Goods and Services Tax

Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 10-2-2016 – How GST will work Generally, the dealers registered under GST (Manufacturers, Wholesalers and retailers and service providers) charge GST on the price of goods and services from their customers and claim credits for the GST included in the price of their own purchases of goods and services used by them. While GST is paid at each step in the supply chain of goods and services, the paying dealers don t actually bear the burden of the tax because GST is an indirect tax and ultimate burden of the GST has to be taken by the last customer. Features of GST GST can be divided into the following features to understand it better: Charging Tax The dealers registered under GST (Manufacturers, Wholesalers and Retailers and Service Providers) are required to charge GST at the specified rate of tax on goods and services that they supply to customers. The GST payable is included in the price paid by the recipient of the goo

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rers, service providers, wholesalers and retailers. If a dealer is not registered, he normally cannot charge GST and cannot claim credit for the GST he pays and further cannot issue a tax invoice. Tax Period The tax period will have to be decided by the respective law and normally it is monthly and/or quarterly. On a particular tax period, which is applicable to the dealer concerned, the dealer has to deposit the tax if his output credit is more than the input credit after considering the opening balance, if any, of the input credit. Refunds If for a tax period the input credit of a dealer is more than the output credit then he is eligible for refund subject to the provisions of law applicable in this respect. The excess may be carried forward to next period or may be refunded immediately depending upon the provision of law. Exempted Goods and Services Certain goods and services may be declared as exempted goods and services and in that case the input credit cannot be claimed on the GS

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sis of thresholds for goods and services prescribed for the States and the Centre Accounts and GST Credit The Central GST and State GST are to be paid to the accounts of the Centre and the States separately. It would have to be ensured that account-heads for all services and goods would have indication whether it relates to Central GST or State GST. Full input credit system would operate in parallel for the Central GST and the State GST. Taxes paid against the Central GST shall be allowed to be taken as input tax credit (ITC) for the Central GST and could be utilized only against the payment of Central GST. The same principle will be applicable for the State GST. Cross utilization of input tax credit for goods and services would be allowed. However, no credit between CGST and SGST would be permitted, except in the case of inter-State supply of goods and services under the IGST model. Credit Accumulation The White Paper on GST states that refund/adjustment of accumulated credit should b

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Goods and Services Tax – GST – By: – CA Akash Phophalia – Dated:- 10-2-2016 – Background The Joint Committee on Business Process for GST on GST return has given its report stating various returns to be filed by the different taxpayers alongwith the periodicity of filing of returns. GSTR -2 prescribes the details to be furnished by the taxpayer in relation to inward supplies effected by it for the relevant period. This article summarizes the components, periodicity and instructions for filing of the return based on the committee report. Who needs to file this return This return needs to be filed by every taxpayer. However, compounding taxpayers and ISD are not required to furnish this return as separate returns have been specified for such categories of registered taxpayers. Periodicity As per the committee report GSTR-2 is the monthly return need to be filed by the 15th of the subsequent month. It is required to be filed by every taxpayer. However, the date of filing of return is like

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or the services received from outside India. 6. The details of inward supplies would be auto-populated in the ITC ledger of the taxpayer on submission of his return. The taxpayer will select the invoice details regarding the in-eligibility and eligibility of ITC in relation to these inward supplies and the quantum available in a particular tax period. 7. There will be a separate table for submitting details in relation to ITC received on an invoice on which partial credit has been availed earlier. 8. In respect of capital goods, there will be a field to capture appropriate information regarding availment of ITC over a period (to be prescribed in GST Law in terms of duration and number of instalments) from the date of accountal of capital goods in the taxpayer s books of accounts. [GST Law may provide that Input credit pertaining to Capital Goods would be allowed to be availed of over a period of 2 years in two equal instalments] 9. In respect of inputs, there can be two situations. If

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rs will be provided in the GST Law. 12. There will be a separate table for submitting details in relation to NIL rated, Exempted and Non GST inward Supplies (Both Inter-State and Intra-State) including those received from compounding taxpayers and unregistered dealers. 13. There will be a separate table for the ISD credit received by the taxpayer. 14. There would be a separate table for TDS Credit received by the taxpayer. Auto Population in this return from GSTR-1 will be done on or after 11th of the succeeding month. Addition or Deletion of the invoice by the taxpayer will be permitted between 12th and 15th of the succeeding month. Adjustments would be permitted on 16th and 17th of the succeeding month Conclusion GSTR-2 is the comprehensive return having schema where detailed information is required to be furnished. Proper invoicing and documentation would be key feature to furnish the correct information in such return. By the time the schema and the law is finalised we can see furt

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Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 5-2-2016 – While 'education' continues to be of utmost importance for the country's economic growth, it also has been a priority for the government in extending tax benefits and other concessions to boost education (both primary and professional / technical) in the country. The much thoughtful leaders of India have spared the education sector all alone from levy of taxes considering the importance of the same for the country. If a country wants to grow manifold than building infrastructure for education and educated infrastructure (people of the country) is a prerequisite. Education / coaching / training is a primary activity imparting skill in a particular discipline and is a process of development of personality of body, mind and intellect. The scope of education is broad but training or coaching is in a particular field. All three are very important today without which nobody could achieve anything. The c

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laced in such a situation where its inflow and outflow both are under the negative list or exempt and it is only the coaching part of entire education which is subject to levy of Service Tax. It may be necessary at this point. To bring in the relevance of coaching in our education system. Why do we need coaching today ? What is the purpose it serves ? What if coaching is not available ? In fact coaching bridges the gap of quality between the input (student coming for coaching) and the output (quality /skills required for further technical or professional courses). No coaching would be required if the education system of the country takes care of the desired levels of quality of education at all stages of education/career of a student. Since it is not there, the gap is filled by the coaching institutes. The importance of education has been considered in Service Tax law. Under the negative list following education services were exempt pursuant to section 66 (l) (d) which stipulates as un

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coaching only supplements the education and is an aid to complete the educations. Coaching and education both go together and in the present system, one cannot think of education without coaching. Infact many schools and colleges also provide coaching to the students appreciating the fact that it cannot be done away with. All parents want to provide the best educational opportunities for their children and coaching has become indispensable and irreplaceable to reinforce learning. More parents are becoming career-oriented and professional and they can t pay adequate attention to their children s education. Also, admittedly, many parents are not well-educated and knowledgeable enough in the academic field where their children need assistance. The benefits afforded by coaching institutions are enormous. Realistically it is already an integral part of a student education. With the ever increasing emphasis of getting excellent exam results at all levels, it is a difficult task for students

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ate …. Today coaching is a major feeding industry to the main stream education sector and given this fact, it is more than justified that it be considered at par with education and spared from all types of taxation by way of exemptions, concessions and inclusion in negative list for the purpose of Service Tax. This argument becomes important at this juncture when India is embarking into an era of largest ever indirect tax reforms in the country with the introduction of Goods and Service Tax (GST) in near future. The other arguments could be many same of which, inter alia are discussed here, besides the main aspect of considering coaching at par with education itself. The subject of coaching, i.e., students to whom coaching is imparted come from an exempt environ (pre-school / school education) and post imparting of coaching, again enter the education field which is excluded from the scope of Service Tax. Why to tax only this part of education system. Rather, steps should be take

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tal goods, except for the provision of one or more of the specified services; or (B) services provided by way of renting of a motor vehicle, in so far as they relate to a motor vehicle which is not a capital goods In absence of significant amount of tax credit not being allowed, it adds to the cost of providing coaching (educations) which again is not desirable. Coaching section also suffers from high completion leading to increased costs in terms of advertisements, fee concessions and discount etc which are not allowed as credits or are disputed (without any sustainable grounds) leading to tax disputes / litigation. This also ought to be sorted out and settled. Today (w.e.f. 1.6.2015), rate of Service Tax is 14% (prior to 1.6.2015, it was 12.36% including education cesses). This itself is considered to be a very high rate of taxation / an indirect tax) which adds to the total cost to be paid by / recovered from the students. In GST regime, talked about likely rates of taxation is in t

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Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 4-2-2016 – Disadvantages / Possible Distortions of Implementation of GST Proposed GST is not a national unitary / centralized tax but a tax to be levied by both, states and the union simultaneously. In GST proposed GST- (a) There is a retrograde move to extend GST to stock transfer by first charging on it and then giving credit. The states have forced their way in this decision which will cause a lot of impairment in work against the wishes of the Centre. It will involve tremendous work with no revenue gain. Even if certain amounts are given credit after initial payment of duty, the money has to be brought out from other circulations and to that extent the economy will become slower. (b) On import, a countervailing (CV) duty of 27 per cent, which is said to be revenue neutral rate for IGST, is to be paid which is substantially higher than before. Earlier, service tax was not to be included in CV duty, but now that also

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as basic food items, exports and some health services. Incorrectly claiming the full amount of GST credits on entertainment expenses where the business has elected for fringe benefits tax purposes to use the 50/50 split method, in which case only 50% of the input tax credits can be claimed. Claiming the entire GST credits on a car purchased for more than the luxury car limit. Sole traders and partnerships are not apportioning input tax credits and making adjustments to expenditure that's partly private and partly business use. Incorrectly claiming an upfront GST credit on assets financed through a commercial hire purchase (CHP).While an up-front GST credit is available for businesses accounting for GST using the accruals or invoice basis, Incorrectly claiming GST credits on payments for Yellow Pages advertising. If the business chooses to pay for the cost of advertising by installments. Claiming a GST credit when the business does not have a valid tax invoice at the time of lodgin

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uding that on exports Expanding service tax to almost all services Common/unified tax rate for goods and services which may be ideally, revenue neutral (a suitable GST rate) Avoiding or minimizing differential tax rates Abolition of other small taxes Abolition of CST in a phased manner Power to levy service tax on select/agreed services to States Issue of inter-State services and goods movement vis-a-vis levy of duty or tax to be sorted out Revenue sharing mechanism to be rationalized Centre should be enabled to tax value added upto retail stage. While GST may be seen as national VAT system on goods and services, states sales tax shall eventually cover all states to have state level VAT system for sales etc. GST, if implemented, would end up prevailing distortions in goods and services taxation in term of money and scope. It will also result in lowering of cost of compliance, enhancing compliance levels and result in higher tax collections. It would offer a wider tax base and reduce re

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VAT and Sales Tax – Input Tax Credit on the capital goods – crushing of stone is manufacturing activity or not. – TNGST – the crusher machine cannot be treated as capital goods – HC – TMI Updates – Highlights

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Goods and Services Tax – GST – By: – CA Akash Phophalia – Dated:- 25-1-2016 – Background The Joint Committee on Business Process for GST on GST return has given its report stating various returns to be filed by the different taxpayers alongwith the periodicity of filing of returns. GSTR -1 prescribes the details to be furnished by the taxpayer in relation to outward supplies effected by it for the relevant period. In this article the author has tried to summarize the components, periodicity and instructions for filing of the return based on the committee report. Who needs to file this return This return needs to be filed by every taxpayer. However, compounding taxpayers and ISD are not required to furnish this return as separate returns have been specified for such categories of registered taxpayers. Periodicity As per the committee report GSTR-1 is the monthly return need to be filed by the 10th of the subsequent month. It is required to be filed by every taxpayer. Late filing would

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-state supply, invoices value of which is less than ₹ 50,000/- and where address is on record will be uploaded under State-wise summary, invoices value of which is in between ₹ 50,000/- to ₹ 2,50,000/- will be uploaded under State-wise summary, invoices value of which is more than ₹ 2,50,000/- will be uploaded invoice -wise. (iii) The recommendation of the Committee on IGST and GST on Imports with respect to the details about HSN code for goods and Accounting code for services to be captured in an invoice are as follows:- (a) HSN code (4-digit) for Goods and Accounting Codes for Services will be mandatory initially for all taxpayers with turnover in the preceding financial year above ₹ 5 Crore (For the first year of operations of GST, self-declaration of turnover of previous financial year will be taken as the basis as all India turnover data will not be available in the first year. From the 2nd year onwards, turnover of previous financial year under GST w

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meters with respect to HSN code for goods and Accounting Code for services will apply for submitting the information in return relating to relevant invoice level information for B2B supplies (both intra-state and inter-state) and inter-state B2C supplies (where taxable value per invoice is more than ₹ 2.5 lakhs). It is proposed that in the return form the description of goods and services may not be required to be submitted by the taxpayer as the same will be identified through the submission of HSN code for goods and Accounting Code for services. In order to differentiate between the HSN code and the Service Accounting Code (SAC), the latter will be prefixed with S . The taxpayers who have turnover below the limit of ₹ 1.5 Crore will have to mention the description of goods/service, as the case may be, wherever applicable. (v) For all Intra-State B2C supplies (including to non-registered Government entities, consumer / person dealing in exempted / NIL rated / non-GST goods

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ed, Exempted and Non-GST outward supplies to (both inter-state and intra-state) to registered taxpayers and consumers will be mentioned separately. 8. Details relating to advance received against a supply to be made in future will be submitted in accordance with the Point of Taxation Rules as framed in the GST law. 9. Details relating to taxes already paid on advance receipts for which invoices are issued in the current tax period will be submitted. 10. Details relating to supplies exported (including deemed exports) both on payment of IGST as well as without payment of IGST would be submitted. 11. Meaning of various terms used are :- GSTIN – Goods and Service Taxpayer Identification Number UID – Unique Identification Number for embassies HSN – Harmonized System of Nomenclature for goods SAC- Service Accounting Code GDI – Government department unique ID where department does not have GSTIN POS – Place of supply of goods or services – State code to be mentioned Conclusion GSTR-1 is the

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Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 23-1-2016 Last Replied Date:- 27-1-2016 – How do we compare the present indirect tax laws vis-à-vis proposed GST law regime ? In this part, an attempt is being made to list down the possible differences between the present tax laws and proposed provisions under GST. This comparison is not final and is only for academic purposes to understand the differences or deviations tax base, origin, structure, approach to tax goods and services, place of provision, powers to levy tax, export and import etc. Comparison of Present Taxation and Proposed GST S.No Particulars Present Taxation Proposed GST 1. Structural Architecture • Two separate VAT systems operate simultaneously at two levels, Centre and State, and tax paid (input tax credit) under one is not available as set off against the other • Tax on services is levied under separate legislation by Centre, i.e., Finance Act, 1994 which regulates service tax &bu

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under separate Act, i.e., Customs Act, 1962. Taxable event is import No change is proposed 6. CVD/SAD Imposed by Centre under separate Act, i.e., Customs Act, 1962. Taxable event is import To be subsumed in CGST; Taxable event will be import 7. Service Tax Imposed by Centre under separate Act (Finance Act, 1994). Taxable event is provision of service To be subsumed in CGST & SGST; Taxable event will be provision of service 8. Central Sales Tax Imposed by Centre under CST Act, 1956. Collection assigned to States; Taxable event is movement of goods from one State to another Is being phased out 9. State VAT Imposed by States; Taxable event is sale within the State To be subsumed in SGST; Taxable event is sale within State 10. Inter-State Transactions Imposed on goods & services by the Centre (CST, Service Tax) To be subsumed in GST and subject to SGST & CGST 11. Tax on Manufacturing activity As Excise Duty by Centre No such powers under GST regime 12. Powers to levy Tax on Sa

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owed 19. Cascading Effect Allows cenvat tax credit between Excise Duty & Service Tax, but not with VAT (cross set off is not allowed) Allows seamless tax credit amongst Excise Duty, Service Tax & VAT 20. Non-Creditable Goods Do exist May exist depending upon negative list / exemptions etc 21. Credit on Inputs used for Exempted Activities Not allowed May not be allowed 22. Various Exemptions -Excise Free Zone or VAT Exemption Available May be phased out 23. Exemption for transit Inter-State Sale and High Seas Sale Available May be taxable 24. Transactions against Declaration Forms Allowed under the CST / VAT Forms likely to be abolished 25. Taxation on Govt. and Non-Profit Public Bodies Partially taxed May not change much 26. Stamp Duty Presently taxed concurrently by the Centre and State Status not clear; If subsumed under GST, big relief to real estate industry : to claim input tax 27. Excise Duty Threshold Limit Presently ₹ 1.5 crores Rs.10 lacs to 20 lacs (Turnover of

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of goods Situs issue between States Interpretational issues Sale or works contract Valuation of composite transactions, etc. Exemptions Suppression / limitation Likely to be reduced provided GST legislations are properly drafted (To be continued ………) – Reply By Ashok Aggarwal – The Reply = Very good analysis and comparison between present situation and that after implementation of proposed GST law. Let us hope that the procedures will be simple and more system based to avoid harassment of trade & industry at the hands of those who enforce the law. If the trade will be running to tax departments of Central & State Governments even after GST is reality, the very purpose of bringing GST would be defeated.At Sr N. 18 it is mentioned that no cross set off between CGST and SGST would be allowed against present Excise duty and Service tax. It may be noted that cross set off at present is allowed only between Central Excise duty and Service Tax and this position w

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Income Tax – Brought forward losses of firm – covered u/s 187 OR u/s. 78 – change in the terms and conditions of the partnership – the reconstitution of the partnership was made only as a result of ch

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Goods and Services Tax – Started By: – P S Nath – Dated:- 21-1-2016 Last Replied Date:- 11-9-2016 – Dear All,An interesting question on GST who are planning to buy vehicles from different state and want to transfer and register the vehicle in his name in different state where he lives. Assuming a scenario stated under…..A car which was purchased in 2010 by Person X (First Purchaser) in the State A and given road tax for 10 Years in the State A itself. A Person Y(Second Purchaser) resides in State B and wants to purchase the vehicle, transfer and re-register the vehicle in his own name in State B. So The vehicle age is 6 years and Person X already paid road taxes for 10 years in State A.Now the question…1. After rollout of GST how much

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Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 20-1-2016 – Benefits of GST Benefits of GST shall accrue to all – trade & industry, Government and consumers. Trade and industry shall benefit in terms of easy compliance, removal of cascading effect of taxes and enhanced competitiveness. The Government shall have better control on leakages, higher revenue efficiency, consolidation of tax base and it may be easier to administer and monitor the law. Consumers will also benefit from likely reduced prices and single transparent tax structure. GST will end cascading effects: This will be the major contribution of GST for the business and commerce. At present, there are different state level and centre level indirect tax levies that are compulsory one after another on the supply chain till the time of its final consumption. Growth of Revenue in States and Union: It is expected that the introduction of GST will increase the tax base but lowers down the tax rates and also

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eir taxation that may crop at later stages. This will help the business community to decide their supply chain, pricing modalities and in the long run helps the consumers being goods competitive as price will no longer be the function of tax components but function of sheer business intelligence and innovation. Reduces average tax burdens: Under GST mechanism, the cost of tax that consumers have to bear will be certain and it is expected that GST would reduce the average tax burdens on the consumers. Reduces the corruption: It is one of the major problems that India is overwhelmed with. We cannot expect anything substantial unless there exists a political will to root it out. This will be a step towards corruption free Indian Revenue Services. Present CST will be removed and need not to be paid. At present there is no input tax credit available for CST. There are many indirect taxes in state and central level currently, which will be included by GST. i.e. you need to pay a single GST i

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which suffers from tax considerations and operational hurdles. GST is expected to contribute to 'make in India' and 'ease of doing business in India' initiatives of the Government. GST addresses the issue of multiplicity of taxes. All the rates under to GST will be uniform for are and the place of supply rules will guide the GST India portal to apportion the tax. It will boost up economic unification of India; it will assist in better conformity and revenue resilience; it will evade the cascading effect in Indirect tax regime. In GST system, both Central and state taxes will be collected at the point of sale. Both components (the Central and state GST) will be charged on the manufacturing cost. It will reduce the tax burden for consumers; It will result in a simple, transparent and easy tax structure; merging all levies on goods and services into one GST. It will bring uniformity in tax rates with only one or two tax rates across the supply chain; It will result in a g

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Goods and Services Tax – GST – By: – CA Akash Phophalia – Dated:- 16-1-2016 – Background During the Empowered Committee meeting held on 10th March, 2014, it was decided that a Joint Committee under the co-convenership of the Additional Secretary (Revenue), Government of India and the Member Secretary, Empowered Committee should be constituted to look into the Report of the Sub-Group-I on Business Processes for GST and make suitable recommendations for Registration and Return to the Empowered Committee. It was also decided that the Joint Committee should also keep in view the Registration and Return requirements necessary for IGST Model. The details incorporated here are adapted from the Report of the Joint committee on business process for GST Return – Meaning A return is a statement of specified particulars relating to business activity undertaken by the taxable person during a prescribed period. A taxable person has a legal obligation: (i) To declare his tax liability for a given pe

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ing which they make purchases. They would not be required to file regular return. They would submit their purchase statements (without purchase invoices) as per the periodicity prescribed for claim of refund. Government entities / PSUs , etc. not dealing in GST supplies or persons exclusively dealing in exempted / Nil rated / non -GST goods or services would neither be required to obtain registration nor required to file returns under the GST law. However, State tax authorities may assign Departmental ID to such government departments/ PSUs / other persons. They will ask the suppliers to quote the Department ID in the supply invoices for all inter-State purchases being made to them. Such supplies will be at par with B2C supplies and will be governed by relevant provisions relating to B2C supplies. Periodicity of filing of returns There will be different frequency for filing of returns for different class of taxpayers, after payment of due tax, either prior to or at the time of filing r

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0th of the next month 8 GSTR 8 Annual Return By 31st December of next FY 9 ITC Ledger of taxpayer Continuous 10 Cash Ledger of taxpayer Continuous 11 Tax ledger of taxpayer Continuous Important points relating to periodicity of return filing (i) Normal / Regular taxpayers (including casual taxpayers) would have to file GSTR-1 (details of outward supplies) (Annexure-II), GSTR-2 (details of inward supplies) (Annexure-III) and GSTR-3 (monthly Return) (Annexure-IV) for each registration. (ii) Normal / Regular taxpayers with multiple registrations (for business verticals) within a State would have to file GSTR-1, GSTR-2 and GSTR-3 for each of the registrations separately. (iii) Compounding taxpayers would have to file a quarterly return called GSTR-4 (Annexure-V). (iv) Taxpayers otherwise eligible for the compounding scheme can opt against the compounding and file monthly returns and thereby make their supplies eligible for ITC in hands of the purchasers. (v) Casual/ Non – Resident Taxpayer

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for filing of details of outward supplies (GSTR-1), inward supplies (GSTR-2) and Monthly return (GSTR-3) would be10th, 15th and 20th day respectively of the succeeding month for all Monthly filers. (x) Cut-off date for filing of Quarterly return (GSTR-4) by compounding taxpayer would be 18thday of the first month of the succeeding quarter. (xi) Cut-off date for filing of Input Service Distributor return (GSTR-6) (Annexure-VII) would be 15th day of the succeeding month. (xii) Cut-off date for filing of TDS (Tax Deducted at Source) return (GSTR-7) (Annexure-VIII) by Tax Deductor would be 10th day of the succeeding month. (xiii) For Annual return, the cut-off date would be 31st December following the end of the financial year for which it is filed. (xiv) The filing of return would be only through online mode although the facility of offline generation and preparation of returns would be provided. The returns prepared in offline mode would have to be uploaded. This is just for your refere

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Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 15-1-2016 – According to Model IGST Law, IGST shall mean the tax levied under the IGST Act on the supply of any goods and / or services in the course of inter-state trade or commerce. IGST Act shall apply to whole of India. According to the report of the Task Force on GST, 13th Finance Commission (2009), it had recommended that adoption of the IGST Model for implementation with the caveat that a strong IT infrastructure and complete information of the interstate transactions is a precondition and essential prerequisite for considering the IGST model. Without addressing these fundamental concerns of IT infrastructure and information support systems, the adoption of IGST model which is still at a conceptual stage is far from realistic at this stage in adoption of GST in the course of interstate transaction in goods and GST for the nation'. Central Government would levy IGST (which would be CGST plus SGST) on all inter

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will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. The relevant information is also submitted to the Central Agency which will act as a clearing house mechanism, verify the claims and inform the respective governments to transfer the funds. Revenue from IGST will be apportioned among Union and States by Parliament on basis of recommendation of Goods and Service Tax Council [Proposed Article 269A(2) and Article 270 (1A) of Constitution of India]. The apportionment will be required as input tax credit of IGST can be used for SGST and vice versa. Since IGST will be on 'supply of goods or services', IGST will be payable on stock transfers, branch transfers and even when goods are dispatched inter-state job work and return. The inter-state adjustment will be made by

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substantially. Model can take Business to Business as well as Business to Consumer transactions into account. Salient Features Integrated GST On inter-state and cross border transactions Centre would levy and collect IGST in lieu of CGST and SGST. To be shared between Centre / States Single IGST rate IGST would be levied on all inter-State transactions of taxable goods and services with appropriate provision for consignment or stock transfer of goods and services. Inter-State dealer will pay IGST after adjusting available, input IGST, CGST and SGST on purchases. IGST – Illustration Maharashtra seller selling to Karnataka buyer for ₹ 1,00,000/-. IGST payable assuming an 8% rate is ₹ 8,000/-. Rs.8,000/- can be paid by adjusting Inter-State purchases (IGST) ₹ 3,000/- Local purchases (CGST) ₹ 1,500/- Local purchases (SGST) ₹ 1,500/- Since dealer has used SGST of Maharashtra to the extent of ₹ 1,500/-, Centre has to transfer ₹ 1,500/- to Maharashtra

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Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 14-1-2016 – Objectives of GST One of the main objective of Goods & Service Tax (GST) would be to eliminate the cascading effects of taxes on production and distribution cost of goods and services. The exclusion of cascading effects i.e. tax on tax will significantly improve the competitiveness of original goods and services in market which leads to beneficial impact to the GDP growth of the country. It is felt that GST would serve a superior reason to achieve the objective of streamlining indirect tax regime in India which can remove cascading effects in supply chain till the level of final consumers. Salient Features of the GST Model The GST shall have two components: o

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e GST are to be paid to the accounts of the Centre and the States separately. It would have to be ensured that account-heads for all services and goods would have indication whether it relates to Central GST or State GST (with identification of the State to whom the tax is to be credited). Since the Central GST and State GST are to be treated separately, taxes paid against the Central GST shall be allowed to be taken as input tax credit (ITC) for the Central GST and could be utilized only against the payment of Central GST. The same principle will be applicable for the State GST. A taxpayer or exporter would have to maintain separate details in books of account for utilization or refund of credit. Further, the rules for taking and utilizati

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d State GST. The administration of the Central GST to the Centre and for State GST to the States would be given. This would imply that the Centre and the States would have concurrent jurisdiction for the entire value chain and for all taxpayers on the basis of thresholds for goods and services prescribed for the States and the Centre. The taxpayer would need to submit periodical returns, in common format as far as possible, to both the Central GST authority and to the concerned State GST authorities. Each taxpayer would be allotted a PAN-linked taxpayer identification number with a total of 13/15 digits. This would bring the GST PAN-linked system in line with the prevailing PAN-based system for Income tax, facilitating data exchange and tax

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FEMA – 39 – Dated:- 14-1-2016 – RBI/2015-16/287 A.P. (DIR Series) Circular No. 39 January 14, 2016 To All Category – I Authorised Dealer Banks Madam/ Sir, Export of Goods and Services – Project Exports Attention of Authorised Dealers is invited to Regulation 18 of Notification No. FEMA 23/2000-RB dated 3rd May 2000 viz. Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 in terms of which export of goods or services on deferred payment terms or in execution of a turnkey project or a civil construction contract requires prior approval of the approving authority, which shall consider the proposal in accordance with the guidelines issued by the Reserve Bank from time to time. Further, attention of Authorized Dealers (

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of India that i) the OCCI has been renamed as Project Export Promotion Council (PEPC) and ii) civil construction contracts may include turnkey engineering contracts, process and engineering consultancy services and Project construction items (excluding steel & Cement) along with civil construction contracts, it has been decided to make the necessary changes in Memorandum of Instructions on Project and Service Exports (PEM) accordingly. 3. The revised Memorandum of Instructions on Project and Service Exports (PEM) is enclosed. 4. Authorized Dealers may bring the revision in the Memorandum to the notice of their constituents concerned. 5. The directions contained in this circular have been issued under section 10(4) and 11(1) of the Fore

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Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 13-1-2016 – There are three prime models of GST which have been decided to be implemented in India, viz, GST at Central (Union) Government level only GST at State Government level only GST at both, Union and State Government Leve Canada has GST at Union level extending to all goods and services covering all stages of value addition. In addition, there is tax at province (State) level in different forms which include VAT, Retail Sales tax and so on. European Union (EU) Nations (each one is independent Nation but, part of a Union and have agreed to adopt common principles for taxation of goods and services) have adopted classic VAT. In the Indian context, Constitution of India

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implementation of GST: Extensive Computerization and strong IT infrastructure E-filing of periodical returns E-payment of tax Common tax period National portal for access of information National Agency Trained and well equipped staff. Central GST (CGST) Under this option, the two levels of Government would combine their levies in the form of a single National GST, with appropriate revenue sharing arrangements among them. The tax could be controlled and administered by the Central Government. There are several models for such a tax. Australia is the most recent example of a National GST, where it is levied and collected by the Centre, but the proceeds are allocated entirely to the States. In the case of a Central GST (where all goods and se

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ibution based on the place of final consumption. The Bagchi Report also did not favour this option for the fear that it would lead to too much centralization of taxation powers. The key concerns about this option would thus be political. Notwithstanding the economic merits of a National GST, it might have a damaging impact on the vitality of Indian federalism. Salient Feature of CGST CGST on both , goods and services To be levied, controlled and administered by Union. Levied by the Centre through a separate statute on all transactions of goods and services made for a consideration. Exceptions would be exempted goods and services, goods kept out of GST and transactions below prescribed threshold limits. CGST would be levied across the value

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Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 12-1-2016 Last Replied Date:- 13-1-2016 – What is Goods and Services Tax (GST)? GST stands for Goods and Services Tax , and is proposed to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. Its main objective is to consolidates all indirect tax levies into a single tax, except customs (excluding SAD) replacing multiple tax levies, overcoming the limitations of existing indirect tax structure, and creating efficiencies in tax administration. Simply put, goods and services tax is a tax levied on goods and services imposed at each point of sale or rendering of service. Such GST could be on entire goods a

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ns to go the GST way is to facilitate seamless credit across the entire supply chain and across all States under a common tax base. It is a tax on goods and services, which will be levied at each point of sale or provision of service, in which at the time of sale of goods or providing the services the seller or service provider can claim the input credit of tax which he has paid while purchasing the goods or procuring the service. This is because they include GST in the price of the goods and services they sell and can claim credits for the most GST included in the price of goods and services they buy. The cost of GST is borne by the final consumer, who can t claim GST credits, i.e. input credit of the tax paid. Example: A product whose bas

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s in lieu of Excise duty) SAD (levied on imports in lieu of VAT) Excise Duty levied on Medicinal and Toiletries preparations, Surcharges and cesses Central Sales Tax At State level VAT/Sales tax Entertainment tax (unless it is levied by the local bodies) Luxury Tax Taxes on lottery, betting and gambling Entry tax not in lieu of Octroi Cesses and Surcharges Taxes/Duties Likely to be subsumed in GST Central Taxes/Levies State Taxes/Levies Central excise duty under Central Excise Act, 1944 Sales Tax/Value Added Tax (VAT) Additional excise duties – Under Additional Duties of Excise (Goods of Special Importance Act, 1957 Entertainment tax Excise Duty under Medicinal & Toiletries Preparation Act, 1955 State excise duty Service Tax under Finan

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FEMA – 23(R)/2015-RB – Dated:- 12-1-2016 – RESERVE BANK OF INDIA (Foreign Exchange Department) CENTRAL OFFICE NOTIFICATION No. FEMA 23(R)/2015-RB Mumbai, the 12th January, 2016 Foreign Exchange Management (Export of Goods & Services) Regulations, 2015 G.S.R. 19(E).-In exercise of the powers conferred by clause (a) of sub-section (1), sub-section (3) of Section 7 and sub-section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999) and in supersession of its Notification No.FEMA.23/2000-RB dated May 3, 2000 as amended from time to time, Reserve Bank of India makes the following Regulations in respect of Export of Goods and Services from India , namely: 1. Short title and commencement:- (i) These Regulations may be called the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015. (ii) They shall come into force from the date of their publication in the Official Gazette. 2. Definitions:- In these Regulations, unless the context requires ot

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ent; (vi) 'form' means form annexed to these Regulations; (vii) 'schedule' means schedule appended to these Regulations; (viii) 'software' means any computer programme, database, drawing, design, audio/video signals, any information by whatever name called in or on any medium other than in or on any physical medium ; (ix) 'specified authority' means the person or the authority to whom the declaration as specified in Regulation 3 is to be furnished; (x) the words and expressions used but not defined in these Regulations shall have the same meanings respectively assigned to them in the Act. 3. Declaration of exports:- (1) In case of exports taking place through Customs manual ports, every exporter of goods or software in physical form or through any other form, either directly or indirectly, to any place outside India, other than Nepal and Bhutan, shall furnish to the specified authority, a declaration in one of the forms set out in the Schedule and suppor

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becomes due or accrues on account of such export, and to repatriate the same to India in accordance with the provisions of the Act, and these Regulations, as also other rules and regulations made under the Act. (4) Realization of export proceeds in respect of export of goods / software from third party should be duly declared by the exporter in the appropriate declaration form. 4. Exemptions:- Notwithstanding anything contained in Regulation 3, export of goods / software may be made without furnishing the declaration in the following cases, namely: a) trade samples of goods and publicity material supplied free of payment; b) personal effects of travellers, whether accompanied or unaccompanied; c) ship's stores, trans-shipment cargo and goods supplied under the orders of Central Government or of such officers as may be appointed by the Central Government in this behalf or of the military, naval or air force authorities in India for military, naval or air force requirements; d) by wa

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nes, under intimation to the Development Commissioner of Special Economic Zones / concerned Assistant Commissioner or Deputy Commissioner of Customs (h) replacement goods exported free of charge in accordance with the provisions of Foreign Trade Policy in force, for the time being. (i) goods sent outside India for testing subject to re-import into India; (j) defective goods sent outside India for repair and re-import provided the goods are accompanied by a certificate from an authorised dealer in India that the export is for repair and re-import and that the export does not involve any transaction in foreign exchange. (k) exports permitted by the Reserve Bank, on application made to it, subject to the terms and conditions, if any, as stipulated in the permission. 5. Indication of importer-exporter code number:- The importer-exporter code number allotted by the Director General of Foreign Trade under Section 7 of the Foreign Trade (Development & Regulation) Act, 1992 (22 of 1992) sh

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oftware Technology Parks of India (STPIs) or at the Free Trade Zones (FTZs) or Special Economic Zones (SEZs) in India. (ii) After certifying all three copies of the SOFTEX form, the said designated official shall forward the original directly to the nearest office of the Reserve Bank and return the duplicate to the exporter. The triplicate shall be retained by the designated official for record. C. Duplicate Declaration Forms to be retained with Authorised Dealers On the realisation of the export proceeds, the duplicate copies of export declaration forms viz. EDF and SOFTEX and Exchange Control copies of the shipping bills shall be retained by the Authorised Dealers. 7. Evidence in support of declaration:- The Commissioner of Customs or the postal authority or the official of Department of Electronics, to whom the declaration form is submitted, may, in order to satisfy themselves of due compliance with Section 7 of the Act and these regulations, require such evidence in support of the

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er specified in the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 as amended from time to time. Explanation: For the purpose of this regulation, re-import into India, within the period specified for realisation of the export value, of the exported goods in respect of which a declaration was made under Regulation 3, shall be deemed to be realisation of full export value of such goods. 9. Period within which export value of goods/software/ services to be realised:- (1) The amount representing the full export value of goods / software/ services exported shall be realised and repatriated to India within nine months from the date of export, provided (a) that where the goods are exported to a warehouse established outside India with the permission of the Reserve Bank, the amount representing the full export value of goods exported shall be paid to the authorised dealer as soon as it is realised and in any case within fifteen months from the date of shipment of

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od of nine months. (b) The Reserve Bank may for reasonable and sufficient cause direct that the said exporter/s shall cease to be governed by sub-regulation (2); Provided that no such direction shall be given unless the unit has been given a reasonable opportunity to make a representation in the matter. (c) On such direction, the said exporter/s shall be governed by the provisions of sub-regulation (1), until directed otherwise by the Reserve Bank.' Explanation: For the purpose of this regulation, the date of export in relation to the export of software in other than physical form, shall be deemed to be the date of invoice covering such export. 10. Submission of export documents:- The documents pertaining to export shall be submitted to the authorised dealer mentioned in the relevant export declaration form, within 21 days from the date of export, or from the date of certification of the SOFTEX form: Provided that, subject to the directions issued by the Reserve Bank from time to t

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ch requisition and such constituent signing the declaration shall be considered to be the exporter for the purposes of these Regulations to the extent of the full value shown in the documents being negotiated or sent for collection and shall be governed by these Regulations accordingly. 12. Payment for the Export:- In respect of export of any goods or software for which a declaration is required to be furnished under Regulation 3, no person shall except with the permission of the Reserve Bank or, subject to the directions of the Reserve Bank, permission of an authorised dealer, do or refrain from doing anything or take or refrain from taking any action which has the effect of securing – (i) that the payment for the goods or software is made otherwise than in the specified manner; or (ii) that the payment is delayed beyond the period specified under these Regulations; or (iii) that the proceeds of sale of the goods or software exported do not represent the full export value of the goods

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overned by the terms and conditions set out in the relative public notices issued by the Trade Control Authority in India and the instructions issued from time to time by the Reserve Bank. (ii) An export under the line of credit extended to a bank or a financial institution operating in a foreign state by the Exim Bank for financing exports from India, shall be governed by the terms and conditions advised by the Reserve Bank to the authorised dealers from time to time. 14. Delay in Receipt of Payment:- Where in relation to goods or software export of which is required to be declared on the specified form and export of services, in respect of which no declaration forms has been made applicable, the specified period has expired and the payment therefor has not been made as aforesaid, the Reserve Bank may give to any person who has sold the goods or software or who is entitled to sell the goods or software or procure the sale thereof, such directions as appear to it to be expedient, for t

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iii) the documents covering the shipment are routed through the authorised dealer through whom the advance payment is received; Provided that in the event of the exporter's inability to make the shipment, partly or fully, within one year from the date of receipt of advance payment, no remittance towards refund of unutilized portion of advance payment or towards payment of interest, shall be made after the expiry of the period of one year, without the prior approval of the Reserve Bank. (2) Notwithstanding anything contained in clause (i) of sub-regulation (1), an exporter may receive advance payment where the export agreement itself duly provides for shipment of goods extending beyond the period of one year from the date of receipt of advance payment. 16. Issue of directions by Reserve Bank in certain cases:- (1) Without prejudice to the provisions of Regulation 3 in relation to the export of goods or software which is required to be declared, the Reserve Bank may, for the purpose

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ch conditions as may be specified by the Reserve Bank by directions issued from time to time. c) that a copy of the declaration to be furnished to the specified authority shall be submitted to such authority or organisation as may be indicated in the order for certifying that the value of goods or software specified in the declaration represents the proper value thereof. (2) No direction under sub-regulation (1) shall be given by the Reserve Bank and no approval under clause (b) of that sub-regulation shall be withheld by the Authorised Dealer, unless the exporter has been given a reasonable opportunity to make a representation in the matter. 17. Project exports:- (1) Where an export of goods or services is proposed to be made on deferred payment terms or in execution of a turnkey project or a civil construction contract, the exporter shall, before entering into any such export arrangement, submit the proposal for prior approval of the approving authority, which shall consider the prop

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GST REGIME: BASICS OF STATE GST (SGST) – Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 8-1-2016 – In State GST, the States alone can levy GST and the Centre withdraws from the field of GST or VAT completely. It can be a desirable option given the mismatch in resources and responsibilities of the States. In this case, the State GST will work as the redistributing mechanism. The loss to the Centre from vacating this tax field could be offset by a suitable compensating reduction in fiscal transfers to the States. This would significantly enhance the revenue capacity of the States and reduce their dependence on the Centre. The USA is the most notable example of such arrangements, where the general sales taxes are relegated t

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nd reduces their dependence on the Centre. Disadvantages It would seriously impair the Centre s revenues. The reduction in fiscal transfers to the States would offset this loss, but still the Centre would want to have access to this revenue source for future needs. Major amendments to the Constitution of India will be required. The option may not be revenue neutral for individual States. The incremental revenues from the transfer of the Centre s tax collection would benefit the higher-income States, while a reduction in fiscal transfers would impact disproportionately the lower-income States. Businesses will have to comply with tax laws of each State – which will definitely lack uniformity and harmony. At the same time, decision making will

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CONCURRENT AND NON-CONCURRENT DUAL GST – Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 7-1-2016 – Concurrent Dual GST Here the GST will be levied by both tiers of Governments concurrently. There will be Central GST to be administered by the Central Government and there will be State GST to be administered by State Governments. Thus, the GST would comprise a Central GST and State GST: a Central-level GST will subsume central taxes, such as, excise duty, CVD, SAD and service tax; and a State-level GST will subsume VAT, octroi, entry taxes, luxury tax, etc. Therefore, under this model, both goods and services would be subject to concurrent taxation by the Centre and the States. This variant is closer to the model recommende

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base of goods and services, at all points in the supply chain. It requires least change in infrastructure of tax departments at the Union and State levels. It improves the competitive environment for company working globally. As single taxation system it reduces cost to the consumer. Disadvantages It is not an ideal model. It can be a temporary or transitional model since tax would continue to be levied at two levels. Compliance costs may not reduce significantly. There will always be uncertainty since States might depart from the principles of uniformity. To frame a comprehensive model for taxation of inter-State transactions of goods and services and sharing of its revenue amongst the State will be a challenge. Non-concurrent Dual GST Und

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rvices. Under this model, while levying the VAT on services, the Centre would essentially play the coordinating role needed for the application and monitoring of tax on inter-State services. The Centre would withdraw from the taxation of goods. Even the revenues collected from the taxation of services could be transferred back to the States, partially or fully. Within this framework, cascading could be completely eliminated by the States agreeing to allow an input credit for the tax on services levied by the Centre. Likewise, the Centre would allow an input credit for the tax on goods levied by the States. However, the said model may not be acceptable to the Centre as well as the States. Moreover, constitutional amendment would still be req

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VAT and Sales Tax – Cancellation of exemption certificate of 100EOU – PGST / PVAT – assessment years 2000-01 and 2001-02, the appellant exported nothing outside India. In the assessment year 2001-02,

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Income Tax – By: – CA GOPALJI AGRAWAL – Dated:- 2-1-2016 Last Replied Date:- 16-11-2016 – INCOME TAX NOTIFICATION NO. SO 3545E DT. 30/12/2015 SALIENT FEATURES OF RULE 114 B- SL. NO. 18 OF TABLE FOR ASSESSEE COVERED U/S 44AB OF IT ACT, 1961 Sales or purchase of any goods and services exceeding ₹ 2.00 lac per transaction (with effect from (w.e.f.) Jaunuary 1, 2016 [Other than motor vehicles, hotel or restaurant bill, foreign travel expense, securities, LIC, immovable property etc. (covered otherwise by specific rules)] SITUATION I (W.E.F. JANUARY 1, 2016 ONWARDS) TRANSACTION OF SALE/PURCHASE OF ANY GOODS/SERVICES EXCEEDING ₹ 2.00 LAC PER TRANSACTION AND BUYER HAS PAN ACTION REQUIRED PAN of seller and buyer to be written on the in

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eport in form 61 will be for the period January , 2016 to March 31, 2016 CASH TRANSACTIONS OF SALE OR PURCHASE TO BE REPORTED W.E.F. 01/04/2016 SITUATION III TRANSACTION OF SALE or PURCHASE OF ANY GOODS/SERVICES EXCEEDING ₹ 2.00 LAC PER TRANSACTION ON CASH BASIS EVEN THOUGH BUYER HAS PAN ACTION REQUIRED One time registration to be obtained by seller as reporting entity from IT Department PAN of seller and buyer to be written on the invoice itself Verify the PAN of buyer by taking copy of PAN card Annual Return in Form no. 61A to be filed latest by 31st May for the complete financial year 2016-17 onwards with Director/Joint Director of Income-tax (Intelligence and Criminal Investigation). SITUATION IV TRANSACTION OF SALE OR PURCHASE OF

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FEMA – 16/2015-16 – Dated:- 1-1-2016 – RBI/FED/2015-16/11 FED Master Direction No. 16/2015-16 January 1, 2016 (Updated as on January 12, 2018) (Updated as on November 16, 2017) (Updated as on September 15, 2017) (Updated as on May 26, 2016) (Updated as on May 12, 2016) To, All Authorised Dealer Category – I banks and Authorised Banks Madam / Sir, Master Direction – Export of Goods and Services Export of Goods and Services from India is governed by clause (a) of sub-section (1) and sub-section (3) of Section 7 of the Foreign Exchange Management Act 1999 (42 of 1999), read with Notification No. G.S.R. 381(E) dated May 3, 2000 viz. Foreign Exchange Management (Current Account Transactions) Rules, 2000, further read with 1 FEMA Notification No.23(R)/2015-RB dated January 12, 2016. These Regulations are amended from time to time to incorporate the changes in the regulatory framework and published through amendment notifications. 2. Within the contours of the Regulations, Reserve Bank of In

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e Master Direction issued herewith shall be amended suitably simultaneously. Yours faithfully, (J K Pandey) Chief General Manager INDEX PART – A General A.1 Introduction A.2 Realization and repatriation of proceeds of export of goods / software / services A.3 Manner of receipt and payment A.4 Foreign Currency Account A.5 Diamond Dollar Account (DDA) A.6 Exchange Earners Foreign Currency Account (EEFC Account) A.7 Counter-Trade Arrangement A.8 Exports to neighboring countries by road, rail or river A.9 Border trade with Myanmar A.10 Counter -Trade arrangements with Romania A.11 Repayment of State credits A.12 Forfaiting A.13 Export factoring on non-recourse basis A.14 Project Exports and Service Exports A.15 Export of goods on lease, hire, etc. A.16 Export on elongated credit terms A.17 Export of currency PART – B EDF / SOFTEX Procedure B.1 Export of goods through Customs ports B.2 Export of goods/ software done through EDI ports B.3 Export of goods through post B.4 Mid-sea trans-shipme

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C.14 Export Bills Register C.15 Follow-up of overdue bills C.16 Reduction in invoice value on account of prepayment of usance bills C.17 Reduction in invoice value in other cases C.18 Change of buyer/consignee C.19 Export of goods by Special Economic Zones (SEZs) C.20 Extension of time C.21 Shipments lost in transit C.22 Export claims C.23 Write-off of unrealized export bills C.24 Write off in cases of payment of claims by ECGC and private insurance companies regulated by Insurance Regulatory and Development Authority (IRDA) C.25 Write-off relaxation C.26 Set-off of export receivables against import payables C.27 Netting-off of export receivables against import payments – Units in (SEZs) C.28 Exporters' Caution List C.29 Issue of Guarantees by an Authorised Dealer C.30 Issuance of Electronic Bank Realisation Certificate (eBRC) Part-D Remittances connected with Export D.1 Agency commission on exports D.2 Refund of export proceeds Appendix PART-A General A.1 Introduction (i) Export

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on No. FEMA 23(R)/2015-RB dated January 12, 2016. (iii) The Directions contained in this Document should be read with the Rules notified by the Government of India, Ministry of Finance, vide Notification No.G.S.R.381 (E) dated May 3, 2000, as also Regulations notified by Reserve Bank vide its 3Notification No. FEMA 23(R)/2015-RB dated January 12, 2016. (iv) In terms of Regulation 4 of the Foreign Exchange Management (Guarantees) Regulations, 2000, notified vide 3Notification No. FEMA 8/2000-RB dated May 3, 2000 as amended from time to time, AD Category – I banks have been permitted to issue guarantees on behalf of exporter clients on account of exports out of India subject to specified conditions. (v) There is no restriction on invoicing of export contracts in Indian Rupees in terms of the Rules, Regulations, Notifications and Directions framed under the Foreign Exchange Management Act 1999. Further, in terms of Para 2.52 of the Foreign Trade Policy (2015-2020), All export contracts an

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sactions pertaining to trade related issues. A.2 Realization and repatriation of proceeds of export of goods / software / services It is obligatory on the part of the exporter to realize and repatriate the full value of goods / software / services to India within a stipulated period from the date of export, as under: (i) It has been decided in consultation with the Government of India that the period of realization and repatriation of export proceeds shall be nine months from the date of export for all exporters including Units in Special Economic Zones (SEZs), Status Holder Exporters, Export Oriented Units (EOUs), Units in Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) & Bio-Technology Parks (BTPs) until further notice. (ii) For goods exported to a warehouse established outside India, the proceeds shall be realized within fifteen months from the date of shipment of goods. A.3 Manner of receipt and payment (i) The amount representing the full export

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Gateway Service Providers (OPGSPs) Authorised Dealer Category – I (AD Category – I) banks have been allowed to offer the facility of repatriation of export related remittances by entering into standing arrangements with Online Payment Gateway Service Providers (OPGSPs) subject to the following conditions – a) The AD Category-I banks offering this facility shall carry out the due diligence of the OPGSP. b) This facility shall only be available for export of goods and services of value not exceeding USD 10,000 (US Dollar ten thousand). c) AD Category-I banks providing such facilities shall open a NOSTRO collection account for receipt of the export related payments facilitated through such arrangements. Where the exporters availing of this facility are required to open notional accounts with the OPGSP, it shall be ensured that no funds are allowed to be retained in such accounts and all receipts should be automatically swept and pooled into the NOSTRO collection account opened by the AD C

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he purpose codes reported to the Reserve Bank in the online payment gateways are appropriate. h) AD Category -I banks shall submit all the relevant information relating to any transaction under this arrangement to the Reserve Bank, as and when advised to do so. i) Each NOSTRO collection account should be subject to reconciliation and audit on a quarterly basis. j) Resolution of all payment related complaints of exporters in India shall remain the responsibility of the OPGSP concerned. k) AD Category-I banks desirous of entering into such an arrangement/s should report the details of each such arrangement as and when entered into to the Foreign Exchange Department, Central Office, Reserve Bank of India, Mumbai. l) 4A start-up can realise the receivables of its overseas subsidiary and repatriate them through Online Payment Gateway Service Providers (OPGSPs). (iv) Settlement System under ACU Mechanism a) In order to facilitate transactions / settlements, effective January 01, 2009, partic

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permitted currency outside the ACU mechanism, until further notice. e) In view of the understanding reached among the members of the ACU during the 44th Meeting of the ACU Board in June, 2015, it has been decided to permit the use of the Nostro accounts of the commercial banks of the ACU member countries, i.e., the ACU Dollar and ACU Euro accounts, for settling the payments of both exports and imports of goods and services among the ACU countries. (v) Third party payments for export / import transactions Taking into account the evolving international trade practices, it has been decided to permit third party payments for export / import transactions can be made subject to conditions as under: a) Firm irrevocable order backed by a tripartite agreement should be in place. However, it may not be insisted upon in cases where documentary evidence for circumstances leading to third party payments / name of the third party being mentioned in the irrevocable order/ invoice has been produced s

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.g. Sudan, Somalia, etc.), payments for the same may be received from an Open Cover Country; and g) In case of imports, the Invoice should contain a narration that the related payment has to be made to the (named) third party, the Bill of Entry should mention the name of the shipper as also the narration that the related payment has to be made to the (named) third party and the importer should comply with the related extant instructions relating to imports including those on advance payment being made for import of goods. (vi) 5Settlement of Export transactions in currencies not having a direct exchange rate To further liberalize the procedure and facilitate settlement of export transactions where the invoicing is in a freely convertible currency and the settlement takes place in the currency of the beneficiary, which though convertible, does not have a direct exchange rate, it has been decided that AD Category-I banks may permit settlement of such export transactions (excluding those

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y account abroad. Exporters may deposit the foreign exchange obtained by sale of goods at the international exhibition/ trade fair and operate the account during their stay outside India provided that the balance in the account is repatriated to India through normal banking channels within a period of one month from the date of closure of the exhibition/trade fair and full details are submitted to the AD Category – I banks concerned. (ii) Reserve Bank may consider applications in Form EFC from exporters having good track record for opening a foreign currency account with AD banks in India and outside India subject to certain terms and conditions. Applications for opening the account with a branch of an AD Category – I bank in India may be submitted through the branch at which the account is to be maintained. If the account is to be maintained abroad the application should be made by the exporter giving details of the bank with which the account will be maintained. (iii) An Indian entit

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(i) Under the scheme of Government of India, firms and companies dealing in purchase / sale of rough or cut and polished diamonds / precious metal jewellery plain, minakari and / or studded with / without diamond and / or other stones, with a track record of at least 2 years in import / export of diamonds / colored gemstones / diamond and colored gemstones studded jewellery / plain gold jewellery and having an average annual turnover of ₹ 3 crores or above during the preceding three licensing years (licensing year is from April to March) are permitted to transact their business through Diamond Dollar Accounts. (ii) They may be allowed to open not more than five Diamond Dollar Accounts with their banks. (iii) Eligible firms and companies may apply for permission to their AD Category – I banks in the format prescribed. 9Omitted (iv) Conditions mentioned at Para A.6 (iv) a) & b) shall also apply. A.6 Exchange Earners Foreign Currency Account (EEFC Account) (i) A person resident

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should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments. b) The facility of EEFC scheme is intended to enable exchange earners to save on conversion/transaction costs while undertaking forex transactions. This facility is not intended to enable exchange earners to maintain assets in foreign currency, as India is still not fully convertible on Capital Account. (v) The eligible credits represent – a) inward remittance received through normal banking channel, other than the remittance received pursuant to any undertaking given to the Reserve Bank or which represents foreign currency loan raised or investment received from outside India or those received for meeting specific obligations by the account holder. b) payments received in foreign exchange by a 100 per cent Export Oriented Unit or a unit in Export Processing Zone, Software Technology Park or Electronic H

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realization credited to the EEFC account maintained by the exporter with…… A.7 Counter-Trade Arrangement Counter trade proposals involving adjustment of value of goods imported into India against value of goods exported from India in terms of an arrangement voluntarily entered into between the Indian party and the overseas party through an Escrow Account opened in India in US Dollar will be considered by the Reserve Bank subject to following conditions: (i) All imports and exports under the arrangement should be at international prices in conformity with the Foreign Trade Policy and Foreign Exchange Management Act, 1999 and the Rules and Regulations made there under. (ii) No interest will be payable on balances standing to the credit of the Escrow Account but the funds temporarily rendered surplus may be held in a short-term deposit up to a total period of three months in a year (i.e., in a block of 12 months) and the banks may pay interest at the applicable rate. (iii)

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y rail, Customs staff has been posted at certain designated railway stations for attending to Customs formalities. They will collect the EDF for goods loaded at these stations so that the goods may move straight on to the foreign country without further formalities at the border. The list of designated railway stations can be obtained from the Railways. For goods loaded at stations other than the designated stations, exporters must arrange to present EDF to the Customs Officer at the Border Land Customs Station where Customs formalities are completed. A.9 Border trade with Myanmar In supersession of instructions contained in A.P. (DIR Series) Circular No. 17 dated October 16, 2000, barter system of trade at the Indo-Myanmar border has been discontinued and replaced with normal trade with effect from December 1, 2015. Accordingly, all trade transactions with Myanmar, including those at the Indo-Myanmar border with effect from December 1, 2015 shall be settled in any permitted currency i

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e by the exporter as approved by the EXIM Bank / AD Category – I banks concerned may be done through an AD bank. Such remittances may be made in advance in one lump sum or at monthly intervals as approved by the authority concerned. A.13 Export factoring on non-recourse basis AD banks have been permitted to factor the export receivables on a non-recourse basis, so as to enable the exporters to improve their cash flow and meet their working capital requirements subject to conditions as under: (i) AD banks may take their own business decision to enter into export factoring arrangement on non-recourse basis. They should ensure that their client is not over financed. Accordingly, they may determine the working capital requirement of their clients taking into account the value of the invoices purchased for factoring. The invoices purchased should represent genuine trade invoices. (ii) In case the export financing has not been done by the Export Factor, the Export Factor may pass on the net

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the approval of the AD Category – I banks/ Exim Bank at post-award stage before undertaking execution of such contracts. Regulations relating to Project Exports and Service Exports are laid down in the revised Memorandum of Instructions on Project and Service Exports (PEM-July 2014). (ii) Accordingly, AD banks / Exim Bank may consider awarding post-award approvals without any monetary limit and permit subsequent changes in the terms of post award approval within the relevant FEMA guidelines / regulations. Project and service exporters may approach AD banks / Exim Bank based on their commercial judgment. The respective AD bank / Exim Bank should monitor the projects for which post-award approval has been granted by them. (iii) In order to provide greater flexibility to project & service exporters in conducting their overseas transactions, facilities have been provided as under: a) Inter-Project transfer of machinery – The stipulation regarding recovery of market value (not less tha

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erm paper abroad including treasury bills and other monetary instruments with a maturity or remaining maturity of one year or less and the rating of which should be at least A-1/AAA by Standard & Poor or P-1/-AAA by Moody s or F1/AAA by Fitch IBCA etc., and as deposits with branches / subsidiaries outside India of AD Category – I banks in India. d) Repatriation of funds in case of On-site Software Contracts – The requirement of repatriation of 30 per cent of contract value in respect of on-site contracts by software exporter company / firm has been dispensed with. They should, however, repatriate the profits of on-site contracts after completion of the contracts. A.15 Export of goods on lease, hire, etc. Prior approval of the Reserve Bank is required for export of machinery, equipment, etc., on lease, hire basis under agreement with the overseas lessee against collection of lease rentals/hire charges and ultimate re-import. Exporters should apply for necessary permission, through a

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and (ii) Any person resident outside India, not being a citizen of Pakistan and Bangladesh and also not a traveler coming from and going to Pakistan or Bangladesh, and visiting India may take outside India currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding ₹ 25,000 (Rupees twenty five thousand only) while exiting only through an airport. PART-B EDF / SOFTEX Procedure B.1 Export of goods through Customs ports (i) Customs shall certify the value declared and give running serial number on the two copies of Export Declaration Form (EDF), submitted by exporter at Non- Electronic Data Interchange (EDI) port. (ii) Customs shall retain the original EDF for transmission to the Reserve Bank and return the duplicate copy to the exporter. (iii) At the time of shipment of goods, exporters shall submit the duplicate copy of the EDF to Customs. After examining the goods, Customs shall certify the quantity in the form and return it to the exporte

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ted in duplicate to the authority concerned (Commissioner of Customs or the SEZ, if the export is made through it). (ii) After verifying and authenticating, the authority concerned shall hand over to the exporter, one copy of the shipping bill marked Exchange Control (EC) Copy for being submitted to the AD bank within 21 days from the date of export for collection/negotiation of shipping documents. However, in cases where EC copy of shipping bill is not printed in terms of CBEC s Circular No. 55/2016-Customs dated November 23, 2016 and data of shipping bill is integrated with EDPMS, requirement of submission of EC copy of shipping bill with the AD bank would not be there. (iii) The manner of disposal of EC copy of Shipping Bill shall be the same as that for EDF. The duplicate copy of the form together with a copy of invoice etc. shall be retained by ADs and may not be submitted to the Reserve Bank. The question of disposal of EC copy of shipping bill will, however, not arise where EC c

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sending goods by post should be first presented by the exporter to an AD for countersignature. The procedure is as under: (i) AD shall countersign EDF after ensuring that the parcel has been addressed to their branch or correspondent bank in the country of import and return the original copy to the exporter, who shall then submit the EDF to the post office with the parcel. (ii) The duplicate copy of EDF shall be retained by the AD to whom the exporter shall submit relevant documents together with an extra copy of invoice for negotiation/collection, within the prescribed period of 21 days. (iii) The concerned overseas branch or correspondent shall be instructed to deliver the parcel to consignee against payment or acceptance of relative bill. (iv) AD may, however, countersign EDF covering parcels addressed direct to the consignees, provided: (a) An irrevocable letter of credit for the full value of export has been opened in favor of the exporter and has been advised through the AD conce

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Indian owned vessels, as per the norms prescribed by the Ministry of agriculture, Government of India, the EDF declaration procedure in this regard has been rationalized in consultation with the Government of India as outlined below should be followed by the exporter in conformity with Regulation 3 of Notification No.FEMA.23 (R)/2015-RB dated January 12, 2016. a) The exporters may submit the EDF, duly signed by the Master of the vessel in lieu of Custom certification, indicating the composition of the catch, quantity, export value, date of shipment (date of transfer of catch), etc duly supported by a certificate from an international cargo surveyor. b) Bill of Lading / receipt of trans-shipment issued by the carrier vessel should include the EDF Number. c) The prescribed period of realization and repatriation should be reckoned with reference to the date of transfer of catch as certified by the Master of the vessel or the date of the invoice, whichever is earlier. d) The EDF, both orig

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statement in excel format to the competent authority for certification. Since the SOFTEX data from STPI/SEZ are being transmitted in electronic format to RBI, the exporters now have to submit the SOFTEX form in duplicate as per the revised procedure. STPI/SEZ will retain one copy and handover duplicate copy to exporters after due certification. As hitherto, the exporters have to provide information about all the invoices including the ones lesser than US$25000, in the bulk statement in excel format. (ii) A common SOFTEX Form has been devised to declare single as well as bulk software exports. (iii) Reserve Bank of India has extended the facility for online generation of the EDF Form Number and the SOFTEX Form Number (Single as well as Bulk for use in off-site software exports). The facility of manual allotment of single as well bulk SOFTEX form number by Regional Offices of RBI has been dispensed with accordingly. (iv) Invoicing of software exports a) For long duration contracts involv

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a month, as indicated above. The designated officials may also certify the SOFTEX Forms of EOUs, which are registered with them. d) The invoices raised on overseas clients as at (a) to (c) above will be subject to valuation of export declared on SOFTEX form by the designated official concerned of the Government of India and consequent amendment made in the invoice value, if necessary. B.6 Citing of specific identification numbers In all applications / correspondence with the Reserve Bank, the specific identification number as available on the EDF and SOFTEX forms should invariably be cited. B.7 Export of Services it is clarified that, in respect of export of services to which none of the Forms specified in these Regulations apply, the exporter may export such services without furnishing any declaration, but shall be liable to realise the amount of foreign exchange which becomes due or accrues on account of such export, and to repatriate the same to India in accordance with the provisio

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nks to the effect that he has filed the short-shipment notice with the Customs and that he will furnish it as soon as it is obtained. (ii) Where a shipment has been entirely shut out and there is delay in making arrangements to re-ship, the exporter will give notice in duplicate to the Customs in the form and manner prescribed, attaching thereto the unused duplicate copy of EDF and the shipping bill. The Customs will verify that the shipment was actually shut out, certify the copy of the notice as correct and forward it to the Reserve Bank together with unused duplicate copy of the EDF. In this case, the original EDF received earlier from Customs will be cancelled. If the shipment is made subsequently, a fresh set of EDF should be completed. B.11 Consolidation of air cargo/sea cargo (i) Consolidation of air cargo a) Where air cargo is shipped under consolidation, the airline company s Master Airway Bill will be issued to the Consolidating Cargo Agent. The Cargo agent in turn will issue

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documents even in cases, where export transactions are not backed by letters of credit, provided their 'relative sale contract' with overseas buyer provides for acceptance of FCR as a shipping document in lieu of bill of lading. However, the acceptance of such FCR for purchase/discount would purely be the credit decision of the bank concerned who, among others, should satisfy itself about the bona fides of the transaction and the track record of the overseas buyer and the Indian supplier since FCRs are not negotiable documents. It would be advisable for the exporters to ensure due diligence on the overseas buyer, in such cases. B.12 Exemption from Declaration The requirement of declaration of export of goods and software in the prescribed form will not apply to the cases indicated in Regulation 4 of 11Foreign Exchange Management (Export of Goods and Services) Regulations dated January 12, 2016. The exporters shall, however, be liable to realize and repatriate export proceeds a

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hall not be entitled to Duty Drawback or any other export incentive under any export promotion scheme. Exports of goods not involving any foreign exchange transaction directly or indirectly requires the waiver of EDF procedure from the Reserve Bank. C.2 Receipt of advance against exports (1) In terms of Regulation 15 of Notification No. FEMA 23 (R)/2015-RB dated January 12, 2016, where an exporter receives advance payment (with or without interest), from a buyer outside India, the exporter shall be under an obligation to ensure that the shipment of goods is made within one year from the date of receipt of advance payment; the rate of interest, if any, payable on the advance payment does not exceed London Inter-Bank Offered Rate (LIBOR) + 100 basis points; and the documents covering the shipment are routed through the AD Category – I bank through whom the advance payment is received. Provided that in the event of the exporter s inability to make the shipment, partly or fully, within one

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of long term supply contracts for export of goods subject to the conditions as under: (i) Firm irrevocable supply orders and contracts should be in place. The contract with the overseas party/ buyer should be vetted and the same shall clearly specify the nature, amount and delivery timelines of the products over the years and penalty in case of non-performance or contract cancellation. Product pricing should be in consonance with prevailing international prices. (ii) Company should have capacity, systems and processes in place to ensure that the orders over the duration of the said tenure can actually be executed. (iii) The facility is to be provided only to those entities, which have not come under the adverse notice of Enforcement Directorate or any such regulatory agency or have not been caution listed. (iv) Such advances should be adjusted through future exports. (v) The rate of interest payable, if any, should not exceed LlBOR plus 200 basis points. (vi) The documents should be r

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rt performance as per the contract. b) BG / SBLC should cover only the advance on reducing balance basis. c) BG / SBLC issued from India in favor of overseas buyer should not be discounted by the overseas branch / subsidiary of bank in India. Note: AD Category – I banks may also be guided by the Master Circular on Guarantees and Co-acceptances issued by Department of Banking Regulation. (xii) AD Category – I banks may allow the purchase of foreign exchange from the market for refunding advance payment credited to EEFC account only after utilizing the entire balances held in the exporter s EEFC accounts maintained at different branches/banks. (3) AD Category- I banks may allow exporters to receive advance payment for export of goods which would take more than one year to manufacture and ship and where the export agreement provides for shipment of goods extending beyond the period of one year from the date of receipt of advance payment subject to the following conditions:- (i) The KYC an

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payment or towards payment of interest should be made without the prior approval of the Reserve Bank. (4) (i) As it has been observed that there is substantial increase in the number and amount of advances received for exports remaining outstanding beyond the stipulated period on account of non-performance of such exports (shipments in case of export of goods), AD Category -I banks are advised to efficiently follow up with the concerned exporters in order to ensure that export performance (shipments in case of export of goods) are completed within the stipulated time period. (ii) It is further reiterated that AD category -I banks should exercise proper due diligence and ensure compliance with KYC and AML guidelines so that only bonafide export advances flow into India. Doubtful cases as also instances of chronic defaulters may be referred to Directorate of Enforcement (DoE) for further investigation. A quarterly statement indicating details of such cases may be forwarded to the concern

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triation of proceeds to India. (iii) Such transactions approved by the AD Category – I banks will be subject to 100 per cent audit by their internal inspectors/auditors. C.4 EDF approval for export of goods for re-imports (i) AD Category – I banks may consider request from exporters for granting EDF approval in cases where goods are being exported for re-import after repairs / maintenance / testing / calibration, etc., subject to the condition that the exporter shall produce relative Bill of Entry within one month of re-import of the exported item from India. (ii) Where the goods being exported for testing are destroyed during testing, AD Category – I banks may obtain a certificate issued by the testing agency that the goods have been destroyed during testing, in lieu of Bill of Entry for import. C.5 Re-export of unsold rough diamonds from Special Notified Zone of Customs without Export Declaration Form (EDF) formality (i) In order to facilitate re-export of unsold rough diamonds impor

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allow remittances towards initial expenses up to fifteen per cent of the average annual sales/income or turnover during the last two financial years or up to twenty-five per cent of the net worth, whichever is higher. (ii) For recurring expenses, remittances up to ten per cent of the average annual sales/income or turnover during the last two financial years may be sent for the purpose of normal business operations of the office (trading/non-trading)/branch or representative office outside India subject to the following terms and conditions: a) The overseas branch/office has been set up or representative is posted overseas for conducting normal business activities of the Indian entity; b) The overseas branch/office/representative shall not enter into any contract or agreement in contravention of the Act, Rules or Regulations made there under; c) The overseas office (trading / non-trading) / branch / representative should not create any financial liabilities, contingent or otherwise, f

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ses and repatriation thereon may be sent to the AD Category – I banks. C.7 Delay in submission of shipping documents by exporters In cases where exporters present documents pertaining to exports after the prescribed period of 21 days from date of export, AD Category – I banks may handle them without prior approval of the Reserve Bank, provided they are satisfied with the reasons for the delay. C.8 Return of documents to exporters The duplicate copies of EDF and shipping documents, once submitted to the AD Category – I banks for negotiation, collection, etc., should not ordinarily be returned to exporters, except for rectification of errors and resubmission. C.9 Landlocked countries AD Category – I banks may deliver one negotiable copy of the Bill of Lading to the Master of the carrying vessel or trade representative for exports to certain landlocked countries if the shipment is covered by an irrevocable letter of credit and the documents conform strictly to the terms of the Letter of C

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so permit 'Status Holder Exporters (as defined in the Foreign Trade Policy), and units in Special Economic Zones (SEZ) to dispatch the export documents to the consignees outside India subject to the terms and conditions that: a) The export proceeds are repatriated through the AD banks named in the EDF. b) The duplicate copy of the EDF is submitted to the AD banks for monitoring purposes, by the exporters within 21 days from the date of shipment of export. (iii) AD Category – I banks may regularize cases of dispatch of shipping documents by the exporter direct to the consignee or his agent resident in the country of the final destination of goods, up to USD 1 million or its equivalent, per export shipment, subject to the following conditions: a) The export proceeds have been realized in full. b) The exporter is a regular customer of AD Category – I bank for a period of at least six months. c) The exporter s account with the AD Category – I bank is fully compliant with the Reserve Ba

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) In cases where the exporter has not been able to arrange for repatriation of the undrawn balance in spite of best efforts, AD Category – I banks, on being satisfied with the bona fides of the case, should ensure that the exporter has realized at least the value for which the bill was initially drawn (excluding undrawn balances) or 90 per cent of the value declared on EDF form, whichever is more and a period of one year has elapsed from the date of shipment. C.12 Consignment Exports (i) When goods have been exported on consignment basis, the AD Category-I bank, while forwarding shipping documents to his overseas branch/ correspondent, should instruct the latter to deliver them only against trust receipt/undertaking to deliver sale proceeds by a specified date within the period prescribed for realization of proceeds of the export. This procedure should be followed even if, according to the practice in certain trades, a bill for part of the estimated value is drawn in advance against th

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received from exporters and grant permission for opening / hiring warehouses abroad subject to the following conditions: (i) Applicant s export outstanding does not exceed 5 per cent of exports made during the previous financial year. (ii) Applicant has a minimum export turnover of USD 100,000/- during the last financial year. (iii) Period of realization should be as applicable. (iv) All transactions should be routed through the designated branch of the AD Banks. (v) The above permission may be granted to the exporters initially for a period of one year and renewal may be considered subject to the applicant satisfying the requirement above. (vi) AD Category – I banks granting such permission/approvals should maintain a proper record of the approvals granted. C.14 Export Bills Register AD Category – I banks should maintain Export Bills Register, in physical or electronic form aligned with Export Data Processing and Monitoring System (EDPMS). The bill number should be given to all type

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g exporters does not get delayed. Any laxity in the follow up of realization of export proceeds by AD Category – I banks will be viewed seriously by the Reserve Bank, leading to the invocation of the penal provision under FEMA, 1999. (iv) 14With operationalization of EDPMS on March 01, 2014, realization of all export transaction for shipping documents after February 28, 2014 should be reported in EDPMS. C.16 Reduction in invoice value on account of prepayment of usance bills Occasionally, exporters may approach AD Category – I banks for reduction in invoice value on account of cash discount to overseas buyers for prepayment of the usance bills. AD Category – I banks may allow cash discount to the extent of amount of proportionate interest on the unexpired period of usance, calculated at the rate of interest stipulated in the export contract or at the prime rate/LIBOR of the currency of invoice where rate of interest is not stipulated in the contract. C.17 Reduction in invoice value in

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lls outstanding to the average export realizations during the preceding three financial years, outstanding of exports made to countries facing externalization problems may be ignored provided the payments have been made by the buyers in the local currency. C.18 Change of buyer/consignee Prior approval of the Reserve Bank is not required if, after goods have been shipped, they are to be transferred to a buyer other than the original buyer in the event of default by the latter, provided the reduction in value, if any, involved does not exceed 25 per cent of the invoice value and the realization of export proceeds is not delayed beyond the period of 9 months from the date of export. Where the reduction in value exceeds 25%, all other relevant conditions stipulated in paragraph C.17 should also be satisfied. C.19 Export of goods by Special Economic Zones (SEZs) (i) Units in SEZs are permitted to undertake job work abroad and export goods from that country itself subject to the conditions t

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eriod of realization of export proceeds beyond stipulated period of realization from the date of export, up to a period of six months, at a time, irrespective of the invoice value of the export subject to the following conditions: a) The export transactions covered by the invoices are not under investigation by Directorate of Enforcement / Central Bureau of Investigation or other investigating agencies, b) The AD Category – I bank is satisfied that the exporter has not been able to realize export proceeds for reasons beyond his control, c) The exporter submits a declaration that the export proceeds will be realized during the extended period, d) While considering extension beyond one year from the date of export, the total outstanding of the exporter does not exceed USD one million or 10 per cent of the average export realizations during the preceding three financial years, whichever is higher. 15Omitted 16e) In cases where the exporter has filed suits abroad against the buyer, extensi

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s on shipments lost in transit which are partially settled directly by shipping companies/airlines under carrier s liability abroad are also repatriated to India by exporters. C.22 Export claims (i) AD Category – I banks may remit export claims on application, provided the relative export proceeds have already been realized and repatriated to India and the exporter is not on the caution list of the Reserve Bank. (ii) In all such cases of remittances, the exporter should be advised to surrender proportionate export incentives, if any, received by him. C.23 Write-off of unrealized export bills (i) An exporter who has not been able to realize the outstanding export dues despite best efforts, may either self-write off or approach the AD Category – I banks, who had handled the relevant shipping documents, with appropriate supporting documentary evidence. The limits prescribed for write-offs of unrealized export bills are as under: Self write-off by an exporter (Other than Status Holder Expo

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he importing country. d) The unrealized amount represents the balance due in a case settled through the intervention of the Indian Embassy, Foreign Chamber of Commerce or similar Organization; e) The unrealized amount represents the undrawn balance of an export bill (not exceeding 10% of the invoice value) remaining outstanding and turned out to be unrealizable despite all efforts made by the exporter; f) The cost of resorting to legal action would be disproportionate to the unrealized amount of the export bill or where the exporter even after winning the Court case against the overseas buyer could not execute the Court decree due to reasons beyond his control; g) Bills were drawn for the difference between the letter of credit value and actual export value or between the provisional and the actual freight charges but the amounts have remained unrealized consequent on dishonor of the bills by the overseas buyer and there are no prospects of realization. (iv) The exporter has surrendere

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ed by the central banking authorities of the country. b) EDF which are under investigation by agencies like, Enforcement Directorate, Directorate of Revenue Intelligence, Central Bureau of Investigation, etc. as also the outstanding bills which are subject matter of civil / criminal suit. vii) AD banks should report write off of export bills through EDPMS to the Reserve Bank. viii) AD banks are advised to put in place a system under which their internal inspectors or auditors (including external auditors appointed by authorised dealers) should carry out random sample check / percentage check of write-off outstanding export bills. ix) Cases not covered by the above instructions / beyond the above limits, may be referred to the concerned Regional Office of Reserve Bank of India. C.24 Write off in cases of payment of claims by ECGC and private insurance companies regulated by Insurance Regulatory and Development Authority (IRDA) (i) AD Category – I banks shall, on an application received

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The exporter produces a certificate from the Foreign Mission of India concerned, about the fact of non-recovery of export proceeds from the buyer; and c) This would not be applicable in self write off cases. C.26 Set-off of export receivables against import payables AD category -I banks may deal with the cases of set-off of export receivables against import payables, subject to following terms and conditions: (i) The import is as per the Foreign Trade Policy in force. (ii) Invoices/Bills of Lading/Airway Bills and Exchange Control copies of Bills of Entry for home consumption have been submitted by the importer to the Authorized Dealer bank. (iii) Payment for the import is still outstanding in the books of the importer. (iv) Both the transactions of sale and purchase may be reported separately in R-Returns and FETERS. (v) The relative EDF will be released by the AD bank only after the entire export proceeds are adjusted / received. (vi) The set-off of export receivables against import

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s the case may be while details of import of goods / services are recorded through A1 / A2 form as the case may be. The relative EDF will be treated as complete by the designated AD Category – I banks only after the entire proceeds are adjusted / received. (iii) Both the transactions of sale and purchase in R- Returns under FETERS are reported separately. (iv) The export / import transactions with ACU countries are kept outside the arrangement. (v) All the relevant documents are submitted to the concerned AD Category – I banks who should comply with all the regulatory requirements relating to the transactions. C.28 Exporters Caution List 181) Caution Listing/ de-caution Listing of exporters is automated in EDPMS. The updated list of caution listed exporters can be accessed through EDPMS on a daily basis. Criteria laid down for cautioning/ de-cautioning of exporters in EDPMS are as under: (a) The exporters would be caution listed if any shipping bill against them remains open for more t

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such cases based on the recommendation of AD Category – I banks. 2) AD Category – I banks should follow the procedure mentioned below while handling shipping documents in respect of caution listed exporters: (a) They will intimate the exporters about their caution listing, giving the details of outstanding shipping bills. When caution listed exporters submit shipping documents for negotiation / purchase/ discount/ collection, etc. the AD Category – I bank may accept the documents subject to following conditions:- (i) The exporters concerned should produce evidence of having received advance payment or an irrevocable letter of credit in their favour covering the full value of the proposed exports; (ii) In case of usance bills, the relative letter of credit should cover full export value and also permit such drawings. Besides, the usance bills should also mature within prescribed realisation period reckoned from date of shipment. (iii) Except under the above mentioned conditions given in

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bank of international repute resident broad; (ii) as a counter-guarantee to cover guarantee issued by his branch or correspondent outside India, on behalf of Indian exporter in cases where guarantees of only resident banks are acceptable to overseas buyers. C.30 Issuance of Electronic Bank Realisation Certificate (eBRC) 19 AD Category-I banks are required to update the EDPMS with data of export proceeds on as and when realised basis and, with effect from October 16, 2017, they are required to generate Electronic Bank Realisation Certificate (eBRC) only from the data available in EDPMS, to ensure consistency of data in EDPMS and consolidated eBRC. PART-D Remittances connected with Export D.1 Agency commission on exports (i) AD Category – I banks may allow payment of commission, either by remittance or by deduction from invoice value, on application submitted by the exporter. The remittance on agency commission may be allowed subject to conditions as under: a) Amount of commission has b

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by deduction from the invoice value. (iii) Payment of commission is prohibited on exports made by Indian Partners towards equity participation in an overseas joint venture / wholly owned subsidiary as also exports under Rupee Credit Route except commission up to 10 per cent of invoice value of exports of tea & tobacco. D.2 Refund of export proceeds AD Category – I banks, through whom the export proceeds were originally realized may consider requests for refund of export proceeds of goods exported from India and being re-imported into India on account of poor quality. While permitting such transactions, AD Category – I banks are required to: (i) Exercise due diligence regarding the track record of the exporter (ii) Verify the bona-fides of the transactions (iii) Obtain from the exporter a certificate issued by DGFT / Custom authorities that no incentives have been availed by the exporter against the relevant export or the proportionate incentives availed, if any, for the relevant e

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ces – Exports to Warehouses Abroad May 2, 2003 6 A.P. (DIR Series) Circular No.77 Foreign Exchange Management Act, 1999 – Guidelines for Compilation of R-Returns March 13, 2004 7 A.P. (DIR Series) Circular No.71 Data on Project Export Finance June 8, 2007 8 A.P. (DIR Series) Circular No.30 Compilation of Bank-wide consolidated R-Return February 25,2008 9 A.P (DIR Series) Circular No.43 Settlement system under ACU Mechanism December 26, 2008 10 A.P. (DIR Series) Circular No.84 Compilation of R-Returns : Reporting under FETERS February 29, 2012 11 A.P. (DIR Series) Circular No.46 Supply of Goods and Services by Special Economic Zones to Units in Domestic Tariff Areas October 23, 2012 12 A.P. (DIR Series) Circular No.60 Export Outstanding Statement (XOS) Online Bank wide Submission October 01, 2013 13 A.P. (DIR Series) Circular No.62 Closing of Old Outstanding Bills : Export – Follow-up – XOS Statements October 14, 2013 14 A.P. (DIR Series) Circular No.63 Memorandum of Procedure for Chann

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PMS) Issuance of Electronic Bank Realisation Certificate (eBRC) September 15, 2017 1 FEM (Export of Goods and Services) Regulations, 2000 was repealed and replaced by FEM (Export of Goods and Services) Regulations, 2015 with effect from January 12, 2016. 2 FEM (Export of Goods and Services) Regulations, 2000 was repealed and replaced by FEM (Export of Goods and Services) Regulations, 2015 with effect from January 12, 2016. 3 FEM (Export of Goods and Services) Regulations, 2000 was repealed and replaced by FEM (Export of Goods and Services) Regulations, 2015 with effect from January 12, 2016. A.13 Export factoring on non-recourse basis 4 Inserted by AP (DIR Series) Circular 51 dated February 11, 2016 with effect from February 11, 2016. 5 Inserted by AP (DIR Series) Circular 42 dated February 4, 2016. 6 Inserted by FEM (Foreign Currency Accounts by a person Resident in India) Regulations, 2015 with effect from January 21, 2016. Prior to insertion it read as Regulation 7(7) of the Foreig

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a person Resident in India) Regulations, 2015 with effect from January 21, 2016. Prior to insertion it read as Regulation 4 of the Foreign Exchange Management (Foreign Currency Accounts by a person Resident in India) Regulations, 2000 notified vide Notification No. FEMA 10/2000-RB dated May 3, 2000 11 FEM (Export of Goods and Services) Regulations, 2000 was repealed and replaced by FEM (Export of Goods and Services) Regulations, 2015 with effect from January 12, 2016 12 Inserted vide Gazette Notification No. 23/2015-2020 dated August 23, 2017. Prior to deletion it read as: AD Category – I banks may consider requests for grant of EDF waiver from exporters for export of goods free of cost, for export promotion up to 2 per cent of the average annual exports of the applicant during the preceding three financial years subject to a ceiling of ₹ 5 lakhs. For Status Holder exporters, this limit as per the present Foreign Trade Policy is ₹ 10 lakhs or 2 per cent of the average annua

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xtension has been granted may be indicated in the Remarks column. 16 The existing sub-para (f) has been re-numbered as (e) on the deletion of the existing sub-para (e) by AP (DIR) Series Circular 74 dated May 26, 2016 17 Inserted by AP (DIR) Series Circular 74 dated May 26, 2016 with effect from June 15, 2016. Prior to insertion it read as: and delete them from the XOS statement. 18 Inserted by AP (DIR) Series Circular 74 dated May 26, 2016 with effect from June 15, 2016. Prior to insertion it read as: (i) The list of exporters who are cautioned shall be shared with the AD banks and they may approve EDF of exporters who have been placed on caution list if the exporters concerned produce evidence of having received an advance payment or an irrevocable letter of credit in their favor covering the full value of the proposed exports. (ii) Such approval may be given even in cases where usance bills are to be drawn for the shipment provided the relative letter of credit covers the full expor

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FEMA – 17/2015-16 – Dated:- 1-1-2016 – RBI/FED/2016-17/12 FED Master Direction No. 17/2016-17 January 1, 2016 (Updated as on October 20, 2016) (Updated as on March 31, 2016) (Updated as on February 4, 2016) To All Authorised Dealer Category – I banks and Authorised Banks Madam / Dear Sir, Master Direction – Import of Goods and Services Import of Goods and Services into India is being allowed in terms of Section 5 of the Foreign Exchange Management Act 1999 (42 of 1999), read with Notification No. G.S.R. 381(E) dated May 3, 2000 viz. Foreign Exchange Management (Current Account Transaction) Rules, 2000.. These Regulations are amended from time to time to incorporate the changes in the regulatory framework and published through amendment notifications. 2. Within the contours of the Regulations, Reserve Bank of India also issues directions to Authorised Persons under Section 11 of the Foreign Exchange Management Act (FEMA), 1999.. These directions lay down the modalities as to how the fo

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ces INDEX Section I – Introduction Section II – General Guidelines for imports B.1. General Guidelines B.2. Remittances for Import Payments B.3. Import Licenses B.4. Obligation of Purchaser of Foreign Exchange B.5. Time Limit for Settlement of Import Payments B.6. Import of Foreign exchange / Indian Rupees B.7. Third Party Payment for Import Transactions B.8. Issue of Guarantees by an Authorised Dealer Section III – Operational Guidelines for Imports C.1. Advance Remittance C.2. Interest on Import Bills C.3. Remittances against Replacement Imports C.4. Guarantee for Replacement Import C.5. Import of Equipment by Business Process Outsourcing (BPO) Companies for their overseas sites C.6. Receipt of Import Bills/Documents by the Importer Directly from Overseas Suppliers C.7. Evidence of Import C.8. Import Data Processing and Monitoring System C.9. Verification and Preservation C.10. Follow up for Import Evidence C.11. Import of Gold C.12. Import of Other Precious Metals C.13. Import Facto

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mentary Credits (UCPDC), etc. while opening letters of credit for import into India on behalf of their constituents. (iii) Compliance with the provisions of Research & Development Cess Act, 1986 may be ensured for import of drawings and designs. (iv) AD Category – I banks may also advise importers to ensure compliance with the provisions of Income Tax Act, wherever applicable. (v) Any reference to the Reserve Bank should first be made to the Regional Office of the Foreign Exchange Department situated in the jurisdiction where the applicant person resides, or the firm / company functions, unless otherwise indicated. If, for any particular reason, they desire to deal with a different office of the Foreign Exchange Department, they may approach the Regional Office of its jurisdiction for necessary approval. Section II – General Guidelines for Imports B.1. General Guidelines Rules and regulations to be followed by the AD Category – I banks from the foreign exchange angle while undertak

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called for and adherence to special conditions, if any, attached to such licences should be ensured. After effecting remittances under the licence, AD Category – I banks may preserve the copies of utilised licence /s till they are verified by the internal auditors or inspectors. B.4. Obligation of Purchaser of Foreign Exchange (i) In terms of Section 10(6) of the Foreign Exchange Management Act, 1999 (FEMA), any person acquiring foreign exchange is permitted to use it either for the purpose mentioned in the declaration made by him to an Authorised Dealer Category – I bank under Section 10(5) of the Act or for any other purpose for which acquisition of foreign exchange is permissible under the said Act or Rules or Regulations framed there under. (ii) Where foreign exchange acquired has been utilised for import of goods into India, the AD Category – I bank should ensure that the importer furnishes evidence of import viz., Exchange Control Copy of the Bill of Entry, Postal Appraisal Form

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formity with the extant provisions and the import is in conformity with the Foreign Trade Policy in force. (iv) Any person resident in India may also make payment as under : (a) In rupees towards meeting expenses on account of boarding, lodging and services related thereto or travel to and from and within India of a person resident outside India who is on a visit to India ; (b) By means of a crossed cheque or a draft as consideration for purchase of gold or silver in any form imported by such person in accordance with the terms and conditions imposed under any order issued by the Central Government under the Foreign Trade(Development and Regulations) Act, 1992 or under any other law, rules or regulations for the time being in force; (c) A company or resident in India may make payment in rupees to its non- whole time director who is resident outside India and is on a visit to India for the company s work and is entitled to payment of sitting fees or commission or remuneration, and trave

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and may be permitted in terms of the directions in para C.2 of Section III below. B.5.2. Time Limit for Deferred Payment Arrangements Deferred payment arrangements (including suppliers and buyers credit) upto five years, are treated as trade credits for which the procedural guidelines as laid down in the Master Circular for External Commercial Borrowings and Trade Credits may be followed. B.5.3. Time Limit for Import of Books Remittances against import of books may be allowed without restriction as to the time limit, provided, interest payment, if any, is as per the instructions in para C.2 of Section III of this Circular. B.5.4 Extension of Time i) AD Category – I banks can consider granting extension of time for settlement of import dues up to a period of six months at a time (maximum up to the period of three years) irrespective of the invoice value for delays on account of disputes about quantity or quality or non-fulfilment of terms of contract; financial difficulties and cases wh

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e concerned Regional Office of Reserve Bank of India. iv) The above shall be reported in IDPMS as per message Bill of Entry Extension and the date up to which extension is granted will be indicated in Extension Date column. B.6. Import of Foreign Exchange / Indian Rupees (i) Except as otherwise provided in the Regulations, no person shall, without the general or special permission of the Reserve Bank, import or bring into India, any foreign currency. Import of foreign currency, including cheques, is governed by clause (g) of sub-section (3) of Section 6 of the Foreign Exchange Management Act, 1999, and the Foreign Exchange Management (Export and Import of Currency) Regulations 2000, issued by Reserve Bank vide Notification No.FEMA 6/2000-RB dated May 3, 2000, as amended from time to time. (ii) Reserve Bank may allow a person to bring into India currency notes of Government of India and / or of Reserve Bank subject to such terms and conditions as the Reserve Bank may stipulate. B.6.1. I

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rency and Currency Notes (i) Any person resident in India who had gone out of India on a temporary visit, may bring into India at the time of his return from any place outside India (other than from Nepal and Bhutan), currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding ₹ 25,000 (Rupees twenty five thousand only). (ii) A person may bring into India from Nepal or Bhutan, currency notes of Government of India and Reserve Bank of India for any amount in denominations up to ₹ 100/-. B.7. Third Party Payment for Import Transactions AD category I banks are allowed to make payments to a third party for import of goods, subject to conditions as under: (a) Firm irrevocable purchase order / tripartite agreement should be in place. However this requirement may not be insisted upon in case where documentary evidence for circumstances leading to third party payments / name of the third party being mentioned in the irrevocable order / invoic

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uthorised dealer may give guarantee, Letter of Undertaking of Letter of Comfort in respect of any debt, obligation or other liability incurred by a person resident in India and owned to a person resident outside India (being an overseas supplier of goods, bank or a financial institution), for import of goods, as permitted under the Foreign Trade Policy announced by Government of India from time to time and subject to such terms and conditions as may be specified by Reserve Bank of India from time to time. B.8.3 An authorised dealer may, in the ordinary course of his business, give a guarantee in favour of a non-resident service provider, on behalf of a resident customer who is a service importer, subject to such terms and conditions as stipulated by Reserve Bank of India from time to time: Provided that no guarantee for an amount exceeding USD 500,000 or its equivalent shall be issued on behalf of a service importer other than a Public Sector Company or a Department / Undertaking of th

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Guidelines for Imports C.1. Advance Remittance C.1.1. Advance Remittance for Import of Goods (i) AD Category – I bank may allow advance remittance for import of goods without any ceiling subject to the following conditions: (a) If the amount of advance remittance exceeds USD 200,000 or its equivalent, an unconditional, irrevocable standby Letter of Credit or a guarantee from an international bank of repute situated outside India or a guarantee of an AD Category – I bank in India, if such a guarantee is issued against the counter-guarantee of an international bank of repute situated outside India, is obtained. (b) In cases where the importer (other than a Public Sector Company or a Department/Undertaking of the Government of India/State Government/s) is unable to obtain bank guarantee from overseas suppliers and the AD Category – I bank is satisfied about the track record and bonafides of the importer, the requirement of the bank guarantee / standby Letter of Credit may not be insisted

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ing companies to whom an importer (other than Public Sector Company or Department / Undertaking of Government of India / State Government) can make advance payments, without any limit / bank guarantee/ stand-by letter of Credit. Banks must ensure the following: i. The overseas mining company should have the recommendation of GJEPC. ii. The importer should be a recognised processor of rough diamonds and should have a good track record. iii. AD Category – I banks should, undertake the transaction based on their commercial judgment and after being satisfied about the bonafides of the transaction. iv. Advance payments should be made strictly as per the terms of the sale contract and should be made directly to the account of the company concerned, that is, to the ultimate beneficiary and not through numbered accounts or otherwise and AD banks should ensure that they have created the Outward Remittance Message(ORM) for all such outward remittances in IDPMS. v. Further, due caution may be exe

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er customer as per the message format BOE Settlement xi) Multiple ORMs can be settled against single BoE and also multiple BoEs can be settled against one ORM. b) In case of an importer entity in the Public Sector or a Department / Undertaking of the Government of India / State Government/s, AD Category – I banks may permit the advance remittance subject to the above conditions and a specific waiver of bank guarantee from the Ministry of Finance, Government of India, where the advance payments is equivalent to or exceeds USD 100,000/- (USD one hundred thousand only). C.1.3. Advance Remittance for Import of Aircrafts/Helicopters and other Aviation Related Purchases 1. As a sector specific measure, entities which have been permitted under the extant Foreign Trade Policy to import aircrafts and helicopters (including used / second hand aircraft and helicopters) or any other person who has been granted permission by the Directorate General of Civil Aviation (DGCA) to operate Scheduled or N

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r the Indian importer entity and the overseas manufacturer company as well. ii. Advance payments should be made strictly as per the terms of the sale contract and directly to the account of the manufacturer (supplier) concerned. iii. AD Category – I banks may frame their own internal guidelines to deal with such cases, with the approval of their Board of Directors. iv. In the case of a Public Sector Company or a Department / Undertaking of Central /State Governments, the AD Category – I bank shall ensure that the requirement of bank guarantee has been specifically waived by the Ministry of Finance, Government of India for advance remittances exceeding USD 100,000. v. Physical import of goods into India is made within six months (three years in case of capital goods) from the date of remittance and the importer gives an undertaking to furnish documentary evidence of import within fifteen days from the close of the relevant period. It is clarified that where advance is paid as milestone

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elines. C.1.4. Advance Remittance for the Import of Services AD Category – I bank may allow advance remittance for import of services without any ceiling subject to the following conditions: (a) Where the amount of advance exceeds USD 500,000 or its equivalent, a guarantee from a bank of international repute situated outside India, or a guarantee from an AD Category – I bank in India, if such a guarantee is issued against the counter-guarantee of a bank of international repute situated outside India, should be obtained from the overseas beneficiary. (b) In the case of a Public Sector Company or a Department/ Undertaking of the Government of India/ State Governments, approval from the Ministry of Finance, Government of India for advance remittance for import of services without bank guarantee for an amount exceeding USD 100,000 (USD One hundred thousand) or its equivalent would be required. (c) AD Category – I banks should also follow-up to ensure that the beneficiary of the advance rem

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nce at the prevailing LIBOR of the currency of invoice. (iii) In case of change in value due to (i) or (ii) above, the respective AD bank should ensure proper remark/indicator is entered for ORM mark off in IDPMS etc as per extant IDPMS guidelines. C.3. Remittances against Replacement Imports Where goods are short-supplied, damaged, short-landed or lost in transit and the Exchange Control Copy of the import licence has already been utilised to cover the opening of a letter of credit against the original goods which have been lost, the original endorsement to the extent of the value of the lost goods may be cancelled by the AD Category – I bank and fresh remittance for replacement imports may be permitted without reference to Reserve Bank, provided, the insurance claim relating to the lost goods has been settled in favour of the importer. It may be ensured that the consignment being replaced is shipped within the validity period of the license. AD bank should ensure that proper remark/i

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for setting up of the ICC. (ii) The remittance should be allowed based on the AD Category – I banks commercial judgment, the bonafides of the transactions and strictly in terms of the contract. (iii) The remittance is made directly to the account of the overseas supplier. (iv) The AD Category – I banks should also obtain a certificate as evidence of import from the Chief Executive Officer (CEO) or auditor of the importer company that the goods for which remittance was made have actually been imported and installed at overseas sites. (v) The AD Category I bank should ensure compliance with IDPMS guidelines as applicable. C.6. Receipt of Import Bills/Documents Concerned AD Category banks to ensure generation of ORMs, BoE entries and BoE settlement with the respective ORMs in compliance with IDPMS guidelines as applicable. C.6.1.1 Receipt of import documents by the importer directly from overseas suppliers Import bills and documents should be received from the banker of the supplier by th

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ter of rough diamonds, rough precious and semi-precious stones has received the import bills / documents directly from the overseas supplier and the documentary evidence for import is submitted by the importer at the time of remittance. Status holder importers as defined in the Foreign Trade Policy dealing in the import of rough diamonds, rough precious and semi- precious stones can receive import bills directly from the suppliers without any ceiling. AD Category – I banks may undertake such transactions subject to the following conditions: (i) The import would be subject to the prevailing Foreign Trade Policy. (ii) The transactions are based on their commercial judgment and they are satisfied about the bonafides of the transactions. (iii) AD Category – I banks should do the KYC and due diligence exercise and should be fully satisfied about the financial standing / status and track record of the importer customer. Before extending the facility, they should also obtain a report on each

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ue of foreign exchange remitted / paid for import into India, it is obligatory on the part of the AD Category- I bank through which the relative remittance was made, to ensure that the importer submits :- (a) The Exchange Control Copy of the Bill of Entry for Home Consumption, or (b) The Exchange Control Copy of the Bill of Entry for warehousing, in case of 100% Export Oriented Units, or (c) Customs Assessment Certificate or Postal Appraisal Form, as declared by the importer to the Customs Authorities, where import has been made by post, or Courier Bill of Entry as declared by the courier companies to the Customs Authorities in cases where goods have been imported through couriers, as evidence that the goods for which the payment was made have actually been imported into India, or (d) The Exchange Control Copy of the Ex-Bond Bill of Entry or Bill of Entry issued by Customs Authorities by any other similar nomenclature for goods imported and stored in Free Trade Warehousing Zone (FTWZ)

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Exchange Control Copy of Bill of Entry for home consumption, a certificate from the Chief Executive Officer (CEO) or auditor of the company that the goods for which remittance was made have actually been imported into India provided :- (a) The amount of foreign exchange remitted is less than USD 1,000,000 or its equivalent and (b) The importer is a company listed on a stock exchange in India and whose net worth is not less than ₹ 100 crore as on the date of its last audited balance sheet, or, the importer is a public sector company or an undertaking of the Government of India or its departments. (ii) The above facility may also be extended to autonomous bodies, including scientific bodies/academic institutions, such as Indian Institute of Science / Indian Institute of Technology, etc. whose accounts are audited by the Comptroller and Auditor General of India (CAG). AD Category – I bank may insist on a declaration from the auditor/CEO of such institutions that their accounts are a

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(ORM) for all outward remittance/s for import payments on behalf of their importer customer for which the prescribed documents for evidence of import have not been submitted. (ii) Creation of ORM for all outstanding outward remittance/s for import payments need to be completed on or before October 31, 2016. Settlement of ORM with BoE (iii) Based on the AD code declared by the importer, the banks shall download the Bill of Entry (BoE) issued by EDI ports from BOE Master in IDPMS. For non-EDI ports, AD bank of the importer shall upload the BoE data in IDPMS as per message format Manual BOE reporting on daily basis on receipt of BoE from the customer/Customs office. (iv) AD banks will enter BoE details (BoE number, port code and date) for ORM associated with the advance payments for import transactions as per the message format BOE settlement . (v) In case of payment after receipt of BoE, the AD bank shall generate ORM for import payments made by its importer customer as per the message

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idelines on the matter subject to submission of satisfactory documentation by the importer irrespective of the amount involved. AD Bank shall settle and close ORM/BoE with appropriate Adjustment Indicator in IDPMS. (x) The above operational guidelines for extension and write off are meant to facilitate closure of bills in IDPMS and will be subject to extant guidelines on the matter and not absolve the importer from remitting / receiving the amount in case of change in circumstances. (xi) While allowing write off, AD Category – I banks must ensure that: (a) The case is not the subject matter of any pending civil or criminal suit; (b) The importer has not come to the adverse notice of the Enforcement Directorate or the Central Bureau of Investigation or any such other law enforcement agency; and (c) There is a system in place under which internal inspectors or auditors of the AD category – I banks (including external auditors appointed by authorised dealers) should carry out random sampl

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troyed only after obtaining clearance from the investigating agency concerned. C.10. Follow-up for Import Evidence (i) In case an importer does not furnish any documentary evidence of import, as required under paragraph C.7. of Section III, within 3 months from the date of remittance involving foreign exchange irrespective of value, the AD Category – I bank should rigorously follow-up for the next 3 months, including issuing registered letters to the importer. (ii) On operationalization of IDPMS, all outstanding import remittances, irrespective of the amount involved, will be reported into the system by banks and submission of a separate BEF statement would be discontinued from a date, to be notified separately. C.11 Import of Gold C.11.1 Import of Gold. (i) The 20:80 scheme of import of gold was withdrawn on November 28, 2014. However, the obligation to export under the 20:80 scheme would apply to the unutilised gold imported before November 28, 2014. (ii) Nominated banks and nominate

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es (other than the nominated banks)/ EOUs/ SEZs in Gem & Jewellery sector during the month under report as well as the cumulative position as at the end of the said month beginning from the 1st month of the Financial Year. Both the statements shall be submitted, even if there is 'Nil' position, by the 10th of the following month / half year, to which it relates. C.11.2. Import of Gold Jewellery Including Jewellery Made of Precious Metals or/and Studded With Diamonds / Precious Stones /Semi-precious. Suppliers and Buyers credit (trade credit) including the usance period of Letters of Credit opened for import of gold in any form (excluding bullion), but, including jewellery made of gold/precious metals or/and studded with diamonds/semi- precious/precious stones, should not exceed 90 days from the date of shipment. C.12. Import of Other Precious Metals C.12.1. Import of Platinum /Palladium/Rhodium/ Silver/Rough, Cut & Polished Diamonds / Precious and Semi-precious Stones.

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the Reserve Bank. Such extension by AD banks may be subject to the conditions such as: (i) AD banks being satisfied of the genuineness of the reason and bonafides of the transaction and also that no interest payment is involved for the additional period; (ii) reasons for such extension are due to financial difficulties and/ or quality disputes; (iii) importer is not under investigation and is not a frequent offender. AD banks may submit a half yearly report of such extensions allowed customer-wise, to the respective Regional Office of the Reserve Bank. (b) AD Category – I banks should ensure that due diligence is undertaken and Know Your Customer (KYC) norms and Anti-Money Laundering (AML) guidelines, issued by the Reserve Bank are adhered to while undertaking import of the precious metals and rough, cut and polished diamonds. Further, any large or abnormal increase in the volume of business should be closely examined to ensure that the transactions are bonafide and are not intended fo

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ctions relating to imports, Foreign Trade Policy in force and any other guidelines/directives issued by Reserve Bank in this regard. C.14. Merchanting Trade C.14.1. For a trade to be classified as Merchanting Trade following conditions should be satisfied: a. Goods acquired should not enter the Domestic Tariff Area, and b. The state of the goods should not undergo any transformation. C.14.2. AD Category – I bank may handle bonafide Merchanting Trade Transactions and ensure that: (a) Goods involved in the transactions are permitted for export / import under the prevailing Foreign Trade Policy (FTP) of India as on the date of shipment and all the rules, regulations and directions applicable to export (except Export Declaration Form) and import (except Bill of Entry) are complied with for the export leg and import leg, respectively, (b) Both the legs of a Merchanting Trade Transaction are routed through the same AD bank. The bank should verify the documents like invoice, packing list, tra

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leg is received by the Merchanting Trader before payment of the import leg, AD bank should ensure that the same is earmarked for making payment for the respective import leg. However, AD bank may allow short-term deployment of such funds for the intervening period in an interest bearing account; (g) Merchanting Traders may be allowed to make advance payment for the import leg on demand made by the overseas seller. In case where inward remittance from the overseas buyer is not received before the outward remittance to the overseas supplier, AD bank may handle such transactions by providing facility based on commercial judgement. It may, however, be ensured that any such advance payment for the import leg beyond USD 200,000/- per transaction, should be made against Bank Guarantee / LC from an international bank of repute, except in cases and to the extent where payment for export leg has been received in advance; (h) Letter of Credit to the supplier is permitted against confirmed export

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obligations under the order. The overall Merchanting Trade should result in reasonable profits to the Merchanting Trader. C.14.3. Merchanting trade to Nepal and Bhutan As Nepal and Bhutan are landlocked countries, there is a facility of transit trade whereby goods are imported from third countries by Nepal and Bhutan through India under the cover of Customs Transit Declarations in terms of the Government of India Treaty of Transit with these two countries. In consultation with Government of India, it is clarified herein that goods consigned to the importers of Nepal and Bhutan from third countries under merchanting trade from India would qualify as traffic-in-transit, if the goods are otherwise compliant with the provisions of the India-Nepal Treaty of Transit and Indo-Bhutan Treaty of Transit respectively. C.15. Processing of import related payments through Online Payment Gateway Service Providers (OPGSPs) AD Category-l banks have been permitted to offer facility of payment for impor

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overseas exporters in permitted foreign currency; (ii) payment to Indian importers for returns and refunds; (iii) payment of commission at rates/frequencies as defined under the contract to the current account of the OPGSP; and (iv) bank charges 3C.16. Settlement of Import transactions in currencies not having a direct exchange rate To further liberalize the procedure and facilitate settlement of import transactions where the invoicing is in a freely convertible currency and the settlement takes place in the currency of the beneficiary, which though convertible, does not have a direct exchange rate, it has been decided that AD Category-I banks may permit settlement of such import transactions (excluding those put through the ACU mechanism), subject to conditions as under: (a) Importer shall be a customer of the AD Bank, (b) Signed contract / invoice is in a freely convertible currency, (c) The beneficiary is willing to receive the payment in the currency of beneficiary instead of the o

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dia – Evidence of Import February 20, 2004 8 2 Import of Gold by (i) Export Oriented Units (EOUs), (ii) Units in SEZ/EPZ, and (iii) Nominated Agencies July 9, 2004 9 34 Import of Gold on Loan Basis – Tenor of Loan and Opening of Stand-By Letter of Credit February 18, 2005 10 1 Import of Goods of Value USD 100,000 and Less -Clarification on Follow up for Evidence of Import July 12, 2005 11 33 Liberalisation of Export and Import procedures February 28, 2007 12 34 Import of Goods of Value USD 100,000 and Less -Clarification on Follow up for Evidence of Import March 2, 2007 13 63 Import of Equipments by BPO Companies in India for International Call Centre May 25, 2007 14 77 Advance Remittance for Import of aircrafts / helicopters / other aviation related purchases June 29, 2007 15 18 Direct Receipt of Import Bills / Documents – Liberalisation November 7, 2007 16 37 Direct Receipt of Import Bills / Documents for Import of Rough Precious & Semi-Precious Stones April 16, 2008 17 03 Advanc

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s – Modification April 03, 2012 29 83 Import of precious and semi precious stones- Clarification February 20, 2013 30 103 Import of Gold by Nominated Banks/Agencies May 13, 2013 31 107 Import of Gold by Nominated Banks/Agencies June 4, 2013 32 122 Import of Gold by Nominated Banks/Agencies June 27, 2013 33 15 Import of Gold by Nominated Banks /Agencies/Entities July 22, 2013 34 39 Export import of Currency September 6, 2013 35 70 Third party payments for export / import transactions November 8 , 2013 36 71 Advance Remittance for Import of Rough Diamonds November 8, 2013 37 73 Import of Gold by Nominated Banks /Agencies/Entities November 11, 2013 38 75 Trade Credit for imports into India- Online submission of data on issuance of Guarantee/Letter of Undertaking (LoU)/Letter of Comfort (LoC) by ADs November 19, 2013 39 82 Import of Gold by Nominated Banks/Agencies/Entities December 31, 2013 40 95 Merchanting Trade Transactions January 17, 2014 41 100 Third party payments for export / impo

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Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 31-12-2015 – The golden rule for collection of tax is given by world s oldest economist Sage Kautilya alias Chanakya Muni more than 2000 years ago. He said that 'the King should collect tax from different persons as the humble bee collects honey from different flowers without making any harm to them'. Thus, all efforts should be made to keep the GST rate as low as possible. In the proposed GST regime, the revenue of the Government would not be the same in comparison with the present tax structure due to tax credit mechanism or otherwise. Therefore, an adjustment in tax rate is required to avoid reduction in revenue of the Government. Hence, the rate of tax will have to be suitably adjusted to ensure that tax revenue does not reduce. This rate is termed as Revenue Neutral rate (RNR). It is the rate at which tax revenue remains the same despite giving credit of duty paid on inputs and other factors. It is the tax

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the good indicator of future requirement in calculating the adequate compensation to both state as well as central government. For the determination of RNR, the National Institute of Public Finance and Policy had undertaken a study on Revenue Implications of GST and Estimation of Revenue Neutral Rate. NIPFP recommends that GST rate will be same as the combined central and state taxes on Goods at present but it should be lower than the combined central and state taxes on services. The sub-committee had proposed a total RNR of almost 27 percent for the dual – structure GST. While the state GST component is proposed to be 13.91% , the central GST component is proposed at 12.77 %. This rate computation work in progress and its need to be updated as per the latest figures of revenue collection. As per Dr . P. Shome the RNR rates would be fixed at little higher level to ensure that there would be no revenue loss from the proposed changes and a normal growth is maintained. Factors for Determ

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r example stamp duty, property tax, toll tax, etc. might be kept outside the GST structure. The success of GST will largely depend on the determination of ideal rate at Central level as well as State level which should be acceptable to the public and revenue neutral to Government. The GST rates would be fixed after ensuring that there would be no revenue loss from the proposed changes and a normal growth is maintained. The deadlock in the passage of the GST Bill is not entirely due to opposition in the Parliament. It is largely due to the apprehensions of the States which are , to a great extent , real. It is therefore, hard to tell between the concerns of the opposition and the States that really led to the stalling of the proceedings in the Parliament. The 13th Finance Commission wanted a perfect GST with uniform tax rates across the States and the Centre and after due compensation provided to the States. The idea of a perfect GST, however, does not appear a reality anymore. Therefor

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n tax base, the extent of tax occupied by the multiple taxes that the States and the Centre levy in their own taxing jurisdiction has to be estimated and factored into the total tax income to arrive at a realistic GST rate . Like there is need for a dual GST , there is also perhaps a concomitant need for a dual Central and State RNR – one to be reckoned on tax to Gross Domestic Product and the other on tax to Gross Domestic Expenditure as a back room exercise to be assured of revenue neutrality in real time economic mode. That will be real Revenue Neutral Rate. Recommendation of GST Rates Committee The Committee headed by the Chief Economic Adviser on GST rates has submitted its reports to the Ministry of Finance on 3 December 2015. It has recommended the Revenue Neutral Rate (RNR) in the range of 15 percent to 15.5 percent (combined rates for centre and states) with a preference for the lower end of the range. According to the report, the term revenue neutral rate (RNR) will refer to

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d finally also because the prerogative of deciding the precise numbers will be that of the future GST Council, this Committee has chosen to recommend a range for the RNR rather than a specific rate. For the same reason, the Committee has decided to recommend not one but a few conditional rate structures that depend on policy choices made on exemptions, and the taxation of certain commodities such as precious metals. On the RNR, the Committee s view is that the range should between 15 percent and 15.5 percent (Centre and states combined) but with a preference for the lower end of that range based on the analysis in this report. On structure, in line with growing international practice and with a view to facilitating compliance and administration, India should strive toward a one-rate structure as the medium-term goal. Meanwhile, the Committee recommends a two-rate structure. In order to ensure that the standard rate is kept close to the RNR, the maximum possible tax base should be taxed

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Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 28-12-2015 Last Replied Date:- 4-1-2016 – In a federal country like India where the power to tax domestic trade is divided between the Central Government and the State Government, the designing of a destination based GST becomes extremely complicated. A conventional national GST cannot be implemented without the States losing their fiscal autonomy. Dual GST signifies that GST would be levied by both, the Central Government and the State, on supply of goods or services. Under the Constitution, presently the taxing powers are presently split between the State and the Centre. In case of certain transactions, the power to tax is vested with the Centre and while in certain others

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he Centre and the States, but independently. It will have two components: one levied by the Centre (hereinafter referred to as CGST), and the other levied by the States and Union Territories (UTs) [hereinafter referred to as SGST] Both the CGST and SGST will operate over a common base. That is, the base will be identical. Benefits of Dual GST The dual GST is expected to be a simple and transparent tax with one or two CGST and SGST rates. The dual GST is expected to result in:- reduction in the number of taxes at the Central and State level decrease in effective tax rate for many goods removal of the current cascading effect of taxes reduction of transaction costs of the taxpayers through simplified tax compliance increased tax collections d

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points in the supply chain. It also eliminates tax cascading, which occurs because of truncated or partial application of the Centre and State taxes, said the survey. Despite improvements in the country s tax design and administration over the past few years, the systems at both Central and State levels are still complex, said the survey. The complexities, it says, are policy related and also due to the present system of multiple rates and exemptions at State and Centre level. The survey noted that deficiencies in CENVAT (Central value added tax) and service tax are grave and need to be looked at. For instance, CENVAT s already narrowed base is being further eroded by a variety of area-specific exemptions. The introduction of GST would thus

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