13 October 2023 | Import/Export

By means of Public Notice No. 34/2023, dated October 13, 2023, the Directorate General of Foreign Trade (DGFT) has proposed a noteworthy amendment to Paragraph 4.10 (i) of the Handbook of Procedures, 2023. With this amendment, materials covered by the Advance Authorization Scheme that require GST payments are permitted to use the Input Tax Credit. This change’s main goal is to reduce transaction costs and streamline business operations.

In the past, a company’s units had to notify the Customs Authority in advance before transferring duty-free materials acquired under Advance Authorization for manufacturing purposes. Additionally, input tax credit could not be claimed on these transferred inputs.

The amendment states that the GST law’s provisions and related regulations will apply to the transfer of duty-free materials between units, whether they are located in the same state or separate states. This enables materials for which GST has been paid to be eligible for input tax credit.

The amendment is significant because it helps prevent dual taxation by enabling input tax credit, an essential component of the GST system. Additionally, the use of input tax credits effectively reduces the effects of cumulative taxation.In the context of the Advance Authorization Scheme, this development makes doing business easier and lowers transaction costs.