If your business imports raw materials, components, or consumables for manufacturing goods that will be exported, our Advance Authorisation services can help you understand how the Advance Authorisation (AA) Scheme, administered by the Directorate General of Foreign Trade (DGFT) under Chapter 4 of the Foreign Trade Policy (FTP), allows such inputs to be imported without paying customs duty. In short, the AA scheme permits duty-free import of inputs that are physically incorporated into the exported product (with normal allowance for wastage), in exchange for a corresponding export obligation.
This guide explains what the scheme covers, who is eligible, the documents you'll need, the key conditions that shape how smoothly a licence runs, and the step-by-step application process — so you can approach AA with a clear picture of what it involves.
What the Advance Authorisation Scheme covers
The scheme covers an eligible exporter, or "deemed exporter," importing inputs without paying basic customs duty, additional customs duty, education cess, anti-dumping duty, and safeguard duty where applicable — on the condition that the imported inputs are used in, or incorporated into, a product that is subsequently exported.
DGFT establishes the link between input and output either through Standard Input-Output Norms (SION) notified for a large number of export products, or, where no SION exists for a given product, through ad-hoc norms fixed by the Norms Committee at DGFT headquarters on application.
Fuel, oil, energy, catalysts, and certain other inputs consumed in the production of the export product are also covered under the scheme, subject to conditions notified from time to time.
Who is eligible
The following are eligible for Advance Authorisation:
- Manufacturer exporters, whether they hold their own manufacturing facility or work with a supporting manufacturer who is named on the authorisation.
- Merchant exporters tied to a supporting manufacturer, where the manufacturer is named on the authorisation and the export obligation is jointly monitored.
- Deemed exporters, only in specified categories such as supplies to Export Oriented Units (EOUs), Special Economic Zones (SEZs), and specified project categories that qualify as "deemed exports" under the FTP.
An Advance Authorisation can be issued for:
- Physical exports
- Deemed exports
- Supply of goods to specified categories
- Exporters with a track record of past exports, on an annual basis (Advance Authorisation for Annual Requirement)
Documents you'll need
A typical Advance Authorisation application includes the following, though the exact checklist can vary based on the product and its SION:
- Valid Importer Exporter Code (IEC)
- Registration-Cum-Membership Certificate (RCMC) from the relevant Export Promotion Council, in most cases
- Digital Signature Certificate (Class II or III) for filing on the DGFT portal
- A technical write-up or manufacturing process flow chart showing in detail how each input is consumed in the export product
- Self-declared or Chartered Engineer-certified input-output norms, if SION is not available for your product
- A bond or bank guarantee undertaking, as applicable, to secure the duty foregone
Key conditions to know before you apply
A few conditions shape whether AA is the right fit and how smoothly the licence runs once issued.
- Value addition — FTP requires a minimum positive value addition on exports made against the authorisation, expressed as a percentage of duty-free imports. Value addition is calculated as export value minus the Cost, Insurance and Freight (CIF) value of inputs used.
- Export Obligation (EO) period — Exports must be completed within the prescribed EO period from the date of issue of the authorisation. In eligible cases, businesses may apply for an extension of the export obligation period by complying with DGFT guidelines and paying the applicable composition fee.
- Pre-import condition — This applies only to certain sensitive inputs. DGFT/CBIC notifications have at times required the import to precede the corresponding export. Checking the current notification for whether this applies to your product is mandatory.
- Actual user condition — No sale or transfer of duty-free imported inputs is allowed. They generally remain subject to actual-user conditions until the export obligation is discharged.
How to apply: step by step
- Confirm your input-output norms. Check whether SION already exists for your export product on the DGFT portal. If not, apply for ad-hoc norms fixation along with your authorisation application, which may add processing time.
- Gather supporting documents, including your IEC, RCMC, technical write-up, and, if you're a merchant exporter, the supporting manufacturer's details.
- File the application online along with the prescribed application fee through the DGFT e-Com portal, against the relevant Aayat Niryat Form (ANF).
- Respond to any deficiency memo. If DGFT raises clarifications or queries on the norms or documentation, respond promptly to keep the file moving.
- Receive the authorisation, issued electronically after approval, after which inputs can be imported duty-free against it, subject to the conditions on the licence.
- Track and discharge the export obligation, applying for an Export Obligation Discharge Certificate (EODC) once the obligation is met, and closing the licence by releasing any bond or bank guarantee. Maintain records of each export shipment against the authorisation to close it smoothly.
Advance Authorisation vs. doing nothing: what's at stake
Without an Advance Authorisation, the same inputs can still be imported, but only by paying upfront customs duty — which means a larger working capital requirement until a refund or duty drawback is claimed later. For businesses with a recurring, predictable export pipeline, AA removes that upfront duty payment entirely rather than making the business wait for a refund, in return for tracking and meeting the export obligation within a specific period.
The trade-off is administrative: the norms have to be right, documentation has to be complete, and the obligation has to be monitored and formally closed out, or the authorisation holder can face proportionate duty demands with interest.
While the Advance Authorisation Scheme is ideal for duty-free imports of raw materials and inputs, businesses importing capital goods such as machinery may instead benefit from the EPCG scheme, which offers customs duty concessions subject to fulfilling export obligations. Choosing the right scheme depends on your business requirements and the nature of the goods being imported.
