Bill to Oversea Company and Ship to Indian Company (Present in SEZ)

[Danish Azfar]

Dear Experts.

Have a case that needs support for clarification.

Company Z (indian Entity Present in SEZ in India) places the PO to Taiwan Company (we called it company A). Company A places the PO to Company B (MOOWR approved company in India).

Company B Places the Raw material PO to Company A, once the raw materials converted to finished goods, company B provide the Bill to invoice to Company A but ship the FG to company Z (on the instruction of Company A). Upon receiving the goods company A provide the invoice to company Z.

Question 1 - How it will become export to company B (how this will show in the IDPMS system of bank)

Question 2 - How it will become import for company Z, (how this will show in the IDPMS system of bank) so that Z will make the payment to company A.

Thanks

[YAGAY andSUN]

Following is our understanding on the above query and hope the given solution will be useful to you.

Background of the Case:

1. Company Z, which is in an SEZ in India, places an order to Company A, based in Taiwan.
2. Company A then places the order to Company B, which is an Indian company operating under MOOWR (Manufacturing and Other Operations in Warehouse Regulations).
3. Company B sources raw material from Company A, manufactures finished goods, and sends the goods directly to Company Z as per instructions from Company A.
4. Company B raises an invoice to Company A.
5. Company A raises an invoice to Company Z, and Z makes the payment to A.

Question 1: How is it considered an export for Company B, and how will it reflect in the bank’s export system (EDPMS)?

Even though Company B is sending goods to another company in India (Company Z), this is treated as an export because:

• Company B is selling the goods to a foreign company (Company A), and receiving payment in foreign currency.
• Since the goods are being delivered to an SEZ unit, and SEZ is treated like a foreign territory under Indian rules, this also supports the export nature of the transaction.

In this case, Company B shows this as an export to Company A, and it will be reported under EDPMS (Export Data Processing and Monitoring System) of the bank. Even though there's no traditional shipping bill like in a cross-border export, documentation like invoice, payment receipt, and SEZ delivery confirmation (endorsed by SEZ customs) are used to support the export status.

Question 2: How does this become an import for Company Z, and how is it reflected in the bank’s import system (IDPMS)?

From Company Z’s side, they are importing goods from Company A (Taiwan), even though the goods are made and delivered by Company B in India. That’s because:

• The invoice is raised by a foreign supplier (Company A).
• Payment is made in foreign currency to that foreign company.
• The SEZ unit treats any purchase from a foreign supplier—even if the goods physically come from within India—as an import.

So, Company Z files a Bill of Entry (BOE) at the SEZ gate showing Company A as the supplier, and based on that, the bank will track the import in the IDPMS (Import Data Processing and Monitoring System). This lets Company Z make the payment to Company A through proper banking channels.

***

[Danish Azfar]

Hi Expert,

Thanks for reply. 

So this model is risk free in all the manner? Like GST, Custom and FEMA?

[YAGAY andSUN]

Is this model risk-free in terms of GST, Customs, and FEMA?

Your understanding that this model should be "risk-free" is mostly correct, but there are still some key considerations to ensure full compliance:

1. GST:
   • Company Z (SEZ): Goods received by SEZ units are exempt from GST under Section 16 of IGST Act (zero-rated supplies). Company Z will not be liable for GST on the goods it receives, as the transaction is treated as an import under SEZ rules.
   • Company B (Manufacturer): Company B will need to ensure that no GST is charged on the invoice to Company A, as it is an export transaction. The goods will be under export exemption.
2. Customs: Since SEZs are treated as "foreign territory," the entry of goods into the SEZ does not attract regular customs duties, but the proper documentation (Bill of Entry) and customs procedures must be followed. Company Z must ensure that they file the correct BOE and comply with SEZ-specific customs regulations.
3. FEMA (Foreign Exchange Management Act): Company Z’s payment to Company A will be treated as an import under FEMA, so the payment must be routed through the correct foreign exchange channels, ensuring that the IDPMS system is updated to monitor the import and foreign currency payment.
4. MOOWR Compliance: Since Company B is operating under MOOWR (Manufacturing and Other Operations in Warehouse Regulations), they are allowed to manufacture goods using imported materials and sell the finished goods, typically without customs duties, provided they comply with the necessary procedures.

Potential Risks:

• Documentation: The most crucial element is ensuring all the paperwork is correct—especially the invoice from Company A to Company Z, the SEZ delivery confirmation, and the Bill of Entry.
• SEZ Compliance: The SEZ unit (Company Z) needs to ensure it properly handles the goods as imports, despite them being manufactured in India, in line with SEZ regulations.

As long as the necessary steps (GST exemption, customs documentation, FEMA compliance) are followed, this model should indeed be low-risk in terms of regulatory compliance.

***

AI Summary

International Trade Compliance: Taiwanese Firm Navigates Complex SEZ Manufacturing and Export Transaction Under MOOWR Guidelines A Taiwanese company facilitates a complex transaction involving an Indian SEZ entity, a MOOWR-approved manufacturer, and international trade regulations. The arrangement involves purchasing raw materials, manufacturing finished goods, and shipping directly to the SEZ unit. The transaction is structured to leverage export-import provisions, ensuring compliance with GST, customs, and FEMA regulations while minimizing tax and duty implications through careful documentation and procedural adherence.