What is Advance Authorisation?
Advance Authorisation (AA) allows duty-free import of inputs that are physically incorporated in an export product, with a normal allowance for wastage. Fuel, oil and catalysts consumed in production may also be allowed (FTP 2023, para 4.03(a)).
The quantities allowed are fixed in one of four ways (para 4.03(b)):
- The Standard Input Output Norms (SION) published in the Handbook of Procedures;
- Self-declaration, with norms fixed afterwards;
- Prior fixation of norms for the applicant by the Norms Committee;
- The Self-Ratification Scheme (FTP para 4.06).
AA can be issued to a manufacturer exporter, or to a merchant exporter tied to a supporting manufacturer (para 4.05(a)). It covers physical exports (including to SEZs), intermediate supplies, specified deemed-export supplies and ship's stores where a SION exists (para 4.05(c)).
Which duties does Advance Authorisation exempt?
Imports under AA are exempt from basic customs duty, additional customs duty, education cess, anti-dumping duty, countervailing duty, safeguard duty and transition product-specific safeguard duty where applicable. For both physical and deemed exports they are also exempt from IGST and compensation cess (para 4.14). Some deemed-export supplies (para 7.02(c) and (f)) do not get the anti-dumping, countervailing and safeguard exemption.
Duty drawback can still be claimed on duty-paid inputs that are not covered by the norms, if they are declared in the AA application and endorsed in the condition sheet (para 4.15).
What value addition is required?
At least 15% (para 4.09), calculated as:
Value addition = (A − B) ÷ B × 100, where A is the FOB value of exports realised (or FOR value of supplies received) and B is the CIF value of inputs covered by the authorisation plus any other inputs on which drawback is claimed (para 4.08).
Exceptions: products in Appendix 4D can have lower value addition; tea needs 50% and spices 25%; gems and jewellery follow the Handbook of Procedures (para 4.09).
What is the export obligation period?
The import validity and the export obligation period are set in the Handbook of Procedures (FTP paras 4.17 and 4.22). The export obligation period is commonly 18 months from the date of issue, extendable. For import, one revalidation for 12 months from the expiry date is generally permitted.
Export proceeds must be realised in freely convertible currency, or in Indian rupees where para 2.53 allows. Exports to SEZ units count if paid from the SEZ unit's foreign currency account; exports to SEZ developers count even if paid in rupees (para 4.21).
What conditions apply after import?
- Actual User. The authorisation and the imported inputs cannot be transferred, even after the export obligation is met. Once the obligation is completed, the holder may dispose of products made from the duty-free inputs (para 4.16(i)).
- Input tax credit. Where input tax credit was taken on inputs for the exported goods, the imported inputs may only be used to make dutiable goods, supported by a chartered accountant's certificate at the time of the EODC application (or a self-declaration by an AEO) (para 4.16(ii)).
- Waste and scrap can be disposed of on payment of duty even before the obligation is met (para 4.16(iii)).
- Pre-import condition. For inputs in Appendix 4-J, or where the SION says so, inputs must be imported before the export goods are made (para 4.13).
- Annual requirement. Exporters with at least two years of export performance can get an AA for annual requirement for SION items, up to 300% of the previous year's FOB exports or ₹1 crore, whichever is higher (para 4.07).
How is an Advance Authorisation redeemed?
The step that most often fails is input matching (para 4.12):
- Where the SION allows a generic or alternative input, the name and quantity of the input actually used must be endorsed on the shipping bill, and must match the description in the bill of entry. Otherwise the authorisation will not be redeemed.
- Where the SION gives one quantity for a group of inputs, the shipping bill must show the proportion of each input actually used.
- At redemption, the Regional Authority allows only inputs that are named on the shipping bills with quantities.
The same applies to supplies to SEZs and deemed exports, through the bill of export or tax invoice (para 4.12(iv)).
Redemption then runs in these steps:
- Verify export obligation fulfilment. Confirm that the export value, quantity and value addition requirements are met.
- Reconcile imports and exports. Match bills of entry, shipping bills and the authorisation details.
- Compile supporting documents. Export realisation evidence, the prescribed input consumption statements and other applicable documents.
- Apply online to DGFT for redemption in the prescribed form.
- Respond to DGFT queries with clarifications or additional documents, if asked.
- Obtain the Export Obligation Discharge Certificate (EODC) from DGFT.
- Complete customs closure. Follow up on closing the customs bond or bank guarantee, and update records.
Why is Advance Authorisation hard to manage at scale?
- Many authorisations run at once, each with its own norms, import validity, export obligation period and value addition target.
- Every bill of entry has to be debited against the right authorisation and input line, and every shipping bill has to carry the right input names and quantities.
- Value addition depends on realised FOB, so it changes as payments come in.
- Pre-import conditions, actual-user rules and scrap disposal have to be followed for each consignment.
How do OptiEXIM and OptiEXIMc manage Advance Authorisation?
- Input-wise debit of each bill of entry against the authorisation and its input lines.
- Endorsement of input names and quantities on shipping bills, as para 4.12 requires.
- Value addition monitoring against realised export value.
- Alerts before import validity and export obligation deadlines.
- Redemption support, including the consumption report and the document pack for the EODC application.
- Bills of entry come from SAP purchase documents and shipping bills from SAP sales documents, so input and export lines are taken from the same SAP records.
Frequently asked questions
What is Advance Authorisation?
A DGFT authorisation that allows duty-free import of inputs physically incorporated in export products, against an obligation to export those products (FTP 2023, para 4.03).
Which taxes are exempt under Advance Authorisation?
Basic customs duty, additional customs duty, education cess, anti-dumping, countervailing and safeguard duties where applicable, plus IGST and compensation cess for physical and deemed exports (para 4.14).
What is the minimum value addition?
15% in general; lower for products in Appendix 4D, 50% for tea and 25% for spices (para 4.09).
What is the export obligation period?
Commonly 18 months from the date of issue, extendable as set out in the Handbook of Procedures.
Can an Advance Authorisation be transferred?
No. The authorisation and the imported inputs are subject to the Actual User condition and cannot be transferred, even after the obligation is met (para 4.16).
What is SION?
Standard Input Output Norms: the input quantities allowed per unit of export product, published in the Handbook of Procedures and used to fix Advance Authorisation entitlements.
Why are Advance Authorisations rejected at redemption?
Most often because the inputs named on the shipping bills do not match the authorisation and the bills of entry. Only inputs endorsed on the shipping bill, with quantities, are allowed at redemption (para 4.12).
Can exports under Advance Authorisation also claim RoDTEP?
Yes. RoDTEP has been extended to Advance Authorisation exports up to 31 December 2026 (DGFT Notification 41/2026-27).
Sources
This guide summarises the rules for general information and is not legal advice. Check the current notifications before acting on them.