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Wednesday, February 24, 2016


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Exporters should seriously consider having the freight forwarder handle the formidable amount of documentation that exporting requires; freight forwarders are specialists in this process. The following documents are commonly used in exporting; which of them are actually used in each case depends on the requirements of both our government and the government of the importing country.

  • 1. Commercial invoice
  • 2. Bill of lading
  • 3. Consular invoice
  • 4. Certificate of origin
  • 5. Inspection certification
  • 6. Dock receipt and warehouse receipt
  • 7. Destination control statement
  • 8. Insurance certificate
  • 9. Export license
  • 10. Export packing list

STEP1: Enquiry :
The starting point for any Export Transaction is an enquiry.
An enquiry for product should, inter alia, specify the following details or provide the following data
Size details - Std. or oversize or undersize
Drawing, if available
Sample, if possible
Quantity required
Delivery schedule
Is the price required on FOB or C& F or CIF basis
Mode of Dispatch - Sea, air or Sea/air
Mode of Packing
Terms of Payment that would be acceptable to the Buyer - If the buyer proposes to open any Letter of Credit, any specific requirement to be complied with by the Exporter
Is there any requirement of Pre-shipment inspection and if so, by which agency
Any Certificate of Origin required - If so, from what agency.

STEP 2: - Proforma generation :
After studying the enquiry in detail, the exporter - be it Manufacturer Exporter or Merchant Exporter - will provide a Proforma Invoice to the Buyer.

STEP 3: Order placement :
If the offer is acceptable to the Buyer in terms of price, delivery and payment terms, the Buyer will then place an order on the Exporter, giving as much data as possible in terms of specifications, Part No. Quantity etc. (No standard format is required for such a purchase order)

STEP 4: Order acceptance :
It is advisable that the Exporter immediately acknowledges receipt of the order, giving a schedule for the delivery committed.

STEP 5: Goods readiness & documentation :
Once the goods are ready duly packed in Export worthy cases/cartons (depending upon the mode of despatch), the Invoice is prepared by the Exporter.
If the number of packages is more than one, a packing list is a must.
Even If the goods to be exported are excisable, no excise duty need be charged at the time of Export, as export goods are exempt from Central Excise, but the AR4 procedure is to be followed for claiming such an exemption.
Similarly, no Sales Tax also is payable for export of goods.

STEP 6: Goods removal from works :
There are different procedures for removing Export consignments to the Port, following the AR4 procedure, but it would be advisable to get the consignment sealed by the Central Excise authorities at the factory premises itself, so that open inspection by Customs authorities at the Port can be avoided.
If export consignments are removed from the factory of manufacture, following the AR4 procedure, claiming exemption of excise duty, there is an obligation cast on the exporter to provide proof of export to the Central Excise authorities

STEP 7: Documents for C & F agent :
The Exporter is expected to provide the following documents to the Clearing & Forwarding Agents, who are entrusted with the task of shipping the consignments, either by air or by sea.
Packing List
Declaration in Form SDF (to meet the requirements as per FERA) in duplicate.
AR4 - first and the second copy
Any other declarations, as required by Customs
On account of the introduction of Electronic Data Interchange (EDI) system for processing shipping bills electronically at most of the locations - both for air or sea consignments - the C&F Agents are required to file with Customs the shipping documents, through a particular format, which will vary depending on the nature of the shipment. Broad categories of export shipments are:
Under claim of Drawback of duty
Without claim of Drawback
Export by a 100% EOU
Under DEPB Scheme

STEP 8: Customs Clearance :
After assessment of the shipping bill and examination of the cargo by Customs (where required), the export consignments are permitted by Customs for ultimate Export. This is what the concerned Customs officials call the ‘LET EXPORT’ endorsement on the shipping bill.

STEP 9: Document Forwarding :
After completing the shipment formalities, the C & F Agents are expected to forward to the Exporter the following documents:
Customs signed Export Invoice & Packing List
Duplicate of Form SDF
Exchange control copy of the Shipping Bill, processed electronically
AR4 (original duplicate) duly endorsed by Customs for having effected the Export
Bill of Lading or Airway bill, as the case may be.

STEP 10: Bills negotiation :
With these authenticated shipping documents, the Exporter will have to negotiate the relevant export bill through authorized dealers of Reserve Bank, viz., Banks.
Under the Generalized System of Preference, imports from developing countries enjoy certain duty concessions, for which the exporters in the developing countries are expected to furnish the GSP Certificate of Origin to the Bankers, along with other shipping documents.
Broadly, payment terms can be:
DP Terms
DA Terms
Letter of Credit, payable at sight or payable at... days.

Step11: Bank to bank documents forwarding :
The negotiating Bank will scrutinize the shipping documents and forward them to the Banker of the importer, to enable him clear the consignment.
It is expected of such authorized dealers of Reserve Bank to ensure receipt of export proceeds, which factor has to be intimated to the Reserve Bank by means of periodical Returns.

STEP 12: Customs obligation discharge :
As indicated above, Exporters are also expected to provide proof of export to the Central Excise authorities, on the basis of the Customs endorsements made on the reverse of AR4s and get their obligation, on this score, discharged.

STEP 13: Receipt of Bank certificate :
Authorized dealers will issue Bank Certificates to the exporter, once the payment is received and only with the issuance of the Bank Certificate, the export transaction becomes complete.
It is mandatory on the part of the Exporters to negotiate the shipping documents only through authorized dealers of Reserve Bank, as only through such a system Reserve Bank can ensure receipt of export proceeds for goods shipped out of this country.

Monday, February 22, 2016

Why is GST Important For India

gst in india
GST is expected to be a critical reform in spurring growth in the economy. When introduced, GST will not only make the tax system simpler, but will also help in increased compliance, boost tax revenues, reduce the tax outflow in the hands of the consumers and make exports competitive. It is hoped that the new Government will set forth a roadmap of the GST implementation in the upcoming Budget. The GST or the Goods and Service Tax is a long pending indirect tax reform which India has been waiting for, and which is hoped to iron out the wrinkles in the existing tax system. This comprehensive tax policy is expected to be one of the most important reforms in contributing to the India growth story. To begin with, the GST is a value added tax to be levied on both goods and services (except for a list of exempted goods and services), at both the centre and state level (Central GST and State GST respectively). This is a single tax which will be levied on the product or service which is sold. In other words, multiple taxes like CENVAT, central sales tax, state sales tax, octroi, etc will not exist and will be replaced by GST. This comprehensive tax covers all stages from manufacture to sale. The tax will be levied only on the value added at each stage of the life cycle. The GST, as mentioned above is an indirect tax and will be borne by the customer. There will be a standard rate of GST across various goods and services, which could broadly be in line with international rates. World over, GST has been implemented in over 150 countries. You may wonder why this tax reform is so important for the country and how it will help the common man. Here’s how: 

Simpler tax structure: As multiple taxes on a product or service are eliminated and a single tax comes into place, the tax structure is expected to be much simpler and easier to understand. Paperwork will become simpler and there will be a reduction in accounting complexities for businesses. A simple taxation regime can make the manufacturing sector more competitive and save both money and time. Experts opine that the implementation of GST would push up GDP by 1%-2%.

Increased tax revenues: A simpler tax structure can bring about greater compliance, thus increasing the number of tax payers and in turn tax revenues for the Government. The current state of the Indian economy demands fiscal consolidation and reduction in fiscal deficit. A recent report by CRISIL states that GST is the country’s best bet to achieve fiscal consolidation. As there is not much scope to reduce Government expenditure, increasing tax revenues is the best alternative to improve the fiscal health. 

Competitive pricing: GST will eliminate all other forms of indirect taxing. This will effectively mean that the tax paid by the final consumer will come down in most cases. Lower prices will help in boosting consumption, which is again beneficial to companies. The biggest positive of GST is that goods and services will be taxed on a common basis. 

Boost to exports: When the cost of production falls in the domestic market, Indian goods and services will be more price-competitive in foreign markets. This can bode well for exporters, who compete with manufacturers abroad facing a lower cost structure. The exact rate of tax levied under GST will obviously be clear only when the final announcement will be made. Irrespective of the tax rate, it is logical and apparent from examples of other countries, that GST is a critical reform needed for the country. However, many state Governments are not in favour of this move, as it will result in a fall in their tax revenues. Arriving at a suitable formula to solve this problem, making constitutional changes and considering all the dynamics in the economy has resulted in a considerable delay in GST’s implementation. The CRISIL report states that at best, only a partial rollout of GST will be possible by the Government in the next financial year. The majority win by the ruling party in the recent elections has given a renewed hope that such important structural reforms will be brought into place without much delay. It is hoped fervently by the industry that Budget 2015 will spell out some solid measures and give a roadmap to the implementation of the GST. 

क्या है GST
वस्तु और सेवा कर (जीएसटी) एक अप्रत्यक्ष कर है। जीएसटी के तहत वस्तुओं और सेवाओं पर एक समान कर लगाया जाता है। जहां जीएसटी लागू नहीं है, वहां वस्तुओं और सेवाओं पर अलग-अलग टैक्स लगाए जाते हैं। सरकार अगर इस बिल को 2016 से लागू कर देती तो हर सामान और हर सेवा पर सिर्फ एक टैक्स लगेगा यानी वैट, एक्साइज और सर्विस टैक्स की जगह एक ही टैक्स लगेगा। संक्षिप्त में कहे तो भारत में 20 तरह के टैक्स लगते हैं और अब एक टैक्स इन सबकी जगह ले लेगा, और वो होगा जीएसटी।

इससे पूरे देश में वस्तुओं और सेवाओं की कीमतें लगभग एक हो जाएंगी। उत्पादन लागत घटेगी, जिससे उपभोक्ताओं के लिए सामान सस्ता होगा।

जीएसटी के फायदे
● इससे पूरे देश में किसी भी सामान को खरीदने के लिए एक ही टैक्स चुकाना होगा। यानी पूरे देश में किसी भी सामान की कीमत एक ही रहेगी।
● इससे कर की वसूली करते समय कर विभाग के अधिकारियों द्वारा कर में हेराफेरी की संभावना भी कम हो जाएगी।
● इसके लागू होने के बाद राज्यों को मिलने वाला वैट, मनोरंजन कर, लग्जरी टैक्स, लॉटरी टैक्स, एंट्री टैक्स आदि भी खत्म हो जाएंगे। जिससे अभी जिस सामान के लिए 30-35 प्रतिशत टैक्स के रूप में चुकाना पड़ता है वो भी घटकर 20-25 प्रतिशत पर आ जायेगा।
● भारत की ग्रोथ रेट में भी एक से डेढ़ फीसदी की बढ़ोतरी होगी।
● केंद्रीय बिक्री कर (सीएसटी) खत्म हो जाएगा। प्रवेश शुल्क और चुंगी भी खत्म हो जाएगी। अलग-अलग टैक्स की बजाय एक टैक्स लगने की वजह से चीजों के दाम घटेंगे और आम उपभोक्ताओं को फायदा होगा।

जीएसटी के किसको होगा नुकसान
जीएसटी लागू होने से राज्यों को डर है कि इससे उन्हें नुकसान होगा क्योंकि इसके बाद वे कई तरह के टैक्स नहीं वसूले पाएंगे जिससे उनका राजस्व कम हो जाएगा। इसे ध्यान में रखते हुए केंद्र ने राज्यों को राहत देते हुए मंजूरी दे दी है कि वे इन वस्तुओं पर शुरुआती सालों में टैक्स लेते रहें। साथ ही, राज्यों का जो भी नुकसान होगा, केंद्र उसकी भरपाई पांच साल तक करेगा।

Industrial Accounting & Taxation Training Institute 
15,Bhande Plot Umred Road Nagpur  mob. 9373104022