GST Update on Duty Drawback and EPCG Scheme in GST regime

GST Update on Duty Drawback and EPCG Scheme in GST regime

At present, two rates of drawback are prescribed - “Drawback when CENVAT facility has not been availed” and “Drawback when CENVAT facility has been availed”. Wherever the wordings, “Drawback when CENVAT facility has not been availed” have been used, it means that the exporter is eligible to claim the components of Customs, Excise and Service tax. This rate is on higher side and cenvat facility is not available with this rate. Further, wherever the wordings, “Drawback when CENVAT facility has been availed” are used, it means that the exporter is eligible only for the Customs portion of duty drawback. This rate is on lower side and exporters claiming this rate are allowed to avail the facility of cenvat credit. This is the existing system of drawback which will cease to have effect from 1.10.2017.

Government has notified new Customs and Central Excise Duties Drawback Rules, 2017 vide notification no. 88/2017-Customs (N.T.) dated 21.9.2017. Circular no. 38/2017-Customs dated 21/09/2017 has been issued to clarify the provisions related to the new rules. Further, the new all industry rates of duty drawback have also been notified which are effective from 1st October, 2017.

Under new scheme of drawback only one rate has been prescribed which is limited to custom portion of inputs. The IGST paid on the import is admissible as Input tax credit (ITC).

Further, according to Trade notice no. 11/2017 dated 30/06/2017 issued by DGFT, under GST regime, both the Advance Authorization and EPCG holders would continue to get the exemption from payment of the Basic Customs Duty, Safeguard Duty, Transitional Product Specific Safeguard Duty, and Antidumping Duty. And for items specified in Fourth Schedule to Central Excise Act 1944 (specified petroleum products, tobacco etc.) exemption from Additional C Duty leviable under Sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 will also be available.

However there is one major change. Now an Advance Authorisation holder will have to pay IGST at the time of imports. He can take input Tax Credit (ITC), and after export, claim refund of any unutilized input tax credit at the end of tax period.

The EPCG holder also will have to pay IGST at the time of imports and take input Tax Credit (ITC) on the duty paid. However, he cannot claim refund of any unutilized input tax credit after the exports.

The balance import quantities under Advance Authorisations can be utilised for duty free import but only Basic Customs Duty will be exempted on import after 01.07.2017. The applicable IGST will be required to be paid. There will be no implication on export obligation of Advance Authorisations.

The balance import quantities under EPCG can be utilised for duty free import but only Customs Duties will be exempted on import after 01.07.2017. The applicable IGST will be required to be paid. Since the export obligation is based on actual duty saved amount, the EO will be accordingly adjusted.

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Pradeep Jain, F.C.A.

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GST Update on Duty Drawback and EPCG Scheme in GST regime

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