Advance Authorization

Advance Authorization Scheme
The Advance Authorization Scheme is a scheme started with the objective of endorsing the import of duty-free inputs for the production of export. Advance authorization helps in the easy production of export goods and helps in the exemption of additional duties on the inputs being imported.
The inputs include fuel, oil, catalysts, energy, etc. required in the production of export. These inputs are used in the manufacturing of the export products and hence, come under the exemption of the duty-free import inputs.
After having a brief on what Advance Authorization Scheme is, let us now explore it in detail.
Applicability of Advance Authorization Scheme
The applicability of the Advance Authorization Scheme applies to a variety of domains. The Advance Authorization Scheme has helped export manufacturers and producers in a drastic way.
Advance Authorization i.e. the import of duty-free inputs can be put in use or availed by a variety of manufacturers such as merchant exporters, manufacturer exporters, supporting exporters, etc.
The merchant and manufacturer exporters are linked with the supporting exporters which means both the types of exporters take the help of supporting exporters for physical exports to different places such as SEZ exports, stores’ supply on aircraft/vessel going out of the country, intermediate supplies, etc.
Along with the above activities for which the Advanced Authorization is issued, it can be also issued for the import of raw sugar by the merchant exporter or the manufacturer exporter with the help of the supporting exporter.
Advanced Authorization is also issued to the social initiative programs of the United Nations such as the Aids programs, or to the other different types of Agencies related to a social cause. It is also issued to sub-contractors related to a specific project, to the United Nations Organization(UN).
Advance Authorization Benefits
The benefits of Advance Authorization are many as the exemption on duty of imports help the export manufacturers to buy these resources at a reasonable price from outside the country and use it efficiently.
Exemption from payment of the following Duty on inputs-
  1. Additional Customs
  2. Basic Customs
  3. Education Cess
  4. Countervailing
  5. Anti-Dumping
  6. Safeguard
  7. Integrated Tax and Compensation Cess subject to the pre-import condition
  8. Transition Product Specific Safeguard
The export manufacturers and merchant exporters get the benefits of duty exemptions from all the above-mentioned duties hence making it easy and convenient for them to import the inputs.
Value Addition Calculation
Let us now have a look at the formula used for calculating value addition for the imported inputs with respect to the export production.
Value Addition is a term used to calculate and examine the amount of profit an exporter had with respect to the imported inputs when the duties are exempted.
Here is an excerpt of Value Addition-
VA = ((A-B)/B)*100
A = FOB value of export realized / FOR value of supply received
B = CIF value of inputs covered by Authorisation, plus the value of any other input used on which benefit of Drawback is claimed or intended to be claimed.
For Ex. If the exporter imports inputs worth 100 Rs. and the export product made with the input is worth 120 Rs., then there is value addition of 20%.
Minimum Value Addition
  • The Minimum Value Addition of inputs exported under the Advance Authorization Scheme has a provision of minimum value addition of 15%.
  • The Minimum Value Addition for Tea is 50%.
  • The Minimum Value Addition for Petroleum and Copper Concentrate Products is 8%.
  • The Minimum Value Addition for the Jewelry and other gems is around 1.5%

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