IEC and AD code: the export setup order that works

Most first export shipments do not fail on price, packaging or demand. They fail at a customs counter because a registration that takes an afternoon was done in the wrong week. The registrations themselves are not hard. The sequence is where brands lose a month.

Here is what a D2C brand actually needs before a first parcel leaves India, and the order to do it in.

What an Importer Exporter Code is

The IEC is a ten digit code issued by the Directorate General of Foreign Trade. It is the identity of your business in every customs and trade system in the country. No IEC, no shipping bill.

Two things about it surprise people. First, it is PAN based. Since the code was aligned with PAN, your IEC is your PAN, and one PAN gets one IEC. If you already hold an IEC under an older format, you are not applying for a new one, you are updating an existing record. Second, an IEC is not permanent by default. It must be confirmed on the DGFT portal every year between April and June, even when nothing has changed. Skip that and the code is deactivated. This is the single most common reason a brand that exported last year cannot export this year.

The DGFT application

The application runs online at the DGFT portal, on the Aayaat Niryaat form for new IEC issuance. You will need, at minimum:

• PAN of the entity, matching the name exactly
• Entity details, including the registered address and proof for it
• Bank account details in the entity name, with a cancelled cheque or a bank certificate
• A digital signature or Aadhaar based e-sign for the authorised signatory
• A small application fee, payable online

Approval is usually quick when the PAN name, bank name and address proof agree with each other. When it stalls, it is almost always a name mismatch between PAN and the bank record. Fix that before applying rather than after.

The AD code, and why it strands first shipments

This is the step nobody tells a founder about. An AD code is a numeric code issued by your Authorised Dealer Category I bank, on bank letterhead, identifying the branch that will handle your export proceeds.

The code is useless until it is registered against a specific customs location. Customs systems are location bound. An AD code registered at a sea port does not work at an air cargo complex, and neither works at a courier terminal. If you plan to ship parcels by express courier from a particular airport, your AD code has to be registered at that courier terminal’s customs location, and separately at every other location you intend to use.

The registration is now handled online through ICEGATE rather than only over a counter, but it still takes days and it still needs the bank letter in the correct format. Brands that skip it discover the problem at the worst moment, when a courier partner reports that the shipping bill cannot be generated and the parcels are sitting at the terminal.

While you are there, register the IEC on ICEGATE itself with a class 3 digital signature. That registration is what gives you the ledger for export incentives later. It is separate from your DGFT login and it is easy to forget.

GST and zero rated exports

Exports are zero rated supplies under the IGST Act. Zero rated does not mean ignore GST. It means you choose one of two routes.

• Export under a Letter of Undertaking without paying IGST, then claim refund of unutilised input tax credit.
• Pay IGST on the export invoice, then claim refund of the IGST paid, with the shipping bill itself acting as the refund application.

Most D2C brands take the LUT route because it does not tie up working capital. The LUT is filed on the GST portal in the prescribed refund form, and it is valid for one financial year only. It has to be filed again for each new financial year. A brand that files once and forgets discovers in April that its exports are no longer covered and it is now expected to pay IGST on every parcel. Put the renewal in the calendar the day you file the first one.

If you take the IGST paid route, the invoice number, GSTIN and port code must match between your GST return and the customs record. Mismatches are the standard reason refunds sit unpaid, and the fix is clerical rather than legal.

The sequence, in order

1. PAN in the entity name, correct and current
2. Current account with an AD Category I bank, name matching PAN
3. GST registration, if you are not already registered
4. Digital signature or e-sign for the authorised signatory
5. IEC application on the DGFT portal
6. AD code letter from the bank
7. AD code registration at every customs location you will ship from, including the courier terminal
8. IEC registration on ICEGATE with the digital signature
9. LUT filed on the GST portal for the current financial year
10. First shipping bill, with the export incentive declaration made at item level

Steps six and seven are the ones that need lead time. Start them the day the IEC is issued, not the week you plan to ship. If you sell through an export promotion council supported category, check separately whether a Registration Cum Membership Certificate is required for the specific benefits you intend to claim.

After the first shipment

Shipping bills flow automatically into the banking system’s export monitoring database. Each one stays open until export proceeds are realised and a bank realisation certificate is generated against it. Under exchange control rules, proceeds are expected within a defined period from the date of export. Open entries pile up quietly and then block future benefits.

Assign one person to reconcile shipping bills against realisations monthly. It takes twenty minutes and it prevents the class of problem that takes a quarter to unwind.