Duty Exemption and Remission Schemes

Duty exemption schemes enable duty free import of inputs required for export production.

a) Advance Authorization Scheme

Scheme allows duty free import of Inputs, along with Fuel, Oil, Catalyst etc., required for manufacturing of export products. Inputs are allowed either as per Standard Input Output Norms (SION) or on adhoc basis under Actual User condition. This facility is available for physical exports (also including supplies to SEZ units & SEZ Developers) and deemed exports including intermediate supplies. Minimum value addition prescribed is 15%, except for certain items. Exporter has to fulfill the export obligation over a specified time period, both quantity and value wise. A number of initiatives have been undertaken in the current year. Some of them are listed below:

• In its endeavour to keep upto the commitment on the underlying principle that goods and services should be exported and not the taxes and levies, imports under Advance Authorization for Annual Requirement has been also exempted from payment of Anti-dumping & Safeguard duty. Exporters shall now have the flexibility to Club Advance authorization with Advance Authorization for Annual Requirement for the purpose of account closure.
• Adhoc Norms ratified under Advance Authorisation scheme shall henceforth apply to all cases for the same export product upto one year not only prospectively but also retrospectively.
• Chartered Engineer Certificate for Advance Authorisation on self declared basis has been dispensed with. This will reduce documentation and the transaction cost.
• Value addition norms requirement for petroleum products have been reduced to 8% from the earlier 15%, as per actuals.

b) Duty Free Import Authorization (DFIA)

Operational since May 2006, the DFIA scheme is issued to allow duty free import of inputs which are used in the manufacture of the export product (making normal allowance for wastage), and fuel, energy, catalyst etc. which are consumed or utilised in the course of their use to obtain the export product. The Authorisation shall be issued on the basis of inputs and export items given under SION. The import entitlement shall be limited to the quantity mentioned in SION. Such Authorisation can be issued either to a manufacturer exporter or merchant exporter tied to supporting manufacturer(s). A minimum 20% value addition shall be required for issuance of such Authorisation

c) Duty Entitlement Pass Book (DEPB) Scheme

DEPB scheme neutralises the basic customs duty on inputs with the assumption that all inputs, mentioned in the SION for a product are imported. Duty credit Scrips are allowed at a notified rate of FOB value of Exports. These scrips are freely transferable and are valid for imports within 24 months of its issuance. These scrips can be used for payment of customs duty for clearance of import consignment or for payment of customs duty in case of default in fulfillment of export obligation under various schemes. DEPB benefit is available on physical exports with realisation in free foreign exchange or supplies to SEZ units / SEZ developers. The Government extended the validity of the scheme till September 2011 which was scheduled to come to an end by June 2011. This scheme is likely to be replaced by a modified duty drawback scheme.

d) Schemes for Gems & Jewellery Sector

Duty free import / procurement of precious metal (Gold / Silver / Platinum) from the nominated agencies is allowed either in advance or as replenishment. In addition, exporters of Gems & Jewellery items are allowed access to duty Free Import of consumables for export production upto a certain specified percentage of FOB value of previous years’ export. List of items allowed for duty free import by Gems & Jewellery sector has been expanded by inclusion of additional items such as Tags and labels, Security censor on card, Staple wire, Poly bag.

e) Duty Drawback Scheme

Duty Drawback scheme allows refund of customs duty and the excise duty on the inputs used in the manufacture of the export product at a specified percentage of FOB value of exports. Service Tax on the input services has also been factored in the All Industry rate of Duty Drawback. Duty drawback scheme for physical exports is being administered by the Department of Revenue and that of deemed exports, by the DGFT. Duty drawback rates for a number of products have been reduced on account of reduction in tariff and roll back of adhoc increase affected earlier.

In addition to the schemes mentioned above, the GoI also offers export promotional schemes such as the 100% EOU Scheme and the SEZ scheme, which have been already detailed in Chapter IV Foreign Investment Framework.