The international market gives Indian MSMEs (Micro, Small, and Medium Enterprises) a lot of chances to grow. India’s exports are worth about $450 billion for goods and $323 billion for services during 2022-2023. Because of this, foreign trade is now an essential way for small businesses to reach more customers and find new ways to make money.
However, MSMEs need to get an IEC code (Import Export Code) from the Directorate General of Foreign Trade (DGFT) to trade across borders. Read on to help you understand why this code is essential for MSMEs with GST and how it lets them enter profitable global markets.
What is an Import Export Code?
Import export code is a unique 10-digit code that the DGFT provides. It gives permission to an Indian business to bring goods and services into and out of the country. The IEC registration is a must for companies that do business across borders.
The IEC code is essential because it builds a company’s reputation on the global market and makes customs procedures easier. It is often required by banks to do business in foreign currencies. With an IEC registration, a business can also get export benefits from the government, which helps to grow foreign trade and become more competitive.
Also Read – What is ICEGATE?
The Benefits of IEC Code Registration For MSMEs With GST
Credibility and Recognition:
An IEC code registration helps to increase visibility of MSME in market and lets global partners know that the business follows Indian rules on exporting and importing. There are many schemes that will help MSME market upliftment such as Market Development Assistance.
International buyers may not conduct business with a company that doesn’t have an IEC number because they may think that the company isn’t recognized or legal. As a result of this registration, banks know that the business can adequately handle financial activities related to foreign trade. This makes it easy to get trade credit and other services from banks.
Access to Global Markets:
MSMEs can develop a lot by being able to sell their goods in foreign markets. Businesses with an import and export code can reach customers in other countries and increase their profits. In 2023, India’s overall exports reached almost $400 billion, with the MSME sector accounting for roughly half of that total. This amounts to around 0.4% of the total market size worldwide.
Many of India’s exports come from its MSME sector, and that amount is increasing as more small companies start to export. The IEC code application process is simple, allowing MSMEs to look for business options worldwide. It lets them make money from more than just the Indian market.
Simplified Customs Process:
The IEC code makes customs procedures easier. Customs officials use the IEC verification or “Find IEC Code” method to quickly identify businesses. This helps prevent delays in import and export processes. Streamlined customs processes cut down on paperwork, which means that they don’t need as much administrative help. This lowers operating costs, which lets businesses better focus their resources on tasks that make them money.
For MSMEs, having an import and export code registration enables faster delivery of goods to customers, reducing business downtime and ensuring timely delivery to global markets.
Eligibility for Government Schemes and Incentives:
An IEC code makes it possible for the government to offer many benefits. For example, MSMEs can get tax benefits under the MEIS and SEIS based on how well they do with exports. To encourage the export of Indian goods, the MEIS offers tax breaks to businesses who ship their wares abroad. Promoting international trade in services, the SEIS provides tax breaks to companies who export these goods and services. Also there is an indirect tax that government impose on goods and service i.e Excise Tax.
The Ministry of Commerce says these programs have helped small and medium-sized businesses cut their total shipping costs by 3–5% annually. With IEC code registration, these incentives can help companies cut costs and make their product prices more affordable worldwide.
How to Apply for IEC Code Registration Online?
Using the DGFT site speeds up the process of IEC registration online. Here are the steps for the IEC code application:
- Prepare Documents: Get essential documents together, like your PAN, Identity card, proof of address, and details of your business bank account.
- Apply on the DGFT Portal: MSMEs can get their IEC code online by going to the DGFT site and filling out an application form.
- Pay IEC Registration Fees: The government charges a small fee of about ₹500 for import export code registration.
- Obtain IEC Number: Once approved, MSMEs receive an IEC code that is valid for life and does not require renewal unless business information needs updating.
MSMEs of all kinds can participate in the digital process because it makes import export code registration easier and reduces paperwork. Also, paying the import export code registration fees is much easier online.
Importance of IEC Code Renewal
The IEC code does not expire, but MSMEs must renew or change their details yearly. IEC code renewal is significant, especially if business information like address or bank account has changed. If you don’t update your information, you may have to pay fines or may face trade restrictions with other countries.
Online IEC code renewal is a simple process. MSMEs should ensure they update information on time to keep their import and export activities running smoothly.
Verifying IEC Details for Accuracy and Compliance
After registration, businesses should ensure that their Import Export Code (IEC) information is accurate, as it is often required for official purposes. Using the IEC verification, find IEC Code” feature on the DGFT site, and businesses can review their registered details and correct any errors if needed. This feature also lets international clients confirm an MSME’s authenticity, building trust in global business dealings.
Conclusion
Import export code registration is necessary for small businesses with GST and the ones that want to grow internationally. An IEC code does more than just follow the law. It also gives you access to government benefits, makes customs procedures easier, and gives you a reputation in foreign markets.
Application for an IEC is easy; there aren’t many fees, and the certificate is valid for life. This code can speed up growth for Indian MSMEs and lead them to success in international markets.
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FAQs
- Is IEC registration required for all MSMEs?
Yes, IEC registration is needed for any MSME that trades across borders, even if it’s just occasionally.
- In the event that a business is sold, can an IEC code be passed on to the new owner?
If a business is sold, the new owner needs to use the updated business information for a new IEC code apply.
- What’s the best way to update an IEC code?
Even though the IEC code is good forever, it’s best to update it once a year to avoid fines and ensure you follow the DGFT rules.