Advance Authorisation is one of duty exemption scheme provided under the foreign trade policy. Advance Authorisation is issued to allow the 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.
Advance Authorisation is issued Advance Authorisation is issued for inputs in relation to resultant product, on the following basis:
- As per Standard Input Output Norms (SION) notified (available in Hand Book of Procedures); OR
- On the basis of self-declaration as prescribed by handbook of procedures; OR
- Applicant specific prior fixation of norm by the Norms Committee; OR
- On the basis of Self Ratification Scheme in terms of Foreign Trade Policy.
Advance Authorisation can be issued either to a manufacturer exporter or merchant exporter tied to supporting manufacturer, however Advance Authorisation for pharmaceutical products manufactured through Non-Infringing (NI) process shall be issued to manufacturer exporter only.
Advance Auhorisation shall be issued for physcial export (including export to SEZ); intermediate supply; and or supply of ‘stores’ on board of foreign going vessel/ aircraft, subject to condition that there is specific Standard Input Output Norms in respect of items supplied.
Apart from that, Advance Authorisation can also be issue for the supply to categories mentioned in foreign trade policy like: EOU/STP /EHTP/BTP or capital goods under EPCG Authorisation or supply by main contractor/ subcontractor to project financed by multilateral or bilateral Agencies/ funds as notified by department of economic affairs (DEA), MoF, where legal agreements provide for tender evaluation without including customs duty or others as specified under policy.
Details of duty exempted
Imports under Advance Authorisation are exempted from payment of Basic Customs Duty, Additional Customs Duty, Education Cess, Anti-dumping Duty, Countervailing Duty, Safeguard Duty, Transition Product Specific Safeguard Duty, wherever applicable, however, import for supplied covered under specific supplies are not covered under the exemption from the payment of applicable anti-dumping and safeguard duty.
Actual User Condition
Materials imported under the ambit of Advance Tax are subject to conditions meted out to the user. It will not be transferable despite completing the expert obligation, though the Authorization holder may dispose of the product manufactured out of duty-free imports upon the completion of the export obligation.
Exported goods benefited with CENVAT credit facility shall be utilized for no other purpose than the manufacture of dutiable goods. For this purpose, the Authorization holder needs to produce a certificate from either the jurisdictional Central Excise Superintendent or Chartered Accountant.
Further, the manufacturing wastes/scrap may be disposed of by remitting the applicable duty before fulfilling the export obligation.
Minimum Value Addition
Minimum value addition required to be achieved under advance authorization is 15%, however DGFT has also provided the list of products where value addition could be less than 15% and in case of Tea, minimum value addition shall be 50%.
Validity Period for Import and its Extension
Validity period for import of Advance Authorisation shall be 12 months from the date of issue of Authorisation, however for specified supplies validity period shall be co-terminus with contracted duration of project execution or 12 months from date of issue of Authorisation, whichever is later.
Regional Authority may consider a request of original Authorisation holder and grant one revalidation for six months from expiry date.
Export Obligation Period and its Extension
Period for fulfillment of export obligation under Advance Authorisation shall be 18 months from the date of issue of Authorisation. Period of EO fulfillment under an Advance Authorisation shall commence from date of issue of Authorisation, unless otherwise specified.
Regional Authority may consider a request of Advance Authorisation holder for one extension of EO period upto six months from the date of expiry of EO period subject to payment of composition fee of 0.5% of the shortfall in EO. Authorisation holder will have to submit a self- declaration to RA stating that unutilised imported/domestically procured inputs are available with the applicant.
Request for further extension of six months after first extension can be considered by Regional Authority, provided Authorisation holder has fulfilled minimum 50%
export obligation in quantity as well as in value, on pro-rata basis. This will be subject to payment of composition fee @ 0.5% per month on unfulfilled FOB value of export obligation. No further extension shall be allowed by Regional Authority. This provision shall also be applicable to Advance Authorisations issued during FTP 2009-2014. However, only two extensions of six months each as mentioned above can be allowed subject to payment of composition fee and under no circumstance Regional Authority shall allow any extension beyond 12 months from date of expiry of EO period. At the time of filing application for second EO extension, the Authorisation holder will have to
submit a self-declaration to RA stating that unutilized imported/domestically procured inputs are available with the applicant.
Advance Authorisation for Annual Requirement:
Advance Authorisation for Annual Requirement shall only be issued for items notified in Standard Input Output Norms (SION); however, it shall not be issued in case of SION also where any item of input appears in Appendix-4J.
Exporter should have past export performance in at least preceding two years for obtaining Advance Authorisation for annual requirement.
Entitlement in terms of CIF value of imports shall be upto 300% of the FOB value of physical export and / or FOR value of deemed export in preceding financial year or Rs 1 crore, whichever is higher.
Commodities classified as prohibited under ITC (HS) (ITC (HS) codes are better known as Indian Trade Clarification (ITC) and are based on Harmonized System (HS) of Coding) Or commodities reserved for imports by STEs (State Trading Enterprises), despite the prohibition these commodities can be procured from STE’s against an ARO (Advance Release Order) or Invalidation Letter.
The Export of restricted items is bound by requirement of Export Authorisation or permission under schedule II of ITC (HS).
Advance Release Order (ARO) and Invalidation Order
Holders of Advance Authorization, Advance Authorization for Annual Requirement and Duty-Free Import Authorization, who are aiming to source inputs from indigenous sources/State Trading Enterprises (in lieu of direct import) are facilitated to source them either against Advance Release Order (ARO) or Invalidation letter denominated in free foreign exchange or Indian rupees.