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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
import.
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
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 port.
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.
Exporters 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 value-added norms.
Agent
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 after-sale servicing.
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.
Liaison office
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 local purchasers.
Branch
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 products.
Sales subsidiary
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.
Further 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.
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General Section
