Advance Authorisation Scheme explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The Advance Authorisation Scheme, under Chapter 4 of the Foreign Trade Policy 2023, lets exporters import inputs duty-free — exempt from BCD, IGST and cesses — provided those inputs are used to make goods that are exported against a binding export obligation. Quantities follow Standard Input Output Norms (SION) or self-declared norms, subject to minimum value addition.
Overview
Advance Authorisation (AA) is one of the flagship duty-exemption schemes administered by the Directorate General of Foreign Trade (DGFT). It is a pre-export/pre-import scheme: the exporter imports raw materials without paying duty upfront, manufactures the export product, and discharges the export obligation. It suits manufacturer-exporters and merchant-exporters tied to a supporting manufacturer.
Legal Basis
The scheme sits in Chapter 4 of the Foreign Trade Policy 2023 and the corresponding Handbook of Procedures, issued under the Foreign Trade (Development and Regulation) Act 1992. The customs duty exemption is operationalised through customs exemption notifications, and the goods are cleared on a Bill of Entry with the AA licence details and a bond/LUT to secure the export obligation.
Key Conditions
| Condition | Requirement |
|---|---|
| Actual user | Inputs are subject to actual user condition until EO is fulfilled |
| Value addition | Generally minimum positive 15% (higher/lower for specified sectors) |
| Input norms | SION, or self-declared norms under Para 4.07 HBP |
| Export obligation period | Ordinarily 18 months from issue, extendable |
| Accountability | Bond/LUT at import; EODC on completion |
Step-by-Step Process
- Apply to DGFT: File the AA application (ANF 4A) online with input-output details, SION reference or self-declared norms, and projected exports.
- Authorisation issued: DGFT issues the AA specifying CIF import value, quantities and the export obligation.
- Duty-free import: Import inputs against the AA on a Bill of Entry; execute a bond/LUT with customs.
- Manufacture & export: Use inputs to make and export the resultant product against Shipping Bills quoting the AA.
- EO fulfilment: Achieve the required quantity and value addition within the obligation period.
- EODC: Apply for the Export Obligation Discharge Certificate; on issue, the bond is redeemed.
Value Addition — Worked Example
Suppose CIF value of duty-free imports is ₹40,00,000 and FOB value of exports is ₹48,00,000.
- Value addition = (FOB − CIF) ÷ CIF × 100 = (₹48,00,000 − ₹40,00,000) ÷ ₹40,00,000 × 100
- = ₹8,00,000 ÷ ₹40,00,000 × 100 = 20%
- This exceeds the general 15% minimum, so the value-addition condition is met (verify the current threshold for the specific product).
Common Pitfalls
- Breaching the actual-user condition by diverting duty-free inputs to the domestic market.
- Missing the export obligation period and incurring duty, interest and composition fees.
- Wrong SION application leading to excess duty-free imports and later regularisation.
- Delaying the EODC application, keeping bonds and licences open.