c. Canalized items can be imported only through
designated public sector agencies, such as the Indian Oil Corporation
and the State Trading Corporation. However, the central government may
grant licenses to others to import any canalized goods.
The negative list of import is under constant
review; it is important to check the current list at the time of
2. The import of consumer goods and durables
continues to be restricted (with exceptions for a Specific items).
3. The import of capital goods machinery has been
liberalized and is generally allowed without license. Secondhand
capital goods are also allowed, subject to certain conditions.
4. Special licensing schemes permit the import of
capital goods required for export production either duty-free import of
inputs required for export production.
5. The import of gold and specified items of
consumer goods is also permissible under special import licenses issued
to certain categories of exporters on the basis of either the net
foreign exchange earning or the FOB value of physical exports.
Customs duties are levied at specific percentage
ad valorem, specific amount per unit of quantity or both, depending on
the classification of the imported goods in the Customs Tariff Act.
The classification of goods and the applicable
rates for the levy of import duties are furnished in the Customs Tariff
Act. Duty rates may change according to the country of origin and the
type of product. For example, complete exemption or rate concessions
are allowed on the import of specified items from some neighboring and
developing countries such as Bangladesh, Bhutan, Egypt, Myanamar,
Nepal, and Sri Lanka.
Schedule I to the Imports (Control) Order 1955,
commonly known as ITC Schedule, contains several thousand
classifications for imports.
Three types of duty are generally applicable to
imports into India : basic, special and additional (or Countervailing)
duties. The special customs duty is in force until March 31, 1999 at a
flat rate of 2 percent on the value of all imported goods except those
subject to a zero rate of duty. The counter vailing duty is equal to
the excise duty on similar articles produced or manufactured in India,
and it is eligible for an offset against excise duty liability if the
imported goods are used in the manufacture of other goods. A fourth
type of duty, referred to as protective duty, may be imposed to counter
the effect of a bountry or subsidy given by an exporting country.
Basic duties generally range from 0 to 50 percent.
Lower duty rates are generally applicable to raw materials and
intermediate goods as opposed to finished products. Duty drawback is
available for imported raw materials used in products exported. General
machinery and project imports are subject to duty at the effective rate
of 39.7 percent (including 12.7 percent on account of countervaling
duty, which may be eligible for offset), although certain specific
projects benefit from lower rates. Effective duty is sometimes lowered
due to exemptions or concessions provided through notifications. Import
duties have been considerably lowered, and further reductions may take
place over the next few years.
Duty is waived or a concessinal duty rate is
permitted for export into India of capital goods under the Export
promotion Capital Goods (EPCG) Scheme.
Antidumping duty provisions have been invoked in
some cases. Indications are that they may be applied more actively
where availability of imports in India at lower price that that
prevailing in the exporting country is likely to cause significant harm
to the domestic industry.
The rules and procedures for imports are contained
in the Handbook of Procedures - Imports and Export Promotion, which is
issued from time to time by the Director General of Foreign Trade.
Import licenses are issued in duplicate and market for customs and
exchange control purposes, respectively. It is important that the
correct quantity, description and value of the goods be properly
recorded on the license and exporter's invoices, because failure to do
so could lead to protracted delays in the clearance of goods and
litigation. Every invoice must be signed. Invoices should normally be
prepared on FOB terms, and a freight note should be attached, since in
the absence of documentary evidence of the amount payable for freight
and insurance, Indian customs adds 10 percent to the invoice price in
arriving at the value for imposing import duty. Where an import license
is required, no letter of credit may be opened or remittance made to a
foreign country for imports unless the importer is in possession of a
valid import license marked for exchange control purposes.
The quality of customs and storage facilities and
the security of goods are modest to adequate, varying from port to
Customs bonded warehouses are available at
selected ports of entry, e.g., Banglore, Mumbai, Calcutta, Cochin,
Delhi, Kandla, Chennai, and Vishakhapatnam, for duty-free import of raw
material and components for stock and subsequent sale to actual users.
To facilitate access to imported inputs for
exporters, the government has allowed private operators to set up
bonded warehouses subject to certain conditions. However, there are no
restrictions on the type of goods to be warehoused.
are free to choose a port of entry. Availability of inland transport is
not a problem, but the timing of movement maybe restricted in the case
of very bulky items.
The Duty Exemption Scheme
enables imports of duty-free raw materials, components, intermediates,
consumables, parts, spares, and packing materials required for purposes
of export production. Licenses issued for this purpose require
adherence to value-added and input-output norms and fulfillment of
export obligations. Units set up in export-processing zones or as 100
percent export-oriented units are also required to comply with specific
Because it is generally advisable to export on an
FOB basis, it is not necessary to employ a local agent. However, where
responsibility for port clearance rests with the exporter, it is useful
to engage the services of a local customs clearing house. Business
reasons may also favor the appointment of a local agent or
distributor(s) for better market penetration, scale economies or
Under the tax treaties entered into with various
countries, there are tow types of agents: independent and dependent. A
dependent agent is usually defined as an agent who works exclusively
for a nonresident company and therefore creates a permanent taxable
entity for the organization in India. An independent agent is defined
as one who is not a dependent agent. It is advisable to check the
applicable tax treaty for the exact definition to avoid being taxes in
India. For nontreaty countries, the business connection as defined by
the Income Tax Act holds.
Appointment of a sales agent is permitted under
Indian law. However, in the case of contracts for the sale of defense
equipment where the government is the monopoly buyer, the appointment
of a local sales agent is currently not permitted.
A liaison office can be set up to promote and
disseminate information about the company and its products. The office
can carry out sales promotion, market intelligence, etc., but cannot
carry out any commercial activity. The liaison office cannot sign a
contact but can act as a postal box between the parent company and the
Following liberalization allowing branches of
foreign trading and manufacturing companies, some such companies have
set up branches in India to facilitate import or export or to provide
technical or maintenance services relating to their equipment or other
Permission from the Foreign Investment Promotion
Board (FIPB) is required to set up a sales subsidiary in India. The
FIPB considers proposals on a case-by-case basis and considers the
proposal as a whole.
assistance may be obtained from the commercial division of any Indian
embassy or consulate. For applicable customs tariff rates, see the
current years Customs Tariff Guide, taking care to check for any
notifications modifying the applicable duty rate.