Advance License Explained: Benefits, Process & AEO T2 Registration Guide

 Businesses involved in importing raw materials for export manufacturing often face high duties that affect cash flow. The Advance License scheme (also known as Advance Authorization) offers a solution by allowing duty-free import of inputs used in the manufacture of export products. For companies looking to maximize their export competitiveness, understanding the Advance License and related compliance like AEO T2 Registration is critical.

What is an Advance License?

An Advance License is a government-issued authorization that permits duty-free import of raw materials, components, or inputs that will be used to produce goods meant for export. This scheme is part of India’s Foreign Trade Policy (FTP) and is administered by the Directorate General of Foreign Trade (DGFT).

Under the Advance License scheme:

• Basic Customs Duty (BCD), IGST, Anti-Dumping Duty, Safeguard Duty, and Compensation Cess are exempted.

• The exporter commits to exporting a certain quantity or value of finished goods within a specified time frame (export obligation).

• Both manufacturers and merchant exporters tied to supporting manufacturers can apply.

Key Benefits of Advance License

1. Cost Savings: Immediate relief from paying import duties improves working capital and reduces the landed cost of raw materials.

2. Competitive Pricing: Lower production costs enable exporters to offer better pricing in global markets.

3. Cash Flow Advantage: No upfront duty payments mean more liquidity for business operations.

4. Wider Eligibility: Available to both small and large exporters, including new businesses entering export markets.

How to Apply for an Advance License

The application process involves:

• Filing an online application via the DGFT portal.

• Submitting details of raw materials, export products, and Bill of Materials (BOM).

• Providing IEC (Importer Exporter Code), GST registrations, and supporting documents.

• Fulfilling norms under Standard Input Output Norms (SION) or Self-Declared norms.

Once the DGFT approves the application, the license holder can import inputs duty-free. The exporter must then fulfill the export obligation typically within 18 months.

Compliance & Monitoring

After fulfilling export obligations, the exporter must submit evidence to the DGFT for closure of the license. Non-compliance may lead to penalties or payment of exempted duties with interest.

Why AEO T2 Registration Matters

While the Advance License eases import costs, exporters also benefit by obtaining AEO T2 Registration (Authorized Economic Operator Tier 2). AEO T2 status provides additional advantages for frequent importers/exporters:

• Faster Customs clearances with reduced examination.

• Deferred duty payments.

• Fewer physical inspections and audits.

• Priority treatment at Customs for faster cargo movement.

Both Advance License holders and regular exporters are encouraged to secure AEO T2 Registration to streamline their logistics and compliance.

Conclusion

The Advance License scheme, when combined with AEO T2 Registration, offers a powerful way to reduce costs, improve operational efficiency, and stay globally competitive. Understanding the eligibility, application process, and compliance requirements ensures businesses fully leverage these government incentives for export growth.