Can we “set-off” of export receivables against import payabl

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PRAVEEN KUMAR (Querist)
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07 December 2011 My query relates to the RBI/2011-12/264 A.P. (DIR Series) Circular No. 47 dt. November 17, 2011, regarding “Set-off” of export receivables against import payables. I need to confirm in this regard that the company which has made import way back in the year 2007 can set off its payables by making export to the same exporter from whom import was made in today's date. i need to add in this that the company has still outstanding payments of that import.

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PRAVEEN KUMAR

PRAVEEN KUMAR (Querist)
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08 December 2011 Please reply experts... its urgent. :-(

Aashok Kumar Sharma

Aashok Kumar Sharma

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18 July 2024 The RBI Circular No. 47 of 2011 pertains to the set-off of export receivables against import payables under the Foreign Exchange Management Act (FEMA). Here’s a clarification based on your query:

### Set-off of Export Receivables against Import Payables

1. **Conditions for Set-off**: According to RBI guidelines, set-off of export receivables against import payables is permissible under certain conditions:
- The exports must be made to the same entity (exporter) from whom the imports were originally received.
- The set-off can only be done against the specific import transaction for which the exports are being made.
- Both the import and export transactions should be in compliance with FEMA regulations and any other applicable laws.

2. **Time Limit**: There isn’t a specific time limit mentioned in the circular regarding the duration between the import and export transactions. However, the circular emphasizes that the set-off should be done for transactions related to the same importer/exporter relationship.

3. **Outstanding Payments**: If your company still has outstanding payments from an import transaction dating back to 2007, and you now intend to export goods to the same importer/exporter for whom the imports were made, you can explore the option of setting off the export proceeds against the outstanding import payables.

4. **Documentation and Compliance**: Ensure that all transactions are properly documented, including invoices, shipping documents, and compliance with FEMA guidelines. It’s advisable to consult with a qualified chartered accountant or a financial advisor who specializes in foreign trade and FEMA regulations to ensure proper compliance and documentation.

### Practical Steps:

- **Verification**: Verify the current status of the outstanding import payables and the feasibility of exporting goods to the same exporter.
- **Documentation**: Prepare all necessary documentation related to both the original import and the subsequent export transactions.
- **Compliance**: Ensure compliance with all regulatory requirements under FEMA and any other relevant laws.

By following these steps and ensuring compliance with RBI guidelines, your company can explore the option of setting off export receivables against outstanding import payables, provided all conditions are met.

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