How to do business in India
Getting finance to fulfil an export contract to India
Schemes are available to UK companies selling products and services to India to make it easier to fulfil an export contract and grow your business. Contact your bank or specialist financial organisations for assistance.
UK Export Finance (UKEF) has significant risk capacity to support exports to India. Contact one of UKEF’s export finance advisers for free and impartial advice on your finance options: www.gov.uk/government/publications/find-an-export-finance-manager.
Getting paid in India
You need to use secure terms of payment in India through a letter of credit or documentary collection via your bank. The other option is payment or partial payment in advance. Open account is not allowed in India.
Your contract should always clearly state the terms for delivery and payment of goods and services. Indian law does not regulate late payments, and settlement action through the courts can be expensive and take a long time.
Find out more about managing money in India by visiting: www.ukibc.com/india-guide/how-india/managing-money.
Transferring money from India
There are exchange controls in India. Foreign currency money transfers from India are subject to restrictions under the FEMA.
Legal considerations of doing business in India
The legal system in India is based on English common law and the judiciary is relatively independent. However, court delays can run to many years making litigation very expensive and lengthy.
Contact the DIT team in India to help find tax and legal advisers before entering into agreements. See the ‘Resources’ section of this guide for more information.
Controlled goods export licences for India
You must have a licence to supply anything on the UK strategic export control lists to India.
Nuclear technology licence applications are considered against the Nuclear Suppliers Group (NSG) trigger list and NSG dual-use list for nuclear transfers to India. This will be done on a case-by-case basis for all items destined for International Atomic Energy Agency (IAEA) safeguarded civil nuclear facilities in India.
Find out more about getting a licence to export military or dual use goods, services or technology to India by visiting: www.gov.uk/guidance/beginners-guide-to-export-controls. You can also find out about supplying goods on the UK export control list to India.
Find out which products will need certification or licensing before they can be exported to India. Visit: www.gov.uk/starting-to-export/licences.
Import restrictions in India
The Ministry of Commerce and Industry (MCI) in India lists goods where restrictions are imposed or import is not allowed. For more information, visit: www.dgft.gov.in.
Standards and technical regulations in India
Imports of some products are subject to compliance with specified Indian quality standards. Manufacturers must obtain certification from the Bureau of Indian Standards (BIS) before exporting such goods to India. BIS does offer pre-certification subject to production inspections. See: www.bis.org.in.
Around 109 products are subject to compliance with these standards, including:
food preservatives and additives
certain electrical appliances
some types of gas cylinders
Find out more about the Foreign Manufacturers Certification Scheme (FMCS) by visiting: www.bis.org.in/fmcs/index.asp.
The Food Safety and Standards Authority of India maintains a Food Import Clearance System which can be accessed to understand the requirements for export of food to India. See: www.ics.fssai.gov.in/AOLogin.aspx.
Intellectual property (IP) in India
You must register your intellectual property in India to guard against potential infringement. Registration of patents and trademarks can take months and sometimes years, so you should plan well ahead.
If faced with infringement or piracy you should engage a local legal practitioner who understands the context and has experience of initiating appropriate civil or criminal proceedings.
Read guidance on how to protect and enforce your intellectual property rights in India at: www.gov.uk/government/publications/intellectual-property-rights-in-india.
Taxes & tariffs in India
The Central Board of Excise and Customs provides information on Indian customs tariffs. India’s current customs regulations are guided by the Export Import Policy of 2012 to 2017. In addition to customs duties, a 1% handling fee is imposed.
Indian customs regulations allow:
temporary import of goods into India with drawback of some customs duty possible
import of goods for use or display at exhibitions and trade fairs, subject to certain conditions
countervailing duty (CVD), Customs Education/CESS and Special additional Duties may apply
[Source – UKIBC]
India has signed a Double Taxation Agreement with the UK. See: www.gov.uk/government/
If you are registered for value added tax (VAT) you can zero-rate the VAT on most goods you export to India. You will need to get evidence of the export within 3 months from the time of sale.
To find out more about VAT on exports to non-EU countries and zero-rating conditions, visit: www.gov.uk/guidance/vat-exports-dispatches-and-supplying-goods-abroad#vat-on-exports-to-non-eu-countries.
Corporate taxation in India
If you set up an office in India, corporate tax will apply.
Non-resident companies and branches of foreign companies are taxed at a rate of 40% plus other surcharges. Domestic companies and partnerships are charged at 30% plus surcharges.
India makes provision for advance rulings to guide investors and exporters on their tax liabilities, and on the customs and excise duty implications of transactions.
India Goods and Services Tax (GST)
The new Indian Goods and Services Tax (GST) is a destination-based tax on consumption of goods and services. The tax accrues to the taxing authority which has jurisdiction over the place of consumption (also called the place of supply).
It is proposed that GST will be levied at all stages from manufacture through to final consumption, with credit of taxes paid at previous stages available as set-off. Only value-addition will be taxed and the burden of tax is to be borne by the final consumer.
GST will replace existing taxes currently levied by the centre, such as Excise Duty, some customs duties (known as CVD), Special Additional Duty of Customs (SAD), Service Tax, State VAT, Central Sales Taxes (such as Luxury Tax, Entry Tax), Entertainment and Amusement Tax, taxes on advertisements and taxes on lotteries, betting and gambling. Taxes, levies and fees that are not specifically related to supply of goods & services will not be subsumed under GST.
Some goods – such as the supply of alcohol for human consumption, and some petroleum products (petroleum crude, petrol, high-speed diesel, natural gas and aviation turbine fuel) – are temporarily excluded, and electricity too. These will continue to be taxed under the existing taxation system (VAT & Central Excise).
Introduction of the new GST has required amendments to the Indian Constitution so as to simultaneously empower both the centre and the states to levy and collect the tax.
Under the new GST regime, an Integrated GST (IGST) will be levied and collected by the centre on inter-state supply of goods and services. Imports of Goods and Services will be treated as inter-state supplies and IGST will be levied on the import of goods and services into the country.
The incidence of tax will follow the destination principle and the tax revenue will accrue to the state where the imported goods and services are consumed. Full and complete set-off will be available on the GST paid on import of goods and services.
A Goods and Service Tax Network (GSTN) has been created to provide a shared IT infrastructure and services to central and state governments, taxpayers and other stakeholders for the implementation of GST. This network will facilitate registration, forward the returns to central and state authorities, calculate and settle IGST, match tax payment details with banking networks, provide various MIS reports to the central and state governments based on taxpayer returns and provide analysis of taxpayer profiles.
By amalgamating a large number of central and state taxes into a single tax, it will pave the way for a common national market, and for consumers, the biggest gain will be in terms of a reduction in the overall tax burden on goods, currently estimated at 25%-30%.
Introduction of GST will also make products competitive in both domestic and international markets, which should instantly spur economic growth. There may also be revenue gain for the centre and the states due to widening of the tax base, increase in trade volumes and improved tax compliance. Last but not the least, this tax, because of its transparent character, will be easier to administer, with fewer rates and exemptions.
Customs and documentation
Complying with HMRC regulations to export to India
You must make export declarations to HMRC through the National Export System (NES) to export your goods to India.
Find out how to declare your exports through the NES to India at: www.gov.uk/guidance/export-declarations-and-the-national-export-system-export-procedures.
You must classify your goods as part of the declaration, including a commodity code and a Customs Procedure Code (CPC).
Find commodity codes and other measures applying to exports in the UK Trade Tariff: www.gov.uk/trade-tariff.
Find out how to contact the HMRC Tariff Classification Service for more help: www.gov.uk/
You must declare any goods that you take with you in your baggage to sell outside the EU. For more information, see: www.gov.uk/take-goods-sell-abroad.
Temporary export of goods to India
You can use an Admissions Temporaire (ATA) Carnet to simplify the customs procedures needed to take goods into India temporarily. For more information, see: www.gov.uk/taking-goods-out-uk-temporarily.
You need an export licence to take dual use goods to India, temporarily.
Use the SPIRE system to apply for a temporary export licence: www.spire.trade.gov.uk/spire/fox/
Customs in India
The Central Board of Excise and Customs provides information on Indian customs tariffs. India’s current customs regulations are guided by the Foreign Trade Policy 2015 to 2020. See: www.cbec.gov.in/index.
You can find more about import tariffs in the Market Access Database: http://madb.europa.eu/madb/
Your goods should be appropriately packed for India. Packages may receive heavy handling and be left in the open air for longer than anticipated, so you must take into account India’s climate.
Documentation required for exporting to India
Mandatory documents required for import of goods:
bill of lading or airway bill
commercial invoice cum packing list
bill of entry
The MCI publishes a listing of restricted and prohibited items. See: www.dgft.gov.in.
Exporting will involve paperwork for transport, customs clearance, insurance and payments. According to the British Chambers of Commerce you will be typically be required to complete 11 documents to export to India. These must be dealt with in detail and may take more time and resources than you expect. At first you may want to hire a consultant to help with the paperwork whilst your export volumes grow and you build up the necessary in-house skills and resources.
The documents required will depend on the products you export to India. Apart from the documentation required for the transportation of goods, insurance and payment mechanism you may also need a clear written contract which covers at least the following:
where and when the goods will be delivered
who arranges transport and insuring of goods
who handles customs procedures and pays any duties and taxes
currency of payment and what payment method will be used
Export documentation such as:
know your customer (KYC)
GATT (General Agreement on Tariffs and Trade) / DGFT (Directorate General of Foreign Trade) declaration
purchase order / letter of credit
bill of lading / airway bill
bill of entry
commercial invoice and packing list
technical write up for specific goods if any
In addition to the documents mentioned above, documents may be required for the export of certain specific goods. Your customer in India should tell you what paperwork they require at their end and some of the paperwork can be arranged by your importer in India.
Export licence requirements
Although the majority of goods can be shipped to India without an export licence, for certain goods the receiver should hold a special import permission or licence from the Government of India. A list of those can be found at the website of Directorate General of Foreign Trade.
[Source – UKIBC]
Standards, certifications and labelling requirements
The standards followed in India are generally in line with international norms and most are harmonised with International Organisation for Standardisation (ISO) standards. However, imports of some 109 products are subject to compliance with specified Indian quality standards. To remain compliant with the law, manufacturers of these products must obtain certification from Bureau of Indian Standards (BIS) before exporting such goods to India.
Labelling requirements in India require that all imported pre-packaged commodities, intended for direct retail sale, must carry the following declarations on the label:
name and address of the registered importer
generic or common name of the commodity packed for import
net quantity in terms of standard unit of weights and measurement – in metric
month and year of packaging in which the item is manufactured, packed or imported
maximum retail sales price (MRP) at which the goods, in packaged form, may be sold to the end consumer
It is important to remember that consignments to India should be appropriately packed. Packages may receive heavy handling and be left in the open air for longer than anticipated. Remember much of India has a hot and humid climate, as well as seasonal extremes such as the monsoons.
Labelling requirements in India
All imported pre-packaged commodities intended for direct retail sale must include specific information on the label.
Declarations may be printed in English or Hindi. All imported goods as well as transport documents must show standard units of measurement and weight.
You must comply with these requirements for your consignment to be cleared by customs in India.
Slightly different arrangements apply to pre-packaged commodities such as raw materials or components that need further processing before they are sold to consumers.
[Source – UKIBC]
Shipping your goods to India
If you are not knowledgeable about international shipping procedures you can use a freight forwarder to move your goods. A forwarder will have extensive knowledge of documentation requirements, regulations, transportation costs and banking practices in India.
Find freight forwarding companies to help you transport your goods to India via the British International Freight Association (BIFA) at: www.bifa.org/home; or the Freight Transport Association (FTA): www.fta.co.uk.
Selling and distribution
Before you start exporting to India, you will need to make a few fundamental choices about selling and distribution. There are four main ways in which to sell your product or service: selling direct, selling through local agents or distributors, contractual methods and setting up an overseas site.
An agent is an individual or firm you employ to sell your product or service. A distributor, on the other hand, buys your product from you and then sells it on to the end users. It is important to find the right representative, who is familiar with the local market and can help you find customers, distribution channels and handle documentation. In addition to market research UK India Business Council (UKIBC) also offer an introductions service where they can help you identify and qualify relevant contacts in the Indian market.
[Source – UKIBC]
Posting goods to India
Find out about sending goods by post to India from Royal Mail at: www.royalmail.com/india.
Shipping dangerous goods to India
Special rules apply if you are shipping dangerous goods to India. For more information, see: www.gov.uk/shipping-dangerous-goods/what-are-dangerous-goods.
Terms of delivery to India
Your contract should include agreement on terms of delivery using Incoterms. Visit: http://iccwbo.org/resources-for-business/incoterms-rules/ for more information.
[Source – www.gov.uk/guidance/exporting-to-india]
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