What happens if I miss my Advance Authorisation export obligation?

What counts as a default on an Advance Authorisation?

You default when the export obligation period ends and the exports recorded against the authorisation fall short. In quantity, in value, or in both. The export obligation period is 18 months from the date of issue of the authorisation under HBP para 4.40(a). For items in the defence, military store, aerospace and nuclear energy categories it is 24 months, or co-terminus with the contracted duration of the export order, whichever is more (para 4.40(c)).

The Handbook calls this a bonafide default , and para 4.49 sets out how the Regional Authority regularises it. That word matters: the scheme anticipates that exports fall through, and provides a priced route to closing the authorisation rather than treating every shortfall as an enforcement matter.

What you owe turns on which limb you missed. A quantity shortfall and a value shortfall are charged under different sub-paragraphs, at different rates, to different authorities. Work out which one applies before you calculate anything.

Can I extend the export obligation period instead?

Yes, twice, and the ceiling is firmer than most exporters expect. Para 4.40(e) allows the Regional Authority to grant one extension of up to six months from the date of expiry of the EO period. Para 4.40(f) allows a further six months after that. And then states plainly that no further extension shall be allowed, and that under no circumstance shall the Regional Authority allow any extension beyond 12 months from the date of expiry of the EO period.

Each extension carries a composition fee set against the CIF value of the authorisation, and the second extension costs double the first.

At the time of applying for either extension you must give the Regional Authority a self-declaration stating that the unutilised imported or domestically procured inputs are still available with you. If the inputs are gone, extension is not the route. Regularisation under para 4.49 is.

What do I pay if I fall short on quantity?

This is the case in para 4.49(a): the export obligation is fulfilled in terms of value, but there is a shortfall in terms of quantity. Two amounts can fall due.

Para 4.49(a). What is payable

4.49(a)(i)

Customs duty on the unutilised value of imported or indigenously procured material, along with interest as notified by the Department of Revenue. Paid online through the ICEGATE payment gateway.

4.49(a)(ii)

A further 10% of the CIF value of the unutilised imported material, but

only if the item of import is restricted

. Paid into Head of Account 1453, Foreign Trade and Export Promotion, Minor Head 102.

The 10% charge is the one worth checking carefully. Para 4.49(a)(ii) expressly states that it does not apply if the unutilised material was freely importable on the date of import or domestic procurement . The test is the policy status on that date, not the status today. So an input that has since moved to the restricted list does not attract the charge retrospectively, and an input that was restricted then does attract it even if it has since been freed.

What do I pay if I fall short on value?

Para 4.49(b) covers the reverse case: the quantity obligation is met but the value falls short. Here the answer is often nothing at all.

No penalty is imposed if you achieved the minimum prescribed value addition. Only where value addition falls below that minimum does a charge arise, and it is an amount equal to 3% of the shortfall in FOB value , deposited in Indian rupees online through the DGFT website.

Para 4.49(c) then does something that helps exporters more than any other line in the chapter. Value-wise shortfall is calculated with reference to the actual quantity exported and the FOB value realised, against a pro-rata quantity of imports and CIF value. Not against the full authorisation. The Handbook gives the worked example: if export performance is only 50% by quantity but the import has been for the complete permitted CIF value, value addition is calculated against 50% of the CIF value of imports.

What if I missed both quantity and value?

Para 4.49(d) is short: where the export obligation is not fulfilled in terms of quantity and value, the authorisation holder pays as per (a), (b) and (c) above. There is no separate or additional charge for missing both. The two calculations run in parallel and the pro-rata rule in (c) applies to the value limb exactly as it would on its own.

In practice this means the quantity limb does the work. Customs duty and interest on the unutilised imports is the substantial amount; the 3% value charge only bites if value addition on the pro-rata basis still falls below the prescribed minimum.

What if I never imported anything against the authorisation?

Para 4.49(e) gives a separate exit. Where an exporter is unable to complete the export obligation in full and has made no import under the authorisation , the holder has the option to get the authorisation cancelled and apply for drawback instead, after obtaining permission from the customs authorities for conversion of the shipping bills to drawback shipping bills.

This is the better outcome where it is available. You took no duty-free benefit, so there is no duty to repay, and the exports you did make can be routed to a duty drawback claim rather than being stranded against a dead authorisation. The conversion of the shipping bills needs customs permission, so it is not automatic.

How do I actually pay the duty and interest?

Para 4.50 sets the mechanics, and they are specific. Customs duty with interest, whether arising from regularisation or from enforcement of the bank guarantee or legal undertaking, is deposited in the customs revenue head.

Para 4.50. Payment mechanics

Head of account

Major Head 0037 (Customs, minor head 001) Import Duties

Mode

Online through the ICEGATE payment gateway

Deadline

Within 30 days of the demand raised by the Regional or customs authority

Interest rate

As notified by DoR, at the rate applicable on the date of payment of the delayed duty

Evidence

Documentary proof of online payment, with a duty calculation sheet, to the Regional Authority

You do not have to wait for a demand. Para 4.50(a) expressly allows the exporter to make a suo motu payment of customs duty and interest on their own calculation, per the procedure laid down by the Department of Revenue, which is then adjusted when the case is closed. Because interest runs at the rate applicable on the date of payment, paying earlier on your own figures limits what accrues while a demand is being worked out.

What happens after I pay?

On receiving documentary evidence of payment, para 4.50(f) requires the Regional Authority to redeem the case, endorse the details of duty paid on the EODC or redemption letter, and inform the customs authority at the port of registration (or the Commissioner of Customs having jurisdiction over your factory) of the recovery.

That endorsement is the point of the exercise. The authorisation closes with the default recorded and settled, which is what releases the bond or bank guarantee and what a future application will be read against.

One obligation outlives the closure. Para 4.51 requires every Advance Authorisation holder to maintain a true account of consumption and utilisation of duty-free imported and domestically procured goods in Appendix 4H or 4I, filed online at the beginning of each licensing year for all authorisations redeemed in the previous year, through the DGFT dashboard under Repository and then CA/CE Repository. Para 4.49(f) gives that filing teeth: the Regional Authority compares the certified Appendix 4H against the norms allowed and the quantity actually imported, and where a holder has consumed less than they imported, duty and interest fall due on the unutilised value. Or additional exports must be made within the EO period.

Track your export obligation before it expires

Almost every default in this guide is cheaper if it is seen coming. An extension costs a five-figure composition fee; the same shortfall discovered after expiry costs customs duty plus interest on every unutilised input. Seasaw tracks shipping bills and realisations against each authorisation, so the gap between what you have exported and what you owe is visible while there is still time to act on it.

See how Seasaw tracks export obligations →

What should I read next?

• How does Advance Authorisation work?. The scheme itself, SION norms and redemption
• How do I claim duty drawback on exports?. The fallback route under para 4.49(e)
• How does the EPCG scheme work?. The other authorisation with an export obligation to watch
• How do I use ICEGATE for exports?. Where the duty and interest payment is actually made
• How do I use the DGFT portal?. Where extensions and the 3% deposit are filed

Sources

Handbook of Procedures 2023, Chapter 4. Duty Exemption and Remission Schemes. Para 4.40 (export obligation period and its extension), para 4.49 (regularisation of bonafide default), para 4.50 (payment of customs duty and interest in case of bonafide default in export obligation), para 4.51 (maintenance of proper accounts). Composition fees and the 10% and 3% charges are quoted as they appear in the Handbook. Interest is not a fixed rate: paras 4.49(a)(i) and 4.50(e) both refer to interest as notified by the Department of Revenue, at the rate applicable on the date of payment.

This guide is not legal or tax advice. Rules change by notification. Verify against the current text of the Handbook before you file. Last verified: August 2026.

Update history

• 2026-08-28 First published.