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Advance Authorisation Scheme: How does it help exporters?

Advance Authorisation Scheme is issued by the DGFT to allow duty-free import of materials that are incorporated in export products. Learn more about it in this blog.

The export industry is one of the major pillars of the Indian economy, contributing significantly to its growth. According to a Ministry of Trade and Commerce report, India’s overall exports stood at $61 billion as of September 2022¹. To further accelerate exports, the Government of India takes active measures to support Indian exporters by offering various export incentives and duty exemptions that enable easy trade. The Advance Authorisation Scheme (AA) is one such duty exemption scheme offered by the government.

What is the Advance Authorisation Scheme?

The Government of India provides duty exemption for exporters under the Advance Authorisation Scheme (AA). Issued by the Directorate General of Foreign Trade (DGFT), it encourages importing essential raw materials and additives that are incorporated physically into goods intended for exports. Raw materials like fuel, oil, electricity or catalysts may be used in the manufacturing of exported goods, which can be imported duty-free through the Advance Authorisation Scheme (AA). The program also provides a standard allowance for the losses faced by exporters on these materials².

What are the methods to issue an Advance License?

There are four ways through which exporters can apply for an Advance Authorisation license:

SION (Standard Input and Output Norms)

Also known as IO (Input Output) norms, this method is applicable for products that fall into various categories like chemical, electronics, engineering, food products, handicrafts, leather, plastic, sports and textile. It defines the amount of inputs required to produce output for export purpose³.

Self-declared norms

If the required export product is not present in the SION, an application needs to be made to the Regional Authority (RA) who will issue the Advance Authorization after a review⁴.

Self-ratification

In this method, Advance Authorisation Scheme is applicable to exporters who have obtained Authorized Economic Operator (AEO) Certificate.

Applicant specific prior-fixation of norms

You must first contact the Norms Committee to amend the norms through this procedure. DGFT will only grant a license based on predetermined standards.

What are the duties exempted under the Advance Authorisation Scheme?

Within the Advance Authorisation Scheme, several duties are waived, including the basic customs duty, education cess, social welfare cess, anti-dumping duty, countervailing duty, and safeguard duty. Furthermore, this scheme extends exemptions to IGST and compensation cess.

Eligibility for Advance Authorization Scheme

Either a manufacturer exporter or merchant exporter, affiliated with the supporting manager, can avail of the benefits of AA. The license is also available for the following⁵:

• Intermediate supply
• Physical exports
• Supplies made in particular deemed exports categories
• Stores supply onboarded on foreign-going aircraft or vessels in accordance with the Standard Input Output Norms (SION) related to the items.

Products eligible under the Advance Authorization Scheme

The following are the products eligible under the advance authorization scheme for export⁴:

• Advance Authorisation Scheme permits the export of items that are prohibited under Chapter 7 and Chapter 15 of ITC (HS) Schedule 25, unless specified. The norms committee sets pre-import conditions for these exports, subject to specific guidelines.
• Export Obligation Period (EOP) for these goods is 90 days post-import clearance.
• Non-compliance incurs a penalty of five times the CIF value, with a prohibition on material transfer.
• “Wheat Flour (Atta)” export is allowed under outlined conditions, with a 180-day EOP and similar penalties for non-compliance. No domestic wheat sourcing or third-party exports are permitted under these regulations.

Documents required to register under the Advance Authorisation Scheme

Following documents are required to apply for the AA license on the DGFT website:

1. Valid copy of SSI/IEM/MSME/copy of GST certificate
2. Copy of Import Export Code (IEC) and Registration Cum-Membership Certificate (RCMC)
3. Application form ANF 4A
4. MSME/SSI/Manufacturing proof
5. Copy of Export House Certificate

What is the Advance License for deemed exports?

“Deemed Exports” denote transactions where goods supplied stay within India, and payment is received in Indian rupees or free foreign exchange. The Foreign Trade Policy recognizes certain categories of supply as "Deemed Exports" if manufactured in India⁶:

• Supply against Advance Authorisation/DFIA.
• Supply to EOUs/STP/EHTP/BTP units.
• Capital goods supply to EPCG holders
• Supply to projects funded by specified Agencies/Funds via ICB
• Supply of goods for installation purposes, spares to fertilizer plants, and projects with zero customs duty permissions
• Supply to power projects, refineries, UN-funded projects, and nuclear power projects meeting specific bidding criteria

Step-by-step process to obtain an advance authorization license

Below is the process to obtain an advanced license online:

Step 1:

Visit the official website of DGFT.

Step 2:

Use your DSC to log in and select services in the online Ecom application option.

Step 3:

Select Advance Authorisation (DES).

Step 4:

Input all the information and upload the necessary documents.

Step 5:

Submit the application after filling in all the details.

Step 6:

After a successful application, DGFT will issue the Advance License.

Benefits of the Advance Authorisation Scheme

When importing goods from another country, importers must pay import duty. When exporting products from India, exporters must declare their income and pay taxes on the export amount. If raw materials required for manufacturing are imported, businesses end up paying duties at both ends. The Advance Authorisation scheme benefits in this regard. Below is the list of duties exempted under the AA scheme⁶:

1. Basic Customs Duty
2. Anti-Dumping Duty
3. Countervailing Duty
4. Education Cess
5. Safeguard Duty
6. Integrated Tax and Compensation Cess
7. Additional Custom Duty
8. Duty Drawback

Export obligation under Advance Authorization Scheme

The export obligation under the Advance Authorization Scheme is as follows¹⁰:

As per para 4.42 (a) & (c) of HBP, the Export Obligation (EO) period under the advance authorization scheme is 18 and 24 months, respectively. For authorizations expiring post-01 Feb 2020, this EO period automatically extends by 6 months. Post this extension, options for further extensions per HBP 4.42 (e) and (f) persist.
In line with para 4.42 (d) of HBP, items listed in 4J see an EO extension equivalent to half of the initial EO period. Now, for authorizations expiring after 01 February 2020, items under Appendix 4J receive an additional automatic extension of six months to their EO period.

When is Advance Authorization Scheme issued?

AA can be issued based on:

Inputs based on SION

DGFT has predefined norms and quantities for inputs or imported items required for manufacturing export products. Exporters can apply for AA license to get duty exemption on these goods.

Self-declaration

If the SION norms do not include the list of inputs or if quantities are less than what an exporter requires for manufacturing, then the exporter can apply for AA license through self-declaration, along with the input number needed.

Advance Authorisation is a beneficial scheme for exporters. The Government of India and worldwide organizations have introduced many export incentive schemes and processes to make international trade simpler for exporters. With e-commerce exports gaining awareness and popularity, Indian exporters are now able to sell internationally and expand their businesses without setting up physical stores or warehouses abroad.

Amazon Global Selling: Your passport to easy exports

As an e-commerce exports program, Amazon Global Selling enables Indian sellers and MSMEs to take their products from India to international marketplaces across 200+ countries and territories. From simple registration to attractive listing and hassle-free shipping, Amazon Global Selling offers international tools and solutions, enabling sellers to reach over 300 million customers.

Guide to export with Amazon

More blogs on export schemes

1. A guide to the Export Oriented Units (EOUs) scheme and process to avail its benefits

2. Gold Card Scheme for exporters: Objectives, eligibility and benefits

3. How to register for the Market Access Initiative (MAI) scheme?

4. What is the NIRVIK scheme for exporters?

5. All you need to know about Interest Equalisation Scheme and its benefits

6. All you need to know about the Transport and Marketing Assistance Scheme (TMA Scheme)

7. RoSCTL scheme: Benefits, eligibility and application procedure

8. What is Duty Entitlement Passbook (DEPB) Scheme for exporters?

9. Understanding export incentives in India: What are the benefits for exporters?

10. What is Export Promotion Capital Goods Scheme (EPCG)?

11. What is Duty Drawback in export: Meaning, types and process

12. Understanding the benefits of RoDTEP scheme: A guide for Indian exporters

13. What is Authorized Economic Operator (AEO) Programme: How to register and obtain AEO certificate?

Frequently Asked Questions

How do I close the advance license from DGFT?

The applicant can visit DGFT website and follow this process to close their advance license: DGFT Website → Services → Advance Authorisation → Closure of Advance Authorisation

Is Advance authorisation transferable?

The AA license is not transferable even after the completion of the export.

Is IGST exemption available under Advance Authorisation?

Yes, IGST is exempted under the Advance Authorisation scheme.

What is the redemption of the advance license?

When an exporter has completed export obligation, they must submit proof of export to DGFT and apply for a license for redemption for closure.

What is the validity of Advance Authorisation Scheme?

The AA license is valid for 12 from the date of issuance.

Published on September 29, 2022.

Sources:
1. https://commerce.gov.in/trade-statistics/latest-trade-figures/
2. https://www.dgft.org/standard_input_output_norms_io_norms_sion.html
3. https://www.aepcindia.com/system/files/FAQ%20on%20AAS-SAAS.pdf
4. file:///C:/Users/pc/Downloads/HBP2023_Chapter04%20as%20on%2030.10.2023.pdf
5. https://content.dgft.gov.in/Website/dgftprod/64c14faa-53ac-4387-bcf3-d355fee40bc8/Schedule%202%20-%20Export%20Policy%20New.pdf
6. https://www.meity.gov.in/writereaddata/files/DeemedExportScheme(1).pdf
7. https://www.dripcapital.com/en-in/resources/blog/advance-authorization
8. https://content.dgft.gov.in/Website/FTP%20Chapter%204%20as%20on%20June%2030%202019.pdf
9. https://cleartax.in/s/advance-authorization-scheme
10. https://pib.gov.in/PressReleasePage.aspx?PRID=1613365

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