2018 (11) TMI 885 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2018 (19) G. S. T. L. 281 (A. A. R. – GST) – Levy of GST – Sale and/or Purchase of DFIA licenses – whether the ‘Duty Free Import Authorization (DFIA) license’ is a ‘Duty Credit Scrip’ as defined under GST laws?
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Held that:- 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 go
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ND 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 the CGST Act and MGST Act ] by M/s. SPACEAGE SYNTEX PVT LTD., the applicant, seeking an advance ruling in respect of the following question. Whether GST is applicable on Sale and/or Purchase of DFIA licenses? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes Of this Advance Ruling, a reference to such a similar provision und
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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. Provisions of paragraphs 4.12, 4.18, 420, 4.21 and 4.24 of FTP 2015-2020 shall be applicable to DFIA also. With regard to duty credit and duty exemption, these both terms are synonymous as duty credit available can only be utilized to pay custom duty liabilities where as 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 same. DFIA license are also freely transferable as du ty credit scrip s are. Clarification 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
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exporters. It may be noted that in both chapters common thread is benefits under MIES/SIES/EIS. 4. Nomenclature used under .4907 is Duty Credit Scripts. It is submitted as under: a. Under both schemes credit, relief or advantage given is of payment of basic customs duty. b. Both are scrips i.e. are paper authorizations. c. Both are entitled only on fulfilling Export obligations and submission of BRC. d. It is observed by Department that DFIA is duty exemption scheme and does not give any duty credit. The meaning of word credit as defined in legal dictionary is as under: credit (Delayed payment), noun advance, chance to borrow money on time, confidence, future payment, installment buying, loan opportunity to obtain goods on time, permission to defer payment, purchase on time, purchase on trust, reliance Associated concepts: confirmed credit, consumer credit, contingent creditors, credit agreement, credit association, credit bureau, credit rating, credit union, creditor and debtor, credi
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ort and also to give competitive edge to Indian exporters by offerings these advantages. 6. Both the Duty Credit scrips and DFIA Licences are freely transferable and can be used 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 repleni
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money that is given to someone. Publicly acknowledge a contributor s role in the production of. b.. Remit means To transmit (money) in payment ITO refrain from exacting (a tax or penalty), The act of reducing or Canceling the amount of money that you owe. A remission is conventional when it comes about through an express grant to the debtor by a creditor. It is tacit when the creditor makes a voluntary surrender of the original title to the debtor under private signature constituting the obligation. c. scrip means a certificate entitling the holder /authorisation/license. D. FEATURFS OF DUTY CREDU SCRIPS DERIVED FROM FTP No where Duty credit scrip is specifically defined. However reading from FTP following Clear inferences can be drawn. 1. They are issued to exporters only. 2. The scrip allows duty deduction (non-payment of taxes) of a specified amount in the scrip. 3. The scrips value or tax reduction is expressed as a percentage of export turnover of the exporter. 4. The scrip value
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me (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 Free Import Authorization shall be exempted only from payment of Basic Customs Duty. (c) Duty Free Import Authorization shall be issued on post export basis for products for which Standard Input Output Norms have
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be taken into considerations. B. Under Duty Credit Scrip any OGL can be imported. In Our opinion DIFA license also allows to import only OGL items. Hence this view expressed by the department is incorrect. C. Department view is that the Duty Credit Scrip can be used for payment of specified duties and under DFIA they say it is duty remission. We do not understand how these two benefits are different. Essence of the benefits is reward in duty payment. 4. It is submitted that rationale behind issuing such scrip s need to be taken into consideration. Press release issued by the GST council explains the rationale behind this. Also FTP policy enumerates both the schemes MEIS and DFIA as export incentive. Copy of Press release enclosed. 5. The object in exempting Duty credit scrip s from GST is as under: Mindful of the difficulties faced by exporter s post-GST leading to a decline in export performance and export competitiveness, the Council had last month set up a high power Committee on E
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d 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 remission or nonpayment of duties. Copy of Notification closed. 8. It is submitted that in the letter issued by GST council, clarification says that DFIA license is like MEIS/SEIS and exempt from GST. It is submitted that if your honour disagree with the view of GST council reference may be made to technical officer for the clarification on their opinion. EXPORT PACKAGE GST PRESS BRIEF The GST Council under Chairmanship of Union Finance Minister Shri Arun Jaitley has in its 22nd Meeting held at Delhi today approved a major relief package for exporters. 2. Mindful of the difficulties faced by exporters post-GST leading to a decline in export performance and export competitiveness, the Council had last month set up a high power Com
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in the national interest to take all possible measures to support the exporting community, which earns valuable foreign provides significant employment especially in the small and medium sector. Accordingly, the Council approved the following package of relief and incentives for exporters with immediate affect: a. Within the next 4 days i.e. by 10.10.2017 the held-up refund of IGST paid on goods exported outside India in July would begin to be paid. The August backlog would get cleared from 18.102017 and refunds for subsequent months would be handled expeditiously. Other refunds of IGST paid on supplies to SEZs and of inputs 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 Counc
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red that the e-Wallet solution should be made operational w.e.f. 1st April 2018. e. Exporters have been exempted from furnishing Bond and Bank Guarantee when they clear goods for export. f. Specified banks and Public Sector Units (PSUs) are being allowed to import Gold without payment of IGST. This can then be supplied to exporters as per a scheme similar to Advance Authorization. g. To restore the lost incentive on sale of duty credit scrips, the GST on sale purchase of these scrips is being reduced from 5% to 0%. h. GST on bunker fuel is being reduced to 5% for both coastal vessels and foreign going vessels. This will boost coastal shipping. It will also improve India s competitiveness. 6. The Council is confident that these measures would provide immediate relief to the export sector and enhance export competitiveness of India. The Council also decided to continue to monitor the situation closely so that going forward all required support continues to be extended to this important s
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t/saved aspect. MEIS authorisation specifies the duty credit in authorisation. The DFIA licence also gives the duty saved / credit amount, 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 a
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minutes of 22nd GST council dated 6th October 2017 meeting and it is not superintendent s view. 12. The exemption of MEIS is based on the Clarification in GST council press release and clarification says Duty Credit Scrips such as MEIS . Thus the intention of the legislature is to include similar scrips for exemption. (Copy enclosed.) A long title of a Legislation may not control, circumscribe or widen the scope of the legislation, if the provisions thereof are otherwise clear and unambiguous, but if the terms of the legislation are capable of both a wider and a narrower construction, that construction which would be in tune with the avowed Object manifested in the preamble or declared in the long title, ought to be accepted. 13. Circulars / notifications have statutory legal backing and emanate through delegated legislation or subordinate legislation. Compliance in accordance with them is mandatory. Judicial authorities are duty bound to act upon the true intention of legislature. 14
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he 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 is as under: Mindful of the difficulties faced by exporters post-GST leading to a decline in export performance and export competitiveness, the Council had last month set up a high power Committee on Exports under Revenue Secretary Shri Hasmukh Adhia to recommend suitable strategies for helping this sector. This Committee had five s
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vour of the assessee, provided no violence is done to the language used. C. In the background of above submissions we pray as under: a. The authorities should not interpret the words Duty Credit Scrips in narrower sense. Interpretation should be broad based and convincing taking into consideration circumstantial clarifications / notifications issued. It is submitted that the directory publications are issued in support of the main provision and cannot be ignored all together b. It is submitted that in case your honour has different opinion, 30 days time be given to seek further clarification from GST council. A letter is already forwarded to joint Secretary, GST and also to DGFT. Copies attached. c. It is submitted that clarification be sought by the authority from CST council considering far reaching effects on industry as the issue relates to export promotion which is of national interest / importance. d. Advance ruling being judicial authority ; we request your honour to explain the
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f 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 Purchase of DFIA Licenses. (ii) A ruling is required whether DFIA(Duty Free Impost Authorisation) covered under HSN 4907 00 90 has nil GST applicable. 2. M/s. Spaceage Syntex Pvt. Ltd. was registered under Service Tax having Service Tax Registration No. AAACS0730MST001 for providing Business Auxiliary Services covered under Section 65(105)(zzb) of Finance Act, 1994. Now in GSTIN No.27AAACS0730LIZG is engaged in trading of Export Entitlement Licenses such as DFIA/DFRC etc. The applicants have stated that they have purchased the said licenses from the exporters and sold to manufacturers to avail the benefit of entitlement of duty free imported goods. 3. The applicant is engaged in trading of Export Entitlement Licenses such as DFIA/DFRC etc. which are to be covered under HSN 4907 as DUTY FREE CREDIT SCRIPTS . A duty Credit sc
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0.2017. Currently there is zero GST on Supply of these Scrips and can be used to pay Customs Duties, Composition fee, Application fee under Foreign Trade Policy(FTP). 6. The basic issue to be decided in the application is whether the DFIA (Duty Free Import Authorisation) will be covered under Duty Credit Scripts as envisaged in the Serial No. 122A of Notification 1/2017 Central Tax (Rate) inserted vide Notification No.35/2017-Central Tax(Rate) dated 13.10.2017 ? The answer to this question is negative due to following reasons 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
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he MEIS and SEIS prescribed under Chapter 3 of FTP. DEIA is duty exemption scheme and does not give any duty credit. DFIA cannot use for payment of Customs Duty. Thus DFIA is distinguished from duty credit scrips and hence it is not 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 13.102017 even if it falls under CTH 4907. Therefore, in the view of the above discussion, DFIA will fall under Chapter 4907 and attract applicable GST. 6.1.5. Notwithstanding anything contrary to Whatever stated herein above it is also to bring your kind notice that this issue falls under purview Of the Foreign Trade policy and hence it is suggested that authority may seek opinion from DGFT also. PRAYER (i) Considering the facts discussed in foregoing paragraphs, the questions (i) framed by the applicant in Point No. 14, whether GST is applicable on Sale and/or Purchase of DFIA licences, the answer
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.A. alongwith Sh. Pravin Mehta, Director and Sh. Mozar Dhalu appeared 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) D
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ost export basis for products for which Standard Input Output Norms (SION) have been notified. 6. Merchant Exporter shall be required to mention name and address of supporting manufacturer of the export product on the export document for export prescribed under the GST rules. 7. Application is to be filed with concerned Regional Authority before effecting export under Duty Free Import Authorisation. 8. No DFIA shall be issued for an input which is subjected to pre-import condition or where SION prescribes Actual User condition or pre import condition for such an input. 9. Applicant shall file online application to Regional Authority concerned before starting export under DFIA and Export shall be completed within 12 months from the date of online filing of application and generation of file number. While doing export/supply, applicant shall indicate file number on the export / supply documents viz. Shipping Bill / Bill of Export / Tax invoice for supply prescribed under CST rules. 10. W
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d 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 are paper authorizations that allow the holder to import inputs that go into manufacture of products that are exported. Under DFIA, which is mostly quantity based, only items specified in a particular Auth
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) and 3 (5) of the Customs Tariff Act, 1975 for import of certain inputs or goods, including capital goods and also payment of Central excise duties on domestic procurement of inputs or goods. B. Objective of the MEIS is to promote the manufacture and export of notified goods/ products to certain notified markets and such export shall be rewarded under MEIS. Such reward would be calculated on realised FOB value of exports in free foreign exchange, or on FOB value of exports as given in the Shipping Bills in freely convertible foreign currencies, whichever is less, unless otherwise specified (Hence it can be said that the duty credits scrips issued are on value basis and not quantity based. C. As per para 3.06 of the FTP certain exports categories /sectors shall be ineligible for Duty Credit Scrip entitlement under MEIS D. Under SEIS Service Providers of eligible services shall be entitled to Duty Credit Scrip at notified rates (as given in Appendix 3D) on net foreign exchange earned. E
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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 MEIS and SEIS. c. DFIA falling under Chapter 40f the FTP enable duty free import of inputs for export production, including replenishment of inputs or duty remission whereas Duty Credits Scrips are issued under Chapter 3 of the FFP whose objectives are to provide rewards to exporters to offset infrastructural inefficiencies and associated costs. d. Duty Credit Scrips can be used for payment of specified duties of the customs on the imported goods and in DFIA, duty free import of inputs for export production, including replenishment of inputs or duty remission. e. Duty Credit Scrips are used for making payment of Basic customs duty for import
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payment of duty at all. DFIA is connected with duty free imports. This is definitely a major difference between the two. The applicant has also submitted that to restore the lost incentive on sale of duty credit scrips, it was proposed by the Council that the GST on sale purchase of these duty credit scrips was being reduced from 5% to 0%. To sum up, we find, in view of the discussions made above that, 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 wi
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