Duty Drawback Scheme

• The Duty Drawback scheme compensates exporters for the duties paid on inputs used to manufacture exported products.

What’s in the news?

• Recently, Government made it clear that it would not be refunding IGST duties that exporters paid on exports since it has already compensated them through the duty drawback scheme.

• However, exporters say that the drawback amount paid back is only a fraction of the total amount they have paid and most of it is locked in IGST.

• They also argue that the current system creates an unfair advantage for exporters operating in a single state, as opposed to those who have operations that cross State lines. An exporter who operates in, say, Delhi and has all her suppliers in Delhi, pays CGST and SGST and gets a refund for that and also gets the drawback. But an exporter operating across State lines does not get the IGST refund and only gets the drawback.

About GST

• The Goods and Services Tax (GST), which was implemented in 2017, subsumed all the indirect taxes that businesses used to pay the central authorities and state authorities separately.

• GST has three components: (i) central GST, (ii) state GST, and (iii) Integrated GST (IGST)- on inter-state supplies of good and services.

Refund mechanism under GST

• Under GST all exports are deemed as interstate transactions and only IGST is applicable. Exporters are eligible to claim refund of IGST paid on exports and such refund should be paid within 60 days.

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Mains Paper 3: Economy

Prelims level: Duty Drawback Scheme

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