SSE - FTP - Duty Exemption Scemes
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Transcript of 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.