Bill to Oversea Company and Ship to Indian Company (Present in SEZ), Banking - Finance

[Danish Azfar]

Dear Experts.

Have a case that needs support for clarification.

Company Z (indian Entity Present in SEZ in India) places the PO to Taiwan Company (we called it company A). Company A places the PO to Company B (MOOWR approved company in India).

Company B Places the Raw material PO to Company A, once the raw materials converted to finished goods, company B provide the Bill to invoice to Company A but ship the FG to company Z (on the instruction of Company A). Upon receiving the goods company A provide the invoice to company Z.

Question 1 - How it will become export to company B (how this will show in the IDPMS system of bank)

Question 2 - How it will become import for company Z, (how this will show in the IDPMS system of bank) so that Z will make the payment to company A.

Thanks

Posts / Replies

[YAGAY andSUN]

Issue ID = 119986    Total Reply: 1    Views = 91

Initiated By: -Danish Azfar - Last Post By: - YAGAY and SUN

[Shilpi Jain]

From MOOWR to SEZ it will not be a clearance for home consumption . So no BoE will be filed for home consumption by SEZ.

I did not understand - "Company B Places the Raw material PO to Company A"

Under GST export means taking goods out of India.

Under GST India include SEZ area as well.

[Danish Azfar]

Thanks for replying ma'am.

Company B Places the Raw material PO to Company A - Here company B acting as a warehouse to company A, so let me change the phrase to "Company B Places the Finished goods  PO to Company A"

 

[YAGAY andSUN]

Thank you for the detailed scenario. Let's break down your questions and provide clarity regarding export and import procedures under GST and customs regulations. Given the complexities involving SEZ, MOOWR, and intercompany transactions, we'll address both questions step by step.

Clarification of the Scenario:

1. Company Z (Indian entity in SEZ) places a PO with Company A (Taiwan company).
2. Company A places a PO with Company B (MOOWR approved company in India).
3. Company B places a raw material PO with Company A.
4. After conversion of raw material to finished goods, Company B issues an invoice to Company A but ships the finished goods to Company Z (on the instruction of Company A).
5. Once Company Z receives the goods, Company A issues an invoice to Company Z.

Since you've amended the phrase to "Company B places the finished goods PO to Company A", this makes it clearer that Company B is acting as an intermediary in the supply chain process, not simply a warehouse.

Question 1: How it will become export for Company B and how this will show in the IDPMS system of the bank?

Answer:

• Under GST and customs law, an export transaction refers to taking goods out of India to a foreign country or Special Economic Zone (SEZ).
• Company B’s export procedure:
  • Since Company B is located in India and the finished goods are shipped to Company Z (in an SEZ), it constitutes an export under GST from Company B to Company Z.
  • Company B will need to treat this transaction as an export and file a Shipping Bill with the Customs Department at the port of export. This is typically required for export transactions (even when going to an SEZ).
  • When Company B exports the finished goods to Company Z in the SEZ, the transaction will be recorded as an export in the IDPMS (Import Data Processing and Monitoring System). This system tracks foreign exchange transactions and helps banks monitor compliance with export and import regulations.

In the IDPMS system, Company B (exporter) will provide the following details for the export transaction:

• • • Exporter Details: Company B’s name and export details.
    • Transaction Type: "Export of goods."
    • Invoice Details: The invoice raised by Company B to Company A for the supply of finished goods.
    • Shipping Bill/Customs Details: The Shipping Bill number and the customs declaration made at the port of export.
    • Payment Details: The transaction will be marked for payment receipt via foreign exchange. However, the actual payment will be routed from Company Z to Company A, and later Company A will receive payment from Company Z.

Question 2: How it will become an import for Company Z, and how will this show in the IDPMS system of the bank?

Answer:

• Company Z, being located in an SEZ, will treat the goods received from Company B (via Company A) as import into India. The goods entering an SEZ are considered imports and are subjected to the relevant procedures, even though no customs duties are applicable under SEZ rules.
• Import Procedure for Company Z (SEZ):
  • No Bill of Entry for Home Consumption: Since the goods are being supplied to an SEZ and are not intended for home consumption, no Bill of Entry (BoE) for home consumption is filed. However, an SEZ is still considered an import destination for the purpose of tracking the goods entering the zone.
  • In the IDPMS System: The transaction for import will show up under Company Z’s import data in the IDPMS system. Even though there is no home consumption (no BoE filed for customs clearance), the system will register this as an import into the SEZ, provided all the customs formalities for SEZ are followed (such as CTH code, inward goods declaration, and so on).
  • Payment Flow: The payment for the goods will ultimately flow from Company Z to Company A (based on the invoice provided by Company A), as Company A has provided the final invoice to Company Z. In the IDPMS system, this transaction will be shown as payment for goods imported into SEZ.

Key Points:

1. Company B (India) will export the finished goods to Company Z (SEZ). This will be treated as an export in the IDPMS system of the bank, as goods are being sent out of India to an SEZ.
2. Company Z (SEZ) will import the goods (even though they are exempt from customs duties under SEZ rules) and record the import in the IDPMS system as goods entering an SEZ.
3. No BoE for Home Consumption: There is no BoE required for home consumption by Company Z in the SEZ, since SEZs are considered to be outside the domestic tariff area (DTA) of India. However, the goods are still treated as imports in terms of customs procedures.
4. Payment: The payment to Company A from Company Z will be reflected in the IDPMS system as an import transaction (even though the payment is routed indirectly via Company A).

Legal Backing:

1. SEZ Act, 2005: Goods sent to an SEZ are considered imports, even though the SEZ enjoys certain exemptions on customs duties.
2. Customs Act, 1962: Exports are defined under Section 2(18) of the Customs Act as "taking goods out of India."
3. GST Act: Under GST, export of goods is defined in Section 2(5) as the supply of goods to SEZ. Goods entering SEZ are not considered "home consumption," hence no BoE for home consumption is required.
4. IDPMS Guidelines: The IDPMS system tracks foreign exchange transactions, which will show the export and import flows for Company B and Company Z.

Conclusion:

• The export and import transactions between Company B, Company A, and Company Z will be recorded in the IDPMS system as exports (for Company B) and imports (for Company Z).
• No BoE for Home Consumption is required by Company Z as the goods are going to an SEZ, but the import will still be recorded in the system.
• Ensure that all documentation related to shipping bills, export invoices, and foreign payments is correctly filed and tracked through the IDPMS system.

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