Duty drawback on iron, steel, rice, cement withdrawn

Last Updated: Sun, Jun 01, 2008 06:01 hrs

New Delhi: In a further move to discourage exports in the face of domestic inflationary pressures, the Centre has withdrawn duty drawback benefits on all iron & steel, cement and rice shipments.

Henceforth, exporters of these commodities will not be entitled to any rebate or refund of customs, excise or service tax paid on inputs used for their production.

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In a notification dated May 29, the Revenue Department has said that “no amount or rate of drawback shall be determined in respect of any goods falling within Chapter 72 or heading 1006 or 2523 of the First Schedule to the Customs Tariff Act, 1975.”

Chapter 72 covers all iron & steel products, while headings 1006 and 2523 relate to rice (including basmati) and cement, respectively.

The Finance Ministry specifies drawback rates for individual export items after factoring in broad parameters including standard input-output norms pertaining to its manufacture, the share of imported vis-A-vis domestically sourced inputs and the prevailing rates of customs, excise and service tax on the inputs.

The drawback is credited to the exporter’s bank account by the Revenue Department against claims made through the shipping bill.

Currently, the drawback rates range from one per cent on pig iron and non-alloy steels to two per cent on alloy steels. The rate on rice is one per cent, while it is 4.4 per cent for ordinary portland cement (in case manufacturers do not avail Cenvat credit).

Inflation concerns

The Centre’s latest move comes in the backdrop of a weakening rupee, which has made exports more remunerative. With the headline inflation rate crossing eight per cent, the Centre is keen to augment domestic availability of sensitive items and, therefore, discourage exports to the maximum.

On April 11, the Commerce Ministry notified a blanket ban on cement exports from the country, though this condition was subsequently relaxed for shipments from Gujarat and supplies to Nepal and units in special economic zones.

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In rice, with effect from April 1, exports of all non-basmati varieties were banned and the minimum export price on basmati was raised to $1,200 a tonne. On April 29, the floor was reduced to $1,000, but simultaneously an export duty of $200 a tonne was clamped.

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