Introduction: The Advance Authorisation Scheme facilitates duty-free import of inputs for incorporation into export products. This comprehensive guide explores the scheme’s details, eligibility criteria, application process, duty exemptions, minimum value addition requirements, and maintenance of proper accounts.
Scheme at Glance
Advance Authorisation is issued to allow duty free import of input, which is physically incorporated in export product. Advance Authorisation is issued for inputs in relation to resultant product, on the following basis:
a. As per Standard Input Output Norms (SION) notified (available in Hand Book of Procedures);
b. On the basis of self-declaration as per paragraph 4.07 of Handbook of Procedures.
c. Applicant-specific prior fixation of norm by the Norms Committee as per para 4.06 of Handbook of Procedures.
d. On the basis of Self Ratification Scheme in terms of Para 4.06 of Foreign Trade Policy
Eligibility
Advance Authorisation can be issued either to a manufacturer exporter or merchant exporter tied to supporting manufacturer. Advance Authorisation shall be issued for:
a. Physical export (including export to SEZ)
b. Intermediate supply; and/or
c. Supply of goods to the categories mentioned in paragraph 7.02 (b), (c), (d), (e), (f) and (g) of this FTP
d. Supply of ‘stores’ on board of foreign going vessel / aircraft, subject to condition that there is specific Standard Input Output Norms in respect of item supplied.
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, imports under Advance Authorisation for physical as well as deemed exports are also exempt from whole of the Integrated Tax and Compensation Cess leviable under sub-section (7) and sub-section (9) respectively, of section 3 of the Customs Tariff Act, 1975 (51 of 1975).
Minimum Value Addition
Minimum value addition required to be achieved under Advance Authorisation is 15%. Value Addition shall be:
FOB Value-CIF Value X 100
CIF Value
Application Procedure
Application for grant of Advance Authorisation shall be filed online (digitally signed) by IEC holder to the concerned jurisdictional Regional Authority as per Appendix 1A. Applicant could be either Registered office or Head office or a branch office or a manufacturing unit of the IEC holder
Applicant shall upload documents as prescribed in ANF 4A, if any, at the time of online filing of application. No physical copy of application is required to be submitted to Regional Authority.
Fixation of Norms
In case where norms have not been notified or where applicant wants to get the ad-hoc norms fixed before making an application for Advance Authorisation, application in ANF 4B, along with prescribed documents, shall be uploaded online to concerned Norms Committee (NC) in DGFT headquarters for fixation of SION/Adhoc norms.
The decisions of Norms Committees shall be available on the website of DGFT (http://dgft.gov.in) periodically and the applicants shall update themselves the status of norms fixation in respect of Authorisation obtained by them.
Exporters / EPC shall provide data to the Norms Committee concerned for the fixation of SION/Adhoc Norms for an export product. Norms Committee shall endeavour to fix SION or adhoc norms on receipt of complete data. Any adhoc norm fixed under this para, on the basis of an application made by an exporter shall be valid for one authorisation for which such application is made and no repeat authorisations shall be issued. However, Norms Committee can specify extended validity period, not more than two years from the date of fixation of such adhoc norms, for grant of further authorisations under such norm.
Entitlement
Maximum CIF value of one or more authorisations to be issued under paragraph 4.07 of Handbook of Procedures shall be as under:
a. For Status Holders – up to 300% of FOB and / or FOR value of preceding year’s exports and/or supplies.
b. Other than Status Holders – upto 300% of FOB or Rs. 10 crore and / or FOR value of preceding year’s exports and/or supplies, whichever is higher.
Maintenance of Proper Accounts for Authorisations issued
Every Advance Authorisation holder shall maintain a true and proper account of consumption and utilization of duty free imported / domestically procured inputs against each authorisation as prescribed in Appendix 4-I. This record in Appendix 4-I format, duly verified and certified by the jurisdictional Customs Authority, or by the Chartered Engineer (Chemical) along with cross attestation by the Chartered Accountant who shall both independently verify the inputs consumed in the process, shall be submitted to the concerned Regional Authority at the time of filing application for redemption / bond waiver. Regional Authority shall compare the details of Appendix 4-I, with that of the inputs allowed in the authorisation, before allowing redemption or bond waiver against individual authorisation. Such records shall be preserved for a period of at least three years from the date of
Export Obligation Discharge Certificate.
Validity period for import and Revalidation of Authorisation
a. Validity period for import of Advance Authorisation shall be 12 months from the date of issue of Authorisation
b.Validity of Advance Authorisation for supplies under Chapter-7 of FTP shall be co-terminus with contracted duration of project execution or 12months from the date of issue of Authorisation, whichever is later
c. For Advance Authorisations not covered under Para 4.39(b) above, only one revalidation for twelve months from expiry date shall be allowed. No further revalidation would be allowed for such authorisations. Applications for any such revalidation may be submitted online to the concerned Regional Authority
Export Obligation (EO) Period and its Extension
a. Period for fulfilment of export obligation under Advance Authorisation shall be 18 months from the date of issue of Authorisation. Period of EO fulfilment under an Advance Authorisation shall commence from date of issue of Authorisation, unless otherwise specified.
b. In cases of supplies to projects in India under Chapter-7 of FTP or projects abroad, the Export Obligation period shall be co- terminus with contracted duration of the project execution or 18 months whichever is more
c. Extension in export obligation period for Authorisations issued under Appendix-4J shall be allowed for a period not more than the half of the stipulated export obligation period. In such cases, composition fee shall be levied in such a manner as prescribed.
d. Regional Authority may consider a request of Advance Authorisation holder for one extension of EO period up-to six months from the date of expiry of EO period subject to the payment of composition fee as prescribed.
e. Request for further extension of six months after first extension as in (e) above can be considered by Regional Authority, subject to the payment of composition fee as prescribed.
No further extension shall be allowed by Regional Authority. 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 unutilised imported/domestically procured inputs are available with the applicant.
Monitoring of Export Obligation
a. Regional Authority, with whom undertaking is executed by Advance Authorisation holder, shall maintain a proper record in a master register indicating starting and closing dates of obligation period and other particulars to monitor EO. In addition, this information may be generated from Computer System and maintained in a book form.
b. Within six months from the date of expiry of Export Obligation period, Authorisation holder shall file application online by linking details of shipping bills against the authorisation, failing which Regional Authority may initiate action as per FT (DR) Act by way of issuing Show Cause Notice.
Redemption
On completion of exports and imports, the Authorisation holder shall submit online application in ANF-4F as in (a) (i) above. In such cases, if Export Obligation has been fulfilled, the Regional Authority may issue EODC / Redemption Certificate to Authorisation holder and forward a copy to the Customs authority at the port of registration of Authorisation indicating the same details of proof of fulfilment of Export Obligation as stated in paragraph(a) above evidencing fulfilment of Export Obligation.
Conclusion: Understanding the nuances of the Advance Authorisation Scheme is crucial for exporters seeking to leverage duty-free imports for their export endeavors. With insights into eligibility, application procedures, and compliance requirements, exporters can navigate the scheme effectively to optimize their export operations and ensure adherence to regulatory standards.
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