EOU to DTA services: RBI should allow payment in foreign exchange

TNC Rajagopalan answers readers' SME queries related to GST, export and import matters

We are an EOU in the services sector. Can we sell our services in DTA against payments in INR?

 

 Para 6.07(b) of FTP says that ‘for services, including software units, sale in DTA in any mode, including online data communication, shall also be permissible up to 50% of FOB value of exports and/or 50% of foreign exchange earned, where payment of such services is received in foreign exchange’. Also, Para 11.51 of FTP says that “services” include all tradable services covered under General Agreement on Trade in Services (GATS) and earning free foreign exchange. Both these provisions require you to receive payment in foreign exchange from the DTA unit. However, RBI has not issued any circular allowing DTA units to purchase foreign exchange or make payment in foreign exchange from EEFC account against services received from EOU. So, the DTA unit may not be able to pay you in foreign currency. The RBI should take note and allow DTA units to pay EOUs in foreign currency against receipt of services from them.

 

 

For our SEZ unit, we purchased one of our raw materials from indigenous sources. The goods were brought in under a bill of export claiming drawback at All Industry Rates. The DTA supplier had cleared the goods under LUT. We could not utilise the materials and now we want to sell them to another DTA party at less than 25% of our purchase price.   Can we do so and if so, should we pay IGST on the purchase price or the sales price?  

 

 You can follow Rule 48(2) of SEZ Rules, 2006 read with Section 14 of the Customs Act, 1962 read with Rule 3 of the Customs Valuation Rules, 2007 and clear the goods at transaction value i.e. your sales value. However, Customs may expect you to justify the lower price.  You may pay full duties, including IGST, as leviable on such goods if imported, or clear the goods under S.No. 1 in the Table to the notification 45/2017-Cus. dated 30th June 2017, surrendering the drawback taken and the IGST not paid at the time of procurement.

 

Due to closure of the Strait of Hormuz, our shipping line has declared ‘end of voyage’ and unloaded our export cargo at an intermediate port. Who is responsible for safety and additional charges for bringing the cargo back to Indian shores and then to our factory?

 

 If you exported the goods on an FOB/CFR/CIF basis, the risk normally passes to the buyer when the goods go on board the vessel. If you exported on DAP/DDU/DDP basis, the risk stays with you till the goods are delivered to the buyer as envisaged in the contract/Incoterms. The shipping lines or the intermediate port authorities may safeguard your cargo but the related charges, including storage, return freight customs clearance and inland movement, will be payable by the party responsible under Incoterms/contract/bill of lading terms. Your insurer will reimburse these costs only if your policy includes Institute War Clauses. 

 

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