Advance Authorization Scheme (ASS) is one of the incentive schemes laid down under the Foreign Trade Policy by the Director General of Foreign Trade. Advance Authorization is issued to allow duty-free import of inputs, which are physically incorporated in the export product. Fuel, oil, catalyst which is consumed or utilized in the process of production of the export product may also be allowed under Advance Authorization Scheme.
Under Advance authorization Scheme, an exporter is allowed to import raw materials and related inputs under 100% duty exemption schemes. The importer needs to approach DGFT to avail the benefits under the scheme. The value addition is fixed in accordance with the standard input-output norms. Once the business fulfills the export obligation with the licensing authority, it is allowed to sell manufactured products in domestic market.
Applicability of Advance Authorization Scheme
The Advance Authorization Scheme is applicable on and can be availed by the following:
- Manufacturer exporters or merchant exporters who are linked with supporting manufacturers for
- physical exports (including exports to SEZ),
- intermediate supplies, and
- supply of ‘stores’ on board of foreign going vessel/aircraft (conditions apply).
- Sub-contractors to any project (where the name of the sub-contractors appears in the main contract), United Nations Organizations (UNO), aid programs of the United Nations or other multilateral agencies; the likes of which are paid for in free foreign exchange.
- For the import of raw sugar, either a manufacturer exporter or merchant exporter who are associated with supporting manufacturers.
Duties Exempted under Advance Authorisation Scheme
Under Advance Authorisation scheme following duties are exempted:
- Basis custom duty, Education Cess.
- Education Cess, Social Welfare Surcharge.
- Anti-dumping Duty, Countervailing Duty, Safeguard Duty, leviable under the Customs Act, 1965 and Customs Tariff Act, 1975. Additionally, Import IGST and Compensation Cess.
ALSO READ: Service Exports from India Scheme (SEIS)
Advance Authorisation or the materials imported thereunder will be with actual user condition. It will not be transferable even after completion of export obligation. However, Authorisation holder will have the option to dispose of product manufactured out of duty-free inputs once the export obligation is completed.
In case where CENVAT credit facility on inputs have been availed for the exported goods, even after completion of export obligation, the goods imported against Advance Authorisation shall be utilized only in the manufacture of dutiable goods whether within the same factory or outside (by a supporting manufacturer), for which the authorisation holder shall produce a certificate from either the jurisdictional Central Excise Superintendent or Chartered Accountant, at the option of the exporter, at the time of filing application for EODC to RA concerned.
Further, the manufacturing wastes/scrap, as allowed, can be disposed of with the payment of applicable duty even before the fulfillment of export obligation.
Minimum Value Addition
- Advance Authorisation necessitates exports with minimum value addition of 15%, except for items specified in HBP v1 and for items in Gems & Jewellery Sector, for which value addition would be as per HBP v1. Exports to SEZ Units, supplies to Developers, Co-developers, irrespective of the currency of realization, would also be covered.
- For physical exports for which payments are not received in freely convertible currency, same shall be subject to value addition as specified in HBP v1.
- In case of Authorisation for import of Tea, minimum value addition under Advance Authorisation shall be 50%.
- In case of spices, duty-free import of spices shall be permitted only for value addition purposes like crushing, grinding, sterilization or for the manufacture of oils and oleoresins and not for simple cleaning, grading, re-packing, etc.
Who can apply for Advance Authorisation Scheme?
The following businesses can apply for the Advance Authorisation Scheme:
- Manufacturer exporter.
- Merchant exporter tied to supporting manufacturer.
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