Advance Authorisation Scheme: Complete Guide for Indian Exporters

Key takeaways

For Indian exporters who import raw materials, components, or consumables to manufacture export products, customs duty on those inputs is a direct hit to margins. The Advance Authorisation (AA) scheme under Chapter 4 of the Foreign Trade Policy (FTP) 2023 addresses this by allowing duty-free import of inputs that are physically incorporated in the export product. This includes Basic Customs Duty (BCD), IGST, Compensation Cess, and Anti-Dumping Duty.

First introduced as the "Advance Licence" scheme and subsequently renamed, AA is one of the most widely used export promotion schemes in India. According to DGFT data, over 80,000 Advance Authorisations are issued annually, covering sectors from chemicals and pharmaceuticals to textiles, engineering goods, and food processing.

This guide covers everything you need to understand the scheme. Eligibility, application process, norms, export obligation, value addition, transferability, comparison with DFIA, impact on other incentives, and the compliance pitfalls that catch exporters off guard.

What Is Advance Authorisation?

Advance Authorisation is a licence issued by the Directorate General of Foreign Trade (DGFT) that permits duty-free import of inputs required for the manufacture of export products. The "advance" in the name means you get the authorisation before you import. Unlike drawback or RoDTEP, where you claim benefits after export.

The scheme covers the following types of inputs:

• Physical inputs. Raw materials, components, intermediates, and parts that are physically incorporated in the final export product.
• Catalysts and consumables. Items consumed or utilised in the manufacturing process, even if not physically present in the final product (e.g., fuel, oil, chemicals used in processing).
• Mandatory spares. Spares that are required to be exported along with the main product as per the export contract (up to 10% of the CIF value of the authorisation).
• Packaging materials. Any packaging material required for the export product.

The duties exempted under AA include Basic Customs Duty, Additional Customs Duty (CVD), Education Cess, Anti-Dumping Duty, Countervailing Duty, Safeguard Duty, Transition Product Specific Safeguard Duty, and Integrated Goods and Services Tax (IGST). In effect, the input lands at your factory at zero duty.

Who Is Eligible for Advance Authorisation?

The Advance Authorisation scheme is available to two categories of exporters:

Eligible applicants

• Manufacturer-exporters. Entities that manufacture the export product in their own factory or in a factory of a job-worker / supporting manufacturer. This is the most common category.
• Merchant-exporters. Trading firms that export goods manufactured by a supporting manufacturer. The merchant-exporter must tie up with a supporting manufacturer and declare the manufacturer details in the application. The supporting manufacturer executes an Annexure-I declaration.

In addition, AA can be issued for:

• Physical exports. Goods physically shipped out of India.
• Intermediate supplies. Supply of goods to other AA holders, EOU/SEZ units, or against deemed exports (e.g., supply to a project funded by a multilateral agency).
• Deemed exports. Supply of goods to categories specified in Chapter 7 of FTP, such as supply against international competitive bidding.

SION vs Adhoc Norms

The quantity of duty-free imports allowed under AA is governed by "norms". The input-output ratio that specifies how much of each input you can import per unit of export output. There are two types:

Standard Input Output Norms (SION)

SION are pre-fixed norms published by DGFT in the Handbook of Procedures (HBP). They specify the maximum quantity of each input permitted per unit of the export product. For example, SION for a specific chemical product will list every raw material, the allowed quantity per metric tonne of export output, and any wastage percentage.

SION-based AA applications are processed faster because DGFT does not need to verify the norms. They are already published and standardised. If your export product is covered under SION, this is the preferred route.

Adhoc Norms

If your export product is not covered under SION, or if your actual input consumption differs significantly from the published SION (due to different technology, product specifications, or manufacturing process), you can apply for an AA under Adhoc norms. In this case, you declare your own input-output ratio based on your actual manufacturing data.

Adhoc norm applications require DGFT to fix the norms on a case-by-case basis. This involves submission of a Chartered Engineer (CE) certificate verifying your declared input consumption, and DGFT may refer the application to the Norms Committee for verification. Processing time is longer. Typically 3 to 6 months versus 2 to 4 weeks for SION-based applications.

Application Process on the DGFT Portal

All AA applications are filed online through the DGFT portal at dgft.gov.in . Here is the step-by-step process:

Export Obligation Period

Every Advance Authorisation comes with an Export Obligation (EO). The commitment to export goods manufactured using the duty-free imported inputs within a specified period. The standard EO period is 18 months from the date of issue of the authorisation.

The EO has two components:

• Quantity obligation. You must export at least the quantity of output specified in the authorisation.
• Value obligation. The FOB value of exports must meet the minimum value addition requirement (15% over the CIF value of imported inputs).

Extensions

If you cannot fulfil the EO within 18 months, you can apply for an extension:

• The Regional Authority (RA) of DGFT can grant up to two extensions of 6 months each , making the maximum regular EO period 30 months.
• Each extension requires payment of a composition fee calculated as a percentage of the duty saved amount.
• Extensions beyond 30 months require approval from the Policy Relaxation Committee (PRC) at DGFT headquarters, and are granted only in exceptional circumstances.

Value Addition Requirements

The AA scheme mandates a minimum 15% value addition (VA). This means the FOB value of the export product must be at least 15% higher than the CIF value of the imported inputs used in manufacturing it.

The formula is:

Value Addition (%) = [(FOB value of export − CIF value of imported inputs) ÷ CIF value of imported inputs] × 100

For certain product categories, DGFT has specified higher value addition requirements. For example, gems and jewellery exports have different VA thresholds depending on whether the export involves cut and polished diamonds, gold jewellery, or platinum jewellery.

Transferability of the AA Licence

Advance Authorisations are generally non-transferable . The licence is issued to a specific exporter for a specific export product, and the duty-free inputs must be used by that exporter (or their declared supporting manufacturer / job-worker) for manufacturing the specified export product.

However, there are limited exceptions:

• Job-work / supporting manufacturer. Duty-free inputs imported under AA can be sent to a job-worker for manufacturing, provided the job-worker is declared in the authorisation or subsequently endorsed by DGFT.
• Clubbing of authorisations. Multiple AA licences for the same or similar products can be clubbed together to allow flexibility in input utilisation and export obligation fulfilment.
• Invalidation of unused AA. If you have not used the AA (no imports made against it), you can request invalidation and apply for a fresh authorisation with amended specifications.

Advance Authorisation vs DFIA: Which Should You Choose?

Both AA and Duty Free Import Authorisation (DFIA) allow duty-free import of inputs for export production. But they differ in important ways that affect which scheme is right for your business.

When to choose AA: Your product is not covered under SION and needs Adhoc norms; you are a merchant-exporter; your inputs attract anti-dumping duty; or you need to import inputs before exporting (pre-import).

When to choose DFIA: Your product has a published SION; you want the option to sell unused import entitlements in the market; you consistently achieve 20% or higher value addition; and your inputs do not attract anti-dumping duties.

Impact on Other Export Incentives

Using Advance Authorisation affects your eligibility for other export incentive schemes. This is one of the most important (and most commonly misunderstood) aspects of the AA scheme.

RoDTEP

Exports made under Advance Authorisation are not eligible for RoDTEP (Remission of Duties and Taxes on Exported Products). The rationale is straightforward: RoDTEP reimburses embedded duties and taxes on inputs, while AA already exempts those duties at the import stage. Claiming both would be double dipping.

Duty Drawback

Exports under AA are eligible for duty drawback only at the lower "All Industry Rate" . Brand Rate drawback is not available for AA exports. The drawback is limited to the duties on inputs that were not imported duty-free under the AA licence. Essentially, drawback covers only domestic procurement duties that AA does not address.

MEIS / SEIS / Other Scrip-Based Schemes

While MEIS has been discontinued and replaced by RoDTEP, exports under AA were eligible for MEIS when it existed. Currently, there are no additional scrip-based export incentive schemes that conflict with AA. However, always verify against the latest DGFT notifications, as the incentive landscape changes with each trade policy update.

Redemption / EODC Process

After you have fulfilled the export obligation, you must apply for an Export Obligation Discharge Certificate (EODC) from DGFT. This is the formal closure of the AA licence and releases your Bank Guarantee (BG), if any was furnished at the time of import.

Common Compliance Issues

Based on DGFT enforcement data and our experience working with Indian exporters, these are the compliance issues that cause the most trouble with Advance Authorisation:

Importing excess quantity beyond norms

Importing more inputs than allowed under the SION or Adhoc norms is a direct violation. The excess quantity must be re-exported, or you must pay the applicable duty plus interest on the excess imports. Customs regularly checks import quantities against the AA licence at the time of clearance, and any mismatch triggers an investigation.

Diversion of duty-free inputs to domestic market

Selling duty-free imported inputs in the domestic market instead of using them for export production is a serious contravention. It attracts recovery of the entire duty saved, interest at 15% per annum, and a penalty up to five times the duty amount under the Customs Act. DGFT and Customs jointly investigate such cases, and they have become more effective at detection through data analytics matching import volumes against export output.

Not maintaining proper manufacturing records

AA holders are required to maintain proper records of receipt, storage, consumption, and wastage of duty-free inputs. During EODC verification or a Customs audit, you must be able to demonstrate that the imported inputs were actually used in manufacturing the export product. Many exporters maintain casual records that cannot withstand audit scrutiny, leading to adverse findings and duty recovery.

HS code mismatch between AA, bill of entry, and shipping bill

The HS codes declared in the AA application, the bill of entry for import, and the shipping bill for export must all match. Even a minor discrepancy at the 8-digit level can result in Customs refusing clearance, holding your consignment at the port, or DGFT rejecting your EODC application. Always verify HS codes with your customs broker before filing.

Mixing AA and non-AA exports in the same shipping bill

Each shipping bill should clearly indicate whether the export is against an AA licence (by entering the AA number and date in the relevant field). Exporting AA goods on a general shipping bill without linking it to the AA makes it very difficult to claim EODC later. The shipping bill must have the scheme code "Advance Authorisation" and the correct licence number to count toward your export obligation.

Not claiming re-import benefit on rejected exports

If your exported goods are rejected by the buyer and returned to India, you need to re-import them under the AA framework to avoid paying duty on the re-import. Many exporters clear the re-imported goods on a regular bill of entry, pay duty, and then struggle to get a refund. The correct process is to re-import under the AA licence, rectify or reprocess the goods, and re-export them within the EO period.

Frequently Asked Questions

What is the export obligation period under the Advance Authorisation scheme?

The standard export obligation period is 18 months from the date of authorisation. The DGFT Regional Authority can extend this by up to two periods of 6 months each (total 30 months) on payment of a composition fee. Extensions beyond 30 months require PRC approval and are granted only in exceptional circumstances.

What is the difference between Advance Authorisation and DFIA?

The key differences are: AA supports both SION and Adhoc norms while DFIA requires SION only; AA is available to both manufacturer and merchant-exporters while DFIA is for manufacturer-exporters only; DFIA becomes freely transferable after EO fulfilment with 20% value addition, while AA is generally non-transferable; and AA exempts anti-dumping duty while DFIA does not. See the detailed comparison table above.

Can I claim RoDTEP or duty drawback on exports made under Advance Authorisation?

Exports under AA are not eligible for RoDTEP. Duty drawback is available only at the lower All Industry Rate (not Brand Rate), and only for duties on inputs not covered by the AA exemption. Before opting for AA, compare the net benefit against exporting on full duty with RoDTEP + full drawback to determine which route gives you a better margin.

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Update history

• 2026-08-11 First published.