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How to Apply for Duty Free Import Under the Advance Authorisation Scheme?

Author: Himanshu Goyal
by Himanshu Goyal
Posted: Nov 27, 2021

The Advance Authorisation Scheme (also known as the Advance Licence Scheme) is a program that exempts manufacturers from duty so they can import raw materials duty-free to make export-oriented products.

The Directorate General of Foreign Trade, (DGFT), determines how many inputs are allowed for a product. It does this by publishing a sector-wise list of standards input-output norms. It outlines the minimum inputs required for specific products and takes into account any waste that might occur during manufacturing.

Exporters can apply for advance licences under ad-hoc norms in cases where the standard input/output norms do not apply to them or their manufacturing processes. An exporter may apply for this scheme if there is no SION or other ad-hoc norms.

This scheme is open to manufacturer-exporters but not limited to them. Merchant exporters who are involved in supporting manufacturers may also be eligible to apply. If their names are on the contract, suppliers to the United Nations or other aid programs can also apply. Convertible foreign currency must be used to pay the payment. In the case of pharma imports, the authorisation will be extended only to manufacturer-exporters.

Manufacturers are exempted from basic customs duties, education cess and social welfare cess. They also get exemptions from anti-dumping, countervailing, safeguard, and education duty. This scheme also exempts integrated goods and services tax as well as compensation cess.

What inputs is the scheme covering?

This scheme allows for exemption of duty on a wide range of inputs. This includes inputs that are physically integrated into the final product, such as fuel, oil or other catalysts used to make the export product. The authorisation scheme covers spare parts that must be exported as part of the final product. It can cover up to 10% of CIF (costs, insurance, freight).

If the Department of Biotechnology approves, and issues a No-Objection Certificate, biotechnological items can be allowed.

Only manufacturers who make oil or oleoresin from specified spices can import them duty-free. Packaging, cleaning, grading, and packaging are not considered manufacturing. Therefore, spices imported for this purpose cannot be exempt from duty.

An advance authorization scheme for duty-free import is available. It is subject to standard input/output norms, and the condition that the fabric is physically integrated into the export product.

Value-addition requirement

After a minimum 15% value-addition, raw materials imported under this scheme can be exported. For tea, however, the value-addition requirement for tea is 50%.

Appendix 4D is a part of Handbook of Procedures 2015-2025 and lists products for which value-addition cannot be below 15%. Appendix 4C outlines the value-addition requirements for products that are not paid in freely convertible foreign currency.

Fine print and paperwork

Manufacturers and exporters can apply for DFIA Scheme via the DGFT's website www.dgft.gov.in. They will need to have a valid importer/exporter (IEC code) and can also seek the assistance of any dgft consultants. An advance authorization can only be issued if the export obligation is met within a specified timeframe.

If requested, applicants must ensure that the export proceeds are converted into freely convertible currency. The regional authority should be notified within one month if exported goods are reimported.

The validity period of the authorization runs for 12 months from the date it was issued. It is recommended that you keep evidence of fulfilling your obligations for at most 18 months after the date of the advance authorization was issued.

Advance authorization licenses are also required for items that have been notified under the standard input-output norms. Exporters must report on their export performance over the past two years. The export value should not exceed 15% of the CIF value for the inputs covered by the scheme.

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Author: Himanshu Goyal

Himanshu Goyal

Member since: Nov 24, 2021
Published articles: 1

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