Can One IEC Code Be Used for Two Businesses in India?

The import and export trade in India is regulated through the Importer Exporter Code, also referred to as the IEC code. The Directorate General of Foreign Trade (DGFT) issues this special 10-digit code that is obligatory for every business or individual involved in cross-border trade. One of the questions frequently asked by business owners is whether it is possible to apply a single IEC code to two businesses. As diversification increases, single ventures, various lines of business, and different forms of proprietorship ventures, entrepreneurs tend to wish to run more than one business under the same IEC. This blog elaborates on the legality, procedure, benefits, and drawbacks of using a single IEC code for two firms.

Understanding the IEC Code

The IEC code is a unique number that serves as the identity of a business participating in import or export activities. This is true regardless of whether the industry is in goods, services, manufacturing, or trading; the IEC code is the initial step in entering the international market. There is no need to renew the code every year. It is used as a document of legitimacy for customs clearance, bank transactions, export benefits, and other formalities related to international trade.

Applicability of a Single IEC Code for Two Businesses

When an individual has more than one business with a single PAN number under which they conduct business, they can legally use the same IEC code across all these businesses. The reason is that the IEC is associated with the PAN of the applicant. The PAN is valid for all business activities conducted by that individual, provided the person has the same PAN.

Nevertheless, if the two businesses are legally distinct with different PAN numbers, or if there are two partners in the case of two companies, two LLPs, or two partnership firms, then only one IEC can be shared by both. Every business organisation must obtain its own IEC code.

Therefore, the registration is fully contingent upon the legal structure and registration PAN.

Using One IEC Code for Two Proprietorship Businesses

Most of the individuals have more than one proprietorship, such as a separate trading unit, manufacturing activities, an e-commerce business or service exports. When this happens, both businesses can be registered under the same IEC, though with the same PAN of the proprietor.

It only requires the proprietor to change the business information in the DGFT portal, including the new business name and address. This helps maintain accurate records and prevents confusion during customs clearance.

Using One IEC Code for Multiple Branches

If a business has multiple branches or operating sites, only one IEC is required. The proprietor will be required to change the addresses of the branches in the IEC profile on the DGFT portal. Exporters with warehouses, offices, and units in other cities typically use a single code for all their branches, as the legal entity remains the same.

This makes operations easier and eliminates the need for several IEC applications.

When are Separate IEC Codes Mandatory?

They are not the same IEC code that should be used when:

1. The companies belong to two legal entities.
2. The two businesses differ in their PAN numbers.
3. One of the businesses is a company, and the other is a partnership or LLP.
4. The two units differ in terms of ownership, administration and legal status.

Where one of these cases is involved, it is not permitted by law to share a single IEC code. To trade internationally, each of the registered entities has to seek its own IEC.

Advantages of One IEC for Two Businesses

• Comfort and efficient processes: A single code centralises the management of import and export documents, making the process easier for small business owners.
• Lower compliance standards: The fact that IEC is enduring ensures that the utilisation of one IEC means that there is decreased paperwork, and many updates to the DGFT portal are avoided.
• Faster international trade processes: When one IEC is applied in interconnected business transactions, it reduces the time taken by banks, customs authorities and logistics partners to process documentation.
• Cost efficiency: One IEC can be used to maintain two records of the proprietors, thus preventing the inconvenience of maintaining two sets of records, although IEC registration is inexpensive.

Risks and Limitations of Using a Single IEC Code

• Confusion in documentation: Customs officials may require clarification when processing either exports or imports if the two businesses do not have the same trade names and invoices.
• Problem with keeping records: Combined import/export data and mixed invoices might complicate the bookkeeping and GST reconciliation process.
• Brand identity issues: One IEC can have an impact on branding since any export document will also include the main business of the IEC holder.
• Limited to the same legal Ownership: This is not a possibility in companies belonging to other individuals or entities. The application of one IEC in such circumstances will complicate legal issues.

How to Add Multiple Business Names Under One IEC?

In case two businesses have similar PAN, the owner may add the second business name by modifying the IEC profile on the DGFT portal. The procedure involves editing the business name field, the new address, and uploading documents. Both business names are registered after approval and are officially associated with IEC.

This makes export operations in the country easy and in accordance with the DGFT rules.

Practical Example

In case an individual has both, the married proprietorship of the two separate units of proprietorship under the name of “ABC Handicrafts and ABC Organic Foods, only one IEC is applicable to the two. But when one of the businesses is XYZ Pvt Ltd and the other is ABC Traders, then a different code would need to be used since they differ in PAN.

Conclusion

It is only permissible to use one IEC code when two businesses are in the same proprietorship and share the same PAN number. For legally separate entities, individual IEC registration is mandatory. When familiar with these rules, it is easier to comply with the DGFT regulations and eliminate issues when clearing customs. When entrepreneurs are well-documented and updated with IEC details, they can conduct numerous business activities under one IEC code with ease, enabling them to increase their market share in the global market.