Indirect Tax Laws · Importation and Exportation of Goods

Drawback on Re-export of Duty-paid Goods (Section 74, Customs Act, 1962)

Updated 5 October 2026 · Fact-checked

Section 74 lets you claim back 98% of the customs duty paid on imported goods that you re-export. The goods must be easily identifiable, identified to the officer's satisfaction, and entered for export within two years of paying the duty. To solve a question, check each condition, then compute 98% of the duty paid.

Understand Drawback on Re-export of Duty-paid Goods (Sec 74)

Sometimes you import goods, pay customs duty, and then the goods are not used in India. They may be defective, surplus, or the buyer cancelled the order. If the goods go back out, it would be unfair to keep the duty. Section 74 gives relief. It refunds most of the duty as drawback.

The section applies to goods that are capable of being easily identified, were imported into India, and had duty paid on import. The goods can leave in three ways: through a shipping bill export (the proper officer permits clearance and loading), as baggage (the declaration of contents counts as the entry for export), or by post.

If the conditions are met, 98% of the duty paid is repaid as drawback. The two main conditions are: (a) the goods are identified, to the satisfaction of the Assistant Commissioner or Deputy Commissioner of Customs, as the goods that were imported; and (b) the goods are entered for export within two years from the date of payment of duty on import. The Board can extend the two years in a particular case if sufficient cause is shown.

If the goods were used after import, the drawback is reduced. The extent of the reduction depends on the use and is worked out under the rules made for this purpose, not by a flat 98%. In exam questions, the facts usually say the goods are unused, so apply 98%.

Do not confuse this with Section 75. Section 75 deals with drawback on imported or excisable materials used in manufacturing goods that are exported. Section 74 is about the same imported goods going back out.

Key rules to remember

Drawback under Section 74: Drawback = 98% × customs duty paid on the goods re-exported; Applies to unused goods that meet all conditions. For a part consignment, take only the duty attributable to the quantity re-exported.
Time limit: Entry for export ≤ 2 years from the date of payment of duty; Count from payment of duty, not from the date of arrival or the Bill of Entry. The Board may extend it for sufficient cause in a particular case.
Identification condition: Goods must be easily identifiable and identified to the satisfaction of the Assistant/Deputy Commissioner as the goods imported; Both the nature of the goods and actual identification at examination matter.
Used goods: Drawback is reduced for use after import, as per the rules; Do not apply a flat 98% if the question says the goods were used. Use the percentage given in the question.
Section 74 vs Section 75: Section 74: re-export of the same imported goods. Section 75: materials used in manufacture of exported goods; The distinction is the standard theory comparison.

How to solve Drawback on Re-export of Duty-paid Goods (Sec 74) questions

Use this order for any Section 74 question. It covers both theory and numerical cases.

1Confirm the goods were imported into India and customs duty was actually paid on import. No duty paid means no drawback.
2Confirm the goods are capable of being easily identified and were identified to the satisfaction of the Assistant or Deputy Commissioner as the imported goods.
3Check the mode of export: shipping bill clearance, baggage declaration, or post. All three are covered.
4Find the date of payment of duty and the date the goods were entered for export. Check the gap is within two years. If it is longer, look for a Board extension.
5Check whether the goods were used after import. If they were, the drawback is reduced as per the rules. If unused, go ahead with 98%.
6Work out the duty attributable to the quantity re-exported, if only part of the lot is going back.
7Compute drawback as 98% of that duty. State the amount clearly.
8Write the conclusion in provision-facts-conclusion form: eligible or not, and the amount.

Quickest way: Four-gate check, then 98%

When to use it: Use this for short MCQs and for practical questions where time is tight.

Gate 1: Was duty paid on import? If no, stop.
Gate 2: Are the goods identifiable and identified? If no, stop.
Gate 3: Date of duty payment to date of export entry within 2 years (or extended by the Board)? If no, stop.
Gate 4: Unused? If used, apply the reduced percentage the question gives.
If all gates are open: drawback = 98% × duty on the quantity re-exported.

Common mistakes in Drawback on Re-export of Duty-paid Goods (Sec 74)

Counting the two years from the date of import or arrival of the goods.
Students link the time limit to the import date because that is the more familiar date.
Fix: The section counts from the date of payment of duty on importation. Always find that date in the question.
Giving 100% of duty back.
The word 'refund' suggests the full amount.
Fix: Section 74 repays 98% of the duty. The balance 2% is not repaid.
Mixing up Section 74 and Section 75.
Both are called drawback and both sit close together in the Act.
Fix: Ask one question: are the same imported goods going back out (Section 74) or are imported materials used to make exported goods (Section 75)?
Ignoring identification and treating drawback as automatic.
Students focus on the arithmetic and skip the conditions.
Fix: State identification to the officer's satisfaction as a condition in every answer. Link it to examination of the goods.
Applying 98% to used goods without comment.
The reduction for use is a lesser-known part of the section.
Fix: If the facts say used, say that drawback is reduced as per the rules and use the percentage given in the question.
Computing drawback on the whole duty when only part of the consignment is re-exported.
Students pick the total duty figure from the facts.
Fix: Apportion the duty to the quantity re-exported first, then take 98%.

Worked examples

Example 1

Alpha Traders imported 10 identical machines and paid total customs duty of ₹12,00,000 on the consignment on 1 June 2025. Four machines were found unsuitable. They were unused, were identified to the satisfaction of the proper officer as the imported machines, and were entered for export on 1 October 2026. Compute the drawback under Section 74.

Show the solution

Provision: Section 74 allows 98% of duty paid as drawback on identifiable imported goods re-exported, if identified and entered for export within two years of payment of duty.
Time check: payment on 1 June 2025, entry for export on 1 October 2026. This is 16 months, within two years.
Identification and use: the machines are identified and unused, so no reduction for use.
Duty on 4 machines = ₹12,00,000 × 4 ÷ 10 = ₹4,80,000.
Drawback = 98% × ₹4,80,000 = ₹4,70,400.

Answer: Alpha Traders is eligible. Drawback is ₹4,70,400.

Example 2

Beta Ltd imported a testing instrument and paid customs duty of ₹8,00,000 on 10 January 2025. The instrument is unused and easily identifiable. Beta Ltd entered it for export on 15 February 2027. Is drawback available under Section 74? What changes if the Board extends the period for sufficient cause?

Show the solution

Provision: drawback under Section 74 needs entry for export within two years from the date of payment of duty. The Board may extend this in a particular case on sufficient cause.
Time check: two years from 10 January 2025 ends on 10 January 2027. The entry for export is on 15 February 2027, which is after the limit.
Without extension: the time condition is not met, so no drawback is allowed.
With extension: if the Board extends the period to cover 15 February 2027, the time condition is met. The goods are unused and identifiable, so 98% applies.
Drawback with extension = 98% × ₹8,00,000 = ₹7,84,000.

Answer: Without a Board extension, no drawback is available because the export entry is made after two years. If the Board extends the period, drawback is ₹7,84,000.

Exam tips

Practical questions usually hide the failing condition in a date. Compute the gap from the date of payment of duty first.
In theory answers, list the conditions in order: duty paid, identification, entry for export within two years, and 98%. Mention the Board's power to extend.
Be ready to state the Section 74 versus Section 75 difference in two or three lines. Focus on what the goods are and what happens to them.
Show the 98% working on its own line. Marks are given for method even if the final figure is wrong.
For case-scenario MCQs, scan for words like used, defective, identified, and the dates before choosing an option.

Practice questions from Importation and Exportation of Goods

Drawback on Re-export of Duty-paid Goods (Sec 74) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA FinalSection 74: Drawback on Re-export of Duty-Paid Goods

Drawback on Re-export of Duty-paid Goods (Sec 74): frequently asked questions

How much drawback is allowed under Section 74 of the Customs Act?

The section allows 98% of the duty paid on importation to be repaid as drawback. This applies when the goods meet the conditions, such as identification and export within two years. If the goods were used after import, the amount is reduced as per the rules.

From when does the two-year period run under Section 74?

It runs from the date of payment of duty on the importation of the goods. The goods must be entered for export within that period. The Board can extend it in a particular case if sufficient cause is shown.

What is the difference between Section 74 and Section 75 drawback?

Section 74 covers re-export of imported goods on which duty was paid, with 98% of the duty repaid. Section 75 covers drawback on imported or excisable materials used in manufacturing goods that are exported. In Section 74 the same goods go back out. In Section 75 the materials are transformed into new goods.

Does Section 74 apply to goods exported as baggage or by post?

Yes. The section covers goods entered for export through a shipping bill clearance, goods exported as baggage after a declaration of contents, and goods sent by post. In each case, the proper officer must permit clearance for export.