Advance Authorisation Scheme

Advance Authorisation Scheme (AAS) or Advance License Scheme is a type of duty exemption scheme introduced by the Government of India under the Foreign Trade Policy 2015-2020. Under this scheme, exemption from the payment of import duties is given to raw materials/inputs required for the manufacture of export products i.e., you can import raw materials/inputs at zero customs duty for the production of export products. The purpose of this scheme is to make India’s products competitive in the global market. When duties paid on raw materials are saved, it automatically brings down the cost of the final export product.

Schemes under this Chapter enable duty free import of inputs for export production, including replenishment of inputs or duty remission

(a) Advance Authorisation is issued to allow duty free import of input, which is physically incorporated in export product (making normal allowance for wastage). In addition, fuel, oil, catalyst which is consumed / utilized in the process of production of export product, may also be allowed.
(b) Advance Authorisation is issued for inputs in relation to resultant product, on the following basis:
(i) As per Standard Input Output Norms (SION) notified (available in Hand Book of Procedures); OR
(ii) On the basis of self declaration as per paragraph 4.07 of Handbook of Procedures. OR
(iii) Applicant specific prior fixation of norm by theNorms Committee. OR
(iv) On the basis of Self Ratification Scheme in terms of Para 4.07A of Foreign Trade Policy.

(a) Advance Authorisation can be issued either to a manufacturer exporter or merchant exporter tied to supporting manufacturer.
(b) Advance Authorisation for pharmaceutical products manufactured through Non-Infringing (NI) process (as indicated in paragraph 4.18 of Handbook of Procedures) shall be issued to manufacturer exporter only.
(c) Advance Authorisation shall be issued for:
(i) Physical export (including export to SEZ);
(ii) Intermediate supply; and/or
(iii) Supply of goods to the categories mentioned in paragraph 7.02 (b), (c), (e), (f), (g) and (h) of this FTP. (iv) Supply of „stores‟ on board of foreign going vessel / aircraft, subject to condition that there is specific Standard Input Output Norms in respect of item supplied.(Deemed Exports)

• Deemed Export: Deemed Export refers to the supply of finished goods that do not leave the country, and the payment of transaction can be in INR or free foreign exchange.
• Following are the categories of supply that are considered as Deemed Exports:
  1. Supply of goods to EOU / STP / EHTP / BTP units.
  2. Supply of goods against Advance Authorization / Advance Authorization for
     annual requirement / DFIA
  3. Supply of Capital Goods/Machinery against EPCG Authorization.
  4. Supply to other Government Funded projects, etc.
• One can apply for an Advance License for Deemed exports from the DGFT office.

Imports under Advance License are exempted from the payment of Basic Customs Duty (BCD), Additional Customs Duty, Education Cess, Anti-dumping Duty, Countervailing Duty, Safeguard Duty, Transition Product Specific Safeguard Duty, wherever applicable. Under the Advance Authorisation, imports for physical exports are also exempted from the whole of the integrated tax and Compensation Cess and such imports shall be subject to pre-import condition. Imports against Advance Authorisations Scheme for the physical exports are exempted from Integrated Tax and Compensation Cess up to 31.03.2020 only. As per Notification No. 57/2015-20 dated 31.03.2020, this exemption is renewed till 31.03.2021.

Documents for filing Advance Authorisation application depends as per the above four methods. Please find below basic Important documents required-

1. DGFT DSC.
2. Copy of IEC.
3. Application form ANF – 4A.
4. Copy of SSI/IEM/MSME
5. Copy of Export House Certificate (if applicable)
6. Copy Valid RCMC
7. Copy of GST Certificate.

Our experts help you in getting Advance License Benefits from DGFT & Customs as under:

• We help you in preparing documents for application of Advance License.
• Obtaining Advance License from Director General of Foreign Trade.
• Guiding regarding the procedural requirement & Compliances to be followed by the Client after issuance of Advance Authorization.
• Obtaining Amendment, Enhancements or Extension for the Advance License.
• Getting Redemption Letter from DGFT RA and release of Bond after fulfilling the export obligation from Customs.

The benefit under Advance Authorisation scheme comes with certain terms and conditions, please find them below:
1. Items prohibited for exports or imports are not allowed under AA.
2. AA is issued Subject to Actual User Condition.
3. Inter Unit Transfer of Inputs permitted.
4. 15% is the minimum Value Addition to be achieved.
5. Certain products have less/more Value Addition.
6. Certain categories of Inputs are ineligible for benefits.
7. Free of cost Material permitted for imports.
8. Duty Drawback shall be available for only duty paid inputs used. (All Industry Rate of Drawback will not be available)
9. Import of restricted items shall also be allowed under Advance Authorisation (AA) Scheme.

It means that the raw material should be imported first; physically incorporated in the export product and then the export should take place. You cannot export first using the duty paid material that you have and then Import raw material duty-free. This is not allowed. Items that have the pre import condition have been indicated in Appendix 4J or SION Norms List.

Value Addition shall be:
Where,
A = FOB value of export realized or the FOR value of supply received.
B = CIF value of inputs covered by the authorisation, plus the value of any
other input used on which benefit of DBK is claimed or intended to be claimed.

In case the exporter does not want to import directly under Advance Authorisation, i.e. he wants to procure raw materials indigenously from a domestic supplier. Then he/she needs to invalidate the Advance License for direct import and obtain the Invalidation letter from DGFT. Invalidation Letter is issued by DGFT RA at the time of Advance Authorisation or subsequently. The validity of the Invalidation letter is co-terminus with the validity of Advance Authorisation.

On completion of the imports and exports, the license holder shall submit an application in ANF-4F for the Redemption of the Advance Authorisation License. Regional Authority of DGFT will verify the completeness of the Application in all aspects. If Export Obligation (EO) and other conditions have been successfully fulfilled, the Regional Authority (RA) will issue the EODC (Export Obligation Discharge Certificate)/ Redemption Certificate to the Authorisation holder.

• Circular No. 35/2015-20 dated 23.04.2020:
  Extensions in Import Validity period and Export obligation period in Advance Authorisations/DFIA notified due to COVID-19 Pandemic.
• Notification No. 57/2015-20 dated 31.03.2020:
  As per the above Notification, “Imports against Advance Authorisations for physical exports are exempted from Integrated Tax and Compensation Cess up to 31.03.2020” is extended up to 31.03.2021.