Understanding the Guaranteed Remittance Waiver: What do Indian exporters need?
Any business exporting goods from India will be required to complete and submit a range of documentation to the country's customs authorities. Typically, one essential piece of paperwork will be a Guaranteed Remittance (GR). This declares the proceeds for the export and confirms that any foreign exchange will be realized within the prescribed time.
However, there are occasions when exports do not involve foreign exchange, where a GR will not be required. In such circumstances, businesses will need to apply for a Guaranteed Remittance Waiver in order to confirm their exemption from the requirement.
Knowing when these waivers are available, how to apply for them and what conditions apply is therefore important in ensuring the smooth flow of goods from India.
When is a Guaranteed Remittance Waiver available?
In most commercial exports from India, the Foreign Exchange Management Act (FEMA) requires exporters to realize and repatriate all foreign exchange proceeds within a prescribed time frame - usually 180 days. This is typically done through banking channels using a GR form.
However, there are several circumstances in which this documentation is not required. These include the following:
- Free of cost shipments: Products that are sent outside the country that are deemed to have no commercial value, such as trade samples or promotional items. This also includes gifts or donations.
- Demonstration items: Goods that are temporarily exported with the intention of participating in international exhibitions, trade fairs or other product demos.
- Repair and replacement: Items such as machinery or equipment that are being sent outside of India for specialist repair, testing, calibration or inspection, or items being shipped as replacements under a warranty.
- Re-exports: Items that have been imported temporarily to India and are being returned to their country of origin, such as if a transaction is cancelled.
In these cases, no payment is expected, so there is no requirement for foreign exchange realization. As such, a GR Waiver simplifies customs procedures and makes it easier for exporters to meet their reporting and compliance requirements.
How to obtain a GR Waiver
Businesses that believe their goods are eligible for a GR Waiver must make a formal request to their authorized dealer (AD) bank, which is usually the exporter's bank. In some cases, they may apply to the Reserve Bank of India (RBI), which can also issue a waiver.
The first step is to determine if the products are likely to qualify for a waiver, based on the criteria above. Once firms are satisfied with this, they must prepare a range of documentation for the application. This includes:
- Covering letter: This should explain to the AD the reason for the exports and why the firm believes a waiver is justified.
- Invoice: This should provide proof that no foreign currency payments are involved.
- Shipping bill: This will be needed to show proof of export and endorse the waiver.
- Agreement or contract: If applicable, this should demonstrate further evidence of the non-commercial nature of the shipment.
This information should then be submitted to the AD bank, which will verify that the export does not involve foreign exchange earnings and is in compliance with FEMA requirements.
If necessary, they may forward the application to the RBI, such as if the shipment is of high value (for example, large donations to NGOs or foreign governments) or contains unusual export types that require closer investigation.
If they are satisfied, the bank will then issue a GR Waiver on the shipping bill or export declaration form. This can be done electronically and be integrated in the Electronic Data Interchange system for presentation to customs at the point of export to confirm that no remittance is required.
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