Payment from EEFC Account-

[Nash Industries I Pvt Ltd]

RBI circular allows payment from EEFC account to EOU/EHTP/STP in foreign currency.

The question is whether payment received by an 2nd EOU from another 1st EOU (in case of Inter unit transfers as per para 6.13 of FTP) from the EEFC account of the latter is considered as FE earnings in the hands of the former.

The FE is earned by the 1st EOU in its EEFC account. Payment is made by the 1st EOU to 2nd EOU from the EEFC account. Whether such earnings are considered as FE in both EEFC account.

Thanks and Regards

S.Ramaswamy

[YAGAY andSUN]

Whether both the units are of the same company or not?

[Nash Industries I Pvt Ltd]

Two unconnected (principal to principal) business entities - supplier and customer

[YAGAY andSUN]

Please check para 6.04 of the FTP and para 6.10 of the HBP (mid term review) about the Net Foreign Exchange (NFE) Earnings. There is no mentioned about EEFC Account. However you may get it clarified from Development Commissioner.

[DR.MARIAPPAN GOVINDARAJAN]

Yes, there is no mention about EEFC in para 6.13 of FTP. The suggestion given by Shri Yagay may be followed.

[Nash Industries I Pvt Ltd]

EEFC is as per RBI Master Circular. Its not regarding FTP. FTP talks about FE earnings.

The question is whether transfer (settlement of payment) of FE from EEFC Account of EOU to another EOU is considered earnings of FE for the supplier EOU when the FE is actually earned by the First EOU (customer EOU).

Only if the settlement in FC (by the Customer EOU) is shown as a outflow of FE, the second EOU ( supplier EOU) to be considered as FE earnings. Else two units claiming FE earnings within the country.

EOU unlike SEZ is considered within the Indian territory for tax purpose.

Is it correct?

Regards

S.Ramaswamy

AI Summary

Foreign exchange earnings treatment: EEFC transfers count for recipient only if shown as foreign currency outflow and FE realization. Whether a foreign currency payment from one EOU's EEFC account to another constitutes FE earnings for the recipient depends on treatment: the payer's EEFC credit is FE for the payer, and the supplier will be treated as having FE earnings only if the payment is shown as an outflow of foreign currency by the payer and recognised as FE realization for the supplier; FTP addresses net foreign exchange but does not expressly treat EEFC transfers, so administrative clarification is recommended.