1 – Are businesses subject to specific compliance requirements for undertaking import and export?
The compliance requirements for undertaking import and export transactions may vary on a case-to-case basis. Apart from regular compliances such as obtaining Importer Exporter Code (‘IEC’), Goods and Services Tax (‘GST’) registration, ICEGATE registration, it is also essential to consider the following in case of import or export of goods sold into/from India:
Import license as per the Indian Tariff Classification (Harmonised System) (‘ITC(HS)’) Import Policy
Import of goods into India are generally classified as ‘free’, ‘restricted’ or ‘prohibited’ as per the ITC(HS) Import Policy. In cases where imports are classified as ‘restricted’, an authorisation/license or permission is required.
Bureau of Indian Standards (‘BIS’) registration
In order to import certain specified goods into India it is mandatory to conform to the specified Indian Standard. Manufacturers of these goods (even if located outside India with no presence in India) are required to apply for registration from BIS after getting their product tested from BIS recognized labs.
Extended Producer Responsibility Certificate under E-Waste Rules
Extended Producer Responsibility (‘EPR’) is the responsibility of every producer of certain specified electrical and electronic equipment (‘EEE’) to channelize e-waste to an authorised dismantler / recycler to ensure environmentally sound management of this waste. EPR authorisation is mandatory and has to be obtained by all importers subject to exceptions granted.
Legal Metrology License
Under Legal Metrology Act 2009, registration is required for importing packaged commodities which are meant for distribution or sale and for importing weights and measures.
Export license as per ITC(HS) Export Policy including SCOMET license
The Export Licensing Schedule lists out various goods and sets out the export policy regime applicable to certain goods. This is based on whether these goods are either prohibited / restricted / free to be exported.. This also covers the SCOMET list. The SCOMET list is a single, unified control list of all dual use items. This list (set out under Appendix 3 to Schedule 2 of India’s Export Policy) contains dual-use items and technologies classified in 8 Categories.
2 – What are the practical steps / broad checklist that importers and exporters should be aware of in light of the various import / export compliance requirements?
- The broad checklist in case of import/export of goods is as follows:
- Whether necessary registrations such as IEC, GST, ICEGATE have been obtained?
- Whether the imported products are ‘freely’ importable, ‘restricted’ or ‘prohibited’?
- Have they filed an application for import license, where applicable?
- Whether the imported goods require BIS registration. If yes, then the process of registration should ideally commence 2 to 3 months prior to importation
- Whether Legal Metrology Packaged Commodity (LMPC) certificate for sale or distribution of pre-packaged commodity has been obtained?
- In case of import of weights and measures, whether the certificate of registration has been obtained?
- Whether the imported goods require an EPR Certificate? If yes, whether an application is made to Central Pollution Control Board?
- In case of goods or services which are part of the SCOMET list, what are the key aspects to be analysed?
- Examining the category of the SCOMET list under which the products would be covered
- In case of export of services, whether a SCOMET license is required, e.g., R&D services
- Estimating the quantum of goods which will require SCOMET license
- Whether the exporter should opt for normal license or Global Authorisation for Intra Company Transfer (‘GAICT’) in case of intra Company tranfers?
- Whether goods are imported/exported from/to related parties?
- Whether there are any benefits availed on import or export of goods?
- Whether the imported goods are ‘second hand’ goods, in which case there are additional requirements?
3 – What are the consequences for violation of any import/export compliances?
On a standalone basis, if the provisions of Foreign Trade Policy (‘FTP’), Foreign Trade Development and Regulation Act (‘FTDR Act’) and Customs Act, 1962 (‘Customs Act’) are reviewed for possible legal consequences-penal or otherwise, penalties, both in the nature of civil as well as criminal, have been prescribed in these legislations.
By way of illustration, possible punishment for violation of FTP is generally prescribed under the FTDR Act. Where any person makes or abets or attempts to abet any export or import in contravention of any provision, penalty of not less than INR 10,000 or not more than 5 times the value of goods, whichever is more, may be imposed. Additionally, goods may be subjected to confiscation and IEC may be suspended/cancelled.
Under the Customs Act, in the case of dutiable goods, a penalty not exceeding 10% of the duty sought to be evaded or INR 5,000, whichever is higher can be imposed in addition to confiscation of the goods. The authorities are empowered to raise demands for a period of 5 years from the date of import/export in which case the penalty can be as high as equal to duty so determined.
Further, fines and penalties are levied under various other allied respective legislations as well.
4 – Valuation of goods is of paramount importance in judicious levy of indirect taxes. Having said that, what are the special provisions and procedures for determination and acceptance of transaction value of goods in case of import from related parties?
In case of sale between related parties, the Special Valuation Branch (‘SVB’) of the Customs investigates whether the value of goods imported by a related party in India is influenced by the relationship between the parties.
Every importer while filing the Bill of Entry should make a declaration in Annexure A on whether the seller of imported goods is related parties as defined under Rule 2(2) of Customs Valuation (Determination of Price of Imported Goods) Rules, 2007.
If the Commissioner refers the case to SVB, the proper officer at SVB will carry out the investigation and seek further information in Annexure B from the importer.
Till the time the SVB investigation is pending, the importer can continue importing goods under a provisional assessment. Once the SVB investigation report is issued, the process of finalization of provisional assessment would be initiated.
5 – As per a recent survey, 40% of 1,200 business leaders surveyed in the US, UK, Japan and Singapore are planning additional or first-time investments in India. What are the incentives schemes available for investments in India?
India’s Finance Minister, Smt Nirmala Sitharaman has announced an outlay of INR 1.97 Lakh Crores for the Production Linked Incentive (PLI) Schemes across 13 key sectors, to create national manufacturing champions and generate employment opportunities for the country’s youth.
The key sectors which have been identified are:
- Mobile Manufacturing and Specified Electronic Components
- Manufacturing of Medical Devices
- Automobiles and Auto Components
- Textile Products
- Pharmaceutical Products
- Electronic/Technology Products
- High efficiency solar PV modules
- Advanced Chemistry Cell Battery
- Telecom & Networking Product
- Speciality Steel
- White Goods (Air conditioners and LEDs)
- Critical Key Starting materials/Drug Intermediaries & Active Pharmaceutical Ingredients
- Food Products
The Government also has a special thrust on e-vehicles. with India seeking to be the premier manufacturing hub for electric vehicles in the world. Further, many incentive schemes have been chalked out for providing impetus to manufacturing of electric vehicles in India such as Faster Adoption and Manufacturing of Hybrid and Electric vehicle (‘FAME’).
Various other incentives by respective State Governments are also launched from time to time viz. Package Scheme of Incentives (PSI). Depending on scale of investments, location of manufacturing etc., Companies may explore availing eligible incentives for undertaking manufacturing related investments in India.
For further information, please contact:
Rohit Jain, Partner, Economic Laws Practice
+91 22 6636 7000
RohitJain@elp-in.com
Rohit Jain is a Partner in the Tax practice of ELP focusing on indirect taxes, direct tax and transfer pricing and customs laws. He is a law graduate from the University of Mumbai and a fellow member of the Institute of Chartered Accountants of India. His areas of expertise prior to the introduction of GST covered customs, excise, service tax, central sales tax, state Value Added Tax (VAT) laws and Foreign Trade Policy (FTP).
Rohit has been with the firm since its inception and has over a decade of experience in handling matters related to tax, in both advisory and litigation matters. He has advised various Fortune 500 Companies and Indian Conglomerates in sectors like financial services, manufacturing, telecommunication, oil and gas, petroleum and infrastructure projects in order to ensure smooth transitions from sales tax to the VAT regime.
He has also been involved in making representations to the Ministry of Finance and the Ministry of Commerce in relation to various tax policy matters on behalf of numerous industry associations. Rohit has been ranked as an Elite Practitioner by Asialaw Profile 2020 and has been recognized for his expertise in Tax by Chambers Asia-Pacific, recommended by the Tax Director’s Handbook and has also featured in World Transfer Pricing guide. Rohit has also been recognized in the Benchmark Leading Lawyers Guide as the “Dispute Resolution Star for Tax” and has featured in International Tax Review’s Tax Controversy Leaders Guide & Indirect Tax Leaders Guide. Rohit has also been ranked as a Legal Individual for Tax in the Legal 500 rankings. Prior to ELP, Rohit was part of the Tax team at RSM & Co.
Jignesh Ghelani, Partner, Economic Laws Practice
+91 22 6637 1989
JigneshGhelani@elp-in.com
Jignesh Ghelani is a Partner at ELP focusing on indirect taxes and the newly introduced Goods & Services Tax (GST). He is a fellow member of the Institute of Chartered Accountants of India (ICAI).
His areas of expertise include customs, excise, service tax, central sales tax (CST), state Value Added Tax (VAT) laws, Foreign Trade Policy (FTP), Special Economic Zone and Export Control related matters. Jignesh has over a decade of experience in handling matters related to tax, in both advisory and litigation matters.
He has advised various Fortune 500 Companies and Indian Conglomerates in sectors like manufacturing, oil and gas, petroleum, energy, construction and infrastructure and telecommunication. His areas of specialization include tax optimization strategies, structuring contracts, tax reviews / due diligence and representing clients before the tax authorities. He has also been a regular speaker at various tax conferences and has authored associated papers / articles on issues of Indirect taxation Prior to joining ELP, Jignesh was part of the Tax team at EY & PwC.
