ADVANCE AUTHORISATION SCHEME: 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 2015-2020. 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 the 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, and catalyst consumed/ utilized for acquiring the export product.
  • Spares 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?

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.

ADVANCE LICENSE FOR DEEMED EXPORTS

Deemed Export 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 government-funded projects.

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) intending 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 in different segments, such as Chemicals and allied products, Electronics, Engineering, Food products, Handicrafts, Leather, Plastics, Sports, and textiles.

WHAT ARE SELF-DECLARED NORMS?

This method enables the exporter to apply for an Advanced Authorisation License based on self-declaration. The exporter can claim this if the product isn’t eligible under SION or is unsatisfied with the import quantity allowed.

The Advance License will be closed if the norms are accepted by the Norms Committee. However, if the applied norms are rejected, the applicant will pay Customs Duty along with Interest on the excess import quantity, further closing the Advance License.

WHAT IS THE APPLICANT-SPECIFIC-PRIOR FIXATION NORMS?

After getting the norms rectified by the Norms Committee the DGFT will provide the applicant an Advance License based on the fixed norms. Except for this, the entire process remains the same.

SELF- RATIFICATION ADVANCE AUTHORISATION SCHEME

The DGFT instituted this scheme for the smooth functioning of business procedures. Under the Self-Ratification Advance Authorisation Scheme, an Advance License is provided by the DGFT based on self-declaration without any direct involvement of the Norms Committee in Delhi for ratification of the norms. These are assumed to be self-ratified, thus, no further questioning is done. However, the eligibility of exporters under this method is limited, there are a few conditions to be adhered to by the exporters:

  • Only the exporter having an AEO (Authorised Economic Operator) can apply under this scheme.
  • The scheme isn’t available for all the export products mentioned in Chapters 1-24 and Chapter 71 of ITC HS, etc.
  • Before exporting, inputs must be imported and incorporated physically into the export product.
  • An audit may be held by the DGFT or the authority.
  • If the audit finds any misdeclaration or it’s found that the claimed inputs aren’t involved/utilized in the manufacturing process or excess quantity consumed is falsely mentioned, demand and recovery actions will be initiated.

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