AIR Rate of Duty Drawback Under GST Framework: Suggestions for Improvement

The implementation of GST in India has affected the way in which exports and imports are being carried out. One such aspect that has undergone significant changes is the duty drawback system. The All Industry Rates (AIR) of duty drawback have been introduced under the GST framework. The AIR rates are fixed rates of refund that are applicable to all goods that are exported from India.

The AIR system has been introduced to simplify the process of duty drawback for exporting firms. The system takes into account the average incidence of duties and taxes on inputs used in the manufacture of exported goods. The AIR rates are determined by the Government of India and are revised periodically. The AIR rates are published in the form of notifications by the Central Board of Excise and Customs (CBEC).

AIR rates of duty drawback under the GST framework.

Some of these issues are:

1. Unequal refund rates:

The AIR rates are not uniform across all sectors. The refund rates for some sectors are significantly higher than others. This leads to unequal treatment of exporters and can discourage the growth of certain sectors.

2. Limited scope of coverage:

The AIR rates do not cover all the duties and taxes that are levied on inputs used in the manufacture of exported goods. This limits the scope of coverage of the duty drawback system.

3. Complexity of the refund process:

The refund process for duty drawback under the GST framework is complex and time-consuming. This can discourage small and medium-sized exporters from availing the benefits of the duty drawback system.

4. Delayed refunds:

The refunds under the duty drawback system are often delayed, which can cause cash flow problems for exporting firms.

5. Unavailability of data:

The AIR rates are determined based on average incidences of duties and taxes. However, the data on which the rates are based is not readily available to the exporting firms. This makes it difficult for firms to estimate the refund amount that they are entitled to.

Smooth functioning the GST framework, the following suggestions can be considered:

1. Uniform refund rates:

The AIR rates should be made uniform across all sectors. This will ensure equal treatment of exporters and encourage the growth of all sectors.

2. Expansion of scope:

The scope of coverage of the AIR rates should be expanded to cover all the duties and taxes that are levied on inputs used in the manufacture of exported goods. This will make the duty drawback system more comprehensive and beneficial for all exporting firms.

3. Simplification of the refund process:

The refund process for duty drawback under the GST framework should be simplified and made more user-friendly. This will encourage small and medium-sized exporters to avail the benefits of the duty drawback system.

4. Timely refunds:

The refunds under the duty drawback system should be processed and disbursed in a timely manner. This will prevent cash flow problems for exporting firms.

5. Availability of data:

The data on which the AIR rates are based should be made available to the exporting firms. This will enable firms to estimate the refund amount that they are entitled to and avoid any discrepancies.

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The AIR rates of duty drawback under the GST framework are a crucial aspect of the export-import industry in India. The duty drawback system plays a vital role in promoting exports and helping exporting firms compete in the global market. It is important that the issues with the current system are addressed and the system is made more comprehensive and beneficial for all exporting firms.