The customs department, in what promises to blow up into a full scale turf war with the Reserve Bank of India (RBI), has blamed the central bank for not exercising enough vigilance in the matter of exporters remitting unlimited foreign exchange abroad in the guise of agency commissions. | |
| In a recent recommendation to the finance ministry, the customs department has argued for a restoration of the 12.5 per cent limit on agency commissions. "The RBI should give a thought to the ill-effects of unhindered remittances outside India in the guise of agency commissions and revise their instructions to bring back the ceiling on agency commissions," the department stated. |
| |
| Prior to the regime of Foreign Exchange Management Act (FEMA), agency commission paid by exporters was capped at 12.5 per cent of total exports. Agency commission is paid to overseas agents to facilitate export procedures. Since Fema came into being, the cap was deregulated and exporters were free to pay any amount as agency commission. |
| |
| According to the customs department, there have been numerous instances of exporters remitting as much as 50 per cent of the export proceeds as agency commissions. It is not known what happens to these sums after they are remitted overseas through legitimate banking channels. There are fears that the funds might get channelised into nefarious activities such as money laundering or other anti-national activities. |
| |
| The central bank's contention on the other hand, is that since the 12.5 per cent (of export value) cap on agency commission has been scrapped under the revamped Fema, it is left to the discretion of exporters on matters related to amounts remitted or the end use of these funds. The customs department, however, stated that this is not conducive to "safeguarding the revenue outgo as well as fiscal and territorial security (of the country)." |
| |
| Arguing its case, the customs department quotes the director general of foreign trade (DGFT) as already having noted that export incentives should only be given to exporters with a maximum limit of 12.5 per cent on agency commissions, "which is in conformity with the clause of the World Trade Organisation agreement on Subsidies and Countervailing duties." |
| |
| If the exporter claims that he has paid commissions in excess of 12.5 percent, the excess amount should not be taken into account for the calculation of export incentives. |
| |
|
| |
