What Is a Bill of Materials (BOM) in Manufacturing?

Published on November 20, 2025

• 7 min read

The BOM full form in production is Bill of Materials. A bill of materials is a comprehensive list of all components, raw materials, and subassemblies required to manufacture a product. In simple terms, it answers the question: What is BOM in production? It is the recipe or formula that guides manufacturers in producing a finished item.

The bill of materials connects every stage of production, including design, procurement, inventory, and manufacturing. Design teams define product structures, procurement teams utilise BOMs for sourcing, inventory managers track part availability, and production teams follow it for assembly.

A well-structured BOM improves efficiency by ensuring accurate part requirements, reducing errors, and streamlining planning. It prevents shortages, avoids overstocking, and supports better scheduling.

Table Of Contents

Types of Bill of Materials
Bill of Materials Example
BOM Format and Structure
How to Make a BOM
WareIQ Fulfilment & Shipping Solutions for eCommerce
FAQs

Types of Bill of Materials

A bill of materials (BOM) is not one-size-fits-all. Different industries and functions require different types of BOMs to manage product design, production, sales, and after-sales services. Below are the most common types of BOMs and their specific purposes.

Engineering Bill of Materials (EBOM)

An Engineering BOM defines the design of a finished product.
It usually originates from CAD (Computer-Aided Design) drawings and reflects how engineers envision the product.
Multiple EBOMs may be created during product lifecycle management as designs evolve.

Manufacturing Bill of Materials (MBOM)

The Manufacturing BOM details all raw materials, parts, and sub-assemblies required on the shop floor to produce a finished item.
It also includes packaging materials to ensure the product is ready for delivery to the customer.

Sales and Configurable BOMs

A Sales BOM links finished products directly to sub-items in the sales order.
A Configurable BOM, on the other hand, is designed for customised products.
It outlines components, labelling, and packaging tailored to customer specifications, making it common in industries with product variants.

Service BOMs

A Service BOM supports after-sales needs. It lists parts and assemblies required for repairs, maintenance, and replacements, ensuring smooth product servicing throughout its lifecycle. To learn more about how material planning ties into operations management, see material requirement planning in operations management.

Costed BOMs

A Costed BOM adds financial data to material requirements. Associating costs with each component helps businesses analyse pricing, profitability, and cost control before and during production.

Other specialised BOMs include Production BOMs (the foundation of production orders), Assembly BOMs (sales-focused structures), Template BOMs (flexible models), and Modular BOMs (breaking products into subassemblies for customisation and easier maintenance).

Bill of Materials Example

A bill of materials example illustrates how various components come together to form a finished product. Below is a simple BOM for a wooden chair:

Product	Components	Quantity
Wooden Chair	Wooden Legs	4
	Seat Panel	1
	Backrest	1
	Screws	12
	Wood Glue	1 unit
	Cushion Cover (optional)	1

This bill of materials example demonstrates how each part is listed with its required quantity. In real-world production, such as furniture manufacturing, the BOM ensures every material is accounted for before assembly.

Similarly, in electronics like a smartphone, a BOM would include the display, battery, processor, camera module, and casing. Each component is tracked for quantity, sourcing, and cost. This prevents errors, reduces material shortages, and streamlines the production process.

BOM Format and Structure

A bill of materials (BOM) format is a structured list that outlines all components needed to build a product. Typical BOM fields include part name, ID, description, unit of measure, quantity, cost, and supplier details. This format ensures accuracy in procurement and production planning.

Depending on the industry, formats may vary. For example, electronics may include version numbers, while furniture may highlight the materials and finishes used.

Single-level Bill of Materials

A single-level BOM lists each part required to build a product, similar to a shopping list. It is simple to create, but it does not show relationships between assemblies and subassemblies. For example, in a car BOM, it won’t break down the door handle into smaller parts, making troubleshooting difficult.

Example: Single-level BOM for a Wooden Table

Part ID	Component	Quantity
T001	Tabletop	1
T002	Wooden Legs	4
T003	Screws	12
T004	Wood Glue	1 unit

Multi-level Bill of Materials

A multi-level BOM (or indented BOM) shows hierarchical relationships between components, subassemblies, and assemblies. Changes in a parent assembly automatically cascade to child components. This makes it the preferred format for complex products, such as vehicles, machinery, or electronics.

Example: Multi-level BOM for a Wooden Table

Level	Parent Item	Component	Quantity
0	Wooden Table	Tabletop	1
0	Wooden Table	Leg Assembly	4
1	Leg Assembly	Wooden Leg	1
1	Leg Assembly	Screws	3
0	Wooden Table	Wood Glue	1 unit

How to Make a BOM

Creating a bill of materials (BOM) is a structured process that ensures accuracy in production. Here’s a step-by-step guide on how to make a BOM:

Step 1: Define Your Product

Begin by identifying the product and its various versions. For example, a chair may have different BOMs depending on the type of wood or upholstery used.

Step 2: List Components

Include all raw materials, parts, and subassemblies required. For a chair, this may include legs, seat, backrest, screws, and upholstery fabric.

Step 3: Assign Part Numbers

Give each component a unique identifier (SKU or part number) for easy tracking in inventory and procurement.

Step 4: Specify Quantities

Document the exact quantity required for each part, specifying whether it is in unit or batch form.

Step 5: Add Costs

Record unit costs of materials and labour to calculate total production cost. This helps in pricing and cost control.

Step 6: Review and Update

BOMs must be updated regularly as products evolve. Version control ensures everyone uses the most accurate information.

Tools like Excel, ERP systems, and PLM software simplify BOM creation, helping manufacturers maintain accuracy, standardisation, and efficiency.

WareIQ Fulfilment & Shipping Solutions for eCommerce

For growing e-commerce brands, managing inventory, orders, and shipping across multiple channels can be a complex task. WareIQ, a Y Combinator-backed full-stack platform, simplifies this process with end-to-end fulfilment and shipping solutions for D2C, Marketplaces, Quick Commerce, and B2B channels.

With a pan-India network of WareIQ-operated Seller Flex & FAssured-compliant fulfilment centres across 12+ cities, brands can store inventory closer to customers and reach over 27,000 pin codes via reliable last-mile partners.

WareIQ’s multi-channel platform integrates seamlessly with marketplaces (Amazon, Flipkart, Myntra, Nykaa), D2C stores (Shopify, Magento, WooCommerce), WMS, and ERPs. Features like Inventory LogIQ, AI-driven replenishment, and tech-enabled returns QC ensure minimal stockouts, optimised operations, and reduced order disputes.

Brands also benefit from flexible fulfilment capacity, centralised inventory for multiple channels, and access to marketplace programs like Seller Flex & FAssured. With WareIQ, businesses can streamline order management, lower operational costs, and focus on scaling sales rather than logistics.

FAQs

Can a BOM be used for services, not just physical products?

Yes. Service BOMs list the tasks, tools, and resources required to deliver a service efficiently, much like product BOMs list components.

How often should a BOM be updated?

A BOM should be updated whenever there’s a design change, new component, supplier change, or process modification to avoid production errors.

What is the difference between a single-level and a multi-level BOM?

A single-level BOM lists only the immediate components of a product, while a multi-level BOM includes sub-assemblies and their components, showing the full hierarchy.

Can a BOM help with regulatory compliance?

Yes. BOMs track materials and components, which is crucial for industries such as electronics, automotive, and pharmaceuticals that require regulatory documentation.

Is it possible to automate the creation of BOMs?

Absolutely. ERP and PLM software can automatically generate BOMs from CAD designs or product configurations, reducing manual errors and saving time.

Supercharge your fulfilment with WareIQ now, contact our team.

Author

Mariyam Jameela

Mariyam Jameela works as a content writer at WareIQ. With a proven track record of working with renowned brands such as GO Digit, Urban Ladder, Juspay, Hong's Kitchen, and many more. She actively contributes to the creation of blog posts centered on eCommerce operations, fulfillment, and shipping, in addition to providing insights on various strategies and techniques tailored for eCommerce sellers

Read all of Mariyam Jameela's Posts

What Is a Customs Tariff? Types and How They Work

A customs tariff is a tax imposed on goods imported into a country. It is one of the oldest trade tools used by governments to regulate international commerce.Customs duties make imported products more expensive, giving locally produced goods a competitive edge. This helps protect domestic industries from foreign competition.For governments, tariffs are a major source of revenue. For businesses, they directly impact pricing, sourcing, and profitability. For consumers, tariffs influence product availability and final purchase costs. In this blog, you will learn what a customs tariff is, its various types, how it works, and why understanding tariff codes, such as the Indian customs tariff, and tools like the CBIC duty calculator, are essential for global trade compliance.The Customs Tariff Act, 1975The Customs Tariff Act, 1975, was enacted to consolidate and amend the law relating to customs duties in India. It came into effect on August 2, 1976, and provides the legal framework for levying import and export duties under the Customs Act, 1962.The Act empowers the Central Government to impose tariffs not only for revenue but also for trade protection. It allows for additional duties, countervailing duties, and anti-dumping duties to safeguard domestic industries. In short, the Act is the backbone of India’s customs duty system, ensuring that imports and exports are regulated fairly and systematically.Structure of the Customs Tariff ActThe Act is structured around two main schedules: the First Schedule, which covers import tariffs, and the Second Schedule, which covers export tariffs. These schedules are divided into sections and chapters, each covering specific categories of goods and services.Tariff classification is central to the Act, where every product is assigned a unique tariff item number. This number determines the applicable duty rate and compliance requirements. The structured classification system ensures uniformity, simplifies trade documentation, and aligns India’s tariffs with international standards, such as the Harmonised System (HSN).Customs Tariff Code and ClassificationA customs tariff code is a numeric identifier used to classify traded goods and services. Globally, it is based on the Harmonised System of Nomenclature (HSN), which assigns each product category a unique code. These codes standardise trade, making it easier for customs authorities to assess duties and ensure compliance.Every imported or exported item must be declared with its tariff code. This determines the applicable duty rate, trade restrictions, and documentation requirements. Without proper classification, businesses face risks of penalties, delays, or incorrect duty payments.Indian Customs Tariff & Classification SystemIndia follows an eight-digit classification system under the Customs Tariff Act, 1975, aligned with the HSN. The first six digits are based on the global HS code, while the last two represent Indian sub-classifications.The First Schedule covers import tariffs and the Second Schedule covers export tariffs. Each schedule is divided into sections and chapters, grouping products by nature and use. The classification rules are detailed and supported by general notes, section notes, and chapter notes.DigitsMeaningExample (HS Code 85011011)1–2Chapter (product category)85 = Electrical machinery3–4Heading (broad type of goods)01 = Motors and generators5–6Sub-heading (specific product group)10 = Motors ≤ 37.5 W7–8Indian sub-classification11 = Micro motorChapter 85 of Customs Tariff (Electrical Machinery and Equipment)Chapter 85 is one of the most important categories in India’s customs tariff. It covers electrical machinery, equipment, sound recorders, television apparatus, and related parts. Products under this chapter include motors, generators, transformers, semiconductors, telecommunication devices, and electronic components. Proper classification is critical as duty rates vary widely depending on the subheading.For businesses importing electronics, Chapter 85 has a direct impact on cost calculations, compliance, and competitiveness in the Indian market.How Customs Tariffs WorkCustoms duties generally fall under different categories:Basic Customs Duty (BCD) is the standard tax on imports.Integrated Goods and Services Tax (IGST), which aligns imports with domestic GST.Additional duties, such as Countervailing Duty (CVD) or Anti-Dumping Duty, may apply. The tariff rate may also vary depending on the country of origin, with preferential duty rates often granted under trade agreements such as the ASEAN-India FTA or SAFTA.Importers must declare the correct CTH, product description, and country of origin when filing bills of entry. Any misclassification can lead to penalties or confiscation. Hence, understanding tariff classification and its impact on total duty payable is critical for compliance and accurate cost estimation in international trade.Using the CBIC Duty CalculatorThe CBIC’s online Duty Calculator simplifies tariff determination by allowing importers to search using either the Customs Tariff Heading (CTH), product description, or country of origin.You need to enter the details so the system can display the correct customs duty rate. Here’s how to fill it:CTH (Customs Tariff Heading):Enter the tariff code of the product you want to import.It’s usually a 4 to 8-digit number (HS Code).Example: Books = 4901, Laptops = 8471, Perfume = 3303.Description (optional if you know CTH):Type the product name or description (max 30 characters).Example: “Laptop”, “Perfume”, “Printed Books”.Country of Origin (optional):Select if you want to check for preferential duty rates (under trade agreements) or for anti-dumping duty.If not relevant, you can leave it blank.Types of Customs TariffsCustoms tariffs are taxes levied on imported goods, and they can take various forms depending on the method used to calculate the duty. The different types of tariffs are Specific Tariffs, ad valorem tariffs, and Preferential Duties.Specific TariffA specific tariff is imposed as a fixed charge on each unit of goods imported, regardless of its price. For example, if the tariff on shoes is set at ₹50 per pair, importing 2,000 pairs will result in a duty of ₹100,000, regardless of whether the shoes are made of luxury leather or basic canvas. This method provides predictability for governments but may disproportionately affect lower-value goods.Ad Valorem TariffAn ad valorem tariff is charged as a percentage of the value of the imported item. For instance, if the ad valorem tariff on mobile phones is 10% and you import a consignment worth ₹5,00,000, the payable duty will be ₹50,000. This system ensures fairness by scaling duties in proportion to the value of the goods, but it also requires accurate documentation and valuation at customs.Preferential DutiesPreferential duties are reduced or zero tariffs are applied to imports from certain countries under trade agreements or development schemes. For example, India may import textiles duty-free from a partner country under a Free Trade Agreement. These measures aim to encourage trade with developing economies while supporting strategic economic ties.Explore in details - Different Types of Tariffs and Tariff Codes with ExamplesRole of Customs Tariffs in Global TradeCustoms tariffs directly influence trade flows by determining costs, market access, and competitiveness. While most global trade is tariff-free, remaining duties still create significant barriers, especially for developing economies.Tariff-free trade dominates: About two-thirds of international trade occurs without tariffs due to Most-Favoured-Nation (MFN) treatment and trade agreements.High protection in key sectors: Agriculture faces average MFN import duties of nearly 20%, while textiles and apparel attract around 6%. Manufacturing barriers also persist, whereas raw materials typically see low tariffs.Developing countries are disadvantaged: exporters from developing nations face higher duties, which limit their access to global markets. High agricultural tariffs particularly restrict their competitiveness.South-South trade hurdles: Trade between developing regions, such as Latin America and South Asia, carries average tariffs of 15%, showing limited liberalisation compared to North-South trade.Tariff escalation effect: Many countries impose higher tariffs on finished goods than raw inputs, discouraging industrialisation in developing economies by keeping them dependent on raw material exports.Global trade trends (2024): World trade reached $33 trillion, representing a 3.7% increase. Services drove growth with a 9% increase ($700 billion), while goods grew by only 2% ($500 billion).Regional performance: Developing economies expanded imports and exports by 4%, led by East and South Asia. Developed economies stagnated, with trade falling 2% in the fourth quarter.Imbalances widen: The US deficit with China increased to -$355 billion, while China’s surplus reached its highest level since 2022. The EU shifted into a trade surplus after years of deficits.How WareIQ Simplifies Customs Tariffs and LogisticsWareIQ is a Y Combinator-backed e-commerce full-stack platform that powers seamless cross-border and domestic fulfilment. With its technology-first approach, WareIQ helps businesses simplify compliance and optimise logistics.Pan-India Fulfillment NetworkWareIQ operates a network of Seller Flex and FAssured compliant fulfilment centres across 12+ cities.Last-mile delivery partners cover 27,000+ pin codes, ensuring faster clearance and smoother movement of goods subject to customs tariffs.Multi-Channel Fulfillment PlatformPlug-and-play integrations with marketplaces (Amazon, Flipkart, Myntra, Nykaa), D2C platforms (Shopify, Magento, WooCommerce), WMS, and ERPs.Businesses can manage cross-border imports, distributor supply, flagship stores, and e-commerce sales with one system.Inventory LogIQ for Smarter PlanningAI-led inventory planning that reduces stockouts and automates replenishment.Helps businesses better forecast demand, ensuring customs-cleared goods move quickly into distribution channels.Tech-Enabled Returns & QCHD media evidence capture for damaged or missing returns, stored centrally for transparency and accountability.Eliminates disputes and rejections in marketplaces, reducing compliance risks associated with tariff number mismatches.Seller Enablement & SupportDedicated account managers for smooth customs and logistics operations.Assistance with APOB/PPOB registrations, GST compliance, and COD verification.Also read - HTS Explained: What Is the Harmonised Tariff Schedule?FAQsWhat is a customs tariff in simple terms?A customs tariff is a tax or duty imposed on imported goods by a country’s government to regulate trade, generate revenue, and protect domestic industries.How do I find my custom tariff code?You can find your custom tariff code (HSN or tariff number) through the CBIC portal, trade directories, or by consulting with customs agents for accurate classification.What is the difference between customs duty and customs tariff?A customs tariff is the structured schedule of rates applied to imported goods, while customs duty is the actual tax paid based on that tariff.How do I use the CBIC duty calculator?The CBIC duty calculator allows importers to input the tariff code, product details, and shipment value to estimate payable customs duty and landed costs.

November 19, 2025

What Is a UPC Code, and Why Is It Crucial for Retail?

When it is about the retail landscape, there is no denying that it is quite fast-paced. Whether it is the self-checkout lanes or the warehousing operation, the hallmarks of success are accuracy and speed. One such aspect that plays an important role is the Universal Product Code (UPC Code). Did you know that 10 billion barcode scans happen daily across the globe? Among these codes are UPCs, which are standardised barcode symbologies used to uniquely identify retail products. But the question is, why is the UPC an indispensable tool in retail, e-commerce, and supply chain logistics? Let us find out!What Is a UPC Code? (UPC Full Form, and UPC Meaning)The full form for UPC is Universal Product Code. This is a barcode symbology that is used in North America. The UPC typically appears as a string of 12 digits (in the UPC-A format), printed beneath a series of vertical black bars that scanners can read. This 12-digit number is also referred to as a UPC number. Moreover, the barcode itself, the visual pattern of bars and spaces, is often described as the UPC barcode.IBM engineer George Laurer developed the UPC, or UPC number. The UPC was first used commercially in 1974 when a pack of Wrigley's gum was scanned in an Ohio supermarket. The primary need of the UPC number is to provide a universal identification standard that works seamlessly across all retail and supply chain systems. The 12 digits of a UPC correspond to:1. Company Prefix: Assigned by GS1 (the global standards organisation) to identify the manufacturer or brand.2. Item Reference Number: Assigned by the company to identify a particular product or variation (e.g., size or colour).3. Check Digit: Automatically calculated to validate that the barcode is scanned correctly.Once the UPC is scanned, it retrieves useful product information such as name, price, and stock level from the retailer's database. The UPC can be considered a product's digital fingerprint, unique, standardised, and indispensable for efficient retail and e-commerce operations.Why Are UPC Codes Crucial for Retail?UPC numbers are the backbone of modern retail operations. From checkout counters to global supply chains, UPC barcodes ensure products move efficiently, data stays accurate, and businesses run smoothly.Here are the top reasons why UPCs become absolutely essential for the retail industry:Streamlines Checkout and TransactionsThe main impact of UPCs is on the checkout process. Once a UPC is scanned, it instantly pulls up all product information. It eliminates errors due to manual entry while also reducing waiting times. Some retail studies also show that barcode scanning can considerably reduce checkout time by up to 70% to 80% compared to manual entry. UPCs not only enhance efficiency but also improve customer experience. Leads to Accurate Inventory ManagementReal-time stock tracking is possible thanks to UPCs. Every scan, whether at sale, shipment, or return, automatically updates inventory databases.It also helps retailers to monitor what is in stock, what is selling fast and which stock is running out. Eventually, it will help in reducing overstocking, understocking, and inventory discrepancies, leading to cost savings and better demand forecasting. Better Product IdentificationAs every UPC is unique to a product, it can help a retailer to:Distinguish between similar products.Maintain accurate product catalogues.Avoid confusion in pricing, promotions, or returns.Universal ApplicationAlmost all e-commerce platforms, like Amazon or eBay, require a UPC number for the listings on their portal. This allows for the correct identification of duplicate listings, the management of product data, and the display of accurate search results.There is also a possibility that a product can be flagged or removed from the listings if a valid UPC is not available. Hence, it is no longer optional; it is a compliance requirement. Improves Supply Chain EfficiencyFor a transparent and efficient supply chain, UPCs are a necessity. From manufacturing to logistics to retail shelves, each UPC scan provides real-time visibility into product movement.In the end, it can help in quicker recalls, better demand forecasting, and improved warehouse accuracy. Better Data Analytics and Retail InsightsEvery time a UPC is scanned, it generates valuable data such as sales trends, customer behaviour, geographic demand and more. These data sets can be used to make informed decisions regarding price points to be set, stock placement and promotions.Thus, UPCs can power data-driven retail strategies that help boost profit margins and improve customer satisfaction.Build CredibilityA UPC registered with GS1 gives your product a globally recognised identity. It helps in creating credibility and trust among marketplaces, distributors and consumers. It also ensures your products can be traded internationally without duplication or confusion.Best Practices for Assignment & Use of UPC CodeRegistering your product with the Universal Product Code Barcode is only the very first step. It is necessary to use it and manage it correctly for smooth retail and e-commerce operations. Below are the best practices for assigning and using UPCs effectively:Always get the UPC from GS1 to make sure it is authentic and globally recognised. Avoid resellers offering cheap UPCs; they often lead to duplication or rejection on platforms like Amazon and Walmart.Each product variation (size, colour, flavour, packaging type, etc.) must have its own unique UPC number. Remember the golden rule: "One Product Variant = One UPC Code."Keep a record of every product's UPC in detail and mention the description, size, colour, and date of issue. Maintain correct quiet zones, contrast, and barcode dimensions (recommended size: 1.469" × 1.02"). Also, it is best to place the barcode on a flat, visible part of the packaging for easy scanning.Scan the barcode with multiple devices to ensure it reads properly. To confirm the readability, check it under different lighting conditions. It is also best practice to sync UPC data across your POS, other e-commerce platforms, and warehouse management systems. Make the retired or discontinued product's UPC inactive, and do not reassign it. Educate packaging, logistics, and sales teams on the importance of proper UPC usage. When applying for a GS1 prefix, choose a range that allows room for future product lines.Simplified UPC Codes and Their Applications with WareIQWareIQ is a Y-Combinator-backed eCommerce full-stack platform offering multi-channel fulfillment across D2C, Marketplaces, Quick Commerce, and B2B (General Trade & Modern Trade)Our solution offers:Pan-India network of Seller Flex & FAssured compliant across 12+ cities operated by WareIQ, and shipping partners for last-mile delivery across 27000+ pin codesMulti-Channel Fulfilment Platform with plug-and-play integrations across marketplaces (Amazon, Flipkart, Myntra, Nykaa, etc.), D2C platforms (Shopify, Magento, WooCommerce, etc.), WMS, and ERPs, to support fulfilment across distributors, flagship stores and eCommerce channels with analytics capabilities to assess operational performanceInventory LogIQ: AI-led multi-channel inventory planning solution to minimise stockouts and automate replenishmentLeverage the tech-enabled returns QC solution to capture, centrally store, and auto-index HD media evidence of damaged or missing returned products and eliminate marketplace claims rejections.A host of seller enablement and support – dedicated account manager, APOB/PPOB registrations, GST registration, NDR & COD verification, etc.ConclusionThe UPC, or Universal Product Code Barcode, is more than just a normal barcode; it is the digital DNA of a product. By ensuring accuracy, speed, and consistency across checkout counters, warehouses, and online marketplaces, UPCs form the foundation of efficient inventory management and global trade. Businesses must follow best practices in UPC assignment, registration, and usage to achieve smoother operations, stronger brand credibility, and enhanced customer experience. A well-managed UPC system is necessary for building a smarter, scalable and more connected retail future. Explore more - IEC Code and AD CodeFAQs About UPC CodeWhat is a UPC used for?A UPC helps retailers, manufacturers, and online marketplaces identify, track, and manage products efficiently. It's used for pricing, checkout, inventory control, and global product recognition.Is UPC the same as a barcode?Not exactly. A barcode is the visual pattern of lines and spaces, while a UPC refers to the numeric code embedded within that barcode. In short, every UPC is a barcode, but not every barcode is a UPC.Can I buy UPCs from resellers?While some third-party resellers sell UPCs, only codes directly purchased from GS1 are officially recognised and traceable to your brand. Marketplace platforms like Amazon may reject non-GS1 UPCs.What happens if I use the same UPC for two products?Using duplicate UPCs causes system errors, pricing confusion, and listing rejections on e-commerce platforms. Each product must have a unique UPC to maintain data integrity.

November 18, 2025

Duty Drawback: Meaning, Process, and Eligibility

Imagine that you have a manufacturing business that imports raw materials to create finished goods, which you then export. The duty you pay on imports can become a significant cost burden. The burden can lessen when you get some or all the paid duty back. This is where duty drawbacks come into the picture. In fact, India's duty drawback schemes have refunded billions of dollars to exporters over the years, helping them remain price-competitive in international markets. Today, we are going to look at what duty drawback means, how the duty drawback scheme works, how to calculate it, the eligibility criteria, and the steps involved in claiming drawback. What is Duty Drawback?Duty drawback is the refund or rebate of customs duties or other duties, such as excise and taxes, that are paid on imported goods when they are subsequently exported. It is after the materials are processed into finished goods. In other words, duties you paid earlier can be "drawn back" under certain conditions.The duty drawback scheme in India is designed to neutralise the burden of customs duty drawback. Put simply, the idea is that when inputs (raw materials, components, etc.) are taxed on import, that burden should be removed (or partly removed) when they contribute to export goods so that Indian exports can remain globally competitive.Types/Categories of DrawbackTo suit different export situations, there are different types and forms of duty drawback under the Customs Act. This ensures that every exporter, whether relying on standard industry rates or claiming actual duty paid, has a fair mechanism to recover costs.1. All Industry Rate (AIR) / All Industry DrawbackThis refers to the standard or average rate that is fixed on a broad range of products. Exporters can claim this without needing brand-specific computations. Here are some things to know:The drawback rates under the AIR are periodically notified. It is often based on the average duty burden on inputs for that specific product class. Under the Drawback Rules, AIR cannot exceed 33% of the market price of the export goods.It also includes end-to-end electronic processing of duty drawbacks. Producing separate documentary evidence for the realisation of proceeds is not needed. 2. Brand Rate / Special Brand RateIn cases where the actual input duty of an exporter exceeds the AIR, exporters can apply for a brand rate or a special brand rate, which is ideally tailored to their cost structure. The local customs commissioners set the brand rates. The brand rate requires submitting detailed computations and proof of duty paid on inputs. Customs authorities review and fix the rate.The brand rate duty drawback gets disbursed electronically directly to the exporter's account. 3. Drawback on Re-Export Whether the imported goods are processed slightly or not at all, if they are re-exported, a drawback can be claimed under Section 74. This reimburses the import duty drawback.According to Section 74, a refund of up to 98% of the import duty can be claimed.What Are the Benefits of Duty Drawback?The duty drawback scheme is not simply a refund; it is an important policy designed to streamline operations. The objectives include:Boosting ExportsExporters can significantly reduce their cost base as well as offer more competitive prices in global markets through cost-effective measures.Avoidance of Double TaxationIf duty drawbacks did not exist, the exporter would have to pay both import duties and export duties. Drawback helps neutralise that aspect. Promoting Value-AdditionThe duty drawback scheme encourages domestic manufacturing that utilises imported inputs, as the duty burden is mitigated. Balancing Fiscal IncentivesThe government uses drawbacks as one among many export incentive schemes to promote trade without blanket exemptions.Provides Clarity and Promotes PredictabilityThe Customs Act and the Drawback Rules help create a statutory framework that enables exporters to know when and how drawback can be claimed. Duty drawbacks play a quite important role in India's foreign trade and customs policy regime. Eligibility Criteria: Who Can Claim Duty Drawback?Several conditions apply when claiming customs duty drawbacks. Below are typical eligibility criteria:The goods must be exported from an Indian port / customs station. The export must originate from India.The claim must be related to imported or excisable domestic materials on which customs or excise duty has already been paid.If the exported goods are manufactured, there should be value addition (i.e., the export value must not be less than the cost of imported inputs in most straightforward cases).Sale proceeds of export must be realised (in foreign exchange) and repatriated to India within the prescribed time as per RBI/EXIM guidelines.Drawbacks will not be admissible for goods or categories that are excluded, such as exports to Bhutan or Nepal under special trade agreements, or those categories that are prohibited by notification.The claim must be filed within the prescribed time limit (often within 3 months of the Let Export Order, with extensions possible).How to Claim Duty Drawback? Step-by-Step ExplanationClaiming the duty customs drawback is a time-bound, document-driven process. Here is a step-by-step breakdown of all the steps that are included to claim the duty drawback scheme:Step 1: Filing the Shipping Bill/Export DeclarationWhen goods are being exported, the exporter can file a shipping bill via Electronic Data Interchange (EDI). More often, the shipping bill itself acts like a drawback claim. The exporter indicates the intention to avail a customs drawback (AIR or Brand Duty Drawback Rate).Step 2: Document SubmissionThe documents that are necessary to claim under the duty drawback scheme include:Copy of shipping bill (triplicate)Copy of the bill of entryInvoice of importProof of the duty paid on the importsRe-export approval from the Reserve Bank of India.Airway Bill/Bill of Lading copyBank-certified invoices copyCopy of AR-4Manufacturing/processing recordsCertificate or declaration regarding non-availment of ITC / GST credit (if applicable)Export invoice and packing list.Modvat DeclarationBank acknowledgement cardStep 3: Verification by Customs/Drawback AuthoritiesThe customs authorities will verify the claim. It also involves checking documents, after which it will be approved, adjusted, or rejected. However, selected claims are subject to audit and physical verification as part of a risk management system.Step 4: Fixation of Brand Rate (if applicable)If AIR is inadequate or not available, the exporter must apply for brand rate fixation, supplying detailed computations. Customs will scrutinise and fix a duty drawback rate.Step 5: Disbursement Upon approval, the drawback will be credited either via NEFT or RTGS to the exporter's bank account. The EDI systems and custom banks coordinate it.Step 6: Time Limits and ExtensionsThe claims must be filed within three months of the date of the Let Export order. The Assistant/Deputy Commissioner may grant an extension of up to 3 months; the Principal Commissioner may grant further extensions of up to 6 months.If the application is incomplete, customs may issue a deficiency memo; the exporter must respond within 30 days.Step 7: Supplementary ClaimsSupplementary claims are generally not allowed in most cases.Step 8: DisputeIf the drawback claim is delayed or rejected, exporters may also appeal to higher customs authorities. For non-credit of drawback, they may check with customs/banks. (ICEGATE has a "Drawback Enquiry" mechanism).How to Calculate Duty Drawback on Export?Now that you are aware of the eligibility and the process to apply for duty drawback, here is how to calculate duty drawback on exports. Step 1: Determine which duties will be eligible. Step 2: Determine how much duty was paid on each imported input (raw materials, components) actually used in the exported product.Step 3: Multiply the duty borne by the applicable drawback percentage. However, it is necessary to make sure that the duty drawback does not exceed the cap.Step 4: For re-export cases where goods were used, a time-based reduction is applied.Step 5: If some portion is disallowed (per rules, notifications, or adjustments), subtract it.Simplify the Duty Drawback Procedure with WareIQWareIQ's smart shipping solution helps eCommerce brands minimise cost leakages caused by RTOs, fake delivery attempts in NDR, weight reconciliation issues, and more. Our solution also offers prompt support for handling urgent client escalations, ensuring smooth operations at all times.Our solution offers the following capabilities:Multi-carrier engine enabling fast deliveries across 24,000+ pin codesControl Tower & automated workflows to minimise NDRs & RTOsSame/Next-day delivery courier optionsSeamless Integration with your WMS, ERPs and StorefrontsShipping Badges to display precise Estimated Delivery Dates (EDD)Custom-branded tracking pages, as well as notifications, to enhance customer experienceConclusionIn order to boost export competitiveness in the Indian commerce landscape, the duty drawback scheme plays an essential role by refunding duties that will eventually lead to cost inflation. Exporters must understand duty drawback, its process, and the eligibility to ensure complete compliance. It is also about reclaiming legitimate refunds that can improve margins and cash flow. For exporters, staying informed as well as filing claims correctly can turn what often feels like a complex process into a strategic advantage, especially in the international marketplace.FAQs About Duty Drawback SchemeWhat is a duty drawback in exports?Duty drawback can also be referred to as the refund of customs duties, excise, or service tax which are to be paid on imported inputs used in the manufacture of goods that are later exported. It helps reduce export costs and makes Indian goods more competitive on the global market.What is the main objective of the duty drawback scheme?The scheme's primary objective is to encourage exports by refunding duties paid on inputs, thereby eliminating the double taxation burden on exporters.How is customs duty drawback different from GST refunds?Customs duty drawback specifically covers customs duties on imports, while GST refunds pertain to the reimbursement of input tax credit or IGST paid on exports.What is the difference between the All Industry Rate and the Brand Rate?AIR is a standard rate applicable across industries. At the same time, the Brand Rate is a customised refund calculated for a specific exporter when the actual duties paid differ significantly from the AIR.

November 17, 2025