How to Claim Duty Drawback on Exports — Complete Guide

Duty Drawback is one of India's oldest and most significant export incentive schemes. If your exported goods use imported raw materials or components on which customs duty was paid, the government refunds that duty to you after export. For many Indian MSME exporters, duty drawback is the difference between a profitable shipment and a loss-making one — especially in price-sensitive product categories like textiles, leather goods, chemicals, and engineering products.

Despite its importance, many first-time exporters either do not claim drawback (leaving money on the table) or claim it incorrectly (leading to delays, audits, or even penalties). The process is largely automated through ICEGATE, but you need to understand the scheme structure, get the classification right, and ensure your Shipping Bill is filed correctly.

This guide covers the legal framework, the types of drawback rates, the step-by-step claim process, the brand rate application procedure, and the mistakes that commonly delay or reject claims.

What Is Duty Drawback?

Duty Drawback is a refund of customs duties paid on imported inputs (raw materials, components, intermediates) that are used in the manufacture of exported goods. The principle is straightforward — India should not export its taxes. If you import brass at 7.5% customs duty and manufacture brass fittings that you then export, the 7.5% duty should be refunded because the final product left India.

The scheme also covers excise duties and service taxes paid on domestic inputs, though the GST regime has changed how this interacts with input tax credits.

Legal basis:

• Section 74 of the Customs Act, 1962 — Drawback on re-export of imported goods. If you import goods and re-export them (either unused or after minor processing), you get a refund of the customs duty originally paid. The refund percentage depends on how long the goods were in India — 98% if re-exported within 3 months, declining to 85% if within one year.

• Section 75 of the Customs Act, 1962 — Drawback on goods manufactured or processed from imported materials. This is the more common section for MSME manufacturers. You import inputs, manufacture finished goods, and export them. The duty paid on those imported inputs is refunded.

Administered by: Central Board of Indirect Taxes and Customs (CBIC), Department of Revenue, Ministry of Finance.

Types of Duty Drawback Rates

All Industry Rates (AIR)

These are standardised drawback rates fixed by the government for various product categories. They are notified annually by CBIC in a drawback schedule, typically effective from February each year.

How AIR works:

• Rates are assigned per drawback tariff item number (not the same as HS codes, though they are related)
• Rates can be expressed as:
  • A percentage of FOB value (with a cap in Rupees per unit)
  • A fixed amount per unit of quantity (per kg, per piece, per metre, etc.)
  • A combination of both
• AIR is a composite rate that factors in average customs duty incidence across the industry

Example from the drawback schedule:

Drawback Tariff Item	Description	Rate (% of FOB)	Cap per Unit
6109	T-shirts, singlets, knitted	1.8%	Rs 7.9 per piece
7307	Tube/pipe fittings, stainless steel	1.5%	Rs 24.5 per kg
4104	Tanned leather	1.0%	Rs 22 per kg

Who should use AIR: Most exporters start with AIR because it is automatic — no separate application or verification is needed. You simply mention the correct drawback serial number in your Shipping Bill, and the system processes the claim after export.

Brand Rate

Brand Rate is a company-specific drawback rate calculated based on your actual duty incidence — the actual customs duties you paid on the specific imported inputs used in your exported goods.

When Brand Rate makes sense:

• Your actual duty incidence is higher than the AIR rate
• Your product is import-intensive (high percentage of imported inputs)
• The AIR rate does not adequately reflect your cost structure
• No AIR rate exists for your specific product

Brand Rate is almost always higher than AIR, but it requires significantly more documentation and a verification process by customs authorities.

Special Brand Rate

When no AIR exists for your product, or when the notified AIR is considered inadequate (not reflecting even a fraction of your actual duty incidence), you can apply for a Special Brand Rate.

The application process is similar to Brand Rate, but you must demonstrate why the AIR is inadequate or absent.

How to Read the Drawback Schedule

The Duty Drawback Schedule is a large document notified by CBIC, typically running several hundred pages. Understanding how to navigate it is essential.

Structure of the schedule:

Column	Content
Tariff Item	Drawback serial number (different from HS code but correlated)
Description of Goods	Product description
Unit	kg, piece, metre, sq metre, etc.
Drawback Rate	Percentage of FOB value
Drawback Cap	Maximum amount per unit

How to find your drawback rate:

1. Identify the correct HS code for your product using the HS Code Finder
2. Cross-reference with the drawback tariff item number — these are broadly aligned with HS codes but not identical
3. Check the current year's Drawback Schedule notification on the CBIC website
4. If your product falls under multiple possible tariff items, pick the one that most accurately describes your export product

Important: The drawback tariff item you declare in the Shipping Bill determines the rate applied. A wrong classification means either a lower refund than you are entitled to, or an excess claim that triggers audit and recovery.

Step-by-Step Claim Process for AIR Duty Drawback

The AIR drawback claim process is largely automated through ICEGATE. Here is the sequence:

Step 1: Ensure Correct Drawback Serial Number in Shipping Bill

When filing the Shipping Bill on ICEGATE, select the applicable drawback tariff item number for your product. This is the most critical step — everything downstream depends on correct classification.

Your Customs House Agent (CHA) should know the correct drawback serial number for your product. Double-check it against the current year's Drawback Schedule before filing.

The Shipping Bill should include:

• Drawback tariff item number
• Description matching the drawback schedule
• Quantity in the correct unit (kg, piece, etc.)
• FOB value in both INR and foreign currency
• Your bank account details for drawback credit

Step 2: File Shipping Bill on ICEGATE

File the Shipping Bill electronically through ICEGATE with the drawback claim. The system automatically calculates the drawback amount based on the tariff item, quantity, and FOB value you declare.

Make sure you have an active IEC (Import Export Code) and ICEGATE registration before filing.

Step 3: Customs Examination and Let Export Order

Customs examines the goods (or grants a green channel clearance based on risk assessment) and issues the Let Export Order (LEO). At this point, the goods are cleared for export.

Step 4: Goods Exported and EGM Filed

After the goods are loaded onto the vessel, the shipping line files the Export General Manifest (EGM) with Customs. The EGM confirms that the goods have actually left India. This step is critical — your drawback claim cannot be processed until the EGM is filed and matched with your Shipping Bill.

Common delay: If the shipping line delays the EGM filing, your drawback payment gets delayed. Follow up with your CHA to confirm EGM filing within 7 days of vessel departure.

Step 5: ICEGATE Processes the Claim Automatically

Once the EGM is matched with the Shipping Bill, the ICEGATE system processes the drawback claim automatically. No separate application is needed for AIR claims — the claim was embedded in the Shipping Bill at Step 1.

The system checks:

• Shipping Bill details are complete and valid
• EGM is filed and matched
• No hold or stop has been placed by customs on the claim
• Bank account details are valid

Step 6: Amount Credited to Exporter's Bank Account

The drawback amount is credited directly to the bank account registered with customs. For AIR claims, the typical processing time is:

Scenario	Timeline
Clean Shipping Bill + EGM matched, no audit	7 – 14 days
Minor query raised by system	15 – 30 days
Physical verification required	30 – 60 days
Bank account mismatch or other error	60+ days until resolved

Track your claim: Log in to ICEGATE and check the drawback status under the "Track Shipping Bill" section. You can see whether the claim is processed, pending, or held.

Brand Rate Application Process

If the AIR does not adequately compensate your actual duty incidence, you can apply for a Brand Rate that is specific to your company and your product.

When to Apply for Brand Rate

• Your imported inputs attract high customs duty (say 15-20%) and constitute a major portion of your product cost
• The AIR for your product is significantly lower than what a Brand Rate calculation would yield
• You have detailed records of input-output ratios and duty payments
• The additional drawback amount justifies the effort and cost of the Brand Rate process

How to Apply

Step 1: File application with the jurisdictional Customs Commissioner. Submit Form DBK-I (for Brand Rate) or DBK-II (for Special Brand Rate) along with:

Document	Details
Statement of input-output norms	What raw materials go into each unit of exported product, in exact quantities
Bills of Entry (import documents)	Proof of customs duty paid on imported inputs
Manufacturing process details	How the inputs are transformed into the export product
Wastage declaration	Normal manufacturing wastage percentage
Cost sheet	Detailed production cost breakdown
Shipping Bills	Of the exports for which brand rate is claimed
CA certificate	Chartered Accountant certificate verifying the duty incidence calculation

Step 2: Verification by customs. A customs officer may visit your factory to verify:

• Input-output ratios claimed by you
• Manufacturing process and capacity
• Stock records and raw material consumption
• Correlation between imported inputs and exported goods

Step 3: Brand Rate fixation. After verification, the Commissioner fixes the Brand Rate for your product. This becomes your specific drawback rate for all subsequent exports of the same product.

Timeline

Stage	Typical Duration
Application preparation	2 – 4 weeks
Customs processing and verification	1 – 3 months
Brand Rate notification	1 – 2 months
Total	3 – 6 months

Provisional Brand Rate

Because the Brand Rate process is slow, you can request a provisional brand rate while your application is being processed. Customs may grant a provisional rate (usually 80% of the estimated brand rate) so you receive partial drawback immediately. The balance is paid once the final brand rate is fixed.

This is important for cash flow — do not wait 6 months for your drawback when a provisional rate can give you 80% of the amount immediately.

Section 74 vs Section 75 — Know the Difference

This distinction matters and is often confused:

Feature	Section 74 (Re-export)	Section 75 (Manufactured Goods)
What is exported	The imported goods themselves (same goods re-exported)	Goods manufactured/processed using imported inputs
Processing allowed	Repair, reconditioning, remaking — but the goods remain essentially the same	Full manufacturing/transformation
Rate basis	Percentage of original duty paid, based on time in India	AIR or Brand Rate based on duty incidence on inputs
Time limit	Must be re-exported within 2 years of import	No specific time limit, but inputs must be identifiable
Documentation	Bill of Entry (import) must be correlated with Shipping Bill (export)	Input-output records needed for Brand Rate

For most MSME manufacturers: You will use Section 75. Section 74 applies mainly to traders re-exporting imported goods or goods imported for repair and return.

Key Rules and Conditions

Market Price Cap

The duty drawback amount cannot exceed the market price of the exported goods minus the export duty (if any). This prevents fraudulent claims where the drawback exceeds the value of the goods themselves.

In practice, this cap rarely affects genuine exporters. It is a safeguard against mis-declaration and over-invoicing.

Interaction with IGST and GST

Under the current GST regime:

• If you claim IGST refund on exports (by paying IGST on the export and claiming refund), the duty drawback is restricted to customs duty component only — the IGST component is excluded from drawback
• If you export under Letter of Undertaking (LUT) without paying IGST, you claim ITC refund separately and duty drawback covers only the customs duty component

Read the GST on exports guide for the full picture on how these interact.

RoDTEP and Duty Drawback

RoDTEP (Remission of Duties and Taxes on Exported Products) was introduced to refund embedded taxes and duties not covered by other schemes. You can claim both RoDTEP and duty drawback on the same shipment — they cover different cost elements. RoDTEP covers embedded central, state, and local taxes on inputs. Duty drawback covers customs duties on imported inputs.

Minimum Claim Amount

Individual drawback claims below Rs 50 are not paid. However, in practice, this threshold rarely applies because even small shipments generate claims well above this amount.

Bank Account Requirement

The drawback amount is credited to the bank account registered in your IEC profile on DGFT and linked in ICEGATE. Ensure your bank details are current. A mismatch between the bank account in your Shipping Bill and the one registered with customs is a common cause of payment delays.

Common Mistakes That Delay Drawback Claims

Wrong drawback serial number. This is the most common error. If you classify your product under the wrong drawback tariff item, you receive the wrong rate — either less than you deserve or more than you should, which triggers audit. Always verify the tariff item against the current year's Drawback Schedule.

Not claiming drawback in the Shipping Bill. If you do not select the drawback scheme in the Shipping Bill at the time of filing, you cannot add it later. The Shipping Bill is the foundation of your drawback claim. Your CHA must select the correct scheme code and tariff item during filing.

EGM not filed or not matched. The shipping line must file the EGM, and it must match with your Shipping Bill. If the vessel details, container numbers, or Shipping Bill number in the EGM do not match, the system holds the claim. Follow up with your CHA to ensure EGM reconciliation.

Bank account mismatch. The bank account in the Shipping Bill must match the one registered with customs/ICEGATE. If you recently changed your bank account, update it on ICEGATE before filing the Shipping Bill.

Not opting for Brand Rate when AIR is too low. Many MSMEs simply accept the AIR rate without checking whether their actual duty incidence would justify a Brand Rate. If you import a significant portion of your inputs and pay substantial customs duty, do the Brand Rate calculation — even a rough estimate — to see if it is worth applying.

Not maintaining input-output records. For Brand Rate claims, you need detailed records of which imported inputs went into which exported products, in what quantities, and with what wastage. If your factory floor does not maintain this level of tracking, you cannot support a Brand Rate claim. Start maintaining these records now if you plan to apply for Brand Rate in the future.

Ignoring the time value of money. AIR drawback is processed in 7-14 days for clean claims. Brand Rate takes 3-6 months. If your Brand Rate is only marginally higher than AIR (say 10-15% more), the 6-month delay in receiving the additional amount may not be worth the effort and cost. Calculate the net present value before deciding.

Not following up on pending claims. The system is automated, but claims can get stuck due to system errors, data mismatches, or manual holds by customs officers. Check ICEGATE regularly for the status of your drawback claims. If a claim is pending beyond 30 days without explanation, raise the issue with your CHA and the customs drawback section.

Drawback on Export of Services

Duty drawback under Section 75 applies to goods only, not services. If you are a service exporter (IT services, consulting, etc.), duty drawback does not apply to you. Your tax benefits come through GST mechanisms — specifically, the ITC refund route for zero-rated service exports. See the GST on exports guide for details.

Duty Drawback vs Other Export Incentive Schemes

Scheme	What It Refunds	Claim Method	Processing Time
Duty Drawback (AIR)	Customs duty on imported inputs	Automatic via Shipping Bill	7 – 14 days
Duty Drawback (Brand Rate)	Actual customs duty incidence	Application to Commissioner	3 – 6 months
RoDTEP	Embedded taxes and levies not refunded elsewhere	ICEGATE scrip, Shipping Bill	7 – 30 days
IGST Refund	IGST paid on export	Automatic via Shipping Bill + GSTR	14 – 60 days
ITC Refund (LUT route)	Input tax credit accumulated	RFD-01 on GST portal	30 – 90 days
Advance Authorisation	Customs duty exemption on imported inputs (pre-export)	DGFT application	Not a refund — upfront exemption

Important: Advance Authorisation and duty drawback are mutually exclusive. If you import inputs under Advance Authorisation (which exempts customs duty), you cannot claim drawback on the same inputs because no duty was paid. Choose one route based on your business model — upfront exemption or post-export refund.

Key Takeaways

• Duty drawback refunds customs duties paid on imported inputs used in exported goods — it is one of the most direct export incentives available
• All Industry Rates (AIR) are automatic and processed in 7-14 days — just get the drawback tariff item right in the Shipping Bill
• Brand Rate gives higher refunds based on actual duty incidence but takes 3-6 months — request a provisional rate to bridge the gap
• Section 74 covers re-export of imported goods; Section 75 covers manufactured goods using imported inputs
• The single most common error is wrong drawback serial number in the Shipping Bill — verify against the current Drawback Schedule every time
• You can claim both duty drawback and RoDTEP on the same shipment — they cover different duty/tax components
• Duty drawback and Advance Authorisation are mutually exclusive — choose based on your import pattern and cash flow preference

Claim Your Drawback

If you are exporting manufactured goods that use imported inputs, you are likely eligible for duty drawback. Here is what to do:

1. Identify your product's drawback tariff item from the current CBIC Drawback Schedule
2. Use the HS Code Finder to confirm your HS code and cross-reference with the drawback tariff item
3. Ensure your CHA files the Shipping Bill with the correct drawback scheme code and tariff item
4. Track your claim on ICEGATE after the EGM is filed — payment should arrive in 7-14 days for AIR claims
5. Evaluate whether Brand Rate is worth pursuing — calculate your actual duty incidence and compare with the AIR rate
6. Read the GST on exports guide to understand how drawback interacts with IGST refund and ITC claims
7. Check the Duty Calculator to understand the duty structure on your imported inputs — this helps estimate your potential drawback amount

Every rupee of drawback you claim is a rupee added back to your export margin. For MSMEs operating on thin margins, this is not an optional exercise — it is essential to staying competitive.