- Advance Authorization is issued to allow duty free import of input, which is physically incorporated in export product (making normal allowance for wastage). In addition, fuel, oil, catalyst which is consumed / utilized in the process of production of export product, may also be
- AA is issued for inputs in relation to resultant product, on the following basis:
- As per Standard Input Output Norms (SION) notified (available in Hand Book of Procedures);
- On the basis of self declaration as per paragraph 4.07 of Handbook of
- Applicant specific prior fixation of norm by the Norms
- Self Ratification Scheme in terms of Para 07A of Foreign Trade Policy.
AA for Spices
Duty free import of spices covered under Chapter-9 of ITC (HS) shall be permitted only for activities like crushing/grinding / sterilization/ manufacture of oils or oleoresins. Authorization shall not be available for simply cleaning, grading, re-packing etc.
A Special AA Scheme for export of Articles of Apparel and Clothing
Duty free import of fabric under ‘Special Advance Authorization Scheme for export of Articles of Apparel and Clothing Accessories’ shall be allowed, as per Customs Notification issued for this scheme, for export of items covered under Chapter 61 and 62 of ITC(HS) Classification of Export and Import, subject to the following terms and conditions:
- The authorization shall be issued based on Standard Input Output Norms (SION) or prior fixation of norms by Norms
- AA shall be issued for the import of relevant fabrics including inter lining only as input. No other input, packing material, fuel, oil and catalyst shall be allowed for import under this
- Exporters shall be eligible for All Industry Rate of Duty Drawback, for non fabric inputs, as determined by Central Government for this scheme. For the purpose of value addition norm of Para 4.08 of FTP, the value of any other input used on which benefit of Drawback is claimed or intended to be claimed shall be equal to 22% of the FOB value of export realized. Minimum value addition shall be as per Para 4.09 of
- Where the exporter desires to claim drawback determined and fixed by Jurisdictional Customs Authority (brand rate), he shall follow Para 4.15 of FTP regarding declarations to be made in application for the authorization and make export under claim for brand rate. In such cases the value addition shall be as per Para 4.08 of Minimum value addition shall be as per Para 4.09 of FTP.
- Authorization, and the fabric imported, shall be subject to actual user condition. The same shall be non transferable even after completion of export obligation. However fabric imported may be transferred for job work in terms of provisions of GST Acts under intimation to the Customs authority at the port of registration (excluding to units located in areas eligible for area based exemption from Central Excise Duty). Invalidation of the Authorization shall not be
- The fabric imported shall be subject to pre-import condition and it shall be physically incorporated in the export product (making normal allowance for wastage). Only Physical exports shall fulfil the export
- Provisions of paragraphs 4.02, 4.05(a), 4.13(i), 4.13(ii), 4.14, 4.15, 4.17, 4.19, 4.21(i), 4.21(ii), 4.21 (iii), 4.21(v), 4.22(i), and
4.24 of Foreign Trade Policy shall be applicable in so far as they are not inconsistent with this scheme.
- Eligible Applicant / Export / Supply
- Advance Authorization can be issued either to a manufacturer exporter or merchant exporter tied to supporting
- AA for pharmaceutical products manufactured through Non-Infringing (NI) process (as indicated in paragraph 18
of Handbook of Procedures) shall be issued to manufacturer exporter only.
- Advance Authorization shall be issued for:
- Physical export (including export to SEZ);
- Intermediate supply; and/or
- Supply of goods to the categories mentioned in paragraph 7.02 (b), (c), (e), (f), (g) and (h) of this
- 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
- AA for Annual Requirement
- Advance Authorization for Annual Requirement shall only be issued for items notified in Standard Input Output Norms (SION), and it shall not be available in case of adhoc norms under paragraph 4.03 (b)(ii) of
- Advance Authorization for Annual Requirement shall also not be available in respect of SION where any item of input appears in Appendix 4-J.
- Eligibility Condition to obtain Advance Authorization for Annual Requirement
- Exporters having past export performance (in at least preceding two financial years) shall be entitled for Advance Authorization for Annual
- Entitlement in terms of CIF value of imports shall be upto 300% of the FOB value of physical export and / or FOR value of deemed export in preceding financial year or RS 1 crore, whichever is
- A Self Ratification Scheme
- Where there is no SION/valid Adhoc Norms for an export product and where SION has been notified but exporter intends to use additional inputs in the manufacturing process, eligible exporter can apply for an Advance Authorization under this scheme on self declaration and self ratification basis. RA may
issue Advance Authorizations and such cases need not be referred to Norms Committees for ratification of norms. Application under this scheme shall be made along with a Certificate from Chartered Engineer in the prescribed format.
- A Certificate from a Chartered Engineer who has been not been penalized in the last five years under FT(D&R) Act 1992, Customs Act 1962, Central Excise Act 1944, GST Acts and allied acts and rules made there under shall only be accepted for grant of Authorization under this
- Detailed procedure for administering the scheme shall be prescribed in the Handbook of Procedures.
- An exporter (manufacturer or merchant) who holds AEO Certificate under Common Accreditation program of CBEC is eligible to opt for this
- The scheme shall not be available for the following export
- All items covered under Chapter-1 to 24 and Chapter-71 of ITC(HS) Classification;
- Biotechnology items and related products; and
- The scheme shall not be available for the following
- All vegetable / edible oils classified under Chapter-
15 and all types of oilseeds classified under Chapter-12 of ITC (HS) book;
- All types of cereals classified under Chapter–10 of ITC (HS) book;
- Horn, hoof and any other organ of animal;
- Wild animal products, organs and waste thereof;
- All items with basic customs duty of 30% or more;
- All types of fruits/ nuts/ vegetables classified under Chapter-7 and Chapter-8 of ITC (HS) book;
- Items covered under heading 2515, 2516, 3301, 3302, 3303 6801 and 6802 of ITC(HS) Classification;
- Items covered under Chapter 50 to 63 of ITC(HS) classification.
- Acetic Anhydride, Ephedrine and Pseudoephedrine;
- Biotechnology items and related products;
- Insecticides, Rodenticides, Fungicides, herbicides, Anti sprouting products, and plant growth regulators, disinfectants and similar products of all forms, types and grades;
- Waste/Scrap of all types; and
- Second hand.
- Inputs imported shall be subject to pre import condition and they shall be physically incorporated in the export product (making normal allowance for wastage). In case of local procurement under invalidation/ARO, the inputs shall be procured prior to manufacture of export item and shall be physically incorporated in the export.
- Wherever value of by-products and recoverable wastage generated during manufacturing process is more than 5% of CIF value, corresponding quantity of main input shall be reduced from the entitlement to the extent that value of disallowed quantity is equal to the value of by-products and recoverable wastage generated during manufacturing.
- DGFT or any person authorized by him may conduct audit of the manufacturer. The frequency and manner of audit shall be prescribed by DGFT in Handbook of Procedures. The manufacturer shall be required to provide the necessary facility to verify the books of account/other documents as required, give information and assistance for timely completion of the audit. Non-availability of production and consumption documents/data shall be treated as misdeclaration and indulgence in fraudulent activities and shall be penalized under FT(D&R) Act, as amended and rules made there.
- DGFT or any person authorized by him may initiate special audit, considering the nature and complexity of the case and revenue of government, if he is of the opinion at any stage of scrutiny/enquiry/investigation that the norms have not been claimed correctly or the excess benefit has been availed. Special audit can be conducted even if the manufacturer has already been audited.
- If the audit results in detection of misdeclaration and/or instances of claiming of inputs which are not used in manufacturing process or excess quantity of inputs than consumed, demand and recovery actions will be initiated in addition to initiation of action against the authorization holder, manufacturer and Chartered Engineer in terms of Foreign Trade Development and Regulation Act 1992 and/or Customs Act 1962, as amended and rules made there.
- In cases where Chartered Engineer has not exercised due diligence or has willfully become party to misdeclaration action will be initiated under against such person under FT(D&R) Act 1992, as amended and rules made there under. In addition, such cases shall also be referred to ‘The Institute of Engineers India for taking action as warranted under the bylaws of the.
- All the provisions applicable for Advance Authorization Scheme shall be applicable to this scheme also in so far they are not inconsistent with this.
Value Addition for the purpose of this Chapter (except for Gems and Jewelry sector for which value addition is prescribed in paragraph.
4.38 of FTP) shall be:-
VA =————- x100, where
A =FOB value of export realized/FOR value of supply received.
B =CIF value of inputs covered by Authorization, plus value of any other input used on which benefit of DBK is claimed or intended to be claimed.
- Minimum Value Addition.
- Minimum value addition required to be achieved under Advance Authorization is 15%.
- Export Products where value addition could be less than 15% are given in Appendix.
- Minimum value addition for Gems & Jewelry Sector is given in paragraph 4.61 of Handbook of.
- In case of Tea, minimum value addition shall be 50%.
- Import of Mandatory Spares.
Import of mandatory spares which are required to be exported / supplied with the resultant product shall be permitted duty free to the extent of 10% of CIF value of Authorization.
- Ineligible categories of import on Self Declaration basis.
- Import of following products shall not be permissible on self- declaration basis:
- All vegetable / edible oils classified under Chapter-15 and all types of oilseeds classified under Chapter-12 of ITC (HS) book;
- All types of cereals classified under Chapter–10 of ITC (HS) book;
- All Spices other than light black pepper (light berries) having a basic customs duty of more than 30%, classified under Chapter-9 and 12 of ITC (HS) book;
- All types of fruits/ vegetables having a basic customs duty of more than 30%, classified under Chapter-7 and Chapter-8 of ITC (HS) book;
- Horn, Hoof and any other organ of animal;
- Rough Marble Blocks/Slabs; and
- Vitamins except for use in pharmaceutical
- For export of perfumes, perfumery compounds and various feed ingredients containing vitamins, no Authorization shall be issued by Regional Authority under paragraph 4.07 of Handbook of Procedures and applicants shall be required to apply under paragraph 4.06 of Hand Book of Procedures to the Norms
- Where export and/or import of biotechnology items and related products are involved, Authorization under paragraph 4.07 of Handbook of Procedures shall be issued by Regional Authority only
on submission of a “No Objection Certificate” from Department of Biotechnology.
- Accounting of Input
- Wherever SION permits use of either (a) a generic input or (b) alternative input, unless the name of the specific input together with quantity [which has been used in manufacturing the export product] gets indicated / endorsed in the relevant shipping bill and these inputs, so endorsed, within quantity specified and match the description in the relevant bill of entry, the concerned Authorization will not be redeemed. In other words, the name/description of the input used (or to be used) in the Authorization must match exactly with the name/description endorsed in the shipping
- In addition, if in any SION, a single quantity has been indicated against a number of inputs (more than one input), then quantities of such inputs to be permitted for import shall be in proportion to the quantity of these inputs actually used/consumed in production, within overall quantity against such group of inputs. Proportion of these inputs actually used/consumed in production of export product shall be clearly indicated in shipping
- At the time of discharge of export obligation (issue of EODC) or at the time of redemption, Regional Authority shall allow only those inputs which have been specifically indicated in the shipping bill together with
- The above provisions will also be applicable for supplies to SEZs and supplies made under Deemed exports. Details as given above will have to be indicated in the relevant Bill of Export, ARE- 3, Central Excise certified Invoice / import document / Tax Invoice for export prescribed under the GST rules
- Pre-import condition in certain cases
- DGFT may, by Notification, impose pre-import condition for inputs under this
- Import items subject to pre-import condition are listed in Appendix 4-J or will be as indicated in Standard Input Output Norms (SION).
- Import of drugs from unregistered sources shall have pre- import
- Details of Duties exempted
Imports under Advance Authorization 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. Import against supplies covered under paragraph 7.02 (c), (d) and (g) of FTP will not be exempted from payment of applicable Anti-dumping Duty, Countervailing Duty, Safeguard Duty and Transition Product Specific Safeguard Duty, if any. However, imports under Advance Authorization for physical 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), as may be provided in the notification issued by Department of Revenue, and such imports shall be subject to pre-import condition. Imports against Advance Authorizations for physical exports are exempted from Integrated Tax and Compensation Cess upto 31.03.2018 only.
- Admissibility of Drawback
Drawback as per rate determined and fixed by Customs authority in terms of DoR Rules shall be available for duty paid imported or indigenous inputs (not specified in the norms) used in the export product. For this purpose, applicant shall indicate clearly details of duty paid input in the application for Advance Authorization. As per details mentioned in the application, Regional Authority shall also clearly endorse details of such duty paid inputs in the condition sheet of the Advance Authorization.
- Actual User Condition for Advance Authorization.
- Advance Authorization and / or material imported under Advance Authorization shall be subject to ‘Actual User’ condition. The same shall not be transferable even after completion of export obligation. However, Authorization holder will have option to dispose of product manufactured out of duty free input once export obligation is
- In case where CENVAT/input tax credit facility on input has been availed for the exported goods, even after completion of export
obligation, the goods imported against such Advance Authorization shall be utilized only in the manufacture of dutiable goods whether within the same factory or outside (by a supporting manufacturer). For this, the Authorization holder shall produce a certificate from either the jurisdictional Customs Authority or Chartered Accountant, at the option of the exporter, at the time of filing application for Export Obligation Discharge Certificate to Regional Authority concerned.
- Waste / Scrap arising out of manufacturing process, as allowed, can be disposed off on payment of applicable duty even before fulfillment of export
- Validity Period for Import and its Extension
Validity period for import under Advance Authorization shall be as prescribed in Handbook of Procedures.
- Importability/Export ability of items that are Prohibited/Restricted/ STE
- No export or import of an item shall be allowed under Advance Authorization / DFIA if the item is prohibited for exports or imports respectively. Export of a prohibited item may be allowed under Advance Authorization provided it is separately so notified, subject to the conditions given therein.
- Items reserved for imports by STEs cannot be imported against Advance Authorization / DFIA. However, those items can be procured from STEs against ARO or Invalidation letter. STEs are also allowed to sell goods on High Sea Sale basis to holders of Advance Authorization / DFIA holder. STEs are also permitted to issue “No Objection Certificate(NOC)” for import by Advance Authorization / DFIA holder. Authorization Holder would be required to file Quarterly Returns of imports effected against such NOC to concerned STE and STE would submit half-yearly import figures of such imports to concerned administrative Department for monitoring with a copy endorsed to
- Items reserved for export by STE can be exported under Advance Authorization / DFIA only after obtaining a ‘No Objection Certificate’ from the concerned
- Import of restricted items shall be allowed under Advance Authorization/
- Export of restricted / SCOMET items however, shall be subject to all conditionalities or requirements of export authorization or permission, as may be required, under Schedule 2 of ITC (HS).
- Free of Cost Supply by Foreign Buyer
Advance Authorization shall also be available where some or all inputs are supplied free of cost to exporter by foreign buyer. In such cases, notional value of free of cost input shall be added in the CIF value of import and FOB value of export for the purpose of computation of value addition. However, realization of export proceeds will be equivalent to an amount excluding notional value of such input.
- Domestic Sourcing of Inputs
- Holder of an Advance Authorization / Duty Free Import Authorization can procure inputs from indigenous supplier/ State Trading Enterprise/EOU/EHTP/BTP/STP in lieu of direct import. Such procurement can be against Advance Release Order (ARO), or Invalidation Letter.
- When domestic supplier intends to obtain duty free material for inputs through Advance Authorization for supplying resultant product to another Advance Authorization / DFIA / EPCG Authorization, Regional Authority shall issue Invalidation
- Regional Authority shall issue Advance Release Order if the domestic supplier intends to seek refund of duties exempted through Deemed Exports mechanism as per provisions under Chapter-7 of
- Regional Authority may issue Advance Release Order or Invalidation Letter at the time of issue of Authorization simultaneously or
- Advance Authorization holder under DTA can procure inputs from / SEZ units without obtaining Advance Release Order or Invalidation
- Validity of Advance Release Order / Invalidation Letter shall be co-terminous with validity of
- Currency for Realization of Export
- Export proceeds shall be realized in freely convertible currency except otherwise specified. Provisions regarding realization and non realization of export proceeds are given in paragraph 2.52, 2.53 and 2.54 of
- Export to SEZ Units shall be taken into account for discharge of export obligation provided payment is realized from Foreign Currency Account of the SEZ
- Export to SEZ Developers / Co-developers can also be taken into account for discharge of export obligation even if payment is realized in Indian Rupees.
- Authorization holder needs to file Bill of Export for export to SEZ unit / developer / co-developer in accordance with the procedures given in SEZ Rules, 2006.
- Export Obligation Period and its Extension
Period for fulfilment of export obligation and its extension under Advance Authorization shall be as prescribed in Handbook of Procedures.
- Re-import of exported goods under Duty Exemption / Remission Scheme
Goods exported under Advance Authorization/ Duty Free Import Authorization may be re-imported in same or substantially same form subject to such conditions as may be specified by Department of Revenue. Authorization holder shall also inform about such re- importation to the Regional Authority which had issued the Authorization within one month from date of re-import.
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