Important updates under FEMA for GCCs in India – Export of services and Imports

Over the past few years, Global Capability Centres (GCCs) in India have evolved from cost-focused captive units into strategic hubs delivering high-value services to global enterprises. With this evolution has come heightened regulatory attention, particularly around cross-border transactions, imports and service exports, and the underlying tax and foreign exchange frameworks governing such flows. Recent developments under India’s indirect tax and foreign exchange regulations indicate a clear shift towards closer scrutiny, greater alignment across laws, and increased expectations from GCC finance and compliance teams.

Under GST law, there is a shift awaiting to become effective, from taxing the intermediary services to granting them the export status. Further, there is more clarity emerging on the judicial side regarding the fact that support services qualify as export of service and are not to be regarded as intermediary services. In a relevant matter of Amazon Development Centre India (P) Ltd. [1] it is held byKarnataka High Court that pre-sale and post-sale support services provided to foreign affiliates qualify as an export of services and are not 'intermediary services'.

Against this backdrop, it has become imperative for GCCs to reassess their existing models, documentation, and compliance practices to ensure they remain robust, defensible, and aligned with current regulatory thinking. This article highlights key updates under FEMA and areas of focus that GCCs in India should be mindful of, while dealing with import and export transactions.

Vide notification No. FEMA 23(R)/2026-RB, the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 were notified that would be effective from 1st Oct 2026. At first glance it looks like there is simplification in the procedures and requirements for the realisation and payment of forex related to such cross border transactions. However, on a closer look one would understand that the RBI has now placed greater role and responsibility on the Authorised Dealers (AD) to monitor these transactions.

Below is a summary of key aspects of these regulations related to export of services and imports, that need to be complied, going forward by the service exporters:

Realisation and payment

1. Export proceeds shall be realised within 15 months from the date of service export invoice. As per the GST law, the invoice for supply of services shall be issued within 30 days from the date of provision of the service.
2. Import payments shall be made as per the contract terms, for which extension shall be provided by AD in case satisfied with the reasons.
3. In case of advance receipt/payment for export/import, subsequent receipt/payment for such export/import shall be made through the same AD. If not, suitable intimation shall be made to both the ADs.  
4. Export receivables and import payables can be set-off within stipulated time, which would now be available seamlessly for goods and/or services, for example - payables related to goods import can be set off against receivables for service exports. Though this must be done with the same overseas buyer/supplier or with the exporter’s overseas group or associate companies.
5. Receipt or payment to third parties would be allowed based on satisfaction of the AD regarding bona fides of the transaction.
6. Advance payment for imports would require adherence to limits set by AD / furnishing of a standby Letter of Credit (SBLC) /guarantee.

Declaration and procedural aspects

1. Earlier only export of software required filing of SOFTEX. Now ALL service exports would require declaration in Export Declaration Form (EDF) to the specified authority.
2. A single EDF can be submitted for a month. Timeline for submission of EDF is as below:
   • For software exports - within 30 days from the end of month in which invoice for services has been raised,
   • For other service exports - on or before the date of receipt of payment.
   • Extension may be granted by AD Bank in case of reasonable request from exporter after citing reasons.
3. Based on declaration from exporter, entry in EDPMS for invoices up to Rs.10 lakh (or its equivalent in foreign currency) would be closed, which can also be submitted quarterly.
4. For such invoices, any reduction in value of exports may be permitted by the AD Bank based on declaration from the exporter.
5. Similar mechanism would be available for closure of entry in IDPMS related to import of goods/services of value up to Rs.10 lakh.

Transactions not materialising

Imports: Full repatriation of advance payment is required in case of imports not materialising within contract/extended period. If not done, future advance payment for imports by the importer shall require an unconditional, irrevocable SBLC / guarantee from an international bank of repute or a guarantee of an AD in India, which is issued against a counter-guarantee of an international bank of repute.

Exports: In case ofunrealisedexport proceeds for a period beyond one year from the due date of realisation or extended period, further exports can be undertaken only against receipt of full advance or an irrevocable LC.

AD’s SOP

The AD’s are required to put in place a separate, comprehensive, well-documented internal policy and SOP, for handling transactions (including the reporting thereof) related to export and import of goods and services. The policy and the main features of the SOP shall be displayed on the AD’s website.

Though the above regulations look simple and straightforward, it would be relevant to look at the AD’s SOP to see what would be the actual terms, conditions, restrictions, procedures and documentation that need to be in place to convince the AD regarding the bona fide of the export / import transactions.

Consequences of future exports only on advance receipt, imports on SBLC, etc. could pose operational issues and hence proper understanding and adherence of the regulations and the AD’s SOP would be prime.

Each AD is free to have its own SOP and hence important for the GCCs to have one or max two ADs through which these transactions would be routed, so that based on such AD’s SOP, an internal SOP can be drawn up by the GCC to ensure adherence to the provisions related to FEMA for imports and exports.

Though the responsibility of ensuring adherence to the regulations is cast on the ADs, one will have to look at how the SOP of the ADs evolve over a period to ensure ease of doing business for its customers and at the same time ensuring that infructuous transactions are not permitted.

The views expressed are strictly personal and cannot be regarded as an opinion. For any queries or feedback please write to [email protected] and [email protected].

[1] M/s. Amazon Development Centre India Private Limited Versus Additional Commissioner Of Central Tax GST Appeals-II, Bangalore, Assistant Commissioner Of Central Tax, Bangalore. [2025 (5) TMI 150 - KARNATAKA HIGH COURT]