Due to the increased reliance on India for export and manufacturing, India is in the process of streamlining and liberalizing import-export policies to reduce compliance burdens for persons engaged in trade. Compliances have now been simplified and digitized to reduce burden for international traders.
India has grown to be a highly regarded destination for international trade in recent years, and the pandemic has only caused greater interest in India in this aspect. According to figures released by the Indian government, exports from India in 2020-21 was valued at nearly USD 221 billion, with another USD 204 billion in imports. Estimated continued growth is nearly 6%, specifically with the renewed focus on India for manufacturing and export of vaccinations, medicines, and medical devices in the coming years.
Due to this increased focus, India is also in the process of streamlining and liberalizing import-export policies to reduce compliance burdens for persons engaged in trade. The new Foreign Trade Policy 2021-26, will came into effect in April 2021 and is expected to help guide India towards a USD 5 trillion economy. In this article, we take a look at the compliance requirements for international traders when exporting and importing through India, and the new rules being introduced.
The Director General of Foreign Trade (DGFT) under the Ministry of Commerce is the apex body regulating imports and exports and ensuring that trading is in compliance with the Foreign Trade Policy (FTP), Foreign Exchange Management Act, 1999 (FEMA). The FTP of 2015-2020 is still in effect, as it had been extended till 31st March 2021, and a new FTP will come into force in April of 2021.
The FTP of 2015-2020 took various steps to streamline import-export compliance requirements by digitizing various compliances and creating a better structure for redressal of complaints and disputes.
Exports and imports to and from India are free unless the products or services are prohibited, restricted, or differently classified under the Indian Trade Classification (Harmonized System) of Exports and Imports. [ITC (HS)]
The ITC (HS) provides a classification code for such goods according to their groups or sub groups. The classification by ITC (HS) is aligned at the 6 digit level with the International Harmonized System of Goods Nomenclature maintained by the World Trade Organization. The schedules of the ITC (HS) also lays down the import and export policies of India.
For importing and exporting to and from India, traders will be required to obtain the Importer Exporter Code (IEC), prior to starting operations. The IEC is also issued based on the Permanent Account Number (PAN), and so all traders including foreign entities will have to obtain a PAN first.
As stated earlier, traders are free to import goods to India unless they are specifically restricted or prohibited under the ITC (HS) classification. The main compliance requirements/ steps for import of goods are as follows:
Once an export order has been received and it is examined in terms of the items, specifications, conditions of payment, conditions of delivery, etc. then the exporter may enter into a formal contract with the buyer placed overseas. Once it is fully confirmed, the following are the main steps that have to be carried out:-
A new platform will be launched soon for IEC related services for traders. While the process of filing the application for IEC is electronic, this platform will subsume all further services issuance of IEC, modification, amendment process, etc. Advance authorization, Export Promotion Capital Goods, and other schemes related to the FTP can now be availed through this platform.
The Bombay High Court also recently held in the case of Siddharth Mandavia v. Union of India, that the indirect tax department cannot suspend or cancel the IEC of any person. Only the DGFT is empowered to cancel or revoke an IEC. The Court had ordered that the IEC be unblocked along with the attached bank accounts.
Since 2020, the use of harmonized Unit Quantity Codes (UQC) for bills of entry or bills of shipping has been mandated by the DGFT and the Indian Customs offices. New guidelines are to be issued for use of UQC through the EDI system.
A new track and trace system is being introduced for export of pharmaceuticals and drug consignments. The system will now be implemented from 1st April 2021.Copyright 2023 – Helpline Law