SSE - FTP - Duty Exemption Scemes

8/7/2019 SSE - FTP - Duty Exemption Scemes

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FOREIGN TRADE POLICY

Select Schemes

AA, DFIA and DEPB


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FOREIGN TRADE POLICY

(Duty Exemption Scheme)

ADVANCE AUTHORISATION

SCHEME FOR DUTY FREE

IMPORTS


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ADVANCE AUTHORISATION SCHEMEFOR DUTY FREE IMPORTS

The scheme is jointly operated by theDGFT and Ministry of Finance. DGFTtakes care of the Policy / Procedural

aspects and MOF issues relevantcustoms duty exemption notifications.


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DUTY EXEMPTION SCHEME

Duty Exemption Scheme enables duty

free import of inputs required for export

production.

An Advance Authorization (Earlier known

as Advance Licence) is issued under

Duty Exemption Scheme.


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Advance Authorization

Eligibility:

Registered Exporters, Manufacturer or

Merchant - who has a tie-up with supporting

manufacturer.Relaxation:

Applications for an AA can be filed even if

there is neither an export order nor a L/C in

case of exports to warehouses setup in

Dubai (UAE) made by Star Export House

and Public Sector Undertaking on

consignment basis.


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ADVANCE AUTHORISATION - DUTY FREE

IMPORTInputs for Production

An advance Authorization is issued toallow duty free import of inputs whichare physically in incorporated in theexport product (making normalallowance for wastages).

In addition, fuel, oil, energy, catalysts,etc. which are consumed in the courseof their use to obtain the export productmay also be allowed under the scheme.


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Mandatory Spares

Duty free import of mandatory sparesupto a specified 10% of the CIF valueof authorization which are required to

be exported / supplied with theresultant product may also be allowedunder Advance Authorisation.

Imports vis--vis Export Items

Import items must be related with theexport item i.e. required as an inputfor production of a particular item.


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Standard Input Output Norms (SION)

Advance Authorizations are issued on thebasis of the inputs and export items givenunder SION. However, they can also be

issued on the basis of Adhoc norms or selfdeclared norms as fixed by the competent

authority.

SION norms have been fixed for a largenumber of items and published in the

Handbook of Procedures (Vol. 2), 2004-2009 (Now 2009 2014, w.e.f. 27th Aug.

2009) by the Ministry of Commerce.


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Inputs Free of Cost:

The Advance Authorisation shall alsobe available - where some or all of

the inputs are supplied free of cost tothe exporter.

Validity:

Validity of effecting import is 24months extendable 6 more months

i.e. up to 30 months


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Export obligation

Advance Authorisation shall be subject to thefulfilment of a specified time bound export

obligation.

The EO imposed shall be fulfilled within a

period of 24 months from the date of

issuance of advance Authorisation.

It is extendable first by 6 months, an

application to be made in Aayaat NiryaatForm 4E subject to payment of

composition fee of 2% of duty saved on all

the unutilized imported items as per

Authorisation.


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Value Addition for this purpose shallbe:

A - B

V.A. = x 100

BWhere, V. A. is value addition

A - is the FOB value of the export realized

B - is the CIF value of the imported inputs

covered by the Authorisation, plus anyother imported material used on which thebenefit of duty drawback is being claimed.


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Notional Value of Inputs Received Free

of Cost

The value addition in the case of such

Advance Authorizations would becomputed by adding the notional

value of the free of cost inputs along

with value of other duty free inputsshall be taken into consideration.


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Non-Transferable

Advance Authorisation is issued subject to

Actual User (AU) condition.

Such authorisations and /or materialimported there under shall not be

transferable even after completion of EO.

Even items received free of cost, shall beutilized in the manufacturing of the

product except the wastage.

However, the Authorisation holder will havethe option to dispose off the product

manufactured out of the duty free inputsonce the export obligation is completed.


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Duty Free

ImportAuthorization


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Duty Free Import Authorisation (DFIA)Scheme offers the facility to importproduction inputs before exports,

and allows transferability of the DFIAScrip on the completion of exportobligation.

It allows imports of specified inputs asper SION and comes into effect from

1st May, 2006.


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Duty Free Inputs Import

Duty Free Import Authorisation (DFIA) isissued to allow duty free import of inputswhich are used in the manufacture of the

export product (making normal allowancefor wastage), and fuel, energy, catalyst,

etc. which are consumed or utilized in thecourse of their use to obtain the export

product.


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Mandatory Spares

Duty free import of mandatory spares upto10% of the CIF value of Authorisation which

are required to be exported / supplied with

the resultant product may also be allowed

under the scheme.

Entitlement against SION only:

The Authorisation shall be issued only for

products for which Standard Input OutputNorms (SION) have been notified. The import

entitlement shall be limited to the quantity

mentioned in SION.


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Nexus with Export Product

In respect of resultant product, thematerials permitted in an authorization or a

duty free import authorization forintermediate supply, as the case may be,

shall be of the same quality, technical

characteristics and specifications as thematerials used in the said resultant

product.

However, in respect of the said resultantproduct the exporter shall give declaration

with regard to the quality, technicalcharacteristics and specifications of

materials used in the shipping bill.


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Duty Exemption

Basic customs duty,

Additional customs duty,

Educational cess

Safeguard and Antidumping duty

AU Condition

The Authorisation shall be initiallyissued with actual user condition.However,


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Transferability of DFIA::

Once export obligation has beenfulfilled, request for transferability of

the Authorisation or the inputsimported against it may be made

before the Regional Authority. Oncetransferability is endorsed, the

Authorisation holder will be at libertyto transfer the duty free inputs, otherthan fuel, any other item(s) notified by

DGFT for this purpose.


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Validity

The validity of such licences shall be 24months.

Value Addition

DFIA shall be issued on minimum valueaddition of 20% (except for items in gem

& jewellery sector for which separatenorms are prescribed in paragraph 4A 2.1of Handbook Vol. 1) and items for whichhigher value addition is prescribed underAdvance Authorization Scheme.


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Value Addition free of cost materials

In case of free of cost materials, the value

addition would be computed by adding the

notional value of such material to both theCIF value of imports and FOB value of

exports.

Export Obligation

Export Obligation on DFIA shall be the

same as under Advance Authorisation

Scheme


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DUTY ENTITLEMENT

PASS BOOK

(DEPB)


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DUTY ENTITLEMENT PASS BOOK

(DEPB) SCHEME

The objective of DEPB Scheme is to

neutralize the incidence of Customs

Duty on import content of export

product.

The neutralization shall be provided

by way of grant of duty credit against

the export product.


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The credit shall be available against

such export products and at such

rates as may be specified by the

Director General of Foreign Trade

(DGFT) by way of public notice. Creditmay be utilized for payment of

Customs Duty on freely imported

items. The holder of DEPB Scheme shall

have the option to pay additional

customs duty, if any, in cash as well.


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Time Limit

The application for obtaining credit shallbe filed:

Within a period of 12 months from the

date of exports, or Within six months from the date of

realization, or

Within three months from the date of

printing/release of shipping bill,whichever is later, in respect ofshipments for which the claim havebeen filed.


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Late Cut

Whenever any application is received

after the expiry of the last date, but

within six months from such last date,

such application may be considered

after imposing a late cut fee of 10% on

the entitlement.


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Value Cap

DEPB rates for some products are

subject to value cap. The value cap,

wherever existing shall be with

reference to the FOB value of exports.DEPB rate shall be applied on the FOB

or value cap whichever is lower. For

example, if the FOB is Rs. 500/- perpiece and value cap is Rs. 300/- per

piece, the DEPB rate shall be applied

on Rs. 300/-.


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Present Market Value In respect of products where the rate of credit

entitlement under DEPB scheme comes 10% ormore the amount of credit against such exportproduct shall not exceed 50% of the Present Market

Value (PMV) of the export product. At the time of export, the exporter shall declare in

the shipping bill that the benefit under DEPB wouldnot exceed 50% of the PMV of the export product.

But the PMV declaration shall not be applicable forproduct for which value cap exists irrespective ofthe DEPB rate of the product.

PMV will be inclusive of excise duty, sales andother local taxes.


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Present Market ValueExample

Product X DEPB Rate 20%

Quantity of exports of X = 10,000 pcs.

Value of Export of X = Rs. 100,000/-PMV (MRP) of X = Rs. 3.00 per unit.

50% of PMV of X = Rs. 1.50 per unit.

Amount of PMV worked out = 10,000x1.50

= Rs. 15,000/-Amount of DEPB @20% = Rs. 20,000/-

As per PMV criterion it should not exceed 50% ofPMV, which is Rs. 15,000. Hence, benefit underscheme restricted to Rs. 15,000/-


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Types of DEPB

DEPB shall be issued on Post-export

basis against the exports already

made. No DEPB will be issued on Pre-export

basis.

No exports shall be allowed underDEPB Scheme unless the DEPB rate of

the concerned product is notified.


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Credit Rates

DEPB to be granted against exports

already made. The credits rates shall

be as specified in the book Scheduleof DEPB Rates, as amended, issued

by the Deptt. of Commerce (DGFT).

No exports shall be allowed underDEPB scheme unless the DEPB rate of

the concerned export product is

notified.


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DEPB Credit Utilization for EPCG

DEPB scrip may also be utilized forpayment of duty against imports under

EPCG Scheme

DEPB Credit Utilization for EO Defaults

DEPB scrip can also be used /debited

towards payment of Customs duty in case

of EO defaults for Authorizations issuedunder chapter 4 (AA / DFIA) and 5(EPCG) of

the policy. However, penalty/interest shall

be required to be paid in cash.


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Ports of Imports/Exports

Port of Registration

Sea Ports, Airports, ICDs & LCSs havebeen specified for exporting under

DEPB Scheme (Para 4.19 ofHandbook).

DEPB shall be issued with single portof registration, which will be port from

where exports have been effected.Exports made to any SEZ are also

entitled to DEPB.

SSE - FTP - Duty Exemption Scemes

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