9911796707
TMI BlogIndia’s services exports are stepping into a new eraX X X X Extracts X X X X X X X X Extracts X X X X ..... India’s services exports are stepping into a new era X X X X Extracts X X X X X X X X Extracts X X X X ..... Persons, applies to each service export realization, India will be able to report its trade data more accurately, transparently, and credibly on the global stage. The objective is not only to meet WTO expectations but also to equip India with high-quality, mode-wise service trade data that can be leveraged: * To strengthen India's negotiating position in ongoing and future Free Trade Agreement (FTA) negotiations (such as with the UK, EU, Canada, and others). * To facilitate smarter policymaking, enabling targeted incentives and support schemes based on the specific mode and sector of service export. * To empower Indian exporters with more streamlined compliance procedures under the Foreign Exchange Management Act (FEMA) 2025 regulations, enhancing their competitiveness in the global market. * To build India's image as a trusted, transparent services hub, thus attracting more global investment and partnerships. In essence, this initiative will serve as a foundation for modernizing India's services trade ecosystem, preparing Indian businesses for a future where granular data, regulatory clarity, and global credibilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y will be essential to thrive in increasingly complex international markets. The requirement to specify the 'Mode of Export of Services' stems from the General Agreement on Trade in Services (GATS), which was signed under the framework of the World Trade Organization (WTO) in 1995. Recognizing the diversity of how services are traded across borders, GATS introduced a structured system to classify service exports into four distinct Modes of Supply, each representing a different way in which services can be delivered internationally. These Modes are critical because they provide a common international language for describing, negotiating, and regulating services trade across countries. Accurate identification of the applicable Mode is essential for ensuring transparency, enabling countries to monitor their service trade commitments, negotiate better market access terms, and develop targeted policy interventions. The four Modes defined under GATS are as follows: Mode Description Simple Example Mode 1: Cross-border Supply Services supplied remotely across borders, without movement of individuals. An Indian IT firm providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... software services remotely to a US client. Mode 2: Consumption Abroad Consumer travels to the service provider's country. A foreign tourist coming to India for Ayurveda treatment. Mode 3: Commercial Presence Service supplier sets up a branch, subsidiary, or office in another country. An Indian bank opening a branch in Singapore. Mode 4: Presence of Natural Persons Individual service provider travels abroad temporarily to deliver services. An Indian engineer on a project assignment in Dubai. Thus, by embedding Mode-wise reporting into India's eBRC system, DGFT ensures that India's services trade practices are aligned with the global best practices envisioned by GATS, facilitating greater transparency, improved trade analytics, and stronger international trade negotiations. Going forward, exporters must self-declare the applicable Mode while uploading their eBRCs for services exports. Legal Basis and Supporting Framework The introduction of the 'Mode of Export of Services' field in eBRCs is not a standalone procedural change, it is deeply anchored in both international obligations and domestic legal frameworks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that India has committed to uphold. 1. General Agreement on Trade in Services (GATS), 1995 - WTO. Reference: Part I, Article I:2 of GATS defines the four "Modes of Supply" of services internationally. Extract: "For the purposes of this Agreement, trade in services is defined as the supply of a service: (a) from the territory of one Member into the territory of any other Member (Mode 1 - Cross-border supply); (b) in the territory of one Member to the service consumer of any other Member (Mode 2 - Consumption abroad); (c) by a service supplier of one Member, through commercial presence in the territory of any other Member (Mode 3 - Commercial presence); (d) by a service supplier of one Member, through presence of natural persons of a Member in the territory of any other Member (Mode 4 - Presence of Natural Persons)." Thus, GATS provides the conceptual and definitional foundation for identifying and classifying services trade. 2. Foreign Trade (Development & Regulation) Act, 1992. Chapter 1, Para 2(j) of the FTDR Act (as amended). Extract: "'Services' means service of any description which is made available to potential users and inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ludes all the tradable services specified under the General Agreement on Trade in Services entered into amongst India and other countries who are party to the said Agreement: Provided that, this definition shall not apply to the domain of taxation." This establishes that services trade is officially recognized and regulated under India's Foreign Trade framework, with direct reference to GATS. 3. Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2025 - RBI. Reference: Regulation 4 and Regulation 5 of the new FEMA Export-Import Regulations, 2025. Extract: "Every exporter of goods and services shall furnish to the specified authority a declaration, containing true and correct particulars regarding the export of goods and services, value, and mode of receipt of payment." "In case of export of services, the exporter shall furnish particulars regarding the manner of rendering services, mode of receipt, and period within which payment shall be realized." Thus, service exporters are now explicitly required to provide details of how services are rendered (aligning naturally with GATS modes) and payment reali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zation details. 4. DGFT Notifications and FAQs & DGFT Trade Notice issued in April 2025 and updated eBRC User Manuals under the "Learn" section of the DGFT portal. Extract: "Exporters shall, at the time of certifying the eBRC linked to an IRM, indicate the applicable Mode of Export of Services (Mode 1/2/3/4) based on the nature of the services provided." "The inclusion of the 'Mode of Export of Services' field is aimed at improving the granularity and accuracy of India's service export data in alignment with WTO-GATS provisions." Thus, the operational mechanism for self-certifying the Mode of Service in eBRCs is clearly laid out for exporters. Although the General Agreement on Trade in Services (GATS) was signed way back in 1995, India had, for decades, not operationalized mode-wise tracking of services exports in its systems. There were several valid reasons for this cautious delay. In the early years after liberalization, India's policy thrust was heavily oriented towards boosting merchandise exports, textiles, engineering goods, gems and jewelry, petroleum products which were tangible, easy to measure, and dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly impacted forex earnings. In 2000, India's merchandise exports were around $44 billion, whereas services exports were still emerging at $16 billion largely dominated by IT services. Thus, service trade governance lagged because it simply wasn't the immediate economic engine at the time. Unlike physical goods (which clear customs and generate shipping bills), services are intangible, there are no border checkpoints or physical documents at the point of supply. Systems like DGFT, RBI, and ICEGATE were designed primarily around goods movement, and services data capture remained voluntary, sectoral, and scattered. Until 2012, IT companies exporting services reported earnings only through bank realization documents (FIRC) without standard classification across modes. A unified eBRC portal for services emerged much later. Internationally too, most countries (including developed economies) struggled to accurately track services trade mode-wise during the early 2000s. The WTO GATS framework existed, but global best practices on services data capture matured only in the last 10-12 years.&nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; Even the European Union, a leader in services trade, formally standardized mode-based services trade reporting only around 2014-2015 through Eurostat initiatives. India was not uniquely slow, it reflected a global challenge. Why India's Current Reality Demands Immediate Action: Services exports have exploded from $16 billion in 2000 to over $325 billion in FY 2023-24 now nearly 42% of India's total export earnings. (some report shows 54% also) Today, IT, business consulting, education, medical tourism, and financial services drive India's trade growth. TCS, Infosys, Wipro, leading Indian IT giants, earn over 90% of their revenues through cross-border Mode 1 exports. This economic reality mandates precise services trade governance. India is negotiating or upgrading major Free Trade Agreements, with the UK, European Union, Canada, GCC, and others. These agreements do not treat services as a single block, they negotiate Mode 1 (IT delivery), Mode 4 (mobility of professionals) separately. In India-UK FTA talks, a major sticking point is visa and work permit relaxations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Indian nurses, chefs, engineers (Mode 4). To justify demands, hard Mode 4 export data is needed. Without precise mode-wise statistics, India's negotiating position weakens. In its 7th Trade Policy Review (TPR) of India (2021-22), the WTO Secretariat specifically observed that India's services trade statistics lacked sufficient granularity. WTO encouraged India to strengthen mode-wise tracking to align with GATS commitments and global reporting standards. During the TPR review meetings, questions were raised by trading partners about how much of India's services exports were Mode 4 dependent, which India could not precisely quantify at that time. This was a wake-up call for policy makers. Today, India's DGFT portal, eBRC online platform, and ICEGATE systems have matured to handle API integrations, bulk uploads, cross-verification, and data analytics seamlessly. The DGFT's revamped portal allows direct eBRC issuance, online validations, and auto-tagging, which were unimaginable even five years ago. Thus, capturing 'Mode of Export' data is now technologically feasible, withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t overburdening exporters or banks. How This Move Benefits India, Exporters, and Importers The introduction of the 'Mode of Export of Services' in eBRCs isn't just about filling a new field. It brings real, powerful advantages, both for the Government of India and for you as an exporter/importer. When India negotiates Free Trade Agreements (like with the UK, EU, Canada), specific demands are made: Easier visa rules (Mode 4), Recognition of digital exports (Mode 1), Permission to open offices abroad (Mode 3). Without mode-wise data, India cannot argue effectively. With mode-specific hard numbers, India can demand better terms for sectors where Indian exporters are strong. For eg: Imagine you're a software company doing 100% work remotely from India (Mode 1). If India shows strong Mode 1 exports, it can negotiate zero customs duties on remote IT services into Europe. Our services become cheaper for EU buyers; we get more clients! Similarly, if you're a yoga teacher traveling abroad (Mode 4) - better visa access can be negotiated for you. Benefit for Exporters: Faster ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Compliance, Less Scrutiny, Better Documentation with Banks and DGFT. WTO members like India must submit trade reports. Until now, India's service export data was generic and high level. Now, with Mode-specific capture, India can show detailed, world-class service trade data. In return, exporters benefit from smoother customs, DGFT, and FEMA compliance, because systems now have clean, standardized records. Eg: Suppose you export medical transcription services online (Mode 1). When DGFT verifies your eBRC in future for SEIS claims or audits, They won't ask 10 extra questions because your service mode is already clear and backed by your eBRC. Less paperwork. Faster refunds. Lower risk of notices. No more running pillar to post! The government can now design special incentive schemes not generic but specific. Different for Mode 1 (IT exports), Mode 2 (tourism services), Mode 3 (bank branches abroad). Exporters who work in a growing Mode will get faster, more direct benefits. Eg: Suppose the government finds that Mode 2 exports (medical tourism) are booming. They may launch a special medical tourism incent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive scheme, extra sops for hospitals and wellness centers. If you're running a hospital receiving foreign patients, you'll now qualify for special support easily, just by ticking the correct Mode in eBRC. Earlier, everyone was painted with the same brush, now policies will be mode-sensitive. International buyers and governments prefer trading with countries where records are clean, exports are verifiable, and services are categorized transparently. By Mode-wise reporting, India will build a stronger, trusted reputation as a serious services economy - like the EU, Singapore, Australia. Eg: Imagine you are a design consultant offering services to a European client. When you show them that your services are formally registered under India's government records under Mode 1, They feel more secure doing business with you. A True Win-Win Situation Benefit for India Benefit for Exporters Can negotiate FTAs smarter, faster, stronger. Can access incentives, finance, and client trust more easily. Can fulfill WTO GATS reporting obligations accurately. Will face less paperwork, quicker refunds, smoother compli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance. Can design policies focused on Mode-specific sectors. Will enjoy specialized schemes suited to their export mode. Can enhance India's reputation globally. Will see better client perception, faster payments, and global respect. How This Move Strengthens Existing FTAs Like CEPA, CECA, ECTA India has already signed important Free Trade Agreements like: * India-UAE Comprehensive Economic Partnership Agreement (CEPA), * India-Australia Economic Cooperation and Trade Agreement (ECTA), * India-Singapore Comprehensive Economic Cooperation Agreement (CECA). These FTAs contain detailed commitments for services trade, where different Modes (especially Mode 1 and Mode 4) are critical. With Mode-wise eBRC reporting: * India can demonstrate compliance and seek even deeper market access in ongoing FTA upgrades. * Indian exporters (especially IT firms, consulting firms, and tourism players) will find it easier to claim benefitsunder FTA-linked programs. * Future FTA dispute resolution will become easier as mode-specific exports can be evidenced through authenticated eBRC data. India now speaks the language that the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orld expects clear, mode-wise, rule-based services trade documentation. Anticipated Challenges While the move is excellent, practical hurdles need attention: * Awareness Gaps: Exporters may initially be confused about Mode 1-4 selection. * Overlapping Services: Some activities might fall into more than one Mode. * Banking System Updates: Banks need to align their internal systems with the new reporting fields. * Contract Documentation: Exporters may need to revise contracts/invoices to mention modes clearly. The solution lies in training sessions, clear guidance, and handholding exporters and banks through the transition phase. Building India's Future as a Global Services Superpower This is a smart, future-ready reform. India is now equipping itself not just to trade, but to lead the world in services exports through transparent, WTO-compliant, FTA-leveraging systems. Exporters who understand this shift and embrace it early will be the biggest winners. I invite your thoughts! - What challenges do you foresee for Indian service exporters? - What support would you like DGFT, RBI, and industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y bodies to provide during this transition? Let's discuss in the comments below. ([email protected]) Together, let's build the future of Indian services exports! "The future belongs to those who prepare for it today." - Malcolm X Reply By YAGAY andSUN as = Dear Sir, This is a milestone reform, and your write-up captures the gravity and opportunity of this transition brilliantly. India's services sector has long been a global force - but the absence of mode-specific trade data has kept it from fully leveraging its clout on the world stage. With this move, India is finally syncing internal systems with global trade standards, readying for a more transparent, analytics-driven future. Let's dig into your questions: Challenges Indian Service Exporters Might Face 1. Lack of Awareness and Training * Many small and mid-sized exporters, especially outside of IT (like healthcare, education, wellness, or design), may not yet understand the GATS Modes. * There's a risk of misclassification, especially in hybrid services (e.g., online coaching + overseas retreats = Mode 1 + Mode 2/4). 2. Complexity in Multi-Mode Service Contracts * Contracts may span multiple M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odes. For example, a consulting firm might run remote ops (Mode 1), while sending staff abroad (Mode 4). * Will exporters be able to select multiple Modes per eBRC? Or will billing and documentation need to be split accordingly? 3. Contract & Invoice Realignment * Current export documents often don't mention service delivery mode. Exporters may need to revise invoice/contract formats to reflect the Mode of Supply clearly, for both compliance and audit trail. 4. Banking System Alignment * Banks (AD Category-I) will need to update internal software and SOPs to accommodate Mode-tagged eBRC validation. * Lack of training may lead to processing delays, particularly during audits or queries by FEMA/RBI/DGFT. 5. Policy Clarity for Future Benefits * Exporters wonder if Mode-specific policies or benefits will emerge in FTP updates or Budget-linked schemes. This creates uncertainty in business planning until such frameworks are published. 6. Marketplace-Based Exporters * Freelancers and micro-exporters using platforms like Upwork, Fiverr, Amazon Services, or online teaching portals may not know how to declare their Mode or may lack control over how payments are documented. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * Need for specific platform-based export guidelines. Support DGFT, RBI, and Industry Bodies Should Provide 🎓 Awareness & Capacity Building * Organize sector-specific webinars (with regional language options), explaining each Mode with practical examples. * Include visual flowcharts: e.g., "If client is abroad, service is delivered remotely, and you're in India → Mode 1." Smart Mode Selection Tool * Introduce a "Mode Wizard" on the eBRC portal: a Q&A-based tool that helps exporters auto-identify the right Mode based on their inputs. Updated Export Templates * Publish model invoice and contract templates with Mode references. * Encourage inclusion of Mode in purchase orders and service agreements. Bank-Level Training Programs * RBI and DGFT should jointly train bank officers, particularly those in export finance and forex teams, to validate eBRC Mode declarations confidently. * Avoid processing delays due to internal confusion. Relaxation Period for Initial Misclassification * Allow self-correction of Mode declarations without penalty during May-Dec 2025. * Provide exporters a clear grace period for adjusting to new norms. Integration with Other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Systems * Ensure Mode-tagged data flows smoothly across: * ICEGATE (customs integration for mixed exporters), * GSTN (for service classification), * RBI EDPMS (for tracking realization), * INR-based invoicing systems (intra-SAARC trade). Framework for Mode-Specific Support * FTP 2023 moves toward targeted interventions: * Promotion budgets, international branding, skill support, visa facilitation - all can be Mode-specific. * Publish a "Modes Matrix" to show which schemes or support are available per Mode and per sector. Feedback & Query Portal * Launch a dedicated DGFT Help & Feedback Portal for Mode-related queries. * Let exporters flag confusion, seek clarification, and track responses in a time-bound manner. Final Thought This reform is more than just compliance - it's about unlocking the true story behind India's services trade. It builds trust, improves negotiations, and prepares our exporters to compete globally with data, clarity, and credibility. For Exporters: "The more you know your Mode, the more you own your market." Mode-wise reporting isn't red tape - it's your passport to smoother documentation, global trust, and future-ready government s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport.
Regards,
YAGAY & SUN
(A Team of Freelancers and Consultants)
Dated: 24-4-2025 X X X X Extracts X X X X X X X X Extracts X X X X
|
