Re-Export to SEZ

[Shekhar Poojary]

Dear All,

Is Drawback under Section 74 will be applicable for supplies of imported goods to SEZ?

[YAGAY andSUN]

If you file Bill of Export and get it approved from Development commissioner before sending the goods to SEZ and payment is received in freely convertible currency, then, AIR DBK can be availed.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Yagay.

[Spudarjunan S]

In addition to the suggestion of Shri.Yagay and Sun ji, you may aslo need to get a disclaimer certificate from the SEZ unit that drawback has not been claimed/availed of on the goods by the SEZ unit or the Developer.

[ASHOK PATRA]

I think instead of AIR DBK, 98% of Custom duty paid will be granted.

[YAGAY andSUN]

AIR Duty Drawback also come under Section 74 of the Customs Act, 1962. This 98% is now reduced to 95%.

[YAGAY andSUN]

Please refer Notification No. 27/2006-Customs dtd.14h March, 2006

https://www.taxtmi.com/article/detailed?id=5868

[Shekhar Poojary]

Thanks All for the replies.

Dear Yagay, could you highlight the provisions where it specify that proceed should be in freely convertible currency.

[Affirmservicesconsultancy Privatelimited]

Dear Shekhar Pujary sir

The provisions of sub rule (3) of Rule 24 of SEZ Rules, 2006 may kindly be seen wherein it is clearly mentioned that Drawback shall be admissible to DTA supplier only if payments of supply are made from Foreign currency account of the SEZ unit. Thus Payment should be in convertible foreign currency only to avail drawback.

[Robert Kunnel]

Hi,

For Re-export of Imported goods under Section 74 there are 2 parts (Used goods and Unused goods) if goods exported are used then deducted slab rates apply starting from 95% and if the same is unused then it is 98%.

AIR rates will not apply to re-export of goods imported as same applies to goods manufactured in India only.

[Subhash Modi]

AIR of DBK applies to goods manufactured/processed in India when exported out of India or even to SEZ i.e. when it is an export and not a re-export. The relevant Section is 75/CA, 1962 read with Customs and Excise Duties Drawback Rules, 2017.

For re-export of imported goods the Section is 74 and the rules are Re-export of Imported Goods Customs duties drawback Rules, 1995.

If the re-export is made within 2 years from the date of import then 98% of customs duties paid is granted as DBK, if the goods are the same as imported and not put to any use.

However if imported goods are put to use and then sought to be re-exported then the same Section 74 and the 1995 rules will apply but with a difference that DBK will be granted at graded reducing rates starting from 95% if re-export is within 3 months lowering to 60% if re-export is within 18 months whether used sparingly or occasionally or frequently.

The same will apply to re-export to SEZ of goods procured from SEZ (import from SEZ).

A section 74 SB or Bill of Export has to be filed declaring whether taken or not taken for use import documents to match and justify the claim. There will be 100% AC/DC supervised physical verification at port of export or SEZ entry gate and then re-export allowed. EDF waiver will be required if no payment in FFE is to be realised with NFEI (no foreign exchange involved selected and AD code not inserted) or the SB by default will become EDF if the bank AD Code is inserted.

If for the amount of import IGST credit has been taken under GST then 98% or 95 to 60%, as applicable, DBK should be confined to amount of import BCD + Cess paid and export supply made either on payment of IGST under claim of refund or without payment under LUT. If no credit has been taken then DBK at the applicable 98 or from 95 to 60% should be claimed including the amount of import IGST.

From the overseas recipient or SEZ Unit the payment should be received in FFE within RBI prescribed time limit unless there was EDF waiver.

[Raghunandhaanan rvi]

Sir,

1. I think Section 74 of CA not applicable to SEZ

2. Drawback under AIR available to SEZ unit or DTA seller if DTA seller supply goods

manufactured by him .

3. in the instant case, DTA can send back the goods to SEZ unit for repair or replacement without payment of duty subject to approval from specified officer.

This is only my views. Thanks

[Subhash Modi]

SEZ is deemed to be a territory outside India. Any supply received in DTA from SEZ is import into India and liable to customs duties and taxes as applicable to like goods when imported from abroad.. The clearance from SEZ to DTA is through the customs bill of entry process. Such goods when supplied (or returned) to the SEZ is an in the nature of re-export of imported goods and entitled to DBK through Section 74/CA, 1962 read with the relevant rules and notifications. It is not export of goods manufactured or processed in India to which the Section 75 and the relevant rules apply subject to claim under the AIR or instead the Brand or special brand rate with reference to the unrefunded basic customs duties suffered on imported inputs used in the manufacture of the exported goods. It is re-export of goods not manufactured in India (SEZ is a territory deemed to be outside India) and drawbak is allowed, subject to certain conditions, of the import duty paid on the goods itself.

AIR/BR/SBR DBK provisions under Sec. 75 are qua the import duties suffered in respect of the inputs utilized in manufacture in India (DTA) of the goods that are exported out of India which includes SEZ.

Provisions regarding grant of DBK at 98% or 95% down to 60% of duties paid on imported goods that are re-exported in the same condition out of India to any country and from any port apart from the same country and the same port (already clarified by Circular) are qua the goods itself which were not manufactured in India. Goods manufactured in SEZ are not goods manufacture in India but in a territory deemed to be outside India.

[Raghunandhaanan rvi]

Thank you Shri Subhash Modi Ji for your well explained clarification

AI Summary

Duty Drawback Eligibility Under Section 74 for Goods Supplied to SEZs: Conditions and Rates Explained A discussion on whether duty drawback under Section 74 applies to imported goods supplied to Special Economic Zones (SEZs) generated multiple responses. It was clarified that if a Bill of Export is filed and approved, and payment is received in freely convertible currency, duty drawback can be availed. A disclaimer certificate from the SEZ unit is necessary to ensure no prior claims on the goods. The drawback rates vary: 98% for unused goods and a graded reduction starting at 95% for used goods. Section 74 applies to re-exports, while Section 75 pertains to goods manufactured in India. SEZ is considered outside India for customs purposes.