Duty Drawback explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Yes. For exports made today, an exporter can claim duty drawback on customs duties and, on the same shipment, a GST refund, either of IGST paid or of ITC accumulated under LUT. The two do not overlap because they refund different taxes. The one situation the law still blocks is drawback of central tax combined with a GST refund of ITC, and that no longer arises under the current drawback schedule.
The third proviso to section 54(3) of the CGST Act bars a refund of ITC only where the exporter avails drawback in respect of central tax or claims refund of IGST paid on the same supplies. Drawback under the Customs and Central Excise Duties Drawback Rules, 2017 covers customs duties on inputs (and remnant central excise on certain fuels), not GST. Circular 125/44/2019-GST therefore confirms that such drawback does not stop a refund of unutilised CGST, SGST, IGST or cess.
Why the question comes up
Before GST, drawback rates were set to neutralise customs, central excise and service tax on inputs. When GST arrived on 01.07.2017, central excise and service tax on most inputs were replaced by GST, which exporters could recover through GST refunds. Paying drawback for the same taxes again would have meant a double refund.
The transition was handled in two steps, as the ICAI Refunds Handbook explains:
| Period | Drawback position | Effect on GST refund |
|---|---|---|
| 01.07.2017 to 30.09.2017 | Exporters could opt for the higher (composite) drawback rate | Only if they declared they would not claim IGST refund or take ITC for a refund |
| From 01.10.2017 | Only customs-duty-based All Industry Rates, with caps | Drawback and GST refund can run together |
From 01.10.2017 the declaration exporters used to give for the composite rate (Circular 32/2017-Customs) is no longer required. The Handbook sums it up: with the 2017 Drawback Rules, the issue of claiming drawback and GST refund simultaneously "has been resolved".
If your shipments carry both claims and one of them is stuck, our export refund team can reconcile the shipping bills against both the drawback and GST data.
What each scheme refunds
The ICAI Handbook on Foreign Trade Policy is explicit that the drawback scheme does not cover IGST or compensation cess. That separation is why both can be claimed.
| Duty drawback | GST refund on exports | |
|---|---|---|
| Tax neutralised | Customs duties on imported inputs; remnant central excise on specified petroleum products used for captive power | IGST paid on the export, or ITC on inputs and input services |
| Law | Customs Act and Drawback Rules, 2017 | Section 54 CGST Act, section 16 IGST Act, Rules 89 and 96 |
| Claimed through | Shipping bill (All Industry Rate) or brand rate application | Shipping bill (IGST route) or RFD-01 (LUT route) |
| Paid by | Customs | Customs (IGST route) or GST officer (LUT route) |
The drawback scheme has three forms: the All Industry Rate (an average rate claimed on the shipping bill), the brand rate (fixed by the Commissioner of Customs on actual duty incidence where there is no AIR or the AIR neutralises 80% or less of the duties), and drawback on re-export of duty-paid imported goods.
The section 54(3) proviso: what it still blocks
The third proviso to section 54(3) reads, in substance: no refund of ITC shall be allowed if the supplier avails drawback in respect of central tax, or claims refund of the IGST paid on such supplies.
This creates two rules:
- Drawback of central tax + ITC refund = not allowed. Current AIRs are customs-based, so ordinary AIR drawback does not trigger this. Circular 125/44/2019-GST also clarifies that drawback of central tax does not bar a refund of state tax credit.
- IGST refund + ITC refund on the same supply = not allowed. You choose one route per export: pay IGST and get it back, or export under LUT and claim the credit. You cannot do both on one invoice.
Drawback itself does not appear in Rule 96. The IGST-paid route and AIR drawback therefore run side by side on the same shipping bill.
A second bar applies where exported goods attract export duty. The Finance (No. 2) Act, 2024 moved it, with effect from 01.11.2024, from the proviso to section 54(3) into a new section 54(15), which now denies both the ITC refund and the IGST refund on zero-rated goods subjected to export duty.
Worked illustration
An exporter ships goods with an FOB value of ₹50 lakh. Figures are round and for illustration only.
| Claim | Basis | Amount |
|---|---|---|
| AIR drawback | Assumed 1.5% of FOB for this tariff item | ₹75,000 |
| IGST refund (IGST route) | IGST paid on the invoice at an assumed 18% | ₹9,00,000 |
| Total | Both allowed | ₹9,75,000 |
Had the exporter used the LUT route instead, the drawback would stay the same and the GST side would be an ITC refund under the Rule 89(4) formula. What the exporter cannot do is claim IGST refund and ITC refund on the same ₹50 lakh.
Practical points for exporters claiming both
- One bank account. The Refunds Handbook notes that the IGST refund is credited to the account registered with Customs, the one normally used for drawback, even if it differs from the GST registration. Keep both the same and PFMS-validated.
- Consistency across the shipping bill. The drawback serial number, FOB value and GSTR-1 Table 6A data all come from the same shipping bill. A mismatch there holds up the IGST refund; see shipping bill error codes.
- Brand rate claims. If a brand rate is being fixed on actual duty incidence, keep the computation limited to customs duties so it cannot be read as drawback of central tax.
- RoDTEP is separate again. RoDTEP remits other embedded taxes and is issued as scrips; it is covered in RoDTEP and GST refund together.
Need help lining up drawback and GST refunds?
When the drawback is credited but the IGST refund is not, the cause is usually in the GST data rather than the drawback claim. We match the shipping bills with GSTR-1, GSTR-3B and the ICEGATE status and take the refund through to credit. Start with our GST refund on exports service, or see IGST refund support if you export on payment of tax.
Key takeaways
- Drawback and GST refund can both be claimed on the same export from 01.10.2017.
- Current drawback rates cover customs duties, not GST, so there is no double benefit.
- Section 54(3) still bars an ITC refund if drawback of central tax is taken or IGST refund is claimed on the same supply.
- The export-duty bar on ITC refunds was omitted from 01.11.2024.
- Keep one PFMS-validated bank account with Customs for both drawback and IGST refunds.
Read next
- Duty drawback vs RoDTEP: which to claim
- GST refund for exporters: both routes explained
- Rule 96: the shipping bill as refund application
- IGST refund not received: GSTR-1 Table 6A mismatch
Disclaimer: Positions stated as on 30 September 2026, based on the CGST Act and Rules as amended, the Finance Act 2026, and the ICAI Handbook on Refunds under GST (January 2026). Verify current notifications before filing.