Since the discovery of the concept of exchanging goods, the Indian trade market has thrived. Slowly, as globalisation brought items from other nations into India, the import-export sector gained footing and demand for imported and exported goods increased.
Many new traders began to participate in foreign trade practise among the majority people. As a result, the government mandated that traders register in order to avoid fraud and malpractice and avail the benefits of Importer Exporter Code given by the government on registration.
Most businesses are expanding their services and products by bringing them to the international market, which includes Importing and Exporting. Because overseas transactions are considered business activity, the government’s requirements must also be obeyed. Importer – Exporter Code is one such essential that must be obtained before beginning any such transaction. In this blog, we will understand the meaning of IE Code and discuss the 7 benefits of Importer Exporter Code.
Meaning of Import Export Code (IEC)
The Importer-Exporter Code is a unique 10-digit code that holds significance in international trade activities. This code is issued by the Directorate General of Foreign Trade, a department under the Ministry of Commerce and Industries in the Government of India.
Significance and Validity
Upon issuance, the Importer-Exporter Code (IEC) assumes an important role in facilitating import and export operations. The code has a lifetime validity, a vital factor that emphasises its indispensability. It is essential to emphasise that the IEC code serves as a condition for individuals or companies engaging in import or export activities within India.
Mandatory Requirement for International Trade
The necessity of the IEC registration extends to businesses of all sizes and types engaged in international trade. This registration becomes a non-negotiable requirement as it directly affects the customs clearance process. The IEC code functions as a key to unlock the customs procedures, enabling the smooth movement of goods across borders. As a result, the absence of a valid IEC code renders a seller ineligible to import or export goods from India.
Global Market Access
One significant outcome of obtaining the IEC registration is the business entity’s enhanced access to the global market. By acquiring this code, trade businesses open doors to broader international opportunities for their products or services. This privileged access allows entities to participate in cross-border trade, contributing to their growth and expansion on a global scale.
Importance of Import Export Code (IEC)
The importance of importer exporter code can be understood based on the following factors:
Perpetual Validity
One of the most exciting features of the Import Export Code (IEC) is its perpetual validity. Once the comprehensive IEC Registration process is completed and all necessary documents are submitted, the code remains valid for the entity’s entire lifespan. This eliminates the need for periodic renewals, enhancing operational efficiency.
Facilitator for Business Growth
IEC Code serves as a promoter for substantial business growth. By obtaining this code, businesses gain the capability to venture into the global market with their services and products. This expansion beyond domestic borders opens doors to increased revenue streams and opportunities for market diversification.
Simplified Compliance Structure
The IEC Code offers a simplified compliance structure. Unlike certain registrations that necessitate constant return filing or renewal procedures, the IEC Code does not mandate the filing of returns. This attribute reduces administrative burdens and ensures that the code remains valid without the need for any additional actions post-issuance.
Access to Export Subsidies
The significance of the IEC Code extends to its role in facilitating access to various export incentives and subsidies. Companies and firms that possess an IEC Code become eligible to receive benefits and subsidies from entities such as the Directorate General of Foreign Trade (DGFT), Export Promotion Councils and the Customs department. These incentives further encourage and support businesses engaged in international trade activities.
7 Benefits of Importer Exporter Code and Registration
The 7 benefits of importer exporter code are as given below:
Access to International Markets
Obtaining IEC registration offers a gateway for traders to introduce their products to the global market, enabling them to broaden their trade horizons and explore international opportunities.
Simplified Online Registration
The IEC registration process is conveniently conducted online, simplifying the procedure for traders. A unified portal serves as the platform for registration, providing a user-friendly interface. The registration form is accompanied by a comprehensive list of necessary documents, presented in a simplified manner.
Minimal Document Requirements
Completing the registration demands just four essential documents:
- Permanent Account Number (PAN) card
- Copy of any valid identification proof
- Passport-sized photograph
- Cancelled cheque
Enhanced Control against Illicit Trade
With registered entities falling under the jurisdiction of a centralised authority, the risk of unauthorised export or import activities is lessened through effective oversight. Instances of illegal transactions can be pinpointed by officials utilising the data collected during the registration process.
Governmental Benefits and Exemptions
Beyond these advantages, the government extends specific schemes to registered traders, affording them exemptions from liabilities that unregistered traders would typically face. This provision serves to minimise additional financial losses for registered traders.
Incentives for Service Exports
The Importer Exporter Code (IEC) registration offers many advantages, particularly in the context of service exports. Under the Service Exports from India Scheme, exporters engaging in outsourcing services receive incentives ranging from 3% to 5% of net foreign exchange earned.
Enhanced Export Schemes
The Foreign Trade Policy introduced two key schemes for merchandise and service exports: the Merchandise Exports from India Scheme (MEIS) and the Service Exports from India Scheme (SEIS). These schemes aim to offset infrastructural inefficiencies and related costs, benefiting goods and services that possess high profit potential in the global market.
Tax Exemptions for Registered Exporters
Registered exporters who file a Letter of Undertaking (LoU) under the Goods and Services Tax (GST) regime enjoy tax exemptions. This enables them to conduct export activities without the burden of taxes.
Tax Prepayment Reimbursement
Exporters conducting prepayment of taxes for their exports are entitled to claim tax refunds, further simplifying the export process.
Impact on Import and Export Activities
The impact of importer exporter code on the activities of import and export are as given below:
Cost Efficiency in Imports
IEC registration impacts import activities by reducing production costs for essential goods like car spare parts and smartphones. This reduction in production costs subsequently leads to lower product sale prices, driving increased demand and market expansion in the importing country.
Market Expansion for Exporters
For exporters engaged in international trade, IEC registration encourages efforts to enhance product sales potential and broaden market reach in target countries. This positive approach contributes to the growth and recognition of the Indian trade market on the international stage.
Top Performing Import and Export Industries in India
The top performing import and export industries in India are:
Imports:
- Mineral Fuels Including Oils: India’s substantial energy demands drive the import of mineral fuels, including oils. These imports are important to meet the energy needs of industries and households.
- Gems and Precious Metals: India’s historical expertise in jewellery and gemstones contributes to the import of these valuable items, which are both popular commodities and integral to the country’s cultural heritage.
- Electrical Machinery and Equipment: The import of electrical machinery and equipment supports various sectors such as manufacturing, infrastructure and technology, aiding India’s industrial growth.
- Medicines: Imports of medicines help fulfil the healthcare needs of India’s large population. This includes pharmaceuticals and medical supplies required for healthcare facilities and patients.
- Plastics: The plastic industry is a significant consumer of raw materials and imports of plastics cater to the manufacturing of many products.
- Inorganic Chemicals: These chemicals are essential components in various industries and thereby influence India’s economic output.
Exports:
- Gems and Precious Metals: India is a global hub for processing and exporting gemstones and precious metals. Its skilled craftsmanship and rich jewellery tradition contribute to high-quality exports.
- Machinery and Computers: India’s engineering and IT expertise have led to the export of machinery and computer-related products, reflecting the country’s growing technological capabilities.
- Organic Chemicals: Exports of organic chemicals include a range of products used in pharmaceuticals, agriculture and manufacturing, showcasing India’s chemical industry prowess.
- Electrical Machinery and Equipment: Just as in imports, India’s electrical machinery and equipment sector thrives in exports as well.
- Iron and Steel: India’s iron and steel industry has a strong presence in both domestic and international markets, which contributes to the country’s industrial and infrastructural growth.
- Cotton: India’s rich history in cotton cultivation positions it as a major exporter of cotton fibres, supporting the global textile and apparel industries.
- Clothing and Accessories: The apparel industry is a significant contributor to India’s economy. Exports of clothing and accessories highlight the country’s diverse textile offerings.
Final Thoughts
The Importer Exporter Code (IEC) emerges as an essential instrument driving India’s participation in global trade. As international exchange becomes integral to economic growth, the IEC serves as a bridge connecting Indian businesses to global markets. With its perpetual validity and simplified online registration process, it empowers businesses to enter the international field with ease. The benefits of importer Exporter Code are manifold as it acts as a facilitator, granting access to international markets, simplifying compliance, and encouraging growth.
Further, it offers a pathway to governmental benefits, exemptions, and incentives that enhance the competitive advantage of registered traders. By enabling tax exemptions, access to export subsidies, and participation in export schemes, the IEC acts as a facilitator for expansion, innovation, and increased revenue streams. Ultimately, the IEC is not merely a code; it symbolises India’s commitment to open trade, economic dynamism, and global relevance in an interconnected world.
For more information on the 7 benefits of Importer Exporter Code, connect with our experts at StartupFino.
