Paragraph 4 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.
An Advance Authorisation holder need not import every input. Paragraph 4.20 of the Policy lets it buy inputs from an Indian supplier in place of direct import, against an Advance Release Order (ARO) or an invalidation letter. The choice between the two depends on what the supplier wants: to pass on the duty-exempt status of its own material, or to claim the deemed export benefit. Paragraphs 4.30 to 4.32 of the Handbook set out intermediate supplies and the contents of the application.
This article is based on the chapter-wise text of the Foreign Trade Policy, 2023 published on the DGFT website, as consulted on 2 October 2026; the copy carries no "updated up to" date. The procedure is taken from Chapter 4 of the Handbook of Procedures, 2023 as published on the DGFT website (file of July 2026), consulted on 2 October 2026. Later Notifications and Public Notices should be checked. A supplier who claims the deemed export benefit on the other side of an ARO will also want our GST refund on deemed exports service.
Under paragraph 4.20(i), the holder of an Advance Authorisation or DFIA may procure inputs from an indigenous supplier, a State Trading Enterprise, or an EOU, EHTP, BTP or STP unit in lieu of direct import, against an ARO or an invalidation letter. The invalidation letter is for a supplier who will itself obtain duty-exempt material to supply another authorisation (4.20(ii)); the ARO is for a supplier who seeks a refund of duties exempted through the deemed exports mechanism of Chapter 7 (4.20(iii)). Both are co-terminous with the authorisation (4.20(vi)).
What the Policy says: paragraph 4.20
DFIA is the Policy's abbreviation for the duty-exempt import authorisation scheme; the paragraph applies to it as well. The sub-paragraphs are:
| Sub-paragraph | Rule |
|---|---|
| 4.20(i) | The holder can procure inputs from an indigenous supplier, a State Trading Enterprise, or an EOU, EHTP, BTP or STP unit, in lieu of direct import. The procurement can be against an ARO or an invalidation letter. |
| 4.20(ii) | Where the domestic supplier intends to obtain duty-exempt material through an Advance Authorisation, to supply the resultant product to another Advance Authorisation, DFIA or EPCG authorisation, the Regional Authority issues an invalidation letter. |
| 4.20(iii) | The Regional Authority issues an Advance Release Order if the domestic supplier intends to seek a refund of duties exempted through the deemed exports mechanism of Chapter 7 of the Policy. |
| 4.20(iv) | The Regional Authority may issue the ARO or invalidation letter at the time of issue of the authorisation, simultaneously or subsequently. |
| 4.20(v) | An Advance Authorisation holder in the DTA can procure inputs from SEZ units against a Certificate of supply till the EDI message system between the SEZ and Customs is enabled. |
| 4.20(vi) | The validity of the ARO or invalidation letter is co-terminous with the validity of the authorisation. |
Put simply, the two instruments serve two different suppliers. The invalidation letter works inside the Advance Authorisation system: the ultimate exporter's authorisation is made invalid for direct import of the item, and the intermediate supplier gets its own authorisation (paragraph 4.30 of the Handbook, below). The ARO works with the deemed exports mechanism: the supplier, rather than importing, supplies against the ARO and claims the benefit under Chapter 7. For the benefits side, see our articles on the deemed export paragraphs, starting with paragraphs 7.00 to 7.02 of the Policy and paragraphs 7.03 to 7.06 and 7.08. The refund and GST side is covered in how to claim a GST refund on deemed exports.
The Policy is made under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (section 5 of the FTDR Act); the paragraph claims no other section. It is not a statute: it binds through the Act and the conditions of each authorisation.
What the Handbook requires
Paragraph 4.30: intermediate supplies
- 4.30(a). An application for an Advance Authorisation or DFIA for intermediate supply may be made on the basis of a tie-up arrangement with an ultimate exporter (physical or deemed) holding an Advance Authorisation or DFIA. The Regional Authority considers such requests.
- 4.30(b). The intermediate authorisation is issued after the authorisation of the ultimate exporter is made invalid for direct import of the item to be supplied by the intermediate manufacturer. A copy of the invalidation letter goes to the ultimate exporter, the intermediate supplier and the intermediate supplier's Regional Authority. The intermediate holder may supply the intermediate product to the ultimate exporter's authorisation holder, or export (physical or deemed) directly. It may also supply directly to the port for export by the ultimate exporter; the shipping bill is then in the name of the ultimate exporter, with the intermediate supplier's name endorsed.
- 4.30(c). Documentary evidence of the quantity available under the Advance Authorisation goes with the application for invalidation; it is not needed if invalidation is applied for together with the Advance Authorisation application.
- 4.30(d). The facility is available even where the intermediate supplier has supplied, or intends to supply, material after the ultimate exporter has fulfilled its export obligation, from whose authorisation the invalidation letter was issued.
- 4.30(e). The invalidation letter specifies the supplier's name, address and GSTIN; the GSTIN and address of the recipient unit where the inputs are processed; the name, description and quantity of items; and the individual value of items to be procured.
Paragraph 4.31: the application for an ARO
The application is filed online in ANF 4A to the Regional Authority concerned for an ARO to procure inputs from indigenous sources or State Trading Enterprises. The documentary evidence outlined in paragraph 4.30(c), if applicable, is submitted. ANF 4A is named only.
Paragraph 4.32: what the application and the ARO specify
- 4.32(a)(i) to (iv). The same particulars as the invalidation letter: supplier's name, address and GSTIN; the recipient unit's GSTIN and address; the items with specifications and quantity; and individual value.
- 4.32(a)(v). For domestic procurement of steel at export parity price by MSME exporters of EEPC, under the Ministry of Steel Office Memorandum dated 27.05.2020 read with the Office Memorandum dated 24.06.2020 as amended from time to time, the details of the service centre, distributor, dealer or stockyard of the domestic steel producer, countersigned by EEPC, are provided and endorsed on the ARO. The Office Memoranda are named as printed and not explained.
- 4.32(b). An ARO may be issued along with the authorisation or later; its validity is co-terminous with the authorisation.
Paragraph 4.20(vi) of the Policy and paragraph 4.32(b) of the Handbook say the same thing about validity; the Handbook adds nothing to the period. The Handbook is issued by the Director General under section 6 (section 6 of the FTDR Act).
A worked example
Bose Gears Private Limited, an invented manufacturer exporter, holds an Advance Authorisation and wants a casting from a local foundry instead of importing it. The foundry, Menon Castings, wants to sell the casting and itself claim the deemed export refund, so the Regional Authority issues an ARO to Bose (paragraph 4.20(iii)). Bose files ANF 4A, naming the foundry's GSTIN, its own recipient unit, the item and the individual value (paragraphs 4.31 and 4.32). In another case a supplier, Dutta Alloys, prefers to import its raw material duty-exempt to make the casting: it applies for an intermediate Advance Authorisation on a tie-up with Bose, and Bose's authorisation is made invalid for direct import of that item (paragraph 4.30(b)). The shipping bill is in Bose's name with Dutta's name endorsed.
Need help with a deemed export claim?
Getting the supplier, the ARO and the GST refund papers consistent is where deemed export claims tend to stall. Our GST refund on deemed exports team can review the file with you.
Key takeaways
- An Advance Authorisation or DFIA holder may source inputs from Indian suppliers, State Trading Enterprises and EOU, EHTP, BTP and STP units (paragraph 4.20(i)).
- Invalidation letter: supplier uses an authorisation to obtain duty-exempt material for another authorisation (4.20(ii)); ARO: supplier seeks the deemed export refund (4.20(iii)).
- ARO and invalidation letter are co-terminous with the authorisation (4.20(vi); Handbook 4.32(b)).
- Intermediate supply rests on a tie-up and an invalidation of the ultimate exporter's authorisation for direct import (Handbook 4.30).
- ARO applications are online in ANF 4A (Handbook 4.31).
Read next
- Paragraph 4.18 of the Foreign Trade Policy, 2023: prohibited, restricted and State Trading Enterprise items
- Paragraphs 4.21 to 4.23 of the Foreign Trade Policy, 2023: realisation currency and re-import of exported goods
- Paragraphs 7.00 to 7.02 of the Foreign Trade Policy, 2023: deemed exports and categories of supply
- Deemed export refund: who claims and the undertakings
Disclaimer: Based on the chapter-wise text of the Foreign Trade Policy, 2023 and the Handbook of Procedures, 2023 published on the DGFT website, and on the later Notifications named in this article, as consulted on 2 October 2026. The copies carry no "updated up to" date. Notifications, Public Notices, Trade Notices, the ITC(HS) schedules, Appendices and forms change often; the current text on the DGFT website should be checked before acting. This article is general information, not legal advice; check the official text before acting.