HOW TO START IMPORT AND EXPORT BUSINESS? WHAT ARE THE LEGAL REQUIREMENTS?

Over the last few years, the import and export business has seen a lot of growth. The boom is due to the increasing number of successful entrepreneurs which in turn leads to increasing startup ventures in this area.

HOW TO START IMPORT AND EXPORT BUSINESS? WHAT ARE THE LEGAL REQUIREMENTS?

Over the last few years, the import and export business has seen a lot of growth. The boom is due to the increasing number of successful entrepreneurs which in turn leads to increasing startup ventures in this area. But building a truly profitable business requires knowledge,  dedication and numerous contacts to help and recommend work. Fulfilling a import/export business basically requires an air of diplomacy along with the ability to sell.

Not only does it demand a low level of financial investment to start, but it offers prestige of working with clients all over the world. Although it seems obvious that all manufacturers would want a world-wide market, it is not easy. There are hundreds of manufacturers aiming for a foreign distribution. This is where the abilities and skills come in. A manufacturer needs to make solid international relations with established companies. Once the business makes progress, all of this becomes easy to handle. However, there are certain legalities and mandatory procedures to be followed before starting an import/export venture.

 

  • REGISTRATION: First and foremost, the businessman has to set up his company. He must open a sole proprietorship by taking a Service Tax registration or a VAT registration. Until he/she forms international relations and contacts a logo for the company is used to represent his business. Hence a business logo should be designed along with the registration to make it look professional.

 

  • PAN CARD APPLICATION: Once the registration has been done, the manufacturer has to obtain a PAN Card issued by the Income Tax Department.

 

  • OPENING A CURRENT A/C: Once the registration is done  and the  PAN Card is received, a current account has to  be opened with any commercial  bank exclusively for the business. It helps businesses to  carry out smooth and large flow of transactions. The current account measures the international transfers and helps in making direct payments to the creditors via demand drafts, pay orders and  cheques.

 

  • GETTING AN IMPORT EXPORT CODE (IEC): The 10-digit identification number issued by the DGFT (Director General of Foreign Trade), Department of Commerce, Government of India is mandatory to be obtained by companies and businesses that intend to deal with imports and exports within the Indian territory. There are certain conditions that need to be fulfilled before obtaining an IEC, for example, a PAN is mandatory for allotment of a code along with the other required documents. The IEC has a validity of a lifetime and is basically needed for clearing customs.

 

  • OBTAINING THE REGISTRATION CUM MEMBERSHIP CERTIFICATE (RCMC): Once the IEC is obtained, a Registration cum Membership Certificate has to be applied for before the concerned Export Promotion Councils (EPC) or  the Federation of Indian Exporters Organizations (FIEO) to get authorisation to import, export, or for any other benefits. The manufacturers can apply under two categories: Merchant exporter and Manufacturing exporter. There are 26 promotion councils in India. The entire process of obtaining an IEC and RCMC takes about ten to fifteen days and the certificate remains valid for a term of 5 years. However, companies or businesses that are exempted from the Import-Export Policy do not have to register themselves with the RCMC.

 

  • ENSURE LEGAL COMPLIANCE UNDER DIFFERENT TRADE LAWS: After the IEC and RCMC are obtained,  businesses may import/export  goods that are compliant with Customs Act, 1962; Foreign Trade (Development & Regulation) Act, 1992 and The Foreign Trade Policy, 2015-20. However, certain items that are declared or notified to be prohibited or restricted by the government require additional permission and license from the DGFT and the Federal Government. 

 

  • TRADE DOCUMENTS: Businesses are required to submit a set of documents before starting an import export business in India. These include commercial documents and regulatory documents required to be exchanged between buyers and sellers; and to deal with various regulatory authorities like the customs respectively. The Foreign Trade Policy,  2015-20 mandates the following commercial documents:
  1.     Bill of lading or airway bill;
  2.     Commercial invoice cum packing list;
  3.     Shipping bill, or Bill of exports, or Bill of Entry (imports)

 

Wheres,  the important regulatory documents include:

  1.       GST return forms (GSTR 1 and GSTR 2);
  2.       GST refund form;
  3.       Exchange Control Declaration;
  4.       Bank Realisation Certificate; and
  5.       Registration cum Membership Certificate (RCMC)

 

However, in a move that would improve ease of doing business in the country, the Commerce Ministry has allowed PAN numbers to be used as Importer Exporter Code (IEC) with the introduction of Goods and Services Tax (GST).  As of today, PAN has one to one correlation with IEC. With the implementation of the GST from July 1, 2017, GSTIN, i.e. a 15-digit alpha numeric code, would be used for purposes of - credit now of IGST on import of goods, and refund or rebate of IGST related to export of goods.

 Further, for the existing IEC holders, necessary changes in the system are being carried out by DGFT so that their PAN becomes their IEC. DGFT system will undertake this migration and the existing IEC holders are not required to undertake any additional exercise in this regard.

 

The import and export of goods or services is an integral part of a country’s economy, and a country cannot grow without interacting with other parts of the world. While coming up with an idea costs nothing, executing and materialising is what will create a lucrative business. Import and export of goods and services will always be an encouraging business, and will always help in opening up new avenues for you and for your country. 

- Ridhika Kapoor