Accounting for Duty Drawback
Drawback is the refund, reduction or waiver in whole or in part of customs duties assessed or collected upon importation of an article or materials which are subsequently exported.
The Duty Drawback provisions are described under Section 74 and Section 75 under the Customs Act, 1962. This Act laid down the various restrictions and conditions to claim drawback of duties under certain situations.
The Duty Drawback is of two types:
- All Industry Rate and
- Brand Rate.
Accounting Entries for Duty Drawback
- At the time of when export invoice is booked
Dr Duty Drawback Receivable (ledger under current assets)
Cr Duty Drawback A/c (ledger under indirect income)
- At the time of receipt of duty drawback
Dr Bank A/c
Cr Duty Drawback Receivable A/c
Different opinion of accounting view shall be taken based on method of accounting, which applies for an entity for the relevant financial year.