No relief from QCO for inputs imported under advance authorisation scheme

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

For deemed exports supplies to EOU, we are obtaining advance authorisation under the notification 21/2013-Cus dated 1st April 2023. Can we import under the advance authorisation, the inputs subject to quality control orders (QCO)?

 

No. DGFT notification no.71/2023 dated 11th March 2024 says that the exemption from QCO will be available for physical exports only and such exemption will not be allowed for deemed exports for advance authorisation holders.

 

We have imported certain inputs under advance authorisation. Our customer has cancelled the orders because of higher tariffs in the US and uncertainties ahead. Now, the imported raw materials cannot be used for making other goods. Our supplier has refused to take them back and we cannot find other buyers abroad to take them either. So, we cannot export the raw materials but we have found an EOU who needs the raw materials. Instead of importing, the EOU is ready to buy from us. If we supply the duty free raw materials to the EOU, will it be considered as deemed export and will the supply discharge our export obligation? If this is not possible, what options can you suggest?

 

First of all, please note that as per Para 4.16(i) of the FTP, ‘advance authorisation and/or material imported under advance authorisation shall be subject to ‘actual user’ condition. 

 

The same shall not be transferable even after completion of export obligation. 

 

However, authorisation holders will have option to dispose of products manufactured out of duty free input once export obligation is completed’. Secondly, please note that as per Para 7.01 of the  FTP, ‘supply of goods as specified in Paragraph 7.02 below shall be regarded as “deemed exports” provided goods are manufactured in India’.  

 

So, your only option is to take the permission of the authority that issued the advance authorisation, in accordance with Para 2.46(a) of the HBP.

 

During our foreign travels recently, many of our relatives gave some currency notes as gifts to our 6 year old daughter. Instead of converting these into rupees, can we hold such foreign currency notes for use later? Alternatively, can we open a foreign currency account where we can deposit such notes for use later?

 

Regulation 3(iii)(c) of the Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2015.allows you to retain currency notes acquired by way of gifts while on a visit abroad upto a limit of US$ 2000/-.. Para 3.3(1)(d) of the RBI Master Direction no.14/2015-16 dated January 1, 2016 (as amended) allows a resident individual to open an RFC(D) account to retain in a bank account in India the foreign exchange acquired in the form of currency notes, bank notes and travelers cheques as gifts from relatives.  Para 3.3(3) says that the sum total of the accruals in the account during a calendar month must be converted into rupees on or before the last day of the succeeding calendar month after adjusting for utilisation of the balances for approved purposes or forward commitments.   

Business Standard invites readers’ SME queries related to GST, export and import matters. You can write to us at smechat@bsmail.in