An Overview:
Advance Authorisation Scheme (AAS) or Advance License Scheme is a duty exemption scheme issued by the Government of India (GOI) under the Foreign Trade Policy. This scheme exempts the payment of import duties on raw materials/inputs required for manufacturing products for export. With the Advance License, import of raw materials/inputs can be instigated at zero customs duty for production of export products. The motive is to enhance the competitiveness of Indian products in the global market. Exempting duties on raw materials automatically reduces the expenses of the final export product.
Products eligible to be imported duty-free
Advance authorization licenses the exporter to import raw materials with exempted duties. Chapter 9 of FTP, 9.44 defines raw material as an input(s) required for the manufacturing of goods. These inputs can either be considered as raw/natural/unrefined/unmanufactured or manufactured state.
List of items eligible to be imported without payment of duty under the scheme:
- Physically incorporated inputs that have to be exported after making a normal allowance for wastage.
- Fuel, oil, catalyst consumed/ utilized for acquiring the export product.
- Spare that are mandatory to be exported along with the export product- up to 10% of the CIF value (Cost, Insurance, and Freight) of Authorisation.
- Spices that are specified to be allowed for a duty-free import, only to be utilized in activities like crushing, grinding, sterilization, manufacture of oil or oleoresin and not for simpler activities like cleaning, grading, re-packing, etc.
What are the Duties Exempted under the Advance Authorisation Scheme?
Benefits
- Input for exports exempted from payment of Basic Customs Duty, Additional Customs Duty, Education Cess, Anti-dumping Duty, Safeguard Duty and Transition Product Specific Safeguard Duty, wherever applicable.
- Exempted from IGST and Compensation cess.
Beneath the Advance License, imports are exempted from 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.
Eligibility
- Advance Authorisation can be issued either to a manufacturer exporter or merchant exporter tied to supporting manufacturer,.
- 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.
Advance Authorisation shall be issued for:
- Physical export (including export to SEZ)
- Intermediate supply; and/or
- Supply of goods to the categories mentioned in paragraph 7.02 (b), (c), (d), (e), (f) and (g) of this FTP.
- 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
Export Obligation:
1. Minimum value addition of 15%
2. Period for fulfilment of export obligation – 18 months from the date of issue of Authorisation or as notified by DGFT
Advance License for Deemed Exports
Deemed Exports is a term used to define the supply of finished goods that do not leave the country, and transactions for payment can be either in INR or foreign exchange.
These are the supplies that are categorized under Deemed Exports:
- Supply of goods to EOU/ STP /EHTP /BTP units.
- Supply of goods against Advance Authorisation/ Advance for annual requirement/ DFIA
- Supply of Capital Goods/ Machinery against EPCG Authorisation.
- Supply to other projects that are Government Funded.
The application for an Advance License for Deemed Exports can be placed in the DGFT office.
What are Standard Input-Output Norms?
The DGFT issued the Standard Input-Output Norms (SION) with an aim to determine the number of inputs required for the production of a unit of output to be exported.
This method has pre-fixed norms for thousands of products of different segments such as Chemical and allied products, Electronics, Engineering, Food products, Handicrafts, Leather, Plastics, Sports, textile, etc.
What are Self-Declared Norms?
This method enables the exporter to apply for an Advanced Authorisation License on the basis of self-declaration. This can be claimed by the exporter if the product isn’t eligible under SION or they aren’t satisfied with the import quantity allowed.
The Advance License would be close if the norms are accepted by the Norms Committee. However, if the applied norms are rejected, the applicant will be paying Customs Duty along with Interest on the excess import quantity and further close the Advance License.
Why seek DGFT Consultancy from the HBS?
- HBS has a team of expert consultants with more than thirty years of experience. Our advanced authorisation scheme experts have solved over 7000 cases with excellence. The aim is to provide our clients with top-notch Consultancy services at a reasonable cost.
- Our DGFT Consultants work with immense dedication and make sure to get involved and keep our clients updated about the latest government policies, amendments, schemes, and all the related information that can maximize profits.
- We minted to assist our exporters with the best import-export consultancy services thus, we have made ourselves available 24/7. Our DGFT Advisors will be at your service throughout the procedure and will be assisting you with the documentation from the initial stage.
- The HBS have highly experienced, well-trained, professional DGFT Consultants who attain a great understanding of the working process of the DGFT office, and take regular follow-ups to obtain and close Advance Licenses at the earliest.
How Can HBS Help you with your Advance License?.
HBS can help you secure the following benefits from DGFT and Customs when you apply for an Advance License. We will assist you in getting the necessary paperwork together to submit for an Advance License and getting Early Approval from the Director General of Overseas Trade. Recommendations for the Client’s post-Advance Authorization compliance procedures and requirements. We are securing a License Extension, Enhanced License, or Amendment. After satisfying the Customs’ export obligation, you can request a Redemption Letter and have your Bond released from DGFT RA.
Application Process
Online
i) Application Link:
- www.dgft.gov.in
- Then follow the steps: For AA under Services > Advance Authorisation /DFIA > Apply for Advance Authorisation (ANF 4A).
ii) Steps Of Application Process:
Prerequisite:
- Log onto DGFT’s website https://www.dgft.gov.in/ in and get your PAN based IEC
- Link the existing IEC (For more details please see IEC section FAQ’s)
- Register the DSC under My Dashboards > View and Register Digital Signatures Token
- IEC is issued for lifetime, to be updated yearly without any charges
For RCMC:
- Obtain Registration cum Membership Certificate (RCMC) from the concerned Export Promotion Council (EPC) or Commodity Board concerned
- Listed in Appendix 2T to the FTP available on www.dgft.gov.in
- Necessity of RCMC
- RCMC is a must to claim export benefits, participation in international trade fairs, to get restricted licenses and applying for imposition of anti dumping duty
Then they can apply for AA under Services > Advance Authorisation /DFIA > Apply for Advance Authorisation (ANF 4A)
Documents Required
- IEC Copy.
- Export Item Description.
- ITC HS code of the export product.
- Quantity of Export item.
- FOB value of item to be exported.
- Import Item description.
- ITC HS code of the import product.
- Quantity of Import item.
- CIF value of imported item.
- IGST duty percentage on item to be imported (%).
- Custom duty percentage on item to be imported (%).
- Port of Registration to be mentioned.
- Valid RCMC from an Export Promotion Council suitable to the export product.
- Industrial license.
- CA certificate.
- CA certificate of consumption for last 3 years.
Frequently Asked Questions
Who can apply for the Advance Authorisation Scheme?
Manufacturer exporters or merchant exporters tied to supporting manufacturers are eligible to apply under this scheme.
Can I apply for Advance Authorisation if I am a pharmaceutical exporter?
Yes, but Advance Authorisation for pharmaceutical products made through Non-Infringing (NI) process is issued only to manufacturer exporters.
What benefits does this scheme offer for imported inputs?
It allows duty-free import of inputs physically incorporated in the export product, including fuel, oil, and catalysts consumed during production.
Are there any exemptions from taxes and duties under this scheme?
Yes, inputs are exempted from Basic Customs Duty, Additional Customs Duty, Education Cess, Anti-dumping Duty, Safeguard Duty, IGST, and Compensation Cess.
Is there any provision for importing spices under this scheme?
Yes, duty-free import of spices under Chapter 9 is allowed only for crushing, grinding, sterilization, or oil/oleoresin manufacturing, not for cleaning or repacking.
What is the time limit to complete the export obligation?
The export obligation must be fulfilled within 18 months from the date of issue of the Authorisation or as notified by DGFT.
What are SION norms?
SION (Standard Input Output Norms) are sector-wise norms notified by DGFT that define input-output ratios for specific export products.
Is Advance Authorisation applicable for SEZ or intermediate supplies?
Yes, it can be issued for physical exports, including SEZ supplies, intermediate supplies, and other specified categories under FTP para 7.02.
How do I start the application process for Advance Authorisation?
You must visit www.dgft.gov.in and apply under Services > Advance Authorisation / DFIA > Apply for Advance Authorisation (ANF 4A).
What is RCMC and why is it necessary?
RCMC (Registration cum Membership Certificate) from the relevant Export Promotion Council is required to claim export benefits and apply for restricted licenses.