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What Is the Advance Authorization Scheme?

The Advance Authorization Scheme allows eligible exporters to import inputs/raw materials, consumables, packing materials, fuel, catalysts, and co-products without paying Basic Customs Duty (BCD) and several other import duties.
These duty-free imports are allowed only when the exporter commits to export finished goods made from those inputs.

This exemption applies to:

• Basic Customs Duty (BCD)

• IGST

• Compensation Cess

• Safeguard duty

• Social Welfare Surcharge

Thus, the scheme significantly reduces cost of production and makes international pricing more attractive.

Key Features of Advance Authorization Scheme

To help you understand clearly, here are the major highlights:

1. Duty-Free Import of Inputs

Exporters can import required inputs without paying customs duties. Example:
A garment exporter can import fabric, yarn, chemicals, accessories, and packing materials duty-free.

2. Export Obligation (EO)

a. Quantity-Based EO (Primary Obligation)

You must export the specific quantity of finished goods that corresponds to:

• The inputs imported duty-free, and

• The input–output norms (SION) assigned by DGFT.

Example:
If SION says:
1 kg fabric → 1 shirt
And you import 10,000 kg fabric duty-free
→ You must export approx. 10,000 shirts (adjusted for wastage norms).

This is the main EO used for Advance Authorization.

b. Value-Based EO (Secondary Condition)

The FOB value of exports must be higher than the CIF value of imports plus a minimum value addition.

Minimum Value Addition Requirements

• General products: 15% value addition

• Pharma products (special cases): 3%

• Gems & Jewellery: 1.5% – 5%

• Other sector-specific variations exist.

Formula:
Value Addition (%) = [(FOB export value – CIF import value) / CIF import value] × 100

3. Validity Period

• Import Validity: 12 months from the date of issue

• Export Obligation Period (EOP): 18 months from the date of authorization
  (EOP can be extended under DGFT rules)

4. No Minimum Investment Required

Any exporter—from startups to large manufacturers—can apply.

5. Physical Exports & Deemed Exports Allowed

The scheme supports:

• Normal exports

• Deemed exports such as supplies to EOU, EHTP, SEZ, Defence, Nuclear Power Projects etc.

6. Available for Manufacturer & Merchant Exporters

Merchant exporters can apply if they have tied up with supporting manufacturers.

Who Can Apply for Advance Authorization Scheme?

The following entities are eligible:

• Manufacturer Exporters

• Merchant Exporters tied with supporting manufacturers

• EOUs / SEZ units (under specific conditions)

• Manufacturers supplying to deemed export categories

• Exporters with past export records or new exporters