The DFIA scheme (Duty Free Import Authorisation) has become a pillar for Indian exporters to simplify costs and aid in global competitiveness. As per the Foreign Trade Policy, the DFIA scheme permits exporters to import inputs free of duty on the condition that such materials should be embodied physically into export goods.
This scheme not only minimizes input costs but also facilitates flexibility in pricing for exporters who operate from engineering, textiles, and pharma to food processing, and specialty manufacturing. Businesses who intend to take advantage of this facility need to know about the DFIA scheme, compliance issues, and running nuances.
What is DFIA (Duty Free Import Authorisation)?
The DFIA scheme is a duty exemption scheme under the Foreign Trade Policy whereby raw materials, components, and certain consumables could be imported by exporters without paying customs duty on them provided such inputs are used in export products.
The objective of the DFIA is to raise export competitiveness by reducing the cost of production entering the country so that it becomes feasible for exporters to offer their products at competitive prices in foreign markets.
The essential features of the DFIA scheme are:
- Duty-free import of eligible inputs.
- Physical integration of the imported inputs into exported goods compulsorily.
- Minimum value addition requirement (usually 20%).
- In various industries like engineering, pharma, food processing, textiles, etc.
By facilitating cost-effective imports, the DFIA scheme encourages export business growth with compliance regulation.
DFIA Scheme: Applicability and Eligibility
- Exporters registered with IEC and RCMC.
- Both manufacturer exporters and merchant exporters (along with supporting manufacturers).
- Export products covered under Standard Input Output Norms (SION) notified by DGFT.
- Post-export purposes, i.e., DFIA is issued upon completion of exports and realization of proceeds.
Restrictions include:
- Products eligible for pre-import or actual user conditions (Appendix 4J).
- Prohibited/restricted items like SCOMET items or designated biotech/agriculture products.
- Exclusion of industry groups such as gems and jewellery.
DFIA Application Process and Documentation
1. Filing of Application: Submit the digitally signed application on DGFT portal (ANF 4G format).
2. Export Realization: Export realization should take place within 12 months from the date of filing of application, and DFIA file number should be mentioned on bills of export.
3. Documentation: Documents needed include shipping bills, e-BRC, technical details of inputs, and proof of realization of export.
4. Issuance & Port Registration: Post-export, apply for issue of transferable DFIA by DGFT. DFIA should be registered in authorized ports for duty-free importation.
DFIA Scheme: Benefits for Exporters
- Reduced Costs: Exemption from Basic Customs Duty lowers input costs.
- Transferability: Exporters are able to partition and transfer DFIA to other eligible parties, making it flexible.
- Competitiveness: Lower input costs allow for competitive overseas market pricing.
- Sector Coverage: DFIA benefits are spread over different sectors of industry like engineering, textiles, pharma, and food processing.
- Eligible Inputs: Raw materials, consumables, catalysts, and packing materials to be utilized in export production.
Major Features and Limitations of DFIA
Key Features:
- Duty Exemption: The scheme exempts BCD on imported inputs but not IGST and cesses.
- Export Realization: DFIA is released upon export, with realization of export proceeds as per RBI instructions.
- Transferability: The DFIA is transferable to other eligible parties upon realization of export, giving ease to exporters.
- Eligible Inputs: Such inputs that come under the Standard Input-Output Norms (SION) are eligible inputs and not pre-imported goods or goods under actual user condition.
- Split Authorisation: DFIA may be split by exporters with a minimum CIF value of ₹10 lakh per split.
- Sector Restrictions: Certain sectors such as gems & jewellery, and goods such as SCOMET or biotech items are exempted.
- Application Mode: Online applications are submitted on the DGFT portal and a digital signature is required.
- Export Period: Exports should be completed within 12 months from the date of application.
- Value Addition: A minimum value addition of generally 20% must be present to take advantage of DFIA benefits.
Limitations:
- DFIA covers only Basic Customs Duty, hence other charges like IGST are levied.
- The facility cannot be extended beyond the period of 12 months validity.
- Only goods with notified SION are admissible; others have to utilize alternative facilities such as Advance Authorisation.
- Compliance with documentation, usage of inputs, and realization of export is required, otherwise, penalty or recovery of duty may be applicable.
Validity of DFIA License
DFIA license is valid for 12 months from the date of issue and is non-renewable. It is issued subsequent to the export and can be transferred to eligible parties during the term. The exporters must avail all duty-free imports and utilize the inputs within the specified time frame because any delay may attract duty recovery and penalties.
How SKMC Global Can Help?
Eligibility & Product Mapping: Product mapping and checking against SION and DFIA applicability.
Application Filing: Assistance in filing online, technical reports, port registration, and shipping bill endorsements.
Post-Export Compliance: Verify export invoices, e-BRC, and realization documents for issuance of DFIA.
Transferability & Splitting: Guidance on splitting DFIA among eligible parties.
Regulatory Liaison: Interface with DGFT and Customs for approvals and clarifications.
Record Maintenance: Compliance with input consumption tracking according to guidelines of DFIA.
Audit Preparation: Support during audits, including document verification and technical justification.
Conclusion
The DFIA scheme or Duty Free Import Authorisation is a vital instrument for Indian exporters looking for affordable overseas expansion. Export promotion becomes costlier, production costs are reduced, and export growth is promoted through the exemption of duty on input to be utilized in exports by the DFIA scheme. Technical compliance, correct documentation, and timely submission are required to avail these benefits.
SKMC Global offers exporters professional guidance at every stage of the DFIA process—ranging from eligibility mapping and application filing to post-export compliance and audit readiness. With professional guidance, exporters can utilize the DFIA scheme effectively and derive significant operational and financial benefits under India's Foreign Trade Policy.
FREQUENTLY ASKED QUESTIONS
No. Only Basic Customs Duty (BCD) is exempted. IGST and other cesses are to be paid on import.
Yes. Merchant exporters are eligible provided that the supporting manufacturer's details are reported in the application and export documentation.
Generally 20% value addition is required, but in some sectors exceptions have been notified in the SION.
The DFIA is divisible into admissible entities with a minimum CIF value of ?10 lakh per division.
No. The DFIA license is non-transferable and must be taken within its 12-month validity period.
The exporters must maintain suitable records of all imported inputs, i.e., data about consumption, and submit online compliance reports under DGFT guidelines.
No. DFIA is only for notified Standard Input-Output Norms (SION) products. Exporters can make use of Advance Authorisation schemes for other products.
Defective goods may be re-exported under Custom provisions, and DFIA may be issued afresh for the remaining validity period.
Default in export obligations can result in recovery of duty saved with interest, penalty, or refusal of authorization of DFIA.