What Has Changed Under the New DGFT Rules?
Earlier, exporters had to submit a declaration of intent and obtain a UIN to access factoring support. Under the revised DGFT export factoring rules, DGFT will now use the Importer Exporter Code (IEC) to identify exporters throughout the process.
Following are some key changes:
- The exporters are not required to obtain a separate UIN or submit a declaration of intent.
- UIN issued earlier will not be valid in this intervention.
- DGFT will identify exporters based on the IEC for application, claim and disbursement process.
- DGFT has also clarified the timelines for reporting transactions and submitting claims.
What Is Export Factoring?
Export factoring is a service that enables exporters to obtain money in advance of the actual payment by overseas buyers. Exporters can receive advance finance against their eligible export receivables through a factoring agency. This can help exporters in better cash flow management to pay off their operational costs.
Suppose an Indian exporter sells goods to the buyer in a foreign country with a 60-days payment term. Using factoring, the exporter can get funds earlier instead of waiting until the full payment. As per the DGFT export factoring rules, eligible exporters are eligible to avail the interest cost support under the Export Promotion Mission, subject to conditions of the scheme.
How Can Exporters Apply for Support?
Steps that should be followed by exporters and factoring agencies:
1.Registration of factoring agency: The factoring agency needs to be registered on DGFT portal
2.Uploading of transaction details: The factoring agency should upload details of transaction within the prescribed time frame
3.Verification of the transaction details: The exporters should check the transactions uploaded against the IEC
4.Submitting of claims: The exporter needs to submit the consolidated monthly claim within applicable timeline
5.Approved support: DGFT will transfer the approved assistance to the eligible exporter’s linked bank account.
For DGFT export factoring revised norms, factoring agencies in general are given one month time from the applicable trigger for uploading data of transactions. The claim submission by exporter is two months from the relevant data upload, subject to applicable provisions.
Importance of IEC Registration and MSME Registration
IEC Registration is required for firms operating in import/export of goods with exceptions of any applicability. Considering that DGFT has started using the IEC for identifying the exporter, businesses need to maintain their records accurately and make sure that their bank accounts are active.
The MSME Registration may also come in handy for eligible firms. Exporters who qualify should ensure that their Udyam registration is accurate and they satisfy the conditions of the scheme.
Even though IEC Registration and MSME Registration have different intentions, both can be useful while verifying one’s eligibility for obtaining export support. However, registration by itself does not ensure approval.
Can Exporters Claim Other Interest Support?
The eligible MSME exporters can avail of factoring support with the Interest Subvention for Pre and Post Shipment Export Credit intervention, subject to scheme conditions. However, exporters cannot claim support for the same invoice, export receivable or interest cost twice. They should scrutinize their claims to avoid double benefits and possible recovery actions.
Conclusion
The newly framed DGFT export factoring rules have made it easier for exporters to avail the benefit without any need of UIN and clear claim process procedures. The exporters must keep their IEC Registration updated and check their MSME Registration status as well and follow reporting deadlines to support smooth claim processing.
FAQs
Q1. Is a UIN essential as per the revised DGFT guidelines on export factoring?
No. The UIN and declaration of intention has been omitted by DGFT, and the exporter has to use his IEC for identity purposes.
Q2. Is MSME Registration required for getting the benefits of the factoring scheme?
Eligibility depends on the scheme conditions. Businesses should check the MSME Registration requirements before applying.
Q3. When is the submission deadline for export factoring claims?
Factoring firms generally need to upload transaction details within one month of the applicable trigger event. Exporters must submit their claims within two months of the data upload.
Q4. Can exporters avail themselves of factoring support and interest subvention schemes?
Yes, eligible MSME exporters can benefit from both schemes but not twice from the same invoice/receivable/interest cost.
Moreover, if you want any other guidance relating to DGFT export factoring rules , please feel free to talk to our business advisors at 8881-069-069.
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