For manufacturers dependent on imported raw materials, customs duty can materially increase production costs and weaken export competitiveness. The Advance Authorisation Scheme allows eligible exporters to import specified inputs without payment of applicable customs duties, subject to prescribed input-output norms and fulfilment of export obligations.
What Is the Advance Authorisation Scheme?
Advance Authorisation, also commonly searched as an Advance Licence, is a duty-exemption scheme administered by the Directorate General of Foreign Trade under Chapter 4 of the Foreign Trade Policy.
The scheme permits duty-free import of inputs that are physically incorporated in the exported product, allowing normal wastage as prescribed under the applicable norms. Fuel, oil, catalysts and other materials consumed or utilised during the production process may also be permitted where covered under the relevant policy provisions and input-output norms.
The benefit is granted against a corresponding obligation to manufacture and export the specified resultant product within the prescribed period.
In practical terms:
Duty-free inputs -> Manufacture of resultant product -> Export -> Export obligation fulfilment -> EODC and licence closure
Why Advance Authorisation Matters for Exporters
Import duty on raw materials directly affects product cost, working capital and international price competitiveness. Advance Authorisation can help an exporter:
- Reduce the landed cost of imported inputs
- Avoid upfront payment of eligible customs duties
- Improve export pricing and operating margins
- Reduce working-capital blockage
The scheme can create substantial savings where imported inputs carry a significant duty incidence or form a major part of the exported product.
Duties That Will Be Exempted
Subject to the applicable Customs notification and conditions of the authorisation, imports under the scheme may receive exemption from duties such as:
- Basic Customs Duty
- Social Welfare Surcharge
- Additional Customs Duty, wherever applicable
- Anti-dumping duty
- Safeguard duty
- Integrated Goods and Services Tax
- Compensation Cess
Who Can Apply for Advance Authorisation?
Advance Authorisation may generally be issued to:
- A manufacturer exporter
- A merchant exporter tied to a supporting manufacturer
For pharmaceutical products manufactured through a non-infringing process, specific conditions apply and the authorisation is generally available to the manufacturer exporter.
Applicants must have a valid Importer Exporter Code, RCMC and comply with the applicable requirements of the Foreign Trade Policy, Handbook of Procedures, Customs notifications and product-specific regulations.
Common industries using Advance Authorisation include:
- Chemicals and specialty chemicals
- Pharmaceuticals and life sciences
- Engineering goods
- Automobile and auto components
- Electronics and electrical equipment
- Textiles and garments
- Food processing
- Plastics and polymers
- Paper and packaging
- Metals and fabricated products
- Leather and footwear
- Gems and jewellery
- Defence and aerospace manufacturing
How Is Input Entitlement Determined?
The quantity of inputs permitted under an Advance Authorisation may be determined through one of the following routes.
1. Standard Input Output Norms
2. Self-Declaration Basis
3. Prior Fixation of Ad Hoc Norms
4. Self-Ratification Scheme
Minimum Value Addition
The general minimum value addition requirement under Advance Authorisation is
15%, unless a different requirement has been prescribed for the relevant product or sector.
Separate or product-specific requirements may apply to:
- Tea
- Spices
- Gems and jewellery
- Products listed in the relevant appendices
- Certain restricted or sensitive items
- Products governed by special conditions
Value addition must be examined at the application stage. A technically valid input-output norm may still become commercially or legally unsuitable if the required value addition is not achieved.
Import Validity and Export Obligation Period
Under the general provisions:
- The normal validity for import is 12 months from the date of issue
- The normal export obligation period is 18 months from the date of issue
Different periods may apply to certain products, project supplies, defence and aerospace items, gems and jewellery, or other specially regulated categories.
Revalidation and extension may be available subject to eligibility, prescribed timelines and payment of applicable composition fees. Exporters should review the licence well before expiry instead of waiting until the export obligation period has lapsed.
Advance Authorisation Application Process
A typical assignment involves the following stages:
- Review of the export product and manufacturing process
- Identification of imported and domestically procured inputs
- Examination of applicable SION or alternative norms route
- Calculation of input entitlement, wastage and value addition
- Preparation and filing of the application in the prescribed form
- Resolution of DGFT deficiencies or technical queries
- Issuance and verification of the authorisation
- Registration of the authorisation with Customs
- Execution of the required bond or undertaking
- Import of approved inputs and completion of exports
- Periodic reconciliation of imports, exports and consumption
- Filing of the EODC or redemption application
- Closure of Customs bond or bank guarantee
An error at the application stage frequently surfaces much later, when imported inputs have already been consumed and the exporter applies for redemption. This is why the complete transaction should be structured before the licence is filed.
Our Advance Authorisation Services
Feasibility and Duty-Saving Assessment
Before filing, we evaluate:
- Eligibility of the applicant and supporting manufacturer
- Applicability of the Advance Authorisation Scheme
- Customs duty presently payable on proposed inputs
- Potential duty and working-capital savings
- Availability and suitability of SION
- Manufacturing process and consumption ratios
- Minimum value addition
- Import and export timelines
- Product-specific restrictions and approvals
- Whether another scheme may be commercially preferable
This assessment helps exporters understand the expected benefit as well as the compliance obligations before committing to the scheme.
Application and Licence Issuance
We assist with:
- Preparation and filing of the DGFT application
- Classification and technical description of inputs and export products
- Computation of CIF value, FOB value, quantity and value addition
- Supporting manufacturer and co-authorisation arrangements
- Responses to DGFT deficiencies
- Amendment of inputs, export products, values or quantities
- Port-of-registration matters
- Enhancement or reduction of the authorisation
SION and Norms Committee Representation
Our support includes:
- Identification and interpretation of applicable SION
- Self-declaration applications
- Prior fixation of ad hoc norms
- Preparation of manufacturing process notes
- Technical justification of input consumption and wastage
- Coordination for Chartered Engineer certification
- Representation before the DGFT Norms Committee
- Reply to deficiencies and technical observations
- Modification or review of approved norms
Customs and Domestic Procurement Support
We assist exporters with:
- Customs registration of the authorisation
- Bond and bank guarantee-related documentation
- Resolution of description or quantity mismatches
- Addition of supporting manufacturers or job workers
- Advance Release Orders
- Invalidation letters
- Indigenous procurement under the applicable mechanism
- Coordination for closure of Customs bonds after redemption
Export Obligation Monitoring and EODC
Our services include:
- Licence-wise import and export reconciliation
- Mapping of Bills of Entry and shipping bills
- Review of e-BRC and export realisation data
- Verification of input consumption records
- Calculation of export obligation and value addition
- Identification of shortfall before licence expiry
- Filing of EODC or redemption applications
- Reply to redemption deficiencies
- Follow-up with the Regional Authority
- Closure of bond or bank guarantee with Customs
Extension, Regularisation and Legacy Licence Closure
We also handle:
- Revalidation of import validity
- Extension of the export obligation period
- Clubbing of eligible authorisations
- Enhancement or reduction
- Regularisation of bona fide default
- Duty and interest computation for shortfall
- Closure of partially utilised or unutilised licences
- Show-cause notices and adjudication proceedings
- Policy Relaxation Committee representations
- Resolution of old Advance Authorisation cases
Why Exporters Choose OSGAN Consultants
Advance Authorisation involves the combined interpretation of the Foreign Trade Policy, Handbook of Procedures, SION, Customs notifications, manufacturing records and export documentation.
OSGAN Consultants brings together:
- Specialised experience in DGFT and Customs matters
- Transaction-specific analysis instead of standardised filing
- Support from application through final redemption
- Experience in complex input-output norm matters
- Representation before Regional Authorities and DGFT committees
- Coordination between commercial, production, finance and logistics teams
- Licence-wise reconciliation and compliance monitoring
- Assistance in resolving delayed and disputed cases
- Advisory support for exporters operating across India
Our focus is not merely on obtaining an authorisation. We structure the transaction so that the benefit can be implemented, documented and successfully closed.
Frequently Asked Questions
Can a merchant exporter apply?
Yes. A merchant exporter may apply when tied to a supporting manufacturer, subject to compliance with the applicable scheme conditions.
Can capital goods be imported under Advance Authorisation?
No. Advance Authorisation is principally meant for inputs used or consumed in manufacturing the export product. Eligible capital goods are generally considered under the EPCG Scheme.
Is SION compulsory?
Not in every case. Where a suitable SION is unavailable, the exporter may explore self-declaration, prior fixation of ad hoc norms or the Self-Ratification Scheme, subject to eligibility.
What is the export obligation under Advance Authorisation?
The authorisation holder must export the specified resultant product in the prescribed quantity and value, achieve the stipulated value addition and comply with the conditions mentioned in the authorisation.
Can domestically manufactured inputs be procured against the authorisation?
Yes. Eligible inputs may be procured from domestic sources through mechanisms such as an Advance Release Order or invalidation letter, subject to the applicable procedure.
Can the import or export period be extended?
Revalidation of import validity and extension of the export obligation period may be available in eligible cases. Applications should be filed within the prescribed time and may involve payment of composition fees.
What happens if the export obligation is not fulfilled?
The exporter may become liable to pay customs duty and applicable interest @ 15% on the unutilised inputs or proportionate shortfall. Regulatory and penal consequences may also arise. Eligible cases can be examined for extension, regularisation or other relief.
What is an EODC?
An Export Obligation Discharge Certificate is issued by DGFT after verification that the prescribed export obligation and other conditions have been fulfilled. It is required for formal redemption of the authorisation and closure of the corresponding Customs bond.
Can OSGAN assist with old or defaulted Advance Licences?
Yes. We assist with reconciliation, extension, clubbing, regularisation, EODC, Customs bond closure, show-cause notices and representation before DGFT authorities.
