In a bid to foster ease of doing business and reduce transaction costs, the Directorate General of Foreign Trade, under the Ministry of Commerce & Industry, Government of India, has introduced important amendments to Para 4.10 (i) of the Handbook of Procedures 2023. This amendment specifically pertains to the Input Tax Credit (ITC) on materials for the Advance Authorization Scheme.
1. Background:
The Ministry of Commerce & Industry operates under the Foreign Trade Policy, 2023, and exercises powers conferred by Paragraph 1.03 and 2.04 of the policy, which can be amended as required. These powers provide the basis for the amendment in Para 4.10 (i) of the Handbook of Procedures 2023.
2. Amendment Details:
The key change is in relation to the transfer of duty-free materials imported or procured under the Advance Authorization Scheme from one unit of a company to another unit for manufacturing purposes. The Handbook previously allowed such transfers with prior intimation to the jurisdictional Customs Authority but explicitly stated that no Input Tax Credit (ITC) would be claimable on these transferred inputs.
With the new amendment, there’s a fundamental shift. In cases where duty-free imported or indigenously procured materials, on which Goods and Services Tax (GST) has been paid, are transferred between units located in the same or different states, the availability of Input Tax Credit (ITC) shall be subject to the provisions of the GST law and its associated rules.
3. Implications:
The amended Para 4.10 (i) stands to enhance the ease of doing business in India by allowing companies greater flexibility in utilizing materials across different units while still benefiting from Input Tax Credits where GST has been paid on those materials. This change will potentially lead to cost savings and more efficient operations for businesses.
4. Conclusion: The recent amendment to Para 4.10 (i) in the Foreign Trade Policy is a positive development for businesses operating under the Advance Authorization Scheme. It opens the door for Input Tax Credits (ITC) on materials for which GST has been paid, enabling smoother operations and reducing transaction costs. The move underscores the government’s commitment to improving the business environment and facilitating trade in India, aligning with the broader goal of economic growth and development. Businesses are encouraged to stay informed about these changes and leverage the benefits they offer.
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Government of India
Ministry of Commerce & Industry
Department of Commerce
Directorate General of Foreign Trade
Vanijya Bhawan, New Delhi
Public Notice No. 34/2023-DGFT | Dated: 13th October, 2023
Subject: Amendments in Para 4.10 (i) of the Handbook of Procedures, 2023.
F. No. 01/94/180/028/AM24/PC-4.– In exercise of powers conferred under Paragraph 1.03 and 2.04 of the Foreign Trade Policy, 2023, as amended from time to time, the Director General of Foreign Trade hereby makes the following amendment in the provision of Para 4.10 (i) of the Handbook of Procedures 2023:
|
Existing para 4.10 (i) |
Amended para 4.10 (i) |
| Transfer of any duty-free material imported or procured against Advance Authorisation from one unit of a company to another unit for manufacturing purpose shall be done with prior intimation to jurisdictional Customs Authority. Benefit of Input Tax Credit shall not be claimed on such transferred input. | Transfer of any duty-free material imported or procured against Advance Authorisation from one unit of a company to another unit for manufacturing purpose shall be done with prior intimation to jurisdictional Customs Authority. In case of transfer of duty free imported or indigenously procured materials, on which GST has been paid, between the units located in same or different States, the availment of Input Tax Credit shall be governed as per the provisions of the GST law & the rules made thereunder. |
Effect of the Public Notice: Para 4.10 (i) of the Handbook of Procedures 2023 has been amended to permit availment of Input Tax Credit on GST paid material, in respect of Advance Authorization Scheme, for ease of doing business and reduction of transaction cost.
(Santosh Kumar Sarangi)
Director General of Foreign Trade
Ex-officio Addl. Secretary to the Government of India
e-mail: dgft@nic.in
