A Duty Free Import Authorization (DFIA) is issued to allow duty free import of inputs which are used in the manufacture of an export product, making normal allowance for wastage, and energy, fuel, catalyst etc. Many are utilized in the course of their use to obtain the export product.
The Director General of Foreign Trade (DGFT), by means of Public Notice and also public interest, can exclude any product(s) from the scheme. This scheme was in force from 1st May 2006.
The Authorization shall be issued on the norms of inputs and export items given under the Standard Input and Output Norms (SION). Thus the import entitlement must be limited to the quantity mentioned in SION
Previously, Duty Free import of mandatory spares to 10% of the CIF value of Authorization which is required to be exported/ supplied as the resultant product may also be allowed under the scheme. Such Authorization may be issued either to a merchant exporter or manufacturer exporter tied to supporting manufacturer.
The details of Duty Free Import Authorization and its modifications to previous Foreign Trade Policy (FTP) 2014-2019 is explained under new Foreign Trade Policy of India 2015-2020. The new policy of Duty Free Import Authorization Scheme is described below:
DFIA Scheme under FTP 2015-2020
1) Duty Free Import Authorization is distributed to allow duty free import of inputs. Thus, import of oil and catalyst which is utilized in the process of production of an export product may also be allowed.
Duties Exempted and Admissibility of Central Value added tax, and Drawback as per Foreign Trade Policy of India 2015-20
(i) Duty Free Import Authorization has been exempted only from the payment of Basic Customs Duty.
(ii) Additional customs duty is not exempted and shall be adjusted as CENVAT credit as per Department of Revenue rules.
(iii) Drawback as per rate is determined and fixed by the Central Excise authority and it is available for duty paid inputs, whether imported or indigenous, used in the export product. However, in case such drawback is claimed for inputs not specified in SION, the applicant should have indicated clearly about the details of such a duty paid inputs and also in the application for Duty Free Import Authorization, and as per the details mentioned in the application, thus the Regional Authority should also have clearly endorsed details of all such duty paid inputs in the condition sheet of the DFIA.
As per the new policy minimum value addition
According to the new IMPEX Policy 2015-20, minimum value addition of 20% shall be required to be achieved. For few items where the higher value addition has been prescribed under the Advance Authorization, the same value addition shall be applicable for Duty Free Import Authorization also.
Eligibility for obtaining the Duty Free Import Authorization
(i) Duty Free Import Authorization shall be issued on post export basis for products for which Standard Input Output Norms have been notified.
(ii) Any Merchant Exporter shall be required to mention name and address of supporting manufacturer of the export product on the export document viz. Shipping Bill / Bill of Export / Airway Bill / / ARE-3 / ARE-1.
(iii) An application is to be filed with concerned Regional Authority before effecting export under Duty Free Import Authorization.