Advance Authorisation scheme explained: duty-free inputs against a real export order

Advance Authorisation lets a manufacturer exporter import raw materials, inputs, and components duty-free, on the condition that they are physically incorporated into a specific export product. Unlike EPCG, which is about equipment, or MOOWR, which is about flexibility, Advance Authorisation is built around one thing: a confirmed export order and the inputs that order requires.

What it actually covers

The authorisation permits duty-free import — Basic Customs Duty, and depending on notification, IGST and cess — of inputs that go physically into the export product, plus fuel, oil, and catalysts consumed in the process where the norms allow it. It does not cover capital goods; machinery falls under EPCG, not Advance Authorisation.

Two versions exist: authorisation against a specific export order (buyer, quantity, and value already fixed), and authorisation against Standard Input-Output Norms (SION), a pre-notified ratio of input to output for a given product category that lets you apply without a specific order in hand, provided your product matches a defined SION entry.

Input-Output Norms: the number that determines everything

SION fixes, per unit of export product, how much of each input can be imported duty-free. If your process is more input-efficient than the notified norm, the surplus stays with you; if it needs more input than the norm allows, the excess has to be sourced duty-paid, because the authorisation will not cover it. Where no SION exists for your product, you can apply for an ad-hoc norm, but that process runs through a norms committee and takes materially longer than a standard SION-based application — worth checking before assuming a fast turnaround.

Value addition: the other condition

Beyond the input-output ratio, Advance Authorisation carries a minimum value addition requirement, generally expressed as (FOB value − CIF value of duty-free inputs) ÷ CIF value of duty-free inputs, subject to a minimum percentage that varies by product category. An authorisation that technically matches the input norm but fails the value-addition threshold does not get approved on input quantity alone — both conditions have to clear together.

Fulfilling and closing the obligation

The export obligation is fulfilled by exporting the finished product manufactured from the duty-free inputs, within the authorisation's validity period (commonly 18 months, extendable in defined cases). Closure requires filing proof of export — shipping bills and bank realisation — against the specific authorisation, along with reconciling actual input consumption against what was imported duty-free. An authorisation left unreconciled, even after the goods physically exported, remains open on paper, and an open authorisation past its validity converts to a duty demand on the unconsumed or unreconciled portion, not just an administrative loose end.

Advance Authorisation vs MOOWR vs EPCG

Advance Authorisation is the sharpest tool when the order is already real: you know the buyer, the quantity, and therefore the exact input requirement, and you want duty-free inputs matched precisely to that order rather than a general-purpose facility. If you are building manufacturing capacity ahead of confirmed orders, MOOWR gives the same duty deferral without requiring an order to apply against. If the constraint is capital equipment rather than input materials, that is EPCG territory. Many manufacturers run Advance Authorisation order-by-order on top of a MOOWR base — the two are frequently layered, not chosen between.

Where this actually goes wrong

Rarely at the point of import — almost always at reconciliation, when actual input consumption per unit produced does not cleanly match the SION ratio the authorisation was issued against, and nobody was tracking the variance shipment by shipment. Reconciling consumed inputs against the authorised norm as production happens, rather than rebuilding the entire input ledger at closure, is the difference between a routine EODC filing and a duty demand on inputs nobody can now account for.