In the year 2005, the commerce minister announced that ‘different categories of advance licences, i.e., advance licence for physical exports, advance licence for intermediate supplies and advance licences for deemed exports have been merged into a single category for procedural facilitation and easier monitoring’. Five years later, confusion still prevails regarding whether this announcement has been actually implemented or not.
Authorities issuing advance licence (now renamed as advance authorisation) are emphatic that different categories have been abolished and that the Foreign Trade Policy (FTP) makes no distinction between different categories of advance authorisations. The FTP also, by and large, makes mention of only ‘advance authorisation’ and ‘annual advance authorisation’.
But, there are exceptions. Para 8.4.1 of the FTP says that in respect of supplies made against advance authorisation in terms of paragraph 8.2(a), a supplier shall be entitled to ‘advance authorisation for intermediate supplies’. Para 4.13 of the Handbook of Procedures (HB-1) makes repeated references to ‘advance authorisation for intermediate supplies’. Para 4.20.2 of HB-1 says that accountability of imports and exports shall be restricted in relation to ‘individual categories of advance authorisations’ including advance authorisation for annual requirements. Such references to advance authorisation for intermediate supplies or to individual categories of advance authorisations create doubts.
The major problem is that the finance ministry has issued separate Customs exemption notifications (number 96/2009 dated September 11, 2009 and 112/2009 dated September 29, 2009) to cover advance authorisation for physical exports and advance authorisation for deemed exports. If different categories of advance authorisation are abolished, why separate notifications are there for physical and deemed exports? Moreover, the notification number 96/2009 for physical exports makes an exception by allowing an ‘advance intermediate authorisation’ holder to discharge export obligation by supplying the resultant products to the advance authorisation holder.
The notification number 112/2009 grants exemption to goods imported under ‘advance authorisation for deemed export’. It allows supplies to all the 10 categories of deemed exports to fulfil the export obligation. This notification covers ‘supply of goods to advance authorisation holder’ also. Thus, ‘supply to advance authorisation holder’ is covered under notification number 96/2009 as well as 112/2009.
Interestingly, the finance ministry has issued only one notification number 99/2009 dated September 11, 2009 for annual advance authorisation and it deals with physical exports. By way of exception, it mentions that an ‘advance Intermediate authorisation holder shall discharge export obligation by supplying the resultant products to exporter in terms of paragraph 4.1.3 (ii) of the Foreign Trade Policy’. But, the other categories of deemed exports find no mention in this notification. The doubt here is whether the annual advance authorisation holder can discharge obligation by effecting supplies in all categories of deemed exports.
Abolition of various categories of advance authorisations should mean that the authorisation holder should have the option to fulfil export obligation by either effecting physical exports or deemed exports. This seems to be the intention of FTP, but issue of separate exemption notifications (96/2009 and 112/2009) by the finance ministry creates reservations. If duty exemption is availed through any notification, the conditions of that notification have to be fulfilled, losing any flexibility. Moreover, two separate notifications for advance authorisation but a single notification for annual advance authorisation compounds the confusion.
The Director General of Foreign Trade should re-look at the relevant provisions and ensure intended flexibility to exporters.
Email: tncr@sify.com
