For encouraging exports, the government has raised duty drawback incentive for 102 items. Items including bicycles, tyres, marine and seafood, leather goods, yarn and handicrafts now will get more input tax drawback after the change.
The duty drawback scheme allows exporters to get back the various taxes they have paid on inputs (imported as well) and raw materials while producing an exportable item. This will help them to reduce the price of the export product and register more export volume.
According to export associations, the drawback on these items have been raised between 0.2% to 05%.
Backgrounder: What is Duty Draw Back Scheme?
The Duty Draw Back Scheme is a major incentive given to the exporters. Under the scheme, manufacturers of exportable commodities can obtain inputs without payment of customs duty (if the input is imported)/excise duty (if the input is domestically produced)/service tax or obtain refund of duty paid on inputs. “Draw Back” is in relation to any goods manufactured in India and exported, means the rebate of duty or tax, chargeable on any imported materials or excisable materials used or taxable services used as input/ services in the manufacture of the exported goods.
The advantage of the scheme is that it helps the exporter to reduce the price of exportable commodities as domestic taxes are excluded from the cost of the commodity.