Advance License enables the duty free import of inputs for manufacturing of export product. These inputs are physically included in the export. Besides all this, there are a few other materials such as fuel, oil, catalyst that are put to use to acquire the export product are also approved by the licensing authority.
The major advantages of obtaining the Advance License are as follows:
The exporter gets an exemption from paying any Customs duty.
The exporter is also free from paying any type of Customs duty such as education cess and many more.
The applicant is not liable to pay safeguard duty and anti-guard duty.
What is Export Obligation Period?
In the case of an Advance License, the export obligation period is regarded as 18 months from the date of authorization. In most cases, the time of export obligation begins from the date issued by the Directorate General of Foreign Trade (DGFT) and if it is not that then the date is specified on the Advance License.
How can you extend the period of Export Obligation?
If the exporter fails to complete the export obligation within a given period, then he/she can apply to extend the period of an export obligation of Advance License. In a majority of cases, the exporter is expected to fulfill the export obligation within a period of 18 months from the date granted by the licensing authority. The licensing authority of the Advance License is the Directorate General of Foreign Trade (DGFT).
And if an exporter is still struggling to fulfill the export obligation of the Advance License, then he/she can apply for another extension of six months again. It all comes down to the needs of the exporter and the ways by which these needs can be fulfilled. The applicant will only be presented with a second extension if he/she has completed at least 50% of the export obligation when it comes to quantity and value.
The applicant must visit the official site of DGFT and then refer to the section related to the Advance License. You will get a clear picture of which documents are required. At the last, the regional authority of DGFT will examine your file and if they feel that the file is complete in all aspects and it qualifies as per the terms and conditions of the licensing authority, then they will give a green signal to you. The file must fulfill provisions of the foreign trade policy.
How many times can a person extend the Export Obligation Period of Advance License?
The candidate can apply for the extension of the export obligation period two times. So basically, there are two extensions each one ranging for a period of up to 6 months. The extension in the export obligation period shall be granted for a period that is not more than half of the stipulated export obligation period.
The exporter will only be given the second extension if the applicant has been successful in fulfilling 50% of the export obligation and that in terms of both quantity as well as value. It is decided on a pro-data basis. When a candidate is applying for a second extension, then the person must submit a self-declaration to the regional authority.
Don’t expect the regional authority to elongate the export obligation period even a day beyond 12 months. The applicant must give in a good reason to the DGFT for not completing the export obligation in the given period of time, and then only the licensing authority will see to the case and come to a conclusion.
What is the application fee required for the extension of the Export Obligation Period?
Type of EOP extension
Composition fee details
1st EOP extension (6 months)
0.5% of the shortfall in export obligation
2nd EOP extension (6 months)
0.5% per month on unfulfilled FOB value of export obligation