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Importing and Exporting - Roots of The Economy

VSAT 2023

What are Exports and Imports?

Last updated date: 23rd Jan 2023
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Import and export trade is an example of foreign trade. Some countries might be surplus in few resources while others might be in a deficit, so in order to fulfil the necessities of resources, the goods are imported if the country is deficient in such resources, and when the goods are in surplus, then goods are exported.


Types of Importing and Exporting

The importing types are listed below:

  • One-time import

  • Recurring import

  • Voter file import

  • Ballot import


The types of exporting are listed below:

  • Direct export

  • Indirect export

  • Merchant export

  • Deemed export

  • Penultimate sale


Export and Import Trade

Import means bringing goods from outside India or goods brought from foreign territory to Indian territory for monetary consideration in foreign currency in order to meet the demands of the people. There can be the import of goods as well as the import of services. The imported goods will be covered under the customs act, and customs duty will be levied on them. In case services are imported, they will be covered under the GST act, and IGST will be levied on them.


In the case of exports of goods, the goods are sold from India to a place outside India. Normally exports of goods are duty-free, but in some cases, it is levied at negligible rates. Moreover, the input tax credit is refundable in the export of goods under the GST tax regime.


The evolution of exports can be traced back to the era of the 18th century when the economies started shifting to liberalisation. The father of Economics, i.e., Adam Smith, wrote in his book “The Wealth of the Nation” in 1776 that he brought international trade into the picture.


Advantages of Import and Export

  • The balance of payments is established through export and import by regulating the balance between Indian and foreign currencies.

  • It provides a huge scope of growth for the entrepreneur across the global markets.

  • The government provides tax benefits through rebates or other promotional schemes from time to time.

  • It reduces the cost of the product by acquiring raw material or finished goods at a cheaper rate.

  • Due to liberalisation, the trade barriers have been removed and hence, it is very easy to import and export nowadays.

  • The investment amount is very less as there is no need to set up business in each and every geographical area.


Difference between Import and Export


Sno.

Basis

Import

Export

1

Meaning

Bringing goods from outside India to meet demands.

Selling goods outside India to earn foreign exchange.


2

Applicable Act

Customs act 1962 is applicable for import of goods and in case of import of services GST act is applicable.

In case of export of goods and is treated as zero-rated supply.


3

Person is called as

Person importing goods is called an importer.

Person exporting the goods is called an exporter.

4

Steps involved

1. Preliminary stage

2. Pre-Shipment stage

3. Shipment stage

4. Post-shipment stage

1. Preliminary stage

2. Pre-import stage

3. Import stage

4. Post-import stage

5

Trade balance

When imports in the economy are more than exports, it is called a trade deficit.

When exports in the economy are more than the imports, it is called trade surplus.


6

Example

Importing goods from China to India.

Exporting goods from India to Nepal.


Case Study

PQR Ltd wants to export the goods to China but it has no idea about the documents required in case of goods for exports. So, as a student of business studies, you are required to draft a list of documents required for the export of such goods.

Ans: The documents required for the export of goods are as follows:

  • Export Invoice

  • Packaging List

  • Certificate of origin

  • Certificate of inspection


Conclusion

Due to the fast spread of the internet across the globe, the import and export procedures have become more simplified than before. Now, the order can be placed with one click and customers can be served at their doorstep. It has not only enhanced the ease of doing business rather it added several advantages to the consumers as well. The world has now become a global village due to the fast spread of the internet.

FAQs on Importing and Exporting - Roots of The Economy

1. Name the major foreign trade promotion and major schemes.

The major foreign trade promotion and major schemes are as follows: 

  • Duty drawback scheme

  • Bond scheme for export manufacturing scheme

  • Exemption in payment of taxes 

  • Advance licence scheme

  • Export promotion capital goods scheme (EPCG)

  • Exportation of services

  • Export processing zones

  • Export oriented units (100% EOUs)

  • Export house, trading house, and superstar house for recognising export firms

These are the few schemes available for export promotion. These schemes may vary from business to business. Moreover, these schemes are amended by the government on a regular basis in order to develop a sustainable market  in the global economy.

2. Name the major documents used in the import transactions.

  • Trade enquiry

  • Performa invoice

  • Import order or indent

  • Letter of credit 

  • Shipment advice

  • Bill of lading 

  • Airway bill

  • Bill of entry 

  • Bill of exchange

  • Sight draft

  • Usance draft

  • Import general manifest

  • Dock challan

These documents play a major role in import procedures. Import in India is regulated by the Central board of excise and Customs under the Ministry of Finance. The rate of basic customs duty of import of goods is given under schedule first of customs tariff act 1975.

3. What is the link between export and import and the balance of trade?

The balance of trade refers to the difference between export and import. If exports are greater than imports, then the trade component of GDP is positive and adds to the GDP which leads to growth in the economy. It is known as the trade surplus. Here, GDP stands for Gross Domestic Product. If imports are greater than exports, then the trade component of GDP is negative and  it reduces GDP which leads to declination in the economy. It is known as the trade deficit.

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