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Q 307: We are an exporter. We have received multiple Purchase Orders from an overseas client. They are remitting proceeds frequently. However, the Swift messages received from the foreign banks sometimes do not mention PO/Invoice reference number. We give disposal instruction to the bank on the basis of First In First Out. (FIFO). Is this practice good? Will there be any risk?
A: 1. We have noted your query and the guidance required by you.
2. The exporter is liable to realise and repatriate export proceeds. As per para A.2 FED Master Direction No. 16/2015-16 Dated 01.01 2016.
3. As per RBI Circular no. 37 dated 20.11.2014, the period of realisation and repatriation of export proceeds shall be 9 months from the date of export for all exporters.
4. We understand that you are exporting against different purchase orders on different dates.
5. In that case, the 9 months period expires on different dates, depending upon date of export.
6. As an exporter you have to monitor this aspect to avoid any non-compliance under FEMA.
7. The Swift message received from the overseas bank of the buyer is the base for appropriating the realisation against specific shipment.
8. Your Authorised Dealer – Bank will also refer the message received from overseas in Swift.
9. In case the message in Swift is not there or is incomplete, then the bank may ask overseas bank to provide the details, so that the bank in India can properly record the realisation.
10. The bank in India, instead of asking overseas bank, may refer to Indian exporter and follow the instruction.
11. The exporter should take pain and identify the payment with the shipment on actual basis.
12. That is correct practice to record the payment.
13. Your accounts department should be geared up to do this exercise. For this purpose you have to remain in touch with your buyer regularly.
14. Your present method of following FIFO is perhaps to avoid old outstanding entry in EDPMS.
15. You may have further problem when large number of payments/outstanding entries are not matching with payments/outstanding entries in the books of overseas buyer.
16. It is good business practice that you do reconciliation of payments on regular basis, say quarterly.
17. We suggest that you follow actual payment recording against right invoice instead of FIFO method.
Q 308: Earlier we used to write “as per the FTP 2015-20”. What should we now mention in documents/communications?
A: 1. Initially, Import Export Policy was an annual document.
2. On April 1 every year the new policy was announced.
3. Exporters represented to the government stating that policy period of one year is grossly insufficient and too short.
4. The government thereafter made Export Import Policy for 3 years.
5. Thereafter, the Foreign Trade Policy was for a period of 5 years.
6. However, many times announcement of the new policy, upon expiry of existing policy period, was delayed.
7. Postponement of the announcement was not well appreciated by many.
8. It was expected that timely announcement of the new policy should be done.
9. There were multiple reasons and constrains from the point of view of the government for the delay.
10. At the time of announcement of the Policy on 31.03.2023 the Minister mentioned that:
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The Foreign Trade Policy 2023 is being announced to provide the policy continuity and a responsive framework. Subsequent revision(s) in the FTP shall be done as and when required and shall not be linked to any date. Continuous feedback from trade and industry to streamline processes and update policy & procedures. |
11. This fact is also mentioned in DGFT Notification No. 1/2023, dated 31st March, 2023.
12. Policy para 1.01 also refers to the same:
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Duration of FTP: The Foreign Trade Policy (FTP) 2023 incorporating provisions relating to export and import of goods and services shall come into force with effect from 1st April, 2023 and shall continue to be in operation unless otherwise specified or amended. All exports and imports made up to 31.03.2023 shall, accordingly, be governed by the relevant FTP, unless otherwise specified. |
13. This is the first time it happened in India.
14. You have to refer FTP 2023 in documents and in communications.