Advance Authorisation - Special Economic Zone (SEZ)
Exporters supplying to Special Economic Zones (SEZs) are increasingly opting for the Advance Authorisation (AA) scheme to import inputs duty-free while operating from the Domestic Tariff Area (DTA). Under the Foreign Trade Policy (FTP) 2023, several policy and procedural changes have made this route more flexible and user-friendly, especially for businesses whose primary exports are directed to SEZ units and developers.
Policy relaxations benefiting SEZ suppliers
A major relaxation now permits exporters to link eligible export shipments with an Advance Authorisation even if the exports occurred before the licence was issued, if the imports (Bill of Entry) happen after the date of issue. This update resolves long-standing practical challenges—particularly for just-in-time suppliers to SEZs—where export timelines and licensing approvals did not align perfectly.
FTP 2023 also aims to place DTA exporters using AA on a more streamlined and facilitative footing, like EOU and SEZ schemes. By simplifying norms and reaffirming that supplies to SEZs continue to qualify as physical exports for many benefits, the policy encourages manufacturers to plan structured, long-term SEZ supply arrangements supported by AA.
Digitalisation and simplified processes
Most key activities under the AA scheme—application, amendments, and DGFT correspondence—are now fully digital through the DGFT online system. This shift has significantly reduced processing time for changes in quantity, value, and other licence details, which is valuable when SEZ buyers revise annual supply plans or change technical specifications.
For redemption and closure of AAs, exporters can now submit many supporting documents electronically. This reduces the need for physical visits to DGFT offices and simplifies the compilation of SEZ-related documentation such as endorsements, export statements, and CA or bank certificates.
Clarifications on redemption and GST-related issues
DGFT has also issued an important clarification for the redemption of older AAs impacted by interpretations of Rule 96(10) of the CGST Rules. The clarification allows closure of such licences in many cases—especially where export obligations were fulfilled through SEZ or other eligible supplies—without prolonged disputes.
This has eased concerns for exporters who had pending AAs due to confusion around GST refunds, ITC eligibility, and duty exemptions. With clearer guidelines now in place, businesses can regularise old AAs and shift focus on new export growth, including enhanced SEZ-linked operations supported by fresh licences.
Implications for exporters supplying SEZs
For DTA-based manufacturers, these updates make the AA–SEZ model more advantageous:
- Inputs can be imported duty-free
- SEZ supplies continue to count toward export obligation
- Licensing, amendment, and redemption processes have become simpler and faster
This combination enhances pricing competitiveness and improves working capital efficiency for SEZ-focused supply chains.
Exporters targeting SEZs should now align contracts with SEZ buyers, schedule imports and exports according to the relaxed timelines, and maintain clean documentation through the DGFT online system for smooth redemption. For more complex cases—such as diverse markets, multiple SEZ customers, or older pending licences—expert guidance based on current FTP 2023 provisions and DGFT circulars is recommended.