Superfluity-Thy name is DFIA scheme

EXPERT EYE

If you are looking for an export promotion scheme, which is overlapping, superfluous and imprecisely drafted, then it is the Duty Free Import Authorisation (DFIA) scheme. This scheme introduced from May 1, 2006, is said to have combined salient features of the Advance Licensing Scheme and the Duty Free Replenishment Certificate (DFRC). The concerned ministry thinks that by issuing newer and newer schemes, that is to say, creating new avatars of the old schemes, export will shoot out of the roof. And it preciously has the opposite effect. Already people are suffering due to lack of clarity, due to show cause memos being issued by Custom Houses and holding up of their availment of benefits of the DFIA scheme. And now they are scurrying back to the old faithful, the DEPB or the Drawback Schemes.

Now for the superfluity. There are already drawback and the DEPB Schemes, which ensure that duties paid or payable are zero rated for all goods exported. Zero rating envisages not only that the final exported product does not pay excise duty which otherwise it would have paid had it been cleared for domestic consumption but also that the duty on the inputs are also not paid or refunded if paid. This purpose of zero rating is well served by several existing schemes. There was absolutely no necessity to have one more scheme going which would do nothing but ensure a duty free import of inputs or duty free procurement of inputs from the domestic market or export of the final products made out of these duty free inputs without payment of duty of the exported goods. We should have the one or the other. There are already a number of such schemes namely: rebate of duty on export goods and material used in the manufacture of such goods under Rule 18 of Central Excise Rules, Export of goods under Bond,without payment of any excise duty on end products or their inputs of the Rule 19 of the Central Excise, Cenvat Credit provided drawback of duty is not taken, Electronic Technology Park, Jewellery Complex and EOUs, SEZ "� Special Economic Zone, , Free Trade & Warehousing Zone (Type of SEZ), DEPB , EPCG,& Advance Licence/DEEC (Duty Entitlement Exemption Certificate). On the top of all of them one more has now been innovated which is supposed to be a combination of Advance Licensing Scheme and DFRC. A committee constituted by the Planning Commission, government of India recommended it its report in May 2001 that multiplicity of export promotion schemes should be replaced by a few clear-cut schemes. The tide on the other hand has gone the opposite way.

The second aspect is the lack of clarity. There is a paragraph 4.4.7 of the Foreign Trade Policy 2006-07 which says "No Cenvat credit facility shall be available for inputs either imported or procured indigenously against authorisation".

This does not at all take into account the fact that there are other inputs (apart from those included in the authorisation under the Scheme), which are also necessary for manufacture of the export goods.

For these inputs, obviously, the input credits are available, which has been clarified in the next year's Policy 2007-08 but the commerce ministry has not so far found time to clarify to the Ministry of Finance that the clarification given in the next year's policy, is also valid from the 2006-07 policy.

The solution lies in avoiding multiplicity of schemes and in having a few precisely drafted ones, which do not overlap or confuse the users and enforcers.

smukher2000@yahoo.com