Thereare various steps that need to be completed before an export order is executed. Here, we have discussed some preliminary steps.
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As per the Foreign Exchange Regulation Act, 1974, exporters need to obtain a code number from the Reserve Bank of India(RBI). To obtain this code number,an exporter has to fillup a prescribed proform a CNX form that can be obtained from the Exchange Control Department of the RBI. This code is used in the various export documents that an exporter needs to submit.
An exporter must be a member of certain bodies such as the Export Promotion Council and Productivity Council. These bodies work in collaboration and offer various services. An exporter may need the guidance and help of these bodies for obtaining the ‘Certificate of Origin’, which is one of the most essential documents needed for export. An exporter may also take an advantage from membership of other institutions such as India Trade Promotion Organisation.
To run an export business, an exporter may need grants and benefits from the government and authorised institutions from time to time. To avail the benefits of the import policy of the government, it is essential for an exporter to get the status of a registered exporter. An exporter should be registered with the concerned registering authority. An exporter can earn the membership of the Export Promotion Council based on his past export performance, good payment record and experience.
An exporter must have a bank account with a reputed commercial bank to deal in foreign exchange. This makes it easier to receive payment for export. The exporter can avail other export-supportive services from a good bank.
Enquiry and Offer
An importer makes an enquiry to the exporter for knowing the details of the goods, description, catalogue numbers or grades, sizes, weights or other characteristic features and the time and method of delivery. This kind of enquiry can be made by the importer using regular mail or e-mail. An offer is submitted by an exporter as a quotation or proposal.
An accepted quotation or offer becomes an order. The exporter usually makes the offer in the form of a proforma invoice that usually addresses the prospective buyer. Once the proforma invoice is accepted, it becomes a confirmed order. Generally, the proforma invoice is duly signed by the buyer in triplicate copy, and he is required to return two copies duly signed by him.
Trade activities like exports are regulated by licenses. An export license is issued by a licensing agency which helps exporters to ship products in a foreign market. Goods of the description specified in Schedule 1 of the Export (Control) Order, made under the Import and Export (Control) Act, 1947, may be exported only under and in agreement with a license approved by the Central Government.
The exporter must ensure that the goods sought to be exported do not fall in the banned list of Import and Export (Control) Act, 1947. If the goods to be exported require a license, it is compulsory to obtain it before finalising a contract. The list contains names of the licensing authorities and items whose export is banned, items regulated by the export license and items that may be freely exported.
Production of Goods
After an export order is confirmed, the order is processed, so that the goods/services can be delivered at a specified time without compromising on quality. An exporter takes the necessary steps for the production of the goods. The goods can be produced at a factory or can be obtained from a supplier.
If the exporter cannot support the production,he must find a supplier, who can ensure timely availability of the goods. When the goods are purchased from the domestic market, sales tax is charged. However, exports are free from sales tax, provided that suitable evidence of export is made available against such purchases.
Some of the important objectives of production for exporter include:
- Producing high quality output in the right quantity at the right time and cost: Producing output at the right time is the importantparameter to judge the effectiveness of an organisation. Similarly, producing the output in right quantity and at minimised cost leads to an increase in the profitability of an organisation.
- Providing excellent service: Every exporter should strive to produce a product that satisfies the needs of importer in terms of the quality, cost, and timely delivery of the product.
Excise Duty Rebate
In India, export products are exempted from excise duty, which is a tax that the government imposes on all manufactured items. The excise duty is collected at source, i.e. the area where the products are manufactured. Excisable goods can be exported either under a claim of rebate of duty paid or under a bond without paying duty.
For claiming the rebate on the paid excise duty, following documents are needed (as per http://www.dcmsme.gov.in/policies/central/t-ed. htm):
- A request on the letterhead of the exporter containing claim of rebate, ARE-1 numbers and dates, corresponding invoice numbers and dates, amount of rebate on each ARE-1 and its calculations
- Original copy of ARE-1
- Invoice issued under Rule 11 of CER, 2002
- Self attested copy of Shipping Bill (EP copy) and Bill of lading/Airway Bill
- Proof of duty payment
- Disclaimer certificate (in case the claimant is other than the exporter)
- Any other document in support of the refund claims
Goods Exempted from whole of the Duty of Excise/ The Additional Duty of Excise
Following is a list of the goods exempted from the whole of the duty of excise:
- Specified goods produced without the aid of power. All capital goods, intermediate goods and inputs if captively consumed within the factory of their production or used in the manufacture of specified final products in the manufacturer or specified goods.
- Specified goods if manufactured on job work basis/cleared for job work/manufactured as a job work and used in the manufacture of final products.
- Genuine specified products of village industry/certain specified goods manufactured in the rural areas by Co-operatives/K.V.I.C., etc.
- Goods meant for repairing, reconditioning and reengineering.
- Goods sent abroad as exhibits for exhibition in International Trade Fairs or for demonstration or carrying out tests or trials.
- Certain goods if cleared for display in any fair or exhibition in India.
- Goods produced in a technical, educational and research institute during the course of technical training or an academic or vocational nature or carrying out experiments or research.
- Goods supplied to specified research institutions.
- Goods produced in Government Factories, Mines, Mints, prisons Defense Production etc.
- Goods manufactured by specified units/Institutions for use by government departments or defense purposes.
- Goods supplied for defense or other specified purposes.
- Specified goods manufactured in a state government factory and intended for use in any of its department.
- Duty in excess of 10% is exempted on goods for supply to the Gas Authority of India Limited, Oil and Natural Gas Corporation Ltd., or the Oil India Limited.
- Certain specified goods connected with solar and natural energy.
- Improved Chulhas (including smokeless Chulhas) capable of burning wood, agro-waste, cow-dung, briquettes and coal.
- Good required for Nuclear Fuel Complex.
- Duty in excess of 5% ad valorem on pollution control equipment.
- Goods manufactured by institution for handicapped persons.
- Good produced or manufactured in a Free Trade Zone.
- Specified goods used by units in Export Processing Zones/Free Trade Zones.
- Goods brought to any gem and jewellery manufacturing units set up in Santa Cruz Electronics Export Processing Zone (SEEPZ).
- Goods produced in 100% Export Oriented undertakings but not sold within India.
Exports Under Bond
According to section 65 of the Customs Act and under Rule 151A of Central Excise Act, an exporter can take the imported material into a bonded warehouse without paying the customs duty and indigenous excisable goods without paying the central excise duty on goods. To gain this benefit, the exporter has to submit a bond to the excise authorities. Such bonds are usually backed by a bank guarantee for a specific amount.
The main aim for execution of bond is that in case of its non-fulfilment of obligation, the excise duty can be claimed from the exporter. The value of the bond is equivalent to the duty amount payable on the goods that the exporter is planning to export. The bond is supported by the bank guarantee for protecting the financial interests of the excise department.
The following exporters are allowed to use a bond with surety and do not have to furnish any cash security:
- Super star trading house
- Star trading house
- Export house
- Registered exporters
- Exporters registered with central excise department