Services under Advance Authorisation: How to Register Your Business

The expansion of the Indian economy relies significantly on the export sector. As indicated by a September 2022 report from the Ministry of Trade and Commerce, India’s total export earnings have exceeded $61 billion. The government is actively dedicated to promoting exports, introducing various measures to assist Indian exporters, including incentives and duty exemptions that streamline trade processes. One such initiative is the Advance Authorisation Scheme, a government program designed to grant duty exemptions and reinforce support for the promotion of exports.

What is the Advance Authorisation Scheme?

Administered by the DGFT, the Advance Authorisation Scheme overseen by the Indian government offers duty exemptions to exporters. This initiative is designed to promote the importation of vital additives and raw materials seamlessly integrated into products destined for export. Within the framework of the Advance Authorization Scheme, the duty-free import of essential materials—such as gasoline, oil, electricity, or catalysts—utilized in the manufacturing of export-oriented items is permitted. Furthermore, the program incorporates a standardized provision to compensate exporters for any losses incurred in the utilization of these materials.

How do I get an Advance License?

Exporters have four avenues to seek an Advance Authorisation license:

Standard Input and Output Norms

Commonly referred to as Input Output (IO) norms, this approach finds relevance across diverse product categories, encompassing chemical, electronics, engineering, food products, handicrafts, leather, plastic, sports, and textiles. Its application extends to defining the requisite inputs for generating output specifically intended for export purposes. In essence, IO norms establish the precise quantities of resources and materials needed in the production process, offering a standardized framework applicable to a wide array of industries. This method serves as a valuable tool for ensuring efficiency and consistency in export-oriented production across various sectors.

Self-declared Norms

If the specified export product is not listed in the Standard Input Output Norms (SION), a formal application must be submitted to the Regional Authority (RA). The RA will then conduct a thorough review of the request. Upon completion of the evaluation process, the RA has the authority to issue the Advance Authorization, provided that all necessary criteria are met. This ensures that the export product, even if not originally included in the SION, receives the required approval for exportation.

Self-ratification

The Advance Authorisation Scheme is designed for exporters who have successfully acquired the Authorized Economic Operator (AEO) Certificate. This certification signifies a recognized level of trustworthiness and compliance within the realm of international trade. Under this scheme, eligible exporters are granted certain privileges and benefits to facilitate their trade activities.

By linking the Advance Authorisation Scheme to the AEO Certificate, authorities aim to streamline and expedite the export process for certified entities. This strategic integration enhances efficiency, reduces bureaucratic hurdles, and fosters an environment conducive to seamless international trade. Exporters holding the AEO Certificate can therefore leverage the benefits provided under the Advance Authorisation Scheme, ultimately contributing to a more agile and secure global trade ecosystem.

Applicant Specific Prior-fixation of Norms

Before obtaining a license from the Directorate General of Foreign Trade, it is necessary to initiate communication with the Norms Committee for the amendment of norms through the prescribed procedure. The DGFT will only issue licenses in accordance with pre-established standards.

This entails engaging with the Norms Committee as the initial step in the process. Amendments to norms must be pursued through the designated procedure overseen by this committee. It is only upon adherence to these established standards that the DGFT will consider and grant the requisite license. This underscores the importance of aligning with predetermined norms when seeking approval from the DGFT.

What are the Eligibility Criteria for Advance Authorisation Scheme?

A manufacturer exporter or merchant exporter, in collaboration with the supporting manager, is eligible to enjoy the advantages of an Authorization (AA). This license extends its benefits to various scenarios, including:

• Intermediate Supply: The Authorization license covers instances of intermediate supply.
• Physical Exports: Entities engaged in physical exports can also take advantage of the benefits provided by the Authorization license.
• Supplies in Deemed Exports Categories: The benefits of the AA extend to supplies falling under specific deemed export categories.

• Stores Supply Onboard Foreign-Going Aircraft or Vessels: Additionally, the license applies to the supply of stores onboard foreign-going aircraft or vessels, aligning with the Standard Input Output Norms (SION) pertaining to the respective items.

This comprehensive scope ensures that various facets of export activities are encompassed under the Authorization license, promoting a streamlined and supportive framework for exporters.

Advantages of the Advance Authorisation Scheme

Importers are obligated to settle import tariffs when acquiring items from foreign nations, and a parallel obligation exists for Indian exporters who transport their goods abroad. These exporters must disclose their income and fulfil tax responsibilities based on the export value. The complexity is heightened for businesses involved in importing raw materials for production, as they encounter duties on both ends of the transaction.

However, to alleviate this cumbersome process and facilitate smoother trade transactions, the Advance Authorization program comes into play. This program provides valuable exemptions from various tariffs, easing the burden on businesses. The exemptions include Basic Customs Duty, Anti-Dumping Duty, Countervailing Duty, Education Cess, Safeguard Duty, Integrated Tax and Compensation Cess, Additional Custom Duty, and Duty Drawback. These concessions contribute to streamlining import-export procedures and enhance the competitiveness of businesses in the global market.

Conclusion

The Advance Authorisation Scheme, administered by the DGFT, is a crucial initiative supporting India’s export sector. This program grants duty exemptions for essential materials, promoting efficiency in export-oriented production. With avenues such as Standard Input and Output Norms, Self-declared Norms, Self-ratification, and Applicant Specific Prior-fixation of Norms, exporters have diverse options to obtain the necessary licenses.

The scheme’s eligibility criteria cover a wide range of export activities, ensuring a supportive framework for manufacturers, merchants, and those involved in deemed exports. The program’s advantages, including exemptions from various tariffs, significantly ease the financial burden on businesses engaged in international trade.

By fostering a more agile and secure global trade ecosystem, the Advance Authorisation Scheme plays a pivotal role in contributing to India’s economic growth. Its streamlined processes and duty exemptions enhance the competitiveness of Indian businesses in the global market, aligning with the government’s commitment to promoting exports and facilitating a robust export-oriented economy.