Launched by the Ministry of Commerce and Industry, the Duty Exemption scheme allows duty-free import of inputs that are required for the production of export. Under the Duty Remission Scheme, post export replenishment of duty is provided on inputs that are used in the export products.

1. Duty Exemption
Schemes
By DHEERAJ SINGH ANDOTRA

2. Classification of
Schemes
Schemes
Duty Exemption
Schemes
Advance
Authorisation (AA)
Duty Free Import
Authorisation (DFIA)
Duty Remission
Scheme
Duty Drawback
Scheme (DBK)

3. Advance Authorisation
• Import of inputs will be allowed to be made duty-free if they are
physically incorporated in a product which is going to be exported.
• An export obligation is usually set as a condition for issuing
Advance Authorization.
• The authorization will not be transferable even after completion of
export obligation.
• Valid for 12 months.
• The export obligation may be fulfilled within 18 months from the
date of issue of Authorization

4. Duties Exempted
• Basic Customs Duty
• Additional Customs Duty
• Education Cess
• Anti-dumping duty
• Safeguard Duty and Transition Product-Specific Safeguard duty
• Integrated tax
• Compensation Cess (wherever applicable)

5. Duty Free Importable Items
• Inputs that are physically incorporated in the product to be
exported.
• Fuel, oil, catalysts which are consumed or utilized to obtain the
export product.
• Mandatory spares that are required to be exported along with the
resultant export product.
• Specified spices would be allowed to be imported duty-free only
for activities like crushing, grinding, sterilization, manufacture of
oil.

6. Eligibility
Issue
d To
Manufacturer Exporter Directly
Merchant exporter tied with a supporting
manufacturer.
Issue
d For
Physical Exports
Intermediate Supply
Supply of ‘stores’ on board of a foreign going vessel
Supplies of goods - deemed exports

7. Grounds for issuing Advance
Authorization The Director General of Foreign Trade (DGFT), on the
recommendation of the Norms Committee, issues standard
norms that define the amount of input required in the
manufacture of a unit of the output product that will be
exported.
Standard Input
Output Norms
(SION) notified
Sometimes the SION is not available for a particular product.
In such a case, an application may be made to the Regional
Authority who will issue the Advance Authorization upon
review.
Self-
declaration
Another option available to an exporter where the SION is not
defined is to make an application to the norms committee,
requesting the same.
Application prior
to fixation of the
norm by the
Norms
Committee
This Scheme can be opted for when there is no SION or valid
ad-hoc norms for an export product and also where, SION has
been notified, but the exporter wishes to use additional inputs
in the manufacturing process.
Self Ratification
Scheme

8. SION Example

9. Calculation of Value Addition
Under Advance
Authorization, the
minimum Value Addition
to be achieved is 15%,
except for physical
exports for which
payments are not
received in freely
convertible currency and
other specified export
products.

10. Export Obligation
Export Obligation (EO) in the case of Advance Authorisation is the
value of export that needs to compulsorily be achieved within a
prescribed time period. The EO is usually mentioned in the
Authorisation issued. After achieving the EO, the entity has to
provide evidence of the same. Not achieving the EO in the prescribed
time period could result in penalties.

11. DUTY FREE IMPORT AUTHORISATION (DFIA)
SCHEME
DFIA is issued to allow duty free import of inputs, fuel, oil, energy
sources, catalyst which are required for production of export
product.
DGFT, by means of Public Notice, may exclude any product from
purview of DFIA. This scheme is in force from 1st May, 2006.

12. Eligibility Criteria For Duty Free Import
Authorization
1. Duty Free Import Authorization shall be issued on post export
basis only for those products for which Standard Input Output
Norms (SION) is available.
2. It is mandatory to mention the name and address of
supporting manufacturer of the export goods on the export
documents like ARE-1, ARE-3, Shipping Bill, Airway Bill, Bill of
Export etc.
Such authorization can be issued to a manufacturer exporter or
merchant exporter tied to supporting manufacturer:
For Physical exports included exports SEZ
For intermediate suppliers
Supplies made to United Nations Organizations
3. Application for Duty Free Import Authorization is to be filed
with the concerned Regional Authority before effecting export of
products.

13. Criteria For Minimum Value Addition
A minimum 20% value addition shall be required for issuance of
such authorization
Except :
Gems and Jewellery sector which are items of higher value addition,
is prescribed under Advance Authorization Scheme, shall be
applicable.

14. Validity & Transferability of DFIA
1. Applicant shall file online application to Regional Authority concerned before starting export under DFIA.
2. Export shall be completed within 12 months from the date of online filing of application and generation of file
number.
3. While doing export applicant should indicate file number on the export documents Shipping Bill, Airway Bill, Bill of
Export, ARE-1, ARE-3.
4. After completion of exports and realization of proceeds, request for issuance of transferable Duty Free Import
Authorization may be made to concerned Regional Authority within a period of 12 months.
5. Applicant shall be allowed to file application beyond 24 months from the date of generation of file number.
6. Separate DFIA shall be issued for each SION and each port.
7. Exports under DFIA shall be made from a single port.
8. No Duty Free Import Authorization shall be issued for an export product where SION prescribes ‘Actual User’
condition for any input.
9. Regional Authority shall issue transferable DFIA with a validity of 12 months from the date of issue and no further
revalidation shall be granted by Regional Authority.

15. Sensitive Items under Duty Free Import
Authorization
While issuing Duty Free Import Authorization, Regional Authority shall
mention technical characteristics, quality and specification in respect of above
inputs in the Authorization.
“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 fiber reinforcement, Relevant Synthetic
Resin, Lining Material”.

16. Thank You