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Formation of an Organization And
Registrations for Exports
Submitted To
Dr. Aashiesh Tavkarr
Submitted By
Varsha Shukla B 23
Disha Shah B 26
Shruti Chakravarty B 32
Aniket Jagtap B 43
Bhupesh Dwivedi B 58
Government policies
Government policies and Regulations may also encourage the companies for international
marketing. Some companies export and invest in foreign countries to avail economic
incentives, and benefits provided by the government. Also some companies internationalize
due to governments emphasis on import development and foreign investment. In India,
certain companies export in order to fulfill their export obligation.
W. T. O.
Due to WTO, member nations have reduced a number of restrictions on foreign investment,
and trade in goods and services. For example, the custom duties have been reduced world
wide. This has motivated business firms to enter in the global markets to a greater extent.
Registering a Company in India
In order to register any kind of company in India, the proposed director(s) of the company
must first apply for a Director Identification Number (DIN), which can be obtained by
submitting an application to Indias Ministry of Corporate Affairs. To receive the number, the
individual applicant must also submit his/her proof of residence, proof of identity and a
current coloured photo. Once the number has been obtained, the director may then begin the
process of incorporating the company. In order to legally register and incorporate a company,
an application must be filed with the Registrar of Companies (ROC) of the state in which the
company is proposed to be incorporated. Afterwards, a registration application, which should
be accompanied by the names of the companys directors, Memorandum of Association,
Articles of Association and the following relevant documents, must be submitted to the ROC
as well. In total, the documents to be submitted include:
Memorandum of Association;
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;
All documents evidencing directorship and company structure; and
Registered Office Forms and Declaration of Compliance with the Requirements of the
Companies Act.
When the above requirements have been fulfilled, the Registrar of Companies will register
the company and issue a formal Certificate of Incorporation. Once the company has been
registered and incorporated as an Indian company, it can then begin proceedings for export
and import-related matters. The entire registration procedure takes about three months.
Types of import/export organization
There are five common forms of corporate organization in which you can set up your
import/export enterprise: the sole proprietorship, the partnership, the corporation, a limited
liability company (LLC), and the subchapter S corporation. Each form has specific
advantages and liabilities.
1. The sole proprietorship
If you plan on keeping things small, prefer not to share ownership with anyone else and will
be dealing in relatively simple, safe products or services, then a sole proprietorship is the way
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to go. A sole proprietorship is usually taxed on income, property and payroll. A typical sole
proprietorship might be a neighborhood flower shop, hot dog stand. The downside of this
corporate form is the unlimited liability you incur. Since your sole proprietorship is not
legally recognized as an independent entity apart from your personal assets, it can be used to
satisfy creditors if you run into serious financial difficulties in the course of your business
operations. Also, the price you pay for your independence is unlimited responsibility -- you
wear ALL the hats by yourself! This is perhaps the best reason for limiting the size of your
company, too. Think through what kind of commitment you're willing to make before you
choose this form. A sole proprietorship is usually established simply by filling out a standard
business form purchased from an office supply store or you might conduct a search online to
find the appropriate form. Include your name, notarize it and send the form with a check
(cashier's or certified) or money order to your county clerk's office. Call the office or your
local chamber of commerce to verify that this is the right procedure and to find out the
amount of the fee. In order to protect your new business, it is prudent to run a classified ad in
the business section of your local newspaper announcing the launching of your enterprise,
along with its assumed name and location.
2. The partnership
If you prefer to share liability, responsibility and profits with another person, then a
partnership is for you. As with a sole proprietorship, you will be taxed on an individual basis
for your share of the partnership, but you will need to expend legal fees to have your articles
of partnership drawn up. Many people prefer the security a partnership can offer, but keep in
mind that a partnership is very much like a marriage: everything that happens to one of you,
good or bad, impacts both of you. Also, if your business partner walks out on you, it's as bad
as or worse than being dumped by your spouse, especially if the terms of dissolution have not
been negotiated at the outset of your relationship -- your whole livelihood could be wiped
out! a partnership is established much like a sole proprietorship -- by filling out the form,
notarizing it and sending it in with the appropriate fee to the county clerk -- but you will also
need to draw up a written contract known as the articles of partnership. This contract states
the salaries of the partners, how profits and losses are to be distributed, and what happens if
one of the partners wants out.
The most common type of partnership is the limited partnership, in which one or more
partners give up participation in management decisions in exchange for limited liability, and
at least one partner has unlimited liability. Less common is the general or regular partnership,
in which all the partners have unlimited liability. In a general partnership, the personal assets
of the partners can be seized when the firm defaults on its obligations. A typical partnership
might be a real estate venture, law firm or consultancy practice.
The advantages of a partnership are obvious: a larger financial base perhaps a better credit
standing (based on one or both of the partners' wealth), more brainpower and more labor to
go around.
The disadvantages are that, particularly in a general partnership, you are subject to unlimited
liability -- not just your own, as in a sole proprietorship, but quite possibly your partner's as
well if he or she cannot fulfill financial obligations. You also may be faced with the
involuntary dissolution of the partnership if your partner dies or becomes disabled or
insolvent, and difficulty in transferring or selling your interest. Your recourse in any of these
eventualities will be determined by what your contract states. These disadvantages may cause
you to prefer to limit the size and scope of your business operation. Discuss this option
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thoroughly with your accountant and attorney so you are sure you're not incurring more risks
than advantages.
3. The corporation
If you want to separate your business affairs from your personal life, limit your liability, be
able to get out of the business easily if need be, and aspire to grow a huge business, then
you'll want to set up as a corporation. You will be taxed on a corporate basis (on the
corporation's net profit) AND on a personal income basis (on your salary and other
compensation). Corporate and personal income are taxed at different rates and are treated
differently; this is a complex topic and lies outside the scope of this discussion.
It generally costs more to set up a corporation than a sole proprietorship or partnership
because of the more involved procedure of incorporation and issuance of shares of stock. You
can set up yourself by purchasing a how-to kit online, but I don't recommend this route. Let
your attorney handle it, and ask first how much it is going to cost you to incorporate. Fees for
a typical incorporation start at about U.S. $1,000. The major parties in a corporation are the
stockholders, the board of directors and the officers. In the beginning, one person can hold all
of these offices and then pass them along as the business expands. You can lay the foundation
yourself, and then build as big a company as you want upon it. That's the beauty of
incorporating.
Some of the most interesting advantages of the corporation, though, arise from the fact that
it's both a human and an impersonal entity. If you set it up by yourself, you're it -- but you can
walk away from it and, legally, it's still a going enterprise. It is a self-contained entity
governed by its own laws; it can sue or be sued; it can receive customer complaints or
charitable donations. Best of all, no matter what happens with the business, your personal
assets will be protected insofar as you will not lose more than your investment in the business
to date -- provided, of course, that you did not incorporate to cover up your own misconduct
(such as intentionally selling a harmful product)!The corporation is the dominant form of
business and is usually set up with the intention to operate on a much grander scale, to
diversify and to maximize profits. You can raise capital for your corporation by selling shares
of stock or by pledging the stock as collateral to a person or entity who is willing to loan you
money. However, the biggest drawback to a corporation is its greater tax liability. It is
generally taxed higher than sole proprietorships and partnerships which, as mentioned earlier,
are taxed only on the owners' personal income. In addition, a corporation must pay assorted
franchise and state taxes. Plus, there's a whole array of corporate documents that must be
kept: articles of incorporation, bylaws, minutes of shareholders' meetings and records of
issuance of stock certificates, for example. Furthermore, your shareholders are the ultimate
owners of your company, and that ownership gives them the right to receive dividends,
review corporate books and records, and hold or sell their stock. The larger you become, the
more likely you are to consider maximizing everyone's investment. A typical corporation
might be Verizon, Starbucks, Apple or Motorola.
4. The limited liability company (LLC).
An LLC oftentimes blends the best of both enterprise worlds: corporate and partnership
structures and refers to its parties involved as "members." These members can be individuals,
corporations and even foreign entities. An LLC allows you to collect profits through the
company without paying corporate taxes (referred to as pass-through income taxation) in
many states and like a corporation, provides limited liability. Flexible in nature, it works best
with a single owner yet there is no maximum number of members. LLCs do not necessarily
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always need to be established for a profit.The primary disadvantage to an LLC is that many
individuals are still not that familiar with it so it may be difficult to raise capital for this type
of structure. Investors are accustomed to and more comfortable investing funds in betterunderstood corporations.
5. The subchapter S corporation.
This form of organization is like a regular corporation in all but a few respects. Besides a
regular corporation's advantages of limited liability and protection of personal assets, a
subchapter S corporation enables you to avoid the double taxation normally associated with
the distribution of corporate earnings to the firms' shareholders, since corporate income is
taxed as the direct income of the shareholders whether it is distributed to them or not. It costs
about the same to set up as a regular corporation. A typical subchapter S corporation might be
a small private-label food company. A subchapter S corporation has a limited number of
shareholders, who may be individuals, estates, or trusts, but not other corporations. The
obvious disadvantage here is that the limitation on the number of shareholders accordingly
limits your ability to raise capital. Also, there are special circumstances in which a subchapter
S corporation is taxed more stringently than a regular corporation.
Registration of Exporters
For all first-time exporters or importers, Indian law requires that you register with the DGFT
which in turn will provide your business with a unique IEC Number. The IEC Number is a
ten-digit code required for both exports and imports, and it will be checked by Indian
Customs during every single import/export transaction. For almost all import businesses, an
IEC number is absolutely necessary; however, certain exceptions do exist. If you are
importing items from Nepal, Myanmar (through the border), China or a small number of
selected ports and locations around India, then an IEC number is not mandatory, provided
that the value of individual consignments does not exceed Rs. 25,000.
To apply for an IEC number, you must submit the required document called the Aayaat
Niryaat Form (ANF2A) to the nearest regional authority of the DGFT. This form can be
submitted online, via post or in person.
How to obtain an IEC number with DGFT with branch code?
If you need to export or import from India, you need to obtain an Import export Code IEC
from Director General of Foreign trade within the jurisdiction office of your firm situates.
Without an IEC code, no movement of goods from/to the country to outside is allowed.
DGFT procedures to obtain an IEC number are too liberalized now days. As per the recent
notification, the following documents are required to obtain an Import Export Code. Further,
in order to obtain the code, the entity seeking to export or import goods must submit the
following items as well:
Details
1. Bank receipt / demand draft against application fee. This fee is INR 1000.00 while writing
this article. You may re-clarify with DGFT before applying.
2. Application form in prescribed format issued by DGFT for issue of Import Export Code
number. This application for is prescribed in Appendix 21B.2.
3. Please attest the application for IEC with you banker where in you have opened current
account in the name of firm to operate export import activities.
4. Self attested copy of Permanent Account Number PAN issued by income tax authorities.
5. Two copies of passport size photographs of the applicant. You need to attest the said
passport size photographs with your authorized bank.
6. If any partner or partners are non resident interest or holding in the firm or company exists
with repatriation benefits, you need to attach a self certified copy of Reserve Bank of India
approval on the same.
Where to get an IEC from?
IEC can be obtained from any of the Zonal and Regional offices of Director General of
Foreign Trade depending on area/region where the individual/company is located. No person
shall make any import or export except under an Importer-exporter Code Number granted by
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the Director General or the officer authorized by the Director General in this behalf, in
accordance with the procedure specified in this behalf by the Director General.
Need/Use of IEC
IEC forms the primary document for recognition by Government of India as an
Exporter/Importer. On the basis of IEC, companies can obtain various benefits on their
exports/imports from DGFT, Customs, Export Promotion Council etc.
Application procedure
An application has to be submitted online at DGFT web site http://dgft.gov.in duly filled in
along with documents as per the Para 2.9 of Handbook of Procedures of Vol I 2009-14 and
fees.
An application for grant of IEC shall be made by registered office to concerned regional
authority in Aayat Niryaat Form (ANF 2A) with the below mentioned documents.
1. Certificate from the Banker of the applicant firm.
2. Copy of Permanent Account Number (PAN) issued by Income Tax Authorities.
3. Three copies of passport size photographs of the applicant.
4. Address proof of the applicant firm / individual.
5. Details of Partners / Director / Proprietor / Trustee & there complete details, List of
branches, Regd off, Head office, factory located in India & abroad with contact
details.
(a) In case of Limited companies (both Private and Public Ltd.):
1. Extract of Board Resolution in favour of the applicant.
2. Memorandum of Association along with Certificate of Incorporation.
3. Form 32 in case of change of Directors and Form 18 in case of change of
Registered office-wherever applicable.
(b) In case of Partnership firm:
4. Notarized Partnership Deed showing date of formation of the firm.
5. No Objection Certificate from other Partners/HUF.
An IEC number once allotted, shall be valid for all its branches/divisions/units/factories as
indicated in the IEC. While applying for registration, care shall be taken to include all
desirable addresses of branches/divisions/units/factories. Address proof for the same would
be required. Validity is for life.
Steps to get the IEC :
1. Covering letter on your companys letter head for issue of new Import Export
Code.
2. Two copies of the application: Application form Import Export Code India. These
information are required in the import export code application form:
a. Contact Details of IEC applicant
b. Import Export Code India
c. Import Export Code India
d. Details of the import export code applicant firm
e. Company structure / nature of concern (PLC, PVT LTD, Partnership, etc.)
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f. Type of exporter
g. Bank account details
h. Pan details
i. IEC Applicants fee details
3. Certificate from the banker of the company : Import Export Code Banks
Certificate
4. Declaration/Undertaking > Import Export Code Declaration In case of a nonIndian company (foreign direct investment in India)> a copy of Form-FC-GPR
along with Unique Identification Number issued by the Reserve Bank of India in
respect of shares allotted to parent company
5. Self-certified copy of Permanent Account Number (PAN) issuing letter or PAN
Card issued by Income Tax Authority in the name of the company. This can be
certified by any of the directors of the company under its companys stamp.
6. Two copies of passport size photographs of the applicant of the import export
code duly attested by the banker of the applicant. A photograph of Managing
Director or any other authorised person will need to be given.
7. Certified copy of board resolution granting approval for submitting application
for IEC > Import Export Code Board Resolution.
8. A copy of Certificate of Incorporation, Memorandum and Articles of Association;
duly certified by a director under companys stamp.
9. If there is any change in directors from the date of incorporation then a copy of
form 32 filed with the registrar of companies will need to be submitted. This also
needs to be certified by a director of the company under companys stamp.
10. Self-addressed envelope with INR 25/- postal stamp for delivery of IEC
certificate by registered post or bank draft of INR 100/- for speed post.
When can an IEC be obtained after submitting documents?
Normally, if all documents are in order, Import Export Code is issued by DGFT within two
working days. However, by taking in to consideration of transit time, you can expect to
receive IE code through post office to your official address within 10 days after submitting
documents subjected, all submitted documents for Import Export Code are in order.
AD code - Authorized Dealer Code - registration with customs
Once you obtained IEC if you intend to do export or import, you need to register your IEC
and Authorized dealer code details with the port through which you are exporting or
importing. If you are going to export by sea, you need to register with sea port customs and if
by air, with airport customs also. You can appoint a customs house agent to get the job done
on behalf of you. Along with the Authorized AD code letter received from your bank though
which you are going to transact your foreign trade; you need to attach a copy of IEC with a
covering letter on your letter to be applied with customs officials. The customs officials
normally finish these formalities within an hour.
3. Registering with the Export Promotion Council
After completing your initial registration, the next step is to register with the Export
Promotion Council (EPC). The EPC, which has branches all over the country and offers
procedures based on provincial laws, is a non-profit organization established to promote
various goods exported from India in international markets. They are supported by financial
assistance from the Government of India. The role of the EPCs is to project countrys image
abroad as a council of reliable suppliers of high quality goods and services. The EPCs
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In order to obtain an RCMC, the exporter is required to mention his/her main line of
business on the application made to the EPC.
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Any firm applying for an Authorization to import/export or avail any other benefits /
concession under FTP is required to furnish valid RCMC.
The current procedure for furnishing RCMC information is manual. IEC holder
submits the RCMC certificate in physical form to concerned Regional authority.
RCMC details are keyed in into DGFT IEC database.
The Registration Certificate will be valid for a period of five years, ending 31st March of the
licensing year subject to continuation of the membership of the council every year. The
certificate shall be deemed to be valid from 1st April of the licensing year in which it was
issued.
FIEO-India's Premier Institution for International Trade
The Federation of Indian Export Organisations represents the Indian entrepreneurs's spirit of
enterprise in the global market. set up in October, 1965, the Federation, known popularly as
"FIEO", has kept pace with the country's evolving economic and trade policies, and provided
the content, direction and thrust to India's expanding international trade. As the apex body of
all Indian export promotion organisations, FIEO works as a partner of the Government of the
India to promote Indian exports. The Federation represents the interests of professional
Government-recognised exporting firms viz., Export House/Star Export House/Trading
House/Star Trading House/Premier Trading House, consultancy firms, service providers and
also non-status holders. Besides promoting exports of merchandise FIEO is also involved in
promoting exports of services. Besides the professional exporting firms, FIEO also has
members representing Banks, Export Management and Training Institutes, Clearing and
Forwarding Agents, Trade Associations, Chamber of Commerce, Export Promotion Councils,
Commodity Boards and Authorities.
The diverse activities of FIEO include dissemination of market information, organising
/participating in national/international workshops/seminars/buyer-seller meets/trade fairs etc.
FIEO works as an exporters partner and helps to resolve their problems by taking up their
causes with the concerned authorities, both, at the State and Central level, organising
meetings with policy and decision-makers etc. In essence, FIEO represents directly or
indirectly, over 100,000 exporters across India. Exports by FIEO members comprise a wide
spectrum of products including Gems & Jewellery, Textiles, Garments, Engineering Goods,
Leather and Leather Products, Handicrafts, Chemicals and allied products, Cosmetics, Drugs
and Pharmaceuticals, etc. as well as a wide range of Consultancy Services covering
Infrastructure, Engineering, Industries, Cement, Leather, Paper & Rubber Industries, Agrobased Industries, Small Scale Industries etc.
13
Membership of FIEO
As per the current Foreign Trade Policy an exporter is required to get a Registration-cum-Membership
Certificate (RCMC) from an Export Promotion Council to avail the various entitled benefits under the
Policy. RCMC is also required for getting certain benefits from the Customs and Central Excise
authorities. For registration purposes, FIEO has been recognized by the Government as an Export
Promotion Council.
An exporter holding recognition certificate issued by the Directorate General of Foreign Trade as
Export House/Star Export House/Trading House/Star Trading House/ Premier Trading House can
obtain RCMC from FIEO. An exporter has also the option to obtain RCMC from FIEO if the
products/services exported by them are not covered by any EPC. Exporters of multiple items can
obtain Registration-cum-Membership Certificate (RCMC) under the Multi-Products Group Category
of FIEO. Registration from FIEO offers double advantage to the exporters. It entitles exporters to the
benefits under the Foreign Trade Policy and also the services and global reach of FIEO the
countrys apex body of all export promotion organizations. An exporter who does not wish to
obtain RCMC can also get enrolled as a member of FIEO under individual Exporter Category and
avail FIEOs services.
The annual (April-March) membership subscription under different categories are:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Consultancy Firm ..
Rs. 6,250.00
11.
Bank/Banking Institute .
Rs. 12,500.00
12.
Rs. 6,250.00
13.
14.
15.
plus
12.36%
Service
Tax
w.e.f.
1.4.2012
Rs. 6,250.00
14
An exporter, who does not wish to obtain the RCMC and claim benefits under the Foreign
Trade Policy, can still be enrolled as a member of FIEO under its Individual Exporter
Category. RCMC is issued for categories No.2 to 10 above. For the rest, a simple
membership certificate is issued. The registration and membership of FIEO is decentralized.
Desirous organizations are required to submit their membership application to the concerned Regional
Office of FIEO.
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16
Proprietorship Company
o
o
o
o
o
o
Partnership
o
o
o
o
o
o
o
o
o
Firm
Export from India required special document depending upon the type of product and
destination to be exported. Export documents not only gives detail about the product and its
destination port but are also used for the purpose of taxation and quality control inspection
certification. Below is the List of Required Documents:
Copy of IEC Code No.
Copy of Pan Card No.
Authorised Dealer Code No of Bank with Banker Details
Deec Registration No or An Application Copy to DGFT with File No for Registration
(If Shipment Under Deec)
Drawback Bank Account No & Dbk Declaration (If Shipment Under Dbk)
Copy of Factory Stuffing Permission
Valuation Declaration
Invoice, Packing list and are Form (If Any)
Few Letter Heads
Previous Shipping Copy
LC or Contract Copy
RCMC Copy
Shop & establishment Copy
Central Excise Registration Copy
Sales Tax Copy
Cha Authority Letter
3. Documents Required for Import:
Import Export Code
Cha Authority Letter
Bill of Lading Original
Invoice & Packing list Original
Phytosanitary Certificate
Certificate of Origin
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 item by identifying its ITC (HS) Classification.
ITC (HS), also known as Indian Trading Clarification based on a 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 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 regulatory information on different classes of
export items. For those wishing to find regulatory or trade-related information about any item
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in Schedules I and II, the DGFT maintains an up-to-date database containing codes for all
items.
Should the exporter find that a license is indeed necessary for the product in question, then
the exporter must file an application for the relevant license to the DGFT. The Export
Licensing Committee under the Chairmanship of Export Commissioner is responsible for 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 license.
These announcements also detail conditions for the export of these items, which may include
a minimum export price registration with the relevant specified authorities, quantitative
ceilings and compliance with other relevant laws, rules or regulations.
Obtaining an Import License
Indias import-export laws are not considered highly restrictive by any standard, and the vast
majority of goods making their way in and out of India are license-free, making them easy to
administer, and profitable.
That said, Indian customs laws do prohibit the import of certain items, and they also restrict
the import of certain items by way of placing import conditions on them. To deal with such
regulations, laid out in some of these laws, the importer must apply for an 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
confiscation or refusal of entry into the country.
Import licenses, which are renewable, are typically valid for 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.
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APPENDIX
ANF 2 A
Application Form for Issue / Modification in Importer Exporter
Code Number (IEC)
Part A
Un-attested
Photograph of
the applicant.
Identical
photograph
should be
used on the
Note: Please state Not Applicable wherever the information / data is not applicable to you.
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21
Place
Name
Date
Designation
Official Address
Telephone
Residential Address
Email Address
22