capitalisation of exports
Anusha H
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Regards
Anusha H
Management Trainee.
RAJESH
Ms. Anusha,
Whenever you export something out of India, you are entitled for a consideration in return. Instead of the consideration being sent to you, the same can be capitalised and treated as a direct investment outside India by you.
Rgds,
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chakri hegde
Dear Anusha,
I too agree with Mr Rajesh,
An Indian Resident is permitted to make investment in an overseas Joint Venture or Wholly Owned Subsidiary by way of many methods. One of those methods is by way of Capitalization of Export Dues and other dues
What is Capitalization of exports dues and other dues?
Indian party is permitted to capitalize the payments due from the foreign entity towards exports, fees, royalties or any other dues from the foreign entity for supply of technical know-how, consultancy, managerial and other services within the ceilings applicable.
As rightly pointed out by Mr. Rajesh, capitalization means the amount which is remained unrealized against exports proceeds will be treated as Direct Investment outside India.
Capitalization of export proceeds remaining unrealized beyond the prescribed period of realization will require prior approval of the Reserve Bank.
Such investments by way of capitalization are also to be reckoned while computing the cap of 400 per cent prescribed in terms of Regulation 6.
Indian software exporters are permitted to receive 25 per cent of the value of their exports to an overseas software start-up company in the form of shares without entering into Joint Venture Agreements, with prior approval of the Reserve Bank.
In terms of Regulation 11 of the Notification number FEMA 120/RB 2004, Indian parties are permitted to make direct investment in JV / WOS abroad by way of capitalization of exports or other dues/entitlements like royalties, technical know-how fees, consultancy fees, etc. In such cases also, the Indian party is required to submit details of the capitalization in Form ODI to the designated branch of the AD Category – I bank.
Further, in cases where the export proceeds are being capitalized in accordance with the provisions of Regulation 11, the AD Category – I banks are required to obtain a custom certified copy of the invoice as required under Regulation 12(2) and forward it to the Reserve Bank together with the revised form ODI.
Capitalization of export proceeds or other entitlements, which are overdue, would require prior approval of the Reserve Bank for which the Indian parties should make an application in form ODI to the Reserve Bank for consideration.
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With Best Wishes
Chakri G Hegde
Nissin Foods India Ltd.
Bangalore