Import of Edible Oil in India

The pricing difference of edible oil between India and some foreign countries makes importing edible oil lucrative for many traders and merchants. Since edible oil is considered a food product, the importance of edible oil is controlled by the Food Safety and Standards Authority of India. Further, any person wishing to start the import of edible oil in India must obtain various licenses and registrations as under.

Business Registration

In the case of the import-export business, there is often a requirement to accommodate foreign promoters and foreign investments. Hence, a Private Limited Company is the best entity choice for NRIs or Foreign Nationals promoters. Foreign Direct Investment (FDI) in a Proprietorship / Partnership Firm / One Person Company is not allowed. On the other hand, foreign direct investment in Private Limited Companies of up to 100% is allowed under the automatic route. I.e., only a notification of the investment must be submitted to the RBI within 60 days of the actual investment. Hence, its best for most businesses involved in extensive import or export business to register a private limited company.

Promoters

A Private Limited Company can have up to 7 Directors and 200 shareholders. It recommends that at least one of the directors be both an Indian Citizen and an Indian Resident. An Indian Resident spends a minimum of 186 days in the past year in India. The other shareholders can all be foreign.

State of Incorporation

There is no requirement for the State of Registration to be the same as the place of residence of the Director. Hence, it's best for those companies involved in extensive import or export to choose states like Maharashtra, Gujarat, Chennai, or Kolkatta, where ports are available along with FSSAI offices.

Setting up an import company in a state like Maharashtra will also give the entity credibility among Indian Traders - as Mumbai is a large trading city. Further, Mumbai has a very good port and plenty of good customs agents - who will be instrumental in clearing the goods through the port.

To register the Company in Mumbai, the following documents would be required:

Utility Bill of the Premises (Electricity Bill / Water Bill / Property Tax Receipt)
No-Objection Certificate from the Landlord - It's a simple letter from the Landlord of the premises to the Registrar of Companies declaring he has no objections to having the Company's registered office in his/her premises.
Rental agreement between the Landlord & the Company [Under Incorporation]. After obtaining Name Approval for the Company, enter the rental agreement. Once name approval is obtained, the rental agreement can be entered with the approved company name and “Under Incorporation” in brackets.

State of Registration - Operational Implication

It is essential to have the operational aspects in mind while choosing the State of Registration. Consider the following questions:

In which State will a majority of my customers be situated?
Where will the goods be stored after import into India?
What will transportation cost be between the place of import and the end consumer?
Availability of manpower or sales personnel?

Licenses & Registrations

To import and sell edible oil in India, the following license and registrations would be required for the business:

GST Registration: Required to sell goods in India. The sale of edible oil attracts GST, and GST registration must be obtained from the State Government where the business will be set up.

Import - Export Code: Required for any importer or exporter of goods from India. Obtain Import - Export Code on opening the bank account for the company.

FSSAI Importer License: Required to import food products into India. Obtain an Importer License after the Import Export Code registration.

Procedure to Import Edible Oil

The Company must engage an experienced customs clearance agent who has experience dealing with edible oil in the past. The clearance agent will arrange shipment, insurance, customs handling, and clearance in India. The charges for the customs house will depend on the firm and the complexity involved. Usually, Customs Agents charge a fee of anywhere from 400 USD and above per container. The timeframe for customs clearance in India would be about 7-12 working days.

Once the product arrives in India, the customs clearance agent will be notified. The customs agent would then make a customs duty payment and clear the goods through Customs. Once clear of the Customs Department, the FSSAI department would be notified. An inspector from the FSSAI department would then ensure the product conforms to FSSAI Labelling & other FSSAI standards. If approved, the goods would be released to the importer in India.

Extension of concessional import duties on specified edible oils

The Central Board of Indirect Taxes and Customs (CBIC) vide notification no. 46/2022-Customs dated 31st August 2022 have extended existing concessional import duties on specified edible oils up to March 31, 2023. The concessional customs duty on edible oil import has been extended till March 2023.

The current duty structure on crude palm oil, RBD Palmolein, RBD palm oil, crude soybean oil, refined soybean oil, crude sunflower oil, and refined sunflower oil remains unchanged till March 31, 2023.
The import duty on crude varieties of palm oil, soyabean oil, and sunflower oil is currently zero. However, after taking into account 5 percent agricess and 10 percent social welfare cess, the effective duty on crude varieties of these three edible oils touches 5.5 percent.
The essential customs duty on refined varieties of palmolein and refined palm oil is 12.5 percent, while the social welfare cess is 10 percent. So, the effective duty is 13.75 percent.
For refined soybean and sunflower oil, the basic customs duty is 17.5 percent, and taking into account the 10 percent social welfare cess; the effective duty comes to 19.25 percent.

Import Export Code

Import Export Code Modification