Importers need not fill up A-1 form or furnish any documents for remittance of foreign exchange up to $5,000 towards the goods they bring into the country. They need furnish only a simple letter to banks giving their name and address, amount to be remitted, name and address of the beneficiary and the purpose of remittance.
A recent Reserve Bank of India (RBI) circular granting this relaxation says the exchange being purchased must be for a current account transaction — and not included in the Schedules 1 and 2 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000. Of course, the payment must be made by a cheque drawn on the applicant’s bank account or by a demand draft..
Thus, exporters can henceforth receive advance payment for export of goods. This would take more than one year to manufacture and ship, if the ‘export agreement’ provides for shipment of goods extending beyond the period of one year from the date of receipt of advance payment.
The RBI approval will not be required, but banks receiving the remittance must adhere to ‘Know Your Customer’ guidelines, ensure compliance with anti money-laundering standards and monitor proper end-use of funds.
However, the AP (DIR) Circular No. 81 dated February 21, 2012, granting the relaxation prescribes certain stringent conditions that include a ceiling of LIBOR plus 100 basis points limit on interest rate, routing export documents through the bank that received the advance, no instance of refund exceeding 10 per cent of advance received in the previous three years and no refund of advance without Reserve Bank approval in the event of failure to export, partly or fully.
Software exporters, with an annual turnover of over Rs 1,000 crore or who file at least 600 SOFTEX forms annually, must hence forth submit a statement in prescribed form giving all particulars of exports along with quadruplicate set of SOFTEX form to the jurisdictional Director of Software Technology Park (STP), who will verify the details and decide on a percentage sample check of the documents in details.
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Software companies need submit only the documents of demanded by the STP, who will carry out necessary verification, certify the statement and SOFTEX forms in bulk on the “Top Sheet” regarding the values, etc, and thereafter forward the copies as prescribed.
But, exporters will have to provide information about all the invoices including the ones lesser than $25000, in the bulk statement in excel format. Reserve Bank’s AP (DIR) Circular No. 80 dated February 15, 2012, says that this new procedure will be effective initially in the STP Bangalore, Hyderabad, Chennai, Pune and Mumbai with effect from the next financial year (starting April 1, 2012) and that based on the success in these centres, it would be adopted by all the STPs and SEZ/EOU/EHTP/DTA units by June this year.
The idea is to cope with the spurt in the volume of software exports, the complexity of work contracts involved, the voluminous nature of contract agreements, the duration involved in execution of each contract and the time-consuming process involved in SOFTEX form certification.
While the above relaxations will help importers of small consignments, exporters offering extended delivery terms and STP officials (who will need to scrutinise fewer documents), the Reserve Bank must delegate more powers to banks and reduce documentation requirements for a larger number of exporters and importers.