In India, the Foreign Trade (Development and Regulation) Act of 1992 regulates imports and exports, which empowers the federal government to make provisions for the development and regulation of foreign trade. The current provisions relating to exports and imports in India are available under the Foreign Trade Policy, 2015-20.
Typically, the procedure for import and export activities involves:
- ensuring licensing and compliance before the shipping of goods
- arranging for transport and warehousing after the unloading of goods
- getting customs clearance and paying taxes before the release of goods
The steps involved in importing goods to India:
1.Obtain Import-Export Code (IEC):
This permanent account number is required for a variety of tasks, including clearing customs, sending shipments, and receiving or sending money in foreign currency. To obtain the IEC registration, importers must first file an online application with the regional joint Directorate General of Foreign Trade (DGFT) and wait about 10 to 15 days for approval. While the process may seem intimidating, the lifetime validity of an IEC number makes it a valuable long-term investment for any importer looking to do business in India.
2.Ensure the legal compliance under different trade laws:
The Indian government has detailed laws and regulations that govern the importation of goods into the country. As an importer, it is important to understand the different restrictions and requirements for bringing in compliant goods. Once an importer is allotted an Importer-Exporter Code (IEC), they can import goods that follow the guidelines set out by the Customs Act (1962), Foreign Trade (Development & Regulation) Act (1992), and the Foreign Trade Policy, 2015-20.
However, it is important to note that certain goods that fall under the category of restricted, canalized, or prohibited items require additional permissions and licenses from the Directorate General of Foreign
Trade (DGFT) and the federal government. Understanding these specifications and following the required procedures is crucial to successful importing.
3.Procure Import Licenses
Before an importer can bring a commercial product or service into the country, it’s crucial to determine whether or not a license is required. And the first step to figuring that out is by identifying the Indian Trading Clarification using the Harmonized System of Coding or ITC classification.
The ITC (HS) code is an essential tool for importers as it allows them to follow regulations for the category of goods they intend to import. A license may be either general or specific, with the former allowing import of goods from any country and the latter only from selected nations.
Accurate classification is crucial, as it helps importers navigate the rules and regulations involved in the importing process.
Import licenses are:
- used in import clearance
- renewable
- typically valid for 24 months for capital goods or 18 months for raw materials components, consumables, and spare parts
4.File Bill of Entry and other documents to complete customs clearing formalities:
Importers have a lot on their plate when it comes to importing goods into a country. After obtaining import licenses, they must ensure that they furnish an import declaration in the prescribed format, along with a Bill of Entry, and a permanent account number (PAN) based Business Identification Number (BIN), as per Section 46 of the Customs Act (1962).
The Bill of Entry is an essential document that provides information on the exact nature, precise quantity, and value of goods that have landed or entered inwards in the country. It’s fascinating how one document can provide so much information about the goods being imported.
However, if goods are cleared through the Electronic Data Interchange (EDI) system, no formal Bill of Entry is filed as it is generated in the computer system. Nonetheless, the importer must file a cargo declaration after fulfilling specific requirements for processing the entry for customs clearance. It’s quite a detailed process, but one that importers must follow diligently to ensure smooth and efficient importing of goods.
If the Bill of Entry is filed without using the EDI system, the importer is required to submit supporting documents that include:
- certificate of origin
- certificate of inspection
- bill of exchange
- commercial invoice cum packing list
5.Determine import duty for the clearance of goods:
India’s customs tariff act of 1975 specifies the basic customs duty that is levied on all imported goods. Additionally, there are other duties such as anti-dumping duty, safeguard duty, and social welfare surcharge that are imposed. However, the new GST system has resulted in an integrated goods and services tax (IGST) being levied on imported goods as well.
The rates for IGST vary depending on the classification of the imported goods. As per the IGST Act of 2017, schedules have been introduced that classify goods into various categories, each with a corresponding rate of tax. This system aims to streamline the tax collection process while ensuring that revenue is generated for the development of the country.
Import documents
It is required to submit a set of documents to carry out import activities in India. These include commercial invoice and regulatory documents that deal with various regulatory authorities such as the customs, excise, licensing authorities.
The Foreign Trade Policy, 2015-2020 mandates the following commercial documents for carrying out importing activities:
- Bill of lading or airway bill
- Commercial invoice cum packing list
- Bill of entry
Additional documents may be required as per the case such as:
- certificate of origin
- inspection certificate
- insurance certificate
- import licence
- letter of credit
- General Agreement on Tariff and Trade (GATT)/DGFT Declaration
- Registration Cum Membership Certificate (RCMC)
The RCMC helps exporters and importers avail benefit or concession under the Foreign Trade Policy 2015-20, which has been extended up to March 31, 2022 to provide a stable regime during the COVID-19 pandemic.
Disclaimer: This content is for informational purposes only and should not be taken as legal or professional advice. It does not constitute any form of advice or recommendation from Kainaaz Associates Cargo Movers Private Limited and is not intended to be relied upon by users in making (or refraining from making) any specific decisions. Appropriate independent advice should be obtained before making any such decision. No representations, warranties or guarantees whatsoever are made as to the accuracy, adequacy, reliability, completeness or suitability of the information presented herein. Kainaaz Associates Cargo Movers Private Limited shall not be liable for any direct, indirect, special or consequential damages including without limitation loss of profits arising out of any use or reliance upon this document.