Breaking Down Brand Rate Fixation for Duty Drawback

The rationale behind the levy of customs duty is to charge tax when the goods are meant for consumption within the country. However, when the goods are meant to be reexported out of India, then the cost of such export goods gets escalated due to the levy of customs duty at the time of export. To prevent this, the government introduced the concept of duty drawback on imported goods. One of the key things when calculating duty drawback is the brand rate fixation. What is duty drawback and how is it calculated? Further, what is the brand rate, and how is it decided under customs law? Let’s find out!

What is Duty Drawback Under Customs?

Duty drawback under customs is put in place to allow rebate of the customs duty that was paid at the time of import of goods into India. Primarily, there are two types of duty drawbacks under customs: 

1. Section 74 of the Customs Act, 1972: Duty drawback receivable by the exporter on re-exporting the imported goods as such and when such goods are easily identifiable.
2. Section 75 of the Customs Act, 1972: Duty drawback receivable when the imported materials are used in manufacturing or processing of goods within India and then such goods are exported outside India.

Duty drawback is allowed as per the duty drawback rates applicable. Following are the three ways to calculate the duty drawback rate in India:

1. All Industry Rates as per Rule 3 and Rule 4 (revised) of the Customs and Central Excise Duties Drawback Rules, 2017.
2. Brand Rate as per Rule 6 of the Customs and Central Excise Duties Drawback Rules, 2017.
3. Special Brand Rate as per Rule 7 of the Customs and Central Excise Duties Drawback Rules, 2017.

In this article, we will obtain a deeper understanding of the brand rate fixation for duty drawbacks in India.

Brand Rate for Duty Drawback

Fixing the duty drawback rate as per the All Industry Rate is possible only in the case of certain standard products. However, All Industry Rates cannot be used for special types of products. For this, the brand rate for duty drawback under customs is used as per Rule 6 of the Customs and Central Excise Duties Drawback Rules, 2017. For fixing the brand rate, an application needs to be filed with the jurisdictional Principal Commissioner or Commissioner of Customs that has jurisdiction over the place of export. The application shall also contain all the details regarding inputs in the prescribed forms.

Upon receipt of the application for brand rate fixation, the Principal Commissioner of Customs or Commissioner of Customs shall determine the amount or rate of drawback in relation to such goods after making such inquiry as it may deem fit. 

Provisional Duty Drawback

If the exporter desires, he may make an application for provisional duty drawback to the Principal Commissioner of Customs or Commissioner of Customs. In such case, a provisional amount of duty drawback can be granted on the export of such goods till the final amount of duty drawback is determined. The amount of provisional duty drawback shall in no case exceed the actual amount of drawback claimed by the exporter. Further, such provisional duty drawback can be allowed subject to the following conditions:

1. The Principal Commissioner of Customs or Commissioner of Customs may require the exporter to enter into a general bond for an amount that shall not exceed the amount claimed by the such exporter as a duty drawback in relation to a particular consignment. 
2. The exporter may be required to refund the amount of provisional duty drawback in case the duty drawback was not admissible.
3. The exporter may be required to refund the excess amount of provisional duty drawback if a lower amount of duty drawback is payable. 

Once the final amount of duty drawback is determined, the amount of provisional duty drawback shall be adjusted against such final amount. Any excess shall be returned by the exporter and if the final amount is higher, then the remaining amount shall be paid to the exporter.

Power to Withdraw the Brand Rate Under Customs

The Central Government has the power to withdraw the brand rate whenever required. It may either directly withdraw the brand rate or direct the Principal Commissioner of Customs or Commissioner of Customs to withdraw such rate. 

Above was the methodology to determine the brand rate for duty drawback under customs law. It is important to determine which method shall be applied for fixing the duty drawback of goods. In case you need any assistance in relation to duty drawbacks under customs, feel free to contact the ASC Group.

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