Overview
This scheme is administered by the Directorate General of Foreign Trade (DGFT) under Chapter 4 of the Foreign Trade Policy (FTP) 2023. This scheme allows the import of raw materials, components, consumables and packing materials which are used in the manufacture of export products by exempting customs duty. This scheme is well known among exporters and is most widely used by exporters for duty exemption on the import of inputs by availing exemption from customs duty.
The Advance Authorisation (AA) scheme is eligible for the following: (1) Manufacturer Exporter, and (2) Merchant Exporter, supported by a manufacturer. Merchant Exporter: a trader is a person who buys goods and resells them.
For most business organisations, it is recommended to have assistance for the filing of an application for an AA licence, so that post-licence compliance, which is critical, can be managed effectively. This page serves as a guide for a smooth compliance process, and through it you will understand the AA-related compliance services that we offer. Before applying for AA, exporters should have a valid Importer Exporter Code (IEC) and understand the various DGFT Services available to maximise export incentives and ensure regulatory compliance.
We at Kireeti Group provide the end-to-end compliance process of AA licences, starting from the Export Obligation Period (EOP) to the Export Obligation Discharge Certificate (EODC), which also includes assistance related to registration, revalidation, amendments, revisions, invalidation, deemed export-related activities, regularisation, surrender and bond cancellation.
Advance Authorisation is not a post-export benefit; rather, it is a pre-import customs duty exemption scheme. Unlike schemes such as Duty Drawback or RoDTEP, in this AA scheme the duty benefit is availed upfront and the authorisation holder is required to fulfil the export obligation during the prescribed Export Obligation Period (EOP). This obligation is generally secured through a bond or bank guarantee, as applicable.
Accordingly, compliance with the conditions of the authorisation is critical. This includes tracking/monitoring deadlines, maintaining proper documentation for audits, and ensuring timely and smooth closure of the authorisation. In many cases, effective post-authorisation compliance is more important than obtaining the authorisation itself.
Key highlights of the Advance Authorisation scheme
- Nature of the scheme: Advance Authorisation is a pre-export duty exemption scheme that enables exporters to import eligible inputs without payment of customs duties. It is not a post-export refund or incentive scheme.
- Administering authority: the scheme is administered by the Directorate General of Foreign Trade (DGFT) under Chapter 4 of the Foreign Trade Policy (FTP) 2023.
- Validity for imports: the authorisation remains valid for imports for 12 months from the date of issue of the authorisation. A one-time revalidation for 12 months may be granted in accordance with Para 4.39 of the Handbook of Procedures (HBP) 2023.
- Export Obligation Period (EOP): the prescribed export obligation period is 18 months from the date of issue of the authorisation, subject to extension (1st EOP extension of 6 months and 2nd EOP extension of 6 months) in certain circumstances.
- Key compliance requirement: fulfilment of the prescribed value addition and export obligation is mandatory. These requirements must be completed and substantiated through appropriate documentation before obtaining the Export Obligation Discharge Certificate (EODC) for closure of the authorisation.
Eligibility
Advance Authorisation is available to manufacturer exporters and merchant exporters supported by a manufacturer, for undertaking physical exports, deemed exports and supplies to specified categories under FTP 2023. The services covered on this page assist businesses that already hold, or are in the process of obtaining, an AA licence and require support in managing and complying with the AA requirements below. If you are planning to obtain a fresh AA, then our services for filing a fresh application are relevant.
- If you already have an AA licence and need to monitor / extend your Export Obligation Period (EOP), then our EOP extension services are relevant.
- If you need any amendment to your authorisation details, such as quantity, value, input-output norms, etc., then our AA amendment services are relevant.
- If you have fulfilled excess export obligations under some authorisations and some other authorisations are only partially fulfilled, and you want to close all of them together, then the AA-EODC-Clubbing service is relevant.
- If you intend to source inputs from a domestic supplier instead of importing them, under the deemed exports provisions, then the AA Invalidation service is relevant.
- If your export product is not covered under any notified SION, or if an application for ad-hoc norms is required, then the concerned Norms Fixation service is relevant.
Exporters should also maintain a valid RCMC Registration Certificate, as it supports recognition from Export Promotion Councils and facilitates access to several DGFT benefits.
- Eligibility conditions for deemed exports and supplies to SEZ/EOU units are governed by specific provisions under FTP 2023 and Chapter 7 read with Chapter 4. Eligibility applicable to standard physical exports should not be assumed to apply automatically to these categories.
- In cases where the Export Obligation Period (EOP) has lapsed and the authorisation is in default, regularisation may be available subject to timely application and submission of the prescribed supporting documents.
- Applications requiring fixation of ad-hoc norms by the DGFT Norms Committee typically involve more extensive documentation and longer processing timelines compared to SION-based cases. A reasonable delay should therefore be anticipated.
- In the case of a merchant exporter supported by a manufacturer, since adding a supporting manufacturer after the issuance of an Advance Authorisation can be challenging, merchant exporters are advised to declare a valid supporting manufacturer at the time of application itself.
- Authorisations involving supplies to SEZs or EOUs require specific documentation when compared to standard physical exports, and hence may be prone to under-documentation if handled as a routine case.
Eligible exporters may also explore the Interest Equalization Scheme (IES), which provides interest benefits on export credit to improve cash flow and support export growth.
Benefits and savings
The main benefit of AA is the import of inputs which will be used in the manufacture of export products, without payment of upfront customs duty. This results in lower working-capital requirements, which otherwise will become a cost to the company from the time of import of inputs until the recovery of the same through applicable refund. Duty-free imports are not a saving, but may become a contingent liability if the authorisation is not closed properly through an EODC application — this page explains how to protect the value of the imports after the issue of the licence.
Same duty exemption, two very different states
The duty saved on your imports is real cash today, but it is not yet a saving. Your bond and bank guarantee stay encumbered, and the authorisation is not closed until the export obligation is fulfilled, substantiated with documentation, and evidenced before the EODC is issued.
Once the export obligation is fulfilled and the EODC application is filed and approved, the authorisation is formally closed and the bond/bank guarantee is released. The duty exemption is now a closed, audited benefit rather than a contingent liability.
The following approaches, based on the specific requirement, greatly help in meeting the compliance requirements, leading to a smooth closure and issuance of EODC:
Use clubbing and invalidation deliberately
Using the facility of clubbing available in the AA scheme, the excess exports done under one authorisation can be used against the shortfall of another eligible authorisation. This reduces the risk of default, where the overall export performance of all the authorisations included in the clubbing meets the combined obligation of the individual authorisations. Through invalidation, inputs can be procured locally from a domestic deemed-export supplier, offering a simpler alternative to direct imports.
Get the norms right at the outset
DGFT assesses export obligation fulfilment based on the approved input-output norms. Any mismatch discovered during the Export Obligation Period (EOP) or at the redemption stage is typically far more difficult and costly to rectify than one identified at the application stage. Ensuring that the input-output norms are correctly established at the outset, whether under SION or ad-hoc norms, helps facilitate a smoother redemption process.
File a complete, well-documented EODC
For a smooth closure of the Advance Authorisation, it is essential that all the norms are complied with; this requires that the EODC application should have all the supporting documents with clear workings, or there may be issues in the closure leading to financial implications.
Manage supporting-manufacturer cases carefully
Advance Authorisations involving supporting manufacturers include many challenges which require careful attention to declaration, documentation, maintaining production records and fulfilment of export obligation requirements. Early identification of the supporting manufacturer and robust record maintenance help ensure smooth compliance and EODC redemption.
A practical example
This is an illustrative example, not an actual client case.
Case profile: a Hyderabad-based textile exporter
A Hyderabad-based textile exporter has obtained an Advance Authorisation for the import of duty-free embroidery components, leading to an export obligation of exporting finished garments.
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1100% inputs imported
Inputs imported in full
Based on the AA, the textile exporter has imported 100% of the authorised inputs.
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270% EO fulfilled
Initial 18-month EOP
During the period of 18 months (initial EOP), only 70% of the stipulated export obligation (EO) was fulfilled.
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3+6 months
1st EOP extension
For fulfilling the balance 30% of EO, the textile exporter has an option to obtain an extension of 6 months (1st EOP extension).
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420% more fulfilled · 10% balance
Partial progress in the 1st extension
After obtaining the 1st EOP extension period, the textile exporter could fulfil only 20% of the original EO. Hence, a balance of 10% of the original EO still remains to be fulfilled.
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5+6 months
2nd EOP extension
For fulfilling the balance 10% of the original EO, the textile exporter has an option to obtain another extension of 6 months (2nd EOP extension).
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6aFull EO met
If the entire EO is fulfilled during the 2nd extension
Then the EO of the AA can be considered as fulfilled, and the file proceeds to EODC closure.
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6bEO not fully met
If the original EO is not completely fulfilled even in the 2nd extension
Then the textile exporter has to follow the regularisation process to close the AA.
Actual timelines, documentation and eligibility depend on your specific authorisation. This illustration is generic, meant to show how the EOP and EODC provisions interact — please confirm with our team before you rely on any of it.
Documents required
For AA compliance work you should provide the below documents, and these may vary from case to case depending on the applicable services.
Identity & membership
- Importer Exporter Code (IEC)
- Registration-Cum-Membership Certificate (RCMC)
The authorisation file
- Original Advance Authorisation licence, along with prior amendment letters, if any
- If there have been any modifications to the authorisation before, prior amendment or revision letters are required
Trade evidence
- Shipping Bills
- Bills of Entry
- Bank Realisation Certificates (BRCs)
Norms & certification
- Input-Output Norms documentation (SION reference or ad-hoc norms application/ratification papers)
- Chartered Accountant Certificate (CAC) and Chartered Engineer Certificate (CEC), wherever applicable, to confirm the export obligation
Financial security
- Bond and bank guarantee details which were submitted at the time of applying for the authorisation
Merchant exporters only
- If the applicant is a merchant-exporter, details of the supporting manufacturer are required to be named on the authorisation
How it works
Our AA engagement runs in two phases: the application filing process before the licence is issued, and the compliance process that follows once you hold the licence.
Application filing / pre-licence issuance
Before the AA is issuedDiscuss and confirm the type of Advance Authorisation to be applied for.
Obtaining the required documentation.
Scrutiny of the received documents.
Online filing of the application.
Invalidation of AA for procurement of inputs from the domestic market.
Replies / clarifications on the deficiency letters issued, if any.
Liaisoning with the concerned department.
Ensuring the issuance of the licence.
Post-licence issuance process
Once you hold the AAMonitoring of Export Obligation fulfilment during the entire Export Obligation Period.
Checking for the requirement of extension of import period (revalidation).
Checking for the requirement of extension of Export Obligation Period, if required.
Filing of amendment applications for the allowed categories, if required.
Scrutiny of documents related to fulfilment of Export Obligation.
Review the exports done to establish the mode of obtaining the EODC, i.e. whether clubbing of multiple Advance Authorisations is required.
Filing of application for closure of the Advance Authorisation (EODC application).
Comparison of self-filing vs. Kireeti-managed filing with AA compliances
| Factor | Self-filing | Kireeti-managed filing |
|---|---|---|
| Applicable norms and their documentation requirements | Thorough knowledge of all the available categories of norms and their application procedures is required to confirm the norms type as well as their applicable documentation. Required CAC/CEC certificates are to be arranged separately. | Vast experience in identifying the applicable norms category and thorough knowledge of the required procedures for each of them. Our panel of Chartered Accountants and Chartered Engineers can provide specific CAC/CEC certificates as required. |
| Providing replies / clarifications to DGFT queries | Need to understand the reason(s) for the query and provide appropriate clarifications/replies with supporting documents as required. | Being experienced in filing all types of applications, we can easily understand the query and provide the replies/clarifications as expected by the DGFT department. |
| Monitoring the EO and the timelines of EOP, Bond/BG, and obtaining amendments/revalidation as applicable | The principal in-house activity is manufacturing, and hence continuous monitoring across authorisation(s) may be difficult to handle, resulting in other issues. | We have an exclusive department for this activity, and the concerned teams continuously monitor the EO/EOP/Bond/BG-related requirements. |
| Time and cost | Need to earmark a specific team for the end-to-end process, and any lapses/slippages encountered will result in a very adverse impact on time and costs. | Since we have vast experience in providing this service to different clients, the chances of any issues arising are nil or negligible. |
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Advance Authorisation, explained
A quick video walkthrough of how Advance Authorisation compliance works, from EOP tracking through to EODC closure. Tap play to watch here, or open it directly on YouTube.
Prefer YouTube? Watch it on youtube.com in a new tab.
FAQs
The EOP is the period within which you must complete the export obligation specified for your Advance Authorisation. As per FTP 2023, EOP is generally 18 months from the date of issue of the authorisation, but it may vary based on the type of inputs used for the export product (as per Appendix-4J).
You have to apply for an EOP extension before the lapse of the deadline. If you fail to file an extension request before it lapses, the Export Obligation will be considered in default and may have to be regularised, which may involve payment of applicable duty, interest, composition fees, etc.
EODC means Export Obligation Discharge Certificate, which is the official confirmation from DGFT that you have fulfilled the export obligation applicable to your authorisation. Without EODC, your bond and bank guarantee are not released, and the duty exemption benefit will become a contingent liability.
Yes, the AA-EODC-Clubbing service handles EODC clubbing subject to DGFT's clubbing conditions, to combine your export performance across multiple authorisations into a single combined Export Obligation Discharge Certificate.
Invalidation allows purchase of domestic inputs in lieu of the imported inputs. It is a useful option when the inputs required are available in the domestic market and import is not a better option.
SION are fixed ratios of inputs and output permitted by DGFT. In case SION is not applicable for your export product, you can apply for ad-hoc norms fixation through the DGFT Norms Committee, but this is a slower, more document-intensive process than a SION-based authorisation.
Yes. It is very common as export orders evolve. Amendments like quantity, value, input-output norms, etc. can be allowed for the authorisation already issued.
Advance Authorisation and EPCG serve different aspects of the same export supply chain and can sometimes be used together. AA exempts duty on imported inputs (raw materials, components) which will be consumed in making export goods, while EPCG (Export Promotion Capital Goods) exempts duty on capital goods/machinery which are used to produce export goods, against a separate export obligation.
Yes, to certify the consumption and production data at various stages, including EODC applications, CAC is used in most of the cases and, where relevant, a CEC (Chartered Engineer Certificate) is also used.
There is no specific turnaround time, as it will depend on the authorisation, current workload of DGFT officials, completeness of the clubbing requirement (if applicable), and whether any deficiency queries are raised. We work to reduce the processing time by submitting a complete, accurate application.
Official DGFT / CBIC source notifications
- Foreign Trade Policy (FTP) 2023, Chapter 4 — Duty Exemption / Remission Schemes.
- Handbook of Procedures (HBP) 2023, Para 4.39 — import validity and revalidation of Advance Authorisation.
- DGFT official portal (dgft.gov.in) — for current Public Notices on EOP extension and default regularisation.
