Chatroom: EO against AA can be discharged through physical/deemed exports

Rajagopalan answers SME queries related to GST, export and import matters

Para 4.30 of HBP prescribes the procedure for obtaining advance authorisation (AA) for intermediate supplies.  This is somewhat inconvenient for us because we have a number of customers to whom we have to supply our goods that they will use as inputs in their manufacture of the export products. We have to enter into tie-up agreements with each one of them and we have to wait for the invalidation letters issued against their AA every time and then apply for our AA for intermediate supplies. We are considering obtaining AA for physical imports, import our raw materials under notification 21/2023-Cus dated April 1, 2023, manufacture the intermediates and then supply against invalidation letters as and when they are issued.  Are we likely to encounter any difficulties under this type of arrangement?

The DGFT Policy Circular no.1/2024 dated April 12, 2024 says that AA holder holding an AA issued on or after 01.04.2015, under customs notification no. 18/2015-Customs, dated 01.04.2015 has option to fulfill the export obligation either by physical exports or by making domestic supplies under Para 7.02(A) (a) of FTP 2015-2020 i.e. supply of goods against AA/AA for annual requirement/DFIA.  In my opinion, this circular lays down a principle that is equally applicable for AA issued during the current Foreign Trade Policy 2023 under notification no.21/2023-Cus dated April 1, 2023 also. However, it is better if you get this point clarified by the DGFT.

We are an EOU. We had made certain purchases under high seas sales arrangements where we made payment in INR. Our consultant says that according to the DC, Kandla SEZ, we are required to show such payments in INR also in our NFE calculation. Is this correct?

Yes. Para 6.10 of HBP is quite clear that payments made in INR towards high seas sales will also enter into NFE calculations. 

We import our inputs under advance authorisations without payment of any customs duties or IGST. We export under LUT without payment of IGST and claim refund of unutilised ITC. In this process, our ITC keeps accumulating. We want to liquidate the accumulated ITC by exporting on payment of IGST under refund claim. Our consultant says that this cannot be done due to the bar under Rule 96(10) of the CGST Rules, 2017. Is this correct?

Rule 96(10) of the CGST Rules, 2017 bars you from exporting on payment of IGST if you have imported any of your inputs without IGST payment under notification 79/2017-Cus dated October 13, 2017, which actually amends the basic notification 18/2015-Cus dated April 1, 2015. So, if you imported your inputs under the said notification 18/2015-Cus, you cannot export on payment of IGST. However, if you have imported your inputs under the notification 21/2023-Cus dated April 1, 2023, the bar against exporting on payment of IGST under a refund claim does not operate.  So, after exhausting the inputs imported under the said notification 18/2015-Cus., you can start exporting on payment of IGST under refund claim. 


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