Import and Export Licensing Procedures in India

Posted on by

Editor’s Note: Please find an updated July 2014 version of this article linked here

India’s import and export system is governed by the Foreign Trade (Development & Regulation) Act of 1992 and India’s 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 obtained an Import Export Code (IEC) from the regional authority.

Import Policy

The Indian Trade Classification (ITC)-Harmonized System (HS) classifies goods into three categories:

  1. Restricted
  2. Canalized
  3. Prohibited

Goods not specified in the above mentioned categories can be freely imported without any restriction, if the importer has obtained a valid IEC. There is no need to obtain any import license or permission to import such goods. Most of the goods can be freely imported in India.

Restricted Goods
Restricted goods can be imported only after obtaining an import license from the relevant regional licensing authority. The goods covered by the license shall be disposed of in the manner specified by the license authority, which should be clearly indicated in the license itself. The list of restricted goods is provided in ITC (HS). An import license is valid for 24 months for capital goods, and 18 months for all other goods.

Canalized Goods
Canalized goods are items which may only be imported using specific procedures or methods of transport. The list of canalized goods can be found in the ITC (HS). Goods in this category can be imported only through canalizing agencies. The main canalized items are currently petroleum products, bulk agricultural products, such as grains and vegetable oils, and some pharmaceutical products.

Prohibited Goods
These are the goods listed in ITC (HS) which are strictly prohibited on all import channels in India. These include wild animals, tallow fat and oils of animal origin, animal rennet, and unprocessed ivory.

Export Policy

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:

  • Restricted
  • Prohibited
  • 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, which are detailed in the license.

Prohibited Goods
These are the items which cannot be exported at all. The vast majority of these include wild animals, and animal articles that may carry a risk of infection.

State Trading Enterprise (STE)
Certain items can be exported only through designated STEs. The export of such items is subject to the conditions specified in the EXIM policy.

Types of Duties

There are many types of duties that are levied in India on imports and exports. A list of these duties follows below:

Basic Duty
Basic duty is the typical tax rate that is applied to goods. The rates of custom duties are specified in the First and Second Schedules of the Customs Tariff Act of 1975. The First Schedule contains rates of import duty, and the second schedule contains rates of export duties. Most of the items in India are exempt from custom duty, which is generally levied on imports.

The first schedule contains two rates: Standard rate and preferential rate. The preferential rate is lower than the standard rate. When goods are imported from a place specified by the central government (CG) for lower rates, the preferential rate is applicable. In any other case, the standard rate will be applicable. If the CG has signed a trade agreement with the country of origin, then the CG may opt to charge a lower basic duty than indicated in the first schedule.

Additional Customs Duty (Countervailing Duty)
In addition to the basic duty on imported goods, a countervailing duty is also applicable to imported goods. The rate of duty is equal to the rate of excise applied to goods manufactured in India. If the article is not manufactured in India, then goods of a similar nature are used to determine the correct duty amount. If there are different rates of duty on similar goods, then the highest rates of the known products will be applied to the article in question.

Additional Duty (VAT)
The CG may levy an additional duty equivalent to sales tax or VAT charged on sale/purchase in India. The rate cannot exceed 4 percent. However, the additional duty shall be refunded when the imported goods are sold if the following conditions are satisfied:

  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 cannot exceed 10 years from the date of first imposition.

Countervailing Duty on Subsidized Articles
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 manufacturing or export
  2. Assistance to disadvantaged regions in destination country
  3. Assistance in adaptation of existing facilities to new environment requirements.

The notification issued by CG in this regard shall be valid for five years and possibly subject to further extension. However, the total period cannot exceed 10 years from the initial date of imposition.

Safeguard Duty
A safeguard duty is a tariff designed to provide protection to domestic goods, favoring them over imported items. If the government determines that increased imports of certain items are having a significantly detrimental effect on domestic competitors, it may opt to levy this duty on those imports to discourage their proliferation. However, the duty does not apply to articles imported from developing countries. The CG may exempt imports of any article from this duty. The notification issued by CG in this regard is valid for four years, subject to further extension. However, the total period cannot exceed 10 years from the date of first imposition.

Protective Duties
In addition to safeguard duties, the CG also bolsters domestic industries using protective duties. Should the Tariff Commission issue a recommendation for a protective duty, the CG may impose on any goods imported to India a protective duty to provide protection to domestic industry.

The duty 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.

Valuation

Customs duty is payable as a percentage of ‘Value’ which is known as ‘Assessable Value’ or ‘Customs Value.’ The Value may be either:

  • ‘Value’ as defined in Section 14 (1) of the Customs Act; or
  • ‘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.

The value of imported goods for the assessment of duty is determined in accordance with the provisions of Section 14 of 1962 and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. According to the rules, the assessable value equal the transaction value of goods as adjusted for freight and cost of insurance, loading, unloading and handling charges.

In the assessable value, the following criteria are included:

  • Commission and brokerage;
  • Cost of container, which are treated as being one with the goods for customs purposes;
  • Cost of packing – labour or materials;
  • Materials, components, tools, etc. supplied by buyer;
  • Royalties and license fees;
  • Value of proceeds of subsequent sales;
  • Other payment as condition of sale of goods being valued;
  • Cost of transport up to place of importation;
  • Landing charges; and
  • Cost of insurance

The following costs are excluded from the assessable value:

  • Charges for construction, erection, assembly, maintenance or technical assistance undertaken after importation of plant, machinery or equipment;
  • Cost of transport after importation;
  • Duties and taxes in India; and
  • Types of duties on exports and imports in India are covered in the Customs Tariff Act 1975. The Act provides all the laws and regulations related to customs in India.

Trading-with-India-thmbPortions of this article was taken from the latest issue of the India Briefing Magazine, titled ‘Trading with India.’ In this issue we focus on the dynamics driving India as a global trading hub. Within the magazine, you will find tips for buying and selling in India from overseas, as well as how to set up a trading company in the country. This issue is available as a complimentary download in the Asia Briefing Bookstore until the end of September.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.

For further details or to contact the firm, please email india@dezshira.com, visit www.dezshira.com, or download the company brochure.

You can stay up to date with the latest business and investment trends across India by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.

Related Reading

India’s Taxes for Foreign-invested Entities
In this issue, we provide an overview of India’s taxes on business, which includes a section on India’s double taxation avoidance agreements, and then discuss individual income tax rates and deductions. Finally, we discuss India’s tax reforms in 2013, including an article by Chandrahas Choudhury, New Delhi correspondent for Bloomberg View, “Can India Tax Itself to Prosperity?”

Establishing a Business in India
In this magazine, we discuss establishment structures in India, including liaison offices, project offices, branch offices, and wholly owned subsidiaries. We overview each structure in terms of the situations in which it is appropriate, its permissible activities and limitations, as well as its setup and winding up processes, complete with flow charts. 

India’s Special Economic Zones & Tax Incentives

Ford Wastes No Time Breaking Ground for Vehicle Exports from Chennai

Foreign Investment Manufacturing Incentives in India

India to Export More Dairy to ASEAN

India Raises Import Duty on Gold and Platinum

29 Responses

  • Very good article. Additionally, you may even want to hire service of import export experts such as Global4PL. It helps businesses to apply for necessary import/export licenses or permits.

  • Wong Hao says:

    I would like to import semi-conductors from China to India. What are the India import duties?

  • Gunjan says:

    @ Wong Hao, Import Duty for Semi-Conductors is 29.28%.

  • Tim Burgess says:

    An interesting article, thank you. Is it possible to sell auto components into India exported from China? Does it matter which India Port I send them too? Plus what are the VAT and GST tax rates? Thanks.

  • Gunjan Sinha says:

    Thanks Tim, I am glad you liked our article. You can sell auto-components imported from China, the port chosen for imports does makes a difference, for facts, the port charges and services provided for clearance of goods, vary. The current duty on import of Auto components is 26.85%.

    Best Regards
    Gunjan

  • Zhang Ying Jia says:

    Please be answering what is the import duty in India for rechargeable batteries and solar powered lights

  • Gunjan Sinha says:

    Hi Zhang Ying Jia,

    Import duty of 29.28% is levied on rechargeable batteries and solar powered lights.

    Best Regards
    Gunjan

  • Nilesh says:

    pl. let me know what is the pre requisite to import a food processing machinery in India. we don’t have IEC. Is it compulsory to take IEC for this one time capital machinery import ? or we can have other alternate for the same?

    Is food processing machinery import is free in India or some approvals needed for the same?

    pl. also provide how much duty is applicable to such machinery.

    Thanks & Regards,

    Nilesh

  • Gunjan Sinha says:

    Hi Nilesh,

    It is a pre-requisite to avail IEC before executing any transaction of export/ Import in India. The present effective rate of custom duty on food processing machines is 23.26%.

    Regards
    Gunjan

  • Karthik says:

    Hi Guys,

    I am planning to import cheese from Australia.

    Just wondering if cheese come under restricted,canalized or prohibited items at all ?

    Is there any special document requirements for importing cheese ?

    You advise will be much appreciated.

    Thanks in advance

    Regards
    Karthik

  • Nishanth says:

    Hi Gunjan, this is a really informative site, much appreciated. i would like to know the procedure of importing building materials like floor & wall tiles/kitchen accessories and bathroom accessories to to india for personal use and the rates of import duty and various taxes. kindly advise. thanks.

  • Gunjan Sinha says:

    Hi Nishanth,

    Thanks for your Appreciation!

    To import for personal use, import permission need to be secured from government authorities. The nature of the permission i.e. General or specific imparted by the government in accordance with the need and requirement of the importer. Upon receipt of goods at port the commodities have to be cleared from custom authorities by submission of requisite documents like import permission, receipt of duty paid and likewise.
    The applicable rate of Import duty on ceramic tiles is @ 22.13 % and Sanitary Ware is @ 29.57 %. Post importation, the product is liable for transportation and port charges.

    Best Regards
    Gunjan

  • Gunjan Sinha says:

    Hi Karthik,

    Import of cheese is not subject to prohibited or canalised items, there is no apparent notification/ circular restricting the import of this product. Further, the import of Food items is subject to test check at the time of import, for any adulteration, you need to secure a Food License for trading in food items in India.

    Best Regards
    Gunjan

  • syed says:

    What is the best way to import limited container loads from China into India, especially is we are in a land locked place? What are the applicable duties on hardware items like cutting discs and stereo headphones? What paperwork required to consummate the process with relative ease? We have obtained an IE code.

    Appreciate a quick response.
    BTW, this is a very well written article with amazing clarity. Well done.

    Best regards,
    Syed

  • Gunjan Sinha says:

    Hi Syed,

    Thanks for your appreciation, we are glad that you liked our article.

    The goods are advised to transport to nearby sea-port as importing goods by road or airway may prove dearer. The shipping charges and custom clearance costs are based on the size of container and may vary for ports. The customs duty levied on cutting discs and Headphones, shall be 29.59 %.

    Following documents are mandatory:

    1. Bill of Entry;
    2. Commercial invoice;
    3. Bill of Lading;
    4. Certificate of Insurance;
    5. Letter of credit
    6. Importer’s license

    Please also note the document requirement varies for different ports, you are advised to ensure all the necessary checks are conducted in this respect.

    Best Regards
    Gunjan

  • chintan says:

    Hello Gunjan

    This is Chintan from Mumbai.I m planning to import 3d scanner from china. I have IEC code , VAT/TIN, what will be the custom duty for same. is it possible to bring this scanner while returning from china to Mumbai? the total weight is around 15kg.
    Thanking you.

    Regards
    chintan

  • Gunjan Sinha says:

    Hi Chintan,

    The Custom duty applicable on 3D scanner is 18%; For the commodities brought along with are governed by Baggage rules issued by Customs Department, items which have been utilized for personal use can be brought without any payment of Taxes, subject to satisfaction of officials that the product has been used earlier, and need to be satisfied with the customs authorities.
    However, new items cannot be brought without the payment of duty.

    Best Regards,
    Gunjan

  • kaushik says:

    Hi,

    We are in planning of import the over issued the news paper from south africa to india.

    pls. guide us that there is any import duty or only landing charges on it.

    pls. also guide tha HS code for the same.

    Regards;
    Kaushik

  • Gunjan Sinha says:

    Hi Kaushik,

    There is import duty on the import of newsprint print paper import. The present rate of import duty is 10.40%; government is likely to consider changes in this.
    The HS Code is 48010090 for scrap newspapers and for general news papers the HS code is 49021010; there are restrictions implied by Director General of Foreign Trade on the import of news papers for general use.

    Best Regards
    Gunjan

  • Sonal says:

    Hi Gunjan,

    What will be the documents required to import industrial electrical items and iron materials (casting & others) from china. Till now I only hv the Vat & cst no. With me and which all taxes and how much will be the tax % charged???

    Thanks,

  • Abishek says:

    Please let me know if I need an export license for exporting textiles, jewellery and bags from India.
    Also, if my export quantities are very small, example net profit is only Rs 30,000 do I still need an export license?

    Please let me know at the earliest. Great Site.

    Thanks,
    Abishek

  • Gunjan Sinha says:

    Hi Abhishek,

    The import export license is required for all imports or exports out of India.

    Best Regards
    Gunjan

  • Gunjan Sinha says:

    Hi Sonal,

    For importing, you may require an import export license as basic requirement, the taxes will be charged on the basis of the product’s classification as per HS codes, the tax of 24.5 % – 29.114 % may be charged on the goods.

    Regards
    Gunjan

  • Hi Gunjan

    I went through abv articles & all are really very nice, tips are correct & very informative.
    Good job & really appeciated !

    I just wanted to know some products which are easy to export from india without any more customs interference or intervene, should be free flow export products & also want to know duty on heavy eaerthmoving equipments parts/ like crane parts, hitachi & JCB Spare parts etc

    Also is it necessary to have a plant for import HMS 1 / 2 ? also want to know how LC works under import or export both. Pls advise.

    God bless u, Keep it up ……… Regards … Mukesh

  • Sanjeev says:

    Hi Gunjan,
    Is 3D printers considered as restricted entity requiring me to have an import license or IEC. I would like to import 3D printers but we are not importers.
    Please advise.
    Thanks,
    Sanjeev

  • Gunjan Sinha says:

    Hi Sanjeev,

    The 3 D printers require an additional BIS certification to import them, the relevant HS code for 3D printers is 8471 6029.

    Regards
    Gunjan

  • Gunjan Sinha says:

    Hi Mukesh,

    Most of the products are free to export from India, unless, they are listed on the restricted schedule, which is a ‘negative list’ of exports.

    The following are some of the top export items from India-

    1. Jewellery
    2. Vehicles
    3. Electronic items like TV
    4. Iron & Steel
    5. Organic chemicals/fertilizers.

    Major import of HMS is under the code 7204 4900 (Iron steel – Other). This item is free to import. There are no requirements for a machine or plant.

    For automobiles and earth moving equipments, rate of Duty = 12%

    Letter of credit is issued by the bank of the buyer to the seller, assuring the latter that he will be paid on successful shipment of the goods

    Regards
    Gunjan

  • Charles says:

    Hi Gunjan
    i have planned to import laptop accessories from china and sell it in india, i am having IEC,please let me know that,
    1. Should i have to get any patent/IPR/details regarding dealership from a chinese manufacturer for selling products in india.
    2. What will be the approx. Cost of custom duty if the gross cost of the materials is Rs. 72000, which includes transport charges.

    Thanks & Regards,
    Charles.

  • Gunjan Sinha says:

    Hi Charles,

    HS CODE: 84713010
    Portable digital automatic data processing machines, weighing not more than 10 kg. Consisting of at least a central processing unit, a keyboard and a display: Personal computer
    Rate of Duty = 0%.

    Patent details of the product will be helpful in getting the clearance with customs in India, a copy of all relevant documents must be preserved for future use.

    Best Regards
    Gunjan

Leave a Reply

Asia Briefing Bookstore Catalogue 2013 Dezan Shira & Associates
Social Buttons by Linksku