SIT also directed Directorate of Revenue Intelligence (DRI) to check from it’s database on how many Companies have claimed duty drawback but have failed to bring export proceeds, take necessary action against them as per law; Asks  RBI to immediately develop an institutional mechanism and IT system to not only immediately red flag those cases where exports have been outstanding in violation of FEMA guidelines but share the complete data with Enforcement Directorate and Directorate of Revenue Intelligence on a monthly basis.

As per RBI regulations, all exporters have to bring foreign exchange into the country as export proceeds within one year of the date of exports. The data on whether a particular exporter has brought export proceeds into the country is maintained by RBI.

Not bringing export proceeds is a violation of Foreign Exchange Management Act (FEMA) as it amounts to illicitly parking funds abroad.

Further, exporters can claim duty drawback on exports made with respect to taxes paid on inputs to exports. Any exporter can claim duty drawback only if the exporter has brought export proceeds into the country.

It is important for Directorate of Revenue Intelligence (DRI) also to have this data so that they could cross check the data and see if any exporter who has not brought in export proceeds has claimed duty drawback or not. The country thus loses on two counts – first by not getting proceeds of exports for exports made and secondly wrongful claim of duty drawback.

The Special Investigation Team (SIT) had asked RBI to give details of exports made where exports proceeds were yet to be utilised even after a period of more than one year. In response, RBI provided data on Export outstanding for shipping bills prior to 1st March, 2014 pending for more than one year as well as data on export outstanding for shipping bills on or after 1st March, 2014 pending for more than one year.

The data was reviewed in SIT meeting held on 12th and 13th July, 2016. From the data provided by RBI, it emerged that huge amount of export proceeds have not been realized. The SIT directed as follows :

• Enforcement Directorate to take necessary action under FEMA wherever needed and specially with respect to 216 Companies with respect to the period before 1st March, 2016 and 572 Companies for the period after 1st March, 2016 for which each such Company had export proceeds pending for realisation for more than ₹ 100 crores and inform SIT on action taken.
• Directorate of Revenue Intelligence (DRI) to check from it’s database on how many Companies have claimed duty drawback but have failed to bring export proceeds, take necessary action against them as per law and inform SIT of action taken.
• RBI may immediately develop an institutional mechanism and IT system to not only immediately red flag those cases where exports have been outstanding in violation of FEMA guidelines but share the complete data with Enforcement Directorate and Directorate of Revenue Intelligence on a monthly basis.

Foreign exchange repatriation compliance requires enforcement action and IT red-flagging for exporters with outstanding export proceeds. Non-repatriation of export proceeds within one year violates FEMA and bars duty drawback entitlement. The SIT reviewed RBI data revealing many shipping bills with proceeds outstanding and directed initiation of FEMA action against exporters with significant pending receipts, mandated cross-checks of duty drawback claims against repatriation records with legal action where warranted, and instructed RBI to implement an IT red-flagging system and monthly data sharing with enforcement and revenue investigators.