Drawback - Salient features of All Industry Rates of Duty Drawback for 2005-06 - Customs - D.O. F. No. 609/38/2005-DBK

M.F. (D.R.) Letter D.O. F. No. 609/38/2005-DBK Dated 2-5-2005 The Ministry has announced the revised All Industry Rates of Duty Drawback vide Notification No. 36/2005-Cus. (N.T.), dated 2-5-2005. These rates shall come into force with effect from 5-5-2005. The Ministry's Circular No. 22/2005-Cus., dated 2-5-2005 [2005 (183) E.L.T. T9], being issued today, may kindly be perused for details. 2. In this connection, please find enclosed a Press Note (being released today) containing the salient features of the new Drawback Schedule, 2005-06. It is requested that the new Schedule may kindly be given wide publicity in vernacular newspapers and local English newspapers. 3. The Board may be apprised of the action taken at an early date. Press Note The Ministry has announced the revised All Industry Rates of Duty Drawback vide Notification No. 36/2005-Cus. (N.T.), dated 2-5-2005. These rates shall come into force with effect from 5-5-2005. 2. The Ministry of Finance had constituted a Committee to determine the drawback rates, consisting of Shri Saumitra Chaudhuri, Member, Economic Advisory Council to Prime Minister as Chairman, Shri S.B. Mohapatra, former Secretary, Ministry of Textiles and Shri T.R. Rustagi, former Chief Commissioner of Customs Central Excise as Members. The Committee held extensive consultations with various Ministries/Departments of the Government of India and with various industry and trade associations in various locations and submitted its Report on 20-4-2005. The Government has accepted the drawback rates as suggested by the Committee. 3. 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 changes in drawback rates reflect the changes in applied duties and changes in prices. 4. 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. 5. 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. 6. 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. 7. The drawback rates have undergone significant changes in sympathy with the changes in prices of inputs, duties etc. The rates have been revised upwards on most products. 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. 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. 8. 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. 9. The new drawback rate for hand knotted woollen carpets is 8% with a cap of Rs. 315 per sqm. and for hand tufted woollen 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 Rs. 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. 10. 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. 11. 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). 12. The drawback rates on leather and leather products have mostly been revised upwards. 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. 13. 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 upwards 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. 14. The drawback rates on other items have also been revised upwards. 15. The Customs has already implemented EDI at 23 major customs locations covering about 80% of the imports and exports. Under the system, the shipping bill itself is treated as the claim for drawback. The drawback claim is processed on line and the amount is credited into the exporter's account in the bank designated by the Customs immediately after "let export order" and filing of manifest by the carrier without any additional paper work. Commissioners have also been instructed to ensure that all grievances or problems raised by exporters on drawback claims are addressed within 72 hours and, if this is not possible in any case, to bring the matter to the notice of Member (Customs/Export Promotion) in CBEC. Exporters may also bring any delay beyond 72 hours to the notice of Member (Customs/Export Promotion). 16. It has also been decided that if any Ministry or Department of the Government of India or any industry or trade association has any new facts to present regarding any of the drawback rates, they may approach the Committee through the Drawback Division with supporting material for further consideration by the Committee. All such requests must reach the Drawback Division by 15th May, 2005.