Advance Authorization Scheme

Advance Authorization Scheme

Advance Authorization Scheme

Advance authorization is defined to be an order issued in order to endorse the import of duty-free inputs which are physically included into the export good. Its provisions are extended to fuel, oil, energy, as well as catalysts which are consumed or make use of towards obtaining export goods.


Advance Authorization could be availed by manufacturer exporters or merchant exporters who are associated with supporting manufacturers for physical exports (which includes exports towards SEZ), intermediate supplies, as well as supply of ‘stores’ on board of foreign going vessel or aircraft (conditions are applicable).

Aside from that, Advance Authorization is also issued to sub-contractors towards any project (where the sub-contractors name appears in the main contract), United Nations Organizations (UNO), aid programs of the United Nations or additional multilateral agencies; the likes of which are paid for in free foreign exchange.

Advance Authorization for the import of raw sugar could also be issued in the direction of either a manufacturer exporter or merchant exporters who are linked with supporting manufacturers.


The imports of commodities under this scheme are exempted from the payment of basic customs duty, added customs duty, education, anti-dumping duty, as well as safeguard duty. Though, imports for supplies under specific supplies are not exempted from the payment of pertinent anti-dumping and safeguard duty.

User Conditions

The materials imported under the range of Advance Tax are subjected to conditions meted out towards the user. It would not be transferable in spite of completing the expert duty, though the Authorization holder might dispose of the good manufactured out of duty-free imports on the conclusion of the export duty.

Exported products benefitted with CENVAT credit facility would be utilized for no other reason than the manufacture of dutiable products. For this reason, the Authorization holder requires to produce a certificate from either the jurisdictional Central Excise Superintendent or Chartered Accountant.

Furthermore, the manufacturing wastes or scrap might be disposed of through remitting the applicable duty before completing the export obligation.

Minimum Value Addition

The inputs exported under Advance Authorization usually need a minimum value addition of 15%. The suggested value addition varies for the following products:

•    Physical exports (for which payments are not received in freely convertible currency) – subjected to value additions.

•    Relating to tea import, a minimum value addition of 50%.

•    The duty-free importing of spices are allowed only for value addition purposes like crushing, grinding, sterilization or for oil manufacture as well as oleoresins and not for cleaning, grading, re-packing, and so forth.

Free Provision of Inputs

The service of Advance Authorization is applicable where a few or every of the inputs are supplied through the foreign buyer without imposing any charges on the exporter. Given such a situation, the notional value of free of cost inputs as well as the value of other duty-free inputs is held for the calculation of value addition. If every one of the inputs are supplied without any cost, the exporter would be facilitated with the choice of complying with the necessities set through the DoR (Directorate of Drawback).

Export Obligation Period

Any entity or corporation registered with BIFR or in possession of a unit which is under BIFR shall be furnished with an extension of the Export Obligation Period (EOP) consistent with the formulated rehabilitation package. The provision reliant on the approval of BIFR and is also extended towards SSI units inconsistent with the rehabilitation scheme of the concerned State Government.

Annual Requirement

Advance Authorisation could also be issued for annual requirement. Status Certificate holders as well as additional categories of exporters with a performance record of 2 years are qualified to Advance Authorization for Annual Requirement.

Entitlement relating to CIF value of imports would be up to 300% of the FOB value of physical export and / or FOR value of deemed export in preceding licensing year or Rs 1 crore, whichever is higher.

Advance Release Order (ARO) and Invalidation Order

The holders of Advance Authorization ,Annual Requirement of Advance Authorization as well as Duty Free Import Authorization, who are purpose to source inputs from original sources or State Trading Enterprises (in place of direct import) are enabled towards obtaining them either against Advance Release Order (ARO) or Annulment letter denominated in free foreign exchange or Indian rupees.

Back-to-Back Inland Letter of Credit

The Advance Authorization holders, Advance Authorization for Annual Requirement as well as DFIA are qualified to avail the facility of Back-to-Back Inland Letter of Credit (in place of the ARO or Invalidation letter) consistent with the procedures specified in HBP v 1.

Prohibited Commodities

The commodities that are not entitled to imports against Advance Authorization/DFIA are;

•    Commodities classified as banned under ITC(HS).

•    Commodities reserved for imports through STEs.

Regardless of the prohibition, these commodities could be procured from STEs against an ARO or Invalidation letter.

The export of constrained items is bound through the requirements of Export Authorization or permission under Schedule II of ITC (HS).

Admissibility of Drawback

For an Advance Authorisation, drawback would be available for any duty paid material, whether imported or indigenous, utilized in products exported, inconsistent with the drawback rate fixed through DOR, Ministry of Finance (Directorate of Drawback). Drawback allowed would be stated in Authorisation.

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eStartIndia Team

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