Request for Expert Guidance on DAP vs DDP Error, DHL Duty Payment, and Reimbursement Compliance

[Arryie Arryie]

Dear Experts,

Seeking advice on an import issue involving a documentation error and the correct FEMA/tax treatment for reimbursing a foreign supplier.

My client imported goods from a German company under agreed DAP terms, where the buyer must pay Indian customs duties. However, the exporter mistakenly issued the commercial invoice under DDP, leading DHL Germany to treat the shipment as duties-paid by the shipper. DHL Germany paid the duties in euros, transferred the liability to DHL India, and DHL India deposited the duty to Indian Customs in INR.

The exporter now wants reimbursement of these duties from the Indian buyer in euros. Instead of issuing a reimbursement invoice, they are proposing to issue a “Consultancy Fee” invoice, which is incorrect and creates avoidable complications: mismatch with import documents, unnecessary 15CA/15CB requirements, potential Section 195 issues, DTAA considerations, and FEMA purpose code confusion, since no consultancy service was actually provided.

We believe the correct approach is for the exporter to issue a “Reimbursement of Customs Duty Paid on Buyer’s Behalf” invoice, supported by DHL duty documents and the Bill of Entry. This keeps the nature of payment as a pure reimbursement, not taxable, avoids TDS, and typically requires only Form A2 (and at most 15CA Part A). FEMA purpose code S1303 appears appropriate.

Requesting expert confirmation on whether this is the correct and compliant method, and if any additional declarations or documents are advisable for smooth bank processing.

The value of duties and taxes all included is below 1,20,000 Rs and well below 500000 Rs of threshold in a financial year.

[Shilpi Jain]

Yes, this cannot be given as a consultancy services invoice as it is not the fact and this could lead to import of service related GST liabilities as well.

In this case, it looks like due to wrong declaration as DDP - customs duties and taxes liable at the time of import may have also been paid less. This may require an amendment of the BoE.

[Shilpi Jain]

Also note that the purpose code of S1303 is not appropriate as it relates to "Remittance towards donations to religious and charitable institutions abroad"

AI Summary

Reimbursement of Customs Duty: recover duties as a non taxable reimbursement with documentary support and proper bank filings. Exporter must invoice recovered customs as a Reimbursement of Customs Duty Paid on Buyer's Behalf, supported by DHL duty payment records and the Bill of Entry (amended if needed). Treat the payment as a non-taxable reimbursement to avoid TDS and service characterization; banks typically require Form A2 and, given the low value, at most 15CA Part A. Do not issue a consultancy fee invoice or use FEMA purpose code S1303.