FEMA

This query is : Resolved

Keerthilakshmi B R (Querist)
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19 May 2009 Can an Indian Company raise a bill on another Indian Company in a currency other than rupees? Please let me know with relevant provisions. Thank you.

M Prabhakar Menon

M Prabhakar Menon (Expert)
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19 May 2009 The raising of the bill depends on where the transaction takes place because matters like excise, sales tax, freight insurance etc are slso involved. Local laws applicable at the time and place of billing will have to be respected as sales tax / service tax which ever is applicable is not the same in all countries Further the local laws regarding info to be furnished in the bill form also should be taken care of. X company registered in India can bill y company also registered in India in a foreign currency if the transaction originates at the branch office of X located outside India.

Keerthilakshmi B R

Keerthilakshmi B R (Querist)
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19 May 2009 Thank you sir. Could u please let me know the consequence if both the Companies are located in India only.

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Keerthilakshmi B R

Keerthilakshmi B R (Querist)
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19 May 2009 Thank you sir. Could u please let me know the consequence if both the Companies are located in India only.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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24 July 2024 Under FEMA (Foreign Exchange Management Act) regulations in India, if two Indian companies are transacting with each other, the transactions are primarily denominated in Indian Rupees (INR). Here’s an explanation based on relevant provisions:

### Provisions under FEMA:

1. **Transactions Between Residents:**
- FEMA primarily governs transactions involving foreign exchange and transactions between residents (entities within India).
- As per FEMA regulations, transactions between residents should be in Indian Rupees unless specifically permitted otherwise.

2. **Currency of Transaction:**
- Generally, transactions between two Indian companies (both residents) must be conducted in Indian Rupees.
- The Reserve Bank of India (RBI) has laid down regulations to ensure that foreign exchange transactions are controlled and monitored. Any deviation from using INR requires specific approval from the RBI.

3. **Exceptions:**
- There are certain exceptions where RBI may permit transactions in foreign currency between residents, such as for international trade-related transactions, provided they comply with RBI guidelines and are routed through authorized dealer banks.

### Consequences of Non-Compliance:

- **Penalties:** Conducting transactions in currencies other than INR without RBI approval can lead to penalties under FEMA.

- **Legal Implications:** It could be considered a violation of foreign exchange laws, leading to legal consequences.

- **Regulatory Scrutiny:** Both companies may face scrutiny from RBI or other regulatory authorities for non-compliance with FEMA regulations.

### Practical Implications:

- **Invoices and Agreements:** Indian companies should ensure that invoices, contracts, and agreements clearly state transactions in INR unless explicitly permitted otherwise by RBI.

- **RBI Approval:** If there’s a specific need to transact in a foreign currency (e.g., for import/export or specific business agreements), companies should seek prior approval from RBI through their authorized dealer bank.

### Conclusion:

In conclusion, under FEMA regulations, Indian companies conducting transactions with each other must use Indian Rupees unless authorized otherwise by RBI. Any deviation without proper approval can lead to regulatory issues and penalties. It’s crucial for companies to adhere to these regulations and seek professional advice when dealing with cross-border transactions or transactions involving foreign currency.