Import of Goods and Services into India
Master Circular No. 4/2003-04, dated 1-7-2003, issued by Exchange Control Department, RBI
As you are
aware, the Foreign Exchange Management Act, 1999 has been introduced with
effect from June 1, 2000. In terms of section 5 of the Act, any person may sell
or draw foreign exchange to and from authorised person under current account
transaction. However, Central Government has been empowered to impose certain
restrictions for current account transactions in public interest and in
consultation with Reserve Bank. Accordingly, Government of India issued
Notification No. G.S.R. 381(E), dated May 3, 2000 as amended vide its
Notification No. S.O. 301(E), dated March 30, 2001 and Notification No. G.S.R.
442, dated October 22, 2002.
2. Reserve Bank had issued various
circulars containing directions for authorised dealers for import of goods and
services into India.
3. In order to enable the Authorised
Dealers (ADs) to have all the existing instructions on the subject of “Import
of Goods and Services into India” as on July 1, 2003, at one place, this Master
Circular has been prepared.
Introduction
1. Import trade is regulated by the
Directorate General of Foreign Trade (DGFT) under Ministry of Commerce &
Industry, Department of Commerce, Government of India. Authorised dealers,
while undertaking import transactions, should ensure that the imports into
India are in conformity with the Export Import Policy in force and Foreign
Exchange Management (Current Account Transactions) Rules, 2000 framed by
Government of India vide Notification No. G.S.R.381 (E), dated May 3, 2000 and
the directions issued by Reserve Bank under Foreign Exchange Management Act
from time to time.
2. Authorised dealers should follow normal
banking procedures and adhere to the provisions of Uniform Customs and
Practices for Documentary Credits (UCPDC), etc. while opening letters of credit
for import into India on behalf of their constituents. In respect of import of
drawings and designs, compliance with the provisions of Research &
Development Cess Act, 1986 may be ensured. Authorised dealers may also advise
importers to ensure compliance with the provisions of Income-tax Act, wherever
applicable
PART II:
See Foreign Exchange Management
(Current Account Transactions) Rules, 2000
Import of Goods
A.1 General
Rules and
Regulations from the Exchange Control angle to be followed by the authorised
dealers while undertaking import payment transactions on behalf of their
clients are set out in the following paragraphs. Where specific regulations do
not exist, authorised dealers may be governed by normal trade practices.
Authorised dealers may particularly note to adhere to “Know Your Customer”
(KYC) guidelines issued by Reserve Bank (Department of Banking Operations &
Development) in all their dealings.
A.2 Form A 1
Applications by
persons, firms and companies for making payments, exceeding USD 500 or its
equivalent, towards imports into India must be made on appropriate form A 1.
A.3 Import Licences
Authorised
dealers may freely open letters of credit and allow remittances for import of
goods unless they are included in the negative list requiring licence under the
EXIM Policy in force. In such cases, licences marked ‘For Exchange Control purposes’
should be called for and special conditions, if any, attached to such licences
adhered to. Exchange Control copy of the import licence submitted by importer
for opening of Letter of Credit or making remittance, when fully utilised,
should be retained by authorised dealers and may be preserved till its scrutiny
by the internal auditors or inspectors is completed.
A.4
Obligation of Purchaser of Foreign
Exchange
(i) In terms of section
10(6) of the Foreign Exchange Management Act,1999 (FEMA), any person acquiring
foreign exchange is permitted to use it either for the purpose mentioned in the
declaration made by him to an authorised dealer under section 10(5) of the Act
or to use it for any other purpose for which acquisition of exchange is
permissible under the said Act, or Rules or Regulations framed thereunder.
(ii) Where foreign exchange
acquired has been utilised for import of goods into India the authorised dealer
should ensure that importer furnishes an evidence of import to his
satisfaction, as laid down in paragraph A.10.
(iii) In addition to the
permitted methods of payment for imports laid down in Notification No.
FEMA14/2000-RB, dated 3rd May, 2000, payment for import can also be made by way
of credit to non-resident account of the overseas exporter maintained with a
bank in India. In such cases also authorised dealer should ensure compliance
with the instructions contained in sub-paragraphs (i) and (ii) above.
A.5 Time Limit for Settlement of Import
Payments
In terms of the
extant regulations, remittances against imports should be completed not later
than six months from the date of shipment except in cases where amounts are
withheld towards guarantee of performance etc. Deferred payment arrangements
including payments beyond a period of six months from date of shipment are
treated as External Commercial Borrowings (ECBs) for which the procedure given
below may be followed :—
(i) Authorised Dealers may
approve proposals received in Form ECB (format enclosed) for short term credit
for financing, by way of either Suppliers’ Credit or Buyers’ Credit, of import
of goods into India, provided :
(a) The
credit is being extended for a period of less than three years.
(b) The amount of credit does not exceed US $
20 million, per import transaction.
(c) The ‘all-in-cost’ per
annum, payable for the credit does not exceed LIBOR + 50 basis points for
credit upto one year and LIBOR + 125 basis points for credits for periods
beyond one year but less than three years, for the currency of credit.
(d) Authorised dealers may
issue approval by way of a letter on the lines of Annexure - I and ensure
submission of ECB-5 statement as hitherto.
(e) International Banking
Division of the authorised dealer may furnish the details of approvals granted
by all its branches, during the month, in the Form ECB-ST (format enclosed) to
the Chief General Manager, Exchange Control Department, Reserve Bank of India,
Central Office, External Commercial Borrowing (ECB) Division, Mumbai - 400 001,
so as to reach not later than 5th of the following month. Each credit may be
given a unique Identification number by the authorised dealers. The loan
Identification number allotted to the loan/credit should invariably be quoted
in all the references made to RBI.
(f) All applications, in
form ECB, for availing of short term credit for amount exceeding US $ 20
million for any import transaction may be forwarded to the Chief General
Manager, Exchange Control Department, Reserve Bank of India, Central Office,
External Commercial Borrowing (ECB) Division, Mumbai-400 001.
(ii) Authorised dealers may
permit settlement of import dues delayed due to disputes, financial
difficulties etc. Interest in respect of such delayed payments may be permitted
in terms of the directions in para A.7 below.
Note : Remittances against import
of books may be allowed without restriction as to time limit, provided,
interest payment, if any, is as per the instructions in para A.7
A.6 Advance Remittance
Authorised
dealers may allow advance remittance for import of goods without any ceiling
subject to the following conditions :
(a) If the amount of advance
remittance exceeds US $ 100,000 or its equivalent, an unconditional,
irrevocable standby Letter of Credit or a guarantee from an international bank
of repute situated outside India or a guarantee of an authorised dealer in
India, if such a guarantee is issued against the counter-guarantee of an
international bank of repute situated outside India, is obtained.
(b) Physical import of goods
into India is made within six months (three years in case of capital goods)
from the date of remittance and the importer gives an undertaking to furnish
documentary evidence of import within fifteen days from the close of the
relevant period.
(c) In the event of
non-import of goods, authorised dealer should ensure that the amount of advance
remittance is repatriated to India or is utilised for any other purposes for
which release of exchange is permissible under the Act, Rules or Regulations
made thereunder.
A.7 Interest on Import Bills
Authorised
dealers may allow payment of interest on usance bills or overdue interest for a
period of less than three years from the date of shipment at the rates
prescribed in para A.5 above.
A.8 Remittances against Replacement Imports
Where goods are
short-supplied, damaged, short-landed or lost in transit and the Exchange
Control copy of the import licence has already been utilised to cover the
opening of a letter of credit against the original goods which have been lost,
the original endorsement to the extent of the value of the lost goods may be
cancelled by authorised dealers and fresh remittance for replacement imports
permitted without reference to Reserve Bank, provided the insurance claim
relating to the lost goods has been settled in favour of the importer. It may
be ensured that the consignment being replaced is shipped within the validity
period of the licence.
A.9 Guarantee for Replacement Import
In case
replacement goods for defective import are being sent by the overseas supplier
before the defective goods imported earlier are reshipped out of India,
authorised dealers may issue guarantees at the request of importer client for
despatch/return of the defective goods, according to their commercial judgment.
A.10.1 Evidence of Import
(i) In case of all imports,
where value of foreign exchange remitted/paid for import into India exceeds US
$ 25,000 or its equivalent, it is obligatory on the part of the authorised
dealers through whom the relative remittance was made, to ensure that the
importer submits :—
(a) the
Exchange Control copy of the Bill of Entry for home consumption, or
(b) in case of 100% Export
Oriented Units the Exchange Control copy of the Bill of Entry for warehousing,
or
(c) Customs Assessment
Certificate or Postal Appraisal Form, as declared by the importer to the
Customs Authorities, where import has been made by post, as an evidence that
the goods for which the payment was made have actually been imported into
India.
(ii) Where imports are made in non-physical form, i.e., software or data through internet/datacom channels and drawings and designs through e-mail/fax, a certificate from a Chartered Accountant that the software/data/drawing/design has been received by the importer, may be obtained.
Note : Authorised dealers should
advise importers to keep Customs Authorities informed of the imports made by
them under this clause.
(iii) In respect of imports
on D/A basis, authorised dealers should insist on production of evidence of
import at the time of effecting remittance of import bill. However, if
importers fail to produce documentary evidence due to genuine reasons such as
non-arrival of consignment, delay in delivery/customs clearance of consignment,
etc., authorised dealers may, if satisfied with the genuineness of request,
allow reasonable time, not exceeding three months from the date of remittance,
to the importer to submit the evidence of import.
(iv) Authorised dealers
should acknowledge receipt of evidence of import e.g. Exchange Control copy of
the Bill of Entry, Postal Appraisal Form or Customs Assessment Certificate,
etc., from importers by issuing acknowledgement slips containing all relevant
particulars relating to the import transactions.
(v) Internal inspectors or
auditors (including external auditors appointed by authorised dealers) should
carry out 100 per cent verification of the documents evidencing import, e.g.
Exchange Control copies of Bills of Entry or Postal Appraisal Forms or Customs
Assessment Certificates, etc.
(vi) Documents evidencing import into India should be preserved by authorised dealers for a period of one year from the date of its verification. However, in respect of cases which are under investigation by investigating agencies, the documents may be destroyed only after obtaining clearance from the investigating agency concerned.
A.10.2 Authorised dealers may
accept either Exchange Control copy of Bill of Entry for home consumption or a
certificate from the Chief Executive Officer (CEO) or auditor of the company
that the goods for which remittance was made have actually been imported into
India provided :—
(i) the
amount of foreign exchange remitted is less than US $ 1,00,000 or its
equivalent,
(ii) the importer is a
company listed on a stock exchange in India and whose net worth is not less
than Rs. 100 crores as on the date of its last audited balance sheet, or the
importer is a public sector company or an undertaking of the Government of
India or its departments.
The above
facility may also be extended to autonomous bodies, including scientific
bodies/academic institutions, such as Indian Institute of Science/Indian
Institute of Technology etc. whose accounts are audited by the Comptroller and
Auditor General of India (CAG). Authorised dealers may insist on a declaration
from the auditor/CEO of such institutions that their accounts are audited by
CAG.
A.11
Follow up for Import Evidence
i. In case an importer
does not furnish any documentary evidence of import, as required under
paragraphs A.10.1 & 2 above, within 3 months from the date of remittance
involving foreign exchange exceeding US $ 25,000, the authorised dealer should
rigorously follow-up for the next 3 months, including issue of registered
letters to the importer.
ii. Authorised dealers
should forward to Reserve Bank a statement on half-yearly basis as at the end
of June & December of every year, in form BEF (format enclosed) furnishing
details of import transactions, exceeding US $ 25,000 in respect of which
importers have defaulted in submission of appropriate document evidencing
import within 6 months from the date of remittance. The said half-yearly
statement should be submitted to the Regional Office of Reserve Bank under
whose jurisdiction the authorised dealer is functioning, within 15 days from
the close of the half-year to which the statement relates.
A.12
Receipt of import Bills/Documents
i. Import bills and
documents should be received from the banker of the supplier by the banker of
the importer in India. Authorised dealers should not, therefore, make
remittances where import bills have been received directly by the importers
from the overseas supplier, except in the following cases :
a. Where
the value of import bill does not exceed US $ 10,000.
b. Import bills received by
wholly-owned Indian subsidiaries of foreign companies from their principals.
c. Import bills received by
Super Star Trading Houses, Star Trading Houses, Trading Houses, Export
Houses,100% Export Oriented Units/Units in Free Trade Zones, Public Sector
Undertakings and Limited Companies.
d. Where the value of
import bill does not exceed US $ 25,000 in respect of import of—
i. books
and magazines
ii. life saving drugs/equipments by
Hospitals, etc. and
iii. imports by reputed
research and other development institutions like Tata Institute of Fundamental
Research, C-DOT, Indian Institute of Technology, Indian Institute of Science
and Universities.
e. Import bills received by
all limited companies viz. public limited, deemed public limited and private
limited companies.
ii. In all other cases, at
the request of importer clients, authorised dealers may receive bills direct
from the overseas supplier up to US $ 25,000 (U.S. Dollars Twenty five thousand
only), provided the authorised dealer is fully satisfied about the financial
standing/status and track record of the importer customer. Before extending the
facility, authorised dealer should obtain report on each individual overseas
supplier from the overseas banker or reputed credit agency.
A.13
Import of Gold/Platinum/Silver by
Nominated Banks/Agencies
i. Import of gold on consignment
basis - Gold may be imported by the nominated agencies/banks on consignment
basis where the ownership will remain with the supplier and the importer
(consignee) will be acting as an agent of the supplier (consignor). Remittances
towards the cost of import shall be made as and when sales take place and in
terms of the provisions of agreement entered into between the overseas supplier
and nominated agency/bank.
ii. Import of gold on
unfixed price basis - The nominated agency/bank may import gold on outright
purchase basis subject to the condition that although ownership of the gold
shall be passed on to the importer at the time of import itself, the price of
gold shall be fixed later, as and when the importer sells the gold to the
users.
Note : Instructions contained in
this paragraph would also apply to import of platinum and silver.
A.14 Import factoring
Authorised
dealers may enter into arrangements with international factoring companies of
repute, preferably members of Factors Chain International, without approval of
Reserve Bank. However, authorised dealers will have to ensure compliance with
the extant exchange control directions relating to imports, EXIM policy in
force and any other guidelines/directives issued by Reserve Bank in this regard.
Merchanting Trade
Authorised
dealers may take necessary precautions in handling merchanting trade
transactions or intermediary trade transactions to ensure that (a) goods
involved in the transactions are permitted to be imported into India, (b) such
transactions do not involve foreign exchange outlay for a period exceeding
three months, and (c) all rules, regulations and directions applicable to
export out of India (except Export Declaration Form) are complied with in
respect of the export leg and all rules, regulations and directions applicable
to import (except Bill of Entry) are complied with in respect of the import leg
of merchanting trade transactions. Authorised dealers are also required to
ensure timely receipt of payment for the export leg of such transactions.
Import
of Currency
Import of
currency, including cheques, is governed by clause (g) of sub-section (3) of
section 6 of the Foreign Exchange Management Act, 1999, and the Foreign
Exchange Management (Export and Import of Currency) Regulations, 2000, made by
Reserve Bank vide Notification No. FEMA 6/RB- 2000 dated May 3, 2000 and No.
FEMA 38/RB-2001 dated February 27, 2001.