TaxTMI 
TaxTMI 
2018 (11) TMI 885
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....r the MGST Act. Further to the earlier, henceforth for the purposes Of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST ACT". 02. FACTS AND CONTENTION - AS PER THE APPLICANT Written Submission (Summarised) • Your honour the issue raised before the authority is related to DFIA license whether its a "Duty credit Scrips" as defined under GST and accordingly the rate will prevail. • During the previous discussion response submitted by the respondent was that DFIA is different from Duty free credit scripts on the following grounds viz..... • Duty credit scrips are issued under MEIS and SFIS scheme • It is issued to exporter 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. • DFIA is a duty exemption scheme and does not give any credit of duty. • In response to above we hereby submit as under.... • Duty Free Import Authorization is issued to allow duty free import of inputs. In addit....
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....f 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, creditor of bankrupt, creditor of estate, creditor's bill, creditor's committee, creditor's reference, creditor's suits, establishment of credit, extension of credit, general creditors, judgment creditors, junior creditors, letter of credit, line of credit, paper credit, personal credit, preferred creditors, renewal of credit, secured creditors, unconditional credit. It is therefore submitted that use of word credit i....
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....A' that, whereas under duty credit scraps, any OGL items can be imported, under DFIA only the items specified in a particular authorization can be imported. C. MEANINGS OF RELEVANT WORDS. a. Word Credit means - an amount of 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 percen....
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....ferable and usable for payment of Custom duty. (g) Validity of scrip is 12 months. (h) Issued only after export obligation is completed and endorsed by word TRANSFERABLE on scrip. Note: Sample of MEIS and DFIA licenses enclosed for your reference. F. SUBMISSIONS 1. At the outset it is submitted that there is no dispute that the scrip DFIA is covered under HSN code: 4907 which read as 4' Duty Credit Scrip" 2 Question ultimately boils down to the issue whether DFIA license is Duty Credit Scrip. 3 It is submitted that we disagree with department view for the reasons as under: A. MEIS and DFIA are under different chapter. It is submitted that this makes no difference as rational behind the issue of both scrips need to 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 ....
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....ckage 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 Committee on Exports under Revenue Secretary Shri Hasmukh Adhia to recommend suitable strategies for helping this sector. This Committee had five senior Government functionaries from the Centre and an equal number from the States as members. 3. After wide ranging discussions with major Export Promotion Councils including FIEO, AEPC, GJEPC, EEPC, CLE, CHEMEXIL, PARMAEXCIL and Handicrafts EPC etc. and interacting with all stakeholders the Committee presented its recommendations to the Council today. 4. 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 ICST / GST. 5. The Council was u....
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....r 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 sector. Additional Submissions on 06.08.2018 In the case of Spaceage Syntex Pvt. Ltd. In the course of hearing before your honour on 1st August, 2018 following points were discussed: A. ENTRY NO. 4907 1. Entry No. 4907 read as "Duty Credit Scrips" 2. We were in agreement that DFIA license falls under this entry, but differed on the point whether DFI'A license is "Duty Credit Scrips"? 3. Entry No. 4907 "Duty Credit Scrips" is without any prefix or suffix. No were reference to Chap.3 and/or Chap.4 of FTP is indicated. Hence....
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....is incorrect to say that credit scrips falls under chapter 3 only. This clarification is given on the basis of minutes of 22^nd 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. In the background of above discussion we submit that it is incorrect to....
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....port. 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. It is incorrect to ignore the intention of the legislature. 4. The rule of interpretation for exemption is: an exemption clause in taxing statue must be, as far as possible, construed liberally and in favour 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 give....
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....are to be covered under HSN 4907 as 'DUTY FREE CREDIT SCRIPTS". A duty Credit scrip is issued by the DGFT and can be used to pay various duties/ taxes to the Central Government. These are issued to both exporters of goods as well as exporters of services i.e. Service Exporters, Merchandise Exporters, EPCG Scheme. The value of scrip varies from scheme to scheme, product to product and country to country. However, the scrip value in most of the cases is in the range of 2% to 5% of the realised (FOB value) ( in free foreign exchange). These scrips are issued to exporters as an incentive for them as the export industry has huge potential for employment creation in India. 4. The exporter to whom the Duty Credit Scrip has been issued can use the Duty Credit Scrip for the payment of 1. Basic Custom Duty. 2. Safeguard Duty. 3. Transitional Product Specific Safeguard Duty. 4. Anti-Dumping Duty. 5. With effect from 13.10.2017 GST on "Duty Credit Scrips" classified under CSH No.4907 is NIL as per Serial No.122A inserted vide Notification No.35/2017-Central Tax(Rate) dated 13.10.2017. Currently there is zero GST on Supply of these Scrips and can be used to pay Customs Duties,....
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.... 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 is "Yes". (ii) Answer to question number 2 framed by the applicant in Point no-16, is Duty Free Import Authorisation (DFIA) is not "Duty Credit Scrip" and hence buying and selling of DFIA is taxable under GST and will fall under HSN 4907. The NIL GST Rate is not applicable simply because exemption under Notification No.35/ 2017-Central Tax(Rate) dated 13.10.2017 is limited only to 'Duty Credit Scrips' which are different than DFIA. 04. HEARING The case was taken up for preliminary hearing on dt. 13.06.2018, with respect to admission or rejection of the application when Sh. Anil Vishwakarma, C.A. appeared and requested for admission of ....
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....n post 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. Wherever SION permits use of either (a) a generic input or (b) alternative input, the specific input together with quantity [which has been used in manufacturing the export product]....
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.... Merchandise Exports from India Scheme (MEIS) and (ii) Service Exports from India Scheme (SEIS). A. As per the para 3.02 of the FTP, Duty Credit Scrips are granted as rewards under MEIS and SEIS. The Duty Credit Scrips and goods imported / domestically procured against them shall be freely transferable. The Duty Credit Scrips can be used for Payment of Basic Customs Duty and Additional Customs Duty specified under sections 3 (1), 3 (3) 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 categor....
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....ted only from payment of Basic Customs Duty. f. FIA is issued for products for which Standard Input Output Norms have been notified whereas no such norms are required for issue of Duty Credit Scrips. g. The validity of a Duty Credit Scrip is of 24 months wheras the validity of DFIA is 12 months. The applicant has submitted that both Duty Credit Scrips and DFIAs are issued as export incentive and therefore it does not matter that the Duty Credit Scrip can be used for payment specified duties and under DFIA it is duty remission. The applicant has also submitted that the GST Council had observed 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 / CST. Hence it clearly appears that it was only the duty credit scrips which were loosing their value and not DFIA because DFIA does not envisage 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 be....