TaxTMI 
TaxTMI 
Master Circular on Import of Goods and Services
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....neral Guidelines B.2. Form A-1 B.3. Import Licenses B.4. Obligation of Purchaser of Foreign Exchange B.5. Time Limit for Settlement of Import Payments B.6. Import of Foreign exchange / Indian Rupees Section C - Operational Guidelines for Imports C.1. Advance Remittance C.2. Interest on Import Bills C.3. Remittances against Replacement Imports C.4. Guarantee for Replacement Import C.5. Import of Equipment by Business Process Outsourcing (BPO) Companies for their overseas sites C.6. Receipt of Import Bills/Documents C.7. Evidence of Import C.8. Issue of acknowledgement C.9. Verification and Preservation C.10. Follow up for Import Evidence C.11. Issue of Bank Guarantee C.12. Import of Gold / Platinum / Silver by Nominated Banks / Nominated Agencies C.13. Import of gold in any form including jewellery made of gold/precious metals or/and studded with diamonds/semi precious/precious stones C.14. Import of Platinum, Palladium, Rhodium, Silver and rough, cut & polished diamonds C.15. Import factoring C.16. Merchanting Trade Annex -1 Annex - 2 Annex-3 ....
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....luded in the Schedules I and II of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 framed by Government of India vide Notification No. G.S.R.381 (E) dated May 3, 2000, as amended from time to time, the amount does not exceed USD 5000 or its equivalent and the payment is made by a cheque drawn on the applicant's bank account or by a Demand Draft. B.3. Import Licenses Except for goods included in the negative list which require licence under the Foreign Trade Policy in force, AD Category - I banks may freely open letters of credit and allow remittances for import. While opening letters of credit, the 'For Exchange Control purposes' copy of the licence should be called for and special conditions, if any, attached to such licences should be adhered to. After effecting remittances under the licence, AD Category - I banks may preserve the copies of utilised licence /s till they are verified by the internal auditors or inspectors. B.4. Obligation of Purchaser of Foreign Exchange (i) In terms of Section 10(6) of the Foreign Exchange Management Act, 1999 (FEMA), any person acquiring foreign exchange is permitted to use it either for the purpose mention....
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....Rupees (i) Except as otherwise provided in the Regulations, no person shall, without the general or special permission of the Reserve Bank, import or bring into India, any foreign currency. Import of foreign currency, including cheques, is governed by clause (g) of sub-section (3) of Section 6 of the Foreign Exchange Management Act, 1999, and the Foreign Exchange Management (Export and Import of Currency) Regulations 2000, made by Reserve Bank vide Notification No. FEMA 6/2000-RB dated May 3, 2000, as amended from time to time. (ii) Reserve Bank may allow a person to bring into India currency notes of Government of India and / or of Reserve Bank subject to such terms and conditions as the Reserve Bank may stipulate. B.6.1. Import of foreign exchange into India A person may - (i) send into India without limit foreign exchange in any form other than currency notes, bank notes and travellers cheques; (ii) bring into India from any place outside India, without limit foreign exchange (other than unissued notes), which shall be subject to the condition that such person makes, on arrival in India, a declaration to the Custom Authorities at the Airport in the Cu....
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....c) A Public Sector Company or a Department/Undertaking of the Government of India / State Government/s which is not in a position to obtain a guarantee from an international bank of repute against an advance payment, is required to obtain a specific waiver for the bank guarantee from the Ministry of Finance, Government of India before making advance remittance exceeding USD 100, 000. (ii) All payments towards advance remittance for imports shall be subject to the specified conditions. C.1.2. Advance Remittance for Import of Rough Diamonds (i) AD Category - I bank are permitted to allow advance remittance without any limit and without bank guarantee or standby Letter of Credit, by an importer (other than a Public Sector Company or a Department / Undertaking of the Government of India / State Government/s), for import of rough diamonds into India from the under noted mining companies, viz. a) De Beers UK Ltd, b) RIO TINTO, UK, c) BHP Billiton, Australia, d) ENDIAMA, E. P. Angola, e) ALROSA, Russia, f) GOKHARAN, Russia, g) Rio Tinto, Belgium, h) BHP Billiton, Belgium and i) Namibia Diamond Trading Company (PTY) Ltd. (NDTC). (ii) While allowing the advan....
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....hedule air transport service, can make advance remittance without bank guarantee, up to USD 50 million. Accordingly, AD Category - I banks may allow advance remittance, without obtaining a bank guarantee or an unconditional, irrevocable Standby Letter of Credit, up to USD 50 million, for direct import of each aircraft, helicopter and other aviation related purchases. The remittances for the above transactions shall be subject to the following conditions: • The AD Category - I banks should undertake the transactions based on their commercial judgment and after being satisfied about the bonafide of the transactions. KYC and due diligence exercise should be done by the AD Category-I banks for the Indian importer entity and the overseas manufacturer company as well. • Advance payments should be made strictly as per the terms of the sale contract and are made directly to the account of the manufacturer (supplier) concerned. • AD Category - I bank may frame their own internal guidelines to deal with such cases, with the approval of their Board of Directors. • In the case of a Public Sector Company or a Department / Undertaking of ....
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....reement with the remitter in India, failing which, the amount should be repatriated to India. C.2. Interest on Import Bills (i) AD - Category - I bank may allow payment of interest on usance bills or overdue interest for a period of less than three years from the date of shipment at the rate prescribed for trade credit from time to time. (ii) In case of pre-payment of usance import bills, remittances may be made only after reducing the proportionate interest for the unexpired portion of usance at the rate at which interest has been claimed or LIBOR of the currency in which the goods have been invoiced, whichever is applicable. Where interest is not separately claimed or expressly indicated, remittances may beallowed after deducting the proportionate interest for the unexpired portion of usance at the prevailing LIBOR of the currency of invoice. C.3. Remittances against Replacement Imports Where goods are short-supplied, damaged, short-landed or lost in transit and the Exchange Control copy of the import licence has already been utilised to cover the opening of a letter of credit against the original goods which have been lost, the ....
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....0. (ii) Import bills received by wholly-owned Indian subsidiaries of foreign companies from their principals. (iii) Import bills received by Status Holder Exporters as defined in the Foreign Trade Policy, 100% Export Oriented Units / Units in Special Economic Zones, Public Sector Undertakings and Limited Companies. (iv) Import bills received by all limited companies viz. public limited, deemed public limited and private limited companies. C.6.2. Receipt of import documents by the importer directly from overseas suppliers in case of specified sectors As a sector specific measure, AD Category - I banks are permitted to allow remittance for imports up to USD 300,000 where the importer of rough diamonds, rough precious and semi-precious stones has received the import bills / documents directly from the overseas supplier and the documentary evidence for import is submitted by the importer at the time of remittance. AD Category - I banks may undertake such transactions subject to the following conditions: (i) The import would be subject to the prevailing Foreign Trade Policy. (ii) The transactions are based on their commercial judgment and they are satisfied about th....
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....quest, allow reasonable time, not exceeding three months from the date of remittance, to the importer to submit the evidence of import. C.7.2. Evidence of import in lieu of Bill of Entry (i) AD Category - I bank may accept, in lieu of Exchange Control copy of Bill of Entry for home consumption, a certificate from the Chief Executive Officer (CEO) or auditor of the company that the goods for which remittance was made have actually been imported into India provided :- (a) the amount of foreign exchange remitted is less than USD 1,000,000 or its equivalent, (b) the importer is a company listed on a stock exchange in India and whose net worth is not less than Rs.100 crore as on the date of its last audited balance sheet, or, the importer is a public sector company or an undertaking of the Government of India or its departments. (ii) The above facility may also be extended to autonomous bodies, including scientific bodies/academic institutions, such as Indian Institute of Science / Indian Institute of Technology, etc. whose accounts are audited by the Comptroller and Auditor General of India (CAG). AD Category - I bank may insist on a declaration from the auditor/CEO of s....
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....of the half-year to which the statement relates. (iii) AD Category - I bank need not follow up submission of evidence of import involving amount of USD 100,000 or less provided they are satisfied about the genuineness of the transaction and the bonafides of the remitter. A suitable policy may be framed by the bank's Board of Directors and AD Category - I bank may set their own internal guidelines to deal with such cases. C.11. Issue of Bank Guarantee AD Category - I banks are permitted to issue guarantee on behalf of their importer customers in terms of Notification No. FEMA 8/2000-RB dated May 3, 2000, as amended from time to time. C.12. Import of Gold / Platinum / Silver by Nominated Banks / Nominated Agencies Nominated banks/agencies are permitted to import gold on loan basis, Suppliers Credit/Buyers Credit basis, consignment basis as also on unfixed price basis. However, all imports of gold will necessarily have to be on Documents against Payment (DP) basis. Accordingly, gold imports on Documents against Acceptance (DA) basis will not be permitted. These restrictions will however not apply to import of gold to meet the needs of exporters of gold jewellery. ....
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....ised for all transactions pertaining to import of gold. AD Category - I bank should ensure that due diligence is undertaken and all Know Your Customer (KYC) norms and the Anti-Money-Laundering guidelines, issued by Reserve Bank from time to time are adhered to while undertaking such transactions. AD Category - I bank should closely monitor such transactions. Any large or abnormal increase in the volume of business of the importer should be closely examined to ensure that the transactions are bonafide trade transactions. (iv) In addition to carrying out the normal due diligence exercise, the credentials of the supplier should also be ascertained before opening the LCs. The financial standing, line of business and the net worth of the importer customer should be commensurate with the volume of business turnover. Apart from the above, in case of such transactions banks should also make discreet enquiries from other banks to assess the actual position. Further, in order to establish audit trail of import/export transactions, all documents pertaining to such transactions must be preserved for at least five years. (v) AD Category - I bank should follow up submission of the Bill of ....
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....h usance period not exceeding 90 days, will continue to be applicable. (viii) AD Category - I banks must maintain adequate documentation with them to uniquely link all imports with the SBLC issued for the import of gold on loan basis. ix) The maximum period of gold loan shall be as per the Foreign Trade Policy 2009-14 or as notified by the Government of India from time to time. x) Accordingly, the maximum tenor of gold loan becomes 270 days at present (i.e. 90 days for manufacture and export + 180 days for fixing the price and repayment). C.13. Import of gold in any form including jewellery made of gold/precious metals or/and studded with diamonds/semi precious/precious stones The usance period of Letters of Credit opened for import of gold in any form including jewellery made of gold/precious metals or/and studded with diamonds/semi precious/precious stones should not exceed 90 days from the date of shipment and only on 100 per cent cash margin basis. C.14. Import of Platinum, Palladium, Rhodium, Silver, precious & semi-precious stones and rough, cut & polished diamonds (a) Suppliers' and Buyers' credit, including the usance period of Letters of Credit opened ....
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....buyers' credit is not available for merchanting trade or intermediary trade transactions. Appendix List of Circulars consolidated in the Master Circular Import of Goods and Services • AP (DIR Series) Circular No. 106 dated June 19, 2003 • AP (DIR Series) Circular No. 4 dated July 19, 2003 • AP (DIR Series) Circular No. 9 dated August 18, 2003 • AP (DIR Series) Circular No. 15 dated September 17, 2003 • AP (DIR Series) Circular No. 49 dated December 15, 2003 • AP (DIR Series) Circular No. 66 dated February 6, 2004 • AP (DIR Series) Circular No. 72 dated February 20, 2004 • AP (DIR Series) Circular No. 2 dated July 9, 2004 • AP (DIR Series) Circular No. 34 dated February 18, 2005 • AP (DIR Series) Circular No. 1 dated July 12, 2005 • AP (DIR Series) Circular No. 33 dated February 28, 2007 • AP (DIR Series) Circular No. 34 dated March 2, 2007 • AP (DIR Series) Circular No. 63 dated May 25, 2007 • AP (DIR Series) Circular No. 77 dated June 29, 2007 • AP (DIR Series) Circular No. 18 date....