Disbursal of Duty Drawback by PFMS

• 15 Jun 2024

Source: PIB

Recently, the Central Board of Indirect Taxes and Customs (CBIC) has decided to electronically transfer duty drawback funds via the Public Finance Management System (PFMS), directly to exporters' bank accounts to ensure transparency and efficiency.

What is Duty Drawback ?   

• Duty drawback under section 75 of the Customs Act, 1962 rebates customs duty chargeable on any imported materials or excisable materials used in the manufacture of export goods.
• This system helps exporters mitigate some of the costs incurred during the export process, particularly within the supply or value chain.

Public Financial Management System (PFMS)

• About:
  • It is a web-based online software application developed and implemented by the Office of the Controller General of Accounts (CGA), Ministry of Finance. Initially launched in 2009 as a Central Sector Scheme by the Planning Commission (NITI Aayog). 
• The objective of PFMS: 
  • The overarching goal of PFMS is to facilitate a robust Public Financial Management System by establishing an efficient fund flow system and a payment-cum-accounting network. 
  • Currently, the PFMS covers Central Sector and Centrally Sponsored Schemes, as well as other expenditures, including Finance Commission grants.
  • PFMS provides stakeholders with a real-time, reliable, and meaningful management information system and an effective decision support system, aligning with the Digital India initiative. 
  • The system is integrated with the core banking system in the country, enabling seamless financial transactions and facilitating transparency and accountability in the management of public funds.

What is the Significance of Electronic Disbursal of Duty Drawbacks?

• Streamlining the Process: Electronically transfer of duty drawback funds has been introduced to streamline the process, reduce processing time, eliminate manual intervention, and enhance transparency in customs operations. 
• Less Paperwork: It eliminates the need for physical documentation and manual processing, reducing the time and effort required to claim the refund. 
• Promotes Transparency: The electronic system enhances transparency by providing exporters with real-time visibility into their claims' status and enabling seamless refund process tracking.
• Trade Facilitation: This initiative aligns with CBIC's commitment to paperless customs and trade facilitation, building upon its implementation of the World Trade Organization's, Trade Facilitation Agreement (TFA).

UPSC Civil Services Examination, Previous Year Questions (PYQs)

Prelims

Q1. The SEZ Act, 2005 which came into effect in February 2006 has certain objectives. In this context, consider the following: (2010)

1. Development of infrastructure facilities.
2. Promotion of investment from foreign sources.
3. Promotion of exports of services only.

Which of the above are the objectives of this Act?

(a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2 and 3

Ans: (a)

Q2. A “closed economy” is an economy in which (2011)

(a) the money supply is fully controlled
(b) deficit financing takes place
(c) only exports take place
(d) neither exports or imports take place

Ans: (d)