Advance Authorisation (AA) Scheme
Why in News?
The Advance Authorisation (AA) Scheme is a critical trade-facilitation tool under India’s Foreign Trade Policy (FTP). Managed by the Directorate General of Foreign Trade (DGFT), it permits duty-free imports of raw materials and inputs that are physically incorporated into a finished product meant for export.
Core Objectives & Benefits
- Tax Neutralization: The main principle is that "taxes and duties should not be exported," boosting the global competitiveness of Indian manufacturing.
- Full Customs Exemption: It waives key import taxes, including Basic Customs Duty (BCD), Integrated GST (IGST), Anti-dumping Duty, Safeguard Duty, and Compensation Cess.
- Broad Input Coverage: Beyond raw materials, exporters can import packaging materials, fuel, oil, and catalysts consumed during the production process duty-free.
Eligibility & Application Criteria
- Permitted Exporters: Open to both Manufacturer Exporters (who process goods directly) and Merchant Exporters tied to a supporting domestic manufacturer.
- Types of Supplies: Issued for traditional physical exports, intermediate supplies to other exporters, and specified deemed exports (like supplies to infrastructure projects or UN bodies).
- Mandatory Pre-requisites: Exporters must hold a valid Import Export Code (IEC) and a Registration-cum-Membership Certificate (RCMC) from their respective Export Promotion Council.
Execution Mechanisms (How Norms are Fixed)
- Standard Input-Output Norms (SION): Pre-defined sector-specific input ratios published by the DGFT for quick processing.
- Self-Declaration & Ad-hoc Basis: If a product does not match existing SION rules, exporters can claim ad-hoc norms reviewed by the Norms Committee. Exporters can also use an online searchable database of previously approved ad-hoc rules.
- Self-Ratification Scheme: An expedited path for established exporters to fix their own raw material wastage norms without a preliminary committee review.
Obligations and Timeframes
- The Export Obligation (EO): Exporters are legally required to export a finished product equivalent to the imported raw material within a standard window of 18 months.
- Minimum Value Addition: Exporters must achieve a minimum 15% value addition. This means the final exported merchandise must be worth at least 15% more than the value of the duty-free inputs imported.
- License Validity: The initial authorization remains valid for making inward imports for 12 months from its date of issue.
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