Drawback brand rates can be fixed on basis of averages, says expert

Topics GST | IGST

We are filing our brand rate application, where we have made the DBK-I, DBK-II and DBK-IIA forms. When we make the worksheet, can we take average duties on several bills of entry under DBK-II and DBK-IIA, as we are unable to establish a one-to-one corelation or work out the duty incidence on the basis of first-in first-out basis? If so, can you support us with any specific instructions on this matter?


You can refer to Para 5b (iii) of CBEC Circular no. 21/94-Cus dated September 15, 1994, which says: “In many cases, DBK-II/III statements show procurement of different lots of inputs suffering Customs/Excise Duties as the case may be. In such situations, the exporters can manufacture the goods out of one lot only of different lots procured at different points of time. Where the verification report does not indicate clearly the exact lot from which the export goods have been manufactured, the drawback rates are sometimes arrived at by following the principles of averaging. The brand rates in such cases will now be worked out in all cases by taking the average of duties suffered on different lots of inputs procured over a period of time.”


We have imported our raw material under advance authorisation on payment of IGST. Can we transfer this to our SEZ unit under LUT? What are the relevant provisions?


As per Para 4.43 of FTP, “Goods imported against Advance Authorisation Scheme, which are found defective or unfit for use, may be re-exported, as per Department of Revenue guidelines. The authorisation holder has to inform the RA who has issued the authorisation before re-export of such defective goods”. As per notification no. 16/2015-Cus dated April 1, 2015, “Where the materials are found defective or unfit for use, the said materials may be re-exported back to the foreign supplier within six months from the date of clearance of the said material or such extended period not exceeding a further period of six months as the Commissioner of Customs may allow”.


You will observe that the notification allows you to re-export the goods to the foreign supplier only. So, your option is to pay the basic customs duty and social welfare surcharge with interest from the date of import and then supply the goods to the SEZ under LUT and claim 98 per cent of the basic customs duty and social welfare surcharge paid under Section 74 of the Customs Act, 1962, read with Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995. You cannot claim drawback of interest.


In my individual capacity, I want to consult a foreigner and pay in foreign currency. Can you advise whether I have to pay IGST on foreign exchange remitted on reverse charge basis?


S.No. 10 of notification no. 9/2017-IT (Rate) dated June 28, 2017 exempts “services received from a provider of service located in a non-taxable territory by an individual in relation to any purpose other than commerce, industry or any other business or profession”.


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