Advance Authorisation Scheme Under FTP 2023
Duty-free inputs today, realised exports within 18 months. Here are the conditions CCFE tests.
Advance Authorisation lets an exporter import inputs duty free, on condition that those inputs are physically built into the goods it then exports. It sits in Chapter 4 of the Foreign Trade Policy (FTP) 2023, under the duty exemption schemes, and is issued by DGFT's regional authorities.
For an AD-branch banker the scheme matters because the export obligation is discharged only by exports whose proceeds are realised, and the bank's realisation record is what proves it. CCFE tests the scheme's conditions directly: who can hold it, what it exempts, how value addition is measured and how long the holder has to export.
You save ₹200 today
- 5 full-length mocks
- 553 questions, chapter by chapter
- Rate & risk calculations
One payment, no subscription · Valid for 2 months
The Scheme in Working Terms
- What can be imported
- Inputs physically incorporated in the export product, with normal allowance for wastage. Fuel, oil and catalysts consumed in production may also be allowed.
- How quantities are fixed
- Against Standard Input Output Norms (SION), on self-declaration, by applicant-specific norms fixed by the Norms Committee, or under the Self-Ratification Scheme.
- Who can hold it
- A manufacturer exporter, or a merchant exporter tied to a supporting manufacturer.
- Which supplies qualify
- Physical exports (including exports to an SEZ), intermediate supplies, specified deemed export supplies, and supply of stores on board foreign-going vessels or aircraft where a specific SION exists.
- Actual user condition
- The authorisation and the inputs imported under it are not transferable, even after the export obligation is met. Once the obligation is complete, the holder may dispose of the product made from the duty-free inputs.
Key Numbers Under FTP 2023
Minimum value addition
Position
15% (lower for products in Appendix 4D; 50% for tea, 25% for spices)
Where it sits
FTP para 4.09
Import validity
Position
12 months from the date of issue; one revalidation of 12 months for most authorisations
Where it sits
HBP para 4.39
Export obligation period
Position
18 months from the date of issue
Where it sits
HBP para 4.40(a)
Project supplies
Position
Co-terminus with project execution or 18 months, whichever is more
Where it sits
HBP para 4.40(b)
Defence, military store, aerospace, nuclear
Position
24 months, or the contracted export order duration if longer
Where it sits
HBP para 4.40(c)
Annual Requirement entitlement
Position
Up to 300% of previous year's FOB exports or ₹1 crore, whichever is higher
Where it sits
FTP para 4.07
| Condition | Position | Where it sits |
|---|---|---|
| Minimum value addition | 15% (lower for products in Appendix 4D; 50% for tea, 25% for spices) | FTP para 4.09 |
| Import validity | 12 months from the date of issue; one revalidation of 12 months for most authorisations | HBP para 4.39 |
| Export obligation period | 18 months from the date of issue | HBP para 4.40(a) |
| Project supplies | Co-terminus with project execution or 18 months, whichever is more | HBP para 4.40(b) |
| Defence, military store, aerospace, nuclear | 24 months, or the contracted export order duration if longer | HBP para 4.40(c) |
| Annual Requirement entitlement | Up to 300% of previous year's FOB exports or ₹1 crore, whichever is higher | FTP para 4.07 |
Advance Authorisation and DFIA questions. No signup.
How Value Addition Is Calculated
FTP para 4.08 defines value addition as (A minus B) divided by B, multiplied by 100. A is the FOB value of exports realised (or FOR value of supplies received). B is the CIF value of the inputs covered by the authorisation, plus the value of any other input on which drawback is claimed.
The denominator is the input value, not the export value. If inputs worth ₹100 CIF are imported, the exports must realise at least ₹115 FOB to meet the 15% floor. Because A uses the value realised, an unrealised bill does nothing for the exporter's value addition, which is where the AD bank's realisation record becomes evidence.
How CCFE Tests This
Expect one-line recall questions: the minimum value addition, the export obligation period, whether a merchant exporter qualifies, or whether the authorisation is transferable. The common traps are using FOB as the denominator in the value-addition formula, confusing the 12-month import validity with the 18-month export obligation, and assuming AA is transferable once exports are done. Only DFIA is transferable.
FAQs
What is the Advance Authorisation scheme?expand_more
A duty exemption scheme under Chapter 4 of FTP 2023 that allows duty-free import of inputs physically incorporated in an export product, subject to an export obligation and a minimum value addition.
What is the export obligation period under Advance Authorisation?expand_more
18 months from the date of issue of the authorisation, under para 4.40 of the Handbook of Procedures. Project supplies and defence-related items have longer periods.
Is an Advance Authorisation transferable?expand_more
No. The authorisation and the inputs imported under it are subject to the actual user condition and remain non-transferable even after the export obligation is fulfilled.
What is the minimum value addition under Advance Authorisation?expand_more
15%, calculated on the CIF value of the inputs. Some products listed in Appendix 4D may have a lower figure; tea requires 50% and spices 25%.
Next steps
Take a full CCFE mock test100 questions across all six modules, timed and scored.