The Authority for Advance rulings (AAR) has held that the sale and purchases of Duty Free Import Authorisation ( DFIA ) licenses are subject to GST.
DFIA is issued to allow duty free import of inputs, fuel, oil, energy sources, catalyst which are required for production of export product.
According to the applicant, Spiceage Syntex Pvt Ltd, both Duty Credit Scrips and DFIAs are issued as export incentive and therefore it does not matter that the Duty Credit Scrip can be used for payment specified duties and under DFIA it is duty remission. The applicant has also submitted that the GST Council had observed that the duty credit scrips such as MEIS was losing value due to its reduced usability as it could no longer be used to pay IGST / GST.
The authority noted that the duty credit scrip’s can be used for payment of specified duties of the customs on the imported goods. Duty credit available can only be utilized to pay custom duty liabilities. DFIA license are also freely transferable as duty credit scrips are. Duty Credit scrips are value based whereas DFIA is predominantly quantity based. Both the Duty Credit scrips and DIFA Licences are freely transferable and can be used for payment of specified ‘duties of the customs on the imported goods.
The authority held that the Duty Credit Scrips and DFIAs are not one and 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 to exporters to promote and increase exports from the country, both the schemes are used in different circumstances and in different manner. When the FTP itself has segregated the two in different Chapters with different procedures, it would not be proper to consider the two schemes as one and the same and therefore we differ with the views of the applicant on this issue. Hence we find that DFIA 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),” the authority said.
The authority rejected the contention of the applicant that letter received from GST council clarifies that advance authorisation are included in Duty Credit Scrips and exempted from GST on the basis of minutes of 22nd CST council dated 6th October 2017 meeting.
“In this connection we find that the mail sent to Mr Manish Modi states that “I am directed to inform you that as per the minutes of discussions in the 221’11 CST Council Meeting held on 611, 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 said.
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