Circular No. 22/2005-Cus.
2nd May, 2005
F.NO. 609/38/2005-DBK
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
Sub: All Industry Rates of Duty Drawback, 2005-06 – Reg.
The Ministry has announced the revised All Industry Rates of Duty Drawback vide notification No.36/2005-Cus (NT) dated 2.5.2005. These rates shall come into force with effect from 5.5.2005. The notification may be downloaded from CBEC website www.cbec.gov.in and perused for details.
2. The drawback rates have been determined on the basis of certain broad parameters including, inter alia, the prevailing prices of inputs, standard input/ output norms (SION) published by DGFT, share of imports in the total consumption of inputs and the applied rates of duty. As education cess is being collected as duties of excise/customs, the element of education cess has been factored in the drawback rates. The incidence of duty on HSD/Furnace Oil has also been factored in the drawback calculation. The production, import and price data used for calculation of drawback rates have been obtained from the various sources, such as, the field formations of Central Excise/Customs, the Export Promotion Councils and trade bodies, Government publications and other reputed journals. The changes in drawback rates reflect the changes in applied duties and changes in prices.
A significant feature of the new Drawback Schedule is that barring a few exceptions the rates on all export products have been expressed in ad valorem terms in lieu of earlier specific rates, i.e. Metric Tonne /kg etc. Though the weight based drawback is reported to be less vulnerable to abuse, the ad valorem rates have the dual virtue of first being fair to the exporters and secondly, serve the policy objective of encouraging the export of value added items. Therefore, as a conscious policy decision, it has been decided to express drawback rates in ad valorem terms. The associated drawback caps have, however, been fixed in specific items, i.e. weight or piece, as the case may be.
3. The existing Drawback Schedule is based on a mixed classification that has grown out of precedent and convenience over the decades. Basically, the first two digits reflect the chapter heading while the subsequent two digits are in most cases arbitrary, derived from precedent and convenience. It has been felt that the classification system to be used for notifying the All Industry Rates of Duty Drawback should be insulated from any charge of classificatory confusion. It has, therefore, been decided to adopt the HS classification as the basis for fixing drawback rates. Thus, the new Drawback Schedule is now fully aligned with the HS Nomenclature at the four digit level. While for major export items the drawback rates have been worked out at four digit/six digit/eight digit level, for others a mixed classification, based on precedent and convenience, has been used for prescribing the drawback rates. In several cases, a residual entry has been created so that no export item is left out from a particular heading.
4. The new Drawback Schedule now covers about 2620 entries comprising 685 entries at the four-digit level and 1935 entries at the six-digit/eight-digit/modified six/eight-digit level. Though the entries add to a total of 2620 only, the number of manufactured products covered by these entries would be many times this figure. In terms of product coverage, the new Schedule has much wider scope in comparison with the existing Schedule which covers about 1050 entries only. In view of switchover to HS Nomenclature, the Schedule now covers several new products in chemicals, plastics, textiles, steel and machinery sectors. The advantages of adopting HS classification are many. Apart from transparency and completeness of coverage, it would now be easier to compile revenue foregone figures tariff line-wise. Communication with various agencies dealing with international trade will, henceforth, be smooth.
5. As the Duty Drawback Scheme is designed to reimburse the exporters for the incidence of customs and excise duties borne by an exported article, the practice hitherto has been to identify this incidence separately and then debit them to the respective heads of collection, viz. Customs and Central Excise. Thus, in the existing Drawback Schedule the drawback rates have been shown separately for a product, that is to say, a higher amount when CENVAT facility has not been availed (which is inclusive of Customs and Central Excise allocation) and a lower amount when CENVAT facility has been availed, representing the Customs portion of drawback. As a measure of simplification and to avoid repetition of entries, in the new Schedule the format of the Table has been changed to show the drawback rates separately, i.e. when CENVAT facility has not been availed and when CENVAT facility has been availed. The latter entry denotes the Customs portion of drawback only whereas, the former entry denotes the Central Excise and Customs portion put together. The difference between the two is Central Excise portion of drawback.
6. The drawback rates have undergone significant changes in sympathy with the changes in prices of inputs, duties etc. The Drawback Schedule may be perused for details. The more important changes are outlined below: –
i) Textiles and Textile Articles (Chapters 50-63)
a) Silk: In the case of silk, the drawback rate for higher quality silk fabrics has been revised from Rs. 126/kg to 7.5% with a drawback cap of Rs. 140/kg. The rate for fabrics of noil silk has also been revised.
b) Wool: In the case of wool, the new drawback rate for woollen worsted yarn grey – weaving quality is 6.5% with a cap of Rs.22/kg as against the existing rate of Rs.16.50/kg. The new drawback rate for woollen worsted yarn (dyed) – weaving quality is 7.5% with a cap of Rs.26/kg. Likewise, the new drawback rate for woollen worsted yarn (grey) – hosiery grade is 6.5% with a cap of Rs.17/kg as against the existing rate of Rs.11.50/kg. The dyed yarn – hosiery grade carries a higher rate of 7.5% with a cap of Rs. 21/kg [existing rate – Rs.15.50/kg]. The drawback rates on blended yarn and fabrics have been revised upwards accordingly.
c) Cotton Yarn and Fabrics: As against the existing drawback rate on cotton yarn at Rs. 4/kg (grey) and Rs 8/kg (dyed), the new drawback rates for cotton yarn are 3.5% with a cap of Rs. 5/kg (for grey yarn of less than 60 counts) and 4.5% with a cap of Rs 8/kg (for dyed yarn of less than 60 counts). In respect of cotton yarn of 60 counts and more, a higher rate of 5% / 6% with a cap of Rs. 10 per kg/ Rs. 13 per kg has been provided depending upon whether the yarn is grey or dyed. As for cotton fabrics, the new rates vary from 3% / 4% (grey) / 4% / 5% (dyed) with a drawback cap of Rs. 8 per kg/Rs. 12 per kg (grey)/ Rs. 12 per kg / Rs. 16 per kg (dyed) depending upon the cotton content and weight of fabrics.
d) Carpets and Floor Coverings: The new drawback rate for hand knotted woolen carpets is 8% with a cap of Rs. 315 per sqm. and for hand tufted woolen carpets the rate is 8% with a cap of Rs. 175 per sqm. as against the existing rate of Rs. 35.50/kg for both categories. For silk carpets, the new drawback rate is 10% with a cap of Rs. 1080 per sqm. as against the existing rate of 150/kg. The drawback rate on cotton durries is fixed at 8% with a cap of Rs. 16/kg as against the existing rate of Rs. 8/kg.
e) Ready Made Garments: In the ready made garment sector, the new drawback rate for knitted blouses/shirts/tops of cotton is 6% with a cap of Rs. 19 per piece as against the existing rate of Rs.42/kg. The new rate for knitted blouses/shirts/tops of man-made fibre is 7.5% with a cap of Rs. 24 per piece as against the existing rate of Rs.53.50/kg. For knitted blouses/shirts/tops of cotton and man made fibre blend the new drawback rate is 6.8% with a cap of Rs. 21 per piece as against the existing rate of Rs.48/kg. The drawback rates on woven garments have been revised accordingly. As for ready made garments made up of silk, the rate provided is 6% with a cap of Rs. 36/45 per piece as against the existing rate of Rs.130/kg. The drawback rate on dyed woollen shawls has been revised upwards from Rs.20.50/kg to 6% with a cap of Rs. 30 per piece.
f) Made Ups: In the made up category, the new drawback rate on bed linen, table linen, toilet linen, kitchen linen and curtains of cotton is 5% with a cap of Rs. 50 per kg as against the existing rate of Rs. 4 per kg (grey) and Rs. 8 per kg (dyed). The drawback rates on made-ups of man-made fibres/silk/wool have also been revised.
ii) Leather and Leather Articles (Chapters 41-42 & 64)
7. The new drawback rate for finished leather is 6.3% with a cap of Rs. 5 per sq.ft. as against the existing rate of 5.1% with a cap of Rs. 3.40 per sq. ft. Likewise, the new drawback rate for leather footwear for adults is 8.3% with a cap of Rs. 70 per pair and the rate for leather footwear for children is 9% with a cap of Rs. 40 per pair. Under the existing Schedule, no distinction exists between adult footwear and children footwear and all leather footwears carry a drawback rate of 7.9% subject to a maximum of Rs. 61/pair. In the case of leather apparels the rate provided is 7.5% with a cap of Rs. 400 per piece as against the existing rate of 7.2% with a cap of Rs. 360 per piece. The drawback rates on other leather items have also been revised. The Schedule may be perused for details.
iii) Base Metals and Articles of Base Metals (Chapters 72-83)
8. A significant feature of the new Drawback Schedule is that drawback rates have now been provided for all items of iron & steel in Chapter 72 and 73. The new rate for semi-finished steel, HR Coils, CR Sheets, GP Sheets and bars & rods is 2.5% (all customs) with drawback caps varying from Rs. 615/MT to Rs. 980/MT. In Chapter 74 (Copper and Articles thereof), the drawback rates on copper cathodes, wire bars and rods have been revised from Rs. 6.50/kg (customs) to 4.5% with a cap of Rs. 7.70/kg (customs). Taking into account the duty incidence and prices of inputs, the drawback rate on brass builder hardware and handicrafts of brass has been revised from Rs. 24.10/kg to 9% with a cap of Rs. 33/kg. The same is the case with artware/handicrafts of copper where the drawback rate has been revised from Rs. 31.60 per kg to 11% with a cap of Rs.44/kg.
Machinery and Equipment (Chapter 84 and 85)
9. For items falling within Chapter 84, the new drawback rates are mostly in the range of 1.5%-3%. On textile machinery the rate provided is 2%. On gaskets, the rate has been revised downwards from 8.85% to 4%. In chapter 85 (electrical machinery and equipment and electronic products) the new rates are mostly in the range of 3% to 6%. On colour picture tubes the rate provided is 5% with a cap of Rs.200/piece. For primary cells, diodes etc. and electronic integrated circuits, a drawback rate of 1% has been provided. In case of television apparatus etc. the rate provided is 6% with a drawback cap of Rs. 500 per piece. In respect of several products in Chapter 85, the main inputs are exempt from customs duty. In respect of these items, such as, floppy diskettes, capacitors, resistors etc., the rates provided are in the range of 1%-2%.
Bicycle and Bicycle Parts (Chapter 87)
10.The rates for bicycle and bicycle rickshaw reflect the duty on components. The drawback is mainly on account of duty on domestic steel. Nickel and zinc are also used in the manufacture of certain parts. The rate of drawback has been calculated as per standard input-output norms, where available and domestic steel prices. The rates have undergone changes on bicycle parts. On some parts the rates have registered an increase and on others the same has decreased. The Schedule may be perused for details.
Writing Instruments (Chapter 96)
12. The existing drawback rate on fountain pen, ball point pens, etc. is 9.5% with a cap of 4.90 per piece. The rate has now been reduced to the level of 6% with lower drawback caps.
Chemicals, Dyes, Essential Oils, Plastics and Rubber (Chapters 28-40)
13. The drawback rate on zinc oxide IP/BP/USP grade has been revised downwards from 14,063/MT [Rs.6400/MT (customs) + Rs.7663/MT (central excise)] to 9.6% with a cap of Rs. 9,600/MT. Taking into account the incidence of duty and prices of inputs the drawback rates on dyes and optical bleaching agents have been revised upwards. The new drawback rate on perfumed agarbattis is 8.8% as against the existing rate of 9%. In respect of heat resistant rubber tension tape / heat resistant latex rubber thread, the rate provided is 13.5% with a cap of Rs. 34.50/kg as against the existing rate of 12.95% with a cap of Rs. 30.10/kg.
14. The notification and the new Drawback Schedule may be gone through carefully to note the changes made therein. Though all care has been taken in formulating/publishing the rates, the possibility of errors/omissions due to inadvertence cannot be ruled out. It is requested that any error/omission noticed during the implementation of the rates may be brought to the notice of the Board immediately for suitable corrective action.
15. The Commissioners may kindly ensure that a quick and efficient administrative system is in place to deal with all drawback claims for hassle-free crediting of drawback the moment the exports take place. In particular, they may ensure that the drawback amount is credited into the exporter’s account immediately after ‘let export’ order and filing of manifest by the carrier. Further, the grievances of exporters, if any, relating to payment of drawback should be looked into quickly and if the same are not addressed within 72 hours, the matter should be brought to the notice of Member (Cus/EP) by e-mail. Exporters are also being advised accordingly and to bring delays of more than 72 hours to the notice of Member (Cus/EP).
16. Suitable Public Notices for information of the Trade and Standing Orders for guidance of the staff may be issued. Difficulties faced, if any in implementation of the changes may be brought to the notice of the Board at once
17. Kindly acknowledge receipt of this Circular.
P.K. Mohanty
Jt.Secretary to Government of India
