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Caution List of Exporters

FEMA non – compliance may lead to huge loss under GST and unrepairable loss of repute to include in Caution List of Exporters

Setting Context

Export of goods and services from India is governed by Section-7(1)(a) & (3) of FEMA read with Notification No. G.S.R. 381(E): dated May 3, 2000 v.i.z. FEM (Current Account Transactions) Rules 2000 further read with FEMA Notification No. 23(R)/2015-RB dated January 12, 2016 v.i.z. FEM (Export of goods and services) Regulation 2015. RBI from time to time issue a list of exporters who are in RBI cautious list are those exporters who violate FEMA rules and regulations.

Here in this article, we talk on some very interesting issues Caution List of Exporters.

Key features and contemporary issues:

  • Export trade in India is regulated by Directorate general of Foreign Trade (DGFT) as per policies and procedures prescribed functioning under Ministry of Commerce and Industry.
  • AD Category-1 banks may conduct Export Transactions in conformity with foreign trade policy in vogue and rules framed by Government of India and directions issued by RBI. In case of any inconformity, AD will ask exporters to take RBI approval.
  • There are certain mandatory obligations on the part of the exporters:

(i)     To realise and repatriate the full value of goods/software/services to Indian within 9 months from the date export OR apply for extension of time and if unable to being back the payment Apply for regulatory write off.

(ii)    To surrender Export receivables to an AD within 21 days from the date of shipment.

(iii)   To complete export obligations within specified time depending upon the nature of goods in cases where advance is received against Exports. OR refund the advance within one year from receipt of advance.

  • If the exporters do comply any of the mandatory obligations, the Reserve Bank of India included the exporters in RBI cautions list. After the compliance of the said obligations, the RBI delist the exporters from caution list.
  • There is end to end online tracking from actual Export till realisation of export receivables in case of goods and software while in case of Export of services there is no such mechanism.
  • There are three agencies involved in monitoring export transactions. They are Reserve Bank of India (RBI), Custom Authorities and Authorized Dealer (AD) Banker.
  • Every exporter has to submit an undertaking or declaration in the prescribed format to the regulator to bring back full export payment within the prescribed time limit in the prescribed manner.
  • Under Goods and Services tax, Export may be considered taxable supply, if the Export receivables are not realised with in time or extended time.
  • AD banker may insist for Chartered accountants certificate to rectify any defects in the procedure under his delegated authority.

Concluding Remarks:

For the exporters of goods/software/services, any non-compliances of any provision of Foreign Exchange Management Act (FEMA) may have far reaching consequences not only under FEMA but also under tax laws. One needs an integrated efforts to ensure unrecoverable financial loss and loss of repute to include in Caution List of Exporters.


(Disclaimer: This content is meant for our clients or professional friends only for stimulating discussion on the subject matter not to frame any commercial opinion. All efforts are made to compile correctly with no guarantee of extreme accuracy)

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