(l) “export”, with its grammatical variations and cognate expressions, means—
(i) the taking out of India to a place outside India any goods, (ii) provision of services from India to any person outside India.
While, Section 3(zb) of FEMA defines the term ―service‖ as follows: -
(zb) ―service‖ means service of any description which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, medical assistance, legal assistance, chit fund, real estate, transport, processing, supply of electrical or other energy, boarding or lodging or both, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service;
Obligations of Exporter
Section 7 provides that every exporter of goods shall furnish to the Reserve Bank declaration in the specified form along with such supporting evidence containing true and correct material particulars in respect of the goods or software exported. Such particulars include IEC Code, specific identification number of the document, details of the full export value of goods or software; and where the full value is not known then the value expected to be realized.
Similarly, every exporter of services is also required to furnish a declaration, in the specified form along with such supporting evidence containing true and correct material particulars in respect of the value of services exported. So far no specific form has been prescribed. Hence, service exporters can export such services without furnishing any declaration, but they are nevertheless liable to realize and repatriate the amount due within the time and in the manner prescribed under the law.
Realization, Receipt and Surrender of Foreign Exchange
Section 8 of FEMA deals with the realization and repatriation of foreign exchange. It casts a duty on every person resident in India to whom any foreign exchange is due or has accrued to take all reasonable steps to realize and repatriate to India within the time and in the manner specified by RBI I,e within 6 months from the date of export. Further, the person shall not do anything that has the effect of delaying the receipt of the foreign exchange or the foreign exchange ceases to be receivable in full or in part by him. Where goods are to be exported on terms of credit exceeding those stated above, permission of the RBI will be required to enter into such sale contracts.
In case it is not possible to realize and repatriate the export proceeds within the time frame provided for an application should be made to the Authorised Dealer Bank. Extension up to a period of six months, at a time, irrespective of the invoice value of the export can be granted by the AD subject to fulfilment of the following conditions: —
Manner of repatriation of foreign exchange
On receipt of the foreign exchange due, the exporter may:—
1. Sell it to an authorised dealer.
2. To the extent permitted, retain it in his foreign currency account.
3. Use it to settle a foreign exchange debt or liability.
Period for surrender of foreign exchange
Foreign exchange received towards export of goods and service should be surrendered within 180 days from the date of its receipt. For example, if the exporter has received a cheque or foreign currency from his foreign customer, the same should be surrendered to an authorized dealer within
180 days. But this regulation is not applicable to foreign exchange in the form of currency of Nepal
or Bhutan.
Retaining foreign exchange
An exporter of goods or services may retain up to 100% of foreign exchange earned by him with an authorised dealer in foreign currency in an account known as Exchange Earners Foreign Currency (EEFC) Account.
Manner of Receipt of Foreign Exchange
Payments towards export of goods and services from India may be received in the following manner:
1. In the form of bank draft, cheque, pay order.
2. Foreign currency notes, travellers cheques from the buyer during his visit to India.
3. By debit to the buyers FCNR/NRE account.
4. Through International credit card through servicing bank in India.
5. From rupee account held in the name of an Exchange House with an authorized dealer if the amount does not exceed Rs. 2,00,000 per export transaction.
6. In accordance with the directions issued by the RBI, where the export is covered by arrangement between the Central Government and the Government of a foreign country or by credit arrangement entered into by the Exim Bank with a financial institution in a foreign state.
7. All transactions between a person resident in India and a person resident in Nepal may be settled in Indian Rupees, except in case where the importer has been permitted by the Nepal Rashtra Bank to make payment in free foreign exchange.
8. In the form of precious metals i.e. Gold/Silver/ Platinum by the Gem & Jewellery units in SEZs and EOUs in equivalent to value of jewellery exported on the condition that the sale contract provides for the same and the approximate value of the precious metals is indicated in the relevant GR/SDF/PP Forms.
Trade discount
An authorized dealer may negotiate or send for collection export bills in respect of exports by air or sea which involve trade discount only if the same is declared on the GR/SDF forms and is accepted by Custom Authorities.
Reduction in Value of Export Invoice
An exporter can approach his authorised dealers and seek permission to reduce the value of the export invoice under following circumstances.
Reduction in the value of export invoice after it is negotiated or sent for collection is permitted for genuine reasons, provided the exporter is not on the caution list of RBI, if the reduction does not exceed 25% of the invoice value and it does not relate to the export of commodities subject to floor price stipulations. In all such cases the exporter will have to surrender proportionate export incentives availed against such exports.
In case where the exporter has been in the export business for more than 3 years and his export outstandings do not exceed 5% of the average annual export realization during the preceding 3 financial years reduction in value of invoice is permitted without any ceiling i.e. even in excess of
25% of the invoice value.
Write off of Bad Debts
An exporter is permitted to write off the amounts due which in spite of his best efforts are not realizable. He must approach the authorised dealer who handled the export documents for permission to write off the amount not realizable. Write off is permitted where: —
a. The amount is outstanding for 1 year or more.
b. The total amount of write off allowed in a financial year does not exceed 10% of the total export proceeds realized during the previous financial year.
c. Satisfactory documentary evidence is furnished in support of the efforts made by the exporter for the recovery of the amount due. The case falls under one of the categories specified by RBI and the exporter produces a certificate from the Foreign Mission of India concerned, about the fact of non-recovery of export proceeds from the buyer.
e. The case is not subject matter of any pending civil or criminal suit.
f. The export is not under investigation by ED, CBI or any other law enforcement agency.
g. The export has surrendered the proportionate export incentives availed/received under the
Duty Drawback Scheme against the relevant exports.
Exporters, whose cases are not covered by any of the above criterion, will have to obtain prior permission from the Regional Office concerned of the Reserve Bank before they can write off any export receivables.
Export of Goods Requiring Prior Approval of the RBI
Prior approval of RBI is required for the following exports: -
v Export of goods on lease or hire or under any arrangement or in any other manner other than sale or disposal of such goods.
v Any counter trade arrangement whereby the value of goods imported into India is adjusted against the value of goods exported from India.
v Export of goods under special arrangement or under rupee credits between the Central
Government and the Government of a Foreign State.
v Export on elongated terms or export after one year of receipt of advance payment or 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.
v Export of goods not involving any foreign exchange transaction directly or indirectly requires the waiver of GR/PP procedure from the Reserve Bank.
Advance Payment against Exports
Exporters may receive advance payments from their overseas buyers. Shipments made against the advance payments must be made within one year from the date of receipt of advance and the same are to be monitored by the Authorized Dealer bank through whom the advance payment is received.
