendable by the Board).

Drawback on used goods (Section 74(2))

Drawback = Notified rate (%) × Customs duty paid on importation

The rate is fixed by Central Government notification, based on duration of use, depreciation and other circumstances. Use the rate given in the question.

Time limit for entry for export

Entry for export ≤ 2 years from date of payment of duty

The Board may extend the period on sufficient cause. Provisional assessment: date of payment of provisional duty counts.

Interest on delayed drawback (Section 75A(1))

Interest at section 27A rate, from the day after one month from the claim date until payment

Payable in addition to the drawback if it is not paid within one month of filing the claim.

Drawback on unused re-exported goods

Drawback = 98% × import duty paid

Section 74(1). Applies only if the goods are identified and entered for export within two years of payment of duty.

Time limit

Entry for export ≤ 2 years from date of payment of duty

Board may extend on sufficient cause shown (proviso to Section 74(1)).

Used goods

Drawback = rate notified by Central Government under Section 74(2)

Rate depends on duration of use, depreciation in value and other relevant circumstances. No fixed percentage in the Act.

Deemed date of entry for export

Date used for rate of duty under Section 16

Section 74(4)(a).

Provisional assessment

Date of payment of provisional duty = date of payment of duty

Section 74(4)(b), for goods assessed provisionally under Section 18. The two-year period runs from this date.

Confiscation link

Export under drawback claim without import duty paid = liable to confiscation

Section 113(j).

Quick revision

• Section 74 applies to imported goods, capable of being easily identified, on which duty was paid on importation, when they are exported.
• Under Section 74(1), 98% of the duty is repaid as drawback, subject to the conditions.
• The goods must be identified to the satisfaction of the Assistant Commissioner or Deputy Commissioner of Customs as the goods that were imported.
• The goods must be entered for export within two years from the date of payment of duty.
• The Board can extend the two-year period on sufficient cause being shown.
• For used goods, the rate under Section 74(2) is fixed by Central Government notification, considering duration of use, depreciation and other circumstances.
• Goods are deemed entered for export on the date used to compute the rate of duty under Section 16.
• For provisional assessment, the date of payment of provisional duty is treated as the date of payment of duty.
• Section 75 covers imported materials used in manufacture, processing or any operation on goods that are then exported, through notification and rules.
• Section 75 drawback can equal the duty actually paid on the materials or an average amount fixed in the rules.
• Under Section 75A(1), interest is payable if drawback is not paid within one month of filing the claim.
• Under Section 75A(2), erroneously paid drawback must be repaid with interest within two months of demand.

Common mistakes

• Applying Section 74 to goods that were manufactured in India using imported inputs. Fix: Section 74 needs the imported goods themselves to be exported and identified. Manufactured goods go under Section 75.
• Allowing 98% drawback on used goods. Fix: For goods used after import, the rate is what the Central Government notifies, considering duration of use and depreciation.
• Giving 100% of duty as drawback on unused goods. Fix: Remember the Act repays ninety-eight per cent of the duty.
• Treating the two-year limit as fixed with no extension. Fix: State that the Board may extend the period on sufficient cause being shown.
• Applying 98% to goods that have been used. Fix: 98% is for Section 74(1). Used goods fall under Section 74(2), where the Central Government notifies the rate.
• Calculating drawback on the value of goods instead of duty paid. Fix: The base is always the customs duty actually paid on importation.
• Giving 100% of duty as drawback on unused re-exported goods. Fix: Remember that Section 74(1) repays ninety-eight per cent of the duty.
• Counting the two years from the date of import or arrival. Fix: The Act counts from the date of payment of duty. For provisional assessment, it is the date of payment of the provisional duty.

Exam tips

• Open any classification answer with one line: same goods or manufactured goods. Then name the section.
• Memorise three Section 74 numbers: 98%, two years, and the Board's power to extend.
• In MCQs, watch for the word used. It points to Section 74(2) and a notified rate.
• For a theory question on types, write Section 74, Section 75, then AIR and Brand Rate as forms under Section 75.
• Mention the FEMA realisation condition. It earns marks in Section 75 case answers.
• Quote the three conditions: duty paid, easily identifiable and identified, entry for export within two years.
• Write 98% and the words of sub-section (2) for used goods; do not invent a percentage for used goods.
• In date problems, write the two-year end date first, then compare.