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August 19, 2020

Process for Business Registration as EXIM unit and Documents Required

by shivam jaiswal in Compliance Law

Process for Business Registration as EXIM unit and Documents Required

EXIM Procedure

1. EXIM OVERVIEW IN INDIA

Foreign trade in India is promoted and facilitated by the Directorate General of Foreign Trade (DGFT), under the Ministry of Commerce and Industry (MoCI). The DGFT issues the authorisation to exporters and monitors their corresponding obligations through a network of 38 regional offices. The DGFT also implements the Foreign Trade Policy of India.

Foreign Trade Policy (FTP) is the prime policy that lays down simple and transparent procedures which are easy to comply with and administer for efficient management of foreign trade in India. The Policy aims at enhancing the country’s trade for economic growth and employment generation. The Customs Tariff Act and the Central Excise Tariff Act are the other two important Acts which lay down how the duties of Customs and Excise shall be levied on trade, respectively.

India’s total exports (merchandise and services) increased by 9.06% year-on-year and reached $ 331 bn during 2018-19.

  1. Major items of export
  • Mineral fuels (14.08%)
  • Drug Formulations and Pharmaceuticals (4.37%)
  • Precious metals and stones (11.8%)

2. Major items of export

  • Mineral fuels (28%)
  • Precious metals and stones (16%)
  • Electrical machinery (10%)

2. EXIM Infrastructure

About 95% of India’s merchandise trade (by volume) is handled by its maritime transport. Jawaharlal Nehru Port Trust (JNPT) in Maharashtra is India’s largest port, handling 55% of container cargo across all major ports. Currently, the country has a presence of 290 inland container depots and freight stations for trade (includes those under implementation).

Port Network

To reduce the logistics cost for cargo and promote port-led industrial development, the Government of India launched the Sagarmala Programme under which 6 new major ports and 14 coastal economic zones have been identified for development. The Programme’s four main pillars are port-modernization, better port-connectivity, port-led industrialization and coastal community development. 

Road Network

With a targeted construction of 40 km of national highway every day during 2018-19, the world’s 2nd largest road network in India is aiming to reach the pinnacle soon. For efficient movement of goods and better district-level connectivity, the project of Bharatmala Pariyojana was launched by the Government of India in 2015. The Project aims to develop 50 new industrial corridors, add 34,800 km of road network in its Phase-I, including 10,000 km of the residual road network under NHDP and connect 550 districts through four-lane national highways

Rail Network

Trade through railways in India is also prominent, with the Indian Railways transporting over 1.2 bn tons of freight in 2017-18. There are 6 high-capacity, high-speed freight corridors coming up in the country to support the Indian Railways to manage 40% modal freight share of the economy.

3. Procedure to set up EXIM Unit

For an individual/ business unit to avail incentives under the Foreign Trade Policy, it must first register itself as an EXIM unit. Following are the broad steps to register as an EXIM unit:

Incorporation of company

Set up a sole proprietary concern/ partnership firm/ company.

Open current account

Open a current account with the bank authorized in foreign exchange.

Import Export Code/ PAN

Obtain a Permanent Account Number (PAN) from the Income Tax Department followed by your Importer Exporter Code (IEC)  from Directorate General of Foreign Trade. 

Registration cum membership certificate

To avail concessions, one must obtain Registration cum Membership Certificate (RCMC) from Export Promotion Council (EPC)/ Federation of Indian Export Organization (FIEO)/ Commodity Boards.

Get risk coverage policy

Get your risks covered from Export Credit Guarantee Corporation (ECGC) through an appropriate insurance policy.

Mandatory documents for export and import in India

As per the Foreign Trade Policy 2015-20 issued by the Ministry of Commerce in December 2017, following are the mandatory documents needed for an EXIM unit to export or import from India:

EXPORTS

  • Bill of Lading/ Airway Bill/ Lorry Receipt/ Railway Receipt/ Postal Receipt
  • Commercial Invoice cum Packing List
  • Shipping Bill/ Bill of Export/ Postal Bill of Export

IMPORTS

  • Bill of Lading/ Airway Bill/ Lorry Receipt/ Railway Receipt/ Postal Receipt in form CN-22 or CN-23
  • Commercial Invoice cum Packing List
  • Bill of Entry

Note: For export or import of specific goods or category of goods, which are subject to any restriction/policy condition or require NOC/ product-specific compliances under any statute, the regulatory authority concerned may notify additional documents for purposes of export or import.

Buyers and Sellers have set responsibilities for the delivery of goods under the sales contract, called Incoterms.

For more details, the FTP 2015-20 document can be accessed here.

4. EXPORT PROMOTION INCENTIVES

Duty Exemption Schemes:

  • Advance Authorisation (AA): Duty-free import of inputs that are exempted from Basic Customs Duty, however, IGST is payable. Minimum value addition required to be achieved under the Scheme is 15%.
  • Duty-Free Import Authorisation (DFIA): Importer is exempted only from payment of Basic Customs Duty. Minimum value addition required to be achieved under the Scheme is 20%.
  • Duty Drawback (DBK) Scheme: Enables post export replenishment/ remission of duty on inputs used in the export product

Capital Goods & Machinery

Allows duty-free import of machinery & equipment for export production & services

Export Promotion Capital Goods Scheme (EPCG):

Importers have to pay IGST and take input tax credit as applicable under the GST rules. The capital goods imported can also be used for domestic production.

Importer under the Scheme has an Export Obligation (EO) equivalent to 6 times of duties, cess and taxes saved on capital goods, to be fulfilled in 6 years from the date of issue.

Finished Goods

Duty Credit Scrips are provided against exports that can be used to pay duties

Merchandise Export-Import Scheme (MEIS)/ Service Export-Import Scheme (SEIS):

Duty Credit Scrips are provided against exports that can be used to pay Customs or Excise Duties. However, the scrips cannot be used to pay for any type of GST. 

International Markets

TED (Terminal Excise Duty) exemptions/ refund for DTA (Domestic Tariff Area)

Duty-free import of goods/ procurement by SEZ:

  • Only Basic Customs Duty is paid for the development, operation and maintenance of SEZ 
  • Authorised operations shall be exempted from payment of IGST
  • A portion of taxes paid will be neutralized by Input Tax Credit

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