Invalidation Letter, Advance Release Order, and Certificate of Supplies

Three terms about Advance License you’ll regret not knowing

The DGFT has provided alternatives underneath the Advance Authorisation Scheme that many are apprehensive of. These alternatives, the Invalidation letter, Advance Release Order, and Certificate of Supplies, act as extensions to the benefits of products not eligible for advance license. Through these, the exporters can maximize their profits by sourcing indigenously. Check out the article to know more!

Advance Authorisation Scheme or Advance License Scheme is a duty exemption scheme issued by the DGFT Government of India. The scheme exempts from the payment of import duties on inputs incorporated in manufacturing products for export. Through this scheme, the Government encourages Indian exporters to enhance the competitiveness of Indian products in the global market. Exempting duties on raw materials automatically reduces the expenses of the final export product, thus making it feasible for the exporters.

Eligible exports that can be availed for benefits of Advance License:

• Physical Exports

• Exports to SEZ

• Intermediate supply to other Advance License owners

• Deemed exports, i.e., exports to EOU, BTP, EHTP units

Standard Input Output Norms: Based on the Norms Committee’s recommendation, the Director General of Foreign Trade (DGFT) issued Standard Input-Output Norms (SION) specifying the number of inputs required for the production of a unit of output that will be exported.

This method has pre-determined norms for various products in different segments such as Chemical and allied products, Electronics, Engineering, Food products, Handicrafts, Leather, Plastics, Sports, textile, etc.

Self-declaration: If a product isn’t eligible under SION, it can be applied for Advance Authorisation to the Regional Authority.

Application before fixation of the norm: If SION is not eligible for a product, the exporter may apply to the norms committee. The Norms committee could either fix or provide ad-hoc norms. Thus, the ad-hoc norms have a validity of one authorization only and cannot repeat.

Self Ratification Scheme: The exporter holding an Authorized Economic Operator (AEO) Certificate under the Common Accreditation Programme of CBEC is eligible for this scheme. If the export product is not eligible under SION or ad-hoc norms, this scheme is preferable. There is no requirement for ratification by the norms committee under this scheme. After fulfilling the pertinent conditions, the regional authority can issue Advance Authorization.

The majority is aware of the Advance Authorisation Scheme and the grounds on which an exporter becomes eligible to own it. Here’s something you aren’t well aware of, i.e., ways to maximize your gains on the products ineligible under advance license. As per the Foreign Trade Policy of the Government of India, there are alternative sources to get benefits on products that aren’t mentioned under the terms and conditions of holding an Advance license. The Invalidation Letter, Advance Release Order, and Certificate of Supplies are something every exporter must be well versed about. Read through for some valuable information and details.

Through the Government Of India’s Foreign Trade Policy, an Advance License Holder can obtain required inputs from any indigenous supplier after getting the authorization invalidated for direct imports. The Advance License Holder must also have an Invalidation Letter that is in favor of the domestic supplier. Thus, the domestic supplier can acquire Advance Intermediate Authorisation based on the Invalidation Letter for sourcing duty-free inputs and discharging his obligation by supplying the final manufactured products to the Advance Authorisation Holder.

In brief, an Invalidation Letter exempts duties on material for inputs for the indigenous supplier. It is processed under Advance Authorisation for supplying manufactured products to another Advance Authorisation/ DFIA/ EPCG Authorisation.

Supplies through Invalidation letters are eligible for Advance Authorisation and Terminal Excise Duty refund.

• From the initial stages itself, Terminal Excise Duty is exempted.

• Advance Authorisation and DFIA for intermediate supply.

• Under the EPCG scheme, GST has to be paid while making local procurement

With Advance Release Order, an exporter who is an Advance License Holder can obtain the inputs through indigenous sources, i.e., EOU, SEZ, STP, EHTP, EPZ units instead of direct imports. The transactions can take place in foreign exchange or in Indian currency.

Application for obtaining Advance Release Order (ARO) has to be made to the concerned Regional Licensing Authority.

If ARO and Advance License are issued together, ARO’s validity will be the same as the Advance License. An ARO issued for procuring an individual product is automatically eligible for obtaining from one or more domestic suppliers as well.

For supply under Advance Release Order, the owner can obtain a refund of duty drawback and refund of Terminal Excise Duty.

It helps those domestic suppliers who don’t wish to import inputs.

The certificate of supplies enables the manufacturing unit to import raw materials for manufacturing any specific final product with exempted customs duty from SEZ.

If the manufactured good is purchased by a domestic seller willing to sell it within the domestic market, there’s no exemption of duties imposed on the product because the goods have been consumed within the country. But, if the domestic seller intends to export the manufactured good and they obtain the Certificate of Supplies, then the exporter will be exempted from the customs duties on inputs consumed. A certificate of supplies thus exempts the customs duties levied on the products manufactured by the SEZ manufacturing units if the exporter intends to trade abroad. The DGFT hence provides these incentives to encourage foreign trade.