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Advance Authorisation Scheme now allows duty-free imports even if goods shipped before licence issuance.

Advance Authorisation Scheme

It is an initiative that helps Indian exporters reduce costs and compete globally. It allows exporters to import raw materials, components, or other inputs without paying customs duties, such as Basic Customs Duty, Anti-dumping Duty, Safeguard Duty, Integrated Tax, and Compensation Cess. The duty exemptions apply only if the imported materials are used to produce goods for export.

It is a scheme under the Foreign Trade Policy (FTP) implemented by the Directorate General of Foreign Trade (DGFT), which is an attached office of the Ministry of Commerce and Industry.

Exporters must meet specific conditions, such as fulfilling an export obligation (exporting the finished goods within 18 months) and achieving a minimum value addition of 15% (the exported product must be worth at least 15% more than the imported inputs).

The scheme applies to physical exports, intermediate supplies, certain deemed exports, and supplies like stores on foreign-going vessels or aircraft, provided specific norms are met.

How Does the Scheme Work?

Application Process: Exporters apply to the DGFT for an Advance Authorisation license, which specifies the quantity of inputs they can import duty-free. They can use:

• Standard Input-Output Norms (SION): A sector-wise list provided by the DGFT that defines how much input is allowed for a given export product, accounting for wastage during manufacturing.
• Ad-hoc Norms: If SION doesn’t suit their needs, exporters can request custom norms tailored to their products.

Eligible Inputs: Besides raw materials, the scheme allows duty-free imports of packaging materials, fuel, oil, and catalysts used in production.

Who Can Apply?: The scheme is open to:

• Manufacturer Exporters: Those who produce and export goods directly.
• Merchant Exporters: Traders who tie up with a supporting manufacturer to export goods.

Validity and Obligations:

• The license is valid for 12 months from the date of issue.
• Exporters must complete their export obligation within 18 months or as notified by the DGFT.
• They must submit proof of export to the DGFT to confirm compliance. Failure to meet deadlines can lead to penalties or repayment of waived duties with interest.

Sectors Covered: The scheme supports a wide range of industries, including textiles, engineering goods, chemicals, and more.

Recent Changes to the AA Scheme (May 2025)

The government recently relaxed the rules of the AA Scheme to make it more exporter-friendly.

Relaxation on Shipment Timing

Old Rule: Exporters couldn’t claim duty-free benefits if their goods were shipped from a foreign country before the DGFT issued the AA license. Customs authorities, especially after objections from the Directorate of Revenue Intelligence (DRI) in Ludhiana, strictly enforced this, causing rejections even if goods were cleared later.

• New Rule: Exporters can now claim duty-free benefits even if goods are shipped or arrive in India before the AA license is issued, as long as the Bill of Entry (a legal document filed with Indian Customs to clear goods) is submitted after the license date. This change makes the process more flexible and reduces disputes.

Exceptions for Restricted Goods

The relaxation doesn’t apply to restricted goods or products that can only be imported through designated government agencies (e.g., canalizing agencies like the State Trading Corporation). Exporters need special permission from the DGFT to claim benefits for such goods.

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Source: 

BUSINESS-STANDARD