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A few months ago, an exporter I know was about to start a big export order. The raw material was ready to be imported, but the customs duty and IGST on it were nearly 30% of the invoice. He had to pay all of it upfront, long before the buyer paid him a single rupee. His money was stuck, and the order almost slipped away.
This is exactly the problem the Advance Authorisation Scheme solves. The Advance Authorisation Scheme (also called the advance authorization scheme) is a DGFT scheme under India's Foreign Trade Policy that lets exporters import raw materials and other inputs without paying customs duty, as long as the final product is exported. In this guide, we explain what it is, why it exists, who can use it, how the export obligation works, and how it helps Indian exporters.
TL;DR
What is the Advance Authorisation Scheme? It is a duty exemption scheme run by DGFT. You import inputs duty-free and use them to make products that you export.
What is the purpose of the Advance Authorisation Scheme? It makes Indian exports cheaper and more competitive by removing duty on the inputs used to make export goods.
Who can use it? Manufacturer exporters, and merchant exporters who are tied to a supporting manufacturer. You need a valid Importer Exporter Code (IEC).
What is the export obligation and value addition rule? You must export the required quantity or value within 18 months of the date of issue, with a minimum value addition of 15% for most products.
What are the key benefits? Duty-free import of inputs, IGST exemption on those imports, better cash flow and lower working capital needs.
What documents are required? IEC, GST registration, details of import and export items, input output norms details and, for merchant exporters, supporting manufacturer details.
What is the Advance Authorisation Scheme?
The Advance Authorisation Scheme is an export promotion scheme under which DGFT allows you to import inputs duty-free for making export products. In return, you promise to export a fixed quantity or value of goods within a set time. This promise is called the export obligation.
The scheme is covered in Chapter 4 of the Foreign Trade Policy (FTP) 2023, along with the Handbook of Procedures. It started decades ago as the Advance Licence scheme and was later renamed Advance Authorisation. The core idea has stayed the same: do not tax inputs that are going to leave the country as exports.
In simple words, think of it as a trade-off. The government says, "Import your inputs without duty today. Export the finished goods tomorrow." If you keep your side of the deal, you never pay the duty.
What is the Advance Authorisation Scheme in the Export-Import Policy?
In the export-import policy, the Advance Authorisation Scheme is a duty exemption scheme. This means the duty is not paid at all at the time of import, unlike a duty remission scheme where you pay first and get a refund later.
Here is how the two types of schemes differ:
Duty exemption: Duty is not paid at the time of import. Advance Authorisation is an example.
Duty remission: Duty is paid first and refunded or credited after export. Duty drawback is an example.
The scheme sits inside the Foreign Trade Policy, which is notified by the Directorate General of Foreign Trade (DGFT). The policy tells you what the benefit is. The Handbook of Procedures tells you how to apply for it and how to close it.
What is the Purpose of the Advance Authorisation Scheme?
The purpose of the Advance Authorisation Scheme is to make Indian exports cost-competitive by removing the duty burden on inputs that go into export products. When your raw material costs less, your export price can be lower, and you can compete better in global markets.
The scheme serves three main goals:
Neutralise duty on exports. Exports should not carry the cost of Indian taxes. The scheme makes sure inputs used for exports are not taxed.
Protect your working capital. Paying duty upfront blocks cash. With no duty at import, that money stays in your business.
Encourage manufacturing for export. Because you must add value to the inputs, the scheme supports real production in India, not just trading.
Advance Authorisation Scheme in India: How Does It Work?
The scheme works in a simple cycle: you get the authorisation, import inputs duty-free, make the export product, export it within the time limit and then close the authorisation with DGFT. Here are the steps in order:
Source: DGFT portal
Apply for the authorisation. You apply on the DGFT portal with details of the products you will export and the inputs you need to import. It is important to keep in mind that to apply for advance authorization scheme, iec code is a must.
Norms are decided. Your input quantities are fixed using Standard Input Output Norms (SION). SION is a list of how much input is normally needed to make one unit of an export product. Where SION is not available, other norm routes such as self-declaration are used.
Import inputs duty-free. You use the authorisation at the port to import the approved inputs without paying the exempted duties.
Manufacture the export product. The imported inputs are used only for making the export product. This is called the actual user condition.
Export within the time limit. You export the required quantity or value within the export obligation period.
Close the authorisation. You apply on the DGFT portal for the Export Obligation Discharge Certificate (EODC) from the Regional Authority. This certificate shows that you have fulfilled your obligation.
If the export obligation is not fulfilled, the duty exemption is lost and the duty becomes payable. So it is important to plan your exports before you start importing.
Who is Eligible for the Advance Authorisation Scheme?
Manufacturer exporters and merchant exporters (tied to a supporting manufacturer) can apply for the Advance Authorisation Scheme. In both cases, you need a valid Importer Exporter Code (IEC).
Manufacturer exporter: You make the export product yourself using the imported inputs.
Merchant exporter tied to a supporting manufacturer: You export the goods, but a supporting manufacturer makes them. The manufacturer's details are part of your application.
If you have just received your IEC and are still learning how DGFT works, our [DGFT guide for exporters] explains the basics.
Types of Advance Authorisation
There are a few types of Advance Authorisation, depending on what you export and to whom. The most common ones are listed below.
Physical exports: This suits exporters who ship finished goods out of India. For example, a garment maker importing fabric to export shirts.
Intermediate supplies: This suits a manufacturer who supplies to another exporter, who then exports the final product. For example, a supplier of components to an exporter.
Deemed exports: These are supplies treated as exports under the policy, such as certain supplies to specified projects. For example, supply of goods to an eligible project in India.
Annual Advance Authorisation: This suits regular exporters with a steady yearly requirement of inputs. For example, a manufacturer with continuous export orders.
We have explained one of these in detail in our [deemed exports guide].
What is the Export Obligation and Value Addition Rule?
The export obligation is the quantity or value of goods you must export against the duty-free inputs you imported. Under the Advance Authorisation Scheme, you must fulfil it within 18 months from the date of issue of the authorisation, and the exported product must have a minimum value addition of 15% for most products.
The time limit can be extended in specific cases as per DGFT rules, so it is worth checking the latest policy before you rely on an extension.
How is value addition calculated?
Value addition tells you how much value you have added to the imported inputs by making the export product. The basic formula is:
Value addition = (Export value minus import value of inputs) divided by import value of inputs, multiplied by 100
Here is a simple example:
Item | Amount |
Value of inputs imported duty-free | ₹10,00,000 |
Value of the product you export | ₹12,00,000 |
Value addition | (12,00,000 minus 10,00,000) divided by 10,00,000 = 20% |
In this case, you have met the 15% minimum. To meet exactly 15%, your export value would need to be at least ₹11,50,000.
Some products, such as gems and jewellery, have different value addition norms, which are set separately in the policy. If you work in one of these sectors, check the Handbook of Procedures and the relevant appendix for your product.
Benefits of Advance Authorisation for Indian Exporters
The biggest benefit of Advance Authorisation for Indian exporters is that you can import inputs without paying customs duty and IGST, which protects your cash flow and lets you price your exports more competitively. Here are the main benefits in detail:
Duty-free import of inputs: You do not pay Basic Customs Duty and certain other duties on approved inputs.
IGST exemption on imports: You do not pay IGST upfront on the imported inputs, so there is no blocked tax credit to wait for.
Better cash flow: Money that would have gone into duty stays available for production and operations.
Lower working capital needs: You borrow less, or not at all, to fund duty payments.
More competitive pricing: Lower input cost lets you quote a better price to overseas buyers.
Fuel and catalysts allowed: Along with raw materials, items such as fuel, oil and catalysts consumed in making the export product can also be allowed.
Freedom after fulfilment: Once the export obligation is complete, you can dispose of the product made from duty-free inputs.
A small note on IGST. Under this scheme, the benefit works through exemption on the import side. This is why exporters often compare it with schemes where the duty is paid first and claimed back later.
Documents Required for Advance Authorisation
You need a set of business, tax and product documents to apply for an Advance Authorisation. The exact list can vary by product and by the type of authorisation, but these are the documents most exporters need:
Importer Exporter Code (IEC): Your valid IEC issued by DGFT.
GST registration: Your GSTIN details.
PAN of the business: Used for identity and tax records.
Bank details: Details of the bank account and the authorised dealer bank you use for export transactions.
Details of the export product: Product description and ITC(HS) code.
Details of the inputs to be imported: Description, quantity, value and ITC(HS) code of each input.
Input output norms details: SION reference for your product, or details of the norms route you are using where SION is not available.
Supporting manufacturer details (for merchant exporters): Name, address and registration details of the manufacturer who will make the goods.
Before you apply, always cross-check the current requirements on the DGFT portal, as procedures are updated from time to time.
Advance Authorisation vs EPCG vs Duty Drawback
Advance Authorisation is for duty-free import of inputs, EPCG is for duty-free import of capital goods and duty drawback is a refund of duties paid on inputs after you export. Many exporters use more than one scheme, so it helps to see them side by side.
Point | Advance Authorisation | EPCG | Duty Drawback |
What it covers | Raw materials and other inputs used in the export product | Capital goods such as machinery | Duties already paid on inputs used in export goods |
How the benefit works | Duty exemption at the time of import | Duty exemption at the time of import | Refund after export |
Export obligation | Yes, with minimum value addition | Yes, linked to the duty saved | No export obligation in the same sense |
Best for | Exporters who import raw materials | Exporters buying machinery to expand | Exporters who paid duty on inputs |
To go deeper, read our guides on the [EPCG scheme in India] and the [duty drawback scheme in India].
How Does Infinity Help Receive International Payments?
Infinity helps exporters receive international payments from overseas buyers in a simple, low-cost way, which is useful when your export orders run under schemes like Advance Authorisation. Under this scheme, every export you complete counts towards your export obligation, so you want your buyer payments to arrive quickly, clearly and with proper records.
Here is what Infinity gives exporters:
0.5% all-inclusive fee with no separate FX markup and no additional GST.
Settlement within 24 hours.
Free FIRA for your payments, giving you a clear record of each foreign inward remittance.
Dedicated account manager to help you when you have questions.
50+ currencies and 160+ countries supported, so your buyers can pay in the currency they prefer.
Dedicated mobile app to track your payments on the go.
Getting started is quick. You sign up in about 2 minutes, complete verification and KYC the same day, receive bank details in multiple currencies and then start receiving payments. Sign up with Infinity today and start receiving your international payments seamlessly.
Read more: Best International Payment Gateway Providers for Exporters in India
FAQs
1.What is the Advance Authorisation Scheme in the export-import policy?
It is a duty exemption scheme under India's Foreign Trade Policy. It allows exporters to import inputs without paying customs duty, provided the inputs are used to make products that are exported within the set time limit.
2.What is the purpose of the Advance Authorisation Scheme?
The purpose is to make Indian exports more competitive. By removing duty on inputs used for export products, the scheme lowers production costs and protects the exporter's working capital.
3.What is the Advance Authorisation Scheme in India?
In India, the Advance Authorisation Scheme is run by DGFT under the Foreign Trade Policy 2023. It lets eligible manufacturer exporters and merchant exporters import approved inputs duty-free against an export obligation.
4.What are the benefits of Advance Authorisation for Indian exporters?
The main benefits are duty-free import of inputs, IGST exemption on those imports, better cash flow, lower working capital needs and more competitive export pricing.
5.Who can apply for Advance Authorisation?
Manufacturer exporters and merchant exporters tied to a supporting manufacturer can apply. You need a valid IEC.
6.What is the export obligation period under Advance Authorisation?
The export obligation must be fulfilled within 18 months from the date of issue of the authorisation. Extensions are possible in specific cases under DGFT rules.
7.Is IGST exempt under Advance Authorisation?
Yes. Imports under Advance Authorisation are exempt from IGST, along with Basic Customs Duty and certain other duties, subject to the conditions of the scheme.
8.What is the minimum value addition required?
The minimum value addition is 15% for most products. Some products, such as gems and jewellery, have different norms set in the policy.
Conclusion
The Advance Authorisation Scheme helps Indian exporters import inputs duty-free and focus their money on production instead of paying duty upfront. If you meet the export obligation and the 15% value addition rule, you save real money and can price your exports better. Once your exports are running, make sure the money from your overseas buyers reaches you quickly and at a fair cost. With Infinity, you can receive international payments at a 0.5% all-inclusive fee, with free FIRA and settlement within 24 hours.
