How to Start Export Business: Basic Requirements & Benefits
With the increasing use of technology and liberalisation policy adopted worldwide, now a day whole world is like a business market place subject to that your product/ service meets the customer need/ requirements. There are many examples of this global market place like Alibaba E- Commerce platform is supplying China products globally using the technology.
Indian entrepreneurs like Mukesh Ambani, Adani etc are also setting up their ventures outside India and the Government of India is also focusing on promoting export outside India, so that fiscal deficit can be controlled. In this article, we will discuss about, the basic requirement that must be fulfilled before starting your export business. And how to take benefits of Government schemes to the maximum extent.
How to Start Export Business
In today’s time “Customer is King”. Before starting export business, you must have a product/ service that can be sold to customer. And you should do R&D of the customer behaviour and legal compliances, if any, required in the country where you want to sold your product. You have to find your target audience before starting your export business.
Basic Requirements that are required to start your business
You have to decide the constitution of your business enterprises Like Proprietorship Concern, Partnership Firm, Private Limited company etc after taking into account all tax benefits
Get GST Registration
Apply for Import Export Code
Open Bank Account
Get brief Idea of legal compliances to be done in Foreign Country
Other product specific licence required (if any)
Marketing strategies required to reach your targeted audience
Arrangement of Initial corpus to start export business
In India Export/Import business is regulated by The Foreign Trade (Development and Regulation) Act 1992 and procedure is explained on regular basis by Foreign Trade Policy. As on date FTP effective from 1st April 2015 is in force.
The Government of India is focusing to increase the Export Turnover. To make seamless flow of all export process and to remove human interference, the government is focusing to make almost all export related documentation and formalities online. The DGFT website is playing a very vital role in it. The export products are mainly categorised into Free Exports, regulated Exports and Prohibited Export. Before starting our export business be must know under which category our products falls and further proceedings will be done accordingly.
In export business, products are classified according to ITC (HS) Code. And export benefits in way of duty draw back depends on these ITC (HS) Code. If we want to claim export benefits then we must go through these HS Code and benefits linked with them. Before starting export business, we must obtain Import Export Code which is now required to be renewed (Re-validation) on annual basis.
Mandatory Documents required for Exports of Goods from India are as follows:
Bill of lading/ Airway Bill
Commercial Invoice Cum Packing List
Shipping Bill/ Bill of Export
Note: If an exporter deals in prohibited goods or goods under restricted category or provide false information/ details then his Import export code may be cancelled and monetary penalty will be levied.
As explained above, the Government of India is focusing to increase export, for this reason many export benefits are provided which are as below:
1. MEIS – Merchandise Exports from India Scheme
2. SEIS — Service Exports from India Scheme
Duty Credit Scrips shall be granted as rewards under MEIS and SEIS. The Duty Credit Scrips and goods imported / domestically procured against them shall be freely transferable. The Duty Credit Scrips can be used for:
(i) Payment of Customs Duties for import of inputs or goods
(ii) Payment of excise duties on domestic procurement of inputs or goods, including capital goods as per DoR notification.
Along with above benefits, many other benefits are provided to exporters under GST Law also. For example, Exporters can export their products without payment of IGST and also claim refund of GST input tax credit.
As per Section 8 of The Foreign Trade (Development and Regulation) Act 1992 in following cases the Import Export Code may be suspended and cancelled
(a) any person has contravened any law relating to Central excise or customs or foreign exchange or has committed any other economic offence under any other law for the time being in force as may be specified by the Central Government by notification in the Official Gazette, or
(b) the Director General has reason to believe that any person has made an export or import in a manner gravely prejudicial to the trade relations of India with any foreign country or to the interests of other persons engaged in imports or exports or has brought disrepute to the credit or the goods of the country,
the Director General may call for the record or any other information from that person and may, after giving to that person a notice in writing informing him of the grounds on which it is proposed to suspend or cancel the Importer-exporter Code Number and giving him a reasonable opportunity of making a representation in writing within such reasonable time as may be specified in the notice and, if that person so desires, of being heard, suspend for a period, as may be specified in the order, or cancel the Importer-exporter Code Number granted to that person.
(2) Where any Importer-exporter Code Number granted to a person has been suspended or cancelled under sub-section (1), that person shall not be entitled to import or export any goods except under a special licence, granted, in such manner and subject to such conditions as may be prescribed, by the Director General to that person.
Please feel free to get in touch if you have any doubts or need clarifications.
We wish you luck for your business. Happy Reading!
AYTA Business Consultants | firstname.lastname@example.org | +91 70246 21120
Author: CA Shiv Kumar Sharma