RBI Urged to Allow Foreign Exchange Payments for DTA Services
EOU to DTA services: RBI should allow payment in foreign exchange
Business StandardImage: Business Standard
Export-oriented units (EOUs) are seeking the Reserve Bank of India (RBI) to permit direct tax area (DTA) units to make payments in foreign exchange for services. Current regulations restrict DTA units from purchasing foreign currency for these transactions, limiting EOUs' operational flexibility.
- 01EOUs want RBI to allow DTA units to pay in foreign exchange for services.
- 02Current regulations restrict DTA units from purchasing foreign currency for service payments.
- 03EOUs can sell unused materials to DTA parties at a reduced price but must justify the lower price.
- 04Responsibility for additional charges due to shipping disruptions depends on the Incoterms used.
- 05Insurers may cover costs related to cargo safety if policies include specific clauses.
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Export-oriented units (EOUs) in India are advocating for the Reserve Bank of India (RBI) to enable direct tax area (DTA) units to make payments in foreign exchange for services rendered. Existing provisions under the Foreign Trade Policy (FTP) allow for service sales in DTA, provided payments are received in foreign currency. However, without RBI's circular permitting DTA units to purchase foreign exchange, EOUs face operational challenges. Additionally, EOUs are exploring options to sell unused materials to other DTA parties at a price below 25% of their original purchase cost. They must adhere to customs regulations and justify any price reductions. Furthermore, in the event of shipping disruptions, responsibility for additional costs and the safety of cargo depends on the terms of sale outlined in the contract. Insurers may reimburse these costs if the relevant policy provisions are included.
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Allowing foreign exchange payments could enhance operational flexibility for EOUs, potentially increasing service sales and revenue.
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