Duty-Free Import Authorisation (DFIA): Maximise Export Benefits
The Duty-Free Import Authorisation (DFIA) Scheme is a vital export incentive under the Foreign Trade Policy (FTP) 2023. It allows exporters to import inputs duty-free, reducing production costs and enhancing global competitiveness. This guide breaks down its provisions, eligibility, exemptions, and operational framework.
Why DFIA? A Quick Overview [Para 4.24 of FTP 2023]
Think of DFIA as your golden pass to duty-free imports. It helps exporters by:
Allowing duty-free import of inputs required for manufacturing export products.
Permitting the import of certain oils and catalysts consumed in production.
Restricting imports of tyres and inputs that don’t comply with mandatory Quality Control Orders (QCOs).
Who Can Apply for DFIA? [Para 4.26 of FTP 2023]
Not everyone qualifies for DFIA. Here’s what you need to know:
It is issued post-export and only for products covered under SION.
Merchant exporters must declare the supporting manufacturer’s details in export documents (e.g., Shipping Bill, Bill of Export, or Tax Invoice).
Application must be filed with concerned RA before exporting under DFIA.
It is not available for inputs subject to pre-import conditions or where SION mandates an Actual User condition or Appendix-4J prescribes pre import condition for such an input.
What Duties Are Exempted? [Para 4.25 of FTP 2023]
DFIA grants relief from Basic Customs Duty (BCD). However, other duties and taxes must still be paid. Additionally:
Exporters can claim a drawback (refund of duties) on locally procured or imported inputs used in exported goods.
If inputs aren’t listed in Standard Input Output Norms (SION), they must be clearly mentioned in the DFIA application. The Regional Authority (RA) must officially record (endorse) these inputs in the condition sheet of DFIA to ensure drawback eligibility.
How Much Value Addition is Required? [Para 4.27 of FTP 2023]
Your exported goods must have at least 20% value addition over imported inputs to qualify for DFIA benefits.
DFIA Validity & Transferability [Para 4.28 of FTP 2023]
DFIA authorisations come with strict rules:
If SION allows a generic or alternative input, exporters must specify the exact material/ input and quantity used in manufacturing in the Shipping Bill/ Bill of Export/ Tax Invoice. Only those inputs that are clearly declared and actually used in production will be eligible for duty-free import under DFIA. The quantity allowed for import will be proportionate to what was consumed in manufacturing, but it cannot exceed the overall limit set for that generic or alternative input in SION.
If SION assigns a single quantity for multiple inputs instead of specifying individual limits for each, the duty-free import of each input will be allowed only in proportion to its actual use in production. The proportion and exact quantity of each input used must be clearly declared in the Shipping Bill, Bill of Export, or Tax Invoice (as per GST rules) to ensure compliance. The total quantity of all inputs cannot exceed the overall limit set for that group of inputs in SION.
A separate DFIA will be issued for each SION, meaning one authorisation cannot cover multiple SION items.
DFIA is transferable and remains valid for 12 months from the date of issue—no extensions allowed.
Exports under DFIA can be made from any port listed in Para 4.35 of the Handbook of Procedures.
Separate applications are required for EDI and non-EDI ports.
If exporting from a non-EDI port, a separate application is required for each such port.
Sensitive Items Under DFIA [Para 4.29 of FTP 2023]
Certain inputs under DFIA are classified as sensitive items, requiring additional details to ensure compliance.
Exporter’s Declaration:
While exporting, the technical characteristics, quality, and specifications of the following inputs must be declared in the Shipping Bill:
Alloy Steel (including Stainless Steel), Copper Alloy, Lead Ingots, Zinc Ingots
Synthetic Rubber, Solvent, Perfumes/Essential Oils/Aromatic Chemicals, Surfactants, Insecticides, Citric Acid
Relevant Fabrics, Glass Fibre Reinforcements (e.g., Glass Fibre, Chopped/Stranded Mat, Roving Woven Surfacing Mat), Lining Material.
Relevant Synthetic Resins (e.g., Unsaturated Polyester Resin, Epoxy Resin, Vinyl Ester Resin, Hydroxy Ethyl Cellulose), Bearings, Marble, Articles made of Polypropylene, Articles made of Paper and Paper Board.
Regional Authority’s Endorsement:
When granting a DFIA, the Regional Authority must clearly mention the technical characteristics, quality, and specifications of these inputs in the authorisation.
How to Apply for DFIA? [Para 4.53 of Handbook of Procedures]
Step 1: Apply for DFIA Before Export
Submit an online application in ANF 4G, along with the required documents, to the concerned Regional Authority (RA) before exporting.
Once the application is filed and a file number is generated, exports must be completed within12 months.
The file number must be mentioned on export documents such as the Shipping Bill, Bill of Export, or Tax Invoice (as per GST rules).
Step 2: Request Transferable DFIA After Export
Once the exports are completed and payment is received, the exporter can apply for the issuance of a transferable DFIA.
This request must be made within 12 months from the export date or within 6 months from the realization of export proceeds, whichever is later.
Missed the Deadline? Here’s What Happens [Para 11.02 of Handbook of Procedures]
If an application for DFIA is submitted after the deadline, it may still be considered with a late cut as follows:
Within 6 months from the last date: 2% late cut
After 6 months but within 1 year from the last date: 5% late cut
After 1 year but within 2 years from the last date: 10% late cut
Key Features of an DFIA [Para 4.26 of Handbook of Procedures]
A DFIA shall include the following details:
Items Covered: Names, descriptions, and specifications of items to be imported/exported items.
Quantity & Value: The quantity of each item to be imported or its corresponding value if quantity specification is not feasible. If an item’s quantity and value are limiting factors under SION, the same restrictions apply.
Import & Export Values: The total CIF value of imports and the FOB/FOR value & quantity of exports or supplies.
Validity Periods: The import validity period and the timeframe for fulfilling export obligations.
Can DFIA Be Split? Yes! [Para 4.54 of Handbook of Procedures]
Exporters can request splitting of a DFIA into multiple authorisations. However:
Each split authorization must have a minimum CIF value of Rs.10 lakh or be in multiples of Rs.10 lakh.
Request can only be made when applying for transferability of the DFIA (i.e., converting DFIA into a transferable authorization).
All split DFIAs must have the same port of registration as the original DFIA.
What If the Imported Goods Are Defective? [Para 4.55 of Handbook of Procedures]
If goods imported under DFIA are defective, you can re-export them following Customs guidelines.
If unused after import, the Customs Commissioner will issue a certificate confirming that 95% of the CIF value was debited from the DFIA at import.
This certificate will include:
The amount and description of the re-exported goods.
Details of the original DFIA.
Based on this certificate, the Regional Authority will issue a fresh DFIA, which:
Must have the same port of registration as the original DFIA.
Will be valid for the remaining period calculated from the date of import of the defective goods.
Maintenance of Records for DFIA Imports and Utilization [Para 4.56 of Handbook of Procedures]
DFIA holders must keep accurate records of duty-free imports and their use.
These records must be maintained as per the format given in Appendix 4H and be submitted online to the Regional Authority when applying for transferability of DFIA.
Import & Export Restrictions: Prohibited, Restricted, and STE Goods [Para 4.18 of FTP 2023]
Certain goods face specific restrictions when imported or exported under DFIA:
Prohibited Items: Cannot be imported/exported under DFIA.
State Trading Enterprise (STE) Imports: Goods reserved for import by STEs cannot be imported under DFIA but may be sourced from STEs through an ARO (Advance Release Order) or an Invalidation Letter. STEs can also supply such goods via High Sea Sale to DFIA holder or issue an NOC (No Objection Certificate) for import by DFIA holder, charging a nominal fee (up to Rs.5000).
STE Exports: Goods restricted for export by STEs can only be exported under DFIA after securing an NOC from the respective STE.
Restricted Imports: Unless explicitly disallowed, restricted goods can be imported under DFIA.
Restricted & SCOMET Exports: Exports of restricted or SCOMET (Special Chemicals, Organisms, Materials, Equipment, and Technologies) items must comply with all conditions or applicable authorisation or permission requirements under Schedule 2 of ITC (HS).
Domestic Sourcing of Inputs [Para 4.20 of FTP 2023]
DFIA holders are not limited to direct imports; they can also source inputs domestically:
Inputs can be procured from local suppliers, State Trading Enterprises (STEs), EOUs, EHTP, BTP, and STP units using an ARO (Advance Release Order) or Invalidation Letter.
If the domestic supplier wishes to claim duty exemptions through the Deemed Exports mechanism, the Regional Authority issues an Advance Release Order as per Chapter 7 of FTP.
The ARO/Invalidation Letter can be issued simultaneously with or after the DFIA authorisation.
DFIA holders under DTA (Domestic Tariff Area) can procure inputs from SEZ (Special Economic Zone) units using a Certificate of Supply until EDI message integration between SEZ and Customs is operational.
The validity of an ARO/Invalidation Letter is aligned with the DFIA authorisation period.
Final Thoughts: Is DFIA Right for You?
If you’re an exporter looking to slash import costs and enhance profitability, DFIA could be your best bet. However, strict documentation and compliance are key to maximizing its benefits. By understanding and leveraging DFIA strategically, you can position your business for greater global success!
Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.