Advance Authorization Scheme - CBEC's Customs Manual 2025 - Customs

3. Advance Authorization Scheme: 3.1 Advance Authorisations (AA) are issued to allow duty free import of inputs that are physically incorporated in the export product (after making normal allowance for wastage) as well as certain items like fuel, oil, catalysts which are consumed in the course of their use to obtain the export product. The raw materials/inputs are allowed in terms of Standard Input-Output Norms (SION) or self-declared norms of exporter in relation to the resultant product are allowed on the basis of the criteria mentioned in Para 4.03(b) of FTP, 2023. The AA are issued on pre-export or post export basis in accordance with the FTP and procedures in force on the date of issue. 3.2 AA are issued for physical exports as well as deemed exports. The holder is required to fulfil export obligation (EO) by exporting specified quantity/value of resultant product. The AA and the materials imported are not transferable even after completion of EO. 3.3 AA usually have a minimum of 15% value addition (except for Gems and Jewellery Sector) as prescribed under para 4.09 of FTP The value addition for gems and jewellery and for specified goods is less than 15% as prescribed in Para 4.61 Para 4.60 of Handbook of Procedures. In case of Tea and spices the minimum value addition is 50% and 25% respectively. As per Appendix 11 in HBP 2009-14. (Appendix 4C in HBP 2015-20), Appendix 4C in HBP 2023, higher value addition is prescribed for export for which payment are not received in freely convertible currency. 3.4 Normally, All Industry Rate (AIR) of Duty Drawback is not admissible with AA. However, a new scheme called Special Advance Authorisation for export of articles of apparels and clothing accessories of Chapters 61 62 of ITC (HS) is introduced w.e.f. 01.09.2016, wherein exporters are eligible for claiming AIR of Duty Drawback for non-fabric inputs on the exports and the value of any other input (non-fabric inputs) on which drawback is claimed or intended to be claimed shall be more or equal to 22% value of export realized. Further, Brand Rate of Duty Drawback may be claimed in respect of duty-paid inputs (not specified in the norms) which are used in the export product provided such duty paid inputs have been endorsed by RA for drawback payment on the AA This specification ensures value addition norms. [Refer Circular No. 37/2016 dated 13.08.2016 DGFT Not. No 21/2015-20 dated 11.08.2016] 3.5 AA are also issued on the basis of annual requirements of exporter, which enables planning for manufacturing/exports on a longer term basis. However, self-declared norms are not permitted under annual requirement under FTP 2015-20 FTP 2023, Advance Authorisation for Annual Requirement is also not available in respect of SION where any item of input appears in Appendix 4-J of FTP 2015-20 FTP 2023. [Refer Notification No. 4-Customs 21/2015-Customs both dated 01.04.2015 23/2023-Customs dated 01.04.2023] 3.6 Certain items that are otherwise prohibited for export may be exported under AA scheme, with conditions stricter than otherwise imposed including the export being allowed only from specified EDI enabled ports, subject to preimport condition under notified SION/prior fixation of norms by Norms Committee, export obligation period being 90 days from import clearance without extensions and import being subject to non-transfer, including for job work and actual user condition, and the inapplicability of provisions for regularisation of default, etc. [Refer Notification No. 1/2014-Cus, dated 17.01.2014 and No. 22/2015-Cus., dated 1.4.2015 and Circular No. 4/2014-Cus., dated 10.2.2014 24/2023-Customs dated 01.04.2023] 3.7 AA are issued either to a manufacturer exporter or merchant exporter tied to supporting manufacturer(s) or to sub-contractors in respect of supplies of goods to specified projects provided the name of such sub-contractor appears in the main contract. 3.8 The AA holders are required to file a bond with 100% Bank Guarantee for the duty difference with the Customs at the time of importing duty free inputs. Certain categories of exporters are conditionally exempt from filing Bank Guarantee in terms of CBIC Circular No. 58/2004-Cus dated 21-10-2004 as amended last by Circular No. 15/2014-Cus dated 18.12.2014. In case AA holder exports first by using imported inputs/indigenously procured inputs, he can seek waiver of Bond condition from DGFT in terms of Para 4.47 of HBP 2015-20 HBP 2023. In cases where the AA/DFIA/EPCG authorisation holder is a registered member of an Export Promotion Council, he shall produce a certificate of export performance or payment of duty/GST to claim exemption from furnishing Bank Guarantee from the concerned Export Promotion Council. Those who are not registered with Export Promotion Council, may produce such certificate by a practicing Chartered Accountant who is registered with the GST Department (Centre/State/UT) for payment of GST. [Refer Circular No. 31/2019-Customs dated 13.09.2019) 3.9 Validity of an AA for making imports is 12 months but there is provision for RA to consider request of original authorization holder and grant one revalidation for six twelve months from expiry date as prescribed in Para 4.41 of Handbook of Procedure, 2015-20 Para 4.39 of Handbook of Procedure, 2023. For fulfilment of EO, normally a period of 18 months from the date of issue is specified, with certain exceptions of shorter or longer periods as prescribed in Para 4.42 of Handbook of Procedure 2015-20 Para 4.40 of Handbook of Procedure 2023. 3.10 Under the FTP 2015-20 FTP 2023, the exporters of gems and jewellery can import/procure duty free inputs for manufacture of export product under various schemes viz. (i) Advance Procurement /Replenishment of Precious Metals from Nominated Agencies: (ii) Replenishment Authorization for Gems; (iii) Replenishment Authorization for Consumables and (iv) Advance Authorization for precious Metals. Import of gold for jewellery sector under Advance Authorization is on pre-import basis with actual user condition. [Refer Para 4.39 to Para 4.53 of FTP 2023] 3.11 Keeping in view nuances of individual variants of Advance Authorization, individual notifications issued by Revenue have certain variations in conditions, inter alia, related to prevention of dual or unintended benefits. [Refer Notification Nos. 96 and 99/2009-Cus, both dated 11.9.2009 and No. 112/2009-Cus. dated 29.9.2009 and Nos. 18, 20 and 21/2015- Cus, all dated 01.04.2015. 21, 22, 23, 24 and 27/2023-Cus all dated 01.04.2023] 3.12 After introduction of GST, imports are liable to levy of IGST and Compensation Cess. However w.e.f. 13.10.2017, imports under AA are exempted from IGST and Compensation Cess. Such exemption is available only for physical exports and is subject to pre-import condition. [Refer Notification No. 18/2015-Cus dated 01.04.2015 as amended by Notification No. 79/2017-Cus. Dated 13.10.2017 DGFT Notification No. 33/2015-20 dated 13.10.2017] 3.13 Domestic supplies to holder of AA are treated as deemed export under Section 147 of CGST Act. 2017. Supplier or recipient of such supplies is eligible for refund of GST paid on such supplies. [Refer Notification No. 47/2017-Central Tax dated 18.10.2017 Notification No. 48/2017-Central Tax dated 18.10.2017]