With the advent of Liberalisation, Globalisation and Privatisation, India took its first step towards becoming global, that is to say, from trading within the geographical boundaries to reaching beyond those same boundaries. Fast forward to the 21st century, India is not only a global participant but resultantly has also witnessed economic development by leaps and bounds.
India’s participation has been quite significant when it comes to foreign trade, since the ancient times and while it took a dip during British rule, the same changed and gained momentum post-independence and have assumed the role of engine of growth, the engineers being the entities participating in international trade. These entities have to follow a set of rules to get their products in the foreign market and as such, it is pertinent to have a brief knowledge of the law of the land concerning the import and export of goods and services.
Import and export is a major contributing factor to the country’s Gross Domestic Product (GDP) which is essentially an indicator of the country’s economic health and progress. The fact that no country is self-sufficient concerning resources makes it impossible for any country to be a closed economy. Be it for the unequal distribution of natural resources or the territorial division of labour and specialisation, the willingness to enhance the standard of living of the people ultimately paves the way for foreign trade.
Import as such helps in meeting the shortage of essential consumer goods, capital goods and various inputs which cannot be amply produced within the country. Such goods include sugar, ores and minerals, petroleum and crude products, chemical and allied products etc.
The export basket of India, on the other hand, includes traditional items (such as tea, cotton textiles, jute, cashew nuts etc.) and non-traditional items of export (such as aluminium, electronic goods, ferroalloys, non-ferrous metals, machinery and instruments etc.).
The import and export of goods and services, apart from meeting the increasing consumer demands and resultant enhancement of the standard of living also helps the economy in terms of foreign exchange. The foreign exchange obtained by way of such exports accounts for favourable commercial conditions within the country which in turn attracts more capital and investment funds. Hence as a general principle, it is preferred that an economy has a favourable balance of trade, that is to say, the value of exports is greater than the value of imports. A country needs to have a favourable balance of trade because the low valuation of domestic currencies may result in lesser foreign investment as they lose purchasing power in comparison with other countries. From April 2020 to July 2020, the economy estimated a trade surplus of US$ 14.06 billion wherein the export and import stood at US$ 141.82 billion and US$ 127.76 billion, respectively.
From the abovementioned, it is obvious as to the role that imports and exports play in nurturing the health of the economy. It is important for an entity intending on pursuing import or export business to be aware of the legal framework concerning the imports and exports. A brief understanding of the different legal frameworks concerning Foreign Trade includes:
Taxes collected by the customs authority on the imports and certain exports are known as imports and exports duties. Generally, the export and import of goods is free. It should, however, be noted that the term ‘free’ in connection to exports, herein, does not imply that one does not need to pay any tax on the same but rather, such goods do not require a license or prior authorization.
Now, whether goods to be exported are free, restricted or prohibited can be ascertained as given under the Foreign Trade Policy and Schedule 2 of the Indian Trade Classification (Harmonized System) [ITC(HS)] and Schedule 2 of the Handbook of Procedures, Volume I, respectively. The ITC(HS) is an Indian Trade Classification system which is based on the international coding system followed for export regulation, known as the Harmonized System of Coding.
To export or import goods, the concerned entity has to:
It should be noted that when exporting, the trader has to register with the Indian Chamber of Commerce (ICC) which certifies that the products so exported originated in India by way of issuing Non-Preferential Certificates of Origin.
It is pertinent to note that the compliance requirements as such can either be performed by the entities engaged in export or import or the same can be done by a customs breaker.
There is a list of documents that are necessarily required to be submitted with the authorities for carrying out export and import businesses. The documents which are mandatorily required for exporting or importing have been specified under FTP 2015-2020.
There are specific provisions which provide for the steps to be followed for both imports and exports. However, there are no specific provisions regarding the procedure for imports and export duties, that is to say, a set of steps for the procedure, as the same comes within the ambit of the procedure for imports and exports. Even when dealt separately, there are only two stages to import duties and export duties.
As mentioned earlier, taxes are charged on goods imported or exported. Concerning imports, charges are calculated as given under Schedule I of the Customs Tariff Act, 1975. Imports duty may be basic customs duty as specified under the Schedule 1 of the Customs Tariff Act, 1975, additional duty as per Section 9 of the said Act, special additional customs duty and in certain circumstances anti-dumping duty or safeguards duty as specified under Section 9A and Section 5B of the Customs Tariff Act, 1975.
Additional duties, also known as Countervailing duty are levied on such imported products which are similar to the ones produced within the country thereby levelling the market reception for these products.
In the possible instances where the imported articles may pose a threat to the domestic market, the authority may impose an anti-dumping duty (penalty levied upon low-priced imported products) or safeguards duty (duty levied on articles that may cause serious injury to the domestic market), as per the situation.
On the other hand, in exports, the export duty which is either levied by way of a fixed sum based on the weight of the product or ad valorem i.e., a percentage of the export value will be levied as a charge and the same is determined as per the Schedule II of the Customs Tariff Act, 1975 together with the export cess specified in Appendix I to the said schedule.
Section 11 of the FTDRA, 1992 provides for the penalty to be levied on any import or export made in contravention of the said Act, rules, orders and FTP. As per the provision:
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