Now you can use Post-Office to tranfer you money electronically

There is computerisation is goining on of Post-office all over India.Our Post-office will provide like other banks to transfer fund from one place to other through electronic medium.

In future The Post will become your payment channel as well as 3PL service provider for your supply chain needs of import and export. With linking of post-offices will make parcel visibility more and tracking easy.

It is time to Import and not export goods from India

There is high rupee and low dollar.This make Import cheaper and Export costlier.

This is the time when you can import goods which you wanted to purchase from abroad but being costly you are postponing.

You have to send less foreign currency and also pay less duty on such import, if at all. Your duty free gift limit also increased in Dollar terms.Happy shopping.

Customs Duty on kitchen ,office,toilet and decoration glassware

If you import Glassware articles for personal use and value is above Rs 10,000/- then you have to pay duty @ 17.34% for goods imported as post parcel .But for commercial purpose,the duty is almost double for the post parcel.Bonafide gifts of glassware up to Rs 10,000/-are free for both postal and courier parcels.

(Source of image:http://www.k-read.net)

The glassware articles imported through couriers are charged same rate of duty,34.130%,whether you import for own consumption or for selling purpose.

Now the 4% special additional duty(SAD )on import has been exempted.But to receive this duty benefit who have to produce sales invoice showing sales tax payment and file refund claim to the customs department.

you can plan import of your kitchen,office,interior decoration or drinking glass(including wine glass) from any where in the world.The import of glassware is absolutely free.However,ceramic-glassware are treated differently in the customs classification.

Now at least 4% reduction in duty for goods imported for business and trading purpose

There is reduction in duty at least 4% if goods are imported for selling purpose in India.First you have to pay 4 % special additional duty at the of import and then you have to file refund claim to the customs department. The refund is eligible only when you have claim filed within time limit, Sale invoice proof of payment of sale tax on the imported goods and other conditions of section 27 of the Customs Act 1962( Ref-Notification No. 102/2007-Customs ).
This reduction is on goods imported for trading purpose.The goods for personal use are not exempted from such special duty.
Any claim of refund of excess duty paid for post parcels are to be filed at Foreign Post office only. The reund claim of excess duty for courier goods at Air Cargo Complex.

Explore the Cost effective supply chain of the Indian Post to export goods

The postal channel not only costing less duty and transportation cost but also provide value added service for your export need.Specifically,Logistic post and Speed post account are worth exploring. A comparison of cost associated with exporting parcel may be made among commercial parcel companies like FedEx,UPS,DHL and others viz Indian Post.

Indian Post website may be visited for more information. A relevant portion related to speed post is copied here for ready reference.

``For corporate customers and regular users, Speed Post provides many value added services including pick-up from the premises, convenient monthly billings, account management facilities, assistance in import / export procedures of shipments, corporate tracking facilities, volume discounts etc. When you open a Speed Post account, you open the door to convenience and customized solutions, as per your requirements. As an account holder of Speed Post, you will have the assistance of a Marketing Executive in managing your accounts in all respects.
For having the Speed Post account, just fill this form on-line and submit it. We shall get in touch with you soon.``

The entrepreneur may see this link http://www.indiapost.gov.in/LogisticsPost.html to explore possibility of using Postal service.It will be useful information if any body share his experience of using Logistics Post.

first time export valuation rules introduced in India and will be operative from 10th Oct 2007

Now we have export valuation rules under Customs Act 1962.You have to be careful now to declare your export price of the goods.If you over-invoiced the export cargo then also your violating law and you do the same if you declare low price .

Earlier there was rule that the domestic market value of the goods can be much lower than the selling price to the international market.But now there is sequence to follow for determining export value of the goods.Further, you have should have all documents to justify your price.

The sequences to follow to determine export value .First it is transactional value(rule 3),second by comparing price(rule4),third computed method(rule5) fourth Residual method by adopting principal of reasonableness.If the customs officer has doubt about export value,then he may reject the export price it self.[source:NOTIFICATION No. 95/2007-Customs (N.T.) ].
There is fine,penalty and adjudication process for export violation.At time department may launch prosecution against exporter as the case may be.

Export price in foreign currency is to be converted with RBI notified exchange rate

Every month The RBI issue exchange rate for export and import for a month. We have different rate for Export and import.Even though both are part of international business.But in day to day business we have fluctuating exchange rate.It changes almost every day.Therefore, it may be poosible that price paid to your buyer or importer may be different in rupee terms .In dollar or other foreign currency,it may be same.The invoice price and remittance paid to foreign person is same.The loss or gain may be in rupees terms to you.
Most of company hedge the foreign currency payment but they have to pay hedging charge to the bank.The recent rise in rupee became loss of profit margin in rupee payment for export cargo.However,the import into India is becoming cheaper on account of rupee rising.
Other option is receive price in more stable currency with respect to Rupees.

What are goods which can be imported through Postal but cannot be imported through Courier

It is interesting that you cannot import Perishable ,precious and semi precious stones,gold and silver in any form through Courier services BUT you can import through Postal Channel.

The gold,jewellary,silver are subjected to price verification from Expert jewellary assessing officer. The preshible also subjected to test for fitness for human use from various testing and inspecting agency.

Also gold is considered as foreign exchange,therefore, it has to satisfy all regulationS issued by the RBI.

whether MRP price delared on the export goods to be taken as Export value

Normally goods we purchase in domestic market are sold on MRP basis.A doubt may arise whether we have to delare export price same as MRP price.It is not so.The Export price is the price at which your foreign buyer has agreed to buy from you. Where as MRP is for buying goods in Indian market.Both are different.

As per recent ruling of Honourable Supreme Court if there is difference between Export price and domestic price of goods,then, it does not mean that the value of exported goods is mis-declared.[CC v Vishal Exports Overseas Ltd,2007(209)E.L.T.331 (SC)]

Explore possibility of using Post and Courier for the same shipment to reduce delivery time

The import and export through Post provides cost saving on transportation.Less transportation cost results in less C.I.F value to calculate duty.The end result is less duty on goods.It takes longer time to import or export through Postal channel.Therefore, if some body wants to save duty on goods but not bothered about time then he may use Post as mode of importation.

But if any body is intrested in faster delivery or receiving of goods then he may use Courier as a mode.Of course you have to pay more duty as you have paid more transportation cost on goods. Therefore there is trade off between Cost and service before choosing mode of importation.
It is possible that we can try both Postal and Courier for sending same goods.Like you can import or export through Post upto Indian ports,then some body handle your clearance at the Customs, and , forward through local courier.You can reduce time taken in the Customs clearance and travelling time taken by the parcel in India.
Some courier comany can import on your behalf,handle customs clearance and send parcel to your address. We can think many combination of doing such things.I feel happy some body share his views on this subject.

Now LCD monitor , Digital still image camera,Camcorder will attract less duty

The Goverment has reclassified LCD Monitor and camcorder in Customs heading which attract zero Customs duty presently .But excise duty is still 16%.The reduction in customs duty will also result in lesser excise duty.As the excise duty is collected on value which is equal to Assessable value and Customs duty of the goods.Earlier there was dispute whether LCD monitor and LCD TV are same or different.Similarly,camcorder and digital still image camera are same or not.

Rapid convergence of technology cause such disputes.The world Customs Organisation revise every four year the Customs tariff classification.The Customs classification code is same through out world same.

Before i conclude my writing on foreign remittance some more things to be remember

First you have to produce evidence of import to your bank that particular transaction is related to import purchase,second, you need not to use any form before your bank for amount not exceeding USD500 is used towards import payment. I think most of transaction through post are covered in the above range.
Evidence of import is must in case foreign remittance is more than USD 100,000 or its equivalent.
In case of EXPORT, no GR or PP declaration is required for amount not exceeding USD 25,000 or its equivalent. Export of goods not involving any involving any foreign remittance directly or indirectly, requires waiver of GR/PP procedure from Reserve Bank of India.The Export of goods by way of Gift is permissible up to five lakhs per year.
Hence you should be in touch with your bank and visit RBI websites and if you feel you can contact me for discussion.
Happy buying and selling on Internet

Payment through your International card for purchasing goods from foreign seller is better option

As Per RBI , there is no documents insisted by the Banks if the foreign remittance is less than US $250 or equivalent for bonafide case.Most of online purchase falls under this range only.
Further, there is no monetary limit for using International credit card(ICC).


Regarding payment in Indian rupees for import made by a person is accepted through ICC by any authorised bank. There is restriction to use ICC for prohibited transactions. A ready reference list for additinal use is produced below(source is RBI WEBSITE):


(a) Import of software through Internet.
(b) Fees for training or education of scientific/technical nature through Internet.
(c) Registration of Internet domain name, hosting charges for websites/home pages overseas and access fees for Internet related services through website .
(d) Advance payment not exceeding U.S.$ 15,000 for import of software/database through internet may also be allowed .The cardholder should furnish the details of software/database obtained through the Internet, charges to be paid to the overseas organisation for downloading the software/data and a declaration having received the software/data for which the payment was made through ICC .

There are many digital goods like Music,which can be bought through internet, but,no specific guidelines by the RBI.It seems that general rules related to foreign remittance will apply.

Sending payment to your Foreign Seller through PayPal may be legally valid

Yesterday i went to Bank and ask them,how the remittance happened through PayPal.The Manager was not aware except the fact that the cheque related to PayPal bear Citibank name.Promised to find more detail about how the payment are received in India.

If you see RBI website, The Citibank N.A is authorised dealer in India for foreign remittance.If this is the case,then the PayPal must be having account with the Citibank for settling cheques issued in Indian rupees. The banking operation related for payment made through PayPal should be carried out by the Citibank . Further you are paying through Cheque and Cards issued by your Bank,which means you are using clean money for buying and selling goods over internet.More over we are heading towards full convertability of rupees for all accounts.In such situation ,it appears that paying for your purchase through PayPal should not be illegal. We need some more inputs from valuable readers before making any judgement.

Law relating to valuation of imported parcel goods and payment through PayPal as evidence

Normally value declared by the foreign sender on the parcel is taken value for assement of duty. If this declared value of goods appears to be low than the prevailing price in the International market, then the customs department may reject this value . Various rules are there to determine the value of the imported goods which are based on WTO guidelines. As you are aware that any transaction will have various factors such as brand,quantity,discount,related or unrealted party, free gift, country of origin,place of import,etc, which may affect the price of the imported goods.

The Parliamentry Act and Government rules and interepretation of law by Honourable Court ,Tribunal,Appellate authority and practice of the day become the basis of the valuation.

To be more simple, what is actual price you paid to your foreign supplier through legally recognised channel of foreign remittance. If you produce the evidence to the Customs department that you have paid this much only to your supplier then the customs department will accept the price of the imported goods.But if you produce evidence of payment sent through PayPal,where you have paid only in Indian rupees to the PayPal,then, the departmnet may not accept this has a valid remittance.Be Careful!!

As reday reference, you may glance through relevant portion of the Indian Customs of Law ,which is reproduced below,to get feeling of Valuation subject.

The imported value of parcel goods is determined as per Section 14 of the Customs Act 1962 and CUSTOMS VALUATION (DETERMINATION OF PRICE OF IMPORTED GOODS) RULES, 1988. Various rulesThe section 4 of this rule defines :Transaction value. —
``(1)The transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9 of these rules``.

The rule 9 is produced
``9)Cost and services. —
(1)
In determining the transaction value, there shall be added to the price actually paid or payable for the imported goods, —
(a)
the following cost and services, to the extent they are incurred by the buyer but are not included in the price actually paid or payable for the imported goods, namely:-
(i)
commissions and brokerage, except buying commissions;
(ii)
the cost of containers which are treated as being one for customs purposes with the goods in question;
(iii)
the cost of packing whether for labour or materials;
(b)
the value, apportioned as appropriate, of the following goods and services where supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for export of imported goods, to the extent that such value has not been included in the price actually paid or payable, namely:-
(i)
materials, components, parts and similar items incorporated in the imported goods;
(ii)
tools, dies, moulds and similar items used in the production of the imported goods;
(iii)
materials consumed in the production of the imported goods;
(iv)
engineering, development, art work, design work, and plans and sketches undertaken elsewhere than in India and necessary for the production of the imported goods;
(c)
royalties and licence fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of the sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable;
(d)
the value of any part of the proceeds of any subsequent resale, disposal or use of the imported goods that accrues, directly or indirectly, to the seller;
(e)
all other payments actually made or to be made as a condition of sale of the imported goods, by the buyer to the seller, or by the buyer to a third party to satisfy an obligation of the seller to the extent that such payments are not included in the price actually paid or payable.
(2)
For the purposes of sub-section (1) and sub-section (1A) of Section 14 of the Customs Act, 1962 (52 of 1962) and these rules, the value of the imported goods shall be the value of such goods, for delivery at the time and place of importation and shall include -
(a)
the cost of transport of the imported goods to the place of importation;
(b)
loading, unloading and handling charges associated with the delivery of the imported goods at the place of importation; and
(c)
the cost of insurance :
Provided that —
(i)
where the cost of transport referred to in clause (a) is not ascertainable, such cost shall be twenty per cent of the free on board value of the goods;
(ii)
the charges referred to in clause (b) shall be one per cent of the free on board value of the goods plus the cost of transport referred to in clause (a) plus the cost of insurance referred to in clause (c);
(iii)
where the cost referred to in clause (c) is not ascertainable, such cost shall be 1.125% of free on board value of the goods;
Provided further that in the case of goods imported by air, where the cost referred to in clause (a) is ascertainable, such cost shall not exceed twenty per cent of free on board value of the goods :
Provided also that where the free on board value of the goods is not ascertainable, the costs referred to in clause (a) shall be twenty per cent of the free on board value of the goods plus cost of insurance for clause (i) above and the cost referred to in clause (c) shall be 1.125% of the free on board value of the goods plus cost of transport for clause (iii) above.
(3)
Additions to the price actually paid or payable shall be made under this rule on the basis of objective and quantifiable data.
(4)
No addition shall be made to the price actually paid or payable in determining the value of the imported goods except as provided for in this rule`.`

It will be useful for every body if we start making our data base of value declared to the Customs and accepted for valuation of the parcel goods.This will act as a refernce for future import by other person too.

How to value your export goods for Customs clearance

EXPORT VALUATION:

There is no law on export valuation in India and other foreign countries. In Global economy, the export is valuable source of foreign exchange earning source for all nations, Whether it is poor, developing and developed nation. [ 29th and 30th November 1996, Commissioners Conference at Mumbai].The Central Board of Excise and Customs viewed that while the declared value is being accepted by DGFT for issue of license under VABAL, providing for different standard of valuation for Customs purpose might not be in line with the steps taken to usher in the liberalization.The FOB price accepted by Ministry of Textile while endorsing quota and for collecting Cess and same was declared in Invoice& shipping Bills. This is in conformity to above view of Board.It would be illegal to accept higher FOB for Cess and re-determining FOB value of the same good for foreign exchange.The opinion of the Law Ministry “It may be stated that if the exporter is able to bring in foreign exchange equivalent to the value declared, it may be difficult for the concerned authorities to prove that it was a case of over-valuation. [Commissioner Conference decision]Therefore, presumption that the exporter would not bring foreign exchange equivalent to declared value export cargo, at the stage of examination / assessment at ICD, Udaipur will be contrary to the opinion of Ministry of Law.Ministry of Finance Instructed that the Custom Officers are authorized to verify the PMV of an export product but are not authorized to reduce FOB value.It is stated that the FOB value may be higher, as per the contract between the exporter and Foreign Buyer, ( depending on various factors) but the “Present Market Value” of the goods is an index of their local )wholesale/retail) price inclusive of excise duty, Sales Tax and other local taxes plus cost of transportation. [Ministry of Finance FM 605/51/97-DBK (Circular No:89/97 – Cus dated 08.12.1997]The PMV of the goods can be many multiple of the FOB (Annexure 68).The above Ministry’s Instruction is in line with Rules of valuation contemplated in World Trade Organization (WTO/World Customs Organization (WCO). There are two type of value, one is for foreign exchange or Government Statistics and other is for assessment of duty for Customs Purpose. The First value is corresponds to FOB and letter to the PMV.It is accepted practice in course of assessment of value for important goods to reject declared value in suspected under invoicing. The valuation is done as per WTO valuation Rules with Customs valuation Rules 1988. The goods are adjudicated on account of under invoicing of value and higher duty amount is realized on the increased value.But the Indian Importer only remit the foreign remittance as per the Invoice raised by the foreign supplier and Not the enhanced value determined by the customs.Normally in Import case, there is under invoicing and over invoicing in case of export case.As discussed for Import case, if there is higher PMV value declared by the exporter, then the customs department can re-asses the PMV. The goods can be adjudicated under section 113 and 114 of Custom Act 1962 for claiming higher drawback based on higher export price.But the exporter had to receive foreign exchange from the buyer, as declared in the G.R.Form as per Foreign Exchange Regulation Act 1974.The Foreign buyer would not remit Less foreign exchange corresponding to reduce FOB determined by the Customs authorities for the purpose of determining drawback eligibility.As stated earlier and above, the customs authorities only can determine PMV and not FOB.Definitions:FOB: The International Chambers of Commerce has defined FOB at relevant time of export as [ INCOTERMS 1990] “Free on Board means that the seller fulfils his obligation to deliver when the good have passed over the ship’s rail at the named post of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point.The FOB term requires the seller to clear the goods for export.The buyer must pay the price as provided in Contract of Sale.The FOB is a International Terms of Sale Contract, under such term of sale, the sellers bears all the expenses prior to placing on Board. Thereafter the property usually vests in the buyer.Export Pricing:Price is an index of the value of a product. Rather, it represents besides value, its quality, durability and many other attributes like ego satisfaction or status consciousness.The price depends on cost, competition and demand.International markets are considered to be more competitive than domestic markets, because competition in export markets, originate from three quarters Viz.Competing domestic producers in the export markets;Producers in other competing supplying countries; andCompeting domestic producers in one’s own country.Similarly, demand in international markets is subject to a number of factors, which are different from those operating in domestic markets.A Product has to adapted to meet the special requirement of foreign buyers, which arises from different tastes, habits and customs.The produced may have to be tailored according to the requirements of the overseas consumers and their capacity to pay for it.The other factors, which affect pricing are:Lower price for short deliveries and higher price for long deliveries.Price on credits are higher than the cash.To capture market, offering goods at low price.Fluctuation in foreign currency on account of devaluation or appreciation.Interest rate ,Inflation ,Inventory cost ,allowance for wastage & shrinkage,Price of any product depends on cost of product, cost of distribution, cost of marketing support, supply and demand factors, price level and margins, competition etc.,Normally for FOB price structure includesFactory cost of goods,Export labeling, packing and marking,Loading for transport at factory,Transport to docks,Port handling charges and fees,Cost of documents,Consular Invoice (Certificate of origin)Export duty / cess,Demurrage charges,Godown charges ,Measurement / weighing charges,Re-strapping charges of opened cases,Octrio duty ,Sales Tax for merchant exporter.Charges if any, on account of:Overseas distributors / agents commissions,Cost of providing after sales service,Cost of spare parts ,Financing charge if exporting on credit terms,Direct administrative and selling expenses,Congestion surcharge,Bank Charges, etc ,Profit margin .The above price element in FOB are only illustrative and not are exhaustive. The price of goods varied from buyer to seller and form market to market.If the export price are under priced of a good then importing country may counter by Imposing anti-dumping duty ,Counter vailing or safeguard duty,High import duty ,License condition ,Cost of Product may be arrived on fixed cost, variable cost or Export specific / Indirect cost. Therefore price may vary depending on accounting principle adopted to arrive cost of product.Few examples below would make clear that price of product vary according to market:BPP’s ITC-HSC Classification on Import items with Indian Tariff (1999-2000), price in Rs.695/- (domestic price) and same book price for overseas as US$125 about Rs.6,500/- (Annexure 45). The International price is 10 times more than the domestic price of the same good.Forbes magazine price, India’s Rs.150/- United States US$4.95, Indonesia Rp.23,000/-Benefit Magazine Rs.10/US$4/UK£2.5 [International Market price is about Rs.200/- and domestic price is Rs.10/-] The International price is 20 times more thant he domestic price of the same good.Honourable court decision:At the relevant time of export, various Courts, including the Honorable Supreme Court took a view that over-invoicing is not offence.Such asDimple overseas [1995(76) E.L.T.48] 1996(86) E.L.TA67-(S.C).Shilpi Exports 1996(83) E.L.T.302Bird & Co 1988(37) E.L.T. 70 (Cal)Collectio of Custom V Lexus Exports Pvt. Ltd. 1994 (69) E.L.T 228 (Calcutta)Upheld decision in Shelpi Exports [A-219 of 2000 (115) E.L.T.Upheld Dimple Overseas Case Judgment, on 31.07.96.M.V.T. International Vs Commissioner of Customs, New Delhi 2000 (117) E.L.T. 258(7).Commissioner Vs. Akshay Exports 2004 (163) E.L.T. A67 (S.C.).It is difficult to prove that whether it is deliberate over-invoicing or ability of the exporters to realize higher price in the overseas market.

Import invoicing in Indian Rupees may help Online shopper

There is a discussion between RBI and Commerce Ministry to allowe export invoicing in Indian Rupees. This will help in hedging rupees, which is appreciating against major currencies and eroding margin of the exporter. Further government has lowered pre and post-shipment credit to 7.5-8% on the export goods.
Presently the bank charge very high premium for Hedging and covering risk for export and import of goods, which make individual importer and exporter to look for alternative option for international transaction.The PayPal and similar service offered by Yahoo and others offer easy payment method throgh electronic medium.
In India ,the retail banking and e-payment is still evolving. People will continue to use other than merchant account till legally permissible channel become more cost-effective and easy to use. We have to respond quickly to frame rules and regulation to changing technology in the e-Payment system.More important is education to citizen about pros and cons of a particular mode of payment.

Service tax liability- if you use PayPal and similar services

The Extract of PayPal legal relationship for India is reproduced below for reference only.you are advised to go their website http://www.paypal.com/. It is providing payment processing service and acting as agent on behalf of you. In my opinion you are liable to pay service tax on service amount charged to you. Such service may fall under Business Auxiliary Service or Credit Card, Debit Card, Charge Card or other payment card related services.

Further if service provider ,like PayPal ,is located outside India then it is receipent of service,person residing in India, is liable for service tax in India.
It is better if you consult your CA/TAX-CONSULTANT/LAWYER/OR ask Service TAX department.

The Legal Relationship between You and PayPal.(pl see PayPal website address)
2.1 Agency Relationship. PayPal acts as a facilitator to help you accept payments from and make payments to third parties. We act as your agent based upon your direction and your requests to use our Services that require us to perform tasks on your behalf. PayPal will at all times hold your funds separate from its corporate funds, will not use your funds for its operating expenses or any other corporate purposes, and will not voluntarily make funds available to its creditors in the event of bankruptcy or for any other purpose. You acknowledge that (i) PayPal is not a bank and the Service is a payment processing service rather than a banking service, and (ii) PayPal is not acting as a trustee, fiduciary or escrow with respect to your funds, but is acting only as an agent and custodian.


Discussion on this subject is required. We may seek a clarification from service tax department.
It is better to be safe and ensure better compliance with the rules.Ignorance is not any excuse.

It is advisable to go through terms of condition before using PayPal and similar type of service

One of my valued reader asked me whether PayPal is legal into India.My answer was that any foreign remittance is controlled by the RBI. It appears to me that the PayPal is non-banking activity in India. The RBI suspect such activity .
It is in your interest that any money to be transferred intenationally through authorised channel only.

There is one website whose link is http://www.paypalwarning.com/ ,discuss problem related with the PayPal. Any person is able to share his knowledge about using PayPal service to remove doubt will be welcome!

RBI `s FAQ on Foreign exchange related for individuals

It is very clear from RBI FAQ that you should inform all our export and import related transaction to your Bank.It is bring to your notice that in any international activity such as export and import , many Laws are attracted , for example Customs Act 1962, FEMA Act,Money Laundering Act 2002,COFEOPOSA 1974, Income Tax Act, and many more.

pl consult your CA or legal expert before involving in any international transaction. I am reproducing with RBI link for reference.

Forex Facilities for Residents (Individuals)
FREQUENTLY ASKED QUESTIONS ONFOREIGN EXCHANGE FACILITIES FOR RESIDENTS (AS ON FEBRUARY 1, 2007)
Introduction
The legal framework for administration of foreign exchange transactions in India is provided by the Foreign Exchange Management Act, 1999. Under the Act, freedom has been granted for buying and selling of foreign exchange for undertaking current account transactions. The Government has issued Foreign Exchange Management (Current Account Transactions) Rules, 2000 which have been notified vide Notifications GSR. 381(E) dated May 3, 2000, S.O. 301(E) dated March 30, 2001 and GSR.608(E) dated September 13, 2004 as amended from time to time. The last amendment to the G.S.R is vide Notification No., G.S.R. No.412 (E) dated July 10,2006 notifying certain relaxations on current account transactions in public interest.
Under the Foreign Exchange Management Act, 1999 (FEMA) [in lieu of FERA], which has come into force with effect from June 1, 2000, all transactions involving foreign exchange have been classified either as Capital or Current Account transactions. All transactions undertaken by a resident that do not alter his assets or liabilities outside India are current account transactions. In terms of Section 5 of the FEMA, persons are free to buy or sell foreign exchange for any current account transaction except for those transactions on which Central Government has imposed restrictions, vide its Notification referred to above A copy of the Notification is available in the Official Gazette as well as an annexure to our Master Circular on Miscellaneous Remittances available at our website http://www.rbi.org.in/scripts/BS_ViewMasterCirculars.aspx
These details are available on the Reserve Bank’s website as well as with the Authorised Dealers and Regional Offices of the Foreign Exchange Department of Reserve Bank. This FAQ attempts to answer all such questions in simple language.
I. Guidelines on Travel Related Matters
1. Who is a resident?
A 'person resident in India' is defined in Section 2(v) of FEMA, 1999 as:
A person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include –
(A) a person who has gone out of India or who stays outside India, in either case -
for or on taking up employment outside India, or
for carrying on outside India a business or vocation outside India, or
for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;
(B) a person who has come to or stays in India, in either case, otherwise than – for or on taking up employment in India, or
for carrying on in India a business or vocation in India, or
for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;
any person or body corporate registered or incorporated in India,
an office, branch or agency in India owned or controlled by a person resident outside India,
an office, branch or agency outside India owned or controlled by a person resident in India;
That is to qualify as a resident the person concerned will have to fulfill the criterion regarding (a) the duration of stay and (b) the purpose of stay.
The term Person Resident Outside India is defined in the Act as a person who is not a person resident in India.
2. From where one can buy foreign exchange?
Foreign exchange can be purchased from any authorised dealer. Besides authorised dealers, full-fledged money changers are also permitted to release exchange for business and private visits.
3. Who is an Authorised Dealer?
An Authorised Dealer is normally a bank specifically authorised by the Reserve Bank under Section 10(1) of FEMA,1999, to deal in foreign exchange or foreign securities (List available on http://www.fedai.org.in/ ).
4. How much exchange is available for a business trip?
Authorised Dealers can release foreign exchange up to USD 25,000 for a business trip to any country other than Nepal and Bhutan. Release of foreign exchange exceeding USD 25,000 for a travel abroad (other than Nepal and Bhutan) for business purposes, irrespective of period of stay, requires prior permission from Reserve Bank. Visits in connection with attending of an international conference, seminar, specialised training, study tour, apprentice training, etc., are treated as business visits. Maintenance expense of a patient going abroad for medical treatment and/or check up or for accompanying as assistant to the patient going abroad for medical treatment / check-up also falls within this category.
Incidentally, no release of foreign exchange is admissible for any kind of travel to Nepal and Bhutan or for any transaction with persons resident in Nepal and Bhutan.
5. Can one obtain foreign exchange for medical treatment outside India?
Authorised Dealers may release foreign exchange upto USD 100,000 or its equivalent to resident Indians for medical treatment abroad on self declaration basis of essential details, without insisting on any estimate from a hospital/doctor in India/abroad. A person visiting abroad for medical treatment can obtain foreign exchange exceeding the above limit, provided the request is supported by an estimate from a hospital/doctor in India/abroad. This exchange is to meet the expenses involved in treatment. In addition to the amount referred to in Answer to Question No.4 above may also be availed.
6. How much exchange is available for studies outside India?
ADs may release an amount of USD 100,000 per academic year or the estimate received from the institution abroad, whichever is higher.
Students going abroad for studies are treated as Non-Resident Indians (NRIs) and are eligible for all the facilities available to NRIs under FEMA. In addition, they can receive remittances up to USD 100,000 from close relatives (as defined in Section 6 of the Companies Act, 1956) from India on self-declaration, towards maintenance, which could include remittances towards their studies also. Educational and other loans availed of by students as resident in India can be allowed to continue. There is no dilution in the existing remittance facilities to students in regard to their academic pursuits.
7. How much foreign exchange can one buy when traveling abroad on private visits to a country outside India?
In connection with private visits abroad, viz., for tourism purposes, etc., foreign exchange up to USD10,000, in any financial year may be obtained from an authorised dealer on a self-declaration basis. The ceiling of USD10,000 is applicable in aggregate and foreign exchange may be obtained for one or more than one visit provided the aggregate foreign exchange availed of in one financial year does not exceed the prescribed ceiling of USD10,000 {The facility was earlier called B.T.Q or F.T.S.}. This limit of USD10,000 per financial year can be availed of by a person along with foreign exchange for travel abroad for any purpose, including for employment or immigration or studies. However, no foreign exchange is available for visit to Nepal and/or Bhutan for any purpose.
8. How much foreign exchange is available to a person going abroad on employment?Person going abroad for employment can draw foreign exchange up-to USD100,000 from any authorised dealer in India on the basis of self-declaration.
9. How much foreign exchange is available to a person going abroad on emigration?
Person going abroad on emigration can draw foreign exchange upto USD100,000 on self- declaration basis from an authorised dealer in India or the amount prescribed by the country of emigration. This amount is only to meet the incidental expenses in the country of emigration. No amount of foreign exchange can be remitted outside India to become eligible or for earning points or credits for immigration. All such remittances require prior permission of the Reserve Bank.
10. Is there any category of visit which requires prior approval from the Reserve Bank or Govt. of India?
Dance troupes, artistes, etc., who wish to undertake cultural tours abroad, are required to obtain prior approval from the Ministry of Human Resources Development, Government of India, New Delhi.
11. How much foreign exchange can be purchased in foreign currency notes while buying exchange for travel abroad?
Travellers are allowed to purchase foreign currency notes/coins only up to USD 2000. Balance amount can be taken in the form of travellers cheque or banker’s draft. Exceptions to this are (a) travellers proceeding to Iraq and Libya can draw foreign exchange in the form of foreign currency notes and coins not exceeding USD 5000 or its equivalent; (b) travellers proceeding to the Islamic Republic of Iran, Russian Federation and other Republics of Commonwealth of Independent States can draw entire foreign exchange released in the form of foreign currency notes or coins.
12. Do same Rules apply to persons going for studies abroad?
For the purpose of studies abroad, exchange for maintenance expenses is released in the form of (i) currency notes up to USD 2,000, (ii) the balance foreign exchange may be taken in the form of travellers cheques or bank draft payable overseas.
13. How much in advance one can buy foreign exchange for travel abroad?
The foreign exchange acquired for any purpose has to be used within 60 days of purchase. In case it is not possible to use the foreign exchange within the period of 60 days, it should be surrendered to an authorised dealer.
14. Can one pay by cash full rupee equivalent of foreign exchange being purchased for travel abroad ?
Foreign exchange for travel abroad can be purchased from authorized banks against rupee payment in cash up to Rs.50,000/-. However, if the rupee equivalent exceeds Rs.50,000/-, the entire payment should be made by way of a crossed cheque/banker’s cheque/pay order/demand draft only.
15. Is there any time frame for a traveller for surrender of foreign exchange on his return to India?
On his return to India, the traveller is required to surrender the unspent foreign exchange, whether in the form of currency notes or travellers cheques, within 180 days from the date of return. However, a traveller can retain up to USD 2000 or its equivalent, either in the form of currency notes or travellers cheques, for future use. Further, the traveller also has the facility of retaining the entire unspent foreign exchange in his Resident Foreign Currency (Domestic) Account. In this regard please see Question 29 (c) below .
16. On return to India can one retain foreign exchange?
Yes. Resident travellers, on return to India, can retain unspent foreign exchange up to USD 2,000 or its equivalent, either in the form of currency notes or travellers cheques. The traveller can also credit the foreign currency amount to their RFC (Domestic) Account, without any limit, where the foreign exchange has been acquired by the traveller by any of the following modes : (Please see Question 29 (c) below)
a. while on a visit abroad as payment for services not arising from any business in or anything done in India; or b. as honorarium or gift or for services rendered or in settlement of any lawful obligation from any person who is not resident in India and who is on a visit to India; or c. as honorarium or gift while on a visit to any place outside India; or d. from an authorised person for travel abroad and represents the unspent amount thereof.
17. Is one required to surrender foreign coins also to an authorised dealer?There is no restriction on residents holding foreign coins.
18. How much foreign exchange can a resident individual send as gift / donation to a person resident outside India?
Limit of USD 50,000 per financial year under the Liberalised Remittance Scheme would also include remittances towards gift and donation by a resident individual. Accordingly, under the Scheme, any resident individual, if he so desires, may remit the entire limit of USD 50,000 in one financial year as gift to a person residing outside India or as donation to a charitable/educational/ religious/cultural organization outside India. Remittances exceeding the limit will require prior permission from the Reserve Bank.
19. How much foreign exchange can other residents send as gift / donation to a person resident outside India?
Other residents like corporates, partnership firms, trusts etc., are free to remit up to USD 5000 per annum per donor/remitter each as gift and donation. Remittances exceeding the limit will require prior permission from the Reserve Bank.
20. Is one permitted to use International Credit Card (ICC) for undertaking foreign exchange transactions?
Use of the International Credit Cards (ICCs) / ATMs/ Debit Cards can be made for making personal payments like subscription to foreign journals, internet subscription, etc., and for travel abroad in connection with various purposes. The entitlement of foreign exchange on International Credit Cards (ICCs) is limited by the credit limit fixed by the card issuing authority only. With ICCs one can (i) meet expenses/make purchases while abroad (ii) make payments in foreign exchange for purchase of books and other items through internet in India. If the person has a foreign currency account in India or with a bank overseas, he/she can even obtain ICCs of overseas banks and reputed agencies.
Use of these instruments for payment in foreign exchange in Nepal and Bhutan is not permitted.
21. While coming into India how much Indian currency can be brought in?
A person coming into India from abroad can bring in with him Indian currency notes within the limits given below:
a. up to Rs. 5,000 from any country other than Nepal or Bhutan, andb. any amount in denomination not exceeding Rs.100 from Nepal or Bhutan.
22. While going abroad how much foreign exchange, in cash, can a person carry?
Residents are free to carry the foreign exchange purchased from an authorised dealer or full fledged money changer in accordance with the Rules. They are, however, allowed to carry foreign exchange in the form of currency notes/coins up to USD 2,000 or its equivalent only. Balance amount can be carried in the form of travellers cheque or banker/s draft. (In this connection please see item No.11).
23. While going abroad how much Indian currency, in cash, can a person carry?
Residents are free to take outside India (other than to Nepal and Bhutan) currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs. 5,000/ - per person. They may take or send outside India (other than to Nepal and Bhutan) commemorative coins not exceeding two coins each.
Explanation : 'Commemorative Coin' includes coin issued by Government of India Mint to commemorate any specific occasion or event and expressed in Indian currency.
A person can take or send out of India to Nepal or Bhutan, currency notes of Government of India and Reserve Bank of India notes (other than notes of denominations of above Rs. 100);
24. While coming into India how much foreign exchange can be brought in?
A person coming into India from abroad can bring with him foreign exchange without any limit. However, if the aggregate value of the foreign exchange in the form of currency notes, bank notes or travellers cheques brought in exceeds USD 10,000/- or its equivalent and/or the value of foreign currency exceeds USD 5,000/- or its equivalent, it should be declared to the Customs Authorities at the Airport in the Currency Declaration Form (CDF), on arrival in India.
25. Is one required to follow complete export procedure when a gift parcel is sent outside India?
A person resident in India is free to send (export) any gift article of value not exceeding Rs. 5,00,000 provided export of that item is not prohibited under the extant Foreign Trade Policy.
26. How much jewellery one can carry while going abroad?
Taking personal jewellery out of India is governed by Baggage Rules framed under Foreign Trade Policy by the Government of India. No approval of Reserve Bank is required in this case.
27. Can a resident extend local hospitality to a non-resident?
A person resident in India is free to make any payment in Indian 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.
28. Can residents purchase air tickets in India for their travel not touching India?
Residents may book their tickets in India for their visit to any third country. That is, residents can book their tickets for travel, for instance from London to New York, through domestic/foreign airlines in India itself.
29. Can a resident open a foreign currency denominated account in India?
Persons resident in India are permitted to maintain foreign currency accounts in India under the following three Schemes:
a. Exchange Earners' Foreign Currency (EEFC) Accounts:-
All categories of resident foreign exchange earners can credit up to 100 per cent of their foreign exchange earnings, as specified in the paragraph 1 (A) of the Schedule to Notification No.FEMA.10/2000-RB dated 3rd May, 2000 and as amended from time to time, to their EEFC Account with an authorised dealer in India. Funds held in EEFC account can be utilised for all permissible current account transactions and also for approved capital account transactions as specified by the extant Rules/Regulations/ Notifications/ Directives issued by the Government/RBI from time to time.
b. Resident Foreign Currency (RFC) Accounts :-
Returning Indians, i.e., those Indians, who were non-residents earlier, and are returning now for permanent stay, are permitted to open, hold and maintain with an authorised dealer in India a Resident Foreign Currency (RFC) Account to keep their foreign currency assets. Assets held outside India at the time of return can be credited to such accounts. The foreign exchange (i) received or acquired as gift or inheritance from a person referred to sub-section (4) of section 6 of FEMA,1999 or (ii) referred to in clause (c) of section 9 of the Act or acquired as gift or inheritance therefrom may also be credited to this account or (iii) received as the proceeds of life insurance policy claims/maturity/ surrender values settled in foreign currency from an insurance company in India permitted to undertake life insurance business by the Insurance Regulatory and Development Authority.
The funds in RFC account are free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment outside India.
c. RFC (Domestic) Account:-
A person resident in India can open, hold and maintain with an authorized dealer in India, a Resident Foreign Currency (Domestic) Account, out of foreign exchange acquired in the form of currency notes, Bank notes and travellers cheques from any of the sources like, payment for services rendered abroad, as honorarium, gift, services rendered or in settlement of any lawful obligation from any person not resident in India. The account may also be credited with/opened out of foreign exchange earned like proceeds of export of goods and/or services, royalty, honorarium, etc., and/or gifts received from close relatives (as defined in the Companies Act) and repatriated to India through normal banking channels by resident individuals. The account shall be maintained in the form of Current Account and shall not bear any interest. There is no ceiling on the balances in the account.
30. Can a person resident in India hold assets outside India?
In terms of sub-section 4, of Section (6) of the Foreign Exchange Management Act, 1999, a person resident in India is free to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India. (Please also refer to the Liberalised Remittance Scheme of USD 50, 000 discussed below).
II. Liberalised Remittance Scheme of USD 50,000.
31. What is the Liberalised Remittance Scheme of USD 50,000?
This is a facility extended to all resident individuals under which, they may freely remit upto USD 50,000 per fianancial year for any permissible current or capital account transaction or a combination of both.
32. Who is eligible to avail of this Liberalised Remittance Facility?
The facility is available to resident individuals only.
33. Is there any frequency for the remittance?
There is no restriction on the frequency. However, the total amount of foreign exchange purchased from or remitted through, all sources in India during the current financial year should be within the limit of USD 50,000/-.
34. What are the purpose/s for which remittance can be made under the Scheme?
This facility is available for making remittance/s for any permissible current or capital account transaction or a combination of both. It is not available for purposes specifically prohibited (Schedule I) or regulated by the Government of India (Schedule II) of Foreign Exchange Management (Current Account Transactions) Rules, 2000.
35. Can residents avail of this facility for acquiring immovable property and other assets abroad?
Yes. Individuals are free to use this Scheme to acquire and hold immovable property, shares or any other asset outside India without prior approval of Reserve Bank.
36. Can individuals open foreign currency account abroad for making remittance under the Scheme?
Yes. Individuals are free to open, hold and maintain foreign currency accounts with a bank outside India for making remittances under the Scheme without the prior approval of Reserve Bank. The account can be used for putting through any transaction connected with or arising from remittances under the Scheme.
37. What is the impact of the Scheme on the existing facilities for private/business travel, studies, medical treatment etc./items covered in Schedule III of Foreign Exchange Management (Current Account Transactions) Rules, 2000?.
The facility under the Scheme is in addition to those already available under Foreign Exchange Management (Current Account Transactions) Rules, 2000.
38. Can an individual send remittance under the Scheme to any country?
Remittance cannot be made directly or indirectly to Bhutan, Nepal, Mauritius or Pakistan. The facility is also not available for making remittances directly or indirectly to countries identified by the Financial Action Task Force (FATF) as ‘non-co-operative Countries or Territories, from time to time.
For the current list of such countries/ territories please visit http://www.fedai.org.in/.
Further, remittance under the facility cannot be made to individuals and entities identified as posing significant risk or committing acts of terrorism as advised to banks by Reserve Bank from time to time.
39. What are the requirements to be complied with by the remitter?
The individual will have to designate a branch of an AD through which all the remittances under the Scheme will be made. The applicants should have maintained the bank account with the bank for a minimum period of one year prior to the remittance. He has to furnish an application-cum-declaration in the specified format regarding the purpose of the remittance and declare that the funds belong to him and will not be used for purposes prohibited or regulated under the Scheme.
40. If an investment of USD 50,000 rises in value within the year, can one book profits and invest abroad again?
The investor is free to book profit or loss abroad and to invest abroad again. He is under no obligation to repatriate the funds remitted abroad.
41. Can an individual, who has repatriated the amount remitted during the financial year, avail of the facility once again?
Once a remittance is made for an amount upto USD 50,000 during the financial year, he would not be eligible to make any further remittances under this route, even if the proceeds of the investments have been brought back into the country.
42. Can remittances be made only in US Dollars?
The remittances can be in any currency equivalent to USD 50,000 in a financial year.
43. Last year, resident individuals could invest in overseas companies listed on a recognised stock exchange abroad and which has the shareholding of at least 10 per cent in an Indian company listed on a recognised stock exchange in India. Does this condition still exist?
Investment by resident individual in overseas companies is subsumed under the Scheme of USD 50,000. The requirement of 10 per cent reciprocal shareholding in the listed Indian companies by such overseas companies has since been dispensed with.
III. Guidelines for Financial Intermediaries offering special schemes, protection under the Scheme.
44. Are intermediaries expected to seek specific approval for making overseas investments available to clients?
Banks including those not having operational presence in India are required to obtain prior approval from Reserve Bank for soliciting deposits for their foreign/overseas branches or for acting as agents for overseas mutual funds or any other foreign financial services company.
45. Are there any restrictions on the kind/quality of debt or equity instruments an individual can invest in?
No ratings or guidelines have been prescribed under the Liberalised Remittance Scheme of USD 50,000 on the quality of the investment an individual can make. However, the individual investor is expected to exercise due diligence while taking a decision regarding the investments which he or she proposes to make.
46. Whether minor resident individuals would be permitted to open, maintain and hold such foreign currency accounts, if the same is permissible as per local law in the country of the overseas branch?
Banks may take necessary steps in the matter based on the settled legal position regarding enforcement of the declaration in case the remittance is made on behalf of a minor.
47. Whether credit facilities in Indian Rupees or foreign currency would be permissible against security of such deposits?
No. The Scheme does not envisage extension of credit facility against the security of the deposits.
48. Can bankers open foreign currency accounts in India for residents under the Scheme?
No. Banks in India can not open foreign currency accounts in India for residents under the Scheme.
49. Can an Offshore Banking Unit (OBU) in India be treated on par with a branch of the bank outside India for the purpose of opening of foreign currency accounts by residents under the Scheme?
No. For the purpose of the Scheme, an OBU in India is not treated as an overseas branch of a bank in India.
General Information
For further details/guidance, please approach any bank authorised to deal in foreign exchange or contact Regional Offices of the Foreign Exchange Department of the Reserve Bank.

Use of credit cards to buy goods on Internet and Chapter 7 of Exchange control Manual regarding Import.

Annexure II : Use of International Credit Cards

ANNEXURE II
International Credit Cards (ICCs) (Paragraph 8A.2)
A. Instructions to card issuing banks or their subsidiaries in India
(i) Banks and their subsidiaries may issue International Credit Cards ( ICCs) to residents. They are also free to issue single card valid in India, Nepal and Bhutan as well as other countries provided they have required mechanism in place to segregate rupee transactions (i.e. transactions in India, Nepal and Bhutan) and foreign currency transactions arising out of use of such cards. In such cases, however, the card should bear superscription ' Not valid for payment in Foreign Exchange in Nepal and Bhutan'.
(ii) The card issuing banks/subsidiaries should invariably obtain an undertaking from the applicant, before issue of ICC, that the utilisation of the card would be strictly in accordance with the Exchange Control Regulations, and in the event of any failure on the part of the cardholder to comply with the regulations, he would be liable for action under the FERA, 1973.
(iii) The card issuing banks/subsidiaries can accept payments directly from the card holders in Indian rupees towards the settlement of bills/invoices drawn in foreign exchange.
(iv) Remittances towards settlement/reimbursement of ICC dues should be made through an authorised dealer.
(v) The card issuing bank/subsidiary need not insist on submission of documentary evidence like invoice/bills etc. if the remittance involved is less than U.S.$ 250 or its equivalent and the authorised dealer is satisfied about the bonafides of the remitter and the purpose of remittance.
(vi) In case the amount of claim on account of use of ICC during visits abroad exceeds the applicant's entitlement the card issuing bank/organisation should provide the reimbursement and report the matter to the Regional Office of the Exchange Control Department giving full details. However, under no circumstances reimbursement should be delayed or refused on the grounds of excess drawing .
(vii) ICC can also be issued to software engineers going abroad on software assignments provided the claims for such cards are met out of the foreign currency accounts of the engineers concerned or from EEFC balances of their employer in India.
(viii) ICCs should not be issued to residents going abroad on employment and/or emigration.
B. Conditions governing the use of ICCs
(i) Residents are free to use ICCs for payments in rupees or foreign exchange for goods and services procured in India.
(ii) ICCs can also be utilised by residents for making personal remittances which are permitted under the extant Exchange Control Regulations subject to the applicable ceilings, if any, and compliance with conditions and documentation prescribed for the purpose concerned.
(iii) ICCs issued in India are not valid for payment in foreign exchange in Nepal and Bhutan.
(iv) Residents going abroad are free to use ICCs for all bonafide personal expenses, including the purchase of goods for personal use provided , the total exchange drawn during the trip abroad does not exceed their entitlement. Import of goods so purchased abroad into India would be governed by the Baggage Rules/Exim Policy in force. The entitlement of exchange should be ascertained from the authorised dealer through whom reimbursement would be provided. The residents may , if they so desire, draw foreign exchange against ICCs in the form of foreign currency notes/travellers' cheques to the extent of their entitlement from an authorised dealer /full-fledged money changer. Sale of such foreign currency notes/travellers' cheques out of entitlement would be governed by extant regulations and would be subject to the applicable ceilings. Exchange sold in form of currency notes/travellers' cheques should be endorsed on the passport.
(v) Residents who have been issued ICCs and are going abroad for employment or on emigration are not permitted to use it for drawing exchange. They should surrender their ICCs before they proceed abroad on employment/emigration.
(vi) ICCs can also be used for the following purposes:
(a) Import of software through Internet.
(b) Fees for training or education of scientific/technical nature through Internet.
(c) Registration of Internet domain name, hosting charges for websites/home pages overseas and access fees for Internet related services through website .
(d) Advance payment not exceeding U.S.$ 15,000 for import of software/database through internet may also be allowed .The cardholder should furnish the details of software/database obtained through the Internet, charges to be paid to the overseas organisation for downloading the software/data and a declaration having received the software/data for which the payment was made through ICC.
(vii) The ICC cannot be used for effecting remittances for the purposes for which release of exchange is not permissible under the extant regulations like subscription to (a) magazines etc. which are on the proscribed/banned list and (b) football pools, sweepstakes or lotteries, etc.
(viii) Cardholders drawing exchange under BTQ against ICCs should on their return to India get their passports endorsed from the authorised dealers through whom the reimbursement will be provided.
A.D.(M.A. Series) Circular No.27


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Home>> Publications >> Exchange Control Manual Category >> Exchange Control Manual - Exchange Control Manual View


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Date : 31 May 2005
Import of Goods, Currency, etc., Merchanting Trade and other related matters

CHAPTER 7
IMPORT OF GOODS, CURRENCY ETC., MERCHANTINGTRADE AND OTHER RELATED MATTERS
PART A - IMPORT OF GOODS
7A.1
General
7A.2
Import Licences
7A.3
Obligations of Purchaser of Foreign Exchange for Import
7A.4
Manner of Rupee Payment
7A.5
Letters of Authority
7A.6
Attestation of Invoices by Authorised Dealers
7A.7
Form A1
7A.8
Imports Financed in Rupees
7A.9
Import Licences for c.i.f. value
7A.9A
Imports by Government/Public Sector Undertakings, etc.
7A.10
Advance Remittance
7A.11
Time Limit for Settlement of Import Payments
7A.12
Interest on Import Bills
7A.13
Appointment of Buying Agents Abroad
7A.14
War Risk Insurance/Bunker/Congestion Surcharge/Premium for Extended Insurance cover
7A.15
Endorsement on Import Licences
7A.16
Imports under Penalty
7A.17
Imports into Bonds
7A.18
Remittances against Replacement Imports
7A.19
Surrender of Import Licences to Exchange Control
7A.20
Evidence of Import
7A.21
Precautions for Handling Import Documents
7A.22
Postal Imports
7A.23
Imports through courier
7A.24
Supply of Books in DTA by EOUs/EPZs
7A.25
Legal Expenses connected with imports
7A.26
Import of Software through Datacom.Channels/Internet
7A.27
Import of Second-hand Capital Goods
7A.28
Import of Gold/Platinum/Silver by Nomonated Banks/Agencies
7A.29
Import of films on lease/rental basis
PART B - IMPORTS UNDER FOREIGN LOANS/CREDITS
7B.1
General
7B.2
Procedure for Obtaining Reserve Bank Approval
7B.3
Registration Number
7B.4
Opening of Bank Accounts in India/Abroad
7B.5
Issue of Bank Guarantee
7B.6
Submission of Utilisation Statements
7B.7
Repayment of Loan/Credit and Payment of Other Charges Loans by Export-oriented Units on Self-liquidation Basis
7B.8A
Foreign Currency Loans under U.S.$ 3 Mn. Scheme
7B.9
Sub-loans out of Lines of Credits/Loans obtained by Term Lending Institutions
7B.10
Loans for Purchase of Aircraft/Ships
7B.11
Import Under Foreign Loans/Credits arranged by Government of India from foreign Governments/Institutions
PART C - MERCHANTING TRADE
7C.1
General
7C.2
Advance Remittances to Overseas Suppliers
PART D - IMPORT OF GOLD, SILVER SECURITIES, CURRENCY, ETC.
7D.1
Import of Gold, Silver and Jewellery
7D.2
Import of Cheques, etc.
7D.3
Import of Securities
7D.4
Import of Indian Currency
7D.5
Import of Foreign Exchange
ANNEXURE
Guidelines for Handling Import Bills- Operating Procedure
IMPORT OF GOODS, CURRENCY ETC., MERCHANTING TRADE AND OTHER RELATED MATTERS
PART A - IMPORT OF GOODS
General
7A.1
(i)
Import trade is regulated by the office of the Director General of Foreign Trade (DGFT)
and its regional offices functioning under the Ministry of Commerce, Government of India.
Policies and procedures for import are announced by the DGFT. Sale of foreign exchange or rupee transfer to non-resident account towards payment for import of goods into India from any foreign country, except Nepal and Bhutan, permitted under the prevailing import trade control policy may be made by authorised dealers without approval of Reserve Bank subject to the conditions set out in subsequent paragraphs.
NOTE:
For Exchange Control purposes, accounts in India of Indians, Nepalese and Bhutanese resident in Nepal and Bhutan as well as Indian, Nepalese and Bhutanese firms, companies or other organisations including banks functioning in these countries are regarded as resident accounts and rupee transfers to such accounts against imports into India from these countries (or for any other purpose) may be made freely without reference to Reserve Bank. Sale of foreign currencies in payment for imports from the above countries is not permitted. Payments from India to suppliers in third countries against imports into Nepal/Bhutan are also not permitted.
(ii)
Authorised dealers are permitted to open letters of credit on behalf of their
customers who are known to be participating in the trade. While doing so, they should follow normal banking procedures, UCPDC provisions, etc. The letter of credit should, in particular, stipulate a condition requiring that the bill of lading should indicate the name and address of the importer in India as well as the authorised dealer opening the credit. Remittances for imports under letters of credit or otherwise should be made against shipping documents/lorry/railway receipts/Exchange Control copies of bills of entry/postal/courier wrappers, etc. except where it is otherwise provided in this Chapter.
(iii)
In terms of item No.54 of the list of consumer goods given under paragraph 156
in Part II(A) of Chapter XV of Export and Import Policy (1992-97), import of designs and drawings is permitted without any restrictions. Remittances towards import of designs and drawings may be allowed by authorised dealers on production of (i) suppliers' invoice; and (ii) postal wrappers/exchange control copy of Bill of Entry as documentary evidence in support of import, subject to the following conditions :-
a)
Import of designs and drawings has been made strictly as per the Exim Policy in force.
b)
The transaction is as per provisions of paragraphs 7A.1(iii), 7A.10, 7A.11, 7A.20, 7A.21, 7A.22 7A.23 & 7A.26 of ECM.
c)
The entire payment relates to the cost of import of designs and drawings only and does not include any other cost.
d)
Production of undertaking/certificate regarding payment of Income-tax (cf. Paragraph 3B.10).
e)
The value of designs and drawings imported has been declared to the Customs authorities and incorporated in the Exchange Control copy of Bill of Entry.
f)
In terms of Research and Development Cess Act, 1986 a Research and Development Cess has to be paid by Industrial concerns importing technology, drawings and designs, on all payments made by such concerns which will also include payments made locally in Rupees towards fare, living expenses etc. of foreign technicians/personnel who have been deputed to India in connection with the import of technology, drawings and designs. Authorised dealers should, therefore, while allowing such remittances, obtain confirmation/ evidence from the Indian companies that Research and Development Cess has been paid. In terms of Technology Department Board Act, l995 and amendment made to the R & D Cess Act, in 1995 by Government of India, the power of the Industrial Development Bank of India (IDBI) to call for information and impose penalty has been transferred to the newly constituted Technology Development Board. Accordingly, where such a confirmation/evidence is not produced by Indian companies, authorised dealers should immediately, but not later than 30 days from the date of remittance, report the matter to the Secretary, Technology Development Board, Technology Bhavan, Department of Science and Technology, Mehrauli Road, New Delhi 110 016 alongwith the following particulars.
i]
Name and address of applicant industrial concern
ii]
Name and address of the beneficiary
iii]
Purpose of remittance(with brief details)
iv]
Amount and currency of remittance
v]
Date of remittance.
Authorised dealers may also open letters of credit covering imports of designs and drawings subject to the above referred conditions and also subject to the applicant's undertaking to produce documentary evidence of import within 3 months from the date of remittance.
Import Licences
7A.2
Authorised dealers should not open letters of credit or allow remittances for the import of goods
included in the negative lists unless the importer submits a licence marked For Exchange
Control Purposes'. Special conditions, if any, attached to the licence should be adhered to while opening letters of credit or making remittances.
Obligations of Purchaser of Foreign Exchange for Import
7A.3
Section 8(3) of FERA 1973 makes it obligatory for any person who acquires
foreign exchange for any particular purpose but does not for any reason whatsoever
use it for that purpose, to surrender the foreign exchange without delay to an authorised dealer in foreign exchange. Use of such foreign exchange for any other purpose is an offence under the Act. Furthermore, in terms of Section 8(4) ibid, where any person acquires foreign exchange for importing goods into India but does not at all import the goods or does not import goods of a value representing the foreign exchange acquired within a reasonable time or imports goods of a kind, quality or quantity different from that specified by him at the time of acquisition of the foreign exchange, he shall be presumed to have been unable to use the foreign exchange for the purpose for which it was acquired or, as the case may be, to have used the foreign exchange for a purpose other than the one for which it was acquired. Pursuant to the provisions of Section 9 of FERA 1973, Reserve Bank has permitted credit of rupees to non-resident accounts as one of the methods of payment to persons resident outside India for making payment towards imports. This permission is subject to the condition that payment in such manner by any person is made towards imports as declared by the importer and not for any other purpose. It is, therefore, obligatory for any such person to use the payment only for the purpose declared by him. If the payment is used for any other purpose, it will amount to a breach of the condition subject to which permission has been granted. These provisions are also applicable in case of payments through Asian Clearing Union.
Manner of Rupee Payment
7A.4
Payments in retirement of bills drawn under letters of credit as well as bills received from
abroad for collection against imports into India, must be received by authorised dealers,
irrespective of amount, by debit to the account of the importer with themselves or by means of a crossed cheque drawn by him on his other bankers. Payments against bills should not be accepted in cash. This rule also applies to private imports where the amount involved is Rs.20,000/- or more.
Letters of Authority
7A.5
Authorised dealers may open letters of credit or make remittances where the
Exchange Control copy of relative import licence has been issued in the name of a
party other than the applicant, provided the applicant produces a letter of authority obtained from the import licence holder in his favour authorising him, inter alia, to open letters of credit or make remittances in payment towards import under the licence (subject to the terms and conditions, if any, stipulated in this regard in the Import Policy in force). Authorised dealers may also open letters of credit or make remittances towards imports permitted without licences on behalf of agents appointed by eligible importers, after satisfying themselves by reference to the Import Policy in force that the latter are permitted to utilise services of agents for the purpose of opening letters of credit etc. for the imports in question. In all such cases, the responsibility for production of the Customs Bills of Entry, where required, will rest on the letter of authority holder or agent and an undertaking to do this must be taken from him.
Attestation of Invoices by Authorised Dealers
7A.6
Under Customs regulations, importers have to submit to Customs at the time of
clearance of goods a copy of the invoice attested by the authorised dealer through
whom remittance has been or will be made, as corroboratory evidence of the value of the goods declared on Customs Bills of Entry. To enable the importer to comply with this requirement, authorised dealers should furnish to him a duly attested copy of the invoice in all cases where relative bills of exchange and/or shipping documents were received through their medium. Where documents were received by the importer direct, authorised dealers may also attest copy of the invoice on request by the importer, provided the remittance has been or will be made through them.
Form A1
7A.7
Applications by persons, firms and companies for making payments towards imports
into India must be made on form A1. Variants of this form have been devised in
different colours to be used for -
(a)
remittance in foreign currency,
(b)
transfer of rupees to non-resident bank accounts, and
(c)
remittance through Asian Clearing Union.
Care should be taken to see that appropriate form A1 is used. Care should also be taken to fill in correctly the various details relating to the import as required on the form and to furnish necessary declarations/undertakings thereon.
Imports Financed in Rupees
7A.8
Regulations contained in this Chapter are also applicable to imports which are financed in
rupees and payment for which is made by crediting rupees to a non-resident account in India.
There is also no objection to proceeds of rupee bills being converted into any convertible foreign currency, if remitting bank so desires.
Import Licences for c.i.f. Value
7A.9
(i)
Import licences wherever issued are for the c.i.f. value of the goods to be imported which
includes commission, if any, allowed by the supplier/manufacturer. Import licences cannot be
used to the full amount in cover of f.o.b. cost of the goods leaving insurance, freight and commission to local agent of the supplier, as additional charges to be paid in rupees over the amount specified in the import licence. (See paragraph 7A.13 also).
(ii)
Importers sometime enter into contracts on f.o.b. terms and agree to the suppliers paying
for the freight to be reimbursed to them along with the cost of the goods. Authorised dealers in such cases should, before making the remittance of freight charges, ascertain the actual freight amount paid with reference to the original freight bill or memo issued by the shipping company or the amount stated on the relative bill of lading.
Imports by Government/Public Sector Undertakings, etc.
7A.9A
As per the procedure laid down by Government of India, import contracts by Central/State
Governments, Central & State Public Sector undertakings and autonomous bodies are required
to be made on FOB/FAS basis in respect of transportation of Government owned / controlled cargo by foreign flag vessels (i.e. ocean transportation of cargo) . In case of the import contracts entered into on terms other than FOB/FAS, a No Objection Certificate from the Ministry of Surface Transport (MOST), Government of India is required to be obtained. Authorised dealers, before opening import letters of credit or releasing foreign exchange for imports, should ensure that necessary No Objection Certificate is obtained by the concerned Government organisation in cases of import contracts made on terms other than FOB/FAS.
Advance Remittance
7A.10
Authorised dealers may allow advance remittances for import of goods without any ceiling subject to the following conditions :
(a)
Documentary evidence indicating the cost of the goods and the insistence of the overseas seller on advance payment should be submitted by the importer.
(b)
The importer should hold the EC copy of a valid import licence if the goods to be imported are those included in the negative list of imports given in the Export and Import Policy.
(c)
Remittance is made direct to the suppliers.
(d)
If the amount of advance remittance exceeds U.S.$ 25,000 or its equivalent, a guarantee from an international bank of repute situated outside India or a guarantee of an authorised dealer in India, if such a guarantee is issued against the counter-guarantee of an international bank of repute situated outside India, should be obtained. An unconditional standby L/C from an international bank of repute situated outside India may be accepted in lieu of bank guarantee provided it is irrevocable, non-transferable and lists out full particulars of the transactions and there is a clear provision for prompt payment being received in convertible currency in an approved manner. The validity of the guarantee/letter of credit should cover adequately the period for the purpose of enforcing payment.
(e)
Physical import of goods into India should be made within three months (twelve months in case of capital goods) from the date of remittance and the importer should give an undertaking to furnish documentary evidence of import within fifteen days from the close of the relevant period. Authorised dealers may allow extension of time for import not exceeding one month (three months in the case of capital goods) provided the reasons for seeking extension of time are found convincing. In cases where the advance remittance has been made against a bank guarantee, the guarantee should be suitably amended, if need be, to cover the extended period for import of goods into India.
(f)
In case of import of capital goods, certified copy of importer's contract with the supplier or any other evidence indicating terms of payment should be submitted.
(g)
In the case of import of books, a list of books to be imported should be obtained. This should be attached to the form A1 while submitting it along with the relevant R return.
(h)
Authorised dealer should ensure that in the event of non-import of goods, the amount of advance remittance is repatriated to India.
Time Limit for Settlement of Import Payments
7A.11
(i)
The basic rule relating to remittances against imports is that they should
be completed not later than six months from the date of shipment. Accordingly,
deferred payment arrangements involving payments beyond a period of six months from the date of shipment are not permissible without approval of Reserve Bank/Government of India (See Part B of this Chapter). There would, however, be no objection to importers withholding a small part of the cost of the goods not exceeding 15 per cent towards guaran3tee of performance etc. Authorised dealers may make remittances of amounts so withheld, provided the earlier remittance had been made through them. No interest payment should be allowed to be remitted on these withheld amounts.
(ii)
Sometimes, settlement of import dues may be delayed due to disputes,
financial difficulties, etc. Authorised dealers may make remittances in such cases even if the period of six months has expired, provided -
(a)
authorised dealer is satisfied about the bona fides of the circumstances leading to the delay in payment;
(b)
No payment of interest is involved for the additional period. However, in cases where the overseas supplier insists on payment of interest, it may be allowed in accordance with the provisions contained in paragraph 7A.12 upto a maximum period of 60 days beyond 180 days from the date of shipment provided the import bill is paid within that period.
NOTES:
A.
The above concession permitting remittances beyond six months from the date of shipment should not be construed as general permission for importers concluding extended payment terms with overseas suppliers of goods providing payment beyond six months from date of shipment. All cases of extended payment terms require prior approval of Reserve Bank.
B.
In case of import bills negotiated under letter of credit and retired by importer after expiry of six months from the date of shipment of relative goods, settlement of the payment would be deemed to be completed within six months from shipment if reimbursement was given to overseas bank within that period,
C.
Remittances against import of books may be allowed without restriction as to time limit, provided no interest payment is involved nor has the importer forgone any part of the discount/ rebate normally allowed to importers towards compensation for delay in settlement of dues.
Interest on Import Bills
7A.12
Authorised dealers may make remittances on account of interest accrued on usance bills under
'normal interest clause' or of overdue interest paid on sight bills for a period not exceeding six
months from the date of shipment in respect of imports without prior approval of Reserve Bank. In case of pre-payment of usance import bills, remittances may be made only after reducing the proportionate interest for the unexpired portion of usance at the rate at which the interest has been claimed or the 'prime' rate (or its equivalent) of the country in the currency of which the goods are invoiced, whichever is higher. Where interest is not separately claimed, remittances may be allowed after deducting the proportionate interest for the unexpired portion of usance at the prevailing 'prime' rate.
NOTE :
Interest under 'normal interest clause' would mean interest at the 'prime' rate (or its equivalent) of the country in the currency of which the goods are invoiced.
Appointment of Buying Agents Abroad
7A.13
Authorised dealers may, on application and supported by particulars including
relevant correspondence/buying agency agreement, allow remittance of
commission to overseas buying agents of Indian importers provided the rate of commission does not exceed 2.5 per cent of f.o.b. value of imports. The amount remitted should be endorsed on Import Licence [See paragraph 7A.9(i) also].
War Risk Insurance/Bunker/Congestion Surcharge/ Premium for Extended Insurance
7A.14
Authorised dealers may make remittances towards war risk insurance premium,
bunker/congestion surcharges at foreign ports, premia for extended insurance cover
etc. which are incidental to imports provided the amounts are reasonable and adequate and satisfactory documentary evidence therefor have been submitted.
Endorsement on Import Licences
7A.15
(i)
Authorised dealers should note to endorse on import licences, under their stamp
and signature, the details of letters of credit opened or forward contracts booked or
remittances made in foreign currency as also the amount of insurance, freight and commission paid by the importer locally in rupees [See paragraph 7A.9].
(ii)
Authorised dealers may likewise endorse the value of the back-to-back inland
letters of credit opened by them on behalf of duty free licence holders (including transferees) as required in terms of the relevant provisions of the Export Import Policy.
Imports under Penalty
7A.16
Authorised dealers may make remittances against goods imported without authority,
but later allowed to be cleared by the Customs Authorities against payment of penalty,
to the extent of c.i.f. value of the goods indicated on the relative Exchange Control copy of Customs Bill of Entry evidencing imports of goods to India.
Imports into Bond
7A.17
(i)
Goods are frequently imported into bond by merchants for purpose of re-export.
No import licence is required for such imports. Sales of foreign exchange against such
imports are not permitted.
(ii)
Reserve Bank grants special facility to firms and companies in India to import goods into
bond without import licences, for supply to foreign going vessels and sale to diplomatic missions/personnel etc. subject to certain conditions. The procedure to be followed in regard to opening of letters of credit/making remittances towards cost of import of goods into bond in such cases is as follows :-
(a)
The importer who has been granted the facility should advise the concerned office of Reserve Bank the name and address of the authorised dealer (designated authorised dealer) through whom letters of credit will be opened/remittances will be effected covering cost of import of goods into bond, under advice to the concerned authorised dealer.
(b)
The designated authorised dealer may thereafter open letters of credit/make remittances on behalf of the importer concerned in accordance with the regulations covering import of goods into India. The importer should alongwith the application for opening remittance furnish a declaration to the designated authorised dealer that he will submit the Exchange Control copy of bill of entry for bond within three months from the date of remittance. In case of non-submission of the bills of entry designated authorised dealer should follow up with the matter with importer.
(c)
While opening the letter of credit/making remittance for import of goods into bond, the designated authorised dealer should ensure that
(i)
the importer holds a valid permission from Reserve Bank for import of goods into bond.
(ii)
the goods sought to be imported do not fall under the list of `Prohibited Items' for import as per the Exim Policy.
(d)
The designated authorised dealer should maintain a separate register to record the details of letters of credit opened/remittances effected (importer wise) in respect of such imports. The authorised dealer should also furnish to the concerned importer a monthly statement under his stamp and signature giving the following details of letters of credit opened/remittances effected during the calendar month for import of goods into bond for submission by the importer alongwith the monthly statements to Reserve Bank.
(i)
Date of opening of letter of credit/remittances
(ii)
Description of goods
(iii)
Name & address of the supplier
(iv)
Value of goods
Remittances against Replacement Imports
7A.18
Where goods are short-supplied, damaged, short-landed or lost in transit, the procedure laid down below should be followed for payment against replacement goods:
(a)
In cases where no letter of credit has been opened or remittances made, Exchange Control copy of the import licence may be automatically treated as valid for the replacement consignment, provided it is shipped within the validity period of the licence.
(b)
If the Exchange Control copy 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 authorised dealers without reference to Reserve Bank, provided the insurance claim relating to the lost goods has been settled in favour of the importer by remittance from abroad through an authorised dealer if insurance was covered abroad and by local payment in rupees if insurance was covered in India. Payment for the replacement goods may then be made against suitable endorsement on the import licence subject to the conditions that the replacement consignment is shipped within the validity period of the licence.
(c)
If replacement goods are to be shipped after the expiry of import licence, the importer should be asked to apply to ITC Authorities for replacement or for revalidation of the expired licence.
Surrender of Import Licences to Exchange Control
7A.19
Exchange Control copy of import licence submitted by importer for opening letters
of credit or making remittances should be retained by authorised dealer and
forwarded to Reserve Bank after it has been fully utilised along with R Returns pertaining to the period during which the last remittances under the licences were made.
Evidence of Import
7A.20
(i)
It is obligatory on the part of importers to submit Exchange Control copy of
Bills of Entry for Home Consumption/Postal/Wrappers to the authorised
dealer hrough whom relative remittance was made as evidence that the goods for which the payment was made have actually been imported into India. Authorised dealer should ensure that in all cases, including cases of advance remittances permitted vide paragraph 7A.10, these are submitted by their importer customers and are verified. In respect of imports made on D/A basis, since goods would normally be cleared before the due date of payment, authorised dealers should insist on production of documentary evidence of import i.e. Exchange Control copy of Bill of Entry for Home Consumption/Postal/Wrappers at the time of effecting remittance of the import bill. Authorised dealers should also advise this requirement to their importer customers in writing while delivering the documents against acceptance.
NOTES:
A.
In case of goods imported and stored by 100% Export Oriented Units/Units in Export Processing Zones and Free Trade Zones in bonded warehouses, it will be in order for authorised dealers to accept Exchange Control (quadruplicate) copy of Into Bond Bill of Entry for Warehousing as evidence of import.
B.
As regards submission of evidence in respect of imports by courier services, please see paragraph 7A.23.
C.
In respect of imports on D/A basis if importers fail to produce documentary evidence due to genuine reasons such as non-arrival of consignment, delay in delivery/customs clearance of consignment, etc. authorised dealers may, on merits, allow reasonable time not exceeding three months from the date of remittance to the importer to submit the evidence of import.
(ii)
Authorised dealers should in all cases acknowledge receipt of Exchange
Control copy of bill of entry/postal/wrappers from importers by issuing acknowledgement slips containing the following particulars:
(a)
Importer's full name and address with code number.
(b)
Import licence number and date (wherever applicable)
(c)
Bank's reference of letter of credit number etc., if any.
(d)
Number and date of Exchange Control copy of bill of entry/postal wrapper and the amount of import.
(e)
Particulars of goods imported.
(iii)
Internal inspectors or auditors (including external auditors appointed by
authorised dealers) should carry out 100% verification of all the Exchange Control copies of bills of entry/postal/wrappers and a certificate to that effect should be forwarded, on half-yearly basis, to the office of Reserve Bank under whose jurisdiction the authorised dealer is situated.
(iv)
In case an importer does not furnish the Exchange Control copy of Bill of
Entry within three months from the date of remittance (or within prescribed period as provided in paragraph 7A.10), the authorised dealer should issue a reminder to the importer asking him to roduce it forthwith. If there is still no response, a reminder by registered post with acknowledgement due should be issued not later than one month from the date of the first reminder.
(v)
Authorised dealers should forward to Reserve Bank a statement as at the end
of each calendar quarter in form BEF furnishing details of import transactions in respect of which the importers have defaulted in submission of Exchange Control copies of Bills of Entry within a period of 21 days from the date of issue of registered (acknowledgement due) reminder. The quarterly statement should be submitted to Reserve Bank within 15 days from the end of the quarter to which the statement relates.
(vi)
Exchange Control copy of Bill of Entry for Home Consumption/postal wrappers
should be preserved by authorised dealers for a period of one year from the date of its verification as required under paragraph (iii) above. However, in respect of cases which are under investigation by investigating agencies, the Exchange Control copy of Bill of Entry for Home Consumption/postal wrappers should be preserved till the investigating agency concerned gives clearance for destruction.
Precautions for Handling Import Documents
7A.21
Authorised dealers should exercise due care while handling import documents on collection basis
on behalf of importer customers with reference to their line of business, financial standing,
frequency of import, etc. to establish the genuineness of the import. In the case of bills involving large values, authorised dealers should satisfy themselves that the importer is known to be trading in items mentioned in the shipping documents or that the items are required for his actual use. In case of importers who are not their constituents, authorised dealers should, at the time of acceptance of the documents/making payment, call for detailed Certificate-cum-Report from their bankers in support of the genuineness of imports. Authorised dealers should comply with the detailed procedural precautions laid down in Annexure to this chapter while handling import documents.
Postal Imports
7A.22 (i)
Remittances against bills received for collection in respect of imports by post parcel
may be made by authorised dealers, provided the goods imported are such as
are normally despatched by post parcel. In these cases, the relative parcel receipts must be produced as evidence of despatch through the post and an undertaking to submit post parcel wrappers within three months from the date of remittance should be furnished by importers. If the parcel has already been received in India, the parcel wrapper should be produced in support of the remittance application. Where goods to be imported are not of a kind normally imported by post parcel or where authorised dealer is not satisfied about the bona fides of the application, the case should be referred to Reserve Bank for prior approval with full particulars together with relative parcel receipt/s (or wrapper/s).
Imports through Post
7A.22(ii) Authorised dealers may allow remittance towards import of books, samples, etc. through post parcel, on production of original invoice by the importer, without insisting on submission of parcel receipt/postal wrappers, where the amount of the bill does not exceed U.S.$ 250, or its equivalent provided the import is made in accordance with the current EXIM policy and a declaration is furnished by the applicant that the goods have been imported through post parcel.
NOTE:
Authorised dealers may make remittances towards import of books by post parcel by book-sellers/publishers against bills received for collection, irrespective of the amounts involved, without prior approval of Reserve Bank against endorsement on the import licence where applicable in the normal course. They may also make remittances even if import licences covering the imports have been issued subsequent to the date of import subject to endorsement on such licences.
Imports through Courier
7A.23
Under the current Exim Policy, import of goods through courier is permitted, in
accordance with the Courier Imports (Clearance) Regulations, 1995, as amended by
the Courier Imports (Clearance) Amendment Regulations, 1997, notified by the Government of India, Department of Revenue, Central Board of Excise & Customs (CBEC), New Delhi. Where the C.I.F. value of the consignment imported through courier service, does not exceed Rupees one lakh, the relative Bill of Entry is required to be filed by the registered courier service. However, where the value of the consignment is Rupees one lakh or more, importers are required to file separate Bill of Entry, as in the case of other imports. Accordingly, in respect of remittances for imports through courier services, authorised dealers should ensure submission of Exchange Control Copy of Bill of Entry for home consumption in the case of imports valued at Rupees one lakh or more. Where the value of import is less than Rupees one lakh, authorised dealers may obtain from the importer, a copy of Bill of Entry in the prescribed Form, issued by the Customs in the name of the registered courier, duly certified by the courier company, indicating thereon the particulars of the consignment for which the copy has been issued.
Supply of Books in Domestic Tariff Area (DTA) by EOUs/EPZs
7A.24
EOUs and Units in EPZs undertaking printing of books in India on behalf of
overseas publishers are sometimes required to supply books to Indian booksellers
as per instructions from the overseas publishers. The cost (less discount) of such books is remittable to overseas publishers. Authorised dealers may allow such remittances by Indian booksellers to overseas publishers on application from the Indian bookseller subject to the production of the following documents:
(a)
A letter from the overseas publisher that the books will be supplied by EOU/unit in EPZ which had undertaken the job of printing of books on its behalf.
(b)
Original invoice from the publisher indicating the description and price of books and the discount allowed.
(c)
A letter/certificate from the Development Commissioner conveying his approval to the EOU/ unit in EPZ for the supply of books in DTA, indicating therein the description of books and number of copies.
(d)
Evidence regarding customs duty, if any, payable on release of books from EOU/EPZ to DTA.
Legal Expenses Connected with Imports
7A.25
Authorised dealers may effect, on behalf of their importer constituents, remittances towards
legal expenses relating to import transactions subject to submission of suitable documentary
evidence and satisfying themselves about the chances of success of the case by calling for legal opinion and an estimate of the total likely expenses to be incurred to satisfy themselves with the reasonableness of the charges. However, where the amount of remittance exceeds U.S.$ 100,000 or its equivalent, full details of such remittances should be reported to Reserve Bank on a quarterly basis.
Import of Software through Datacom.Channels/Internet
7A.26 Authorised dealers may allow remittances towards import of software through Datacom channels/Internet and also for import of drawings and designs through E-Mail/Fax, on production of the following documents by the applicant, as applicable.
A declaration from the importer that the software/drawings and designs in question, have been actually received by him from the overseas licensor/supplier.
Invoice stating the details of software/drawings and designs supplied, in support of the amount to be remitted.
User's licence authorising the importer to use the software/drawings and designs.
Copies of E-mail/Fax certified by the officials of the remitter, at the level of Company Secretary/Financial Director/ Adviser.
NOTE:- Authorised dealers should advise importers to keep Custom authorities informed of the imports made by them under this paragraph.
Import of Second-hand Goods
7A.27
In terms of Export-Import Policy presently in force, second hand capital goods are allowed to
be imported freely subject to certain conditions. Such imports sometimes involve payment against
delivery of second hand plant and machinery abroad on 'as is where is basis'. In the absence of shipping documents, it will not be possible for authorised dealers to open letters of credit or make remittances against such imports. Applications for opening of Letters of Credit or for making remittances in regard to imports with such payment conditions should, therefore, be referred to Reserve Bank for prior approval with full details.
Import of Gold/Platinum/Silver by Nominated Banks/Agencies
7A.28
Under the liberalised policy of import, Government of India has permitted import of
gold by certain nominated agencies viz. MMTC, HHEC, STC, SBI and a few banks
authorised by Reserve Bank for sale to jewellery manufacturers, exporters, NRIs, holders of Special Import licences and domestic users. Accordingly, Reserve Bank would permit the nominated agencies/banks to import gold under different arrangements, besides outright purchase on D/P basis, as follows:
(i)
Import of Gold on loan basis
Gold loan my be availed of by nominated agencies/banks, where the loan is denominated on the basis of the quantity of gold, subject to the following conditions -
(a)
The loan shall be obtained directly from the overseas supplier.
(b)
The period of loan shall not be more than 180 days from the date of shipment. Extension of period beyond 180 days will require prior approval of Central Office of Reserve Bank (Imports Division)
(c)
Rate of interest on loan shall be as per the prevailing international practice.
(d)
Metal account in the books of the overseas supplier, if required by the supplier, may be maintained by the nominated agency/bank for the purpose of routing the import transactions only. No deposits will be permitted.
(e)
Guarantee for the loan, if required by the supplier may be furnished by the nominated agency/bank.
(ii)
Import of gold on Suppliers' credit/ Buyers' credit basis
Suppliers' credit up to a period of 180 days may be availed of by the nominated agencies/banks subject to the provisions of paragraph 7A.12. Prior approval of Reserve Bank will be required if the period of credit exceeds 180 days. However, buyers' credit will require prior approval of Reserve Bank, irrespective of the period of credit.
(iii)
Import of Gold on Consignment basis
Gold may be imported by the nominated agencies/banks on consignment basis where the ownership of the goods will remain with the supplier and the importer (consignee) will be acting as an agent of the supplier (consignor). Remittances towards the cost of import shall be made as and when sales take place as per the provisions of agreement entered into between the overseas supplier and nominated agency/bank.
(iv)
Import of gold on unfixed price basis
The nominated agency/bank may import gold on outright purchase basis subject to the condition that although ownership of the gold shall be passed on to the importer at the time of import itself, the price of gold shall be fixed later, as and when the importer sells the gold to the users.
NOTE:
Instructions contained in this paragraph would also apply to import of platinum and silver.
Import of films on lease/rental basis
7A.29 Authorised dealers may allow remittance of rent, royalty, licence fee, profit, etc. in connection with import of cinematograph feature films and video films subject to the following conditions :
(i) Import has been made in accordance with provisions of Exim Policy in force.
(ii) A 'No Objection Certificate' from Central Board of Film Certification, wherever required, has been submitted.
(iii) Exchange Control copy of Bill of Entry for Home Consumption has been submitted as evidence of import.
(iv) The remittance is in accordance with the agreement entered into between the overseas supplier and importer. A certified copy of the contract/agreement should be retained by authorised dealer for record.
(v) A Chartered Accountant's certificate is produced indicating that the payment to overseas supplier is due and the amount sought to be remitted is as per the terms of contract.
(vi) Undertaking/Certificate regarding payment of income-tax has been submitted (cf. paragraph 3B.10).
PART B - IMPORTS UNDER FOREIGN LOANS/CREDITS
General
7B.1
(i)
Proposals for raising foreign currency loans/credits viz. Buyer's Credits, Supplier's Credits or lines of credits by firms/companies/lending institutions, banks, etc. for financing cost of
import of goods, technology or for any other purposes other than those considered by Reserve bank in terms of paragraph 7B.8 and 7B.8A should first be submitted to Government of India, Ministry of Finance (Department of Economic Affairs), ECB Division, New Delhi for necessary clearance. The proposals are considered by the Government on merits and in light of prevailing Government policy.
(ii)
In terms of Section 8(1) of FERA 1973 no person resident in India can borrow any
foreign exchange from any person resident in or outside India without prior permission of Reserve Bank. Similarly, Section 9(1) of the Act places certain restrictions on persons resident in India receiving payments from or making payments to persons resident outside India. Consequently, all loans or credits secured by persons resident in India from non-residents as also repayment of such loans/credits and payment of interest and other charges thereon, require prior permission of Reserve Bank.
NOTE:
The above procedure is also applicable for import of capital goods on financial
lease basis.
Procedure for Obtaining Reserve Bank Approval
7B.2
On receipt of letter indicating the terms and conditions regarding amount of loan/credit, rate of interest, period of repayment, etc. from the Ministry of Finance, the borrower firm/company
should make an application in form ECB1 to the concerned office of Reserve Bank within whose jurisdiction its Head/Registered Office is situated. On receipt of Reserve Bank approval, the borrower firm/company may conclude the loan/credit agreement with the overseas lender, taking care to ensure that no liability, direct or indirect, other than that specifically approved by Government/Reserve Bank is assumed by the borrower through the loan/credit agreement. The borrower should file the requisite number of copies of loan/credit agreement with Government. Government will take the agreement on record under advice to the borrower if it is found to be strictly in conformity with the approved terms. Thereafter, the borrower should apply to Reserve Bank along with two copies of the loan agreement for permission to effect drawal of the loan amount for utilisation towards approved purpose/s.
Registration Number
7B.3
Reserve Bank will allot a registration number to each foreign currency loan/credit which should invariably be quoted on all returns/statements submitted to Reserve Bank. The number should also
be quoted on Form A-2 covering remittance of foreign exchange or rupee transfer towards repayment of the loan/credit.
Opening of Bank Accounts in India/Abroad
7B.4
Reserve Bank may, on application, permit opening of foreign currency bank accounts in India/abroad for retention of the loan funds pending disbursement/utilisation. Borrowers
should approach Reserve Bank giving details of loan, name and address of the overseas bank, type of account and rate of interest, etc.
Issue of Bank Guarantee
7B.5
Issue of guarantees in favour of foreign lenders or suppliers (in the case of Supplier's Credits) requires approval of Reserve Bank. While granting approval for raising the foreign currency
loan/credit, Reserve Bank will grant the required permission to the concerned authorised dealer. In the event of invocation of the guarantee, the concerned authorised dealer may make the necessary remittance without reference to Reserve Bank. A report should, however, be sent to Reserve Bank giving full details citing reference to the approval for furnishing the guarantee. A copy of the claim received from the overseas party should be enclosed with such report.
Submission of Utilisation Statements
7B.6
(i)
Borrowers in India are required to submit to Reserve Bank quarterly statements in
form ECB 2, in duplicate, about drawal and utilisation of the loan amount. The statements should
also contain details of all the repayments/payments made under the loan/credit during the quarter under report [cf. paragraph 7B.7(ii)] and submitted to Reserve Bank duly certified by an authorised dealer by the 10th day of the month following the quarter to which they relate. The statements in form ECB 2 should continue to be submitted to Reserve Bank until such time the loan/credit is fully repaid and in case of financial lease the period of lease is over. In case there are no drawals/repayments during a particular quarter a `NIL' statement should be submitted. In the event of default in timely submission of the statement in form ECB 2, the borrowers shall be liable for such action as may be deemed necessary by Reserve Bank under FERA 1973. The borrowers are also required to submit to Reserve Bank a supplementary statement by way of an annexure to ECB 2 in the prescribed form giving details of utilisation of the loan/credit duly certified by the statutory auditors/chartered accountants and supported by a complete set of documents such as Exchange Control copy/ies of the import licence/s (where applicable), original invoices and Exchange Control copy/ies of bill/s of entry for home consumption evidencing import into India of goods for which the loan/credit in question was obtained. This supplementary statement should be submitted by the borrowers till the loan/credit is fully utilised and the supporting documents are submitted to Reserve Bank.
(ii)
On receipt of the statements in form ECB 2, Reserve Bank will issue an
acknowledgement for receipt of the statement. It should be noted that no remittances towards repayment of the loan/credit would be allowed by authorised dealers/Reserve Bank until the statement in form ECB 2 has been submitted to Reserve Bank for the last quarter and an acknowledgement obtained therefor from Reserve Bank.
Repayment of Loan/Credit and Payment of Other Charges
7B.7
(i)
Application for repayment of the loan/credit and/or any other charges connected
with the loan/credit is required to be made by the borrower in form ECB 3 to the
authorised dealer. The authorised dealer in turn should refer the application to Reserve Bank, together with appropriate supporting documents, sufficiently in advance to avoid payment of additional charges by way of overdue/penal interest.
(ii)
Reserve Bank has been granting general permission to the authorised dealer designated by
the borrower to effect remittances towards repayment of the loan where it is satisfied that the loan amount has been fully utilised and the required documentary evidence regarding utilisation of the loan has been submitted. Under the revised procedure effective June 1997, Reserve Bank would grant general permission for repayment of the loan/credit to the branch of the authorised dealer i.e. designated bank indicated by the borrower in the application in form ECB 1, at the time of granting permission to effect drawal of the loan (cf. paragraph 7B.2). The borrowers should approach the same designated branch for making all future remittances connected with the loan as per terms approved by Reserve Bank/Government of India. In cases where Reserve Bank has granted such general permission, applications for repayment of loan and interest thereon should be made to the designated authorised dealer and the designated authorised dealer may make the remittance subject to compliance with the conditions stipulated in the letter of approval issued by the Government/Reserve Bank and after ensuring that the borrower has submitted the statement in form ECB 2 to Reserve Bank for the last quarter and obtained the acknowledgment therefor (cf. paragraph 7 B.6)
(iii)
(b)
The penal interest may be allowed as per the rate indicated in the approval letters issued by the Government/Reserve Bank. In case no rate is mentioned in such approval letters, the authorised dealers may allow the payment of penal interest based on the rate indicated in the relative debit note/invoice raised by the lender, subject to the ceiling of 2% per annum, besides the normal approved interest, provided the relative loan agreement taken on record by the Government/Reserve Bank contains the provision for payment of penal interest. In case of defaults by the borrowers on three consecutive occasions, authorised dealers should report the same, with full details, to the concerned Regional Office of Reserve Bank.
(c)
The borrower should report the payment of penal interest in form ECB 2 to be submitted to Reserve Bank on quarterly basis against column marked 'others' in item No.7.
(d)
The authorised dealer should allow the remittances of interest, penal interest and other charges only after the borrower has submitted an Undertaking and Accountant's certificate in compliance with Income-tax provisions(cf. paragraph 3B.10)
(iv) Applications for remittance towards prepayment of outstanding ECB which was earlier approved by the Government of India, should be made to the designated branch of authorised dealer through whom the borrower is making debt servicing payments, together with the Government approval in original for prepayment of outstanding ECB. The designated branch of authorised dealer may effect the remittance on behalf of their constituent borrower based on the Government approval, under advice to the concerned Regional Office of Reserve Bank quoting the Registration number of the loan.
In case of prepayment of outstanding ECB approved by Reserve Bank, the borrower is required to submit an application for prepayment of loan to the Reserve Bank of India, Exchange Control Department, Central Office (ECB Division), Mumbai through the designated branch of an authorised dealer together with the following documents:-
A certificate from Statutory Auditor to the effect that the ECB proceeds have been utilised for the purpose for which ECB was sanctioned.
Acknowledgement from the concerned Regional Office of Reserve Bank for having received ECB-2 statement for the last quarter.
The designated authorised dealer may effect the remittance towards prepayment of ECB based on the approval granted by Reserve Bank under advice to the concerned Regional Office of Reserve Bank quoting the Registration number allotted for the loan.
(v)
The borrowers of foreign currency loan/credit are not permitted to use balances in
their foreign currency accounts maintained in India or abroad as per Reserve Bank's specific/general permission for repayment/payment of principal/interest and any other charge connected with the loan/credit unless (a) specific application for the proposed repayment/payment in form ECB 3 has been made to Reserve Bank and approval obtained from Reserve Bank (where necessary) or to the authorised dealer, as the case may be, (b) a statement in form ECB 2 for the last calendar quarter has been submitted to Reserve Bank and its acknowledgement obtained and (c) Reserve Bank has granted approval for debt servicing out of funds held in the foreign currency account.
(vi)
The designated bank should maintain proper records for each foreign currency
loan/credit handled by it and record therein all essential particulars of the amount of loan/credit raised, repaid and outstanding including those remittances made through other authorised dealers. Head Offices of authorised dealers should evolve a suitable system for maintenance of records and supervision over remittances under foreign currency loan/credit.
(vii)
At times borrowers desire to make remittance towards repayment of the loan or
interest through an authorised dealer other than the designated one in order to take advantage of the finer exchange rate available in the forex market. In such cases, the borrower should submit his application for remittance to the designated bank in form ECB 3 together with all the relevant documents and obtain a letter from it in favour of the authorised dealer through whom he proposes to effect the remittance, along with form A 2 under proper authentication by the designated bank. The borrower may then submit the letter and form A2 to the remitting bank for making the remittance. The remitting bank should certify the form A2 after effecting the remittance and forward the same to Reserve Bank along with the relevant R Return. It should also separately send a certificate to the designated bank indicating complete details of the remittance (the name of the remitter and the beneficiary, currency and amount remitted as also date and the purpose of the remittance) to enable the latter to maintain proper record of remittances made. On receipt of the certificate from the remitting bank, the designated bank should verify the particulars of the remittance made and retain the certificate for its record. The designated branch should not allow any subsequent remittance either by itself or through another authorised dealer, if a proper certificate from the remitting bank has not been received for the previous remittance.
(viii)
The applicant borrowers who are permitted to remit the principal amount and
interest in connection with their foreign currency borrowings through designated bank should submit the statement in form ECB 2 to the office of Reserve Bank positively within the prescribed period. In case of failure of submission of statement as stated above, Reserve Bank may be constrained to withdraw the facility of general permission granted for remittances to be made through the designated bank and the applicant would have to seek specific permission each time from Reserve Bank.
(ix)
Reserve Bank attach great importance to statement in form ECB 2 with a view to
monitoring etc. of foreign currency borrowings. In the case of persistent default in timely submission of statement in form ECB 2 to Reserve Bank on more than one occasion by the applicant, Reserve Bank would take suitable action against the defaulting borrowers.
Short Term Loans/Credits
7B.8
(i)
Short term foreign currency loans/credits with maturities less than three years for
the purpose of financing imports into India do not require prior clearance from
Government of India. Applications for raising such loans/credits should be made in form ECB 4 through an authorised dealer to the Chief General Manager, Exchange Control Department, Central Office (IMD-II), Reserve Bank of India, Mumbai 400 001. The proposals shall be considered by Reserve Bank on merits of each case and in the light of prevailing policy.
(ii)
In approved cases, Reserve Bank will issue a letter of approval indicating the terms
and conditions under advice to the concerned authorised dealer. The borrowers, hould thereafter, report the details of drawals, utilisation, repayments and outstandings under the foreign currency loan/credit in respect of each approval granted by Reserve Bank, every month in form ECB 5, (in duplicate); one copy of ECB 5 alongwith the Annexure thereto duly duly countersigned by the concerned authorised dealer and supported by a complete set of documents such as Exchange Control copy of the import licence/s [where applicable], original invoice and Exchange Control copy/ies of Bill/s of Entry for home consumption evidencing import of goods for which the loan/credit was obtained should be submitted to the concerned Regional Office of Reserve Bank, and another copy without the Annexure/documents should be submitted to the Chief General Manager, Exchange Control Department, (IMD), Reserve Bank of India, Central Office, Mumbai 400 001, by the 10th of the month following the month to which it relates. In case the loan/credit has not been drawn, a 'NIL' statement in form ECB 5 should be submitted. In the event of default in timely submission of the statement in form ECB 5, the borrowers shall be liable for such action as may be deemed necessary by Reserve Bank under FERA, 1973.
(iii)
Authorised dealers may allow remittances towards loan instalments and interest
strictly in accordance with the terms and conditions indicated in the letter of approval issued by Reserve Bank. For this purpose, the borrower should make an application to authorised dealer on form A2.
Foreign Currency Loans under US$ 5 million/USD 10 million Schemes
7B.8A (i) Proposals from corporates/institutions for raising external commercial borrowings (ECBs) will be considered under the following schemes:
(a)
USD 5 million Scheme
Raising of ECB under the scheme will be considered provided (a) the amount to be raised does not exceed USD 5 million or its equivalent and (b) the borrowing should be for a minimum simple maturity of three years. Corporates/institutions may utilise the proceeds of such borrowings for their business related expenditure (including rupee expenditure) subject to the caveat that only one such loan should be outstanding at any point of time.
(b)
USD 10 million Scheme
Raising of ECBs under this scheme will be considered provided (a) the amount to be raised does not exceed USD 10 million or its equivalent and (b) the minimum average maturity of the loan should be of three years under various windows i.e. Exporters/Foreign Exchange Earners Scheme, Infrastructure Project Scheme, Long Term Borrowers Scheme and others. The proceeds of the ECB raised under the scheme may be utilised for the purpose for which it has been sanctioned.
Applications for raising ECB under USD 5 million Scheme or under USD 10 million Scheme should be submitted in form ECB 6 through an authorised dealer to the Chief General manager, Exchange Control Department, ECB Division, Central Office, Reserve Bank of India, Mumbai,400 001.
(ii)
In approved cases, Reserve Bank will issue a letter of approval indicating the terms
and conditions of the proposed loan and allot a loan key number. On receipt of Reserve Bank's approval, the borrower firm/company may conclude the loan agreement with the overseas lender taking care to ensure that no condition or financial liability, direct or indirect, other than that specifically approved by Reserve Bank is accepted in terms of the said loan agreement. The borrower, after concluding the loan agreement, should file a certified true copy thereof with the concerned Regional Office of Reserve Bank. Reserve Bank will take the agreement on record, allot a registration number for the proposed foreign currency loan and advise the borrower accordingly if the agreement is found to be in conformity with approved terms. The borrower should draw the foreign currency loan amount for utilisation towards approved purpose(s) only after the loan agreement has been taken on record by Reserve Bank. The Registration Number should be quoted on all returns/statements including form A2 to be submitted to Reserve Bank.
(iii)
As regards drawal of foreign currency loan, utilisation and repayments
there against, the borrowers should follow the instructions contained in paragraphs 7B.6 and 7B.7.
Sub-loans out of Lines of Credits/Loans obtained by Term Lending Institutions
7B.9
Term lending institutions viz.IDBI,ICICI and IFCI have been granted general permission for signing Heads of Agreements with their sub-borrowers in India, without prior approval of
Reserve Bank in individual cases, in respect of sub-loans in foreign currency sanctioned to the latter to cover the cost of capital funds and the net amount of technical know-how fees payable, out of foreign currency loans/lines of credit arranged by the former from overseas institutions with the prior permission of Reserve Bank. Full details of the documents and particulars required to be furnished by the sub-borrowers should be ascertained from the financial institution concerned. IDBI, ICICI and IFCI have been granted general permission to accept personal guarantees of directors/promoters/partners/ associates of sub-borrower companies/firms by way of collateral/ interim security, without prior permission of Reserve Bank in each case, provided such guarantees do not involve any direct or indirect outgo of foreign exchange by way of guarantee commission or otherwise. It will not be necessary for sub-borrowers to approach Reserve Bank separately for permission for obtaining foreign currency loans through IDBI, ICICI and IFCI or for executing personal guarantees by way of collateral/interim security.
Loans for Purchase of Aircraft/Ships
7B.10
Airline/Shipping companies desirous of raising foreign currency loans/credits for
financing purchase of aircraft/ships should follow the procedure outlined in paragraph 8B.12.
Import under Foreign Loans/Credits arranged by Government of India from Foreign Governments/Institutions
7B.11
(i)
Import of goods under foreign loans/credits arranged by Government of India
would be governed by the detailed instructions set out in Public Notices issued by the
Director General of Foreign Trade/AD Circulars issued by Reserve Bank.
(ii)
Generally, one of the two methods viz. letter of commitment method or reimbursement
method is followed for payment for imports under foreign loans/credits. Under letter of commitment method (also called direct payment method), payment is made direct by the loan/credit disbursing agency to foreign suppliers whereas under reimbursement method payment to supplier is made in the first instance by remittance through normal banking channels and reimbursement subsequently claimed by Government of India by submitting prescribed documents. Remittances in foreign exchange from India or rupee transfers to non-resident accounts are not permitted in case of imports covered by licences issued under letter of commitment method. The manner of converting the foreign currency payments made under letter of commitment method into rupees, and of transferring the funds for credit of Government of India and other regulations incidental thereto will be advised to authorised dealers from time to time. At the time of opening letters of credit against import licences where the reimbursement method applies, authorised dealers should make appropriate stipulations to ensure that the prescribed documents are submitted to them without fail. In cases where bills are received for collection in respect of such import licences, authorised dealers should not allow remittances until the required documents are furnished.
PART C - MERCHANTING TRADE
General
7C.1
The basic requirements to be fulfilled from the Exchange Control angle in the case of merchanting trade or intermediary trade transactions are that the transactions should not involve foreign
exchange outlay from India except for the normal transit period not exceeding one month; both the legs of the intermediary trade transaction are financed through the opening of Letters of Credit (with drafts drawn under them being of even tenor) and such credits are on back to back terms. If the Letter of Credit to be opened in favour of the overseas supplier is not backed up by a letter of credit from the overseas buyer, an advance remittance for the full value should have been received from the overseas buyer. Authorised dealers are accordingly authorised to open letters of credit on behalf of their clients, who should be genuine traders in goods and not mere financial intermediaries, in accordance with the basic requirements spelt out in this paragraph and to effect remittances under such letters of credit. They should watch foreign currency receipts from these transactions and for this purpose should maintain suitable records.
Advance Remittances to Overseas Suppliers
7C.2
Authorised dealers may allow advance remittances by Indian merchant exporters who are
their customers to the overseas suppliers, provided (a) confirmed orders have been received by them from the overseas buyers, (b) authorised dealer is satisfied about the capabilities of the merchant exporter to perform the obligations under the order, (c) the transactions would result in adequate profit to the merchant exporter and (d) the other conditions stipulated in paragraph 7C.1 are satisfied. Where the amount of advance remittance exceeds US $ 15,000, a guarantee from an international bank of repute outside India should be obtained from the overseas seller. The concerned authorised dealer should also monitor such transactions to ensure that they are completed and proceeds representing cost of goods supplied to the foreign buyer are repatriated to India by the merchant exporter within a period of six months from the date of advance payment.
PART D - IMPORT OF GOLD, SILVER, SECURITIES, CURRENCY ETC.
Import of Gold, Silver & Jewellery
7D.1
Bringing in of personal jewellery by the traveller is regulated by the Customs under the Customs Act/Baggage Rules. Bringing in of gold and silver would be subject to the Export and Import
Policy announced by the Government of India from time to time. Government of India has permitted the bringing into India gold and silver upto certain stipulated quantity by persons of Indian nationality or origin while coming into India, subject to certain conditions and on payment of the prescribed duty in foreign exchange. Gold/silver so brought to the country is permitted to be sold to residents against payment in rupees. General permission has been granted by Reserve Bank vide its Notification No.FERA 167/95-RB dated 30th May 1995 to persons resident in India to make payment in Indian rupees to NRIs selling gold/silver imported by them by means of a crossed cheque in India towards the cost of gold/silver purchased by them. Authorised dealers should credit the amounts so received only to ordinary non-resident rupee (NRO) accounts of the concerned NRI seller.
Import of Cheques, etc.
7D.2
There are no restrictions on the import of foreign currency cheques, drafts, bills of exchange, postal orders and such other financial instruments but the foreign exchange so received in India should be
offered by the person receiving it for sale to an authorised dealer in India within seven days from the date of receipt.
Import of Securities
7D.3
(i)
There are no restrictions on the import into India of any security, whether Indian or foreign.
(ii)
It is obligatory on the part of persons resident in India (other than foreign nationals
not permanently resident in India) to obtain Reserve Bank's permission to acquire or hold foreign securities.
NOTE:
This will not apply to a person who has been resident outside India for a continuous period of not less than one year, in respect of securities acquired/held as provided in Notification No. FERA 118/92-RB dated 7th September 1992 [See also paragraph 12.6(i)].
Import of Indian Currency
7D.4
In exercise of the powers conferred by Section 13(1) of FERA 1973, Government of India have issued Notification No. F1/107/EC/73 dated 1st January 1974 in terms of which no person
shall bring into India any Indian currency notes or coins except with the general or special permission of Reserve Bank. Reserve Bank by its Notification No. FERA.81/89-RB dated 9th August 1989 (as amended) has permitted import of Indian currency subject to the conditions as under:
(a)
From Nepal by any person
Currency notes of Government
and Reserve Bank of India
notes other than notes of the
denominations of above
Rs. 100/-)
(b)
From other countries
Currency notes of Government of
by Indian travellers
India and Reserve Bank of India
notes up to an amount not
exceeding Rs.1000 per resident
Indian, provided the amount
sought to be brought into India
had earlier been taken out
while proceeding abroad on a
temporary visit.
NOTE:
The above restrictions apply to import of Indian currency notes and coins. There are no restrictions on the import of cheques, drafts, etc. drawn on banks and expressed in Indian rupees.
Import of Foreign Exchange
7D.5
Reserve Bank has granted general permission to any person to bring foreign currency into India from any place outside India without limit, provided he declares to Customs authorities on arrival
the particulars of all such foreign currency brought in by him on the Currency Declaration Form (CDF). However, if the aggregate value of foreign currency brought in by him in the form of currency notes, bank notes or travellers cheques does not exceed U.S.$ 10,000 or its equivalent, and/or the value of foreign currency notes does not exceed U.S.$ 5,000 or its equivalent, CDF is not required to be completed.
NOTE:
Bringing in or sending into India of foreign coins is exempt from the prohibition contained in Section 13(1) of FERA 1973 by virtue of Central Government Notification No. F1/107/EC/73 dated 1st January 1974.
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