Central Government allows International Trade settlements in INR for Export Promotion Schemes under FTP

10 Nov 2022 PDF
Subject Alerts
Categories Indirect Tax, VAT, GST and Sales Tax
Jurisdictions India

This Tax Alert summarizes recent Notification[1] and Public Notice[2] issued by the Directorate General of Foreign Trade (DGFT) amending the Foreign Trade Policy (FTP) and Handbook of Procedures (HBP) to allow Indian Rupee (INR) settlement for benefits/fulfillment of Export Obligation (EO) under export promotion schemes. The same is effective 9 November 2022.

Earlier, Reserve Bank of India (RBI) issued a circular[4] allowing international trade settlement in INR through Special Rupee Vostro Account subject to fulfillment of prescribed procedures. Further, DGFT had also issued a Notification[4] allowing invoicing, payment, and settlement of export and imports in INR as per RBI Circular.

Considering the increased interest in internationalization of INR, changes have been made in the following provisions of FTP and HBP concerning export promotion schemes to align with the RBI Circular:

  • Para 2.46 of FTP allows import for exports subject to conditions. One such condition is export consideration should be realized in convertible foreign exchange. Amendments have been made to allow such realization in INR as well. However, if goods have been imported following INR settlement scheme as per RBI Circular, same shall be exported adhering to the procedure as per the Circular unless otherwise specified by DGFT.

  • Permit exports benefits/EO fulfillment against INR receipts (Para 2.53 of FTP). 

  • Consider INR receipts as well for counting export performance to determine Status Holders recognition (Para 3.20 of FTP).

  • Allow realization of export proceeds in INR for Advance Authorization (AA), Duty-Free Import Authorization (DFIA) schemes (Para 4.21 of FTP), and Export Promotion Capital Goods (EPCG) Scheme (Para 5.11 of HBP).

Comments:

The present amendments to consider INR receipts for export promotion schemes is a trade-friendly measure supporting international trade transactions in Indian currency.

[1] Notification No. 43/2015-2020 dated 9 November 2022
[2] Public Notice No. 35/2015-2020 dated 9 November 2022
[3] A.P. (DIR Series) Circular No.10 dated 11 July 2022
[4] Notification No. 33/2015-2020 dated 16 September 2022

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