Duty Drawback is a refund of customs duties paid on imported inputs that are later used in the production of goods that are exported.
How It Works:
- A business imports raw materials and pays customs duty.
- The materials are used to manufacture export goods.
- Finished goods are exported.
- The exporter applies for duty drawback.
- The government refunds the eligible duty amount.
Benefits:
- Reduces cost of exports
- Improves competitiveness in global markets
- Encourages manufacturing for export
- Enhances cash flow for exporters
Example:
A manufacturer imports components, pays duty, and later exports finished goods. The duty paid on imported components is refunded through duty drawback.