Introduction
The cosmetic products in India were regulated under the Drugs and Cosmetics Act 1940 and Rules 1945. Import of cosmetics into India is regulated through a system of registration by the Central Drugs Standard Control Organization (CDSCO) under the provisions of the Drugs and Cosmetics Act, 1940 and the Cosmetics Rules, 2020. CDSCO is the main regulatory authority for the cosmetics industry.
Further, the import of cosmetic products in India is regulated by Foreign Exchange Management Act, 1999 (the “Act”) and Foreign Direct Investment Policy (“FDI Policy”)
Effective 15th December 2020, CDSCO laid out a fresh set of protocol for importation, manufacture, labelling, packing, sale, and distribution of cosmetics (as defined by the Drugs & Cosmetics Act 1940) in India under Cosmetics Rules 2020.
- GENERAL FDI POLICIES
- Eligibility Criteria
Clause 3.1.1 (a) of FDI Policy provides that a non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited.
- Entry routes for Investment
Clause 3.4 of FDI Policy provides that Foreign Direct Investment (FDI) can be made through two routes that are:
- Automatic Route: Indian companies engaged in various industries can issue shares to foreign investors up to 100% of their paid up capital in Indian companies
- Government Approval Route: Certain activities that are not covered under the automatic route require prior Government approval for FDIs.
Cosmetic is a separate business activity, it is not included in Pharmaceutical business, it is regulated differently. As per the applicable law (under the Act and the FDI Policy), the business of importing and selling cosmetics products in India does not fall under prohibited sector or under the sector requiring government approval for investment.
Thus, it can be interpreted that any company is eligible for entering into the Indian market as its business falls under the 100% Automatic Route i.e., no prior permission from the Government of India is required.
2. WHAT IS COSMETIC
Cosmetic is defined under section 3(aaa) of the Drugs and Cosmetics Act, 1940 as,
“cosmetic” means any article intended to be rubbed, poured, sprinkled or or sprayed on, or introduced into, or otherwise applied to, the human body or any part thereof for cleansing, beautifying, promoting attractiveness, or altering the appearance, and includes any article intended for use as a component of cosmetic.
Any article falling within the definition of cosmetic is required to be registered along with pack size, variant(s) and manufacturing premises before its import into the country.
3. LICENSE & REGISTRATION REQUIREMENT
Importer License
India’s import and export system is governed by the Foreign Trade (Development & Regulation) Act of 1992 (“FTRA Act”) and India’s Export Import (“EXIM Policy”). Any person involved in import or export of goods/services from India must obtain Import Export Code from the DGFT Department.
The Importer License for cosmetics is required when the cosmetic is imported and resold in India and for that we need an importer registration.
Drugs and Cosmetic Registration
All the cosmetic products which are imported for sale in India now are required to be registered with the CDSCO i.e. Central Drugs Standard Control Organization as per Gazette Notification G.S.R 426(E) dated 19th May 2010 amending Drugs and Cosmetic Rules. 1945 and Cosmetics Rules, 2020.
Chapter III of Cosmetic Rules, 2020 provides for regulations of Import and Registration of Cosmetic Products in India. The procedure of optainging the license is provided under Rule 3 and the process of import has been stated under Rule 20.
An application for registration of a cosmetic product intended to be imported into India shall be made through the online portal of the Central Government in Form COS-1 either by the manufacturer himself or by his authorised agent or the importer in India or by the subsidiary in India authorised by the manufacturer A registration certificate granted shall remain valid in perpetuity, subject to payment of registration certificate retention fee before completion of the period of five years.
Tax Registration
Custom Duty
Import duty is imposed by the government when Cosmetics is imported into India from any country. The custom duty is stated under Harmonized System Code (HS Code). HS Code for Cosmetic products Custom Import duty for various cosmetics is HS Code 33041000. The duty stated along side HS Code 33041000 is 20%. 29.8% Custom Duty on Cosmetics in India Import After GST.
Goods and Service Tax
Goods and Service Tax is a comprehensive indirect tax levied on the sale and consumption of goods and services All importers should mandatorily obtain GST registration, the individual requires GSTIN for clearing goods from the Customs Department. From 1st of July, 2017, quoting of GSTIN is mandatory for filing Bill of Entry as IGST is to be paid on imports and input tax credit can be availed for IGST paid. Hence, all importers would be required to obtain GST registration, PAN and IE Code for their business.
In addition to Import and Export license and Tax registration, State Shop & Establishment, is another registration requirements for the doing business.
The company shall have the above stated licenses for operating its business in India.
4. OTHER LEGAL COMPLIANCES
- Labeling Compliances
No person shall sell or distribute any cosmetic unless the cosmetic, if of Indian origin, is manufactured by a licensed manufacturer and labeled and packed in accordance with the Cosmetics Rules, 2020. Chapter VI deals with the requirements of labeling, packaging and standards for sale and distribution of Cosmetics.
Manner of labeling a cosmetic product has been provided under Rule 34 of Cosmetics Rules, 2020. Typically, a cosmetic product would have labels on the container (“inner label”), an outer wrapper or box (“outer label”), and sometimes a leaflet containing instructions or additional information. The list of information to be mentioned over containers are provided thereunder.
Labeling requirements of hair dyes containing dyes, colors and pigments has been provided under Rule 37.
In addition to the Cosmetics Rules, the label must also contain the declarations required under the Legal Metrology (Packaged Commodities) Rules, 2011 (“Packaged Commodity Rules”).
- Standards Compliances
According to Cosmetics Rules, 2020, it is the prerogative of a distributor to suitably inform the customers on the labels on such products if there are any precautions to be taken while using the product, which has been known to show safety concerns for a section of people.
No cosmetic shall be imported or manufactured unless it complies with the specifications prescribed under the Ninth Schedule or any other standards of quality and safety, applicable to it, and other provisions under these rules. In case, the cosmetic is not included under the Ninth Schedule, it shall meet the requirements under these rules and specifications and standards applicable to it in the country of origin.
The Ninth Schedule to the Cosmetics Rules specifies the BIS Standards that are applicable to a total of 37 categories of cosmetics including skin powders, skin creams, hair oils, shampoos, soaps, lipsticks, foundations, etc.
- Prohibition of import of certain cosmetic
The import of the following cosmetics is prohibited –
1. The manufacture, sale or distribution of the cosmetic in question is prohibited in the country of origin;
2. The “Use Before or Use by date” is less than six (6) months from the date of import;
3. The cosmetic contains hexachlorophene; and
4. The cosmetic has been tested on animals after November 12, 2014.
5. No Cosmetic shall be imported or manufactured which contains Dyes, Colors and Pigments other than the one specified by the Bureau of Indian Standards (IS: 4707 Part 1 or IS: 4707 Part 2, as amended) and included the Tenth Schedule.
6. A cosmetic comprising of mercury compounds not in proportion as required under Cosmetics Rules, 2020
7. The use of lead and arsenic compounds for the purpose of coloring cosmetics and products with these compounds are prohibited.
Author Bio
Please Update the Tariff rates. Custom Tariff on HS Code 3304 is not 10% anymore but 20%.