Advance Authorization Scheme
An AA is issued to allow duty free import of inputs, which are physically incorporated in export product (making normal allowance for wastage). In addition, fuel, oil, energy, catalysts which are consumed / utilized to obtain export product, may also be allowed. DGFT, by means of Public Notice, may exclude any product(s) from the purview of Advance Authorization. Mandatory spares which are required to be exported / supplied with the resultant product can be allowed duty free but up to 10% of CIF value of Authorization
Advance Authorizations are issued for inputs and export items given under SION.
These can also be issued on the basis of Adhoc norms or self declared norms
- AA can be issued either to a manufacturer exporter or a merchant exporter tied to supporting manufacturer(s). However, advance authorization under paragraph 7A of HBP. v1 [for pharmaceutical products manufactured through Non-Infringing (NI) process] shall be issued to Manufacturer exporter only.
- AA shall be issued for:
- Physical exports (including exports to SEZ); and/or
- Intermediate supplies; and/or
- Such supply of goods that are allowed in Chapter 8 of the FTP;
- Supply of ‘stores’ on board of foreign going vessel / aircraft subject to condition that there is specific SION in respect of item(s) supplied
Advance Authorizations are exempted from payment of basic customs duty, additional customs duty, education cess, anti dumping duty and safeguard duty, if any. However, imports for supplies covered under paragraph 8.2 (h) & (i) will not be exempted from payment of applicable anti-dumping and safeguard duty, if any.
Actual user Condition:
- AA and / or materials imported thereunder will be with actual user It will not be transferable even after completion of export obligation. However, Authorization holder will have option to dispose off product manufactured out of duty free inputs once export obligation is completed. In case where CENVAT credit facility on inputs have been availed for the exported goods, even after completion of export obligation, the goods imported against AA shall be utilized only in the manufacture of dutiable goods whether within the same factory or outside (by a supporting manufacturer), for which the authorization holder shall produce a certificate from either the jurisdictional Central Excise Superintendent or Chartered Accountant, at the option of the exporter, at the time of filing application for EODC to RA concerned.
- Further the manufacturing wastes / scrap, as allowed, can be disposed off with the payment of applicable duty even before fulfillment of export
Minimum Value Addition:
- AA necessitates exports with a minimum value addition of 15%, except for items specified in Appendix 11B of HBP v1 and for items in Gems & Jewellery Sector, for which value addition would be as per paragraph 2.1 of HBP v1. Exports to SEZ Units / supplies to Developers / Co-developers, irrespective of currency of realization, would also be covered.
- For physical exports for which payments are not received in freely convertible currency, same shall be subject to value addition as specified in App-11 of HBP
- In case of Authorization for import of Tea, minimum value addition under Advance Authorization shall be 50%.
- In case of spices duty free import of spices shall be permitted only for value addition purposes like crushing / grinding / sterilization or for manufacture of oils and oleoresins and not for simple cleaning, grading, re-packing