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The Duty Free Import Authorisation (DFIA) scheme has been revamped in the new Foreign Trade Policy (FTP). It is now a post-export scheme, with exemption limited to basic customs duty. It retains the name but resembles the Duty Free Replenishment Certificate scheme that it replaced in 2006.
The new version of DFIA requires online application before any export. The file number generated online must be quoted on export documents. Based on exports made within 12 months from the application date and realisation of export proceeds, DFIA can be claimed as the basis of the Standard Input Output Norms (SION) applicable for the export product. A separate DFIA will be issued for each SION and port. The DFIA will be transferable and valid for 12 months from the date of issue. Split authorisations can be issued in multiples of Rs 10 lakh.
The scheme maintains the minimum value addition at 20 per cent, except in some cases of payment in non-convertible rupees. The list of sensitive items for which quality, specification and technical characteristics must be mentioned is the same as earlier. Fuel or raw sugar cannot be imported under the new scheme.
Drawback at All Industry Rates (AIR) will not be available for export under DFIA. For getting drawback on the duties paid on the inputs actually used in the manufacture of the export product by way of brand rate fixation, the details must be declared upfront on the DFIA application and taken into account for value addition calculations. These provisions deserve a review, as brand rate fixation is a tedious procedure, involving much documentation. Grant of excise allocation of drawback at AIR for units that do not take Cenvat credit or input stage exemption/rebate appears a simpler option.
The FTP says DFIA is not available against deemed exports (Para 7.04). However, elsewhere, the FTP talks about mentioning the file number on ARE-3 and central excise certified invoices [Para 4.29 (iii)]. The related customs exemption notification (no. 19/2015-Cus dated April 1) refers to DFIA for intermediate supply. These provisions appear inconsistent, as there is no question of mentioning a file number on ARE-3 or excise invoices or intermediate supply when DFIA is available only against physical export and not against any domestic supplies.
A DFIA holder can source inputs from domestic suppliers through an Advance Release Order (ARO) or Invalidation Letter (IL) facility. However, no exemption or refund of terminal excise duty is available against supply to a DFIA holder. Advance authorisation for supplies against IL or drawback for supplies against ARO can be claimed. For export of products requiring specified sensitive inputs, the inputs permitted in DFIA must be of the same quality, technical characteristics and specifications as the materials used for making that product and declared in the shipping bill or bill of export. In respect of other inputs, the material permitted to be imported must be of the specific name/description or quantity as the material used in the export of the resultant product and declared in the shipping bill or bill of export.
The new version of DFIA is less messy than the earlier version but a rethink on grant of drawback at AIR is necessary. Also, all related provisions must be reviewed and unnecessary inconsistencies removed.
email: tncrajagopalan@gmail.com
