Special Advance Authorization for Garments
Special Advance Authorization for Garments
Directorate General of Foreign Trade (DGFT) has introduced the Special Advance Authorization Scheme for the promotion of export of garments. This scheme allows duty-free import of input fabric, including interlining for shipping of articles of apparel and clothing accessories. The authorization is issued based on the Standard Input Output Norms or prior fixation of DGFT.
Advance Authorization for Garments
The Advance Authorization for Garments allows the duty-free imports of inputs (after making standard allowance for wastage) if they are physically incorporated in a product that is being exported. An export obligation is a condition for issuing Special Advance Authorization for Garments.
Under this Scheme, exporters shall be eligible for All Industry Rate of Duty Drawback for non-fabric inputs, as determined by Central Government for this Scheme.
Duty-free importable items under the Scheme
Duty-free import of fabric under the Special advance Authorization Scheme for export of garments is allowed for the shipping of items covered under Chapter 61 and Chapter 62 of ITC (HS) Classification of export and import. The detailed list of product is as follows:chap61
Eligibility for Advance Authorization
The Special Advance Authorization for Garments is available to manufacturer exporter directly or a merchant exporter tied with a supporting manufacturer. The Authorization is possible for the following:
- Physical exports
- Intermediate supply
- Supplies made to specified categories of deemed exports
Actual user condition for Special Advance Authorization
The Authorization and the fabric imported are subject to the exact user condition; this means that the real user alone may import such goods. The Authorization will not be transferable even after completion of export obligation. However, fabric imported may be transferred for job work as permitted by the Central Excise.
Condition for Special Advance Authorization
Special Advance Authorization for Garments issued based on the following situation:
Inputs allowed for Special Advance Authorization: The Authorization issues for the import of relevant fabrics, including inner lining only as input. No other information, packing materials, fuel oil, and catalyst is allowed for import under the Special Advance Authorization.
Standard Input-Output Norms (SION): The Director-General of Foreign Trade (DGFT), on the recommendation of the Norms Committee, issues conventional norms that define the amount of input required in the manufacture of a unit of the output product that will be exported.
Self-declaration: Sometimes, the SION is not available for a particular product. In such a case, an application may be made to the Regional Authority, who will issue the Advance Authorization upon review.
Annual Advance Authorization: If the fabric material is specified in SION, subject to certain conditions, the advance authorization is issued for the annual requirements. Exporters need to have a past export performance in at least two preceding financial years, to be entitled to such Authorization.
Note: It is not available on a self-declaration basis.
Value Addition (VA)
Exporters are eligible for all industry rates of duty drawback for non-fabric inputs as determined by the Central Government for the Special Advance Authorization for Garments Scheme. The value of any information used on which benefit drawback is claimed or intended to be claimed is equal to 22% of the Free On Board (FOB) value of export realized.
Minimum Value Addition
Under Special advance authorization, the minimum Value Addition to be achieved is 15%, except for physical exports for which payments are not received in freely convertible currency and other specified export products.
If the exporter desires to claim drawback determined and fixed by the Central excise authority (brand rate), he/she need to submit an application for the Authorization and make claim export under the claim for brand rate. In such cases, the value addition will be calculated as following and the minimum Value Addition to be achieved is 15%
The whole reason for allowing duty-free inputs is to boost exports. Export Obligation (EO), in the case of Special Advance Authorization for Garments, is the value of the commodity that needs to compulsorily be achieved within a prescribed period. The Export Obligation is usually mentioned in the Authorization issued. After achieving the EO, the entity has to provide evidence of the same. Not achieving the Export Obligation in the prescribed period could result in penalties.
The Validity of Special Advance Authorization
The Special Advance Authorization for Garments is valid for 12 months from the date of issue of such Authorization. In the case of deemed exports, the Authorization is linked to the contracted duration of project execution or 12 months from the date of issue of such Authorization, whichever is more.
However, the export obligation may be fulfilled within 18 months from the date of the issue of Authorization or as notified by the DGFT. Unless specified, the export proceeds should be realized in freely convertible currency.
Application for grant of Special Advance Authorization Scheme for export of Articles of apparels and clothing accessories can be filled online through the official website of Directorate General of Foreign Trade (DGFT). The application procedure is as follows:
From the home page of DGFT, select the online eCOM application option under the Service option; the link will redirect to the application page. The application procedure for filling the special advance authorization is similar to filling of application for the regular advance authorization. After furnishing the details upload the following documents:
Documents for Special Advance Authorization Scheme
- Bank Receipt, Electronic funds transfer or Credit Card details evidencing payment of application fee
- Statement of exports made in the preceding financial year duly certified by a Chartered Accountant or Company Secretary
- Self-certified copy of the manufacturing license of the applicant firm
- Invalidation Letters in case of supplies to an Advance Authorization holder
- In the case of Deemed Export: Project Authority Certificate
- Production and Consumption data of the manufacturer
After scrutinizing the details, the prescribed authority will issue Special advance authorization letter for the export of articles of apparel and clothing accessories.
Note: The usual advance authorization scheme, which is in operation, is still available for exporters. The exporter can choose any of the schemes of their choice.