Exporters seeking to write off unrealised export bills will have to first surrender proportionate export incentives and then approach the banks. The Reserve Bank of India (RBI) has issued revised instructions to this effect through a circular dated March 12, 2013. The circular - A P (DIR series) circular No. 88 - further liberalises certain provisions and gives greater flexibility to exporters.
Earlier, the instructions said that "for export proceeds due within the prescribed period during a financial year all exporters (including status holder exporters) are allowed to write-off (including reduction in invoice value) outstanding export dues and extend the prescribed period of realisation beyond 12 months or further period as applicable, provided the aggregate value of such export bills written-off (including reduction in invoice value) and bills extended for realisation does not exceed 10 per cent of the export proceeds due during the financial year..." Few could understand such complex wordings and the basis of export proceeds due during the current year was illogical.
The instructions also said that status holders exporters, as defined in the Foreign Trade Policy, and manufacturer exporters exporting more than 50 per cent of their production, and recognised as such by the Directorate General of Foreign Trade (DGFT), are permitted "self write off" of outstanding export dues to the extent of five per cent of their average annual realisation during the preceding three financial years or 10 per cent of the export proceeds due during the financial year, whichever is higher.
Now, the "self write-off" limit for such status holders is retained at 10 per cent of the total export proceeds realised during the previous calendar year. The "self write-off" limit for exporters not having such recognition of status is fixed at five per cent of the total export proceeds realised during the previous calendar year. In addition to the "self write-off" limit, the exporter can approach the authorised dealer banks concerned for further write off of 10 per cent of total export proceeds realised during the previous calendar year.
The RBI circular makes it clear that the limit for write-off will be cumulatively available during the year. There is no change in the categories of exports that are ineligible for "self write-off" facility. Exports made to countries with externalisation problem, GR/SDF forms which are under investigation by specified agencies and outstanding bills which are subject matter of civil/criminal suit, will continue to be ineligible for "self write-off".
The conditions for availing "self write-off" and for grant of "write-off" by authorised dealers have been mostly harmonised. In case of "self write off", the exporter should submit to the concerned bank a Chartered Accountant's (CA) certificate indicating the export realisation in the preceding calendar year and also the amount of write-off already availed of during the year, if any, the relevant GR/SDF numbers to be written off, bill number, invoice value, commodity exported, country of export, etc. The CA's certificate should also indicate the export benefits, if any, availed of by the exporter have been surrendered. Earlier, the stipulation for prior surrender of proportionate export incentives was not too specific in cases other than "self write-off", but that condition has been spelt out clearly now. The banks concerned will insist on documents evidencing surrender of export incentives availed of before permitting the relevant bills to be written off. The new set of instructions are more realistic and clearer than the previous one.