INTRODUCTION

Foreign Trade Policy introduce a new Scheme known as DFIA scheme .

It come into force from 1 May 2006 . It replace the erstwhile DFRC scheme .

It is more flexible than DFRC .

WHY DFIA IS ISSUED

Duty Free Import of inputs.

Fuel , Oil , Energy Source , Catalyst . DFIA is a kind of license .

TO

WHOM DFIA IS ISSUED

Either to manufacturer exporter or merchant exporter tied to supporting manufacturer : For Physical Export . For Intermediate Supply

To the main contractor for the supply of goods .

ENTITLEMENT

The Authorization shall be issued only for products for which SION have been notified. In case of post export DFIA a merchant exporter shall be require to mention only name and address of the manufacturer of the export product. Pre- export Authorization shall be issued only with actual user condition and exempted from payment of basic custom duty, excise duty , education cess ,anti dumping duty and safeguard duty .

APPLICATION

ANF-4H along with documents to RA . In respect of following item ,exporter shall be require to give declaration with regards to technical characteristics ,quality and specification in shipping bill :Stainless steel , copper alloy , synthetic rubber , solvent , perfume ,relevant fabrics ,marble , articles, articles made of paper and paper board , lining material .

IMPORT ITEMS

provision of following shall be applicable in case of DFIA holder : Advance release order and invalidation letter . Back to Back inland letter of credit . Prohibited items Admissibility of Drawback .

VALUE ADDITION

minimum 20% VA except for gems and jewellery.

Gems and Jewellery value addition would be

Items for which higher value addition is prescribed under AA shall be applicable .

EXPORT OBLIGATION PERIOD AND ITS

FULFILLMENT

Authorization holder shall furnish prescribed documents in ANF 4F in support of fulfillment of EO . DFIA holder shall maintain true and proper account . These record are required to sent to RA for discharge of EO . Such records should be preserved for a period of at least three years from date of redemption

TRANSFERABILITY

Once export obligation has been fulfilled, request for transferability of Authorization or inputs imported against it may be made before concerned RA.
Once transferability endorsed , authorization holder may transfer DFIA except Fuel and other items.

Once transferability endorsed transfer of imported authorization shall be subject to payment of applicable additional custom duty/excise duty .

CONT..

No transferability allowed for the inputs likes Acetic Anhydride, Ephedrine and Pseudo Ephedrine even after fulfillment of EO . Where SION prescribed actual user condition , no transferability is allowed for the inputs even after fulfillment of EO .

CENVAT CREDIT

The MODVAT Scheme was replaced by a new set of rules called CENVAT Credit Rules 2002
A manufacturer or producer of final product is allowed to take CENVAT credit of duties specified in the CENVAT Credit Rules 2002. CENVAT is based on destination principle i.e. excise duty/service tax is paid only when goods are consumed. Till then, burden of duty gets passed on to the next buyer/customer

CONT

CENVAT scheme allows credit of excise duty paid on inputs goods, capital goods and service tax paid on input services .
CENVAT credit facility shall be applicable for the inputs either imported or procured indigenously.

For example :-

CONT

CENVAT availed at the time purchased various goods :-Rs.20,000

CENVAT payable for his product at the time sales :- Rs.25,000

He will pay only Rs.5000 through cash deposit

FACILITY FOR SPLIT AUTHORIZATION

Split authorization of DFIA subject to a minimum of CIF value of Rs. 10L each and multiples thereof may also be issued, on request at the time of seeking transferability.

A fee of Rs. 1000/- each shall be paid for each split authorization. Split-up DFIAs shall be permitted with same Port of Registration as appearing on the original DFIA .

CONT

DFIA for free of cost and paid material A specific endorsement shall be made on exchange control copy of DFIA Authorization disallowing remittances for material being supplied free of cost. All inputs imported shall be utilized in manufacturing of product except wastage.

Description of a DFIAa) Name & description of items to be imported & exported. b)Quantity c) Aggregate CIF value of imports. d) FOB value & quantity of export.

Export in anticipation of authorization . Shipping/ supply documents should be endorsed with File no. or Authorization no. to establish co-relation of exports with authorization issued.

CONT
The requirement of endorsement of file no.or authorisation no. on the shipping bill would be dispensed with once the EDI Data Transmission System For the Shipment becomes operational.

Acceptance of BG/LUT
At the time of issue of authorisation, acceptance of undertaking given by applicant to RA concerned in relevant ANF will be endorsed on the reverse of DFIA Authorisation. Port of RegistrationDFIA shall be issued for purpose of import & export through specified ports/ICDs/LCS.

Export obligation period and its extention 36 months except in case to projects/turnkey project In india/ abroad under deemed export.

CONT

Regularizations of Bonafide DefaultEO may be regularised by RA. a) If EO is fullfilled in terms of value, but there is a shortfall in terms of quantity-

to custom authorities, custom duty on unutilized value of imported/ indigenously procured material along with interest as notified.
an amount equivalent to 3% of CIF value of unutilised imported material through a TR in authorised branch of Central Bank of India. b)If the EO is fullfilled in quantity but there is shortfall in value, no panalty shall be imposed if authorisation holder has achieved minimum value addition prescribed. However, if value addition falls below the minimum value , then authorisation holder shall be required to deposit an amt. equal to 1% of shortfall in FOB value.

DFIA FOR APPLICANT WITH MULTIPLE UNIT

Transfer of any duty free material imported or procured against actual user DFIA from one unit of co. to another for manufacturing purpose shall be done with prior intimation to excise authority.

RE-EXPORT OF GOODS IMPORTED UNDER DFIA

Good imported under transferable DFIA which are found defective ,may be re-exported . In such cases 95% of CIF value debited against DFIA for export of such goods, shall be generated by concerned Commissioner of Customs as an Authorization ,containing amount generated and the details of original DFIA . Based on the certificate, a fresh DFIA shall be issued by concerned RA .

CONT

Fresh DFIA, so issued, shall have same port of registration and shall be valid for a period equivalent to balance period available on date of import of such defective/unfit goods.

FORMS

ANF-4H:- DFIA Licence. ANF-4E:- Revalidation of authorisation.

ANF-4F:- Fullfillment of EO.

ANF -4A:- Duty free material import/ procured.

CONCLUSION

Prohibited items of imports mentioned in ITC(HS) shall not be imported under the Authorization issued under the Scheme. The import entitlement shall be limited to the quantity mentioned in SION . The DFIA shall be issued for the purpose of import and export through port(s) as specified.