- The Importer-Exporter Code (IEC) from the Directorate General of Foreign Trade is a single 10-character identifier needed for import and export of goods; services exporters generally do not need one.
- Export proceeds must ordinarily be realised and repatriated within nine months of the date of export, under the Master Direction on exports.
- Exports are zero-rated for GST: either pay IGST and claim a refund, or export under a Letter of Undertaking without paying tax.
- Customs classification, valuation and origin determine duty on imports; wrong classification is a common source of demands.
Setting up to trade across borders
- 01
IEC
Apply on the DGFT portal with PAN, bank details and address; the code is issued electronically and kept current by annual update.
- 02
Bank
Open a current account with an authorised dealer bank; link the IEC; register for export-import reporting.
- 03
GST
Register for GST; for exports, file a Letter of Undertaking if exporting without payment of IGST.
- 04
Customs
Register on the customs portal; engage a customs broker; classify goods under the Customs Tariff.
- 05
Shipment
File shipping bill or bill of entry; keep invoice, packing list and transport documents.
- 06
Realise
Export proceeds received through banking channels; bank issues e-BRC; record against the shipping bill.
The IEC: who needs it
Section 7 of the Foreign Trade (Development and Regulation) Act, 1992 prohibits import or export without an Importer-Exporter Code unless exempt. The code is required for a business that exports or imports goods, and for certain categories of notified service providers who want to claim incentives. It is a lifetime identifier, with a requirement to update the details annually. There is no need for an IEC for imports for personal use or for goods exempted by the Foreign Trade Policy, and none for a pure services exporter, though many take one anyway to claim benefits.
Time limits in the exchange-control rules
| Transaction | Limit | Notes |
|---|---|---|
| Realisation of export proceeds | Nine months from the date of export | Longer period (15 months) for exports to overseas warehouses; extensions need the authorised dealer bank’s or RBI’s permission |
| Payment for imports | Six months from the date of shipment | Longer for specified credit arrangements, with the bank’s approval |
| Advance receipt for exports | Goods to be shipped within one year of the advance | Otherwise the bank’s approval or refund is needed |
| Advance payment for imports | Subject to bank guarantee conditions above a threshold | Verify the current threshold with the authorised dealer |
GST on exports
Export with payment of IGST
- Pay IGST on the invoice and claim a refund of the tax paid.
- Refund is processed on the basis of the shipping bill and export general manifest.
- Ties up working capital until the refund is credited.
Export under a Letter of Undertaking
- No IGST paid; input tax credit accumulated can be claimed as a refund.
- Conditions: the LUT must be furnished for each financial year, and proceeds must be realised within the exchange-control period.
- Failure to realise proceeds can lead to a demand for the tax with interest.
Customs and duty
On an import, customs duty is calculated on the assessable value, determined under the Customs Valuation Rules, at the rate applicable to the tariff heading of the goods; basic customs duty, any social welfare surcharge, and IGST on the import are then payable. Customs now operates on a self-assessment model: the importer classifies and values the goods in the bill of entry and the department can verify later. A misdeclaration of classification, valuation or origin can lead to a demand with interest and penalty, and to confiscation in serious cases. Preferential duty under a free trade agreement requires a valid certificate of origin.
First-export checklist
- IEC issued and linked to the bank account and the customs portal
- GST registration with LUT filed for the year
- Commercial invoice and packing list in the prescribed format with HS codes
- Contract or purchase order with the payment terms and currency
- Shipping bill filed and proceeds tracked against it in the bank’s export system
- e-BRC obtained on realisation
Frequently asked
Do I need an IEC to export services?
Generally not. Services exports are governed by FEMA, GST and the Foreign Trade Policy, and an IEC is needed only where the Policy requires it for claiming benefits.
Can export proceeds be received in rupees?
Exports can be invoiced in rupees, through special vostro accounts, in a framework the RBI has put in place, but the normal rule is freely convertible foreign currency through banking channels.
What if the buyer never pays?
Seek an extension from the authorised dealer bank before the period lapses, keep evidence of the dispute and recovery efforts, and consider arbitration or a recovery suit in the contractual forum. An uncollected export bill must be reported, and the bank may write it off with RBI’s conditions.
Is a customs broker mandatory?
No, an importer or exporter can file directly, but most use a licensed customs broker because the filing and classification require expertise.
The Foreign Trade Policy is notified for set periods and the RBI Master Direction, customs tariff and GST rules are amended often. Confirm the current rules before shipping. Not a substitute for advice from an advocate or chartered accountant on your facts.