Advance Authorisation 2026: Shorter Export Obligation Period — What Changed and How to Adapt

Advance Authorisation (AA) is one of India’s most powerful duty exemption schemes, allowing manufacturers to import inputs duty-free for use in export production. For years, exporters had 18 months from the date of licence issuance to fulfil their export obligation. That window has now been cut to 12 months — and the change applies to licences issued on or after 5 May 2026.

This is not a small operational adjustment. For exporters with long production cycles, complex supply chains, or markets that require extended lead times, 12 months is a materially tighter window. In this post, we explain exactly what changed, who is affected, and the practical steps you should take.

Quick Recap: How Advance Authorisation Works

Under the Foreign Trade Policy (FTP) 2023, an Advance Authorisation licence allows an eligible manufacturer-exporter or merchant-exporter tied to a supporting manufacturer to import inputs (raw materials, components, packing materials) without paying Basic Customs Duty, Additional Customs Duty, or Integrated GST.

The scheme operates on a simple principle: the exporter commits to export a specified quantity of finished goods within the validity period. Once the obligation is fulfilled and the Regional DGFT Authority confirms compliance, the importer-exporter is released from any duty liability on the imports made under the licence. If the obligation is not fulfilled, the full duty — with interest — becomes payable.

The scheme has Standard Input-Output Norms (SION) that specify how much of each input is needed per unit of export product. Where no SION exists, exporters apply for Ad Hoc Norms.

What Notification 12/2026 Changed

Licences issued before 5 May 2026 continue under the 18-month regime. If you are mid-cycle on an existing AA licence, your obligation period has not changed.

Who Is Most Affected by the 12-Month Window?

The reduction is most consequential for exporters in the following situations:

Long production cycles: Capital goods, defence components, ship parts, and heavy engineering products that require 6–9 months of manufacturing time leave very little margin under a 12-month window once import, production, and export logistics are factored in.

Export market seasonality: Agricultural exporters whose export markets peak during specific seasons (for example, basmati exporters targeting the Gulf during Eid or Diwali) may find 12 months insufficient if the licence is issued outside the peak window.

Supply chain dependencies: Exporters who import inputs from suppliers with long lead times (for example, specialised chemicals or alloys from Europe or Japan) may find the combined import-to-export cycle tight under 12 months.

Practical Strategies to Manage the Tighter Timeline

1. Apply closer to your production start date.Under the old 18-month window, some exporters applied for AA licences well in advance of actual production needs. With 12 months, the licence start date is critical — apply only when your production and export pipeline is ready to absorb the inputs.
2. Front-load your imports.Since the obligation period starts from the licence issue date (not the import date), plan to import your duty-free inputs in the first 2–3 months to maximise production and export time.
3. Apply for extension proactively.The extension window (up to 6 months in two tranches) remains available. However, extensions require a fee and a documented reason. Apply for the first 3-month extension before the 12-month deadline, not after — DGFT does not accept retroactive extension applications.
4. Consider splitting large orders across multiple licences.For large contracts, multiple smaller AA licences staggered across different application dates can give you a rolling export obligation window rather than one compressed 12-month deadline.

Existing Licences: What You Should Do Now

If you hold active AA licences issued before 5 May 2026, your 18-month window is protected. However, this is an excellent time to conduct a licence health check:

• Review the remaining export obligation on each active licence
• Calculate whether current production and export pace will meet the obligation in time
• Identify licences where an extension application may be needed
• Ensure EODC (Export Obligation Discharge Certificate) applications are filed promptly for completed licences — delays here tie up future licence eligibility

DGFT is also migrating Advance Authorisation to a new digital platform in the coming months. Ensure your DGFT portal login is active and your IEC profile is updated before the migration to avoid processing delays.

EPCG Scheme: A Parallel Update

DGFT Notification 12/2026 also reduced the export obligation period under the EPCG (Export Promotion Capital Goods) scheme, which allows duty-free import of capital goods. EPCG obligations, previously spread over 6 years, have been adjusted for licences issued after May 2026. If you operate under both AA and EPCG, review both simultaneously to optimise your compliance calendar.

About Afleo Group: Afleo is a Mumbai-based DGFT and Customs Consultancy firm with deep expertise in Advance Authorisation, EPCG, and Foreign Trade Policy compliance. Our consultants are updated on every DGFT notification to ensure your licences are always in order.