Advance License for Garment Exporters: Import Fabric Duty-Free to Boost Competitiveness

Indian garment exporters face tough competition in the global market. Raw materials, especially high-quality fabric, can be expensive due to high customs duties.

The Advance License (or Advance Authorisation) helps solve this problem by allowing exporters to import fabric and other inputs without paying duty. This reduces cost, improves margins, and helps exporters price their products more competitively.

The Advance License is an export promotion scheme. Introduced by the Government of India under the Foreign Trade Policy (FTP), its main goal is to help Indian exporters compete better internationally.

The license allows exporters to import inputs required for manufacturing export goods at 0% customs duty. For a garment exporter, the most important input is often the fabric, along with items like interlining, zippers, buttons, and other accessories that are physically used in making the final clothing item.

With this scheme, Indian garments become more price-competitive against goods from countries with lower or no duties on raw material imports. 

The Advance License offers several cost-saving and competitive advantages that directly support manufacturers and merchant exporters in the apparel sector, such as:

• Zero duty on fabric imports: No Basic Customs Duty (BCD), IGST (subject to conditions), Anti-Dumping Duty, or Safeguard Duty.
• Use high-quality speciality fabric: Brands abroad often demand specific fabrics. Advance License helps meet their standards without increasing cost.
• Lower product cost means higher competitiveness: You can offer better pricing to buyers in the US, EU, and the Middle East.
• Higher profit margins: Duty savings directly increase your bottom line.

The Advance License scheme covers both types of exporters:

• Manufacturer Exporter: A firm that manufactures goods and exports them.
• Merchant Exporter: A firm that buys goods from a supporting manufacturer and exports them. In this case, the merchant exporter must be linked with a supporting manufacturer.

The authorisation is issued for importing the required materials based on specific quantity norms. These norms determine how much input material (like fabric) is allowed duty-free for a certain quantity of export product (like a shirt or trousers).

For the most common export products, the DGFT has already set Standard Input Output Norms (SION). These norms specify the quantity of inputs required to produce one unit of the export product, including a normal allowance for manufacturing wastage. Garment exporters usually apply based on these SION.

To ensure that the scheme promotes manufacturing and value addition in India, the exporter must meet a minimum Value Addition (VA). Value Addition is the net foreign exchange earned through the export.

For most products under the Advance License, the minimum Value Addition required is 15%.

Here, FOB stands for Free on Board (Export Value), and CIF stands for Cost, Insurance, and Freight (Import Value).

You must export the finished goods within 18 months from the date of issue of the Advance License. Extension may be possible in certain cases.

Generally, if you fail to meet EO, DGFT may demand full duties with interest, penalties, and block your future licenses.

Many exporters worry about Quality Control Orders (QCOs).

Currently, most garment fabrics are NOT covered under mandatory BIS/QCO, and even if some are covered, the Advance License gives specific relaxations under export-linked imports.

This means that fabric required for export garments can generally be imported without QCO compliance under Advance Authorisation (subject to notification conditions).

It’s a great advantage for garment exporters.

This is where most exporters face penalties and delays. Common issues include:

• Importing the wrong fabric quality or specification: Mismatch between what is imported and what SION allows.
• Not maintaining consumption records: DGFT may ask for usage records during EODC.
• Incorrect HS codes: Wrong classification can lead to duty recovery.
• Missing documentation during closure: Without the right papers, EODC (closure) gets delayed.
• Not applying for an amendment before changes: If fabric width, GSM, composition, or supplier changes occur, an amendment may be required.
• Delay in fulfilling export obligation: This leads to interest and penalty demand.

Exporters need to submit different sets of documents at two stages:

• When applying for the Advance License, and
• When closing the license (EODC process) after completing exports.

Keep these documents handy when applying for the Advance License from DGFT:

• Importer-Exporter Code (IEC)
• RCMC (from AEPC or relevant EPC)
• Technical specification sheet of export product
• Bill of materials (inputs to be imported)
• Applicable SION details or request for Ad-hoc norms
• Product description with HS codes
• Past export performance (if applicable)
• ANF-4A application form (online submission)
• Factory address proof (in case of Manufacturer Exporter)
• Supporting manufacturer details (for Merchant Exporter)

These documents are needed to prove that the export obligation is completed and to obtain the EODC (Export Obligation Discharge Certificate) from DGFT:

• Copy of the Advance License
• Bills of Entry for all duty-free imports
• Shipping Bills (FOB value details)
• Bank Realisation Certificates (BRC/FIRC)
• Consumption sheet showing actual use of imported inputs
• Chartered Accountant or Chartered Engineer certificate
• GST returns (if required for verification)
• Export invoices and packing lists
• Any amendment approvals issued by the DGFT
• Export Obligation statement (EO fulfilled vs allowed)

Here’s a quick stepwise guide to help you understand the process for applying to obtain an Advance License.

• Identify your product and applicable SION.
• Calculate required inputs and quantities.
• Prepare documents and fill in the ANF-4A online on the official DGFT portal.
• Upload technical sheets, shipping bills (if needed), and product details.
• DGFT reviews the application and may seek clarification.
• A license is issued after approval.
• Import fabric and inputs duty-free.
• Manufacture and export finished garments.
• Submit documents to close the license and obtain EODC.

Advance License is the only scheme that gives zero-duty import on fabric.

Advance License is one of the most beneficial schemes for exporters and importers, if used strategically. It allows duty-free import of fabric and other inputs, reduces production cost, and helps exporters stay competitive in global markets.

However, the scheme has technical rules, documentation needs, and compliance requirements. A single mistake in SION, HS code, consumption, or timelines can lead to penalties and duty recovery.

With the right guidance and proper planning, garment exporters can fully utilise this scheme and increase their margins while delivering high-quality garments to international buyers.