The Advance Authorisation Scheme (AAS) or Advance License Scheme is a duty exemption initiative implemented by the Government of India as part of the Foreign Trade Policy 2015-2020. This scheme grants an exemption from import duties for raw materials and inputs essential for the manufacturing of export products.
In essence, it allows the importation of these materials at zero customs duty, facilitating the production of export goods. The primary objective of this scheme is to enhance the competitiveness of India’s products in the global market. By eliminating duties on imported raw materials, the scheme contributes to reducing the overall cost of the final export product.
Duties Exempted under the Advance Authorization Scheme
Below is the list of duties exempted under the AA scheme:
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
This exemption is subject to specific conditions.
Items Eligible for Duty-Free Import under the Scheme
The following items can be imported without the obligation to pay duty under this scheme:
- Inputs that are physically incorporated into the exported product, accounting for normal allowances for wastage.
- Fuel, oil, and catalysts that are consumed or utilised in the process of obtaining the export product.
- Mandatory spares necessary for export along with the resultant export product, up to 10% of the CIF value (Cost, Insurance and Freight) of the Authorization.
- Specified spices are permitted to be imported duty-free solely for activities such as crushing, grinding, sterilisation, or the manufacture of oil or oleoresin. Importation for simpler activities like cleaning, grading, or re-packing is not eligible for duty-free status.
What is the Advance License for Deemed Exports?
Deemed Export: Deemed Export refers to the provision of finished goods that remain within the country, and the transaction payment can be in INR or free foreign exchange.
The categories of supply considered as Deemed Exports include:
- Supply of goods to EOU / STP / EHTP / BTP units.
- Supply of goods against Advance Authorization / Advance Authorization for annual requirement / DFIA.
- Supply of Capital Goods/Machinery against EPCG Authorization.
- Supply to other government-funded projects, etc.
Individuals have the option to apply for an Advance Licence for Deemed Exports through the DGFT office.
Methods for Issuing Advance Licence
Advance Authorization can be granted for inputs utilised in the production of goods intended for export based on the following criteria:
Standard Input Output Norms (SION) Notification
The Director General of Foreign Trade (DGFT), acting on the recommendations of the Norms Committee, establishes standard norms delineating the quantity of input necessary for manufacturing a unit of the output product slated for export. This provision spans a broad spectrum of products.
Self-declaration
In instances where the SION is unavailable for a specific product, exporters can submit an application to the Regional Authority for a thorough review, resulting in the issuance of the Advance Authorization.
Application before Norm Fixation by the Norms Committee
When SION is undefined for a product, exporters can apply to the norms committee to request norms establishment. Upon submission of all requisite data, the committee will either determine these norms or provide ad-hoc norms based on the application. Ad-hoc norms are valid for a single authorization, and no subsequent authorizations can be issued.
Self Ratification Scheme
This scheme is exclusively accessible to exporters holding the Authorised Economic Operator (AEO) Certificate under the Common Accreditation Programme of CBEC. It can be chosen when there is no SION or valid ad-hoc norms for an export product. Additionally, it applies when SION has been notified, but the exporter intends to use additional inputs in the manufacturing process.
Unlike other schemes, ratification by the norms committee is not mandatory under this scheme. The regional authority may issue the Advance Authorization upon fulfilment of the relevant conditions.
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FAQs
Q1. How to apply for the Advance Authorisation Scheme?
An individual can apply for the Advance License from the Directorate General of Foreign Trade (DGFT) using one of the following approaches: Standard Input Output Norms (SION), Self-Declaration, Prior Fixation of Norms by the Norms Committee, or Self-Ratification Basis. When applying online, the applicant must possess a digital signature.
The applicant may be a Manufacturer exporter or Merchant exporter, holding an Importer Exporter Code (IEC) and a Registration Cum Membership Certificate (RCMC) with the factory address provided. In the case of a Merchant Exporter, it is necessary to include details about the supporting manufacturer. The process involves filling out the online form ANF 4A and uploading the required documents.
Q2. How does the Advance License operate?
The following steps outline the functioning of the Advance License Scheme:
- Initiate the application for an Advance Authorisation at the Jurisdictional DGFT office.
- The Advance License, issued by the DGFT, contains crucial details such as item description, HS Code, quantity, and FOB/CIF value for export/import.
- Register the licence at the Customs – Port of Registration and simultaneously execute a Bond/LUT with the Customs Authority.
- Import the raw materials duty-free and transport them to the factory premises for the production of the export item.
- Upon completing the Export Obligation under the Advance Authorisation scheme, close the License, and cancel the Bond.