The Maharashtra Authority for Advance Ruling(ARR) ruled that Goods and Service Tax (GST) is applicable on the sale or purchase of Duty-Free Import Authorization (DFIA) licenses.
M/s. Spaceage Syntex Pvt Ltd, the applicant sought to know whether GST is applicable on the Sale and/or Purchase of DFIA licenses. Duty-Free Import Authorization is issued to allow the duty-free import of inputs. In addition, the import Of Oil and catalyst which is consumed/utilized in the process of production of export product, May also be allowed. Duty-Free Import Authorization shall be exempted only from payment of Basic Customs Duty.
Regarding duty credit and duty exemption, both terms are synonymous as duty credit available can only be utilized to pay custom duty liabilities whereas duty exemption allows the importer to import goods duty-free against the custom duty. With this nomenclature it’s clear that end uses of both are the same, DFIA licenses are also freely transferable as duty credit scrips are.
Duty-free scrips are paper authorizations that allow the holder to import inputs that go into the manufacture of products that are exported or machinery used for producing such goods without paying duties equivalent to the printed value. The scrips are given to exporters for meeting certain goods and exporting them to specific markets. The main objective of the scrip is to incentivize the exporters to make more exports of specific commodities/services and those to specific markets. The FTPs (Foreign Trade Policies) usually mention the schemes eligible for scrips.
A Duty Credit Scrip/ DFIA are issued by the Director General of Foreign Trade (DGFT) and can be used to pay various duties/ taxes to the Central Govt. These are issued to both Exporters of Goods as well as Exporters of Services.
It was observed that the duty Credit Scrips and DFIAs are not the same or similar at all. They are different incentives given to exporters with different conditions and have been separately defined and explained in different Chapters of the FTP. Even though both are an incentive for exporters to promote and increase exports from the country, both schemes are used in different circumstances and in different manners.
A two-member bench comprising of Shri B. V. Borhade, Joint Commissioner of State Tax Shri Pankaj Kumar, Joint Commissioner of Central Tax observed that DF1A is distinguishable from ‘Duty Credit Scrips’ and cannot be considered as a Duty Credit Scrip as envisaged under the Serial No. 122A of Notification 1/2017 Central Tax (Rate) inserted vide Notification No.35/2017-Central Tax(Rate) dated 13.10.2017 even though it falls under CTH 4907.
Further observed that in the mail sent, it was stated that “I am directed to inform you that as per the minutes of discussions in the 22nd GST Council Meeting held on 6th October 2017 the Advance Authorizations are included in the Duty Credit Scrips…” However, it appears that no circular, notification, etc appear to have been issued by the Government in this regard and therefore the contention of the applicant on the said issue is not acceptable. The Authority ruled that GST is applicable on Sale and /on Purchase of DFIA licenses.
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