It is in this age of Globalisation, we see an outcry where every other person wants to develop their own business by reaching out to more people and grow magnificently. But very few of us are aware of the procedure that goes behind such a venture. Several procedures and laws in place and get different registration and license. Import Export Code license is one of such prerequisites when you’re thinking of importing or exporting from India. If you are trying to set up a business abroad. At this point, reading this specific article you will get a basic overview of Import Export Code registration and process.
Table of Contents:
What is the meaning of Import Export Code?
Import Export Code (referred to as IEC Code) is issued by the Director-General of Foreign Trade (DGFT). It is a unique 10 digit identification number. When someone is willing to start an Import or Export business in India, then the Import Export Code is needed to be obtained. Without this code, it is impossible to start any type of business being dealt with in Indian Territory. Department of Commerce sets all the rules and regulation through DGFT to acquire the IEC Code and all other requirements.
Some set of rules and regulation should be adhered to before applying for the Import Export Code. Only after fulfilling certain conditions, an Import Export Code can be issued from DGFT. Basically, IEC Code is the PAN number of the applicant DGFT registered PAN number of the applicant is in the DGFT database. After the confirmation of the DGFT, the applicant can use the PAN no as the Import Export Code.
When is the Import Export Code required?
- Custom authorities need it to clear shipments during imports.
- The bank needs it to transfer the money when imports are made.
- Similarly during export the shipments the Import Export Code is required.
- When exporter is supposed to receive money in foreign currency, Import Export Code is required to transfer the money to his account directly.
When is the Import Export Code not required?
- When any goods or products are imported or exported for personal use and not for reselling and commercial need, then the Import Export Code is not required.
- The Import Export Code is not required when the goods or products are imported or exported by the government of India or charitable institutions.
What is the validity of Import Export Code Registration?
Once the Import Export Code is issued, it becomes valid for a lifetime and there is no requirement of any renewal.
Documents Required for Import Export Code Registration
- Two-colour photographs of Promoters/Individuals/Company/Director
- Pan Card of each Shareholder and director
- Identity Proof (Voter ID/Driving License/Passport)
- Address Proof(Bank Statement/ Electricity, Mobile, Telephone Bill)
- Proof of Registered Office
- Latest Utility Bill as proof must be Latest
Gains from Import Business
- Cheaper Stuff: We can purchase cheaper products locally if possible. But when something is imported from the foreign market, it would be cheaper than what could be produced. When the foreign government subsidizes products for us, you get paid by that government to buy cheaper materials. Cheaper stuff helps us to make each foreign currency go further in terms of consumption.
- Increased Specialization: Importing products or services allows a country to stop producing that certain stuff and focus on other things they are good at producing. Some rare things are area specific. So without imports, we can avail those goods and services.
- Extend your profit margins: Companies from all across the world choose to import goods to extend the profit margin. High taxes, wages and material costs in certain countries make it more beneficial to import products from a country where fees, wages, and material costs are considerably lower. Particular products can cost 50% less to grow, manufacture or produce abroad.
- Better Quality: Sometimes you sell products that are not native or do not belong to your region. It is better to import goods from the source. Each country has particular strength regarding manufacturing or growing certain materials. It is wise to import the materials from an authentic place.
- Government-Assisted Trade: In order to minimize risks, the government provides added support and benefits to importers including reduced taxes and assistance with customs. In these cases, it is very advantageous for companies to develop relationships with foreign exporters.
Gains from Export Business
- Increasing sales: Exporting increases sales potential. Beyond the local market, you can earn great revenue from the market overseas. Increase in sales will result in profit growth.
- Extra Profits: Sometimes the demand of the international buyers is not fulfilled by their local market so they thrive upon foreign goods. Average orders from international customers are often larger than they are from domestic buyers. Some products are unique as they are only manufactured or grown in your country’s market. So, exporting products abroad surely generates more profit.
- Reduces risk and balances growth: It is risky being bound to the domestic market only. Exporting goods in a foreign market can reduce the risk of market fluctuation in the local market scenario that the company might face.
- Lower unit costs: What is more, since more products are being sold without increasing total costs, this has the effect of lowering your unit costs which represents a more productive operation overall. Lower unit costs make a product more competitive in the local as well as in foreign markets making the firm profit more from it.
- Minimizes Seasonal Fluctuation Effect: Some companies sell seasonal products. So, when the season ends they sell these products in other regions that have a suitable seasonal condition. It results in sustainable sales pattern which becomes stable and potent to reduce risk of low profit
Benefits of Import Export Code Registration
- International Market Reach: Import Export Code helps you to take your business to the international market. Not only that, it will increase your revenue as well as growth.
- Life Time Validity: Import Export Code Registration is permanent documentation that is valid for a lifetime. You don’t have to go through any procedure of updating, filing and renewal of the Import Export Code as would be not needed.
- No Annual Maintenance: once you obtain the Import Export Code, there will be any necessity of an annual maintenance fee. It does not require any maintenance fee in any financial year for filing or renewal of the code.
- Reduces the Risk of Illegal Transportation: Import Export Code helps you to get rid of any illegal transportation or fraudulent imports and exports. Import Export Code registration is a centralized registration that helps the officials to supervise and manage the transaction in a better manner which is undertaken as a part of cross border business.
- No Return Filing: You don’t need to file any return once you are done with registration for Import Export Code. After the allotment of the code, you don’t require to follow any process to ensure that the validity is sustained.
- Benefits of Schemes: Import Export Code offers great benefit for Import Export business. An Import Export Code registered business entity would be qualified to avail benefits or subsidies declared by the Customs, Export Promotion Council and other several authorities. After filing LUT under GST, the exporters are not required to pay taxes to make exports. If the exports are made by payment of taxes, the exporter can claim refunds of the paid tax amount.
- Export Incentive: The Government promotes the export of products and services because the foreign currency will come and eventually boost up the economy. The Government has launched multiple schemes and also given a refund of tax or incentive to the exporter in order to promote the export business.
- Online registration process: The process of obtaining Import Export Code is done online making it less time-consuming. Documents are uploaded online and registration is completed similarly.
How to surrender the Import Export Code?
Import Export Code can be surrendered at any point in time if the business is closed or there is no need to Import Export Code any further. You can submit the Import Export Code Closure application through the official website of the DGFT website. After receiving the application, the issuing authority cancels the Import Export Code. The authority can further intimate to custom and regional authority about the cancellation of the Import Export Code.
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