Advance Authorisation (AA)

Objective of the scheme is to enable duty free import of inputs for export production. The input should be consumed in production of export product. Fuel, oil, catalysts which are used in the process of manufacturing the export product are also eligible to be imported under this scheme.

Benefits of AA

Exemption 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
  • Integrated Tax and Compensation Cess subject to pre-import condition
  • Duty Drawback may be applicable for additional inputs not specified in the norms.

All above mentioned benefits are subject to various conditions based on the inputs being imported and source of inputs and product to be exported.

Basis for Issuing Advance Authorisation

Advance Authorisation will be issued for inputs in relation to the resultant product based on the following basis

  • As per Standard Input Output Norms (SION)

    Norms are fixed for various export products and the respective inputs needed for manufacturing the export products under 12 categories/ sectors. Advance Authorisations are granted to the exporters based on the norms specified in these categories / sectors.

  • Self-Declaration

    In case of absence of the above norms, an exporter can apply for Advance Authorisation based on self-declaration. The exporter declares the amount of input required for manufacturing the export product depending on the process that he will implement and based on this self-declaration the RA will issue an Advance Authorisation. The exporter is allowed to import input goods without any duty with this authorization. The application will be forwarded to Norms committee for ratification. The norms committee will scrutiny the application and if there are any discrepancies the committee will inform the RA, and the Authorisation is modified based on the recommendations of the Norms Committee. Exporter will either get the benefit of getting additional inputs if declared less, or will have to pay customs duty if the declaration is more than the recommendation of the Norms Committee. Not all inputs are allowed for authorization under this option.

  • Prior Fixation of Norms

    In case of absence of the above norms, an exporter can apply for Advance Authorisation based on self-declaration. The exporter declares the amount of input required for manufacturing the export product depending on the process that he will implement and based on this self-declaration the RA will issue an Advance Authorisation. The exporter is allowed to import input goods without any duty with this authorization. The application will be forwarded to Norms committee for ratification. The norms committee will scrutiny the application and if there are any discrepancies the committee will inform the RA, and the Authorisation is modified based on the recommendations of the Norms Committee. Exporter will either get the benefit of getting additional inputs if declared less, or will have to pay customs duty if the declaration is more than the recommendation of the Norms Committee. Not all inputs are allowed for authorization under this option.

  • Self-Ratification

    Only Authorised Economic Operators (AEO) can apply with this option. Where there is no SION/ Ad hoc Norms for an export product or where SION has been notified but exporter intends to use additional inputs other than the inputs notified in SION in the manufacturing process, the AEO can apply for Advance Authorisation through self-ratification. These cases will not be referred to the Norms Committee. Not all inputs are allowed for authorization under this option.

Basis for Issuing Advance Authorisation
  • Manufacturer exporter or merchant exporter tied to supporting manufacturer
  • 2. Pharmaceutical products manufactured through Non-Infringing process shall be issued to Manufacturer exporter only
Eligible Exports & Supplies for Advance Authorisation
  • Physical exports (including exports to SEZ)
  • Intermediate Supply
  • Supply of goods to EOU /STP /EHTP /BTP
  • Supply of goods against EPCG
  • Supply of goods to projects financed by Multilateral or Bilateral Agencies / Funds
  • Supply of goods to projects approved by Finance ministry for zero duty from time to time
  • Supply of goods to United Nations or an International Organisation
  • Supply of goods to nuclear power projects
Entitlement
  • Under Self Declaration: Maximum CIF value will be as under Status Holders: upto 300% of FOB and / or FOR value of preceding year’s exports and / or supplies Others: upto Rs. 10 Cr or 300% of FOB and / or FOR value of preceding year’s exports and / or supplies whichever is higher
  • Annual Requirement Exporters have an option for applying for annual requirement i.e., they can get one authorization for requirement of inputs for the whole year. The CIF value of imports shall be upto 300% of the value of FOB value of physical exports done in the previous year or 1 Crore, whichever is higher.
Export Obligation

Exporters are supposed to fulfill “Export Obligation” for the inputs imported through Advance Authorisation. Obligation is the form of “Value Addition” achieved on the export product. Obligation period is set at 18 months from the date of issue of Authorisation. There are exceptions for supplies to projects in India or abroad and for items falling in category of defence, military store, aerospace, and nuclear energy.

Extension in the export obligation period is also allowed by paying a compensation fee.

Export Obligation

VA = ((A-B)/B)*100

A = FOB value of export realized / FOR value of supply received

B = CIF value of inputs covered by Authorisation, plus value of any other input used on which benefit of Drawback is claimed or intended to be claimed.

For Ex. If the exporter imports inputs worth 100 Rs. and the export product made with the input is worth 120 Rs., then there is a value addition of 20%.

Minimum Value Addition
  • Minimum value addition required for advance authorization is 15%
  • Copper concentrate products and Petroleum products as notified in Appendix 4D, the minimum value addition is 8%
  • For Tea – 50 %
  • For Gems & Jewellery sector it ranges from 1.5% to %

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