These Chartered Accountants Submit Key Recommendations on RBI’s Draft FEMA Trade Regulations 2025

In response to the Reserve Bank of India's (RBI) recent release of the Draft Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2025, a consortium of leading chartered accountant firms has submitted detailed feedback highlighting ambiguities and suggesting refinements to ensure clearer compliance for exporters and importers under FEMA 1999.

The feedback, jointly submitted by firms including Shah and Modi Chartered Accountants, P. R. Bhuta & Co., and Hardik D Mehta & Co., emphasizes the need for clarification on service export definitions, third-party payments, and streamlined documentation processes under the new FEMA trade framework.

Top Concerns Highlighted in the Representation

Ambiguity in Export of Services Definition

The current draft language creates confusion about whether services rendered to NRIs physically present in India qualify as exports.

Upon reading the initial part of the definition, it appears to suggest that the service provider must be located outside India, primarily due to the use of the words “render” and “overseas.” However, when the definition is read in its entirety, it seems to imply that the services should be provided “from within India” by a resident service provider to service recipient located outside India. This contrast in interpretation is causing uncertainty in understanding the true intent and scope of the definition.

The CAs sought the RBI’s guidance on whether transactions where the service recipient (though ordinarily residing outside India say, an NRI), is physically present in India at the time the service is provided, would still qualify as “export of services.”

Provision of US Tax Return Filing Services: ABC LLP, a chartered accountant firm based in India, provides assistance in filing US tax returns to their Non-Resident Indian (NRI) client during the client’s visit to India.

Provision of PAN-related Services: ABC, the same chartered accountant firm, also assists the same NRI client in applying for or updating their Permanent Account Number (PAN) during the client’s stay in India.

Ambiguity in Import of Services Definition

Upon reading the definition in its entirety, it appears to suggest that the service provider should be located outside India. In this context, we respectfully seek the guidance of the Reserve Bank of India on the treatment of transactions where the foreign service provider (such as foreign-based consulting firm) sends its personnel in India to provide consulting services to its clients in India.

An illustrative example of a scenario for your kind consideration:

Provision of UAE Entry Services: XYZ LLC sends foreign professionals to India to provide consultancy services related to UAE company set-up procedures and UAE taxation law to an Indian prospective client.

Additionally, since the definition specifically refers to availing services from a person resident outside India, it creates a doubt about whether services rendered by a foreign branch of an Indian entity to the head office / any third party in India would fall under the scope of 'import of services'.

Clarification on Declaration of Exports and Handling of Documents

Regulation 3(3) of the draft FEM (Export and Import of Goods and Services) Regulations, 2025, clearly stipulates the time frame of 21 calendar days within which exporters are required to submit documents evidencing the export of goods or services to the authorised dealer (AD) bank.

However, Regulation 3(2) of the said regulations which allows for the consolidation of similar services rendered to multiple recipients into a single Export Declaration Form (EDF) does not prescribe a similar timeline for submission of such consolidated EDFs by the exporter.

In the absence of a defined due date, there may be uncertainty or inconsistency in compliance among exporters, which could potentially lead to operational challenges for both the exporters and the authorised dealer banks.

“In light of the above, we respectfully request the RBI to kindly issue a clarification requiring a similar timeline of 21 calendar days from the end of the month within which a consolidated EDF must be submitted in cases where multiple service exports are reported together in a single EDF,” the representation read.

Clarification On Matching export realisations against EDF

The CAs pointed out that several instances where export transactions remain open in the Export Data Processing and Monitoring System (EDPMS) due to nominal deductions such as bank charges or other incidental fees. As a result, the exporter is technically unable to realise the full value of the export proceeds as originally declared in the Export Declaration Form (EDF).

This situation poses practical challenges for both exporters and authorised dealer (AD) banks, particularly when it comes to reconciling and closing outstanding entries in the EDPMS. The inability to knock off these transactions, despite the underlying issue being minor and often beyond the exporter’s control, results in operational inefficiencies and unnecessary administrative burdens.

The RBI was requested to consider issuing a clarification or enabling provision to allow exporters to realise the declared export value net of any legitimate bank charges or incidental deductions. This would facilitate smoother closure of export transactions in the EDPMS, and reduce compliance-related challenges.

Clarification Reduction in the export realization

Regulation 6 expressly provides for situations involving the under-realisation or non-realisation of the full value of exports. However, the regulations do not contain a corresponding provision that addresses instances of under-payment or non- payment of the full value in respect of imports.

In the absence of an express enabling provision, it may be inferred that importers are required to seek prior approval from RBI in all such cases. This could inadvertently undermine the decentralised compliance framework envisaged under the draft trade regulations and directions and may lead to unnecessary procedural delays.

The RBI requested to consider inserting a suitable enabling provision in the regulations to deal with cases involving under-payment or non-payment of the import value.

Clarification on Third party receipts & payments

Regulation 8(1) of the draft regulations permits the receipt of export proceeds from a third party, provided such a third party is named in the Export Declaration Form (EDF). Furthermore, the proviso to the said regulation appears to allow the receipt of export proceeds from ‘any party,’ subject to the fulfillment of certain terms and conditions.

However, the use of the term “any party” in the proviso creates some degree of confusion on the scope of permissible third-party receipts. This can be illustrated as below:

1. Scenario 1: ABC Private Limited, India exported goods to XYZ Inc., USA, and named XYZ Pte Ltd., Singapore, as the third party in the EDF. However, due to unforeseen

operational reasons, the export proceeds will now be received from XYZ LLC, UAE. Whether the proviso to regulation 8(1) intends to cover such scenario?

2. Scenario 2: ABC Private Limited, India exported goods to XYZ Inc., USA, and no third party was mentioned in the EDF, as the payment was originally intended to be received from XYZ Inc. directly. Subsequently, due to operational circumstances, ABC Private Limited will now be receiving the proceeds from XYZ LLC, UAE, a third party not previously named in the EDF. Whether the proviso to regulation 8(1) intends to cover such scenario?

The CAs requested RBI to provide clear guidance on the above to remove any ambiguity in the text for third party receipts as well as third party payments where similar language has been used.

Furthermore, in the event that Scenario 2 is not currently envisaged under draft regulation 8(1), we humbly request the RBI to consider amending the regulation to allow for third-party receipts even where the third party was not originally named in the EDF. This could be made subject to appropriate safeguards such as the party being domiciled in a FATF compliant jurisdiction, submission of a bona fide justification by the exporter, a tri-partite agreement, or other documentary evidence to the satisfaction of the authorised dealer bank.

Clarification Export Declaration Form

Section 2 of the Export Declaration Form (EDF) requires exporters to furnish invoice-wise details of the export value, including the currency and corresponding amount.

The RBI was requested to issue clarification on whether exporters would be required to declare the invoice-wise export value in foreign currency or in INR or in both, while filling Section 2 of the Export Declaration Form.

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