Redemption of Advance Authorization under FTP

Oct 04,2025

Redemption of Advance Authorization under Foreign Trade Policy (FTP)

Advance Authorization Scheme, or the Advance License Scheme for short, is one of the keystone schemes of India's Foreign Trade Policy (FTP). The scheme, with the aim to render Indian exports more competitive in international trade, offers a facility to the exporter to import duty-free raw material and inputs needed for export production. By eliminating the cost of import duties, the cost of production can be reduced, price competitiveness assured, and India's dominance overseas strengthened.

While acquiring an advance authorization is the most important first step, redemption stage is as important as well. Redemption—in the form of issuance of the Export Obligation Discharge Certificate (EODC)—marks fulfillment of export commitments and full closure of the licence. Delayed redemption can attract penalties, interest, or claims for duties lost.

In this detailed handbook, we discuss the operation of the advance authorization scheme, the redemption process step by step, documents required, salient features under FTP and Handbook of Procedures (HBP), typical difficulties for exporters, and how expert advice from companies like SKMC Global can make compliance easier.

Understanding the Advance Authorization Scheme

The Advance Authorization Scheme is, specifically, aimed to make Indian exports inexpensive in overseas markets. Customs duty is exempted on importation of inputs and raw materials by exporters under the scheme on the condition that such inputs are utilized in the export production of goods.

Advance authorizations are issued under the Foreign Trade Policy 2023 for:

Physical exports – export of goods in overseas markets.
Intermediate inputs – supplying inputs to other exporters for processing.
Deemed exports – supplying goods to domestic units such as EOUs (Export Oriented Units), SEZs (Special Economic Zones), or for projects acquired through International Competitive Bidding.

Principal Benefits of the Advance Authorization Scheme

Duty Exemption: Inputs imported under the scheme do not attract Basic Customs Duty, IGST, antidumping duty, safeguard duty, and compensation cess.
Cost Flexibility: The exporter can procure inputs from any place across the globe without paying advance duty.
Liquidity and Working Capital Savings: Duty-free import saves cash outgo and increases working capital efficiency.

Basis of Issuance

Advance authorization is issued on the basis of inputs in terms of the resultant product on:

Standard Input Output Norms (SION) notified by DGFT.
Self-declaration under Paragraph 4.07 of HBP.
Applicant-specific norms laid down by the Norms Committee (Paragraph 4.06 of HBP).
Self-Ratification Scheme under Paragraph 4.07A of FTP.

Validity period for import and Revalidation of Authorization

The import licence is usually effective for 12 months from issue date, with a one revalidation facility of another 12 months, on application and approval; otherwise, no revalidation is allowed. In case of export commitments against such authorizations, the normal period stands at 18 months from issue date, extendable according to procedures and charges applicable.

Export Obligation under Advance Authorization

Export Obligation (EO) is one of the key provisions of the Advance Authorization Scheme. All the holders of advance licence need to fulfill the export obligation within a defined time period.

Main Features of Export Obligation:

Export Obligation Period (EOP): Generally, 18 months from the issue date of the licence, though extensions are permissible in defined cases.
Basis of Export Obligation: Exporters will ensure that the goods exported are manufactured on the basis of free-duty inputs imported.
Calculation of EO: EO is to be computed on the CIF value of imports, and it is to be calculated as percentage addition as defined under FTP/HBP.

Non-compliance can result in:

Redemption of foregone duties along with interest.
Fines for late or short shipment exports.
Ban on future advance authorization approval authorizations.

Redemption is thus not discretionary—it is compulsory statutorily under the FTP.

Redemption of Advance Authorization – Overview

Redemption is formal termination of an advance authorization licence after discharge of export obligation. It is a procedure of document filing with DGFT testifying compliance with EO conditions. Upon examination, DGFT issues Export Obligation Discharge Certificate (EODC), which is formal notification of closure of licence.

Redemption assures:

FTP and HBP provision compliance.
Legal closure of the licence.
Avoidance of penalty or legal complications.

Step-by-Step Process of Redemption

Redemption is a procedure which must be executed with a lot of caution and attention to detail. The below mentioned is a step by step procedure:

1. Preparation of documents

Exporters must collect all the documents that are necessary, which typically include:

Original Advance Authorization licence.
Import documents (Bills of Entry).
Shipping bills and e-BRCs (export realization evidence).
Appendix 4H form reflecting exports against the licence.
CA certificate in Appendix 4H format, confirming EO compliance.

2. Filing of Redemption Application

Redemption application is filed on the DGFT portal under the "Advance Authorization Redemption" option. The application must contain:

Licence details.
Mapped import/export data.
Supporting documents in PDF format.

3. DGFT Verification

Formal verification by DGFT involves:

Imports and exports value and quantity.
Correspondence between exported product and imported material (as per SION).
Bank Realization Certificates (BRCs) for determining foreign exchange inflow.

4. Issuance of EODC

After ascertaining all documents and information are in order, DGFT grants an Export Obligation Discharge Certificate (EODC). The license is considered officially redeemed.

5. Intimation to Customs

On grant of EODC, DGFT intimates Customs to cancel the bond that was executed on the date of imports, thus completing the entire process of redemption.

Challenges Frequent in Redemption

Even though redemption is a regular procedure, exporters encounter challenges:

1. Discrepancy in Shipping Bill Information: Inaccurate scheme code or licence number may delay processing.

2. Export Obligation Delay: EO may not be completed within the set timeframe.

3. Issues with BRC: Delay in receipts or difference in e-BRCs by banks.

4. Incorrect Application of Right Norms: Misapplication of SION norms or self-declaration can result in rejection.

5. Technical Snag on DGFT Portal: Technical problems may delay online application filing.

Precautions and proper documentation are required to avoid such issues.

How SKMC Global Can Assist Redemption

For exporters, professional guidance can come in handy to make the redemption process easier. SKMC Global handles end-to-end compliance under Advance Authorization Scheme or Advance License Scheme.

Our Services Include:

Eligibility Test: Compliance testing with export obligations and creating a clear redemption path.
Documentation Support: Preparing Appendix 4H, CA certificates, and collection of BOEs and shipping bills.
Online Filing: End-to-end submission of redemption applications seamlessly on the DGFT portal.
Liaison with DGFT & Customs: Coordination of deficiency letters, clarifications, and bond closure procedures.
Advisory Services: Advisory on EO extension, clubbing of licenses, and Advance Authorization clubbing provisions.

With access to professional expertise, exporters can avoid penalties, minimize delays, and focus on business growth.

Conclusion

Advance authorization redemption is a compliance necessity under India's Foreign Trade Policy. It is not a hollow procedural requirement but delivers:

Legal closure of licenses.
Penalty avoidance, interest, and recovery action.
Seamless reconciliation of import and export transactions.

Exporters must maintain meticulous records, track export obligations, and submit redemption applications within the prescribed time limits. Familiarity with the concerned FTP and HBP provisions is the master key for compliance without hassles.

To exporters who might find these processes too complicated or time-consuming, professional handling from firms such as SKMC Global can facilitate it. Our expertise ensures: