17 July 2023
We have a sale to SEZ unit in India in the USD. While getting the amount, TDS is deducted from the payment and the net payment is received in the bank. The bank is creating the BRCs net of TDS value and are asking us to close the Shipping Bill in the EDPMS by writing off the TDS value since the realization is less than the actual Shipping Bill VAlue
Our contention is that we have realized the full value of Shipping bill partly in cash and partly through TDS so this is not a write off. What is the legal stand on this and should bank issue us the full BRC or only to the extent of realized value ignoring the TDS
06 July 2024
In the scenario you've described, where you have exported goods to an SEZ unit in India and received payment net of TDS (Tax Deducted at Source), there are specific considerations regarding the Bank Realization Certificate (BRC) and the EDPMS (Export Data Processing and Monitoring System):
1. **Bank Realization Certificate (BRC):** - The BRC is issued by the bank certifying the realization of export proceeds in foreign exchange. It is a crucial document for claiming benefits under various schemes and for compliance purposes. - Ideally, the BRC should reflect the full invoice value of the shipping bill, irrespective of whether the payment was received partly in cash and partly through TDS deductions.
2. **Treatment of TDS:** - TDS deducted from the payment is a statutory requirement under Indian tax laws, and it represents tax withheld at the source by the SEZ unit. - From your perspective, you have received the net amount after TDS deduction. The bank should issue the BRC based on the gross invoice value of the shipping bill, not the net amount after TDS.
3. **Legal Standpoint:** - As per Indian export regulations, the BRC should certify the full amount as per the shipping bill's invoice value, irrespective of how the payment was received (partly in cash and partly through TDS). - It is not appropriate for the bank to issue a BRC reflecting only the net amount received after TDS deduction because this does not accurately represent the total foreign exchange earnings from the export.
4. **Action Steps:** - Communicate clearly with your bank about the requirement for issuing the BRC for the full invoice value of the shipping bill. - Provide necessary documentation and clarification that the payment received includes TDS deductions, but the BRC should certify the total invoice value of the shipping bill. - If there are difficulties or disputes with the bank regarding this issue, consider seeking assistance from your customs clearing agent or legal counsel to resolve the matter.
In summary, the bank should issue the BRC for the full invoice value of the shipping bill, even if the payment received is net of TDS deductions. This approach aligns with regulatory requirements and ensures accurate reporting of export proceeds.
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