Rupee fall to have nominal effect on duty drawback rates Drawback rates of around 4,000 commodities are analysed annually Sharp rupee depreciation against the dollar would have a marginal impact on duty drawback rates, to be notified shortly for the current financial year. Drawback on exports means refund of duties paid on imported inputs used for exports. Drawback is not a reward scheme and is meant only for neutralisation of duty. Officials in the know said that a high-powered committee constituted by the government to finalise the duty drawback rates has submitted its recommendations to the Finance Ministry and suggested a 0.1-0.5% change in the rates due to the currency fluctuation. The current rates came into force on October 10, 2012. Since then, the currency has fallen 24.52% to stand at 65.25 against a dollar on September 6, resulting in higher duty refund to exporters. “Because of the change in currency, we have taken latest data from the central excise database and therefore relative price movement could change in some commodities,” a senior official directly engaged in the formulation of drawback rates said. Officials said drawback rates of around 4,000 commodities are analysed annually. “The impact of rupee depreciation on the drawback rates will be there, but it will be nominal,” the official explained. In normal course, duty drawback rates should move according to duties changed in the Budget. In fact, the finance ministry had pushed for a cut in the duty drawback rates as the realisation of exporters has gone up due to depreciation of the rupee. After straight two months of contraction, exports had registered an 11.6% rise in August year-on-year. “Since duty drawback is the percentage of FOB value (freight on board, which includes ex-factory price plus other costs), refunds have gone up,” a finance ministry official had said. While exporters of some commodities are asking for an increase in drawback rates, arguing the current rates do not correctly measure the hidden taxes, the ministry is planning to rationalise it, keeping in mind the rupee fall. The Duty Drawback Committee headed by Saumitra Chaudhuri, member, Planning Commission, has looked into the issue. Its recommendations are not binding on the finance ministry. A member of the committee said the increase in drawback rates, as demanded by the industry, was ruled out because the tax rates had not gone up in the last one year, barring on a few commodities. Some of the suggestions made by the finance ministry include bringing down the excise component in the calculation of duty drawback rates. The issue was also raised during Finance Minister P Chidambaram’s meeting with Chief Commissioners of Central Excise, Custom and Service Tax last month. The drawback committee speaks to traders of various commodities across the country and takes the weighted average of the duty on raw material. Last year, the finance ministry had announced increase in the duty drawback rates on most of the products. However, the drawback rates for some item like leather trunks and handbags, wool yarn and fabric, gaskets, lawn tennis balls, cricket balls etc were reduced from the rates applicable in 2011-12. In between, the finance ministry had increased the duty drawback rate by $2.93 per gram of net gold content in jewellery and gold ornaments from the $1.69 earlier. This amounted to a 73% hike.
Posted on: Sun, 08 Sep 2013 08:11:04 +0000
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