Advance Authorisation Scheme 2026: How Exporters Import Raw Materials Duty-Free
The Advance Authorisation Scheme is one of the most powerful duty exemption tools in India’s Foreign Trade Policy. It lets exporters import the raw materials they need for export production without paying Basic Customs Duty and IGST, as long as the imported inputs go into goods that are exported. For manufacturers who ship regularly, this can be the difference between blocked working capital and a smooth cash cycle.
Many exporters still pay full duty on inputs and then chase drawback or refunds. In this guide we explain how the Advance Authorisation Scheme works, who qualifies, how to apply, and the mistakes that cost exporters their benefits.
What Is the Advance Authorisation Scheme?
The Advance Authorisation Scheme is administered by the Directorate General of Foreign Trade (DGFT) under Chapter 4 of the Foreign Trade Policy 2023 and the Handbook of Procedures. It allows duty-free import of inputs that are physically incorporated in the export product, allowing for normal wastage.
In simple terms, you import raw materials without paying customs duty upfront. In return, you commit to exporting finished goods made from those materials within a fixed period. This commitment is called the export obligation (EO).
The Customs department grants the actual duty exemption under the relevant notification, while DGFT issues the authorisation and monitors the export obligation. Both sides must be handled correctly.
What Duties Are Exempted Under the Advance Authorisation Scheme?
Depending on the authorisation type, imports under the Advance Authorisation Scheme can be exempt from:
- Basic Customs Duty (BCD)
- Integrated GST (IGST), subject to the conditions in the notification
- Compensation cess, where applicable
- Other applicable duties under the notification
For manufacturers importing resin, yarn, chemicals, metals, components or packaging inputs, the saving is immediate. No duty is paid, so no cash is blocked.
Who Is Eligible for the Advance Authorisation Scheme?
Two categories of exporters can apply:
- Manufacturer exporters, who make the export goods themselves.
- Merchant exporters, who export goods made by a named supporting manufacturer.
You need a valid Importer Exporter Code (IEC) and an export product with a defined input-output relationship. The scheme works on an actual user basis, so the imported inputs cannot be sold or transferred. They must be used only for the export product.
Types of Advance Authorisation
Choosing the right type matters, because each has different conditions:
- Advance Authorisation for physical exports: the standard type for manufacturer and merchant exporters.
- Annual Advance Authorisation: for exporters with regular, repeated export of the same product.
- Advance Authorisation for deemed exports: for supplies to eligible domestic buyers.
- Special Advance Authorisation: for specified sectors such as gems and jewellery, textiles and others.
A wrong choice at the start can restrict your benefit for the whole obligation period, so type selection belongs in your planning stage and not at the filing desk.
How SION and Ad-Hoc Norms Decide Your Entitlement
Your import entitlement is calculated using Standard Input Output Norms (SION). SION states how much input is allowed for a unit of export product. If your product has a SION, the entitlement is based on it.
If no SION exists, you apply for ad-hoc norms with supporting technical documents. DGFT has also streamlined this process in recent years so that exporters can apply for an authorisation on ad-hoc norms without approaching the Norms Committee each time, subject to conditions in the FTP and HBP.
Rules on ad-hoc norms and their validity are updated through DGFT trade notices, so always check the current notification before filing.
Step-by-Step Process to Apply for the Advance Authorisation Scheme
- Confirm IEC and registrations. Your IEC, GST registration and bank details must be active and correct.
- Identify the export product and norms. Check whether SION exists, or prepare ad-hoc norms documents.
- Calculate entitlement. Work out the quantity and CIF value of inputs you can import against your planned exports.
- File the application online on the DGFT portal. Upload the technical details, norms and supporting documents.
- Receive the authorisation. DGFT issues the authorisation with an import and export obligation.
- Import duty-free. Present the authorisation to Customs when filing the Bill of Entry.
- Export and fulfil the obligation. Export the finished goods and keep proof of exports and input consumption.
- Apply for EODC. After the export obligation is met, apply for the Export Obligation Discharge Certificate to close the authorisation.
Export Obligation Under the Advance Authorisation Scheme
The standard export obligation period is 18 months from the date of issue of the authorisation, unless DGFT notifies otherwise. DGFT has also granted general extensions for authorisations expiring in particular windows from time to time. Please check the latest DGFT public notices before you plan your shipments around any deadline.
You must also meet the minimum value addition requirement for your product. Missing it can invite duty demands. Keep the export timeline realistic and tied to production capacity, not just to the licence date.
Recent Relaxations Exporters Should Know
DGFT has made the Advance Authorisation Scheme more flexible in recent updates. A key relaxation allows duty-free benefit even when goods were shipped before the authorisation was issued, provided the Bill of Entry is filed after the authorisation date. This relaxation does not apply to restricted items or goods importable only through designated agencies, unless DGFT gives special permission.
DGFT has also simplified some EODC filing requirements and has continued to update norms and procedures through trade notices in 2026. Because these updates arrive often, treat any guide, including this one, as a starting point and confirm the current position on the DGFT portal.
6 Common Mistakes That Cost Exporters Their Benefits
1. Applying after imports are already cleared at full duty. Once duty is paid, recovering it is slow and uncertain. Plan the Advance Authorisation Scheme before the shipment is booked.
2. Wrong HSN classification. A classification mismatch between the authorisation and the Bill of Entry can lead to disputes and denial of exemption. This is the same risk we see across import transactions, which is why classification review is part of our Customs Classification advisory.
3. Ignoring the actual user condition. Selling or transferring duty-free inputs breaches the scheme and can lead to duty, interest and penalty.
4. Weak input-output records. If you cannot prove which imported inputs went into which exports, closing the authorisation becomes difficult.
5. Missing the export obligation deadline. Late exports without a valid extension can lead to duty recovery with interest.
6. Delaying EODC. Many exporters finish exports and then forget to close the authorisation. An open authorisation keeps your bond and liability alive.
Advance Authorisation Scheme vs EPCG vs MOOWR
Exporters often confuse these schemes, but each solves a different problem:
| Scheme | Best for | Key benefit |
|---|---|---|
| Advance Authorisation Scheme | Raw materials and inputs used in export goods | Duty-free import of inputs |
| EPCG | Capital goods and machinery | Zero or concessional duty against export obligation |
| MOOWR | Ongoing imports with production use | Duty deferment until use |
Many manufacturers benefit from using more than one scheme in a planned way, for example EPCG for machinery and the Advance Authorisation Scheme for raw materials. You can read more in our posts on EPCG scheme myths and the Pre-Import Strategy Audit.
Real-World Example
A PVC pipe and fittings manufacturer in Ahmedabad needed regular resin imports. By securing an Advance Authorisation before the cargo arrived, with the input-output norms matched correctly to SION, the company obtained full duty exemption on its resin imports and identified ₹4 Cr in potential savings. The approval took only 21 days. The lesson is simple: timing and documentation decide the outcome.
Frequently Asked Questions
What is the Advance Authorisation Scheme in simple words?
It is a DGFT scheme that lets exporters import raw materials without paying customs duty, provided they export the finished goods within the prescribed period.
Can a merchant exporter use the Advance Authorisation Scheme?
Yes, if the merchant exporter is tied to a supporting manufacturer and meets the conditions in the FTP.
Is IGST exempt under the Advance Authorisation Scheme?
Generally yes, subject to the conditions in the applicable customs notification. Confirm the exact conditions for your authorisation type.
What happens if I miss the export obligation?
You may have to pay the exempted duty with interest, and penalties may apply. You can sometimes apply for an extension or regularisation.
How long does approval take?
It depends on the completeness of your documents and whether norms are already fixed. Cases with a clear SION and clean documents move faster.
Conclusion: Plan Before You Import
The Advance Authorisation Scheme can free up large amounts of working capital, but only when it is structured before the goods arrive. The right authorisation type, correct norms, clean classification and disciplined EO tracking are what separate exporters who save lakhs from those who face notices.
At PriKriti Group, our team handles the full cycle, from eligibility check and norms to filing, import clearance coordination and EODC closure. See our Advance Authorisation service or book a free duty saving assessment to find out how much your next import could save.
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