Duty Exemption Scheme
The Duty Exemption Scheme enables duty free import of inputs required for export production. Under the scheme government can issue an Advance Authorisation or DFIA to import \ procure domestically the inputs duty free.
Imports under Advance Authorisation for physical exports are exempted from payment of Basic Customs Duty, the whole of the integrated tax and Compensation Cess leviable under sub-section (7) and sub-section (9) respectively, of section 3 of the Customs Tariff Act, 1975 (51 of 1975), Additional Customs Duty, Education Cess, Anti-dumping Duty, Countervailing Duty, Safeguard Duty, Transition Product Specific Safeguard Duty, wherever applicable and such imports shall be subject to pre-import condition. For Imports against deemed export supplies have different rules.
Advance Authorisation (License)
An Advance Authorization is issued to allow duty free import of inputs, which are physically incorporated in the export product (making normal allowance for wastage) subject to actual user condition. Such Authorizations are exempted from payment of basic customs duty, additional customs duty, anti dumping duty and safeguard duty, if any.
Advance Authorization can also be issued for supplies with in India that are categorized as Deemed Exports. Purposes like supplies to Mega Power Projects, Projects funded by IBRD/IDA/ADB UN Agencies etc, EOUs etc.
Advance Authorizations are issued with an obligation to export the quantity and value of goods mentioned therein in a fixed period of 18 months. Before imports customs ask for a bond or a bank guarantee towards security for duty saved, till export obligation is fulfilled.
Advance Authorizations or materials imported against it cannot be transferred even after completion of Export Obligation.
Advance Authorisations are also available for Annual requirements under SION.
Input – Output Norms (SION)
The government has published the standard input-output norms (SION) for more than 6000 products. These are available in the Handbook of Procedures (Vol-II) of Exim Policy. While applying for advance Authorisation the Input-Output norms are to be followed for duty exempted inputs. If however no norms are available, Authorisation can still be applied on self- declaration basis.
Duty Free Import Authorisation (DFIA)
DFIA is issued to a merchant-exporter or manufacturer-exporter for duty free import of inputs used in the manufacture of goods without payment of basic customs duty. DFIA is issued on minimum value addition of 20%, and only for the export of products covered under the SION. DFIA or the material(s) imported against it are freely transferable after completion of Export Obligation.
The holder of advance Authorisation and DFIA may also source their inputs from indigenous sources. In such cases, the GST paid by the indigenous supplier can be taken credit of or refunded. In addition the indigenous supplier can import his own raw material duty free or can even get a drawback.
Role of Andees Team
It is very important to note in the above process, that foresight and experience can play a big role in not only getting an optimum license issued but also in monitoring the export obligation and documentation at each point. Further, in case of delay in exports, timely actions can save a lot of problems and liability in future. Finally, proper documentation and representation at the time of redemption can ensure a smoother and optimum closure, taking into account other schemes, compliances etc.
Andees team has been assisting clients with the whole process of Advance Authorisation / DFIA for the last more than 20 years. Since the team is Tech-Savvy, we maintained all the data on the cloud and give real time updates on their work to the client with software. Sound knowledge of Policy & Procedures along with a very qualified and experienced team, Andees has handled hundreds of complicated matters related to Advance Authorisation, saving thousands of crores for clients that are MNCs, Indian Corporates, or PSUs. While proper planning during the entire life cycle has helped smooth operations, several complicated matters even at the last stage have been saved by Andees team from substantial liabilities.