TMI Blog2018 (11) TMI 885X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 - 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) inserted vide Notification No.35/2017-Central Tax(Rate) dated even though it falls under CTH 4907 Ruling:- GST is applicable on Sale and / or Purchase of DFIA licenses. - GST-ARA-13/2018-19/B-86 - - - Dated:- 6-8-2018 - SHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, MEMBER PROCEEDINGS (under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification from member of GST Council that DFIA is duty credit scrips is also enclosed for further clearance. BEFORE THE Advance Ruling Authority (GST), Mumbai DETAILED DISCUSSION OF SUMMARISED SUBMISSION 1. Basically, duty free scrips are paper authorizations that allow the holder to import inputs that go into 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 it to specific markets. 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. 2. A Duty Credit Scrip/ DFIA are issued by the Director General of Foreign Trade (DGFT) and can be used to pay various du ties/ taxes to the Central Govt. These are issued to both Exporters of Goods as well as Exporters of Service. 3. Department while disagreeing with the exemption to DIFA Licenses, opined that Duty Credit Scrips falls under different chapters. It is respectfully submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for payment of specified duties of the customs on the imported goods. 7. The Department opines that Duty Credit scrips can be used for payment of specified duties of the customs on the imported goods and other fees as stipulated in the para 3.18 of the FTP. Whereas Duty free import Authorisation (DFIA) are issued in terms of Chapter 4 of FTP 2015-2020. The details are as under. Schemes under this Chapter enables duty free import of inputs for export production, including replenishment of inputs or duty remission. Duty Free Import Authorisation, is issued to allow duty free import of inputs. This is amazing distinction wherein in one case term used can be used for payment of specified duties of the customs on the imported goods AND IN OTHER CASE duty free import of inputs for export production, including replenishment of inputs or duty remission. B. OPINION OF DEPARTMENT ON THE ISSUE a. Duty credit scrip s are issued to exporters as per chapter 3 of FTP 2015-20. As per para 3.02 of FTP, Duty credit scrip s are granted as reward for exports under MEIS and SEIS. The duty credit scraps shall be freely transferable and can be used for payment pf specified du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xports with different kinds of duty scraps with varying conditions (sector specific or actual user only) attached to their use. Now all these schemes have been merged into a Single Scheme, namely Merchandise Export from India Scheme (MEIS). (b) Rewards for export of notified goods to notified markets under Merchandise Exports from India Scheme (MEIS) shall be payable as percentage of realized FOB value (in free foreign exchange). (C) Scrip s issued under Exports from India Schemes can be used for the following: (i) Payment of Basic customs duty for import of inputs / goods including capital goods, except items listed in Appendix 3 A. (d) Minimum value addition shall be required to be achieved. (e) These duty credit Scrip s are to be freely transferable and usable for payment of Custom duty. (f) Entitled only after export is completed and Bank realization certificate is obtained. (g) Validity of scrip is 24 months. (h) Issued only after export obligation is completed and endorsed by word TRANSFERABLE On scrip. 2.DFIA SCHEME (a) Duty Free Import Authorization is issued to allow duty free import of inputs. (b) Duty Fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or helping this sector. This Committee had five senior Government functionaries from the Centre and an equal number from the States as members. The Council identified the major difficulties constraining the export sector are on account of delays in refunds of IGST and input taxes on exports and working capital blockage as exporters have to upfront pay GST on inputs and Capital goods for export production or for procuring goods for export. Another difficulty was 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 Council was unanimous that it is in the national interest to take all possible measures to support the exporting community, which earns valuable foreign exchange and provides significant employment especially in the small and medium sector. 6. It is submitted that how exporter having DFIA license discriminated from exporter having MEIS license. This is against natural justice. 7. Your attention is drawn to notification issued by GST council while determining the taxability of RECs and PSLCs licenses. It is observed that these licenses are not in the nature of duty remissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s taxes on exports under Bond/LUT, shall be processed from 18.10.2017 onwards. For this, the Council agreed to suitably empower Central and State GST officers so that exporters get refunds from one authority only. Related matters of settlement of funds are being resolved. b. To prevent cash blockage of exporters due to upfront payment of GST on inputs etc. the Council approved two proposals, one for immediate relief and the other for providing long term support to exporters. Immediate relief is being given by extending the Advance Authorization (AA) / Export Promotion Capital Goods (EPCG) / 100% EOU schemes to sourcing inputs etc. from abroad as well as domestic suppliers. Holders of AA / EPCG and EOUS would not have to pay IGST, Cess etc. on imports. Also, domestic supplies to holders of AA / EPCG and EOUS would be treated as deemed exports under Section 147 of CGST/SGST Act and refund of tax paid on such supplies given to the supplier. c. Merchant exporters will now have to pay nominal GST of 0.1 % for procuring goods from domestic suppliers for export. The details would be released soon, d. The permanent solution to cash blockage is that of e-Wallet which wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , by giving the permitted CIF value of imports . It was explained that under both schemes only basic duty exemption is allowed. Both authorisations states Duty credited and duty saved /credit amount (Copies of Both Attached) 7. The first and most elementary rule of constructions is to assume that the words and phrases of legislation are used in their technical meaning if they have acquired one or otherwise in the ordinary meaning. If the language of the Statue is clear and unambiguous, words must be understood in their plain meaning. It is submitted that the Duly Credit Scrips means authorisations where duty is saved/ not payable . 8. It was submitted that both the schemes are rewards under foreign trade policy and are export promotion schemes. 9. We therefore submit that Duty Credit Scrips referred in Entry No.4907 is inclusive concept which includes all Duty Credit Scrips where duty saving / nonpayment is involved. 10. We are enclosing herewith circular no. 46/20/2018 issued by Technical Officer, Tax research unit GST. This letter is addressed to the Principal Commissioner / Director General / Chief Commissioners etc. The circular clarifies following aspects: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tailed listed in our submission dated 01/08/2018. In the course of discussion no difference was observed by your honour except that the words Duty Credit Scrips are not tagged to DFIA. 2. Also rationale followed by GST council while granting exemption on Duty Credit Scrips was explained. It was stated that taxing the sale/purchase of the scrips amounts to double taxation under GST. Bill of entries in support were produced. Following example can explain it further: i. CIF value say 100 ii. Duty thereon say (Paid through MEIS or DFIA) 100 iii IGST @ 18% 36 Hence amount payable 136 -------- Thus IGST is already charged once and hence taxing the scrip sale/purchase amounts to double taxation. Both IGST payable using MEIS or DFIA is on the above basis. With this rational the Duty Credit Scrips are exempted from levy of GST. Hence the same logic needs to be followed in both the cases. Enclosing herewith copies of BOE for your reference. 3. Caused explained while exempting Duty credit scrip s from GST i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Entry No. 4907 following rules of interpretation of taxing statue. Statement containing the applicant s interpretation of law and/or facts. as the case may be. in respect of the questions(s) on which advance ruling is required In 22 meeting of GST council difficulties faced by Exporters were addressed. Press release by the council in sub clause (g) of the clause (V) states as under : to restore the lost incentive on sale of duty credit scripts, the GST on Sale-Purchase of the scripts has been reduced from 5% to 0%. A ruling is required Whether DFIA (Duty Free Import Authorization) covered under HSN - 4907.0090 has nil GST applicable 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- Written submissions M/s. Spaceage Syntex Pvt. Ltd.47, Navketan Industrial Estate, Mahakali Caves Road, Andheri (East), Mumbai 400033 (here in after referred to as the applicant ) has filed above detailed application under Section 98 of the Central Goods and Service Tax Act, 2017 read with Rule 104 (1) of the CGST Rules, 2017 seeking advance ruling on: (i) Whether GST is applicable on Sale and/or Purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.1.1. Duty credit scrips are issued to exporters as per Chapter 3 of Foreign Trade Policy (FTP), 2015-2020. As per para 3.02 of FTP, Duty credit scrips are granted as rewards for exports under Merchandise Exports from India Scheme(MEIS) and Service Exports from India Scheme(SEIS). The Duty Credit scrips shall be freely transferable and can be used for payment of specified duties of the customs on the imported goods and other fees as stipulated in the para 3.18 Of the FTP. 6.1.2. Whereas Du ty Free Import Authorisation (DFIA) are issued in terms of Chapter 4 of FTP 2015-2020. The details are as under. Schemes under this Chapter enables duty free import of inputs for export production, including replenishment of inputs or duty remission. Duty Free Import Authorisation is issued to allow duty free import of inputs. 6.1.3. Another difference between the Duty Credit Scrips and DFIA is that, whereas under Duty Credit Scrips , any OGL item can be imported, under DFIA only the items specified in a particular Authorization can be imported. 6.1.4. In the view of the discussions above, it is evident that DFIA is not Duty Credit Scrip . The Duty Credit Scrips are issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and made oral and written submissions and requested that they would be making further submission latest by 06.08.2018. The jurisdictional officer, Sh. Yashwant Mulye, Supt., Mumbai East Commissionerate appeared and made written submissions. 05. OBSERVATIONS We have perused the records on file and gone through the facts of the case and the submissions made by the applicant and the department. In view of the submissions made by the applicant we find that the basic issue before us is whether the Duty Free Import Authorization (DFIA) license is a Duty Credit Scrip as defined under GST laws and therefore we discuss below both the concepts. DMA LICENSE : Under Chapter 4 of the FTP, 2015-2020, there are two Schemes for exporters, namely, Duty Exemption Schemes (DES) and Duty Remission Schemes (DRS), The DES consist of, (a) Advance Authorisation (AA) (which will include Advance Authorisation for Annual Requirement) and (b) DFIA. We shall limit this discussion only to DFIA scheme which is as follows: 1. As per para 4.25 of the FTP, DFIA is issued to allow duty free import of inputs. In addition, import of oil and catalyst which is consumed/ utilised in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a number of inputs (more than one input), then quantities of such inputs to be permitted for import shall be in proportion to the quantity of these inputs actually used/consumed in production and declared in Shipping Bill / Bill of Export / Tax invoice for supply prescribed under GST rules within overall quantity against such group of inputs. Proportion of these inputs actually used/consumed in production of export product shall be clearly indicated in Shipping Bill / Bill of Export / Tax invoice for supply prescribed under GST rules. 11. Separate DFIA shall be issued for each SION which has a validity of 12 months from the date of issue. No further revalidation shall be granted. 12. In respect of certain Sensitive Items under DFIA, the exporter shall be required to provide declaration with regard to technical characteristics, quality and specification in Shipping Bill and while issuing DFIA. The concerned Authority shall mention technical characteristics, quality and specification in respect of those inputs in the Authorisation. 13. DFIA scheme shall not be available for Gems and Jewellery sector and are issued only in respect of goods. Thus it can be said that DFIA s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xports. To sum up, Duty credit scrips are issued under MEIS and SEIS scheme and can be used to pay various duties/ taxes to the Central Govt. It is issued to exporters of goods/services under FTP(Foreign trade Policy) and is freely transferable. 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. In view of the above discussions we find that there is a lot of difference between Duty Credit Scrips and DFIA which includes the following : a. Duty Credit Scrips are covered under Chapter 3 of the FFP and can be used for payment of specified duties of the customs on the imported goods whereas DFIA is a duty exemption scheme and does not give any credit of duty. b. Duty credit scrips are issued under MEIS and SEIS whereas DFIA is not covered under M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) inserted vide Notification No.35/2017-Central Tax(Rate) dated even though it falls under CTH 4907. Hence we find that DFIA though will fall under Chapter 4907 and attract applicable GST as exemption is in respect of only Duty Credit Scrips. Finally the applicant has submitted that letter received from GST council clarifies that advance authorisation are included in Duty Credit Scrips and exempted from CST. They have also submitted that this clarification is given on the basis of minutes of 22nd GST 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 mi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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