Entering an import-export business in India offers a large international market and plenty of business opportunities. But before entering international trade, it is crucial to follow the legal formalities needed to create a solid foundation. Following these necessary legal procedures, you can avoid penalties, minimize risks, and create an easy and compliant operation for your international business.
Here at this blog, we will take you through the 7 steps of law required to begin a successful import-export business in India. From the selection of appropriate business structure to customs and logistics, we’ve got you covered!
1. Choose the Proper Legal Business Structure
Step number one in beginning your import-export business is selecting the proper legal structure. This decision will have far-reaching effects on tax liabilities, liability, and the way you conduct business.
The three most sought-after business forms for an import-export venture are:
Sole Proprietorship: Simple and low-cost option for a small venture. But on the downside, the owner has unlimited personal liability.
Partnership / Limited Liability Partnership (LLP): Best if your venture is going to have multiple partners. LLPs offer limited liability protection, which isolates personal assets from business liabilities.
Private Limited Company: Most suitable for individuals who are looking to expand and prefer to raise funds. Private Limited Company provides limited liability, i.e., your personal assets remain secure. Further, it provides credibility as you get registered as a Private Limited Company with the Ministry of Corporate Affairs (MCA), and money services get readily available.
Once you have selected the structure, you would then need to complete the corresponding registration process.
2. Get a PAN and Run a Current Account
Having a Permanent Account Number (PAN) is a must for every Indian business. It’s needed for tax-related as well as legal business transactions.
After getting your PAN, the next thing to do is to open a current account in the name of your company. This will be required for processing international payments, be it import or export transactions. Foreign exchange dealing will not be possible without a current account and banks will not process transactions pertaining to international trade.
3. Obtain Importer Exporter Code (IEC)
The Importer Exporter Code (IEC) from the Directorate General of Foreign Trade (DGFT) is likely the most significant license you will need to get to start an import-export business. You are not legally allowed to export or import goods in India without it.
Here are the steps you need to follow to apply for IEC:
Visit the DGFT portal.
Provide necessary information like your PAN, address, and bank account number.
Upload identity and business documents proving your identity.
Pay a minimal application fee.
After making the application, the IEC will normally be issued within 1-3 working days. The code also allows you to avail benefits of government schemes for exports.
4. Register Under GST
Goods and Services Tax (GST) is the tax imposed on goods and services supply in India. GST registration is mandatory if your business turnover is over the notified limit or you are importing products.
Step to register under GST:
Visit the official GST portal.
Enter your business PAN, Aadhaar, address proof, and bank account details.
You will be confirmed and given a GSTIN (Goods and Services Tax Identification Number) in the future.
Not only do you become obligated for paying tax with GST registration, but as an added feature, you can even avail of the Input Tax Credit (ITC) for foreign imports, hence making monetary operations hassle-free for your enterprise.
5. Select Products and Understand Legal Laws
After registration of business and meeting the minimum legal requirements, the following is to select what products to import and export. It is highly important to decide on the appropriate products as there are some products with special licenses or restrictions.
Points to be taken into account:
Product-specific licenses: There are certain products such as foodstuffs, drugs, and chemicals that contain special licenses for exportation.
Restricted or Prohibited Items: Certain products can be prohibited or restricted from importation or exportation. It’s necessary to acquaint yourself with the foreign trade policy for such goods.
How to find product-specific rules:
Go to the DGFT’s Foreign Trade Policy page for the latest product regulations.
Know the international trade restrictions and requirements for your chosen products.
6. Join Export Promotion Councils (EPCs)
Although not mandatory, joining an Export Promotion Council (EPC) can offer significant advantages. EPCs provide recognition, insights into foreign markets, and access to government export schemes. Some popular EPCs include:
APEDA: For exporters of agricultural products and food.
FIEO: For miscellaneous exporters.
GJEPC: For jewelry and gem exporters.
Membership in an EPC adds prestige to your business and ensures that you’re aware of the latest export benefits and market trends.
7. Organize Logistics & Customs Clearance
Logistics and customs clearance are essential to an import-export business being successful. Any discrepancy in this part may cause delays and loss of funds. Here is how you can arrange for a smooth operation:
Customs House Agent (CHA): Hire a reliable CHA or freight forwarder to do the paperwork and clearing of goods.
ICEGATE Registration: Get registered on the Indian Customs portal (ICEGATE) to submit electronic papers and track shipments.
Ensure all the papers such as the bill of lading, shipping bill, packing list, and commercial invoice are well prepared to avoid customs holdups.
With timely updated documentation, you can ensure hassle-free customs clearance and avoid unnecessary disruption of your trade business.
Bonus Import Export Success Tips
Start Small: Start the market testing first before spreading your operations in an effort to be able to quantify demand and detect possible pitfalls.
Attend Trade Fairs and Expos: These are wonderful venues for setting your contacts and visibility.
Keep Good Records: Keep proper records of every transaction and audit-ready.
Engage Professional Services: Co-act with professionals such as Legal Dalal in order to service your business papers, compliance, and government submissions.
Conclusion
Beginning an import-export venture in India has the astounding prospects of growth in the global market. With these 7 lawful steps—from choosing the right business form to customs clearance—your venture will be ready to flourish in the long run.
Still not knowing where to start? Legal Dalal can assist you with company registration, IEC purchase, GST return filing, and all the papers that will have your venture fully legally compliant.
