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Advance Authorisation Scheme

Overview of Advance Authorisation Scheme

The Indian government's Foreign Trade Policy 2015-2020 included a sort of tariff exemption programme known as the Advance Authorisation Scheme (AAS) or Advance Licence Scheme. The importation of raw materials and inputs necessary for the creation of export products is exempt from import charges under this plan, meaning there are no customs fees to pay when importing these items. This plan aims to increase the competitiveness of Indian goods on the international market. Saving on raw material duties automatically lowers the price of the finished export product.

What items qualify for the Advance Authorization Scheme's duty-free importation?

The exporter is permitted duty-free raw material imports under the Advance Authorization Scheme. According to FTP Chapter 9 Paragraph 9.44, "Raw material" refers to the input(s) needed to manufacture items. These inputs can either be made or in a raw, natural, unrefined, or unmanufactured state. In order to permit duty-free import of inputs that are physically incorporated in export products (after making the usual provision for wastage), an advance licence is provided. Additionally, fuel, oil, and the catalyst that are used in the production of export products may also be permitted.

Duties Exempted under the Advance Authorisation Scheme.

The payment of Basic Customs Duty (BCD), Additional Customs Duty, Education Cess, Anti-dumping Duty, Countervailing Duty, Safeguard Duty, and Transition Product Specific Safeguard Duty, if applicable, is not required for imports made under an advance licence. Pre-import conditions apply to such imports, which are also excluded from the entirety of the integrated tax and Compensation Cess under the Advance Authorization. Up until 31.03.2020, imports made under the Advance Authorizations Scheme for physical exports are exempt from Integrated Tax and Compensation Cess. This exemption is extended through 31.03.2021, following Notification No. 57/2015-20 of the 31.03.2020.

Eligibility requirements for the DGFT advance authorization programme.

Advance Authorization Schemes can be provided to either manufacturer exporters or merchant exporters connected to a supporting manufacturer since they have a legitimate user requirement.

As per the Para 4.05(c) of the FTP, Advance Authorisation is issued for:-

  • Exports that are physical (including exports to SEZ).
  • Intermediate Supply, or providing goods or services to a person in possession of an advance licence.
  • Goods supply—considered exports.
  • 'Stores' on board foreign-traveling ships and aircraft.

What is a Deemed Export Advance Licence?

  • Deemed Export: Deemed Export is the supply of finished goods that remain within the nation; the transaction's payment may be made in Indian rupees (INR) or in free foreign exchange.
  • The supply categories that are deemed to be exports are as follows:
    1. Goods delivery to EOU, STP, EHTP, and BTP units.
    2. Advance Authorization for annual requirements, Supply of Goods Subject to Advance Authorization, and DFIA
    3. Supply of Capital Goods/Machinery with EPCG Authorization.
    4. Supply to more government-funded initiatives, etc.
  • One can apply for an Advance License for Deemed exports from the DGFT office.

Methods for issuing Advance License.

An exporter can apply for fresh Advance Authorisation by four ways-

  1. Standard Input and Output Norms, or SION.
  2. Based on Self-Declared Norms, to be accepted later (under Ad-hoc Norms, HBP, Paragraph 4.07).
  3. The Norms Committee's Prior-Fixation of Norms for Each Applicant.
  4. According to self-declaration and self-justification. SRAAS stands for Self-Ratification Advance Authorization Scheme.

Standard Input-Output Norms (SION Norms)

This approach pre-fixes the norms for a large number of products that fall into many categories, such as Chemical and associated products, Electronics, Engineering, Food products, Handicrafts, Leather, Plastics, Sports, Textile, etc. In this procedure, you submit an application for an Advance Authorization Licence under the specified Sr.NO of SION, and the DGFT issues you the licence.

Self-Declared Norms

If the required export product is not present in the SION or the exporter is not pleased with the permitted import quantity, he may use this technique to request for an advance authorization licence on a self-declaration basis. He will choose the Import Items and Quantity of Import Items here according to his needs. For the fixation of Ad-hoc Norms and the Norms' Ratification via this technique, the Applicant must submit an application to the Norms Committee (DGFT Delhi). Only if the Norms Committee approves or ratifies the norms will the advance Licence be closed. If the Norms Committee rejects the applied norms, the applicant must pay customs duty plus interest on the excess import quantity and terminate the advance licence.

Applicant Specific- Prior Fixation of Norms

In order to repair or ratify the norms through this procedure, you must first contact the Norms Committee. The DGFT will only thereafter provide an advance licence based on the predetermined standards. The rest of the process is unchanged.

Self-Ratification Advance Authorisation Scheme

It used to take a lot of effort and money to fix norms. Therefore, DGFT introduced a new procedure known as the Self ratification Advance Authorisation Scheme in order to take into account the Government of India's ease of doing business. With this technique, the DGFT will grant an advance licence based solely on self-declaration; nevertheless, you won't need to go to the Delhi Norms Committee to get your norms approved. No more inquiries will be made because it is presumed that it has been self-ratified. However, not all exporters are qualified for this programme; please see the requirements below.

  1. Only exporters (whether manufacturers or merchants) with an AEO Certification (Authorised Economic Operator) are permitted to use this option.
  2. Not all export products covered by Chapters 1 to 24 and Chapter 71 of ITC HS, etc. will be eligible for the scheme.
  3. Pre-import conditions must be met for both domestically and imported inputs. i.e., before exports happen, inputs should be physically incorporated into the export product.
  4. Any authorised individual or the DGFT may conduct an audit.
  5. If the audit's findings indicate any mistakes were made, it was discovered that the claimed inputs weren't used in the manufacturing process, or more inputs were claimed than were actually needed or consumed. Demand and recovery proceedings will be started in such circumstances.

Documents needed to apply for a DGFT Advance licence

The required documents vary depending on which of the aforementioned four techniques is used. Please find the following essential documents needed:

  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.

Advance License scheme procedure

Please see the figure below for an easy-to-understand explanation of all four of the aforementioned ways.

Please find below procedure for online application of Advance Licence:

  1. Prepare documents in accordance with the list of documents mentioned above.
  2. Visit www.dgft.gov.in, the DGFT's official website.
  3. Select Services from the Online Ecom Application after Logging In with DSC.
  4. To advance authorization (DES), click.
  5. Complete the form, then upload the required papers.
  6. Please take notice of the key information below to ensure that the documents are prepared accurately:
    1. The application should be listed as a manufacturer and exporter on IEC/RCMC.
    2. The location where the raw materials are intended to be transported for processing should be known to IEC/RCMC.
    3. The advance licence should list the export products for MSME/SSI/Manufacturing proof.
  7. Complete the application and then submit it.
  8. The Advance Licence will be issued by DGFT following a successful application.

How can we help you with the advance authorization programme?

Our professionals help you obtain the following Advance Licence Benefits from DGFT & Customs:

  • We assist you in putting together the paperwork needed to apply for an advance licence.
  • Getting a licence in advance from the director general of foreign trade.
  • Advising on the formal requirements & compliances that the client must adhere to after receiving an advance authorization.
  • Getting an advance licence amended, improved, or extended.
  • Receiving a redemption letter from the DGFT RA and the release of the bond following the completion of the export obligation with Customs.

Important Advance Authorization Scheme Terms & Conditions.

The benefit under Advance Authorisation scheme comes with certain terms and conditions, please find them below:

  1. The AA forbids the export or import of certain items.
  2. Subject to Actual User Condition, AA is issued.
  3. Allowable input transfers between units.
  4. The required minimum value addition is 15%.
  5. Some products have more or less value addition.
  6. Benefits are not available for several types of inputs.
  7. Imports of Free of Charge Material are authorised.
  8. Duty Only inputs that have been paid for by duty may be refunded. (No Industry Rate of Drawback will be provided for any Industry)
  9. Under the Advance Authorization (AA) Scheme, the import of restricted commodities will also be permitted.

Actual User Condition under Advance Authorisation Scheme.

The "Actual User" condition shall apply to all material imported with advance authorization. It implies that the content can only be utilised on the premises of the Licence holder and cannot be transferred. Even once the Export Obligation (EO) is complete, it cannot be transferred. However, after the Export Obligation has been fulfilled, the holder of the Advance Licence will have the option to get rid of or sell goods made with duty-free materials.

Pre-Import Condition under Advance Authorisation Scheme.

It implies that the export should happen once the raw material is physically incorporated into the export product. You cannot export after using your already-paid duty material. duty-free raw materials imports. This is not acceptable. Appendix 4J or the SION Norms List indicates which items have the pre-import condition.

Value-Addition under Advance Authorisation Scheme.

Value Addition shall be:value-addition

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.

Invalidation Letter under Advance License.

If the exporter chooses to buy raw materials locally from a domestic supplier rather than importing directly under an advance authorization. Then, he or she must revoke the advance licence for direct import and acquire the DGFT's letter of revoked authorization. The DGFT RA issues an Invalidation Letter either at the time of the Advance Authorization or afterwards. The Advance Authorization's validity and the Invalidation letter's validity are mutually exclusive.

Redemption of Advance License / EODC.

The licence holder must file an application in ANF-4F for the Redemption of the Advance Authorisation Licence once the imports and exports have been completed. The application will be thoroughly examined by the Regional Authority of DGFT. The Regional Authority (RA) shall provide the EODC (Export Obligation Discharge Certificate)/Redemption Certificate to the Authorization holder if the Export Obligation (EO) and other requirements have been successfully met.

Frequently Asked Questions

Frequently Asked Questions

Our government has developed a number of programmes to enhance exports from the nation. One of these is the Advance Authorization Scheme, commonly known as the Advance Licence, which allows duty-free importation of the raw materials and inputs needed to produce the export product. The import of oil and catalyst that are used in the manufacture of export goods may also be permitted duty-free. The granting of the advance licence is subject to an export obligation.

For the past 20 to 30 years, there has been an advance authorization scheme in existence. However, numerous changes have been made to the programme since the GST law was implemented. The duties mentioned before include Basic Customs Duty, CVD, SAD, and others. However, the Basic Customs Duty, Integrated GST (IGST), Compensation Cess, and other import charges are not subject to the Advance Authorizations Scheme under the GST. The following conditions must be met in order to receive an exemption from paying IGST and Compensation Cess:

  • Only if AA is used for exports of tangible goods.
  • Pre-import requirements will apply to imports that are exempt.
  • Exemptions are only valid through March 31, 2021 (date subject to change). Please see the most recent notification.

The Directorate General of Foreign Trade (DGFT) accepts applications for advance licences on the following bases: SION, self-declaration, prior fixation of norms by the norms committee, and self-ratification. We will need the applicant's digital signature when submitting an online application. A manufacturing exporter or a merchant exporter may submit an application. IEC and RCMC with the manufacturing address should be available. Details about the supporting manufacturer should be included in the case of the merchant exporter. The online form ANF 4A must be completed, and the necessary papers must be uploaded.

Please find the below steps that show the entire working of Advance License Scheme -

  • We must first submit an Advance Authorization application to the Jurisdictional DGFT office.
  • The DGFT's Advance Licence will include all relevant information, including the description of the export or import item, the HS code, the quantity, and the FOB/CIF value.
  • The aforementioned licence should thereafter be registered at the port of registration for Customs.
  • Exporters must executive Bond/LUT with the Customs Authority in addition to registering.
  • Then, the raw materials can be brought into the country duty-free and must be transported to the factory for production of the export item.
  • The Licence may be closed and the Bond may be revoked once the Export Obligation under the Advance Authorization scheme has been fulfilled.

An export promotion programme called the Duty Exemption Entitlement Certificate Scheme (DEEC Scheme) permits the duty-free import of materials needed to make export products. Manufacturers and merchant exporters are issued advance licences by DGFT under the DEEC Scheme to allow for the duty-free import of inputs.

The exporter must obtain an advance licence in order to import duty-free raw materials. The exporter must obtain an EPCG Licence in order to import Capital goods duty-free.

The exporter has zero customs duties and can import raw materials with an advance authorization. In a duty drawback, the exporter must pay all customs fees while importing and may then ask for a return of those fees after exporting.

Advance Authorisation Scheme(AAS) Duty-Free Import Authorisation Scheme (DFIA)
In AAS, Exporter will receive a license, and then he will import and export In DFIA, Exporter will export against file number, and then import license will be issued as per export. It is a post-export benefit.
In AAS, License received is not transferable. In DFIA, License received is transferable.

The Exporter must submit the aforementioned pertinent documentation along with the online application form ANF 4A. We have professionals who can assist you with online application completion, document preparation in accordance with DGFT rules, and follow-up in order to obtain an Advance Licence from DGFT.

For applying Advance Authorisation, the application fee depends on the CIF value of the Import product.

The obligation to export a specific amount and value of goods after using the imported raw materials is a condition of receiving duty-free import benefits under advance authorization. Export Obligation is the name given to this obligation to export.

The Export Obligation under Advance Authorisation Scheme is of two types:

  • Quantity-based Export Obligation: In accordance with norms, the quantity of exports should be proportional to the number of imports.
  • Obligation to export goods valued at 15% The Advance Authorization Scheme must always retain value addition.
  • Note: For the tea, gems and jewellery, and other industries, different methods of value addition may be recommended.

Standard input-output norms, or simply standard norms, specify how many inputs or raw materials are needed to produce one unit of an export product. The DGFT has already specified the norms for thousands of products covered by the SION, including those in the chemical and allied products, electronics, engineering, food products, handicrafts, leather, plastics, sports, and textile categories.

As the name implies, an exporter obtains an annual advance authorization for his or her needs. This option of an annual licence is provided to prevent the exporter from issuing a significant number of Advance Authorizations during a given year. saving time and minimising compliance. To be eligible for the application under the Advance Authorization for the annual requirement, there are particular requirements. As follows:

  • The applicant must have exported for at least the two Financial Years before.
  • The highest of 300% of the FOB value from the prior FY or 1 Cr would be the maximum CIF entitlement.
  • It can only be used for products that fall under the established categories of SION or Adhoc Norms.

We can import duty-free fabric under the Special Advance Authorization Scheme for the export of clothes and clothing accessories. The exporter may submit a SION application. No other inputs, such as packing materials, fuel, oil, or catalyst, will be permitted to be imported under this Special Advance Authorization; the Authorization Holder may only import the essential fabrics. After fulfilling the export obligation, the fabric that was brought in without authorization is only transferrable under actual usage conditions. But if there is any job work, it is transferrable. The other domestically purchased inputs would likewise be eligible for duty drawback.

No, benefit under both schemes cannot be taken simultaneously. You can choose only one scheme. Carefully calculate the benefit under each scheme and then make a decision.

In these circumstances, you may be able to obtain a duty drawback at the brand rate on domestically purchased or duty-paid imported raw materials. You must include information about these duty-paid inputs when you apply for the Advance Authorization Scheme. Brand rate setting of duty drawback is the process.

Yes, domestic procurement of raw materials is possible. In certain situations, the DGFT will issue an Invalidation letter to revoke the direct import licence. The DGFT may in rare circumstances also issue an Advance Release Order (ARO).

Typically, getting an advance licence from DGFT takes 15 to 20 working days. Our professionals are capable of precisely preparing documentation in accordance with DGFT criteria and obtaining an advance licence in 5–10 working days.

To close the Advance Licence, the Exporter must complete the ANF 4F with the necessary export documentation.

Yes, We do have a team who will help you in the redemption of Advance License.

Yes, the Authorisation holder can surrender the license if not used to import duty-free.

The next action after receiving the Advance Licence from DGFT is to register the licence with Customs. If you don't register the licence at the port where the shipment will arrive, you won't be able to clear the raw materials duty-free. As specified in the licence, the licence is registered with the port of customs.

Yes, it is mandatory to register the Advance License at customs to import duty-free raw materials.

No, even after the holder has completed the export obligation, the advance licence cannot be transferred. This means that even when the Export Obligation is fulfilled, raw materials cannot be moved. On the other hand, finished goods created from surplus raw materials may be discarded or sold.

No, Advance License is not possible to sell. Also, not after fulfilling an export obligation.