4 questions every Indian seller should mind while selling internationally

Summary-

New organisations face international tax compliance complexities after entering the global markets
Overcoming these hurdles requires some understanding of the topics and a concrete compliance strategy.
Foreseeing and strategising is the best way to deal with tax compliance.
This blog contains FAQs that commonly bother the Indian SMB’s willing to expand their scope by selling internationally.

How businesses communicate with customers has completely changed after the pandemic happened. While people figured out how to work from home, their reach across the markets also increased. As a result, global online sales hit close to $4.29 trillion in 2020. It is estimated that 95% of purchases will be made online by 2040.

Are you a small business thinking of venturing into the international markets? Do the complexities of selling to international customers intimidate you? Well, you aren’t alone. Most of the sellers find global logistics and compliance time consuming and tricky. This is the case because many sellers take a leap of faith in the complex world of international e-commerce. You can’t say it isn’t justifiable. The international markets are full of opportunities, and that is going to continue.

What needs to be done differently is understanding the requirements. According to research conducted by Avalara with NAPCO, most of the sellers venturing into the international markets lack a full understanding of what is required, and therefore also do not have a strategy in place to tackle these cross-border complexities. So if you are already reading this blog, you have successfully taken the first step.

There is nothing wrong with diving into the world of export. In fact, if the e-market booms like it’s promising to, this opportunity should not be missed. But the question remains about who can enter the international market.

1. What type of organisations can export?

For starters, sellers always have ambiguity in terms of the type of organisation permitted to export. The answer is any type of organisation, small or large, can get themselves to exporting. Proprietorships, Partnerships, LLPs and companies can export. The type of organisation that you should register yourself as depends on the size of the business and the way you would like to deal with income tax. The duties you would be required to pay depend on the kind of product you sell and not on the type of organisation.

2. Are there any prerequisites to starting an export business?

The other requirements include having a current account in a bank that deals with foreign exchange and other documents like PAN, Aadhaar cards that are mandatory for importers and exporters.

3. What are the registration requirements?

You will have to get an IEC number (Importer-exporter code) issued by DGFT (Directorate General of Foreign Trade). All importers and exporters are required to get an IEC irrespective of the type of business.

Apart from that, businesses willing to obtain authorisation or avail of benefits under the foreign trade policy are also required to get RCMC (registration cum membership certificate) from Export promotional councils or commodity boards of India. It certifies that your organisation is a member of that particular council or board, and it is valid for five years.

4. What about once the export process begins?

Once you get started, the complexities multiply. Many sellers face roadblocks on their first few international sales. Most of these hurdles arise due to inadequate or incorrect compliance. First, you have to estimate the cost of the product after considering all the expenses and then quote it to the customer. Second, you have to ensure timely delivery of the product. If the shipping costs are incorrectly estimated, the chances are that the authorities will keep your product, and it would not be cleared until you bear the due costs or charge them to your customers. This can affect your reputation and the customer might feel disappointed. The best way of dealing with these complexities without letting them harm your business is through automation. With automation, you can estimate the landed costs inaccurately and never go wrong with duties again.

Avalara’s cross-border solutions help organisations of all sizes overcome tax troubles. Our solutions help clients with timely, error-free compliance that isn’t hard on their pockets too. Get Avalara today.

Tax compliance can be complex, especially if more than one jurisdiction is involved. We keep posting about the changing tax regulations through blogs and whitepapers. Browse through our resources to know everything you need to know about selling across international borders.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.