Supplier under 40/2017-C.T. (Rate) vs Imports on Adv Authorisation

[Prakash and Thiagarajan]

Dear Experts,

I have a scenario wherein the raw materials are imported under advance authorization without payment of Customs and IGST. The finished goods manufactured using such imported raw materail is supplied to a merchant exporter following the procedure of notification 40/2017-CT (Rate) at 0.5% + 0.5% GST. Will such transactions be considered towards fulfillment of export obligation for procurement of raw materials under advance authorization?

Thanks,

Ganesh

[Prakash and Thiagarajan]

Dear Experts,

Any views? To add to the question. The Merchant Exporter is not a AA or DFIA holder.

Thanks,

Ganesh

[Rajagopalan Ranganathan]

Sir,

Advance Authorization can be availed by manufacturer exporters or merchant exporters who are linked with supporting manufacturers for physical exports (including exports to SEZ), intermediate supplies, and supply of ‘stores’ on board of foreign going vessel/aircraft (conditions apply). The conditions are prescribed by FTP or DGFT through notifications.

In view of the above, in my opinion, such transactions are considered towards fulfilment of export obligation for procurement of raw materials under advance authorization.

[Prakash and Thiagarajan]

Dear Sir,

In the given scenario, the merchant exporter (without AA/DFIA) is a third party. The manufacturing unit having AA is not a supporting manufacturer of the the Merchant Exporter. Can such exports through merchant exporter still be considered for EO of the manufacturer against it's AA.

Thanks

Ganesh

[Rajagopalan Ranganathan]

Sir,t

If the merchant exporter does not have a tie-up with the manufacturer who is holding the AA, then exports made through the merchant exporter will not be taken into account to arrive at the export obligation of AA holder.

[Prakash and Thiagarajan]

Thanks Sir.

Ganesh.

AI Summary

Advance Authorization export obligation: supplies via unlinked merchant exporters do not count for fulfilment of obligation. Whether supplies of finished goods made from duty free imports under Advance Authorization count for the holder's export obligation depends on a recognised linkage: if the merchant exporter is a tied up or supporting exporter to the AA holder, such exports may qualify; if the merchant exporter is an unrelated third party with no prescribed tie up, those exports will not be taken into account for fulfilment of the AA holder's export obligation.