What are licenses needed for import-export business in India?

A licence is a form of a permit issued by the government allowing firms to operate within the jurisdiction of the government. Operating a business depends on purchasing a business licence which helps in providing the buyer with the legal authority to run the enterprise lawfully. It’s important to know about the requirements of the licence and an attorney can help you if you have queries related to licensing. Every country, or state follows a unique set of licensing criteria and there are many different types of licenses and permits. 

Some companies don’t have licence requirements so it’s essential to determine whether you are required to have a licence or not. If you don’t have licences you can face many different fines and even you will be forced to close your business. Some businesses require licenses but others don’t. The type of licence depends on the location of your business. 

Licensing process can be complex, it’s difficult to obtain for companies with few resources or small enterprises. In India various factors determine obtaining a business licence, these factors are the type and the size of its business, industry, and jurisdiction. In India, Businesses need to obtain and renew various permits and licenses. 

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Important of Business Licence 

A business licence is simply permission that the state or any other body of government issues to firms to conduct business in India. The federal government, state, and municipal government bodies are in charge of issuing licenses to operate a range of commercial operations. 

Business licenses are important, with the help of licenses the government is able to increase accountability, and transparency in the business and provide consumer protection. If there are no appropriate business licenses then the government will face many different difficulties in dealing with these organizations. In many cases, in the absence of a business licence, the government imposes many different fines on the business and has the power to even close down the business location. 

Business licenses are also for the firms operating from home or for Internet firms, hence business licence is not only necessary for enterprises with a geographical location but also important for the home or Internet businesses. Business licenses are time-consuming but in the long run, they can help in reducing business stress and other costs. 

Read More: How to Select a Product for Export Business?

Import Licence 

DGFT is a proper authority that provides the exporter the right to trade in foreign goods, when the Director General of Foreign Trade (DGFT) provides a licence to the exporter it is known as Import Licence. Most of the goods are imported freely, but certain categories of goods and conditional import of a few items are prohibited by the Exim Policy (2007) of India. In such a case the Government of India helps the importers by issuing import Licences. 

  • Restricted Import Licence: Licensed category consists of restricted items, and these restricted items need an import Licence from the authority. Once DGFT provides permission only then these restricted items can be imported freely, and to import such items a Restricted Import Licence is mandatory. Now with the help of an online module, a restricted import Licence can be issued under the Import Management System. An import licence has 24 months of validity for the category of capital goods, and for other goods, its validity is 18 months.  
  • Canalized items: Canalised items also come in the category of restricted items, and only canalizing agencies can help in the import of goods in this category. Canalized goods can be imported with the help of procedures or specific methods which can help in the import transportation of these items. The perfect example of canalized items at present is petroleum products, agricultural products that are in bulk (grains and vegetable oils), and some pharmaceutical products. 
  • Prohibited Items: The Directorate General of Foreign Trade controls all prohibited items in India. DGFT has issued a list of prohibited items that are listed in ITC (HS). The list includes the meat of wild animals, fat, Guts of animals, wild birds, bones, ivory, Fish nails, Fishtails, Mutton Tallow, and much more. 
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Export Licence 

The Director General of Foreign Trade (DGFT) provides export Licences to the exporters to export goods in restricted categories. An export licence gives permission for exporting prohibited goods, only after getting the export Licence the exporters can get access to the restricted category. This helps the Indian exporters in international product selling. An exporter can obtain a licence according to the category under which the products fall. Only after a careful review of facts the export licence is issued to the exporter. 

  • Restricted items: Restricted category consists of those items which can not be exported without the export licence which allows the exporter to export the items that fall under the restricted category. A set of procedures needs to be followed in order to export restricted goods. 
  • Prohibited Items: Prohibited category consists of items that cannot be exported, these goods include wildlife, environment, social, and other security concerns. The list of items that fall under this list are drugs, obscene material, Antiquities, pornography, psychotropic substances, chemicals, Aero model, products of wildlife, and others. 
  • Statement Trading Enterprise (STE): STE helps in the export of certain items, with the help of designated STEs the exporters can export certain goods. EXIM policy has set some conditions which need to be followed for the export of such items. 
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Import Export Code (IEC)

As different items or goods are imported and exported, hence it’s difficult to have the documentation that is necessary for the import-export licence. In addition to this, each country or nation has its own rules for accepting imports. There is an IEC number that is assigned with each project that needs to be imported or exported, this internationally recognized code number is very important for the import-export process. The validity of the IEC number does not expire and is valid throughout its life, so the previously registered importers or exporters can use the old IEC number. The Permanent Account Number (PAN) of a company is its IEC number. 

Import-Export Business Licence Benefits 

Expansion: the import-export licence benefit in the expansion of the market, and increase the growth and scope of your business. It can help in gaining profits and high revenue by Importing and exporting items outside India. Your business relations will increase with other countries which will eventually lead to the goodwill of the company. 

Access to schemes: companies that have import-export licenses can easily participate in programs that are introduced by the government for the expansion of companies. Export Promotion Council, a non-profit organization, plays a vital role in a country’s exports. These organizations are formed for increasing the country’s exports. 

For exports, the government of India has launched two schemes namely Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS). These schemes offer exporters many different rewards and incentives under a specific rate; these credits are freely transferable. 

There are Duty Exemption and Remission Scheme namely Duty-free Import Authorization Scheme (DFIA) and Duty Drawback of Customs/Central Excise Duty/Service Tax. These schemes are launched for the improvement of imports in India. 

Processing and validity: the import-export licence has another benefit in that its processing is easy and the IEC is valid for a lifetime. So there is no necessity to renew or re-filling it on a regular basis as in the case of other numbers. This licence is permanent and is with you till your business exists. 

In case you are not interested in operating your business anymore then you need to inform DGFT by writing an application regarding it. 

Read More: How can I Register Trademark Internationally?

Conclusion

Import Export Licence or IEC registration is very important to carry out import-export operations in India. The above-mentioned policy of imports and exports will help you to understand the necessity of having a licence in India. The import-export operations have many different benefits like expansion, access to schemes, processing, lifetime validity, and much more. 

FAQ’s

What will happen in the absence of an import or export licence? 

What are the factors that determine business licence?

Why are business licenses important?

What are the different categories of import and export items? 

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