Advance authorization Scheme – One of the contributors to the economy of India is the export made by individuals or entities. Procuring or dealing in goods and services from the domestic territory of India and providing it to states globally are regulated by the various laws and regulations.
In India, the export of goods and/or services are promoted as this a major contributory to the GDP of the economy. The Customs Act, 1962 Read with regulations framed under the Customs Act, Goods & Services Tax regime regulates the exports and imports.
To boost the exports, the government from time to time by initiatives and schemes brings the remission of duty exemption schemes to boost the exports and simultaneously increasing the ranking on the International level of Ease of Doing Business by simplifying the process.
Advance Authorisation Scheme is authorized under the Customs Act which is to allow duty-free import of inputs, consumables that have been utilized in the manufacturing of export products subject to adjustments. The DGFT is the authority that defines the inclusions for duty allowance or may exclude specifically by public notice.
The Beneficiaries of Advance Authorisation Scheme are as follows:
- Manufacturer exporter – A person/entity who manufactures goods and export such goods on his own.
- Merchant exporter – A person/entity which is engaged in trading activity and exporting of goods of manufacturer exporter on a contract basis for commission or charge.
- Subcontractor – A person/entity which is engaged in manufacturing on behalf of the principal manufacturer and named as such in the main contract.
Apart from that this scheme is issued to UNO, Aid Programmes, of United Nations or other Multinational agencies, the likes of which are paid for in free foreign exchange.
Applicability of AAS
Such beneficiaries can take the benefit of the scheme for the following:
- Exports made that includes the exports made in the Special Economic Zones (SEZs);
- Supply of goods of categories as prescribed;
- Intermediate supplies
- Supply of stores on board of a foreign vessel /aircraft subject to conditions.
- Status Certificate Holders & other categories of exporters with a performance record of 2 years are eligible to take advantage of the scheme.
- The actual user can avail of the benefits of the scheme, which implies the authorization benefits are not transferable.
- Basic Customs Duty
- Additional Customs Duty
- Education Cess
- Anti Dumping Duty
- Safeguard Duty
Import of supplies covered under specific supplies are not exempted from payment of applicable anti-dumping duties and safeguard duty.
Import of supplies as per Chapter 8 of Foreign Trade Policy which states certain goods are not eligible for claiming exemption from :
- Anti Dumping Duty
- Safeguard Duty, if any.
- Minimum Value Addition
Inputs exported under the scheme generally requires as a minimum requirement of 15% in terms of value addition.
In specific cases as follows, the value addition may differ:
- Physical exports (for which payments aren’t received in freely convertible currency)
- import of Tea – a minimum value addition of 50%.
- Duty-free import of spices -permitted only for value addition purposes like crushing, grinding, sterilization or manufacture of oils and oleoresins and not for simple cleaning, grading, re-packing, etc.
Calculation of Value Addition
Value Addition = (Free on Board Value of export realized/ FOR value of supply received – CIF Value of inputs covered by the authorization, any other imported materials used on which benefit of drawback is already claimed)* 100
- The validity period of import & export of goods –
An authorization is valid for
- 12 months for procurement of inputs.
- Export of finished goods must be completed within 18 months from the date of
Determination of Amount:
Advance authorization is issued on the basis of resultant products. The quantity is determined in the following manners:
- The amount is determined to take into consideration the standard norms of the particular category of the product known as Standard Input Output Norms (SION).
SION is applicable to the following:
- food products,
- leather products etc.
- Self Declaration by the applicant
- Self Ratification scheme by the applicant
Both Self Declaration and Self Ratification are required by the beneficiary in the case where such a person wants to take additional benefit of inputs
Proceeds of Exports:
Under the scheme, it is mandatory that unless specifically specified/exempted by the competent authority, the proceeds on availing the benefits of the scheme have to be paid in freely convertible currency.
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Also Read: Transfer Pricing