Exporters in many cases are unable to recover payments from overseas buyers. There can be many reasons such as buyer insolvency, commercial disputes, destruction of goods, auction of goods, or an untraceable buyer can leave export proceeds unrealised. As a result, the Reserve Bank of India (RBI) allows exporters to write off certain unrealised export proceeds. Understanding the Export Proceeds Write-Off Rules helps exporters regularise old export receivables and avoid unnecessary compliance issues.
What Are Export Proceeds Write-Off Rules?
A write-off means recognising that an outstanding export receivable is no longer expected to be recovered. However, it is not simply an accounting entry. The exporter must follow the applicable FEMA/RBI requirements through the Authorised Dealer (AD) Category-I bank.
RBI Export Proceeds Write-Off Limits
The applicable write-off limits are linked to the export proceeds realised during the preceding calendar year.
| Type of Write-Off | Limit |
| Self-write-off by other exporters | 5% |
| Self-write-off by Status Holder Exporters | 10% |
| Write-off by AD Category-I Bank | 10% |
These limits are cumulative during the relevant year.
For example, if an exporter realised ₹10 crore during the preceding calendar year, the self-write-off limit for a normal exporter would be ₹50 lakh.
For a Status Holder Exporter, the limit would be ₹1 crore.
Conditions Under Export Proceeds Write-Off Rules
Meeting the percentage limit is not the only condition for write offs. In addition, the exporter must also satisfy the applicable conditions.
Export Proceeds Must Remain Outstanding
Under the existing framework covered here, the relevant export amount should have remained outstanding for more than one year.
The write-off facility is intended for genuine unrealised export receivables that have remained unresolved despite recovery efforts.
Reasonable Recovery Efforts Are Required
Exporters should maintain evidence showing that reasonable attempts were made to recover the outstanding amount.
This can include buyer correspondence, payment reminders, legal notices, insolvency documents, tracing attempts and other commercial records.
Banking Relationship
The exporter should generally be a regular customer of the concerned AD Category-I bank for at least six months.
The account must also satisfy applicable KYC and AML requirements.
When Can Export Proceeds Be Written Off?
The RBI framework recognises several situations where unrealised export proceeds may qualify for write-off. These are as follows:
Overseas Buyer Insolvency
Firstly, if the overseas buyer becomes insolvent and the relevant authority confirms that recovery is not possible, the exporter may qualify for write-off.
Overseas Buyer Cannot Be Traced
Where reasonable efforts to locate the overseas buyer have failed, the outstanding amount may qualify under the relevant provisions.
Goods Destroyed or Auctioned Overseas
Goods may sometimes be destroyed or auctioned by competent authorities in the importing country.
If the exporter cannot recover the corresponding proceeds, the amount may qualify for write-off subject to the prescribed conditions.
Undrawn Export Balance
Lastly, certain small undrawn balances arising from differences in weight, quality, inspection or other commercial adjustments may also qualify. Although, an undrawn balance not exceeding 10% of the invoice value may fall within the specified category, subject to the applicable conditions.
Export Proceeds Write-Off Without Monetary Limit
Certain specified circumstances may qualify for write-off without the normal monetary ceiling. However, this does not mean that documentation is unnecessary.
The AD Category-I bank must still examine the circumstances and supporting evidence before permitting the write-off.
Export Incentives and Write-Off
Exporters should check whether any export incentives were claimed against the relevant shipment.
Where applicable, proportionate export incentives may have to be surrendered before the write-off is permitted.
CA Certificate for Export Proceeds Write-Off
For self-write-off, the exporter is required to furnish a Chartered Accountant’s certificate to the AD bank.
The certificate may contain details of export proceeds realised, previous write-offs, the export bill proposed for write-off and applicable export incentives.
Export Proceeds Write-Off Process
Generally, you will have to follow the following steps:
- Identify outstanding export bills and verify the relevant documents.
- Determine the reason for non-realisation.
- Calculate the available write-off limit.
- Collect evidence of recovery efforts.
- Obtain CA certification where required.
- Review and surrender applicable export incentives.
- Submit the application to the AD Category-I bank.
- Complete EDPMS reporting and regularisation.
Common Export Proceeds Write-Off Mistakes
Exporters should not assume that an old receivable can simply be removed from their books.
Common mistakes include ignoring cumulative limits, failing to maintain recovery evidence, overlooking export incentives, ignoring EDPMS status and assuming that every commercial dispute qualifies.
A regulatory write-off is different from an accounting write-off.
EDPMS and Export Proceeds Write-Off
EDPMS is important for monitoring export transactions.
Export bills can continue to appear as outstanding until the proceeds are realised or the transaction is appropriately regularised.
Exporters should therefore reconcile their export invoices, shipping documents, bank realisations and EDPMS records regularly.
Why Choose Export Compliance Services?
Export transactions involve FEMA requirements, banking documentation, export declarations, EDPMS records and export incentives.
Professional export compliance services from E-Startup can help exporters with documentation review, EDPMS reconciliation, outstanding bill identification, write-off documentation and AD bank coordination.
These services can make the compliance process more organised and reduce the risk of documentation gaps.
ICE Registration and Export Compliance
Businesses involved in international trade should also ensure that their registrations and export-import documentation are properly maintained.
ICE Registration and other applicable export compliances should be reviewed alongside FEMA and banking requirements.
Conclusion
In conclusion, the Export Proceeds Write-Off Rules provide exporters with a mechanism to regularise genuine export receivables that cannot be recovered. However, exporters must satisfy the applicable limits and conditions and maintain proper supporting documentation.
From recovery evidence and CA certification to AD bank coordination and EDPMS reporting, each stage matters. Businesses handling regular exports can consider professional Export Compliance Services to manage these requirements and maintain proper export records.
Frequently Asked Questions
What is the self-write-off limit for exporters?
For exporters other than Status Holder Exporters, the self-write-off limit covered in this framework is 5% of export proceeds realised during the preceding calendar year.
What is the limit for Status Holder Exporters?
The self-write-off limit for Status Holder Exporters is 10% of export proceeds realised during the preceding calendar year.
Is CA certification required?
Yes. A Chartered Accountant’s certificate is required for self-write-off under the applicable framework.
Does accounting write-off close an EDPMS outstanding?
No. The relevant export bill must be appropriately regularised and reported by the AD bank in EDPMS.
Moreover, if you want any other guidance relating to ICE registration or export compliance services , please feel free to talk to our business advisors at 8881-069-069.
Download the E-Startup Mobile App and never miss the latest updates relevant to your business.