What is duty drawback?
Duty drawback refunds customs duties paid on inputs used to make goods that are then exported. The legal basis is sections 74 and 75 of the Customs Act, 1962 and the Customs and Central Excise Duties Drawback Rules, 2017 (Notification 88/2017-Customs (N.T.), in force since 1 October 2017). Section 74 covers re-export of imported goods; section 75 covers imported or excisable materials used in manufacturing exported goods. Since GST, the All Industry Rate covers the customs duty component.
Under the Foreign Trade Policy, drawback is administered by the Department of Revenue (FTP 2023, para 4.01(b)), and it can be claimed alongside Advance Authorisation for duty-paid inputs not covered by the norms (para 4.15).
All Industry Rate or brand rate: which applies?
| All Industry Rate (AIR) | Brand rate | Special brand rate | |
|---|---|---|---|
| What it is | A rate per tariff item in the drawback schedule, the same for every exporter | A rate fixed for one exporter's product from its own duty data | A higher rate for one exporter where the AIR is too low |
| When | The product has an AIR in the schedule | No AIR exists for the product (rule 6) | The AIR is below 80% of the duties actually paid on inputs (rule 7) |
| How | Claimed directly on the shipping bill | Application to customs within 3 months of the relevant date, extendable by up to 15 months with a fee | Same window as brand rate |
| Source | Notification 77/2023-Customs (N.T.), as amended | Drawback Rules 2017, rule 6 | Drawback Rules 2017, rule 7 |
The current AIR schedule was notified by Notification 77/2023-Customs (N.T.) and has been amended since, for example by Notifications 26/2025 and 67/2025-Customs (N.T.). The Drawback Rules were also amended in 2026 (Customs and Central Excise Duties Drawback (Amendment) Rules, 2026, from 15 January 2026); that amendment is specific to gold and silver jewellery and articles under Chapter 71, and is not a general revision of drawback rates.
When is drawback not allowed?
Drawback is allowed only when the export meets the eligibility conditions in the Customs Act, the Drawback Rules and the notifications. It is not allowed, for example, where:
- there is no eligible customs duty incidence on the inputs, including goods made from imported or excisable materials on which duty was not paid (rule 3);
- the goods were taken into use after manufacture (rule 3);
- the goods are exported under prohibited conditions;
- the export value is less than the value of the imported materials used, or does not exceed it by the margin the government notifies (rule 8).
Drawback under rule 3 also cannot exceed one-third of the market price of the export product (rule 9).
How is drawback claimed?
- Declare drawback on the shipping bill. The exporter enters the drawback serial number (tariff item in the schedule) for each item of the electronic shipping bill, which is itself treated as the drawback claim (Drawback Rules 2017, rule 14(1)).
- Customs processes the claim after the let export order and generates a drawback scroll.
- The amount is paid to the exporter's bank account registered with customs. Delays usually come from a mismatch between the bank account name and the IEC name. Under section 75A of the Customs Act, interest is payable if drawback is not paid within one month of the claim.
When is drawback recovered?
If the export proceeds are not realised within the period allowed under FEMA, drawback already paid is recovered, unless the shortfall is covered by ECGC insurance or a reduction allowed under the FEMA rules (Drawback Rules 2017, rule 18). From 1 October 2026 the realisation period for goods is nine months from shipment (RBI FEMA (Export and Import of Goods and Services) Regulations, 2026). See EDPMS, IDPMS and e-BRC.
What goes wrong in practice?
- Wrong drawback serial number or a tariff mismatch between the SAP material master and the shipping bill.
- Missed brand rate deadlines: the three-month application window passes before the cost data is ready.
- Drawback claimed together with a benefit that rules it out, for example on inputs where a conflicting exemption was taken.
- Bank account mismatches that hold back the scroll.
- Unrealised proceeds leading to recovery months later.
- No link to SAP FI: drawback receivable is not booked against each shipping bill, so finance cannot see what is due.
How do OptiEXIM and OptiEXIMc handle duty drawback?
- Rates against HS codes. Drawback rates are maintained in a drawback master against each HS code, from the AIR schedule.
- Computation from SAP. The drawback amount is computed for each shipping bill line from SAP export data, so the serial number comes from the same data as the invoice.
- Brand rate support for products without an AIR.
- Receivables in SAP FI. Drawback receivable is booked against each shipping bill.
- Scrolls and bank receipts are reconciled, so every claim is tracked through to payment.
Frequently asked questions
What is duty drawback?
A refund of customs duties paid on inputs used in exported goods, under sections 74 and 75 of the Customs Act and the Customs and Central Excise Duties Drawback Rules, 2017.
What is the All Industry Rate of drawback?
The standard drawback rate per tariff item in the drawback schedule notified by the Government (currently Notification 77/2023-Customs (N.T.), as amended), the same for all exporters of that item.
When should an exporter apply for a brand rate?
When the product has no All Industry Rate (rule 6), or when the AIR is less than 80% of the duties actually paid on inputs (rule 7). The application is due within three months, extendable by up to 15 months with a fee.
How is drawback claimed?
On the electronic shipping bill, by entering the drawback serial number for each item; the shipping bill is treated as the claim (rule 14(1)). Customs processes it after export and pays the amount to the exporter's bank account.
What happens to drawback if the customer does not pay?
It is recovered if the export proceeds are not realised within the FEMA period (rule 18). From 1 October 2026 that period is nine months from shipment for goods.
Can drawback be claimed with Advance Authorisation?
Yes, for duty-paid inputs not covered by the authorisation's norms, if they are declared in the application and endorsed in the condition sheet (FTP 2023, para 4.15).
Can drawback and RoDTEP be claimed on the same export?
Yes. Duty drawback and RoDTEP can generally be claimed on the same export shipment, subject to the conditions of each scheme and product eligibility. CBIC's ICEGATE advisory states that RoDTEP is allowed in addition to drawback.
How do OptiEXIM and OptiEXIMc help with drawback?
They maintain drawback rates against HS codes, compute drawback from SAP export data, book the receivable in SAP FI and reconcile scrolls with bank receipts.
Sources
- Customs and Central Excise Duties Drawback Rules, 2017 (Notification 88/2017-Customs (N.T.)), rules 3, 6, 7, 8, 9, 14 and 18
- All Industry Rates of drawback: Notification 77/2023-Customs (N.T.), 20 October 2023, and amendments
- Customs and Central Excise Duties Drawback (Amendment) Rules, 2026
- Foreign Trade Policy 2023, Chapter 4, paras 4.01(b), 4.15 and 4.54
- RBI FEMA (Export and Import of Goods and Services) Regulations, 2026
This guide summarises the rules for general information and is not legal advice. Check the current notifications before acting on them.