Exporting Goods from India to Nepal

[Tushar Malik]

Summary

Exporting goods from India to Nepal follows a well-defined process governed by Indo-Nepal trade agreements, customs regulations, and GST compliance. Goods must pass through designated land customs stations, and exporters must adhere to specific documentation and licensing requirements. This guide provides a structured approach, covering key legal provisions, required documents, procedural steps, and the rebate system for duty-paid exports.

Introduction

India and Nepal share a strong trade relationship, with India being Nepal’s largest trading partner. The Indo-Nepal Treaty of Trade governs bilateral trade, ensuring streamlined transactions through designated routes and compliance measures. Exporters must understand legal provisions, customs requirements, and payment mechanisms to facilitate smooth cross-border trade.

Benefits of Exporting to Nepal

1. Zero-Rated GST Benefits – Exports to Nepal are exempt from GST, allowing exporters to either claim a refund on IGST or export under LUT (Letter of Undertaking) without paying IGST.
2. Multiple Transportation Modes – Goods can be transported via road, rail, or air, providing logistical flexibility.
3. Rebate and Refund Mechanism – Duty-paid goods qualify for rebates, ensuring cost-effectiveness for exporters.
4. Flexible Payment Options – Payments can be made in Indian Rupees (INR) under RBI guidelines or in freely convertible foreign currency under the in-bond system.
5. Simplified Customs Process – Designated border checkpoints ensure systematic customs clearance and ease of documentation.

Essential Requirements for Exporting to Nepal

1. Importer Exporter Code (IEC) – Mandatory registration with DGFT (Directorate General of Foreign Trade).
2. Regulatory Compliance and Documentation – Ensuring necessary permits and certifications under GST and customs regulations.
3. Customs Clearance through CHA (Customs House Agent) – Engaging an authorized CHA simplifies export procedures and ensures regulatory compliance.
4. Designated Trade Routes – Exports must pass through 22 designated land customs stations, such as Raxaul-Birgunj and Sunauli-Bhairahawa.
5. Product-Specific Licensing – Special approvals from authorities like FSSAI (for food products), PQC (for agricultural products), and DCGI (for pharmaceuticals) are required where applicable.

Step-by-Step Procedure for Exporting to Nepal

Step 1: Business Registration

Ensure your firm is registered with:

• Ministry of Corporate Affairs (MCA), India
• DGFT (IEC Registration)
• GST Registration (Mandatory under GST Act, 2017)

Step 2: Obtain Necessary Licenses and Permissions

• Food Products: Approval from the Food Safety and Standards Authority of India (FSSAI)
• Agricultural Goods: Plant Quarantine Certificate (PQC)
• Pharmaceuticals: Clearance from the Drug Controller General of India (DCGI)

Step 3: Choose the Trade Route

Select the appropriate border checkpoint for goods movement. Major ICPs (Integrated Check Posts) include:

• Raxaul-Birgunj (Most commonly used route)
• Jogbani-Biratnagar
• Sunauli-Bhairahawa

Step 4: Documentation and Customs Filing

Submit the required documents to Indian Customs through the Electronic Data Interchange (EDI). Essential documents include:

• Authority Letter from an Authorized Customs Agent
• Delivery Order from Terminal Management Company
• Commercial Invoice
• Nepalese Customs Declaration
• Packing List
• Product-Specific Certificates (e.g., Phytosanitary Certificate, Food Safety Clearance, etc.)

Step 5: Engage a Customs House Agent (CHA)

A CHA ensures:

• Proper documentation filing
• Coordination with Nepalese Customs Officials
• Clearance at Integrated Check Posts (ICPs)

Step 6: Transport and Delivery

• Goods are transported via road, rail, or air, depending on product type.
• Nepal-bound shipments must comply with transit regulations under SAFTA (South Asian Free Trade Area).

Step 7: Payment and Final Clearance

• Payments are generally settled in INR through banking channels.
• Under the in-bond process, payments in USD or other convertible currency are processed via Nepal Rastra Bank.
• Final customs clearance is obtained before goods are released to the Nepalese importer.

Detailed Documentation Process

Preparation and Assessment

• Prepare five copies of the Nepal Invoice.
• Goods are assessed under the Central Excise Tariff Act, and duty is recorded.
• Exporters must notify Central Excise authorities 24 hours before dispatch.

Examination and Sealing

• Customs officers verify and seal consignments before dispatch.
• Goods under duty exemption schemes undergo additional scrutiny.

Distribution of Nepal Invoice Copies

• First Copy – Retained by the exporter with sealed goods.
• Second and Third Copies – Submitted at the land customs station.
• Fourth Copy – Retained by the Central Excise Officer.

Procedure at the Land Customs Station

• Goods are presented to Indian Customs with invoices.
• Officers verify and certify exports before allowing entry into Nepal.
• Certified invoices are forwarded to Nepalese Customs for further clearance.

Nepalese Customs Verification

• Nepalese customs officers verify goods and invoices.
• Certified duplicate copies are sent back to Indian authorities for record-keeping.

Role of Directorate General of Inspection (Nepal Refund Wing)

• Maintains records for each land customs post.
• Calculates the total rebate for the Nepal Government.
• Verifies duty payments and reconciles discrepancies.
• Prepares and submits the final rebate statement to Nepalese authorities.

Discussions to this article

[YAGAY andSUN]

Please re-check followings as Central Excise had been subsumed in GST.

1) Goods are assessed under Central Excise Act.

2) Exporter must notify Central Excise authorities 24 hours before dispatch.

3) Fourth Copy - Retained by Central Excise Authority.

[Tushar Malik]

@YAGAY andSUN

I sincerely appreciate your review of my article and your valuable suggestions for improvement.

As per my understanding:

If the goods fall under GST, excise duty does not apply, and the export process will be governed by GST regulations.
If the goods are petroleum products, alcohol, or tobacco, excise duty may still apply, and compliance with excise regulations would be necessary.

Therefore, it is important to verify whether excise duty is applicable to the goods being exported. If not, then excise assessment and prior notification are not required.