ADVANCE AUTHORIZATION SCHEME

Prepared By

Hitesh K Gandhi – 014

Ashwini Gujrathi – 017

Ira Malik – 027

Akhilsingh Y Patil – 034

Mitul D Shah – 046

Priyanka Singhal – 054

04/07/2023 SIMSR

INTRODUCTION

• Principle– Goods and Services are to be exported and not the Taxes and Levies

• Purpose– Procure inputs and capital goods without the component of Central

Indirect Taxes & Levies

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04/07/2023 SIMSR

TYPES OF SCHEMES

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Export Promotion Schemes

Duty Exemption Schemes

Duty Remission Schemes

Advance Authorization

Duty Free Import Authorization

(DFIA)

Duty Entitlement Passbook (DEPB)

Duty Drawback Schemes (DBK)

04/07/2023 SIMSR

ADVANCE AUTHORIZATION SCHEME

• For making available duty free Inputs required to manufacture the export product.

• Inputs allowed as per SION and with Actual User condition

• Facility available for – Physical exports (including supplies to SEZ units & SEZ Developers)– Deemed exports – Intermediate supplies.

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04/07/2023 SIMSR

ADVANCE AUTHORIZATION SCHEME…

• Minimum 15% V.A.

• Export Obligation– Time period for export

• License & input material non-transferrable

• ANF4A

• ANF4F

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04/07/2023 SIMSR 6

DESCRIPTION OF ADVANCE AUTHORIZATION

An advance authorization shall specify:-• Names and description of items to be imported and exported• Quantity of each item to be imported or value• Aggregate CIF value of imports• FOB value and quantity of exports

04/07/2023 SIMSR 7

EXPORTS IN ANTICIPATION OF AUTHORIZATION

• Shipping documents should be endorsed with file number or authorization number to establish co-relation of exports with authorization issued

• If application is approved, authorization shall be issued based on input output norms

• Exports made in anticipation of grant of an advance authorization shall be entirely on risk and responsibility of exporter

• In case application for an advance authorization is rejected, conversion of duty free shipping bills to drawback shipping bills may also be permitted by custom authorities.

04/07/2023 SIMSR 8

ADVANCE AUTHORIZATION OR DFIA FOR INTERMEDIATE SUPPLIES

• Application for grant of advance authorization can be made on the basis of a tie-up agreement with exporter

• It is issued when authorization is made invalid for direct import of items to be supplied by intermediate manufacturer.

• In such cases, a copy of the invalidation letter will be given to authorization holder and copy thereof will be sent to intermediate supplier as well as RA of intermediate supplier

04/07/2023 SIMSR 9

ADVANCE AUTHORIZATION OR DFIA FOR INTERMEDIATE SUPPLIES

• Authorization holder in such cases has an option either to supply intermediate product to holder of Advance authorization or DFIA to export directly

• Facility of advance authorization shall be available even in cases where intermediate supplier has supplied or intend to supply material subsequent to fulfillment of EO by exporter.

Free of Cost Supply by Foreign Buyer

• Advance Authorisation is available where some or all inputs are supplied free of cost to exporter by foreign buyer.

• For calculation of value addition, notional value of free of cost inputs along with value of other duty-free inputs shall be taken into consideration.

• A specific endorsement is made on exchange control copy disallowing remittance for such material.

• All inputs imported need top be used in manufacturing except wastages.

Provision for BIFR units

• Any firm / company registered with BIFR (Board of Industrial and Financial Reconstruction) or any firm / company acquiring a unit, which is under BIFR shall be allowed Export Obligation Period (EOP) extension as per rehabilitation package prepared, subject to approval of BIFR, or 5 years if not specified, without payment of composition fee.

• Above provisions apply also to SSI units as per rehabilitation scheme of concerned State government.

Advance Authorisation for annual requirement

• Advance Authorization can also be issued for annual requirement.• Status Certificate holder and all other categories of exporters having past

ex port performance (in preceding two years) shall be entitled for Advance Authorization for annual requirement.

• Entitlement in terms of CIF value of imports shall be up to 300% of the FOB value of physical export and/or for value of deemed export in preceding licensing year or Rs 1 crore, whichever is higher.

Advance Orders (ARO) and Invalidation Letter

• Option to source inputs from indigenous sources / State Trading Enterprises in lieu of direct import either against Advance Release Order (ARO) or Invalidation letter denominated in free foreign exchange / Indian rupees.

• An application may be made to Regional Authority concerned for grant of ARO.

• Application shall specify:– name, description and quantity of items and– individual value of items to be procured.

• validity shall be co-terminus with validity of Advance Authorisation• An ARO issued for procurement of an individual item shall be

automatically valid for procurement from one or more indigenous sources.

Admissibility of Drawback

• In case of an Advance Authorization, drawback shall be available for any duty paid material, whether imported or indigenous, used in goods exported, as per drawback rate fixed by DoR, Ministry of Finance (Directorate of Drawback).

• Drawback allowed shall be mentioned in Authorization.

Advance Authorization for applicants with multiple units

• Transfer of any duty free import against Advanced Authorisation from one unit of a company to other for manufacturing purpose has to be doen with prior intimation to Jurisdictional Excise.

• No claim of CENVAT benefit is allowed.• To avail this benefit, all the unit need to be mentioned on IEC Certificate.

04/07/2023 SIMSR 16

LUT and BG

• Bank Guarantee ; BG• Legal Undertaking; LUT• Acceptance of BG/LUT

EXECUTION OF LUT/BG• execute wherever any duty free import is allowed with the Customs Authority

before clearance of goods

• Indigenous sourcing - furnish LUT / BG to licensing authority before sourcing

• Execution of LUT in place of BG for import by importers who have signed production Sharing Contract (PSC) with the GOI on re-export basis under EXIM Policy

04/07/2023 SIMSR 17

LUT and BG

• Execution of LUT/BG against Import Authorization issued by import of Restricted Items on Re-export basis.

Turnover >=5 Cr. LUT , full export value

Not covered under 1.)

LUT, full export valueBG for 1 lakh

Minimum time period = Time for re-export + 6 months

Regional Authorities redeem BG/LUT when documents of re-export are furnished

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LUT

Procedure for the execution of the legal agreement

 • Acceptance to the standard terms and conditions of the approval• Triplicate copies • Legal agreement to be typed on a Rs. 50.00 stamp paper• The legal agreement signed on all the pages.• Common embossed seal to be affixed on all the pages.• Witness signatures • Importer exporter code number obtained from DGFT to be enclosed• Board resolution copy to be enclosed• Advance service charge of Rs. 45000.00 • Application of the Green Card• Bank certificate for maintaining the bank account• Photo copy of the legal agreement with original signatures• List of import as per format• (Des Qty Value)• List of indigenous as per format• (Des Qty Value)

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BACK TO BACK INLAND LC

• Instead of applying for an ARO or an invalidation letter• Advance Authorization or DFIA holder - open in favour of indigenous supplier• Bank ensures BG/LUT executed and endorsed

• After opening inland LC, bank s make following endorsement on The Exchange Control copy of the Advance License for Physical Exports / Deemed

Exports / Annual Requirement The Customs copy of the Advance License for Physical Exports / Deemed Exports /

Annual Requirement On the DEEC book (Part-i)

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BACK TO BACK INLAND LC

The original LC may be retained by the bank for negotiation Bank responsibility – Endorsement - not liable for any misrepresentation or false

statement made by the licensee. The inland LC in favour of the indigenous supplier shall not be cancelled for any

reason. The non negotiable copy with the photocopy of the Advance License along with

DEEC duly carrying endorsements made by the bank shall be sufficient for the indigenous

supplier to claim deemed export benefits.

The value of this Advance License for Physical Exports / Deemed Exports / Annual Requirement stands reduced by a sum of Rs. ________ , being the value of the inland LC No.________ opened today by the licensee in favour of M/s ________ (name andaddress of the indigenous supplier)".

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ENTITLEMENT

• CIF value -- maximum 500% of FOB• NC already ratified norms under “ Self Declared Authorization for Free of

Cost and Paid Material”• Valid for 6 months from date of ratification• Authorization issued by RA under “ Adhoc Norms fixed”• Add norms within one month after 6 months from application• Mandatory for industry to provide data for fixation of SION• Else problem in repeat authorization.• Authorization in excess of entitlement : furnish 100% BG to Customs

Authority. A specific endorsement made on authorization.

Port of Registration

• For Advance Authorisation

• Issued for purpose of import and export through one of sea ports, airports,

ICDs or LCS.

• Authorisation only for that port for import.

• Export may be made through any port.

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Examples

• Sea Ports : Mumbai, Kolkata, Kandla, Chennai

• Air Ports : Ahmedabad, Srinagar, Coimbatore, Delhi

• ICDs : Agra, Bangalore, Vadodara, Bhatinda

• LCS : Ranaghat, Jogbani, Mahadipur

SIMSR 2304/07/2023

Facility of Clubbing

• Only for redemption/regularisation of cases.

• No further import/export.

• Issued under similar Customs notification

• In 2004-09 period AA with different customs notifications can be clubbed.

SIMSR 2404/07/2023

Procedure

• Request is considered in Form ANF 4D for clubbing more than 1 AA.

• Value addition = Avg. ( FTP , procedure laid)

• Shortfalls regularised in terms of paragraph “ Regularisation of Bonafide

Default” of Handbook of Procedures, Vol. 1.

SIMSR 2504/07/2023

Conditions

• Only for AA(s) where shortfall in fulfillment of EO which is sought to be

clubbed with an advance Authorisation(s) valid for imports.

• For expired Authorisations with EO shortfall and which is sought to be

clubbed with advance Authorisation(s) valid for imports, payment of

composition fee for EO period as per “ Export Obligation (EO) Period and

Its Extension”

• For exports effected beyond EO extension , no clubbing permitted.

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