Watch out! 3 error zones for Indian export businesses


  • Exporters often talk about the challenges of doing business internationally.
  • Understanding the whole process will help your business plan taxes better.
  • This blog contains all the information about the challenges that you will encounter while selling across international borders.

In the last couple of years, the government introduced technology in processes making them digital and with minimum human contact.

Fintech and tax automation have revolutionized international trade and made it faster, more accessible, and less intimidating. Many organizations are taking the wild leaps of selling into the global market. But when they do so, they often meet with surprise hidden costs and compliance they had not heard of. That becomes a significant blow, not just financially but in terms of goodwill too, and can be discouraging for newbie exporters.

Organizations are looking at tax automation to tackle these issues. If you are an organization that conducts cross-border transactions or planning to take it up soon, here is a list of steps you need to mind while planning for your compliance.

Steps involved in a sale transaction-

Irrespective of the nature of the business, size, scale or volume of operations if you are selling across the border, you will have to mind these steps and accordingly plan your sale.

  1. Customer buys.
    The first stage of every international transaction is where the customer or buyer places an order. This can be via an online catalogue, over the phone, or any other mode.
  2. Ascertaining incoterms.
    The next stage is deciding the incoterms. Incoterms are a globally recognised and accepted set of contract terms that sellers use in sales contracts. They help international sellers, importers, and exporters define and identify the responsibilities and liabilities while shipping and receiving goods. In short, they help the sellers know who is supposed to do what in a particular shipment. For example, who pays for shipping and who will pay the taxes and dues to the authorities, are the kinds of things that the incoterms decide.
  3. Landed cost calculation
    The trickiest part of carrying out an international sale is calculating the landed costs. Landed costs are the root causes of the most commonly known troubles in international business like delays in delivery, bad customer experience, and hidden costs. Calculating landed costs takes a day or two if you do it manually or can be done within a matter of seconds if undertaken digitally. Another reason why more and more organizations are adapting to tax automation is that it allows you to quote in real-time.
  4. Shipping
    The next stage is when you ship it to the destination country according to the incoterms. This will include paperwork, and you will have to identify a reliable and trustworthy shipping company to partner with.
  5. Arrival at the destination country
    Once the shipment arrives at the destination country, it gets checked at customs, and you have to pay the required duty or any other dues at this stage. These dues depend on the product you are shipping and the country where it will be shipped. The duties are calculated based on tariff codes called  HS codes. An incorrect HS code classification can result in your Shipment getting stuck at customs, causing delays in delivery, hidden costs and angry, disappointed customers. Here one needs to keep in mind that rules and regulations keep changing constantly, and businesses must be vigilant and stay up to date with the changing laws and regulations.
  6. Package delivered to customers
    Your package will reach the customer only after custom clearance. Now, if there is any error or miscalculation in the landed costs, the customers would experience trouble. The outcomes could be packages stuck at customs, customers might have to pay more to get their shipments from the customs, and the hidden costs will leave them with a bad shopping experience. Worst, the customers might reject the package, and in cases like that, you will have to pay out of pocket to get the shipment back.

What can go wrong in the process?

The most common error zones are HS codes Landed costs and Incoterms.

If you go wrong in either, you are inviting trouble.

  1. HS codes-
    HS code is a system that helps classify all globally traded products into categories to calculate customs duty for each. If you assign the HS codes inaccurately, you will get the taxes wrong, in turn, you will charge an inaccurate price to the customers. If you quote more, you will fall behind due to competition and if you quote less, you will have to either pay out of your pocket or face angry unsatisfied customers later on.
  2. Landed costs-
    Landed costs are the total costs incurred in getting a shipment to its destination. They usually include the cost of goods, door to door shipping, insurance fees, if any, customs duties, import taxes and other miscellaneous fees and taxes. In short, the total cost to the customer is the landed cost.
  3. Incoterms-
    Incoterms are a globally recognized and accepted set of contract terms that sellers use in sales contracts. They help international sellers, importers, and exporters define and identify the responsibilities and liabilities while shipping and receiving goods. In short, they help the sellers know who is supposed to do what in particular shipping. They help avoid miscommunication and in turn avoid compliance failures as all the parties involved in a particular transaction know exactly what they are supposed to take care of.

We advise our customers to plan for taxes ahead of time rather than giving them a simple afterthought. If more organizations plan out taxes before selling to the international market, a lot of trouble can be saved and your transactions will be time-saving, money-saving and seamless.

We keep posting updates regarding changes in rules and regulations through our blogs and social media.

Follow us to stay up-to-date with relevant indirect tax content. Visit here to take a look at our software solution for cross-border sellers-A free demo harms no one!

Recent posts
Tax planning for business expansion in the U.S.: Best practices for Indian startups in 2024
U.S. sales and use tax guide for SaaS businesses in India
Market entry playbook: Launching your brand in the U.S. tax landscape

Prepare your business for e-invoicing under GST

Discover how to meet all compliance requirements while integrating e-invoicing into your tax function.

Prepare your business for e-invoicing under GST

Stay up to date

Sign up for our free newsletter and stay up to date with the latest tax news.