Issue 20 August & September 2013

From Dezan Shira & Associates

Trading With India

Sourcing From & Selling To India

Import-Export Licensing Procedures
Using Singapore As An Offshore Vehicle
Establishing A Trading Company
Indias SEZs & Tax Incentives

2013 | INDIA BRIEFING - 1

Issue 20 August & September 2013

Introduction
Dear Friends and Clients,

Gunjan Sinha
Country Manager
Dezan Shira & Associates

Tarun Gulati
Senior Accounts Associate
New Delhi Office

Indian global trade has tripled from US$252 billion in 2006 to US$794 billion in 2012. This has been further
influenced by the increasing global awareness of Indias middle class population some 250 million people,
a similar size to that of Chinas. Growth in India has also been consistently strong as the trade figures suggest.
The United States bilateral trade with India has risen consistently in each of the past five years, as has that with
the European Union in fact the EU is Indias largest trade partner. Furthermore, an ongoing series of economic
and investment reforms in India are changing the business environment in positive directions as never before.
Indian consumers want to buy things domestic sales of high end products, such as Apples iPhones and iPads,
have risen by over 400 percent in the past year. Coupled with this phenomenon is the emergence of India
as a global manufacturing hub Indian wages are a third of those in China, and the country is inheriting the
age demographic dividend that has powered China since the early 1990s. Today, the average age of an Indian
worker is 23 and with a population of over a billion, India has a huge and inexpensive workforce. The country
offers not just a large domestic consumer market, but also a rich vein of product availability for global sourcing
businesses. For example, auto titan Ford has announced plans for a facility in Gujarat that will manufacture three
different vehicle types with 50 percent marked for domestic sales and 50 percent for export.
These dynamics drive India as a global trading hub, and they are the reason why we concentrate on this subject
in this issue of India Briefing. Within you will find tips for buying and selling in India from overseas, as well as
how to set up a trading company in India. India is poised to become a major global sourcing center, and we
hope this issue both educates and informs as how best to approach this growing market.

Ravikant Modi
Accounts Associate
Mumbai Office

With best regards;

Gunjan Sinha
Country Manager
Dezan Shira & Associates
India

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2 - INDIA BRIEFING | 2013

Trading With India

Contents

Indian trade has

MC
1
4
7
0

M3
6
9

M+
2
5
8
00

p.4
Sourcing From &
Selling To India

+/%

CE/C

grown exponentially
over the past few
years. Opportunities
have never been
greater, and starting
a trading business in
India has never been
easier.

p.6

Import and
Export Licensing
Procedures

p.8

p.11

Establishing a
Trading Company
in India

Indias Special
Economic Zones
& Tax Incentives

Related Material From Asia Briefing*

* Material featured here is clickable on
the interactive PDF version of the magazine. Get your copy at India Briefing.
www.asiabriefing.com/store

Could India Manufacture The iPad?

Ford to Make India a Global Manufacturing Hub
An Introduction to Investment Structures in India
Using Double Taxation Agreements In Your India Investment Strategy

Additional India Resources

For more business, legal, tax and operational
intelligence concerning foreign investment in
India.

Daily news updates and quarterly business

magazine. Annual subscription from US$59.96
includes free 158 page full-color India business
guide.

www.india-briefing.com/news

www.india-briefing.com

Issue 18 January 2013

Inside This Issue:

3
From Dezan Shira & Associates

7
9

Indias Taxes for

Foreign-invested
Entities

An Overview
of Indias Taxes
on Business

Current Most Popular Issue:

In this article, we give a brief

overview of Indias major taxes
and duties on business, as well
as double taxation avoidance
agreements.

Individual Income Tax

Rates and Deductions
Individual income tax (IIT )
payments are determined
by income source, residency,
amount, and other factors

Indias Tax Reforms

in 2013
The Indian Government has
tabled a measure of reforms
to be introduced to create a
more favorable environment
for foreign investment.

Scan this QR code with your

smartphone to visit:

www.india-briefing.com/news

I ndias Taxes for ForeignInvested Entities

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2013 | INDIA BRIEFING - 3

Sourcing From & Selling To India

By Dezan Shira & Associates, Delhi Office

s Indias total merchandise trade tripled from US$252

billion in 2006 to US$794 billion last year, the business
of import/export with Indian firms has become much
more popular. However, the rising monetary numbers
have brought with them an increasing number of

legal and administrative reforms and considerations for import/

export-related businesses.
To introduce this issue of India Briefing, we will highlight supplier due
diligence issues, import/export regulatory updates, the importance
of tax residency certificates when selling to Indian companies and
other relevant points to consider when setting up an offshore
trading company for the India market.

Supplier Due Diligence

When conducting DD, it is wise to create a checklist of necessary

Indias Regulatory Environment - How This

Affects International Sourcing Companies
Paying attention to the most updated laws and policies in India
is extremely important as Indian laws are subject to changes
on an annual basis. For example, Indias export/import (EXIM)
Policy is updated annually each March 31st, and the subsequent
modifications, improvements and new schemes become effective
starting the following day on April 1st (Indias financial year is AprilMarch).
Also, since Indian exports and imports are regulated by Foreign
Trade Act, 1992, the Indian government has close control over such
activities and transactions which also makes it doubly important to
conduct a thorough DD investigation and to be completely aware
of the specific issues pertinent to your business activities.

information that will allow you to make a judgment call on the

For instance, when conducting an import/export business in India,

status of your supplier and their ability to deliver as promised. These

it is important that you take note of all of the import/export related

documents may include public and private documents such as

issues associated with your business. At the very least, youll need

financial statements, account information, credit checks and checks

to know whether the goods to be imported are classified as either

on legal status, ownership, directors and scope of business.

restricted, canalized or prohibited; or if the goods to be exported are

classified as restricted, prohibited or only for state trading enterprises

Unlike China, India maintains an impressive public records system

(STEs) (i.e., items that can only be exported by designated STEs as

that you can use to ascertain the facts about your potential supplier.

subject to Indias EXIM policy).

As such, it is crucial that you obtain any and all information necessary
to establish that your supplier is both creditworthy and in good

Youll also need to obtain the following documents to conduct

financial standing.

import/export activities in India:

A typical DD report contains information pertaining to the following,

Import/export license;

at the very least:

Customs declaration form;

Dispatch note;

Company and personnel information (including share capital and

taxation issues);
Corporate structure;

Invoice;
Certificate of origin; and
Any other relevant documents.

Directors and shareholders, their interests and conflicts (if any);

Financial information and status;

The above documents are required to import/export items to and

Licenses, permits, approvals and specific statutory compliance;

from India, and such activities are prohibited without them.

Any previous court orders or litigation issues against the company

in question;

You should also be aware of the relevant duties imposed on the

Insurance quality of insurance coverage; and

items to be imported/exported as specified by Customs Act, 1962

Examples of previous clients, such as references.

and Customs Tariff Act, 1975. The basic customs duties vary from
5-40 percent depending on item.

An India-based professional services firm will be able to help you

with these due diligence issues.

Please also be aware that the duty rates are periodically amended
under the Finance Act. Indias HS Codes system with all applicable
tariff rates can be viewed at www.eximguru.com/hs-codes/.

4 - INDIA BRIEFING | 2013

Sourcing From & Selling To India

Selling To India

Heres a quick visual of Indias DTAs:

International businesses looking to sell products to Indian

companies should be aware that the Indian buyer has the right to
request a Tax Residency Certificate from the overseas vendor in order
to process the related payment (s). Understanding this concept is
important as it may allow the vendor to claim additional benefits
under Indias various treaties and agreements.
Specifically, Section 90(4) of Indias Income Tax Act states: An
assessee, not being a resident, to whom an agreement referred to in
sub-section (1) applies, shall not be entitled to claim any relief under
such agreement unless [a certificate of his being a resident] in any

In addition to Indias above-listed DTAs, it should also be noted that

country outside India or specified territory outside India, as the case

the country maintains a significant free trade agreement with the

may be, is obtained by him from the Government of that country or

Association of Southeast Asian Nations (ASEAN) that reduces tariffs

specified territory.

on thousands of imported/exported products. This 10-member

trade bloc which is made up of Indonesia, Singapore, Malaysia,

Tax residency certificates are issued by various national tax bureaus

Laos, Cambodia, the Philippines, Vietnam, Thailand, Myanmar and

as per their own specific format. However, the Indian governments

Brunei is geographically close to India and includes some of Indias

guidelines require that the following information be mentioned on

largest trading partners in Asia.

the certificate:
ASEAN also has a number of FTAs with China and multiple treaties
(i) Name of the assessee;

with other countries as well. Consequently, for an international

(ii) Status (individual, company, firm etc.);

trading company, establishing an offshore company in ASEAN is a

(iii) Nationality (in case of individual);

smart move, since doing so would give it automatic rights to claim

(iv) Country or specified territory of incorporation or registration

the free trade benefits with both India and China. The most popular

(in case of others);

jurisdiction in ASEAN for establishing these companies is Singapore.

(v) Assessees tax identification number in the country or specified

territory of residence

Offshore companies in Singapore are easy and inexpensive to set

(vi) Residential status for the purposes of tax;

up, and Singaporean tax rates are also low and restricted only to

(vii) Period for which the certificate is applicable; and

trade and profits generated in Singapore (i.e., if you make a profit

(viii) Address of the applicant for the period for which the certificate

on a transaction in India, you wont be taxed again in Singapore).

is applicable.
Tax Residency Certificates can be obtained from the relevant tax
departments in the country of origin.

Using Offshore Incorporations for India Trade

Many international businesses, even small ones, use so-called
offshore company jurisdictions for trade purposes to take
advantage of a certain countrys regulations (e.g., lower taxes, etc.).
For example, utilizing a Hong Kong-based company for the purposes
of trading with China is advantageous due to Hong Kongs excellent
business and financial services environment and its status as a free
port which entitles traders to lower tax rates.

Details of Singapore Incorporations are as Follows:

Minimum Number of Shareholders: One
Minimum Number of Directors: One (Note one director must be
a Singaporean resident. Nominee services are available)
Minimum Capital Requirement: One Singapore Dollar
Set Up Timeframe: Two Days
International Banking Facilities: Yes
Singapore Corporate Tax Rate: 17%, no tax on profits earned
externally from Singapore.
Tax Treaties: Immediate qualification for all ASEAN tax treaty
benefits

The same type of structure can also be used with regard to Indian

For a complete overview of every FTA and DTA that ASEAN has inked

trade, and it should be noted that India has numerous free trade

with countries throughout the world, including India and China,

and double tax treaties in place with countries throughout the world

please see our comprehensive treaties section on ASEAN Briefing:

that can all be used to a traders advantage.

www.aseanbriefing.com.

For assistance with sourcing or selling to India please contact Dezan Shira & Associates at india@dezshira.com
For assistance with establishing a trading company in Singapore please contact our Singapore office at singapore@dezshira.com

2013 | INDIA BRIEFING - 5

Import and Export

Licensing Procedures
By Dezan Shira & Associates, Mumbai Office

Export Policy

obtained an Import Export Code (IEC) from the regional authority.

Restricted

ndias import and export system is governed by the Foreign

fat and oils of animal origin, animal rennet, and unprocessed ivory.

Trade (Development & Regulation) Act of 1992 and Indias

Export Import (EXIM) Policy. Imports and exports of all goods
are free, except for the items regulated by the EXIM policy or any
other law currently in force. Registration with regional licensing

authority is a prerequisite for the import and export of goods. The

customs will not allow for clearance of goods unless the importer has

Just like imports, goods can be exported freely if they are not
mentioned in the classification of ITC (HS). Below follows the
classification of goods for export:

Prohibited

Import Policy
The Indian Trade Classification (ITC)- Harmonized System (HS) ,
classifies goods in three categories:
1. Restricted
2. Canalized

State Trading Enterprise

Restricted Goods
Before exporting any restricted goods, the exporter must first obtain
a license explicitly permitting the exporter to do so. The restricted
goods must be exported through a set of procedures/conditions,

3. Prohibited

which are detailed in the license.

Goods not specified in the above mentioned categories can be freely

Prohibited Goods

imported without any restriction, if the importer has obtained a valid

These are the items which cannot be exported at all. The vast

IEC. There is no need to obtain any import license or permission to

majority of these include wild animals, and animal articles that may

import such goods. Most of the goods can be freely imported in

carry a risk of infection.

India.

State Trading Enterprise (STE)

Restricted Goods

Certain items can be exported only through designated STEs. The

Restricted goods can be imported only after obtaining an import

export of such items is subject to the conditions specified in the

license from the relevant regional licensing authority. The goods

EXIM policy.

covered by the license shall be disposed of in the manner specified

by the license authority, which should be clearly indicated in the

Types of Duties

license itself. The list of restricted goods is provided in ITC (HS).

There are many types of duties that are levied in India on imports

An import license is valid for 24 months for capital goods, and 18

and exports. A list of these duties follows below:

months for all other goods.

Canalized Goods

Basic Duty
Basic duty is the typical tax rate that is applied to goods.. The rates

Canalized goods are items which may only be imported using

of custom duties are specified in the First and Second Schedules

specific procedures or methods of transport. The list of canalized

of the Customs Tariff Act of 1975. The First Schedule contains rates

goods can be found in the ITC (HS). Goods in this category can be

of import duty, and the second schedule contains rates of export

imported only through canalizing agencies. The main canalized

duties. Most of the items in India are exempt from custom duty,

items are currently petroleum products, bulk agricultural products,

which is generally levied on imports.

such as grains and vegetable oils, and some pharmaceutical

products.

The first schedule contains two rates: Standard rate and preferential
rate. The preferential rate is lower than the standard rate. When goods

Prohibited Goods

are imported from a place specified by the central government (CG)

These are the goods listed in ITC (HS) which are strictly prohibited

for lower rates, the preferential rate is applicable. In any other case,

on all import channels in India. These include wild animals, tallow

the standard rate will be applicable. If the CG has signed a trade

6 - INDIA BRIEFING | 2013

Import and Export Licensing Procedures

agreement with the country of origin, then the CG may opt to charge

Safeguard Duty

a lower basic duty than indicated in the first schedule.

A safeguard duty is a tariff designed to provide protection to

Additional Customs Duty (Countervailing Duty)

domestic goods, favoring them over imported items. If the

government determines that increased imports of certain items are

In addition to the basic duty on imported goods, a countervailing

having a significantly detrimental effect on domestic competitors,

duty is also applicable to imported goods. The rate of duty is equal

it may opt to levy this duty on those imports to discourage their

to the rate of excise applied to goods manufactured in India. If the

proliferation. However, the duty does not apply to articles imported

article is not manufactured in India, then goods of a similar nature

from developing countries. The CG may exempt imports of any

are used to determine the correct duty amount. If there are different

article from this duty. The notification issued by CG in this regard is

rates of duty on similar goods, then the highest rates of the known

valid for four years, subject to further extension. However, the total

products will be applied to the article in question.

period cannot exceed 10 years from the date of first imposition.

Additional Duty (VAT)

Protective Duties

The CG may levy an additional duty equivalent to sales tax or VAT

In addition to safeguard duties, the CG also bolsters domestic

charged on sale/purchase in India. The rate cannot exceed 4 percent.

industries using protective duties. Should the Tariff Commission issue

However, the additional duty shall be refunded when the imported

a recommendation for a protective duty, the CG may impose on any

goods are sold if the following conditions are satisfied:

goods imported to India a protective duty to provide protection to

domestic industry.

(1) The importer pays all the custom duties;

(2) The sale invoice shall bear the indication that the credit of such
duty shall not be allowed; and
(3) Importer shall pay VAT/sales tax on the sale of these goods.

Anti-Dumping Duty
The CG may impose an anti-dumping duty if an article is imported
to India at less than its normal price, and will notify the importer if
they decide to do so. The amount of duty cannot exceed the margin
of dumping. The margin of dumping means the difference between
the export price and the normal price.
The notification issued by CG in this regard shall be valid for five
years. The period can be further extended. However, the total period

The dut y cannot exceed the amount proposed in the

recommendation. The CG may specify the period up to which
protective duty shall be in force, reduce or extend the period, and
adjust the effective rate.

Education and Higher Education Cess

The education cess, simply put, is a tax designed to fund education
and healthcare initatives. An education cess at the rate of 2 percent
and higher education cess of 1 percent are levied on the aggregate
of duties of customs. However, the aggregate of customs duties does
not include the safeguard duties, countervailing duty on subsidized
articles, anti-dumping duty, or countervailing duty equivalent to VAT.

cannot exceed 10 years from the date of first imposition.

Valuation

Countervailing Duty on Subsidized Articles

Customs duty is payable as a percentage of Value which is known

A countervailing duty is a tariff applied to imported goods to

neutralize the effect of a subsidy from the country of origin. If any
country grants subsidies on any article to be imported to India,
whether directly from the same country or otherwise, then the CG
may impose a countervailing duty equal to or less than the subsidy
itself. However, the duty will not be imposed if the the article is
subsidized for the following reasons:
(1) Research activities conducted by person engaged in

as Assessable Value or Customs Value. The Value may be either (a)

Value as defined in Section 14 (1) of the Customs Act or (b) Tariff
Value described under Section 14 (2) of the Customs Act.
Tariff Value the Tariff Value is fixed by the Central Board of Excise
& Customs (CBEC) for any class of imported goods or export
goods. Authorities will consider the trend of value of the goods in
question while fixing tariff value. Once fixed, the duty is payable as
a percentage of this value.

manufacturing or export
(2) Assistance to disadvantaged regions in destination country

The value of imported goods for the assessment of duty is

(3) Assistance in adaptation of existing facilities to new environment

determined in accordance with the provisions of Section 14 of 1962

requirements.

and the Customs Valuation (Determination of Value of Imported

Goods) Rules, 2007. According to the rules, the assessable value

The notification issued by CG in this regard shall be valid for five

equal the transaction value of goods as adjusted for freight and cost

years and possibly subject to further extension. However, the total

of insurance, loading, unloading and handling charges.

period cannot exceed 10 years from the initial date of imposition.

2013 | INDIA BRIEFING - 7

Import and Export Licensing Procedures

In the assessable value, the following criteria are included:

Cost of insurance

Commission and brokerage;

The following costs are excluded from the assessable value

Cost of container, which are treated as being one with the goods
for customs purposes;

Charges for construction, erection, assembly, maintenance

Cost of packing - labour or materials;

or technical assistance undertaken after importation of plant,

Materials, components, tools, etc. supplied by buyer;

machinery or equipment;

Royalties and license fees;

Cost of transport after importation;

Value of proceeds of subsequent sales;

Duties and taxes in India; and

Other payment as condition of sale of goods being valued;

Types of duties on exports and imports in India are covered in

Cost of transport up to place of importation;

the Customs Tariff Act 1975. The Act provides all the laws and

Landing charges; and

regulations related to customs in India.

For assistance with import-export issues in India please contact Dezan Shira & Associates at india@dezshira.com

Establishing a Trading
Company in India
By Dezan Shira & Associates, Delhi Office

ndia is fast emerging as a global trade dynamo with its vast

information with regard to matters associated with foreign trade

natural resources and huge supply of skilled labor. Undertaking

agreements, which thus requires a lot of preparation time.

considerable industrial deregulation and other structural

reforms, regulators in India recognizes that strong exports are
critical for overall economic growth and poverty reduction. As

such, export-led growth has become a key driver of trade in India

one of the most important trailblazers in the recent enormous
expansion of international trade.
Indian trade has grown exponentially over the past few years, with
exports rising at a rate well above the pace of growth of worldwide
exports. In this atmosphere, opportunities have never been greater,
and starting a trading business in India has never been easier.

Establishing a Trading Business in India

Starting an export-import business with the right strategies

Here is a short flowchart detailing the process below:

1. Establish your company following guidelines provided in

the Companies Act;
2. Apply for an Importer Exporter Code (IEC) from the relevant
regional office of the Director General of Foreign Trade
(DGFT);
3. Obtain an Import License;
4. Register with the regional office of Export Promotion
Council and relevant tax authorities, including the Sales
Tax Office and Export Credit Guarantee Corporation;

can render a business very profitable. However, the long term

success and profitability of an import business depends greatly
on the importers knowledge and understanding of international

5. Obtain an Export License and Certificate of Origin for export

purposes from the Chamber of Commerce; and finally

procedures in addition to a keen analysis of the foreign and

procedure-centric market in India. So, to execute a successful dive
into the pool, one must follow a time-tested and exact set of steps,
which are generally rigid and absolutely necessary.

6. Begin trading.

Registering a Company in India

Furthermore, it is important for prospective investors looking to start

In order to register any kind of company in India, the proposed

an export-import business in India to obtain all of the necessary

director(s) of the company must first apply for a Director

8 - INDIA BRIEFING | 2013

Establishing a Trading Company in India

Identification Number (DIN), which can be obtained by submitting

virtually all matters related to Indias export/import policies. Some of

an application to Indias Ministry of Corporate Affairs. To receive the

its major resources are also devoted to the execution of all foreign

number, the individual applicant must also submit his/her proof of

trade laws passed by the central government and the maintenance

residence, proof of identity and a current color photo.

of an up-to-date database of all of Indias exporters and importers.

Once the number has been obtained, the director may then begin

For all first-time exporters or importers, Indian law requires that you

the process of incorporating the company. In order to legally register

register with the DGFT which in turn will provide your business with

and incorporate a company, an application must be filed with the

a unique IEC Number. The IEC Number is a ten-digit code required for

Registrar of Companies (ROC) of the state in which the company is

both exports and imports, and it will be checked by Indian Customs

proposed to be incorporated. Afterwards, a registration application,

during every single import/export transaction. To apply for an IEC

which should be accompanied by the names of the companys

number, you must submit the required document called the

directors, Memorandum of Association, Articles of Association and

Aayaat Niryaat Form (ANF2A) to the nearest regional authority of

the following relevant documents, must be submitted to the ROC

the DGFT. This form can be submitted online, via post or in person.

as well. In total, the documents to be submitted include:

Further, in order to obtain the code, the entity seeking to export or
Memorandum of Association;

import goods must submit the following items as well:

Articles of Association;
Company agreement, if any, which includes all individual
appointments (i.e., director, manager, etc.);
A copy of the letter of the Registrar of Companies documents
certifying payment of prescribed registration and filing fees;

Two passport-size photographs of the legally responsible person;

Permanent account number (PAN);
Current bank account number; and
Bankers Certificate.

All documents evidencing directorship and company structure;

and
Registered Office Forms and Declaration of Compliance with the
Requirements of the Companies Act.

The PAN is another ten-digit code that is necessary for many financial
transactions in India, and it can be obtained by submitting an
application accompanied by the applicants proof of residence and
identity. The other two documents are obtained simply by opening

When the above requirements have been fulfilled, the Registrar of

a bank account.

Companies will register the company and issue a formal Certificate

of Incorporation. Once the company has been registered and

For almost all import businesses, an IEC number is absolutely

incorporated as an Indian company, it can then begin proceedings

necessary; however, certain exceptions do exist. If you are importing

for export and import-related matters. The entire registration

items from Nepal, Myanmar (through the border), China or a small

procedure takes about three months.

number of selected ports & locations around India, then an IEC

number is not mandatory, provided that the value of individual

Registering with the Director

General of Foreign Trade

consignments does not exceed Rs. 25,000.

is the largest and most important agency concerned with the

Registering with the Export

Promotion Council

promotion and regulation of the foreign trade in India, and has

After completing your initial registration, the next step is to register

an elaborate organizational structure aimed at the facilitation of

with the Export Promotion Council (EPC). The EPC, which has

the various aspects of trade. There are two departments under the

branches all over the country and offers procedures based on

Ministry of Commerce and Industry. The first one is the Department

provincial laws, is a non-profit organization established to promote

of Commerce (DoC) and the second is the Department of Industrial

various goods exported from India in international markets.

In the Government of India, the Ministry of Commerce and Industry

Policy & Promotion (DIPP). In India, exports and imports are regulated
by the Foreign Trade (Development and Regulation) Act, 1992, which

The EPC also works closely with the Ministry of Industry and

provides the government with significant control of export-import

Commerce, acting as a platform for interaction between the

policy and procedures.

exporting community and Indias central government. Given its

function, exporters should regard the need to obtain a registration

In terms of interaction with investors, however, one of the most

and membership certificate from the EPC as paramount. In order

critical and active bodies concerned with the import and export

to apply for registration from the Council, a certified copy of the

of goods in India is the Director General of Foreign Trade (DGFT).

already-provided IEC number is required. Further, those wishing to

Operating as an arm of the Ministry of Commerce and Industrys

register with the EPC will also be required to submit a membership

Department of Commerce, the DGFT is the agency responsible for

fee (which varies by location).

2013 | INDIA BRIEFING - 9

Establishing a Trading Company in India

Registration with Tax Authorities

It is to a companys advantage to identify and register with all of the
relevant local tax authorities if it wishes to receive all of the possible
benefits associated with exports and imports. For instance, all goods
exported from India may enjoy exemptions from value added taxes

regulations regarding specific items. Schedule II, called Export Policy

Schedule II, deals with the regulations surrounding export policy and
other issues surrounding certain exports. Export Policy Schedule II of
the ITC-HS code contains 97 chapters, all of which provide thorough
information about export procedures and policies, and also provide

and sales taxes if properly registered.

regulatory information on different classes of export items. For

In order to enjoy the maximum level of benefits, your business

any item in Schedules I and II, the DGFT maintains an up-to-date

should register with all of the relevant authorities, such as the

regional Sales Tax Department and the Export Import Credit
Guarantee Corporation both of which have different procedures

those wishing to find regulatory or trade-related information about

database containing codes for all items.
Should the exporter find that a license is indeed necessary for the

that vary from state to state.

product in question, then the exporter must file an application for

Additionally, if a business intends to export goods, then the business

under the Chairmanship of Export Commissioner is responsible for

must undertake to register with the relevant regional branch of the

Indian Chamber of Commerce. The major export-related function of
the Chamber of Commerce for exporters is to issue Non-Preferential
Certificates of Origin to Indian exporters, in accordance with Article II
of the International Convention Relating to Simplification of Customs
Formalities, 1923, which requires certification that the exported

the relevant license to the DGFT. The Export Licensing Committee

the consideration of such applications.
Additionally, the DGFT occasionally releases public announcements,
timed to coincide with the implementation of new laws, noting
that certain specified goods that are not included in the ITC (HS)
Classifications of Export and Import items may be exported without a

goods originated in India.

license. These announcements also detail conditions for the export of

Aside from Certificates of Origin, the Chamber of Commerce

with the relevant specified authorities, quantitative ceilings and

and other bodies also offer exporters and importers many other
promotional initiatives, some of which can be very valuable to

these items, which may include a minimum export price registration

compliance with other relevant laws, rules or regulations.

businesses unfamiliar with the local systems. For instance, once

Obtaining an Import License

the actual process of exporting goods has begun, many other

Indias import-export laws are not considered highly restrictive by

requirements must be met in order to keep Indias standards high.

any standard, and the vast majority of goods making their way in

These requirements include finding air and maritime insurance for

and out of India are license-free, making them easy to administer,

the exported products, adequate warehousing, and quality control

and profitable.

resources. The various entities set up to deal with EXIM business can
assist with these steps, and registering with them will also provide

That said, Indian customs laws do prohibit the import of certain

your business with valuable information resources and contacts

items, and they also restrict the import of certain items by way of

that may prove invaluable in getting to know the Indian market.

placing import conditions on them. To deal with such regulations,

laid out in some of these laws, the importer must apply for an

Application for an Export License

To determine whether a license is needed to export a particular
commercial product or service, an exporter must first classify the

import license, which is issued by the relevant governmental import

authorities. Without the necessary documents, imports run the
risk of being declared unauthorized which may subject them to

item by identifying its ITC (HS) Classification.

confiscation or refusal of entry into the country.

ITC (HS), also known as Indian Trading Clarification based on a

Import licenses, which are renewable, are typically valid for

Harmonized System of Coding, is Indias chief method of classifying

items for trade and export-import operations. The ITC-HS code,
issued by the DGFT, is an 8-digit alphanumeric representing a certain
class/category of goods, which allows the exporter/importer to
follow regulations concerned with those goods.
ITC-HS codes are divided into two different sections, or schedules.
The first of these, ITC(HS) Import Schedule I, deals with the rules
and guidelines related to import policies, and is comprised of 21
sections in total. These 21 sections, further divided into 98 chapters,
provide detailed guidelines for classification of imported goods and

10 - INDIA BRIEFING | 2013

24 months for capital goods and 18 months for raw materials

components, consumable and spares. Further, two copies of each
import license is to be issued - one will be considered the Foreign
Exchange Control Copy, which is used to certify compensation for
the foreign seller of the goods; and the second will be presented
to the relevant customs authority for import clearance purposes.
Dezan Shira & Associates can assist with the establishment of
trading companies in India and tax planning, as well as ongoing accounting, payroll and compliance issues. Please email:
india@dezshira.com or visit www.dezshira.com

Further Resources
Indias Special Economic Zones & Tax Incentives
Foreign investors wishing to take advantage of development zones for export related manufacturing and assembly, and obtaining tax
incentives when doing so, may consider Indias SEZs. Indian SEZs closely follow the successful Chinese SEZ model and, like China, foreign
invested businesses may be established in SEZs for the manufacturing of goods, the provisioning of services, and other activities including
processing, assembling, trading, repairing and reconditioning.
Indias SEZ sectors are classified into four types:
Special Economic Zones for Multiple Sectors

Delhi

Special Economic Zones for Specific Sectors

Special Economic Zones for Free Trade and Warehousing

Kandla (Gujarat)

Special Economic Zones for IT/ITES/Handicraft and Other Industries

Kolkata
Mumbai

Tax Incentives for Investors

Visakhapatnam

Incentives and facilities offered to units located within an SEZ can include:
Chennai

Duty free importation of required machinery, production lines and related equipment
Duty free import and domestic procurement of component parts as required for the final product
100% VAT rebates on exported India sourced components;
Income tax breaks depending on the scope of business and where the business is located

India has a number of SEZs located around its coastline, including Gujarat (Northwest), Mumbai (West coast), Noida (Delhi), Kolkata (Bay of
Bengal), Chennai (East Coast) and Visakhapatnam (Southeast Coast). All of these are sited close to significant ports with excellent shipping
and rail infrastructure. Common usages for SEZs are manufacturing and assembly with combined Indian and globally-sourced components,
and the final product can be sold both domestically and/or exported.
Please contact Dezan Shira & Associates India offices at india@dezshira.com for more information on establishing a business in Indias
special economic zones.

Questions on doing business in India?

Email Dezan Shira & Associates at india@dezshira.com or visit www.dezshira.com.

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May and June 2013 | ASIA BRIEFING - 1

An Introduction
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An Introduction To
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(includes India, China,
ASEAN, India, & China and
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Trading With China

Chinas Import and Export Licensing Framework
Import-Export Taxes and Duties
Establishing a Trading Company (FICE) in China
Global Exports to China

Double Taxation Agreements and Your Asian Investment Strategy

Key Tax Rates Around Asia
Anti-Avoidance Rules Across Asia
Bilateral Investment Treaties

March 2013 | CHINA BRIEFING - 1

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2013 | INDIA BRIEFING - 11

Foreign Direct Investment Advice into India and the Rest of Emerging Asia

Corporate Establishment | Due Diligence | Business Advisory | Tax Planning | Accounting | Payroll | Audit and Compliance

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