Import Into India: Compliance And Regulatory Considerations

Margesh Rai

24 May, 2024

Importing into India means bringing goods into India from a foreign country. In India, imports and exports are regulated by the Foreign Trade (Development and Regulation) Act of 1992. The Central Government is empowered to make provisions for developing and regulating foreign trade in India. Generally, the following procedure is involved in the import and export activities:

1. Ensuring licensing and Compliance before the shipping of goods
2. Arranging for transport and warehousing after the unloading of goods
3. Getting customs clearance and paying taxes before the release of goods

Steps involved in Importing into India

• Import-Export Code (IEC): The first step towards importing something into India is to obtain an Import-Export Code (IEC) before importing. Every importer must obtain an IEC number from the regional joint Directorate General of Foreign Trade (DGFT). IEC is a permanent account number (PAN) that has lifetime validity. To obtain an IEC number, an application has to be filed online. IEC number is required for clearing customs, sending shipments, and sending or receiving money in foreign currency.

• Legal Compliance under different trade laws: After obtaining an IEC, the importer has to ensure that the goods which are to be imported are not restricted, canalized, or prohibited by the government or if it requires additional permission and license from the Directorate General of Foreign Trade (DGFT) and the Central Government.

• Procure Import Licenses: For importing certain goods in India, an import license is required. To determine whether an import license is required, the importer must classify the item by identifying its Indian Trading Clarification based on a Harmonized System of Coding or ITC (HS) classification.

The primary method of classifying an item for import and export operations is the ITC (HS) code. The ITC (HS) Code is an 8-digit alphanumeric code issued by the DGFT. It represents a specific class or category of goods, ensuring that the importer follows regulations concerning those goods. An import license can be either a general license or a specific license. With a general license, goods can be imported from any country; however, with a specific license, goods can be imported only from specific countries.

Import licenses are used for import clearance and are generally valid for 24 months for capital goods and 18 months for raw material components, consumables, and spare parts. They can be renewed after the expiry of the validity period.

• Placing Order: After obtaining an import license, the importer can place an order for importing into India, either directly or through an agent. However, if the item to be imported is canalized, then import can only be done through a canalized agency.

• Dispatch of letter of credit: On getting confirmation from the supplier, the importer has to request its bank to issue a Letter of credit in favor of the supplier. A letter of credit is an undertaking by the importer’s bank stating that the payment will be made to the exporter if the required documents are presented to the bank.

• File Bill of Entry and other documents to complete customs clearing formalities: After obtaining import licenses, importers must furnish import declarations in the prescribed format along with the Bill of Entry and PAN-based Business Identification Number (BIN) as per Section 46 of the Customs Act (1962). A bill of entry is like a shipping bill that provides information on the nature, precise quantity, and value of goods imported into India. It is prepared after the goods have landed or entered India. However, a Bill of Entry is not required if the goods are cleared through the Electronic Data Interchange (EDI) system. But the importer has to file a cargo declaration after prescribing particular requirements for processing the entry for customs clearance. The following are required to be submitted by the importer if the Bill of Entry is filed without using the EDI system:

1. Certificate of Origin
2. Certificate of Inspection
3. Bill of Exchange
4. Commercial Invoice cum packing list

• Assessment and Examination of information furnished in the Bill of Entry: When the goods are shipped, the customs officials assess whether the information in the bill of entry matches the imported items. A ‘pass-out’ order is issued if no irregularities allow the imported goods to be moved out from customs.

• Determine import duty for the clearance of goods: When importing into India, a basic customs duty is levied on the imported goods. This is specified in the first schedule of the Customs Tariff Act, 1975, along with goods-specific duties such as anti-dumping, safeguard, and social welfare surcharge. Furthermore, the government levies an integrated goods and services tax (IGST) based on the classification of imported goods specified in Schedules notified under Section 5 of the IGST Act, 2017.

Documents Required for Importing into India

A set of documents are required to be submitted for import in India. These documents include commercial invoices and regulatory documents dealing with various regulatory authorities such as customs, excise, licensing, etc.

As per the Foreign Trade Policy ¹ 2015 – 2020, there are certain commercial documents that are mandatory for importing into India. These documents are:

1. Bill of lading or airway bill
2. Commercial invoice cum packing list
3. Bill of Entry

On a case-to-case basis, certain additional documents may be required for importing into India; they are:

1. Certificate of origin
2. Inspection certificate
3. Insurance certificate
4. Import License
5. Letter of credit
6. General Agreement on Tariff and Trade or DGFT Declaration
7. Registration Cum Membership Certificate (RCMC)

Wrap Up

In summation, the process of import to India is lengthy. Regulatory compliances need to be confirmed for the successful import of goods. On failure to comply with any of the requirements, the delivery of goods can be delayed, canceled, or considered illegal.

FAQs

Read Our Article: How to Setup an Import Export Business in India: A Guide for Entrepreneurs

1. https://en.wikipedia.org/wiki/Foreign_trade_of_India