Watch the video on how GSP influence the Exports and Imports, sectors affected by GSP, what an exporter should do to grow the Exports business?
- Posted by : admin
- June 5, 2019
- Uncategorized
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In simple words, Exports marketing is nothing but marketing your products across borders.
Marketing is vital in any kind of business. It is the process of getting words out about your services/ products. Unlike domestic marketing, exports marketing is more systematic and strategic.
Exports Marketing commence with a solid market research and analysis. Having a product in hand or knowledge about products is not sufficient to enter exports. A major reason behind novice exporters’ failure is down to imitation of successful people. Simply, IT DOESN’T WORK! Times now support the survival of the smartest fit.
Being smart is not a hard thing. It doesn’t mean making things up or trying to give an extravaganza of trivial stuff.
I remember an old Tamil song ‘Unnai Arinthal nee Unnai Arinthal’ reveals the two main ingredients for the foundation of a successful marketing strategy. First, know about yourself. Second, communicate in such an educating way to manifest as a leader of your subject matter. The aim of this article is to focus on two topics: market analysis for exports and role of digital marketing in exports.
An exporter should have a complete understanding of his/her SWOT about their personality, both on personal and professional front. It is ignored by most of the exporters. Sometimes, they focus either on their strength or on their weakness.
A good SWOT Analysis helps in mapping the strength and opportunity exists. The most common characteristics of successful entrepreneurs are ardent learning and networking. These support in identification of the ways to mitigate the threats and weaknesses.
Market analysis:
According to the International trade center, India has an untapped export potential of US$ 209 bn. Indian exporters have a huge opportunity in international trade if the knowledge and skill gaps are addressed. Market analysis is my most favorite part of exports marketing. The successful export strategy begins with a good market analysis. Once you have a product, you should do a deep market analysis. Market analysis should be able to give a clear picture of the size of your target market, competitors, and buyers.
In the International Trade, we compete with three categories of competitors. They are other exporters from our country, exporters from other exporting countries and local distributors of importing market.
Your market analysis should help you identify your advantage over all these competitors. The market analysis then develops into a marketing strategy. Let’s discuss segments of market analysis in exports.
STEEP analysis:
Social: The social developments include factors like consumer behavior, demographics, religion, lifestyles, values, and advertising.
Technological: Focusing highly on technological advancements, factors like innovation, communication, energy, transport, research and development, patent regulations and life-cycle of products are considered.
Economic: Measures of interest rates, international trade, taxes, savings, inflation, subsidies, availability of jobs and entrepreneurship are used to evaluate the consumers’ buying position.
Environmental: Environmental developments involve ecosystem factors such as water, the wind, food, soil, energy, pollution and environmental regulations.
Political: The Political developments can highly influence individuals and organizations. It is important to be aware of likely upcoming shifts in power. Political developments can affect environmental, antitrust, financial markets, trade, and other kinds of laws. Factors dealt include political stability, regulation of monopolies, tax policies, price regulations, consumer protection, jurisdiction, and trade unions.
Trading relationship between countries:
Understanding the trading relationship between two countries is significant. There are three types of trade agreements: Unilateral, Bilateral, and Multilateral agreements. When a single country imposes a restriction, or loosen restriction on a certain country, it’s called as the Unilateral trade agreement.
Bilateral trade agreements are between two countries to liberate the trade flow mutually between the countries, knowing this kind of agreements help in viable market penetration. Multilateral agreements are the most powerful trade agreements. They give a more competitive advantage for the economies involved.
Exports potential to the market:
Exports potential in terms of currency value, give insight about the target market position and viability for an exporter to decide whether it is worth attempting such market.
Trade Intensity to the market:
Trade Intensity is high when a country depends upon a single supplying country. It reveals the competitive advantage of a country, over other competitor countries.
Comparative analysis with competitor countries:
India’s export share (1.8%) in the world is very meager compared to our fastest growing economy. To increase our exports share, we must know about our competitors. India has advantages over competitors in various sectors. But one must utilize the resources available.
Market diversification analysis:
One of the perks of exports business is exporting to different countries. If you are doing well in a market, market analysis can be done for other markets too.
Single market analysis:
Market segmentation analysis is also important for export market analysis. An exporter must have an understanding how his product is being used in a target market. This is like STEEP analysis. But we do a single market analysis to make the product suitable to different segments. Thus, expanding the export potential.
Market concentration analysis:
Market concentration analysis helps in finding out whether an importing market is a diversified or monopolistic. Higher market concentration shows that the country offers the better opportunity for a new exporter.
Competitor Analysis:
The exercises mentioned earlier, give an insight about your competitors from other exporting countries and help you to identify your advantages over such competitors. Another level of competition is from your own country i.e., other exporters. You must have a clear understanding of local market. This includes industry practice, pricing and payments terms, product knowledge, understanding on packing methods. Certain institutions and Government commercial bodies help in understanding current scenario. Your unique selling features will gain a competitive advantage over others.
Buyers:
To reach out the genuine buyers, you must recognize your target market and buyer persona. Not everyone can sell to every kind of buyers. Once the exporter understands his/her procuring/manufacturing capacity, should target such kind of buyers.
Marketing Strategy:
Once marketing analysis is done and an understanding of target market size, competitors, and buyers are acquired, it’s time to develop your marketing strategy. Marketing strategy helps you to strategically do marketing and measure/analyze the result. Let’s see the steps of developing a marketing strategy.
Setting a Goal:
Setting a Goal is the preliminary step. You can have a goal for 1 year, 3 years or 5 years. The goal must be in SMART form. i.e., Specific, Measurable, Achievable, Realistic and Time-Based.
For example: To export to in
You can make it more specific by adding quantity, price, package, and product specification. It’s better to concentrate on one product and one target country to start with.
Prioritise your marketing activities:
After setting the Goal, we must identify the marketing channels. Exports Marketing can be done through B2B portals, placing an advert at the relevant magazine, appointing freelancers, your website and social media, networking, trade fairs and exhibitions, utilizing government marketing schemes and promotion councils’ meetings.
An exporter should identify the most effective marketing channels for him/her. Prioritise the order of marketing channels from most effective to less effective.
Plan your projects and process:
After prioritizing the marketing channels, each channel has a unique approach. Each approach is to be considered as a project. Do a flowchart of activities for each project. Make sure that the flowchart of activities reflects your goal. Have a timeline for each activity and keep track of the progress.
An effective roadmap/flowchart identifies your weakness/gaps and necessary action for that. Best practice is to involve your team members. Solopreneurs can take the help from a mentor or consultant.
Creating a Marketing and sales funnel:
Marketing and sales funnel is a pictorial representation of stages of your buyer before making an order. Your marketing activities should encourage the buyer to move to the final stage. The stages are creating your presence in a marketing channel, replenishing the resources/benefits/process of a marketing channel, receiving an inquiry from a buyer, timely responding to your buyer, progress or drop of inquiry, achieving an order.
Each step should be analyzed for the result. If the inquiry doesn’t progress to next stage, change your course of action. Inbound marketing methodology is the current trend in effective marketing. It’s a method of encouraging the buyers to contact the seller. Digital marketing follows the Inbound marketing methodology.
Digital marketing or data driven marketing is the term used to market a product or service using digital technologies. Digital marketing channels are websites, social media profiles, emails, mobile apps, search engines. Some of the techniques are search engine optimization, search engine marketing, content marketing and automation. Let’s see the role of digital marketing in exports.
Digital Marketing in Exports:
Digital marketing plays an important role in international trade. Digital marketing goes beyond just having a website or social media profile. It is a part of brand strategy. Your website and social media profile should reinforce your brand and create a trust in your buyer’s mind.
Characteristics of a good website:
A good website should be like a digital showroom of your products/services. Buyer should be able to have a proper understanding of your products/service, the purpose of your products/service, benefits of buying from you and people involved in your business, your best practices, frequently asked questions/certifications. Your social media profiles should resonate the same values as your website.
Website performance is very important. The website should be mobile responsive i.e., ability to be configured according to the mobile display. Search engine optimisation (SEO) is a vital feature for a website. Website speed should be less than 3 seconds according to global standards.
More than anything, website content is the key to winning your buyer’s trust. Your content should be educating. It shouldn’t be a copy and paste. Google penalizes such bootlegging websites.
An effective social media profile helps you to build a good network and interact with others. Social media such as LinkedIn, google+, Facebook, Pinterest, Instagram, and Twitter are used for effective B2B marketing.
Consult Kriba specializes in creating content for international trade and audience. If you are looking for a practical, effective and updated online exports/imports course, our EXIM A -Z: A wholesome approach to exim business starts on 05.03.2018. The enrollment is open now with offer. To know more, click here
- Posted by : admin
- August 23, 2017
- Uncategorized
Every government looks to boost exports, because of the economic growth it offers. The current government has taken several initiatives. GST is one of the biggest transitions for India. There have been many debates on it. Our intention is to help exporters understand ‘How to make GST work better for exporters’.
Importer Exporter Code (IEC):
PAN acts as IEC in the GST era commenced on 1st July 2017. GSTIN is the identifier at the transaction level for every import and export. GSTIN would be used for credit flow of IGST paid on import of goods.
Export procedure:
The supply of goods or services or both can be made under bond or Letter of Undertaking (LUT), with or without payment of integrated tax. The exporters can claim the refund of unutilized input tax credit. The exporter must file an application for claiming input tax credit directly through the common electronic portal or through a facilitation center notified by the GST commissioner.
The registered person need not file any application for refund of IGST, paid for the supply of goods. The shipping bill with GST invoice details shall be deemed as the application for refund of IGST. The details of the relevant export invoices contained in FORM GSTR-1 get transmitted through the common portal to customs system and a confirmation of the export get transmitted back to the system, electronically.
The customs system processes the claim for refund, upon receiving the details of export manifest furnished in the return FORM GSTR 3. The amount equal to IGST paid in respect of each shipping bill gets credited to the bank account of the applicant mentioned in the registration.
The existing shipping bill formats are modified to comply with the IGST law. ARE-1 procedure is followed only for the commodities of applied central excise act.
Sealing of containers:
Central Board of Excise and Customs (CBEC), revised the procedure of sealing of the containers to be effective from 01.09.2017. Containers arrive at the port under three categories: containers stuffed at factory/warehouse under self-sealing, stuffed under the supervision of central excise officer, stuffed and sealed at the Inland Container Depot. For ease of doing business and uniformity, the board has decided to do away with the sealing by the CBEC officers. The procedure of self- sealing is simplified as follows:
The exporter should inform the jurisdictional customs officer about the details of the premises (factory or warehouse or any other place) where container stuffing is to be carried out.
Status holders recognized by Directorate General of Foreign Trade (DGFT) can use self-sealing procedure even if they are not registered under GST law. Other exporters are required to register under GST law and will be filing GSTR1 and GSTR2 to use self-sealing procedures. Otherwise, the exports goods are to be stuffed and sealed at ICD.
The exporter, desirous of using this procedure should inform the superintendent ranked customs officer or appraiser of customs at least 15 days before the first consignment from the premise. The officer will inspect the premise regarding the viability of stuffing the container. The officer will submit a report to the Deputy or Assistant Commissioner of Customs within 48 hours, who in turn shall forward the report to the Principal Commissioner of customs. The Commissioner grants permission for self-sealing at the premises.
Every time the self-sealing is carried out at the approved premises, the exporter should furnish details of address, description of export goods and incentives to be claimed at the customs.
In the case of a non-favourable report by the customs officer, the exporter should bring the goods to the ICD for sealing purpose.
Self-sealing permission obtained is valid for exports at all customs station. The Customs Bureau will circulate the permission along with the exporter’s GSTIN to all customs house.
The exporter uses a tamper-proof electronic seal of standard specification, fed with details of the exporter, exports goods, invoice number, authorized signatory name (for affixing the e-seal) and shipping bill, to seal the container before shipment.
The exporter planning to clear export goods without a customs broker can do so, by filing the shipping bill under digital signature.
In transit between approved premises and port of export, arises a possibility of replacing electronic seals with new details. At the port of export, customs officer might verify the integrity of electronic seals and inspect the consignments in self-sealed containers for risk standards using random or intelligent sampling methods.
Impact on Exports:
Drawback scheme will continue with the options of All Industry Rate (AIR) and Brand Rate. On goods imported for re-export purpose, drawback will continue to compensate customs duties as well as integrated tax and compensation cess. On the other hand, for imported goods and services used as inputs, the drawback is limited to customs duties on imported inputs and central excise duty on items specified in the Fourth Schedule to Central Excise Act 1944, instead of central excise duty, customs duty and service taxes combined.
Since there are limitations in Drawback scheme under GST, the existing duty drawback scheme will continue for a period of 90 days to allow a smooth transition. Exporters planning to claim a higher rate of duty drawback (composite AIR) during this period, should submit a declaration that no input tax credit or refund of IGST paid is claimed and CENVAT credit is not carried forward, along with a certificate from jurisdictional GST officer. This will prevent neutralization of input taxes twice. The exporter can claim brand rate for customs, central excise duties, and service tax during this period.
Exporters also have the option of claiming only the customs portion of AIR and claim refund under GST laws.
MEIS and SEIS are being continued, providing the exporters with duty scrips for the exemption of duties paid for the import of raw materials. The amount of exemption is expressed as a percentage of the total turnover of the exporter.
Concerns of exporters:
During initial days of GST implementation, the non-availing of credit certificate from GST officer may not be available for higher rate duty drawback claims. This prevents shipping bill moving to LEO stage and requires revision of bill to claim lower rate, to avoid delay in exports. Once the certificate is available, an additional claim needs to be filed for balance refund.
Another major concern for exporters is the imposition of five per cent GST on ocean freight which was exempted earlier. This will lock up working capital. Therefore, Refund will be processed within a week for 90% of the duties. Remaining 10 % will be refunded after the verification of accounts by tax authorities.
FIEO organized an Open house session on June 2017 to answer the concerns of exporters and to discuss on measures for FTP. Exporters from various sectors expressed their dissent on the announcement that deemed exports benefits may get discontinued under GST. They insisted on the continuation of all schemes for Indian products to remain competitive in global market and outcry over the method of paying tax and claiming the refund, demanding direct exemptions. Also, exporters were concerned about the regular break down in the icegate server of customs.
Conclusion:
The current GST structure has certain negative effects on the exports. It will be reviewed and the council will ensure the smooth transition to the GST regime.
People from all over India out cried on the announcement of Goods and Services Tax (GST) in India. Is it really going to be a burdening tax to consumers, in the history of India? Or is it the best thing that has happened to the people of India? The most debated hot topic of India over the past few months has been implemented by the Government of India on July 1st, 2017, with the taxes ranging from 0% to 28%. More money is flowing out of customer’s wallet as all manufacturers and service providers started billing in accordance to GST. But the real question, unanswered so far, is whether the populace understands how GST works and avoid being exploited. Let us see.
History of Tax in India
In the pre-GST era, there were n number of terminologies associated with tax in India. Income tax, Wealth Tax, Property Tax, Import and Export duty, Excise duty, Value Added tax, Service tax, Central sales tax, Customs duty and the list goes on… These taxes were levied by both Central and State governments, broadly classified as Direct Tax and Indirect Tax.
Direct tax is what the taxpayer pays to the government, directly out of his pocket. Income tax, Wealth Tax, Property Tax comes under this category. The government collects tax from the manufacturer, retailer for selling a good or service, which is added to the selling price for the consumer. It is called an Indirect tax, as though the amount is collected from manufacturers and retailers, ultimately the consumer ends up paying it.
Application of Indirect tax started as early as the goods move out of manufacturer’s warehouse. The Central government levied excise duty for all manufactured goods. In a case of imported goods, four types of excise duty were applied. Specific duty is applied for each individual item of imported goods. In other terms, specific duty was levied based on quantity. Ad-valorem duty was charged on the total value of imported goods. Anti-dumping and Countervailing duties were added to them to protect the sales of Indian goods against the sales of imported goods. Excise duties were applied on exports as well, but the exporter can avail rebate once the goods were shipped.
When the manufacturing and consumption of the product or service are within the state, only the taxes of state government were applied. State government tax rates varied from state to state. The Central government received a share of tax in the name of Central Sales Tax only on the sales involving two or more states.
Too many terms used in Indirect tax caused havoc in the minds of people. An ordinary person could not come in terms with the types of tax. A person with less understanding would find it difficult to cope with the types of taxes applicable or not applicable on each item. To avoid any loss, people simply added the tax on top of the entire amount on each step, resulting in cascading of tax. i.e., adding tax for tax amount calculated previously.
The longer the supply chain, a customer had to pay more irrespective of no value addition. In short, the taxes paid by the customer is multiplied by the number of links in the supply chain. To curb the cascading of taxes, VAT and cenVAT were introduced. VAT was applied by state governments and cenVAT by the central government. Though they reduced cascading to some extent, they were not totally effective.
With the implementation of GST, all different types of indirect tax were combined under one roof. Now, there is just one term that needs to be understood.
GST
Goods and Service Tax, commonly known as GST, is a consumption based tax. The goods or service is deemed taxable only when it is consumed by others. Through GST, the central government will get half of tax money. The state in which the goods or service is consumed will get the remaining half. State in which they are manufactured, will not get any share of tax.
GST comprises of three components: CGST, SGST, and IGST. In the intra-state sales of the goods and service, where they are manufactured and consumed within the same state, CGST and SGST are applicable. In inter-state sales, where the goods are manufactured in one state and sold to a person from another state, IGST is applicable.
CGST is Central GST, a term used to denote the share that goes to central government and SGST is state GST, the share to state government. IGST is Integrated GST, combined value of CGST and SGST, collected entirely by the central government, half of which is added as input credit to the government of the state, where the goods are consumed.
Government has fixed 5 different tax slabs as Nil GST, 5%, 12%, 18%, 28%. Goods and services that are essential for survival fall under 5% and 12% slabs, while the luxury goods and services are placed in 18% and 28% slabs.
How it works
The goal of GST is to ensure that every person pays their tax properly and to avoid cascading of tax.
The gist of GST is as follows, when the manufacturer sells his product to a wholesaler, will be charging as per GST slab. The wholesaler, while selling the same product to a retailer, should be adding tax only for the difference in the selling price, i.e., the profit margin. The retailer, who in turn sold to the customer, should add tax only for the profit margin. So, the end customer will be paying the tax for the amount that is added at the last stage. In long run, the prices of each good and service will come down.
While filing the tax returns, the retailer must ensure that the wholesaler has filed his returns and wholesaler must ensure that manufacturer has filed his returns, to avoid loss. Thus, the transparency in sales will be confirmed in future.
All these ideas behind GST tax structure will work only when the tax is included in the selling price. If the tax is calculated in addition to the selling price, it results in cascading of tax and yield no benefits to the consumer.
Let us consider below scenario and compare what happens when the tax is included/ not included in selling price:
The manufacturing cost of a product is ₹750, GST slab is 18%. Manufacturer from Tamil Nadu sells to a wholesaler in Tamil Nadu for ₹1003. The wholesaler sells the product to a retailer in Kerala for ₹1150. The retailer sells to a customer in Kerala for ₹1300.
1.Tax is included in Selling price (Idea behind GST):
Manufacturer in Tamil Nadu sells to Wholesaler in Tamil Nadu for ₹1003 inclusive of tax.
The manufacturing cost of the product is ₹750. The manufacturer adds ₹100 as his profit.
Base price of product (cost+ profit) = ₹850
18% tax on ₹850 = ₹153
Total selling price = ₹850 + ₹153 = ₹1003
Tax split up (Intra state sales):
Central Government CGST – 9%: ₹153/2 = ₹76.5
Tamil Nadu Government SGST – 9%: ₹153/2 = ₹76.5
Wholesaler in Tamil Nadu sells to Retailer in Kerala for ₹1150.50 inclusive of tax.
Base price from Manufacturer is ₹850. Wholesaler adds ₹125 as his profit.
New Base price of product = ₹850 + ₹125= ₹975
18% tax on ₹975 = ₹175.5
Total selling price = ₹975 + ₹175.5 = ₹1150.5
Tax amount to be paid by Wholesaler:
If manufacturer filed his tax = ₹175.5 – ₹153 = ₹22.5
If manufacturer did not file his tax = ₹175.5
Tax split up (Inter-state sales):
Central Government (IGST – 18%): ₹22.5
Kerala Government gets ₹11.25 as input credit (half of tax amount)
Total profit for Wholesaler:
If manufacturer pays his tax = ₹125 + ₹153 = ₹278
If manufacturer did not pay his tax = ₹975 – ₹1003 = -₹28
The retailer in Kerala sells to Customer in Kerala for ₹1298 inclusive of tax.
Base price from Wholesaler is ₹975. Retailer adds ₹125 as his profit.
New Base price of product = ₹975 + ₹125 = ₹1100
18% tax on ₹1100 = ₹198
Total selling price = ₹1100 + ₹198 = ₹1298
Tax amount to be paid by Retailer:
If manufacturer and wholesaler filed their taxes = ₹198 – ₹175.5 = ₹22.5
If manufacturer did not pay, wholesaler paid tax = ₹198 – ₹175.5 = ₹22.5
If manufacturer paid tax, wholesaler did not pay = ₹198 – ₹153 = ₹45
If both manufacturer and wholesaler did not pay = ₹198
Tax split up (Intra state sales):
Central Government CGST – 9%: ₹22.5/2 = ₹11.25
Kerala Government SGST – 9%: ₹22.5/2 = ₹11.25
Total profit for Retailer:
If manufacturer and wholesaler paid their tax = ₹125 + ₹175.5 = ₹300.5
If manufacturer did not pay his tax, wholesaler paid = ₹125 + ₹175.5 = ₹300.5
If manufacturer paid and wholesaler did not pay his tax = ₹125 + ₹153 = ₹278
If both manufacturer and wholesaler did not pay their tax = ₹1100 – ₹1150 = -₹50
Since GST is consumption based Tax and the product is only manufactured in Tamil Nadu, but consumed in Kerala, SGST collected in Tamil Nadu will be handed over to Kerala Government by the central government.
Final Tax split up:
Tamil Nadu Government (Manufacturing state) = ₹0
Central Government = ₹76.5 + ₹11.25 + ₹11.25 (after deducting input credit in IGST) = ₹99
Kerala Government = ₹11.25 + ₹76.5 + ₹11.25 (Input credit from IGST) = ₹99
To Sum up,
Manufacturing cost = ₹750
Profit to Manufacturer = ₹100
Profit to Wholesaler = -₹25 to ₹278
Profit to Retailer = -₹50 to ₹300
Tax to Government = ₹198 (State and Central Government)
Cost to consumer = ₹1298
2. Tax not included in Selling price:
Manufacturer in Tamil Nadu sells to Wholesaler in Tamil Nadu for ₹1000 exclusive of tax.
The manufacturing cost of the product is ₹750. Manufacturer’s profit is ₹250.
Base price of product (cost+ profit) = ₹1000
18% tax on ₹1000 = ₹180
Total selling price = ₹1000 + ₹180 = ₹1180
Tax split up (Intra state sales):
Central Government CGST – 9%: ₹180/2 = ₹90
Tamil Nadu Government SGST – 9%: ₹180/2 = ₹90
Since wholesaler paid ₹1180 for the product, he tends to sell at a higher cost to avoid loss. Wholesaler in Tamil Nadu sells to Retailer in Kerala for ₹1300 exclusive of tax.
Base price from Manufacturer is ₹1000. Wholesaler’s profit is ₹120. Tax amount paid by wholesaler = ₹180.
New Base price of product = ₹1000 + ₹120 + ₹180= ₹1300
18% tax on ₹1300 = ₹234
Total selling price = ₹1300 + ₹234 = ₹1534
Tax amount to be paid by Wholesaler:
If manufacturer filed his tax = ₹234 – ₹180 = ₹54
If manufacturer did not file his tax = ₹234
Tax split up (Inter-state sales):
Central Government IGST – 18%: ₹54
Kerala Government: ₹27 as input credit (half of tax amount)
Total profit for Wholesaler:
If manufacturer pays his tax = ₹120 + ₹180 = ₹300
If manufacturer did not pay his tax = ₹1300 – ₹1180 = ₹120
Since retailer paid ₹1534 for the product, Retailer in Kerala sells to Customer in Kerala for ₹1700 exclusive of tax.
Base price from Wholesaler is ₹1300. Retailer’s Profit = ₹166. Tax amount paid by retailer = ₹234
New Base price of product = ₹1300 + ₹166 + ₹234 = ₹1700
18% tax on ₹1700 = ₹306
Total selling price = ₹1700 + ₹306 = ₹2006
Tax amount to be paid by Retailer:
If manufacturer and wholesaler filed their taxes = ₹306 – ₹234 = ₹72
If manufacturer did not pay, wholesaler paid tax = ₹306 – ₹234 = ₹72
If manufacturer paid tax, wholesaler did not pay = ₹306 – ₹180 = ₹126
If both manufacturer and wholesaler did not pay = ₹306
Tax split up (Intra state sales):
Central Government CGST – 9%: ₹72/2 = ₹36
Kerala Government SGST – 9%: ₹72/2 = ₹36
Total profit for Retailer:
If manufacturer and wholesaler paid their tax = ₹166 + ₹234 = ₹400
If manufacturer did not pay, wholesaler paid his tax = ₹166 + ₹234 = ₹400
If manufacturer paid, wholesaler did not pay his tax = ₹166 + ₹180 = ₹346
If both manufacturer and wholesaler did not pay their tax = ₹1700 – ₹1534 = ₹166
Final Tax split up:
Tamil Nadu Government (Manufacturing state) = ₹0
Central Government = ₹90 + ₹36 + ₹27 (after deducting input credit in IGST) = ₹153
Kerala Government = ₹36 + ₹90 + ₹27 (Input credit from IGST) = ₹153
To Sum up,
Manufacturing cost = ₹750
Profit to Manufacturer = ₹250
Profit to Wholesaler = ₹120 to ₹300
Profit to Retailer = ₹166 to ₹400
Tax to Government = ₹306
Cost to consumer = ₹2006
When tax is included in sales price, everyone in the supply chain will get their profit share and consumer would not feel any burden in spending. If the tax is not included, the entire burden falls on the consumer, while all others get more profit. So, the entire responsibility of bringing down the cost lies with the consumer. They need to ensure that maximum retail prices need to be quoted inclusive of taxes.
GST promotes private consumption rate in a state, as state governments will get their share of tax only when the goods or service is consumed in the state. An increase in Private consumption will increase total demand, which in turn will help in the economic growth of India. If properly executed, it will help in tax reduction in future.
Watch out for the part 2 of this post titled “How to make GST work better for Indian exporters” on our website
Indian economy
India has one of the fastest growing economies in the limelight of global landscape. Indian economy tops in most of the economic growth contributing sectors. Service sectors such as IT enabled services, BPO & KPO, agriculture sector, Motorcycle division of automobile industry and retail market are the pulsating sectors of Indian economy. According to the World Federation of Exchanges, Bombay Stock Exchange and National Stock Exchange of India ranks 11th and 12th in the world respectively.
Snapshot of Indian Economy:
India has the strongest GDP growth among G20 countries according to Organisation for Economic Co-operation and Development (OECD). India’s tech start-ups hub ranks third largest in the world in a report by NASSCOM. Indian constellation of billionaires is the third largest and ultra-high net worth of households is the fourth largest in the world. RBI data reports that India’s foreign exchange reserves have grown from US$ 360 billion in March 2016 to US$ 366.781 billion in March 2017. The inflation rate is historically low at the rate of 2.6 % in May 2017. The Ease of Doing Business Index for India ranks Ludhiana, Hyderabad, Bhubaneshwar, Gurgaon, Ahmedabad, New Delhi, Jaipur, Guwahati, Ranchi, Mumbai, Indore, Noida, Bengaluru, Patna, Chennai, Kochi, and Kolkata, as the top 17 cities to flourish for entrepreneurs.
Indian export market:
Export – led growth hypothesis (ELGH) indicate that Indian GDP has grown with an averaging about 7 percent per annum since 1995 following economic reforms in 1991. India’s export constitutes approx. 1.6% of the total global exports. In line with Ministry of Commerce report, India’s merchandise export registered a 17.48 % year-on-year growth, with US$ 24.49 billion as on Feb 2017. The country has seen a rise in exports by 8.32 % in May 2017. Petroleum, engineering, textiles, and gems & jewelry sectors have shown strong performance in exports during the month. Gujarat, Maharashtra, Tamil Nadu, Telangana, Andhra Pradesh are leading states in exporting from India. Each Indian state is known for their regional fine products in the global market. On the contrary, between 2011 and 2016 India suffered bear market in its traditionally prowess exports such as readymade garments, gems and jewelry, and agricultural products, Cars, diamonds, maize, trousers, make-up and skincare items, handbag, and cotton sweaters.
India’s main export partners are U.S.A, UAE, Hong Kong, China, U.K., Singapore, Germany, Vietnam, Bangladesh, and Belgium. The data on the top 25 importing countries of Indian products can be accessed through Indian Trade portal.
Government initiatives:
The Government of India has taken a number of initiatives to boost Exports. Ministry of Commerce is officially in charge of trade activities in the country. The government has established institutions to initiate and promote exports, train, and render benefits to exporters. Export promotion schemes are as follows:
Merchandise Exports / Service Exports from India Scheme (MEIS / SEIS):
MEIS and SEIS are aimed to boost India’s exports. Exports of notified goods/ products to notified markets are granted freely transferable duty credit scrips on realized FOB value of exports in free foreign exchange at a specified rate (2-5%). Exports of notified goods shall be entitled to MEIS benefit provided the FOB value up to INR 25, 000 per consignment, through courier or foreign post office using e-commerce. Visit MEIS for more details. Service providers of notified services are eligible for freely transferable duty credit scrip @ 5% of net foreign exchange earned as per Appendix 3E of FTP 2015-2020.
Duty Exemption and Remission Schemes:
These schemes enable duty-free imports of inputs with the export obligation for export production. The schemes are Advance authorization scheme, advance authorization for the annual requirement, duty-free import authorization (DFIA) scheme, duty drawback of customs/central excise duties/service tax and a rebate of service tax through all industry rates.
Zero duty EPCG scheme, Post Export EPCG duty scrip scheme, EOU/EHTP/STP & BTP SCHEMES, Towns of Export Excellence (TEE), Rebate of duty on “export goods” and “material” used in manufacturing of such goods, Export of goods under Bond i.e. without payment of excise duty, Market Access Initiative (MAI) Scheme, Marketing Development Assistance (MDA) Scheme, Status Holder Scheme are the available EPCG schemes.
Other exports promotion initiatives are Export Processing Zone, Free Trade Zone, and Special Economic Zones. The main objectives of these initiatives are to attract foreign investments, to promote technology and infrastructure for economic growth, to promote export-oriented activities, ease of importing goods for exporting and to achieve export-led growth.
EPCs, Institutions, and FIEO:
Export promotion councils and commodity boards are non-profit organizations financially supported by the Government of India. These councils perform both advisory and executive functions to promote the exports of a specific group of products, projects, and services. EPCs play an important role in projecting India as a reliable supplier. They also monitor and encourage the exporters to adhere to the international standards and specifications. EPCs educates the exporters to take advantage of the trends and opportunities in the international markets for the respective goods and services. They are the first point of contact for the exporters regarding any info related to their products. The exporters must become members of the concerned EPCs and commodity boards to avail the benefits. The EPCs will in turn issue RCMC (Registration Cum Membership Certificate) depending on the details furnished by the exporter. There are 27 Export Promotion Councils including commodity boards in India.
Institutions and Advisory boards:
Indian Institute of Foreign Trade (IIFT) provides consultancy to export enterprise, conduct training, commodity studies, overseas market surveys. IIFT conducts “Niryat Bandhu @ Your Desktop”, an online certificate program launched by DGFT. Most proficient and experienced faculties are handling each segment of exports procedure. The program is to mentor new and potential exporters.
Indian Institute of Packaging (IIP) is set up by the government of India with the purpose of maintaining packaging standards to be compatible with those of developed countries.
Export Inspection Council (EIC) is responsible for the enforcement of quality control and compulsory pre-shipment inspection of various exportable goods. Five export agencies across the country are under the technical and administrative control of EIC.
Indian Council of Arbitration (ICA) is the apex body for promoting and encouraging amicable settlement of trade dispute.
India Trade Promotion Organization (ITPO) is the premier trade promotion agency to promote exports through trade fairs and exhibitions. ITPO also provides assistance to State Governments in setting up Regional Trade Promotion Centres (RTPC) in the State’s capital and major cities.
ECGC and EXIM Bank:
Export Credit Guarantee Corporation of India offers insurance to cover the risk of exporting on credit. ECGC provides
- a range of insurance covers to Indian exporters against the risk of non – realization of export proceeds due to commercial or political risks
- different types of credit insurance covers to banks and other financial institutions to enable them to extend credit facilities to exporters
- Export Factoring facility for MSME sector which is a package of financial products consisting of working capital financing, credit risk protection, maintenance of sales ledger and collection of export receivables from the buyer located in the overseas country.
There are different policies available to suit the requirement and credit worthiness of an export order.
EXIM Bank of India is a premier financial institution to enhance and to empower the Indian exporters to extend the trade to a new horizon. EXIM Bank offers financial services, marketing advisory services, research and analysis, Export advisory services and term deposit scheme. They launched export facilitation portal, Exim Mitra for trade related and financial product information.
Foreign trade policy and Trade Agreements:
The government of India formulates the foreign trade policies based on facilitating or controlling foreign trade, economic reforms and globalization. Foreign trade policy 2015-2020 is currently followed FTP to promote the exports. These policies are to encourage exporters through incentives, facilitating the technological and infrastructural up-gradation through imports of goods and equipment, activating Indian embassies as key players in the export strategy. The main objectives of FTP are to double the contribution percentage on the global trade and stir the economic growth by generating employment.
Trade Agreements:
India has signed different trade agreements with neighboring and developing countries to promote and ease the international trade. There are 20 trade agreements that are currently in force. They are PTA between India and Afghanistan, India-Africa trade agreement, Asia Pacific Trade Agreement, CECA between India and ASEAN, Agreement on trade, commerce and transit between India and Bhutan, PTA between India and Chile, CEPA between India and Japan, CEPA between India and Republic of Korea, CECA between India and Malaysia, PTA between India and MERCOSUR, Agreement of Cooperation with Nepal to control Unauthorized Trade, Agreement on South Asia Free Trade Agreement, Treaty of Transit between India and Nepal, Agreement on SAARC Preferential Trade Agreement, Revised Treaty of Trade between Government of India and Government of Nepal, CECA between India and Singapore, Free Trade Agreement between India and Sri Lanka, India – Thailand Free Trade Agreement.
India’s performance in global stage:
Indian products have a good value in the International market. But the credit just doesn’t go to the products alone. India’s geographical location, its climatic condition, vast English-speaking and young population, Entrepreneurial mindset, its ability to reach faster to the global screen are also key strengths of the Indian exports. Indian exports have grown, so as the imports. Indian products are known for the value addition and niche. The majority of the exporters go extra mile for their importers to protect the interest of their buyers. Amidst global demand, uncertainties in the political realm of the developed countries, economic recovery, Government initiatives are real fuel to the Indian export growth.
We cannot ignore the pain points as well. India ranks 130 in ease of doing business according to THE WORLD BANK. The trade deficit shot up to a nearly 30-month high of US$ 13.84 billion because of the increase in gold imports. There is a decline in agricultural output. India needs improvement on many frontiers in ease of doing business. This gives an opportunity to the start-ups. These are the basic information; an Indian exporter should be aware of. There are more to be detailed in the upcoming posts.
Consult Kriba aims to educate and empower Indian exporters to excel in the International trade.
- Posted by : admin
- June 22, 2017
- Uncategorized
Exports are one of the lucrative business. It can be a part of your business or you are entirely prepared to sell your products/services to international market. It helps in mitigating the risk of economic crisis and cash flow. There are certain things you can do before commencing the legal procedures. There are two types of exporters viz merchant exporter and manufacturer exporter. Following are the chronological steps to get an export order for the merchant exporter. The manufacturer export will already have their product chosen. So, they can skip the step 1
Step 1: Choosing a product/service:
First of all, Choosing a product is obviously vital to export. The best strategy to choose a product is to do a STEEP analysis based on your SWOT analysis. You are more likely to get success if you choose a product you can emotionally get attached to or the product you love the most. There are various tools and formula to identify the most profitable product to try for exports. Developing your niche will increase your chance of dominating the international market. Value addition is another key to success to find a better market for your product. If you are keen to have list of items exported from India, choose from, http://dgft.gov.in/exim/2000/itchs2017/ITCHS2017.html
Step 2: Choosing the market:
Most of the exporters are keen about selling their products to developed countries like U.S.A, Europe, U.K., Australia, Canada. But there are perks in exporting to other countries. There are more than hundreds of countries actively importing products and goods from other countries. Choose your market using the 7 market analysis tools provided in legacy.intracen.org/marketanalysis/. Construct your ideal buyer persona before choosing the market. There are buyers of different ranges from small businesses to giant enterprises. The exporter should clearly understand whom can they sell to depending on their capacity. Start with small quantities to get enough experience to achieve big orders.
Step 3: Constructing a business plan:
Developing a business plan is skipped by most of the entrepreneurs. But this is fundamental if you are keen to grow and establish your business. Business planning helps you to set in the right direction based on factual and not on mere intuition. Intuitions can be tested and justified through your detailed business plan.
The most crucial part of business planning is financial projection and marketing strategy. But if you get these right, you can avoid major pitfalls and mistakes at the early stage. The entrepreneur need not be a business graduate to get it done but requires a common sense and logical understanding. There are free courses available online. The best one I would recommend is Startup India learning program.
Step 4: Learn about export market/Incoterms/FTP/export documents:
Once you have chosen your product and market, it is time to plan and prepare for your export business. The export market works slightly different from the domestic market. It’s important to study both the export trend of the product and import trend of the product to your chosen market. You are competing with 3 types of competitors. Exporters of your product from your country, Exporters of your product from other countries and Other importers/suppliers of the same product in the chosen market.
The market analysis tools are essential to be used in studying the trends. Highlights of FTP 2015-2020 can be accessed through http://dgft.gov.in/exim/2000/highlight2015.pdf. The exporters choose to become a member of various B2B portals. There are about 23 such portals. New portals are exhibited almost on daily basis. It is better to become a free member of these portals to gain some understanding. Knowing Incoterms is extremely important to do exports. The export documents are proforma invoice, packing list, commercial invoice, certificate of origin, shipping bill/bill of entry, ARE-1 form, Mate’s receipt, Exchange declaration form (GR/SDF form), Bill of exchange, sight draft, Inspection Certificate, Bill of Lading, Airway Bill, Insurance certificate, consular invoice,
Step 5: Developing a marketing strategy:
This is a crucial step next to constructing a business plan. The business plan is best suitable for your overall business operation. A detailed marketing strategy will help you get a better result in a comparatively shorter span of time. We are living in the era of Information technology. Almost the whole world is acquainted with the WORLDWIDEWEB. Inbound marketing strategy has taken its important seat in the assembly of marketing strategy. We get information at the snap of our fingertip. Having a solid marketing strategy is very important to earn your buyers trust and increase your visibility in the internet search.
Step 6: Getting your license:
This is the easiest step in the export business procedure. Those interested in EXIM business need to apply to the regional office of the Director General of Foreign Trade (DGFT) for getting Importer-Exporter Code (IEC) Number. IEC number is not mandatory in the case of imports for personal use. Now, IEC can be applied through online just by uploading the necessary documents. Check http://dgft.gov.in/exim/2000/iec_anf/ieconlnapplform.htm. This step is applicable in the case of first-time exporters. Under GST regime, changes are made to accept PAN card as the license to do exports.
Step 7: Get in touch with EPC/other government initiatives:
Export promotion councils, Federation of Indian Export Organisations are key government bodies to promote export activities from India. The exporters must be a member of these councils to avail the benefits to doing exports from India. http://www.indiantradeportal.in/vs.jsp?lang=1&id=0,31,223,225 lists the Export promotion councils in India. The exporter has to register with the concerned export promotion council. For example, in the case of garments, it is essential to obtain a registration-cum-membership Certificate (RCMC) from the Apparel Export Promotion Council (AEPC).
Step 8: Contacting CHA or freight forwarding agents:
Custom house agents/Freight forwarders help you with export documentation and freight procedures. The difference between them is very thin. Logistic is itself an ocean to discuss. The important thing is to have CHA/freight forwarder who will take care of your cargo needs to be shipped safely to your buyer doing the necessary documents.
Step 9: Pricing strategy:
Pricing has to be done properly to get profit from the sales. There should be a pricing strategy in place to be able to successfully obtain an export order. A merchant exporter should get product and package cost from the manufacturer/trader, freight and related costs from their CHA/freight forwarder. The exporter should also determine their minimum order quantity and product specification to have a good pricing practice.
Step 10: Listing the buyers:
By now, the exporter will have a list of potential importers through various sources such as social media profiles, inquiries through their own website, B2B portals, other government websites, trade opportunities from Indian government e-magazines, importers list from Indian embassies, buyers list from EPCs, importers contacts from trade shows and exhibitions.
Step 11: Contacting buyers:
The exporters now begin to contact their buyers through emails, Skype calls, WhatsApp, social media, and make your first impression best by providing necessary information. Importers/import agents are usually well-aware of the markets. Your in-depth homework and preparation will give enough confidence to gain their trust. The best practice is, to be honest, tell the truth or else the importer can find out through the missing links. Timely replies and responses will put you ahead of your competitors. Provide your best offer to your buyer on proforma invoice.
Step 12: Sending samples:
Sending samples is not a necessary step unless the buyer asks for one. The best practice is not to assume but be open to ask needed information or provide needed information before committing to sending the samples.
Step 13: Confirming the export order:
You have worked hard/smart enough to get to this point. You deserve a sweet and pat on your shoulder. But before, confirm your order by getting sales contract, purchase order depending on the mutual understanding. Therefore, both exporter and importer will have to agree to the terms and conditions of the contract such as pricing, documents, freight charges, currency and so on. Finally, the importer sends a purchase order.
Step 14: Executing the export order:
With the export order in hand, the exporter starts manufacturing goods or buying them from other manufacturers. The exporter makes arrangements for quality control and obtains from the inspector of quality control, a certificate confirming the quality of goods, depending upon the requirement. Exportable goods are then dispatched to ports/airports for transit. After the completion of these formalities, the exporter contacts the clearing and forwarding agent (C&F agent) for storing the goods in warehouses. The exporter can also store the goods personally. The forwarding agent presents a document called the Shipping Bill, which is required for allowing shipment by the Customs Authority.
Step 15: Receiving payment:
After loading the goods into the ship, the captain of the ship issues a receipt known as ‘Mate’s Receipt’ to the ship superintendent of the port. The superintendent calculates the port charges and gives it to the exporter/C&F agent. When the port payments are made, the C&F agent or exporter gets the Bills of Lading or Airway Bill from the official agent of the shipping company or the airline. The exporter applies to the relevant Chamber of Commerce for obtaining Certificates of Origin, stating that the goods originated from India. This is not a mandatory document in all cases.
The exporter also sends a set of documents to the importer, stating the date of shipment, the name of vessel, etc. Moreover, it is desirable to send certain documents like the Bills of Lading, Custom Invoice, and Packing List to their foreign counterparts.The exporter now presents all the important documents at his bank. This must be done within 21 days after the shipment.The exporter’s bank sends these documents to the importer’s bank. The importer’s bank should make the payment on or before the due date. In the case of advance payment, the exporter will receive the payment after receiving the purchase order.
Step 16: Follow up with the buyer:
It is essential to keep your buyer/importer informed at each stage. It will help you to build a rapport with the buyer and makes it easy for further orders. Once the buyer receives the goods, ask for the feedback to provide any after sales service if required.
These are only basic steps for doing export business. It is one among 7 segments of Exports and Imports business. If you are looking for a one to one mentoring on exports training, email us to consultkriba@gmail.com or WhatsApp +917550302005.
Hi,
This is my first blog after 6 years. I really wanted to start with something inspiring. I am now working on setting up my own consultancy after being in the International trade since 2011. I thought the journey started when I enrolled in Agilam Institute of Foreign trade for the Diploma in International trade. But it wasn’t! The seed of desire was sown when I was six years old. I loved to sit with my grandfather helping him with his ledger. I got no interest in fairy tales but keen about hearing those real stories of how my grandfather toiled to set up his own empire. I remember him saying that his fifth attempt turned out to be a charm. It registered in my mind that those 4 failures were each step closer to his success. He never looked back after that. He is still that energetic and authoritative (He is 90 years old now). Is he not inspiring? Unquestionably He is (At least to me).
Below is the journey of three women entrepreneurs will inspire you. I feel blessed to have known them personally.
Mrs. Ramalakshmi NambhiRajhan (Ramu):
Ramu, aged 52 is from Tirunelveli. She is an LIC insurance advisor and collaborates with her spouse’s rice wholesales business, exports. She became an entrepreneur at the age of 49. She always tells that she wanted to achieve something great in her life. She works round-the-clock and her ambition is to receive an award from the President. Despite all the challenges, she stays motivated by keeping her staunch Christian faith. Her strength is that she motivates herself saying ‘If I can’t, then who can’.
Mrs. Kruthika Kumaran:
Kruthika is the founder of “vilvah store” – a fresh handmade natural. Kruthika started her venture after her mother’s demise due to over dosage of skin medication. She wanted to spread awareness of fresh and natural skincare and cosmetic products. Spending most of her time in research and development, she brings out the best product for her customers. Though sourcing premium quality raw materials is a major challenge, reviews and positive feedbacks from the customers keeps her motivated. She recognizes that her key strengths are diligence, energy, and aspiration to provide the quality products. For more details, click the links below
www.facebook.com/vilvahstore, www.instagram.com/vilvahstore
Mrs. Durgesh Nandhini:
Nandhini is a multifaceted business woman. An inspiring and interesting lady. You feel a buzz if she is around. Her excitement about frivolous stuff makes you realize that petite things do make an impact. She is a minimalist actively focussing into zero waste lifestyle in an urban. Her blogs record her thoughts and experiences of her transition being a hoarder to an organized minimalist and a zero waste. It so happened to be influenced as a guidance, motivation, and support to others. While sticking to strict deadlines and grammar anxiety are the significant challenges faced, the amount of love, massive reach, and positive aura contributes to her motivation. Her strength is the ability to connect with varied demographics, choosing relevant topics, and her writing style. Her blog is www.durgeshnandhini.com.
Setting up a business is not an activity, it is an attitude. We are living in one of the best times of entrepreneurial era. We might tend to feel low at times, with no stones turned. It’s enough if you are passionate about being an entrepreneur. Your perseverance will not let you down. There are loads of information, webinars, and authentic materials available on the internet. The government of India is also taking remarkable steps to make India the preferable location to do business. There are many altruistic mentors providing astounding support to budding innovators.
To conclude, I can write about many who influence others in a positive way. These three ladies are just an example. Money is neither an obstacle nor motivating factor for an entrepreneurial spirit.
YOUR PASSION IS THE KEY.
- Posted by : admin
- April 17, 2017
- Uncategorized