Rate of Drawback and Used Goods Deduction under Section 74

Understand Rate of Drawback and Used Goods Deduction

Key rules to remember

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.

How to solve Rate of Drawback and Used Goods Deduction questions

1. 1Confirm the goods were imported, duty was paid, and the goods are being exported. If not, Section 74 does not apply.
2. 2Check that the goods are easily identifiable and identified as the imported goods to the officer's satisfaction.
3. 3Compute the two-year period from the date of payment of duty to the date of entry for export. Note any Board extension in the facts.
4. 4Find the total duty paid on importation, including all customs duties the question says were paid. Use only what the question treats as duty paid.
5. 5Decide whether the goods were used. If unused, apply 98%. If used, apply the notified rate given in the question.
6. 6Multiply the rate by the duty paid. Do not apply the rate to the value of goods.
7. 7If the claim was delayed beyond one month, add interest under Section 75A(1) as the question requires.
8. 8State the final drawback amount and the reason in one line.

Quickest way: Three-check shortcut

Common mistakes in Rate of Drawback and Used Goods Deduction

• Applying 98% to goods that have been used.

  Students remember 98% as the only rate.

  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.

  Value is the largest figure in the question, so it gets used.

  Fix: The base is always the customs duty actually paid on importation.

• Counting two years from the date of import or arrival.

  Students assume the clock starts with the goods.

  Fix: The Act counts from the date of payment of duty. For provisional assessment, from the date of payment of provisional duty.

• Inventing a fixed percentage deduction for used goods from the Act.

  Students recall tables from notifications and treat them as part of the section.

  Fix: The section only says the rate is fixed by notification considering use and depreciation. Use the percentage given in the question.

• Ignoring the identification condition.

  Focus stays on arithmetic.

  Fix: If goods cannot be identified as those imported, 98% is not repayable. Check this before computing.

• Forgetting interest on delayed payment.

  Section 75A sits outside Section 74.

  Fix: If the question says the claim was unpaid beyond one month from filing, mention interest at the section 27A rate from the day after the month ends.

Worked examples