Q: Intermediate advance license and Advance license
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In the context of India’s foreign trade policy, the Intermediate Advance License and the Advance License are important tools designed to promote exports by allowing importers to bring in raw materials and components without having to pay customs duties. Both licenses are part of the government’s efforts to enhance competitiveness and support the export sector. Below is a detailed exploration of these two types of licenses, highlighting their definitions, features, eligibility criteria, and benefits.
Advance License
Definition: The Advance License scheme allows exporters to import inputs (raw materials, components, or intermediates) required for the manufacture of export products without paying customs duties. This scheme is primarily aimed at encouraging exports by reducing the cost of production.
Key Features:
- Duty Exemption: Importers under the Advance License scheme can import goods without paying customs duties. However, they must export the finished products made from these imported materials.
- Value Addition Requirement: Exporters are required to achieve a certain percentage of value addition, which varies based on the product. This ensures that the imported materials contribute to the creation of exportable products.
- Validity: The license is typically valid for a specific period, usually ranging from 12 to 18 months, during which the exporter must complete the export obligation.
- General and Specific Licenses: The scheme includes both general licenses (for a wide range of products) and specific licenses (for certain products).
- Input-Output Norms: The license is issued based on pre-defined input-output norms that specify the quantity of inputs needed to produce a certain quantity of output.
Intermediate Advance License
Definition: The Intermediate Advance License is a specific type of Advance License that allows manufacturers to import intermediate goods, which are products used in the manufacturing process but are not the final goods themselves. This license is typically more focused on manufacturers who produce goods for export.
Key Features:
- Intermediate Products: The license specifically covers the import of intermediate goods, which are used in the production of other goods that will be exported.
- Duty Exemption: Similar to the Advance License, the Intermediate Advance License allows for the duty-free import of these intermediate goods, provided that the final products are exported.
- Specific to Manufacturing Units: This license is often tailored for manufacturing units that need to import components or semi-finished goods that contribute to the final product.
- Higher Value Addition: The requirement for value addition is typically higher for Intermediate Advance Licenses compared to standard Advance Licenses, reflecting the focus on manufacturing processes.
- Validity and Compliance: Like the Advance License, the Intermediate Advance License also has a validity period and requires compliance with export obligations within the stipulated time frame.
Eligibility Criteria
Advance License:
- Exporters must be registered under the Directorate General of Foreign Trade (DGFT).
- The exporter should have a track record of exports, though new exporters may also apply with certain conditions.
- Compliance with the input-output norms specified for the products.
Intermediate Advance License:
- Must be applicable to manufacturers exporting goods made from intermediate products.
- Similar registration and compliance requirements as the Advance License.
Benefits
- Cost Reduction: Both licenses significantly reduce the cost of production for exporters by allowing them to import raw materials and intermediates duty-free.
- Increased Competitiveness: By lowering production costs, these licenses enable Indian exporters to be more competitive in international markets.
- Encouragement of Exports: The schemes are designed to encourage export-oriented units to enhance their production capabilities and increase export volumes.
- Flexibility in Sourcing: Exporters can source materials from international suppliers without the burden of customs duties, allowing them to maintain quality and negotiate better terms.
- Job Creation: As exporters expand their operations due to lower costs, there is potential for job creation in the manufacturing and export sectors.
Conclusion
The Advance License and Intermediate Advance License are crucial components of India’s export promotion strategy. While both schemes aim to boost exports by allowing duty-free imports of inputs, the Intermediate Advance License specifically targets manufacturers using intermediate goods in their production processes. Understanding the features, eligibility criteria, and benefits of these licenses is essential for exporters looking to maximize their potential in international markets. By leveraging these schemes, businesses can reduce production costs, enhance competitiveness, and contribute to India’s economic growth through increased exports.