Benefits of duty under Advance authorisation, Customs - Exim - SEZ

[mk Jain]

Sir/mam,

1.How can we take the benefit of duty on domestic inputs (Raw material) against advance authorization.

2. Is any benefits of IGST or refund on input from domestic purchase

3. Can take the benefits EPCG and Advance authorization both parallel.

As per my understanding only custom duty benefits available on advance authorization. IGST refund on export only and DBK/RODTEP also available with AA/EPCG.

MK

Posts / Replies

[YAGAY andSUN]

Your understanding is largely correct, but let us clarify each point in detail:

1. How can we take the benefit of duty on domestic inputs (Raw material) against advance authorization?

Advance Authorization (AA) is a scheme under the Foreign Trade Policy (FTP), which allows exporters to import inputs without payment of Customs duty, subject to certain conditions. However, when it comes to domestic inputs (raw materials), the situation is a bit different:

• The benefit of duty exemption on raw materials that are domestically purchased can be obtained by using the Advance Authorization scheme, provided the inputs are used in the manufacture of export products.

• You can claim a duty drawback (DBK) on the customs duty paid on the inputs used in the manufacturing process.

• Duty Credit Scrips like RODTEP (Remission of Duties and Taxes on Exported Products) may also be available, depending on the export product and the specific scheme under the FTP.

So, while AA itself covers exemptions on customs duties for imported inputs, you may still claim benefits for domestic inputs, either through Duty Drawback or RODTEP, if eligible.

2. Is there any benefit of IGST or refund on input from domestic purchase?

Yes, there is a benefit. Under the GST (Goods and Services Tax) regime, you are entitled to a refund of Input Tax Credit (ITC), including IGST paid on domestic purchases of inputs, provided:

• The inputs are used in the manufacture of export products.

• The goods or services are exported, and the ITC is not utilized for payment of tax on any domestic supplies.

For exports, the IGST paid on the inputs (raw materials) can be claimed as a refund under the GST Refund Process. This is available to all exporters, whether they are under Advance Authorization, EPCG, or not.

Key point: The IGST refund is not available unless the goods are exported. So, while domestic purchases do benefit from ITC, the refund can only be claimed after the export of the goods.

3. Can we take the benefits of EPCG and Advance Authorization both in parallel?

Yes, you can use both the EPCG (Export Promotion Capital Goods) scheme and the Advance Authorization (AA) scheme simultaneously, but there are some conditions and restrictions to consider:

• EPCG Scheme: This allows the import of capital goods at zero customs duty, subject to an export obligation. The capital goods are used for manufacturing export goods.

• Advance Authorization: This allows the import of inputs (both raw materials and intermediates) without paying customs duty, subject to export obligations as well.

However, a few points to note:

• EPCG is primarily for capital goods, and AA is for raw materials. They serve different purposes but can be utilized in parallel for different needs in your business.

• When using AA for raw materials, the exports are typically subject to the duty exemption under AA. When using EPCG, the capital goods must be used for manufacturing export products, and there is an export commitment attached.

• Overlap Restrictions: Both schemes cannot be used for the same input or item. You cannot use both AA and EPCG for the same set of raw materials or the same capital goods. However, you can use them for different items or in separate phases of the manufacturing process.

Summary:

• AA and Domestic Inputs: You can claim duty benefits on domestic inputs via Duty Drawback or RODTEP, but Advance Authorization only provides duty benefits on imported inputs.

• IGST Refund: You can claim an IGST refund on inputs used in export production. The refund is available for domestic purchases of inputs.

• AA and EPCG Together: You can use Advance Authorization and EPCG together, but they should not overlap in terms of the same input. EPCG covers capital goods, while AA covers raw materials and intermediate goods.

Let us know if you need further details on any of these!