Advance Authorisation Scheme

Foreign Trade Policy (FTP) 2023, para 4.10: governs the minimum 15% Value Addition (VA) requirement for exports made under the Advance Authorisation Scheme, under which duty-free import of inputs physically incorporated in an export product is permitted, subject to actual user condition and export obligation. Handbook of Procedures (HBP) 2023, para 4.42(a) and (c) prescribes the Export Obligation (EO) period: 18 months from the date of issue of the Authorisation for the standard case, extendable, with certain categories (e.g. deemed exports and specified capital-goods-linked cases) permitted an EO period of 24 months. The Authorisation is issued by the Directorate General of Foreign Trade (DGFT), and both the input-output norms claimed and the 15% minimum VA threshold must be established at the time of application under Appendix 4J of the HBP. Advisory scope under this service covers structuring the Advance Authorisation application to satisfy the para 4.10 Value Addition threshold, sequencing the EO period against para 4.42 timelines, and preparing the export obligation discharge and redemption documentation DGFT requires on completion. Note: this framework is correctly cited as para 4.10 (not para 4.09 or 4.11, a confusion that appears in some third-party commentary on this scheme).

The Advance Authorisation scheme, operated by DGFT under Chapter 4 of the Foreign Trade Policy (FTP), lets an exporter import inputs — raw materials, components, consumables and packing material — duty-free when they are used in goods that will be exported. The authorisation is issued on the basis of the standard input-output norms (SION), and the duty exemption is given effect through notifications under the Customs Act 1962. It is one of the oldest and most widely used export incentive schemes in India, and for manufacturers with high import content it can make the difference between competitive and uncompetitive pricing.

The scheme works as a contract with the government: you get the duty-free inputs now, and you must export the resulting goods within the export obligation period prescribed under the FTP, with the obligation monitored through shipping bills and export realisation. There is also a DTA (domestic tariff area) sale variant — Advance Authorisation for deemed exports — for supplies to specified categories. Because the inputs are duty-free, the exporter must maintain input-output and consumption records so that every unit of imported input can be traced to the export it served.

If the export obligation is not fulfilled in time, the benefit unwinds with interest. The unfulfilled portion of the duty saved becomes payable under the Customs Act with interest under Section 28AA, and contravention of the conditions of the authorisation can attract penalty proceedings under Section 11 of the Foreign Trade (Development and Regulation) Act 1992. Defaults also mark the exporter's record with DGFT, which can complicate future licences and IEC-related approvals.

This service is for manufacturers and exporters who import inputs for export production — including those already exporting without claiming the benefit, who are effectively leaving money on the table. We assess SION applicability, quantify the duty saving, apply for the authorisation on the DGFT portal, and manage the export obligation record-keeping and closure so the scheme never becomes a liability.