MODE OF CURRENCY FOR BUSINESS FROM EOU TO EOU

[Guest]

As per GST Rule, it is understood that all transactions between EOU to EOU is taxable and such business would be treated on par with DTA. As regards payment, I need to know whether it is mandatory for EOU to make payment to other EOU only in terms of foreign currency or it can be paid in Indian Rupee. Please clarify.

[DR.MARIAPPAN GOVINDARAJAN]

In my view it can be paid in Indian Rupee.

[Ganeshan Kalyani]

I am also of the view that payment can be done in INR.

[Nash Industries I Pvt Ltd]

The law does not specify that EOU to EOU settlement to be in FC. RBI in its circular has clarified that an EOU can pay to their EOU suppliers from EEFC account . It is not mandated. The payment from an EOU to another EOU can be made either in FC or in INR.

However, I am of the view that any transaction within India should be in INR only. FC is not earned by the supplier EOU when the FC earned by the recipient EOU when it is a transfer from one EEFC account to another.

AI Summary

Mode of payment between EOUs: payments may be made in INR or foreign currency under regulatory guidance. The document concludes that EOU-to-EOU payments are not mandated to be in foreign currency; payments may be made in either Indian Rupee or foreign currency. GST treatment treats EOU-to-EOU transactions akin to domestic transactions for taxability. RBI guidance allows but does not require use of EEFC accounts for such payments, and transfers between EEFC accounts are not treated as foreign currency earnings for the supplier.