Duty Exemption and Remission Schemes

Exporters often wish to explore new markets abroad for their goods. To compete with companies in the foreign market and to improve their manufacturing process, they need heavy duty machinery. One primary hindrance to this is the exaggerated custom duties required to pay to the government. This is where the Duty Exemption and Remission Scheme fits in.

Overview

The Duty Exemption and Remission Scheme assists you to receive waivers on custom duties on imported heavy duty machinery.

The schemes covered under Duty Exemption are:

  • Advance Authorisation Scheme
  • Duty Free Import Authorisation (DFIA) Scheme

The schemes covered under Duty Remission are:

  • Duty Entitlement Passbook (DEPB) scheme
  • Duty Drawback (DBK) scheme

Here are detailed points about each of the above-mentioned schemes.   

  1. Advance Authorisation Scheme: 

What does this scheme offer?

The scheme allows duty-free import of inputs which are utilised in the manufacturing process for organisations that import fuel, oil, energy and catalysts.

Imports under advance authorisation are exempted from payment of the following duties:

  • Basic customs duty
  • Additional customs duty
  • Education cess
  • Anti-dumping duty
  • Safeguard duty
  • Transition product specific safeguard duty

What is the eligibility criteria for this scheme?

The eligibility criteria for this scheme is:

  • Manufacturer, exporters or merchant exporters tied to supporting manufacturers
  • Advance authorisation shall be issued only to the manufacturer exporter for pharmaceutical products manufactured through non-infringing process.
  • The imported goods should provide minimum 15% value addition
  • The exports/imports need to be completed in 24 months

How can an organisation apply for this scheme?

An organisation can apply for this scheme in the following ways:

  • It will have to submit an online application with the prescribed documents to the concerned regional authority (RA).
  • The RA will then forward a copy of the application within 7 days from authorisation issue date to the Norms Committee (NC) for fixation of norms within the prescribed time.

The application form can be found on the following link

  1. Duty Free Import Authorisation (DFIA) Scheme 

What does this scheme offer?

For organisations that imports oil/catalyst utilised in the production, the DFIA scheme allows duty-free import.

DFIA only exempts from the payment of basic customs duty, unlike the advance authorisation scheme. Additional duties, including customs/excise, are not exempt under this scheme.

These duties are adjusted as CENVAT credit as per the Department of Revenue’s rules. DFIA is issued only for products with notified Standard Input and Output Norms (SION).

What is the eligibility criteria for this scheme?

The eligibility criteria for this scheme is as follows:

  • Merchant exporters and manufacturer exports are eligible to apply for this scheme
  • The imported goods should provide minimum 20% value addition
  • DFIA is exempted only from the payment of basic customs duty unlike the advance authorisation scheme
  • DFIA is issued only for products for which Standard Input and Output Norms (SION) have been notified

How can an organisation apply for this scheme?

An organisation can apply for this scheme by filling up the application form, attaching the necessary documents, and submitting it to the concerned RA.

The application form can be found on the following link

Please note, in respect of the following items, the exporter has to provide declaration with regards to the technical characteristics, quality and shipping bill. The RA will mention the technical characteristics, quality and specifications in respect of these inputs while issuing DFIA.

The items include – Alloy steel including stainless steel, copper alloy, synthetic rubber, bearings, solvent, perfumes/ essential oil/aromatic chemicals, surfactants, relevant fabrics, marble, articles made of polypropylene, articles made of paper and paper board, insecticides, lead ingots, zinc ingots, citric acid, relevant glass fibre reinforcement (glass fibre, chopped/stranded mat, roving woven surfacing mat), relevant synthetic resin (unsaturated polyester resin, epoxy resin, vinyl ester resin, hydroxyethyl cellulose), lining material.

Exclusions:

  • The merchant exporter availing this scheme has to mention the name and address of the supporting manufacturer of the product on the export document (shipping bill/airway bill/bill of export/ARE – 1/ARE – 3).
  • The application form should be filed with concerned regional authority before effecting export.
  • The export needs to be completed within 12 months from the date of online filing of application form and generation of file number.
  1. Duty Entitlement Passbook (DEPB) Scheme 

What does the scheme offer?

This scheme waives off customs duty on the import content of the export product. This is provided by way of grant of duty credit against the export product.

Under this scheme, an exporter can apply for credit as a specified percentage of freight on board (FOB) value of exports, made in freely convertible currency.

This scheme is valid for a period of 24 months from the date of issue.

Who is eligible to apply for this scheme?

Merchant exporters and manufacturer exports are eligible to apply for this scheme.

How to apply for this scheme?

An organisation can apply for this scheme by applying for a grant of credit under the DEPB scheme by submitting the application form to the concerned RA along with the prescribed documents.

An agency commission of up to 12% of FOB value will be allowed for DEPB entitlement.

The application form can be found online here. 

  1. Duty Drawback Scheme 

What does this scheme offer?

Under the Duty Drawback Scheme, the organisation will be reimbursed of the Customs and Central Excise Duties that it incur on its inputs. The amount is deposited it into the nominated bank account.

For further details on these schemes please click here

EXPORT PROMOTION CAPITAL GOODS (EPCG) SCHEME

Every businessman aims to introduce his products in foreign markets. For the products to meet international standards, businesses often have to import certain machinery. For this, the government has introduced the Export Promotion Capital Goods scheme, to be able to help such businesses bear the cost of machinery, customs duty, and other such perks.

Overview

The Export Promotion Capital Goods Scheme allows import of capital goods for pre-production, production, and post-production of products at zero customs duty.

Benefits

What benefits will a business avail from this scheme?

The benefits a business benefits will avail from this scheme are the permissions to:

  • Import machinery needed for their factory, minus the custom duty
  • Import capital goods such as computer software systems, spares, moulds, dies, jigs, fixtures, tools, refractories for initial lining and spare refractories, and catalysts for initial charge, plus one subsequent charge

Eligibility Criteria

Who are eligibility to apply for this scheme?

The following are eligible to apply for this scheme:

  • Manufacturer exporters with or without supporting manufacturers
  • Merchant exporters tied to supporting manufacturers and service providers
  • Service provider who is designated/certified as a common service provider (CSP) by the Directorate General of Foreign Trade (DGFT) Department of Commerce or State Industrial Infrastructural Corporation in a Town of Export Excellence

Application

How can a business apply for this scheme?

A business can apply for the EPGC license online by filling in the application here.

The steps to navigate through the site can be found here.

A business must file the application along with the necessary supporting documents with DGFT.

Documents Required

The complete list of documents needed to apply for this scheme can be found here.

Additional Information

Please take note of the information provided below:

  • Companies shall be subjected to export obligation (EO) equivalent to six times of duty saved on capital goods. This needs to be fulfilled in six years reckoned from date of issue of authorisation.
  • Authorisation shall be valid for 18 months from date of issue. Revalidation of EPCG authorisation is not permitted.
  • Second-hand capital goods shall not be permitted to be imported under this scheme.

Authorisation for import of the following capital goods (including captive plants and power generator sets of any kind) shall not be issued:

  • Export of electrical energy (power)
  • Supply of electrical energy (power) under deemed exports
  • Use of power (energy) in their own unit
  • Supply/export of electricity transmission services

For further information on this scheme, click here.