An advance licence is granted for the import of inputs without payment of basic customs duty. Such licences shall be issued in accordance with the policy and procedure in force on the date of issue of the licence and shall be subject to the fulfillment of a time-bound export obligation, and value addition as may be specified. Advance licences may be either value based or quantity based.
As per the latest amendments to the EXIM Policy, the facility of Back to Back Inland Letter of Credit has been introduced, to enable an Advance Licence holder to source his inputs from domestic suppliers.
Value Based Advance Licence (VABAL)
Under a value based advance licence, any of the inputs specified in the licence may be imported within the total CIF value indicated for those inputs, except inputs specified as sensitive items.
Under a value based advance licence, both the quantity and the FOB value of the exports to be achieved shall be specified. It shall be obligatory on the part of the licence holder to achieve both the quantity and FOB value of the exports specified in the licence.
Amendments to the Advance Licence Scheme
The Advance Licence Scheme has been expanded and liberalized with the amendments made to the EXIM Policy, announced on 31st March 1995.
On the 1 March 1995, the Engineering Products Export (Replenishment of Iron and Steel Intermediates) Scheme was announced as an alternative to the International Price Reimbursement Scheme, which was withdrawn in April 1994. Under the new scheme, primary steel producers would be able to import intermediates like coal and fuel, using advance licences, and then provide steel to engineering exporters at international prices.