What all exporters to India need to know: IEC, TDS and PAN Card

IEC – Import Export Code

IEC is a ten-digit code that every import/export company in India must have. International companies that want to start selling their products in India and do not want to set up an office right away do not have to apply for an IEC themselves, but can work with a recognized, local importer. Of course, this importer must be in possession of an IEC and be registered under the GST. Please note! Without an IEC number, goods will not pass through Indian customs and the importer cannot make payments to foreign bank accounts.

TDS – Tax Deducted at Source

TDS is an input tax that Indian companies that hire foreign service providers must withhold from the invoices of these foreign companies and then pay to the Indian tax authorities. The Indian customer is obliged to withhold TDS if the foreign service provider does not have its own branch in India. In addition to technical service providers (maintenance and installation), this also applies to design and consultancy work, for example.

PAN Card – Permanent Account Number

Just like in the Netherlands, the Indian tax authorities would like to see which companies do business with each other. A PAN number is in fact the Indian equivalent of the Dutch VAT number. A PAN registration is mandatory for Indian companies and optional for foreign exporters and service providers doing business with India.

Exporting and selling in India, how to start?

1. Although it is not mandatory, it is still wise to apply for a PAN registration when you want to start exporting to and selling in India. Without a PAN Card, the Indian customer must withhold 20% TDS and pay it to the Indian tax authorities. This means that only 80% of the invoice amount ends up in your account. If you do have a PAN registration, the TDS rate is 10%. Dutch BVs can get the remaining 10% back via the corporate tax in the Netherlands. Please note that this only applies to service providers, not to the sale and export of physical products or goods.
2. Look for a good importer who has knowledge of your specific market segment and has the correct registrations. The IEC is important for the import of products, but it is only one of the registrations that must be met before products are allowed into India.
3. Once the first sales have been made, it is important to request a TDS certificate from your Indian customers after the end of the Indian financial year (ending on 31 March). This states how much TDS the customer has paid for your company. This certificate can be used as a deduction for the corporate income tax return or income tax in the Netherlands. After all, no tax has to be paid on the TDS that has already been paid in India. This is all laid down in the DTAA (Double Taxation Avoidance Agreement) that the Netherlands and India have agreed upon.

Workshop: Market entry in India

Starting exporting to India can be challenging for European companies that are not yet familiar with the country. IndiaConnected helps over 100 companies with their activities in India every year. We work with local experts and can offer you a helping hand with our tailor-made workshops:

• We give you more insight into what is involved in your market entry in India.
• You receive valuable feedback on your current India strategy from independent experts.
• Expertise in every field: sales, manufacturing, legal, fiscal, financial, supply chain, recruitment, etc.Our workshop usually lasts approximately 2 hours. Our experts will work with you to explore your issue and formulate possible answers and strategies. Afterwards you will receive a report.