Introduction
Every time I ship a consignment, I think of it in terms of three financial events: the revenue from the buyer, the cost of production and logistics, and the incentive income that comes back from the government after the shipment. That third stream — export incentives — is something most new exporters either ignore completely or grossly underestimate. It is real money, it is recurring, and for many product categories it is the difference between a viable export margin and a loss-making one.
Two of the most important incentive schemes in India's Foreign Trade Policy are RoDTEP and Duty Drawback. They sound similar — both involve the government giving money back to exporters after a shipment. Both are calculated as a percentage of FOB value. Both are claimed through the Shipping Bill. But they are fundamentally different in what they reimburse, how they are paid, and how they interact with each other.
The biggest mistake exporters make with these two schemes is thinking they have to choose between them. You do not. You can — and in most cases should — claim both on the same shipment. They cover different types of tax costs, they complement each other, and together they can add anywhere from 2% to 12% of your FOB value back to your bottom line per shipment.
This guide explains both schemes thoroughly: what each one covers, how rates are determined, how to claim them, what the common mistakes are, and how to think about which one matters more for your specific product and cost structure.
The Core Principle: Why Export Incentives Exist
Before diving into the mechanics of each scheme, it helps to understand the underlying policy logic — because once you understand why these schemes exist, their design makes complete sense.
India's tax system embeds various levies throughout the production and distribution chain: GST on inputs, customs duty on imported raw materials, state taxes like VAT on fuel, electricity duty, mandi tax on agricultural produce, stamp duty on export documents. Under the principle of "taxes should not be exported", the government tries to ensure that none of these embedded taxes reach the final export price — because if they do, Indian goods become more expensive in international markets, hurting competitiveness.
RoDTEP and Duty Drawback are both mechanisms to return these embedded taxes to exporters. But they return different taxes through different mechanisms:
- Duty Drawback returns customs duties paid on imported inputs and in some cases excise duty on domestically produced inputs used in export production
- RoDTEP returns a broader set of taxes that Duty Drawback does not cover — state-level taxes, local levies, electricity duties, VAT on fuel — that were paid along the way but could not previously be refunded under any mechanism
Both schemes are WTO-compliant: they are not subsidies in the true sense (which would be prohibited under WTO rules) — they are refunds of taxes actually paid. RoDTEP in particular was designed from the ground up to be WTO-compliant, replacing the earlier MEIS scheme which the WTO had found to be a prohibited export subsidy.
Duty Drawback: The Original Export Refund Scheme
What Duty Drawback Covers
Duty Drawback is a refund of customs duty paid on imported inputs and raw materials that were used to manufacture the goods you export. The logic is straightforward: if you paid customs duty to import a chemical that you then used to make a pharmaceutical product that you exported, the export "consumed" the imported input — and the customs duty paid on that input should not have been borne by the exported product.
Historically, Drawback also covered Central Excise duty paid on domestically produced inputs used in export manufacturing. Post-GST, the excise duty component has become largely irrelevant for most manufacturers (GST replaced excise and is separately refundable through the ITC refund mechanism), but the customs duty component remains very much alive and significant.
What Duty Drawback does NOT cover:
- GST paid on inputs — that is separately recoverable through ITC refund (IGST refund or RFD-01)
- State taxes, VAT, electricity duty, mandi tax — those are covered by RoDTEP
- Duties paid on inputs that were imported duty-free (e.g., under Advance Authorisation — you cannot claim Drawback on inputs you did not pay duty on)
Two Types of Duty Drawback: AIR and Brand Rate
All Industry Rate (AIR) Drawback
The government publishes a Drawback Schedule annually — a comprehensive table that lists Drawback rates for thousands of product categories, indexed by HS code. These rates are called All Industry Rates (AIR) because they are calculated based on industry-average input norms — average customs duty paid per unit of output for that product category across the industry.
AIR Drawback rates are expressed as a percentage of the FOB value of the export. They range from as low as 0.5% to as high as 9.5% depending on the product. The schedule is published by the Ministry of Finance, Department of Revenue, and updated annually (typically effective October 1 each year).
Why AIR is the practical choice for most exporters: You do not need to maintain or submit records of your specific input costs. You simply export the goods, file the correct Shipping Bill type, and the Drawback amount is automatically calculated at the published AIR rate on your FOB value. It is quick, clean, and requires no additional documentation beyond the Shipping Bill.
The limitation of AIR: The AIR is an average. If your product uses a significantly higher proportion of imported inputs than the industry average — or if the duty on your specific inputs is higher than the average — your actual duty incidence may be substantially higher than the AIR refund you receive. In these cases, a Brand Rate may be more appropriate.
Brand Rate (Specific Rate) Drawback
A Brand Rate is a Drawback rate fixed specifically for your company and your specific product, based on your actual input consumption and the actual duties paid on your specific inputs. It is set through an application to the jurisdictional Commissioner of Customs, supported by detailed input consumption records, manufacturing process documentation, and evidence of duties paid.
When Brand Rate makes sense:
- No AIR exists for your specific product category
- Your actual duty incidence is significantly higher than the applicable AIR
- Your product has unusual inputs that are heavily duty-laden compared to the industry average
- You are a new manufacturer with a novel production process not captured in existing AIR norms
The cost of Brand Rate: The application process is time-consuming and documentation-intensive. You need detailed standard input-output norms for your product, bills of entry for imported inputs, production records, and often a Cost Accountant's certificate. For smaller exporters, the administrative effort may not be justified unless the AIR/Brand Rate differential is significant in rupee terms. Consult your CA or a Customs Consultant to evaluate whether the effort is worthwhile for your specific situation.
How Duty Drawback Is Paid
This is one of the key practical advantages of Duty Drawback over RoDTEP: it is paid as cash, directly to your bank account.
After your Shipping Bill is filed, your Let Export Order (LEO) is granted, and the Export General Manifest (EGM) is filed by the shipping line confirming your goods left India, the Drawback amount is automatically calculated by the customs system and credited to the bank account you have registered with customs (through your AD Code registration). No separate application is required for AIR Drawback — it is system-driven.
Typical Drawback credit timeline: 7–30 days after EGM filing, assuming your bank account is correctly registered on ICEGATE. If your Drawback is not credited within 30 days, check: (1) whether EGM has been filed, (2) whether your bank account is registered and validated on ICEGATE, and (3) whether there is any customs query or examination pending on your Shipping Bill.
The Drawback Time Limit — Do Not Miss This
Duty Drawback must be claimed within 3 months from the date of the Let Export Order (the date customs clears the goods for export). Extensions are available — up to 12 months in total with valid reasons — but require a written application to the jurisdictional Commissioner of Customs with supporting documentation for the delay.
In practice, claiming Drawback automatically happens through the Shipping Bill if your CHA files the correct Shipping Bill type. The 3-month deadline becomes relevant only if there is a dispute about the amount, a technical issue with the system, or if you are applying for a Brand Rate retrospectively. Still — track your Drawback credits actively and if a credit has not appeared within 30 days of EGM, investigate immediately rather than letting the deadline approach.
RoDTEP: The New Generation Export Incentive
What RoDTEP Covers
RoDTEP (Remission of Duties and Taxes on Exported Products) was introduced in January 2021 to replace MEIS (Merchandise Exports from India Scheme). MEIS was a direct export subsidy that the WTO found to be trade-distorting and therefore prohibited under WTO rules. The government replaced it with RoDTEP — a carefully designed WTO-compliant scheme that remits only taxes and levies actually paid, not notional benefits.
RoDTEP covers the residual category of taxes and levies that are embedded in the cost of exports but are not refunded under any other mechanism — specifically:
- VAT / CST on fuel used in transportation of goods from factory to port, and fuel used in manufacturing processes
- Electricity duty on power consumed in manufacturing the export goods
- Mandi tax on agricultural inputs used in production (relevant for agri-based product manufacturers)
- Captive power generation taxes
- Stamp duty on export documents
- Various other central, state, and local levies and taxes that are embedded in production costs but not refunded through GST, Duty Drawback, or any other mechanism
The fundamental distinction: RoDTEP covers taxes that are borne by the manufacturing and distribution process but are not input taxes in the GST sense. GST ITC covers your GST inputs. Duty Drawback covers your customs duty inputs. RoDTEP covers the remaining tax ecosystem — electricity duties, fuel taxes, mandi cess, etc. — that make up the often-invisible cost layer in Indian manufacturing.
How RoDTEP Rates Are Determined
RoDTEP rates are published by the Ministry of Commerce as a percentage of FOB export value, indexed by ITC-HS Code at the 8-digit level. The rates are calculated by the RoDTEP Committee after surveying industry inputs, studying production processes, and estimating the embedded tax burden for different product categories.
RoDTEP rates currently range from 0.3% to 4.3% of FOB value across different product categories. They are not static — the government revises rates periodically based on updated cost studies and policy considerations. Check the current rate schedule on the CBIC website or use Eximigo's Tariff Checker for your specific HS code before pricing any export order.
Products excluded from RoDTEP:
- Exports from SEZs (Special Economic Zones) — these units already have comprehensive duty and tax exemptions
- Exports under Advance Authorisation where inputs were imported duty-free
- Exports by EOUs (Export-Oriented Units) — they have their own separate benefits
- Certain specified product categories (check the current schedule — some categories have zero RoDTEP rate)
How RoDTEP Is Paid
This is where RoDTEP differs importantly from Duty Drawback. RoDTEP is not paid as cash — it is issued as transferable duty credit scrips.
After your Shipping Bill is processed and EGM is filed, the RoDTEP scrip is generated electronically on your ICEGATE account. The scrip has a face value equal to your RoDTEP amount (RoDTEP rate × FOB value). You can:
- Use the scrip to pay Basic Customs Duty on your own imports — if you import raw materials, you can apply your RoDTEP scrips against the customs duty payable, saving cash.
- Transfer the scrip to another importer and receive payment — the scrip market operates through BSE and NSE e-bidding platforms. Scrips trade at approximately 97–99% of face value. You effectively sell the scrip and receive cash, at a small discount to face value.
Scrip validity: 18 months from the date of issue. Scrips that are not used or transferred within 18 months expire worthless. This is a common and painful mistake — exporters accumulate RoDTEP scrips and forget about them until they expire. Track your scrip balances actively. Log in to ICEGATE → RoDTEP Scrip Management → View your outstanding scrips and their expiry dates. Set a calendar reminder to redeem or transfer scrips before expiry.
RoDTEP vs Duty Drawback: A Direct Comparison
Now that we understand each scheme independently, let us put them side by side on the dimensions that matter most to exporters.
What Each Scheme Reimburses
Duty Drawback: Customs duties (and historically some excise duties) paid on imported and domestically produced inputs used in export manufacturing. It is specifically about duties paid when inputs entered the production chain.
RoDTEP: State and local taxes, levies, and duties that are embedded in production costs but are not otherwise refundable — primarily VAT on fuel, electricity duty, mandi tax, captive power taxes. These are the taxes paid not when inputs are procured but as part of running the production and logistics operation.
The key insight: These two schemes reimburse entirely different types of costs. There is no overlap. Claiming both is not double-claiming — it is claiming two separate, distinct tax refunds that cover different parts of your cost structure.
Form of Payment
Duty Drawback: Cash — credited directly to your registered bank account on ICEGATE. Most useful for working capital because it is immediately spendable.
RoDTEP: Duty credit scrips — tradeable instruments that can be used against import duty or sold on exchange platforms at a small discount. Slightly less liquid than cash but still valuable. If you regularly import, scrips are as good as cash since they directly offset a cash payment you would have made anyway.
Application Process
Both schemes: Claimed through the Shipping Bill at the time of export. Your CHA selects the appropriate Shipping Bill type on ICEGATE. No separate post-export application is required for standard AIR Drawback or RoDTEP — both are system-driven once the correct Shipping Bill is filed.
The critical instruction: You must explicitly tell your CHA to select both RoDTEP and Drawback on your Shipping Bill before it is filed. Many CHAs default to a standard Free Shipping Bill if not specifically instructed. After the Shipping Bill is filed, you cannot add Drawback or RoDTEP retroactively — you lose the benefit permanently for that shipment.
Rate Ranges
Duty Drawback (AIR): 0.5% to 9.5% of FOB value, depending on HS code and product category
RoDTEP: 0.3% to 4.3% of FOB value, depending on HS code and product category
Combined: For many product categories, claiming both gives you 2% to 10%+ of FOB value in total incentive income per shipment. On a ₹1 crore shipment, that is ₹2–10 lakh coming back to you — without any change in production cost or selling price.
WTO Compliance
Duty Drawback: WTO-compliant — it is a refund of duties actually paid, not a subsidy.
RoDTEP: WTO-compliant by design — specifically engineered to be so after MEIS was challenged. It remits only taxes actually incurred, with rates calculated based on documented tax incidence surveys.
Interaction with Other Schemes
If you import inputs under Advance Authorisation (duty-free import for export production), you cannot claim Drawback on those inputs — because you never paid duty on them in the first place. Drawback on inputs you did not pay duty for would be double benefit.
Similarly, you cannot claim RoDTEP on exports under Advance Authorisation — the AA scheme is considered to have already provided comprehensive input cost benefits.
If you have an EPCG licence — where you imported capital goods at zero duty against export obligation — you can still claim both RoDTEP and Drawback on the goods you export under that obligation. EPCG covers capital goods; Drawback and RoDTEP cover production inputs and embedded taxes respectively — they operate at different levels of the production chain and do not overlap.
A Practical Example: The Combined Impact
Let me walk through a concrete example to show the combined financial impact of claiming both schemes correctly.
Scenario: You export 1,000 kg of processed spices with an FOB value of ₹8,40,000 (at ₹840/kg FOB).
Applicable rates (hypothetical — verify your actual HS code rates):
- Duty Drawback AIR: 2%
- RoDTEP rate: 1.5%
Drawback amount: ₹8,40,000 × 2% = ₹16,800 cash credited to your bank account
RoDTEP scrip value: ₹8,40,000 × 1.5% = ₹12,600 in duty credit scrips
If you sell the scrips at 98% of face value: ₹12,600 × 0.98 = ₹12,348 cash equivalent
Total incentive income per shipment: ₹16,800 + ₹12,348 = ₹29,148
As a percentage of FOB: ₹29,148 / ₹8,40,000 = 3.47% of FOB value
Now scale this up. If you export ₹1 crore per month, that is approximately ₹3.47 lakh in additional monthly income from these two schemes alone — ₹41.6 lakh per year. If you are not claiming both, you are leaving that money behind.
Which Scheme Gives Better Returns? Depends on Your Cost Structure
The question "which is better — RoDTEP or Duty Drawback?" misses the point, because they cover different costs. The real question is: which matters more for your specific production cost structure?
If your product uses significant imported inputs with high customs duty: Duty Drawback will likely give you a higher return because the customs duty component of your costs is large. A pharmaceuticals manufacturer using imported APIs, a textile manufacturer using imported specialty chemicals, an electronics manufacturer using imported components — all have high duty-incidence on their inputs, making Drawback more impactful.
If your product is primarily made from domestic inputs and your cost structure has high energy, fuel, and logistics components: RoDTEP may be relatively more impactful because it covers the electricity and fuel tax costs that are significant in energy-intensive manufacturing. Ceramic tile manufacturers, glass producers, foundries, and food processors often have this cost profile.
For most manufacturers: Both matter, and both should be claimed. The relative importance varies by product, but neither is trivial. The best approach is to:
- Look up both rates for your HS code
- Calculate the annual incentive income from each at your expected export volume
- Ensure your CHA is consistently claiming both on every shipment
- Track both income streams separately in your export accounting
Step-by-Step: How to Claim Both RoDTEP and Duty Drawback
Before the Shipment: Verify Your Rates
Look up your product's current Drawback AIR rate in the annual Drawback Schedule (published on CBIC website) and your RoDTEP rate in the RoDTEP rate schedule (also on CBIC/DGFT website). Use Eximigo's Tariff Checker — enter your 8-digit HS code to see both rates in one place.
If your product has a zero rate under either scheme, that scheme simply does not apply. Proceed with claiming the one that is applicable.
Instruction to Your CHA: File the Right Shipping Bill Type
Before your Shipping Bill is filed on ICEGATE, explicitly instruct your CHA: "Please file a RoDTEP + Drawback Shipping Bill." The specific Shipping Bill type on ICEGATE that enables both is the "Drawback + RoDTEP" type. If you are on a Free Shipping Bill (no incentives) or a Drawback-only Bill, you are leaving RoDTEP on the table.
Verify the Shipping Bill type in the draft your CHA shows you before final submission. After submission, the type cannot be changed.
After Shipment: Verify EGM Status
Both incentives are processed after EGM (Export General Manifest) is filed by the shipping line confirming your goods left India. Check EGM status on ICEGATE approximately 7 days after vessel departure. If EGM is not filed, follow up with your CHA urgently — delayed EGM means delayed incentive credits.
Track Your Credits
For Drawback: Log in to ICEGATE → Drawback Status → Enter your Shipping Bill details → Check credit status. Cash should appear in your registered bank account within 7–30 days of EGM filing.
For RoDTEP: Log in to ICEGATE → RoDTEP Scrip Management → View outstanding scrips → Check balances and expiry dates. Transfer or use scrips before they expire (18-month validity).
Common Mistakes That Cost Exporters Their Incentives
These are the errors that consistently result in exporters either receiving less than they are entitled to or losing incentives entirely.
Mistake 1: CHA Files a Free Shipping Bill
The single most common and most costly mistake. A "Free Shipping Bill" claims no incentives. If your CHA defaults to this type without checking your product eligibility or without explicit instruction from you, you lose all Drawback and RoDTEP for that shipment. No retroactive claim is possible once the Shipping Bill is filed and processed. Instruct your CHA explicitly on every single shipment.
Mistake 2: Using the Wrong HS Code
Drawback and RoDTEP rates are HS code-specific. If your CHA enters a slightly different HS code than the correct one — perhaps a related but incorrect classification — you may receive a lower rate (or zero rate if your product is listed under a different code). This also creates a mismatch between your invoice, Shipping Bill, and GSTR-1, which can trigger other complications.
Verify your HS code before every export season. HS codes are revised periodically (the WCO revises the HS every 5–6 years, and India further updates its ITC-HS annually), so a code that was correct two years ago may be different today.
Mistake 3: Claiming Drawback When Using Advance Authorisation
If you import your inputs duty-free under Advance Authorisation, you cannot claim Duty Drawback on those inputs. Claiming Drawback in this situation is not just wrong — it is a serious compliance violation that can attract penalties and recovery of the drawback amount with interest. Your CHA should know this, but verify it yourself if you use AA for any of your exports.
Mistake 4: RoDTEP Scrips Expiring Unused
Scrips have 18-month validity. Many exporters accumulate scrips, do not track them, and discover them expired in their ICEGATE account. Millions of rupees worth of RoDTEP scrips expire every year across the industry. The fix is simple: set a calendar reminder every quarter to log in to ICEGATE, check your scrip balances, and either use them for your import duty payments or sell them on the exchange platform.
Mistake 4: Not Registering Your Bank Account on ICEGATE
Your Drawback cash credit goes to the bank account registered on ICEGATE through your AD Code registration. If this bank account has changed (you switched banks or opened a new account) and you have not updated it with customs, your Drawback credits may go to an old account or get stuck. Update your bank account with customs immediately whenever it changes.
Mistake 5: Confusing Drawback with GST Refund
These are different things. Duty Drawback is a customs duty refund administered by the Department of Revenue. GST ITC refund is a GST credit administered by the GST department. Many new exporters think their Drawback claim is the same as their GST refund. They are entirely separate processes, separate entitlements, and separate cash flows. Both are legitimate claims; both should be pursued.
The Advance Authorisation Alternative: When It Beats Both
For high-import-input manufacturers, there is a third option that can be more valuable than Drawback: Advance Authorisation (AA).
Under AA, you import your inputs completely duty-free (zero customs duty, zero IGST) upfront — before production — against an export obligation. You then export the finished goods within 18 months.
When AA beats Duty Drawback: When your input customs duty load is high — say, 15–20% customs duty on imported inputs that constitute 50% of your product cost — the duty savings under AA are approximately 7.5–10% of FOB value. The AIR Drawback rate for the same category may be only 3–4%. AA saves you significantly more in absolute rupee terms.
The trade-off: AA comes with export obligation compliance requirements — you must export the specified quantity within 18 months and submit an Export Obligation Discharge Certificate (EODC). Non-compliance means the duty saved must be paid back with interest and penalty. If you have predictable export volumes, AA is highly attractive.
AA + RoDTEP: You cannot claim Drawback if you used AA for your inputs (no duty was paid, so there is nothing to draw back). But you can still claim RoDTEP on exports under AA — because RoDTEP covers different taxes (state levies, electricity duty) that you paid regardless of whether your inputs were imported under AA or not.
Optimising Your Export Incentive Stack
Thinking systematically about all the incentives available to you — not just RoDTEP and Drawback, but the full set — is what separates a financially optimised export operation from one that leaves money on the table.
The full export incentive stack for a typical Indian goods exporter:
- GST ITC Refund: Recover all GST paid on inputs through LUT + RFD-01 or IGST automatic refund
- Duty Drawback: Recover customs duty on imported inputs through correct Shipping Bill type
- RoDTEP: Recover embedded state/local taxes through correct Shipping Bill type
- Advance Authorisation (if applicable): Import inputs duty-free for high-import-content products
- EPCG (if investing in machinery): Import capital goods at zero duty against export obligation
- Interest Equalisation Scheme: Get subsidised interest on export credit (3% for MSME manufacturer exporters)
A well-run export operation claims every applicable incentive from this stack on every shipment, tracks the income streams separately in their accounts, and builds the incentive income into their pricing model and margin calculations.
Frequently Asked Questions
Can I claim both RoDTEP and Duty Drawback on the same shipment?
Yes — and you should. They cover different types of taxes and there is no overlap or double-claiming. Your CHA must file a "RoDTEP + Drawback" Shipping Bill type to claim both. This is the most important practical point in this entire guide: claim both, every time, on every eligible shipment.
What happens if my product has a zero Drawback rate but a non-zero RoDTEP rate?
You claim only RoDTEP. File a RoDTEP-only Shipping Bill type. There is no benefit in filing a Drawback Shipping Bill for a product with zero Drawback rate — it simply records a zero credit. Focus on claiming whatever rate is non-zero for your product.
My Drawback credit has not appeared in my bank account after 45 days. What should I do?
Check the following in sequence: (1) Log in to ICEGATE and verify EGM has been filed — if not, follow up with your CHA and shipping line. (2) Verify your bank account number and IFSC are correctly registered on ICEGATE (through AD Code registration). (3) Check if there is any examination or customs query pending on your Shipping Bill that is holding the credit. If all three check out and the credit is still missing, raise a query on ICEGATE's online grievance platform or contact your jurisdictional customs office's Drawback section directly.
The government has reduced RoDTEP rates for my product category. What can I do?
RoDTEP rates are set by the government based on policy considerations and budget availability. There is no legal challenge mechanism for an individual exporter — the rates are administrative decisions. If your sector's rates have been cut significantly, work through your industry association (EPC, FIEO, CII, FICCI) to represent the case to the Ministry of Commerce for a rate revision. Industry associations have more leverage in rate negotiation than individual companies.
I am a merchant exporter (I source from manufacturers and export in my own name). Can I claim Drawback and RoDTEP?
Yes. Both Drawback and RoDTEP are available to merchant exporters as well as manufacturer exporters. The Shipping Bill is filed in your name as the exporter, and the incentives are credited to your registered bank account and ICEGATE account. The underlying manufacturer's input costs are what give rise to the AIR rates — but the credit belongs to the entity whose IEC appears on the Shipping Bill, which is you as the merchant exporter.
Can I claim Drawback for exports made in the previous financial year?
Yes, if you are within the time limits. For AIR Drawback claimed through the Shipping Bill (the normal route), the claim is part of the Shipping Bill at the time of export — there is no separate retrospective application. For Brand Rate applications, the time limit is typically 1–3 years from the date of export (specific limits vary — check the current Drawback Rules). If your CHA failed to file a Drawback Shipping Bill and you want to claim retrospectively, consult a customs consultant about whether a supplementary claim is possible and what the applicable time limit is.
Conclusion
RoDTEP and Duty Drawback are not competing schemes — they are complementary. One returns your customs duty costs; the other returns your embedded state and local tax costs. Together, they represent a meaningful percentage of your FOB value that comes back to you after every compliant export shipment.
The most important action you can take after reading this guide is to instruct your CHA, right now, to always file a "RoDTEP + Drawback" Shipping Bill for every eligible export. Then verify your HS code rates, track your credits quarterly, sell or use RoDTEP scrips before expiry, and build the incentive income into your pricing model.
Export incentives are not a bonus — they are a structural part of Indian export economics. Treat them as such, claim every rupee you are entitled to, and you will find your export margins meaningfully more robust than those of competitors who do not bother to claim.
