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FEMA - Export Advance

Anirudh Tanvar (Service) (85 Points)

07 January 2011

Hi.

A Indian Company received an advance of 1 mn USD in Jan'09 from a foreign co.. but the export is not done till today. What is procedure now to refund the advance. and what is penal provisions. Please advice.

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3 Replies

RAMESH KUMAR VERMA ( CS PURSUING ) (43853 Points)
Replied 07 January 2011

Advance Payments against Exports

In terms of Regulation 16 of Notification No. FEMA 23 dated May 3, 2000, where an exporter receives advance payment (with or without interest), from a buyer outside India, the exporter shall be under an obligation to ensure that -

the shipment of goods is made within one year from the date of receipt of advance payment;
the rate of interest, if any, payable on the advance payment does not exceed London Inter-Bank Offered Rate (LIBOR) + 100 basis points, and
the documents covering the shipment are routed through the AD Category – I bank through whom the advance payment is received;

Provided that in the event of the exporter's inability to make the shipment, partly or fully, within one year from the date of receipt of advance payment, no remittance towards refund of unutilised portion of advance payment or towards payment of interest, shall be made after the expiry of the said period of one year, without the prior approval of the Reserve Bank.

(2) Where the export agreement provides for shipment of goods extending beyond the period of one year from the date of receipt of advance payment, the exporter shall require the prior approval of the Reserve Bank

(3) AD Category – I banks may allow the purchase of foreign exchange from the market for refunding advance payment credited to EEFC account only after utilising the entire balances held in the exporter’s EEFC accounts maintained at different branches/banks.

for more information link is :-

https://www.rbi.org.in/scriptts/BS_ViewMasCirculardetails.aspx?id=5115#B8

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Anirudh Tanvar (Service) (85 Points)
Replied 07 January 2011

Originally posted by : RAMESH KUMAR VERMA
	Advance Payments against Exports In terms of Regulation 16 of Notification No. FEMA 23 dated May 3, 2000, where an exporter receives advance payment (with or without interest), from a buyer outside India, the exporter shall be under an obligation to ensure that - the shipment of goods is made within one year from the date of receipt of advance payment; the rate of interest, if any, payable on the advance payment does not exceed London Inter-Bank Offered Rate (LIBOR) + 100 basis points, and the documents covering the shipment are routed through the AD Category – I bank through whom the advance payment is received; Provided that in the event of the exporter's inability to make the shipment, partly or fully, within one year from the date of receipt of advance payment, no remittance towards refund of unutilised portion of advance payment or towards payment of interest, shall be made after the expiry of the said period of one year, without the prior approval of the Reserve Bank. (2) Where the export agreement provides for shipment of goods extending beyond the period of one year from the date of receipt of advance payment, the exporter shall require the prior approval of the Reserve Bank (3) AD Category – I banks may allow the purchase of foreign exchange from the market for refunding advance payment credited to EEFC account only after utilising the entire balances held in the exporter’s EEFC accounts maintained at different branches/banks. for more information link is :- https://www.rbi.org.in/scripttts/BS_ViewMasCirculardetails.aspx?id=5115#B8 Thanks Mr. Verma for Advice. I have gone through the above provisions.. Just want to know if there is any way out to regularise the above transaction.