If you are going to start export or Import business of goods
or service and both are required certain approval and registration with Reserve
Bank of India, Custom Department, Central Excise, Service Tax and Value Added
Tax / Central Sales Tax Department.
These departments imposed certain conditions to avail tax
exemption one of important condition is to obtain registration with the
Controller of Foreign Trade. So, it is important to oblation registration with
the Controller of Foreign Trade, which is called Import Export Code Number.
Before planning exporting goods or services, a business man
or tax advisor should ensure registration otherwise take following steps prior
to start export, import of service and goods:
1. Before starting any business a person should decide
character of business entity, which may be one of the following legal entities:
a. Proprietorship
b. Partnership
c. A.O.P. (Association of Person) or body of individuals
(incorporated or not)
d. H.U.F.(Hindu undivided Family)
e. Trust
f. Cooperative Society
g. L.L.P. (Limited Liability Partnership)
h. Private Limited Company
i. Public Limited Company
Proprietorship is an oldest and most independent method of doing
business. The proprietorship business commencing under the seal and signature
of individual, with the individual’s name or any other name as the individual
take decision.
Partnership firm is governed by the Indian Partnership Act, 1932. Indian
Partnership Act prescribe minimum and maximum limit of partners. Partnership
firm can be formed with two individuals but maximum limit of partners shall not
be more than twenty.
It may start from any specific date and determinable at/on
specific date or at will. The partnership firm is run under an agreement between
partners; it is always favorable to reduce in writing on specific stamp paper
which is differing from State to State. Although Partnership deed’s
registration is not mandatory but registration with registrar of Firm is always
good and preferable.
A.O.P. is an abbreviation of Association of Person, although it is
not governed by any specific law but it form by an agreement between the member
of A.O.P. It is more and less as a partnership firm. The agreement shall be
registered with sub registrar. A.O.P. performs business collectively for
specific purpose. The Income Tax Department recognizes A.O.P. and its taxable
rate is as an individual.
H.U.F. is an abbreviation of Hindu Undivided Family, Generally,
Indian people except Jain Sikh, Muslim and christen or having faith in any
other religion except Hindu are eligible to form H.U.F. It is recognized by the
Hindu Law.
It is recognized by the Income Tax department and other
business related Indian Department as a separate legal entity. It managed by a
eldest male member of the family called KARTA and other member of the H.U.F. is
called Coparcener. Coparceners are those members of the HUF, who can ask their
share from the HUF property or business and eligible to form H.U.F.
individually after marriage with Hindu girl.
One or so many settlers can settle trust, which is managed by
the trustees. Trusts are two type one Public Charitable Trust and Private
Discretionary Trust. It is misapprehension that
the trust can run only charitable, social and educational activity.
Charitable, social and educational activates are performed by
the public Charitable trust. Any organization could not perform such activities
without financial resources and then there is no harm in doing business
activity. In my opinion for attaining the purposes/ objects trust can perform
business activities also.
Before, settling a trust, setter should keep in mind that the
trust cannot dissolve but can be merge/ amalgamate with the trust having
similar objects. Trustees could not get financial gains from the trust property
or business otherwise may lose Income Tax Exemptions.
Cooperative Society is greatly unique method of doing
business or work. Co-operative Societies main purpose to do work/ business
collectively with limited capital resources and expertise of its member.
There are two levels of Societies, one is governed by the
Multi State cooperative Societies Act, 1984, it is central act extended to
whole of country and the society registered in this act can work at national
level (All Indian State) with the head/ principle office at one place.
Another is State level Act like The Delhi Cooperative
Societies Act, 1972. Societies registered at state level are confined with one
state. Cooperative Society can form with minimum seven members and there is no
upper limit. Members of the Society are called shareholder with the limited
liability and its registration is mandatory.
Limited Liability Partnership is a newly introduced concept
in India in the year 2008. It is central Government Act namely the Limited
Liability Partnership Act, 2008 and its rules are the Limited Liability
Partnership Rule, 2009. During formation of Limited Liability Partnership, it
require to get reservation of its name and then to file all papers
electronically as well as heard copy of papers along with the prescribe fee.
Private Limited Company is an artificial creation of a
judicial person governed by the Indian Companies Act, 1956. It is Central act.
A Private limited company can be formed with minimum two people or artificial
persons and maximum limit is fifty. Capital is divided into shares duly
subscribed by its shareholder; they may be friends and family members. Share
holder can get profit by way of dividend. Its registration is mandatory. First
of all its name is approved by the Registrar of companies and then file papers
along with prescribe fee by the promoter director.
Public Limited Company is more or less same as the Private
Limited Company it is formed under the same act but it required minimum numbers
of promoters are Seven and there is no maximum limit of shareholder. It is
differently managed from Private Limited Company, after its formation, it
requires to obtain commencement of business certificate.
It is advisable before deciding character of the business
entity one must take serious consideration about its name, its partner/ member
and shareholders because these people pay significant role in running the
business. Secondly, Government compliances should be minimum.
2. The second step is to obtain PAN card from the Income Tax
Department. In case it is proprietorship, it require proof of Identification as
well as residential proof with two photograph, Partnership required only copy
of partnership deed, A.O.P. required proof of Identification and residence proof
of all members, Identity proof and residence proof of Karta and Trust,
Cooperative societies, Limited Liability of Partnership and Public Limited
Company required proof of Incorporation and karta, CEO, managing trustee’
identity and address proof along with Income Tax Form 49A.
3. Third step is to open Bank account, if the business is in
the name of business entity bank open current account while in the individual,
cooperative society and trust can operate saving bank account.
4. After completing all above formalities, If a business
entity is starting business of export/ import of commodities and willing to
chew fruit of export, he should obtain Value Added Tax and Central Sales Tax
Registration, the taxability on purchase and sale will be NIL. He can purchase
Goods against form “H” without paying Tax.
If the goods are dutiable under
Central Excise, exporter/importer should get registration with Central Excise
Department. In case he is service provider/ recipient of export/ import
services outside/inside India against convertible foreign exchange. The service
provider/ recipient should obtain Service Tax registration, these export of
services are exempted under the Rule 3 of the Export of Service Rule,
2005.These days Value Added Tax Department insisting for PAN number while
Service Tax as well As Central Excise are providing PAN base registration
number.
5. After completing all these registration formalities before
exporting/importing of goods or services one has to obtain registration with
The Controller of Foreign Trade. The Controller of Foreign Trade established
Zone wise offices to facilitate public at large, where an exporter/importer can
obtain EXPORT and IMPORT CODE.
a. For obtaining Import and Export Code, application called
ANF-2A is prescribed, it is divided into four parts i.e. A,B,C and D. The
ANF-2A should fill carefully and avoid cutting and correction. If there is any
correction, it is duly signed or attested by the authorize person.
b. Part-A is as simple as any other application but it required
to past one photograph identical as attested by the Banker.
c. Part-B is a Performa for the purpose of Banker, it must
printed on the Banker’s letter head, with authorize person’s photograph duly
attested by the bank official with email address.
d. Part-C, is specifically for modification, in case new
application, need not to fill first and second point otherwise it must be
completed and signed by the authorize person.
e. Part-D is declaration, which is duly signed and filled by
the authorize person.
Note: Authorize person may be self-Proprietor, authorize
partner, Authorize director or authorize CEO/ manager etc.
6. All the pages of application should be signed by the
Proprietor, authorize partner, Authorize director or authorize CEO.
7. Fee for registration/ code number is Rs. 250/- by way of
draft in favour of Zonal DGFT (CLA)……… (Place of Zonal Office)
8. The following documents should be self-attested by the
applicants:
I. Photo Copy of Identity proof of applicant.
II. PAN copy of business organization and if it is
proprietorship firm then proprietor’s PAN photo copy.
III. Two Additional photograph of proprietor/ authorize
person (without any attestation identical as bank attested).
IV. Photocopy of Excise Registration, service Tax
registration or VAT registration as applicable.
V. A self-address Envelop duly pasted Rs. 30/- post Office
stamp.
9. An authorization letter in favour of person submitting
documents with his signature, attested photograph and his telephone number,
duly attested by the applicant.
10. A covering / request letter mentioning the documents are
filling with the application.
