Duty exemption or remission scheme

Duty Exemption Scheme is an export promotion scheme and it enables import of inputs required for export production free of Customs duty. Advance Licenses are issued under Duty Exemption Scheme to allow import of raw materials, which are physically incorporated in the export product.

A Duty Remission Scheme enables post export replenishment/ remission of duty on inputs used in the export product.

These schemes consist of:

1. Advance Authorization Scheme: Under this scheme, duty free import of inputs is allowed, that are physically incorporated in the export product (after making normal allowance for wastage) with minimum 15% value addition. Advance Authorization (AA) is issued for inputs in relation to resultant products as per Standard Input Output Norms (SION) or on the basis of self-declaration, as per procedures of FTP. AA normally have a validity period of 12 months for the purpose of making imports and a period of 18 months for fulfilment of Export Obligation (EO) from the date of issue.  AA is issued either to a manufacturer exporter or merchant exporter tied to a supporting manufacturer.

2. Advance Authorization for annual requirement: Manufacturer exporter with export performance in the preceding year and registered with excise authorities, except for products which are not excisable for which no such registration is required, shall be entitled for such licenses. The entitlement under this scheme shall be up to 200 % (or the FOB value of export in the preceding licensing year. This shall only be issued for items having SION.

The license shall be valid for 12 months for imports and 18 months for exports from the date of its issuance. Each license will have one port of registration for imports. Exports can take place from any of the ports covered under the scheme. After expiry of 18 months the license holder shall furnish proof of having fulfilled export obligation by submitting the prescribed documents. In case of bonafide default in fulfilment of export obligation, the license holder can apply for regularization.

3. Duty Free Import Authorization (DFIA) Scheme: DFIA is issued to allow duty free import of inputs, with a minimum value addition requirement of 20%. DFIA is exempted only from the payment of basic customs duty. DFIA shall be issued on post export basis for products for which SION has been notified. Separate schemes exist for gems and jewellery sector.

Once export obligation has been fulfilled, request for transferability of the Authorization or the inputs imported against it may be made before the Regional Authority. Once, transferability is endorsed, the Authorization holder will be at liberty to transfer the duty-free inputs, other than fuel and any other items notified by DGFT for this purpose

4. Duty Drawback of Customs/Central Excise Duties/Service Tax: The scheme is administered by Department of Revenue. Under this scheme products made out of duty paid inputs are first exported and thereafter refund of duty is claimed in two ways:

  •  All Industry Rates:    As per Schedule
  •  Brand Rate:              As per application on the basis of data/documents

5. Rebate of Service tax through all industry rates: Discount on service tax is applicable to input services availed by the exporter beyond the premises of production or manufacture of the goods. An exporter of goods can claim 100% refund of service tax paid on export of services used by him for manufacturing the export goods.

Exporters are eligible to avail following incentives & discounts:

  • Duty Drawback to counterbalance Customs, Central Excise Duty and Service Tax paid on inputs/inputs services used to manufacture export goods;
  • Rebate of Central Excise duty paid on exported goods under Rule 18 of the Central Excise Rules, 2002;
  • Rebate on goods allowed clearance for export under bond under Rule 19 of the Central Excise Rules, 2002;
  • Refund of Central Value Added Tax (CENVAT) credit of inputs or input services to:
  • A manufacturer who clears a final product or an intermediate product for export without paying duty under bond or letter of undertaking,
  • A service provider who provides an output service exported without paying Service Tax, under Rule 5 of CENVAT Credit Rules, 2004.
  • Complete discount of duty paid on excisable inputs or Service Tax and cess paid on all input services used in providing service exported under Rule 6A of Service Tax Rules, 1994.

6. Duty Entitlement Passbook (DEPB) Scheme: The objective of DEPB is to neutralize the incidence of Customs duty on the import content of the export product. The neutralization is provided by way of grant of duty credit against the export product. 

Under the DEPB scheme, an exporter may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency. The holder of DEPB shall have the option to pay additional customs duty, if any, in cash as well. 

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