Unit – IV: International Marketing - Export Procedure and Documentation

Export Procedure:

Exporting goods from India involves several steps. The procedure typically includes the following:

• Obtaining Importer-Exporter Code (IEC): An IEC is a mandatory requirement to engage in export activities. It is obtained from the Directorate General of Foreign Trade (DGFT).

• Goods Classification and Custom Duty: Determine the Harmonized System of Nomenclature (HSN) code for your products and the applicable custom duties and tariffs.

• Preparing Goods: Ensure that your products meet quality standards and are properly packaged for export.

• Documentation: Prepare necessary documents such as the commercial invoice, packing list, bill of lading/airway bill, certificate of origin, and any specific documents required for the destination country.

• Customs Clearance: File shipping bills or bill of export with customs, and get your goods cleared.

• Port Entry: The goods are taken to the port of shipment for export.

• Customs Examination: Customs authorities may inspect the goods.

• Port Handling: The goods are handled, and customs documents are verified.

• Port Entry Documents: These include the Bill of Entry, shipping bill, and commercial invoice.

• Transportation to Destination: The goods are transported to the destination country through shipping or air.

Documents Required for Exports:

Essential export documents include:

• Commercial Invoice: Details the transaction value of goods.
• Packing List: Lists the contents and packaging details.
• Bill of Lading/Airway Bill: Serves as proof of shipment and title to the goods.
• Certificate of Origin: States the country of origin of the goods.
• Certificate of Inspection: Demonstrates product quality.
• Letter of Credit: Ensures payment by the buyer.
• Insurance Certificate: Provides coverage for the goods during transit.
• Export License: Required for controlled or restricted exports.
• Customs Declaration: Includes shipping bills and bill of export.

Guidelines to Exporters under GST Regime:

Under the Goods and Services Tax (GST) regime in India, the government has introduced various guidelines and provisions to facilitate and regulate exports. These guidelines are aimed at simplifying the export process, ensuring tax compliance, and promoting international trade. The guidelines and provisions that are relevant to exporters in the GST regime:

1. Zero-Rated Supplies:

   One of the fundamental guidelines for exporters under the GST regime is the concept of zero-rated supplies. This means that the GST rate on export goods and services is set at 0%, effectively exempting them from GST. Exporters do not need to charge GST on their invoices to foreign buyers.

   • Impact: This ensures that Indian goods and services are competitive in the international market, as foreign buyers do not have to bear the burden of GST.

2. Refund of Input GST:

   Exporters are eligible to claim a refund of the input GST they pay on the procurement of goods and services used in the export process. This refund can be claimed under the GST law.

   • Impact: This guideline prevents the accumulation of input tax credits and provides exporters with a financial incentive to maintain records of their input GST payments.

3. Integrated GST (IGST) Refund:

   For exporters, especially those engaged in the export of goods, IGST is levied on the export supply. However, IGST paid at the time of export can be claimed as a refund.

   • Impact: This ensures that exporters receive a refund of the IGST paid on their exports, making the overall transaction tax-neutral for them.

4. Letter of Undertaking (LUT):

   Exporters have the option to furnish a Letter of Undertaking (LUT) in lieu of paying IGST on the export of goods and services. This LUT exempts them from paying IGST, provided they meet certain conditions.

   • Impact: The LUT simplifies the export process and eliminates the need for exporters to pay IGST upfront, saving working capital and reducing compliance efforts.

5. GST Invoice for Export:

   Exporters are required to issue a GST-compliant invoice for export transactions. The invoice should include specific details such as the name and address of the recipient, place of delivery, the HSN code of the goods, and the GSTIN of the exporter.

   • Impact: Compliance with invoicing requirements ensures transparency and accuracy in export documentation.

6. Record-Keeping and Compliance:

   Exporters must maintain proper records and documentation of their export transactions, including invoices, shipping bills, and bank realization certificates. Compliance with GST laws and regulations is crucial.

   • Impact: Accurate record-keeping helps in the smooth processing of refunds and compliance with GST regulations.

7. GST Return Filing:

   Exporters are required to file their GST returns as per the prescribed schedule. The returns should accurately reflect the export transactions. Delayed or incorrect filing can affect refund claims.

   • Impact: Timely return filing is essential to maintain compliance and ensure the smooth flow of export-related refunds.

8. Export through Ports and Airports:

   To claim a refund of GST on exported goods, it is necessary to export through designated ports and airports. The government has specified these as authorized locations for export.

   • Impact: Exporters must plan their logistics to align with these designated locations to avail themselves of GST benefits.

9. Export Incentives and Schemes:

   Apart from the core GST guidelines, the government offers various export promotion schemes to encourage and incentivize exporters. These include the Merchandise Exports from India Scheme (MEIS), Service Exports from India Scheme (SEIS), and others. These schemes provide financial incentives to exporters.

   • Impact: Exporters can benefit from these schemes to improve their competitiveness in the international market.

10. E-way Bill for Export:

    For the movement of goods, including for export, the e-way bill system is applicable. Exporters need to generate e-way bills when goods are transported within India for export purposes.

    • Impact: The e-way bill system ensures that goods are traceable and helps in avoiding delays during transportation.

Financing of Exporters:

Financing options for exporters in India include:

• Export Credit Guarantee Corporation (ECGC): Provides export credit insurance to protect against payment risks.

• Pre-shipment and Post-shipment Credit: Banks offer financial assistance for pre-shipment and post-shipment requirements.

• Foreign Currency Loans: Exporters can avail foreign currency loans to manage currency risk.

Pre-shipment Finance:

1. Purpose: Pre-shipment finance, also known as packing credit, is designed to meet the working capital needs of exporters before the shipment of goods. It helps businesses prepare and deliver the goods to the overseas buyer.

2. Timing: This type of finance is availed before the shipment of goods, starting from the manufacturing or procurement stage and continuing until the goods are loaded onto the transport vehicle or vessel.

3. Use of Funds: Exporters use pre-shipment finance to cover various expenses, such as purchasing raw materials, processing, manufacturing, packaging, transportation, and other costs directly related to preparing the goods for export.

4. Security: Typically, the primary security for pre-shipment finance is the export order or letter of credit, which serves as collateral. The exporter may also need to provide additional collateral, such as a bank guarantee or a lien on inventory.

5. Repayment: The loan is usually repaid from the proceeds of the export order, which includes the sales proceeds from the overseas buyer or the realization of export documents.

6. Forms of Pre-shipment Finance: Pre-shipment finance can be in the form of cash credit, export bills purchased or discounted, or export packing credit.

Post-shipment Finance:

1. Purpose: Post-shipment finance, as the name suggests, is provided after the shipment of goods. It helps exporters in the period between the shipment of goods and the receipt of payment from the overseas buyer.

2. Timing: Post-shipment finance is availed after the shipment is made, covering the period from shipment to the point of receipt of payment. It can be a short-term or medium-term credit.

3. Use of Funds: Exporters use post-shipment finance to meet various expenses incurred after the shipment, such as port charges, transportation costs, marketing, and financing the waiting period for payment.

4. Security: The primary security for post-shipment finance is the export documents, including bills of lading, invoices, and the bill of exchange. These documents serve as collateral for the loan.

5. Repayment: Exporters repay post-shipment finance after they receive payment from the overseas buyer. The bank recovers the loan from the proceeds of the export order.

6. Forms of Post-shipment Finance: Post-shipment finance can be in the form of export bills negotiation, export bills collection, or export bills purchase.

Export Promotion Capital Goods Scheme (EPCG):

The Export Promotion Capital Goods (EPCG) Scheme is a vital part of India's foreign trade policy aimed at promoting exports, boosting the competitiveness of Indian industries, and encouraging the import of capital goods. Under the EPCG Scheme, exporters can import capital goods at concessional or zero customs duty rates, subject to certain export obligations. This scheme plays a crucial role in facilitating technology up-gradation, enhancing the export capacity of Indian industries, and promoting economic growth.

Features and benefits of the EPCG Scheme:

1. Customs Duty Concession: One of the primary benefits of the EPCG Scheme is the ability to import capital goods at a reduced or zero customs duty. This significantly lowers the cost of acquiring capital equipment, making it more affordable for businesses.

2. Export Obligations: To avail the benefits of the scheme, exporters must commit to fulfilling specific export obligations. These obligations typically require the exporter to achieve a certain level of exports within a prescribed time frame, which is usually five years from the date of issuance of the authorization.

3. Capital Goods Definition: The EPCG Scheme defines "capital goods" as any plant, machinery, equipment, components, and technological items that are used for manufacturing, packaging, or any other process. This broad definition allows various industries to benefit from the scheme.

4. Prohibited and Restricted Items: Certain categories of goods, such as nuclear reactors, arms, ammunition, and other defense-related items, are not eligible for benefits under the EPCG Scheme. Additionally, the scheme is not available for items specifically restricted for imports.

5. Flexibility in Fulfilling Obligations: The fulfillment of export obligations under the EPCG Scheme can be met by exporting products manufactured with the imported capital goods or through the export of goods manufactured by others, provided that the exporter follows the prescribed norms.

6. Authorization Issuing Authorities: The Director-General of Foreign Trade (DGFT) issues authorizations to eligible exporters for availing benefits under the EPCG Scheme.

7. Monitoring and Reporting: Exporters under the scheme must maintain records and submit periodical reports to the DGFT to verify compliance with export obligations. These reports help authorities ensure that exporters are fulfilling their commitments.

8. Transferability: In some cases, the authorization under the EPCG Scheme can be transferred to another person, subject to specific conditions. This allows greater flexibility for businesses in managing their capital equipment.

9. Redemption of Export Obligations: Exporters can choose to redeem their export obligations through physical exports or deemed exports (supply to special economic zones, for instance) and service exports.

10. Advance Authorization for Annual Requirements: Exporters can also seek advance authorizations under the EPCG Scheme to meet their annual requirements for inputs, which can be used in the manufacture of export products.