Chatroom: 'Export incentives available on payments received through SVAs'

Q. We refer to RBI’s AP (DIR) Circular no. 10 dated July 11, 2022, allowing settlement of international trade transactions in INR through Special Vostro Accounts (SVAs). Subsequently, various provisions of the FTP and HBP have been amended, bringing the relevant provisions in sync with the RBI Circular. Please advise how exporters will be affected by these changes, especially in regard to availing the incentives.

First, export invoicing in INR is already allowed but the payment must come through Vostro Accounts maintained by foreign banks with a bank in India. Second, trade with Nepal, Bhutan and Myanmar in INR is covered by special arrangements. Third, settlements of trade transactions with some neighbouring countries are made through the Asian Currency Union. Fourth, as far as my knowledge goes, no foreign bank has yet opened SVAs with any bank in India.

However, this may happen soon, especially to facilitate transactions with Russia. When that happens, you will be able to invoice in INR for exports to Russia with a specific provision in the contract that the payment must be made through the SVA of a particular Russian bank with a particular Indian bank.

The Commerce Ministry has issued notification no.33/2015-20 dated September 16, 2022, allowing receipt of payments through SVAs against exports. Its notification no.43/2015-20 dated November 9, 2022, allows payments received through SVA to be counted for recognition as an Export House and fulfillment of export obligation against advance authorisations.

It also says that where you make any import against payment through SVAs, receipt of payment for re-export of the same goods must be received through SVAs. DGFT Public Notice no.35 dated November 9, 2022, allows payments received through SVAs to be counted towards discharge of export obligation against EPCG authorisations.

The notification no. 76/2021-Cus(NT) dated September 23, 2021, says that duty credit allowed under the RoDTEP scheme is subject to realisation of sales proceeds within the period allowed by the RBI. It makes no mention of how the sales proceeds must be realised. Similarly, Section 75 of the Customs Act, 1962, and the Customs and Central Excise Duties Drawback Rules, 2017, only say that the sales proceeds must be realised. So, the entitlements of RoDTEP and Drawback will be available against payments received through SVAs also.

The refunds due to zero-rated exports under GST laws will not be affected if you get the payments through SVAs, because Rule 96B of the CGST Rules 2017 only requires you to realise the sales proceeds, and Rule 96A (ii) of the said Rules allows payments in Indian rupees, wherever permitted by RBI.

Rule 53 of the SEZ Rules, 2006, requires realisation in freely convertible currency against exports for calculating NFE. Para 6.10(a) of the HBP talks only about FOB value of exports for calculating NFE. So, payments received through SVA will enter the NFE calculations for EOUs, but not for SEZs. For supplies to SEZ units or developers, deemed exports and exports to Nepal, Bhutan and Myanmar, the present position will continue.

Business Standard invites readers’ SME queries related to GST, export and import matters. You can write to us at smechat@bsmail.in