March 12, 2024

eBRC system is revamped by DGFT

Electronic Bank Realization Certification (eBRC) is a certificate issued by the bank certifying that payment is received in foreign currency against the export of service and goods. As per FEMA, exporters are required to receive payment against export of goods and services within a specified period of time. Timely receipt of foreign currency is a condition for issuance of GST refund as well.

So far, eBRC is processed and issued by the recipient bank on application of the exporter. However, considering the increase in the quantum of export and burden on banking personnels, the DGFT has revamped the entire system of eBRC generation.

This article discusses the revamped process of e-BRC in details:

1. What is electronic Bank Realization certificate

“eBRC” stands for “Electronic Bank Realization Certificate”. eBRC acts as proof that the exporter has realized foreign currency against export done for goods and services. eBRC is done by matching foreign inward remittance received in a Bank with Shipping Bill details available on ICEGATE or DGFT Portal.

eBRC is issued by the bank at the request of the exporter.

2. Benefit of obtaining e-BRC

As per Foreign Exchange Management Act (FEMA) guidelines, the amount representing full value of export shall be realized and repatriated to India within 9 months or within such time as may be prescribed.
Further, as per GST law, exporters are required to realize and repatriate foreign currency within 9 months from date of export.
Realization and repatriation is substantiated through eBRC. An exporter is entitled to the following benefits subject to obtaining eBRC:

Avail incentive of Foreign Trade Policy under DGFT for following policies:
- Advance Authorisation Scheme: Advance Authorisation Scheme permits duty-free import of inputs, including those incorporated in export products, as well as packaging materials, fuel, oil, and catalysts consumed in production. Advance Authorisation covers manufacturer exporters or merchant exporters tied to supporting manufacturer(s).
- Export Promotion Capital Goods Scheme (EPCG): Export Promotion Capital Goods (EPCG) Scheme aims to enable the import of capital goods to improve the quality of goods and services and boost India’s manufacturing competitiveness. Under this scheme, capital goods can be imported duty-free for pre-production, production, and post-production activities. Additionally, capital goods imported under the EPCG Scheme for physical exports are exempt from IGST and Compensation Cess until 31.03.2020.
- MEIS / SEIS / TMA (legacy schemes): Merchandise Exports from India (MEIS) Scheme serves as an incentive scheme to promote goods exports. MEIS consolidated several export incentives. Similarly, Service Exports from India Scheme (SEIS) promotes service exports from India by rewarding service providers with duty script credit for eligible exports. Service providers in India receive rewards for all eligible exports under this scheme.
Benefits under GST Certificate:

Apart from various incentives under FEMA, exports are also entitled to following benefits under GST through eBRC:

Refund of unutilized ITC for tax-free exports.
Refund of tax on exported services with tax payment.
Refund of unutilized ITC for supplies to SEZ without tax payment.
Refund of tax on supplies to SEZ with tax payment.
Refund of tax on deemed exports to suppliers.
Refund of tax on deemed exports to recipient.

3. Current process of obtaining eBRC

Under the current process, the exporter is required to raise a request with the bank for issuance of eBRC. Following is the current process for export of goods and services:

Export of goods

Post export of goods, the exporter prepares necessary documents such as Shipping Bills or Bills of Export.
Remittance for export is received in Exporter’s bank account in foreign currency.
Exporters raise request with bank alongwith supporting document for issuance of eBRC.
Bankers match the inward remittance with shipping bills populating on ICEGATE or DGFT portal.
After verification, banks upload the eBRC to the DGFT system.
Exporters can download the eBRC from the DGFT website and utilize it accordingly.

Export of Services

In case of export of services, no shipping bill or bill of export is available.
Exporter raise request for issuance of eBRC after submitting supporting documents such as Softex certificate, eFIRC, and other relevant documents to the banks for eBRC processing.
After verification, banks upload the eBRC to the DGFT system for record-keeping and validation.
Thereafter, Exporter can download the eBRC from the DGFT Website and use the same.

4. Short comings and Issues in current eBRC process flow

Currently, entire industry is facing following issues in current eBRC process:

Issues for banks

Banks face a significant burden due to the rising volume of exports.
Banks are required to update eBRC/EDPMS for every transaction, adding to their workload.
Banks need to verify multiple documents for offsetting the IRMs (Inward remittance message)
Cumbersome process is applicable in case of cancellation and change in eBRC.

Issues for exporters

Export is required to raise separate requests for each invoice and inward payment with the bank.
Multiple documents are required to be submitted such as:
- Copies of all Shipping Bills and invoices (select banks) to be submitted for merchandise exports
- SOFTEX reconciliation
- Courier export documents

Above mentioned documents involve a lot of papers.
The process involves submitting more documents for clarifications and requires follow-up to ensure the final issuance.
Result is delay in getting export benefits, GST refunds filings etc

5. Issues in current eBRC process flow – Services exports

In case of export of service, eBRC system does not generate proper service export data. Following are gaps faced by the exporter:

eBRC is utilized for claiming GST refunds for software and other service exports.
However, the eBRC system does not capture service classification data.
The refund applicant may opt to generate a FIRA (Foreign Inward Remittance Advice) instead of an eBRC, but this data is also not captured.
Different agencies use different classification systems, making standardization and analysis challenging without detailed data concordance. Such as, following nomenclatures are used for different documents:

System	Codes used for classification of service
eBRC	SAC codes
GSTN	SAC Codes
FETERS	FETER Purpose codes
FIRA	RBI purpose code
SOFTEX	RBI Purpose codes

6. Process flow of revamped eBRC system

Under revised eBRC System, following similar process is applicable in both export of goods and export of services:

Details of export’s bank Account, PAN and IEC Code is already available with DGFT,
All Inward Remittance Message(IRM) received in Bank account are pushed by the Bank to the DGFT portal based on PAN number mapped with Bank account through API Integration,
Banks shall push the IRMs pertaining to the Trade Account only and not the IRMs pertain to Capital Account etc. i.e., remittances pertaining to Goods or Services Exports.
IRM details will be accessible to the concerned exporter upon logging onto the DGFT Website (https://dgft.gov.in). Since IECs are linked to PAN, only the concerned IEC holder will have visibility to their IRM.
Exporter is required to tag such inward remittance with shipping bills available on his portal to generate eBRC,
Exporter will create eBRCs by matching IRM with relevant shipping bills, SOFTEX, or invoice details. Multiple IRMs may be grouped under one eBRC, or one IRM can be split amongst several eBRCs.
The RBI Purpose Code and other fields mentioned in the IRM shall be used to validate the eBRC fields being certified by the Exporter.
eBRC generated by the exporter will flow to the bank for post audit risk assessment.
Process of sharing such eBRC with other agencies may also be developed in future.

7. Key features of revamped eBRC process

Reduction in compliance costs for exporters due to paperless eBRC generation;
Beneficial to small exporters, especially useful for e-commerce exports with low cost, high volume of transactions to claim benefits and refunds;
Workload reduction for banks and bank will focus on targeted risks only instead of checking all transaction documents;
Expeditious process as eBRC are generated by the exporter on self certification basis.
Each bank will decide its own cut off date to move to self certification based eBRC generation. IRMs received after such date shall be made available to the exporter for eBRC generation.

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

Proceedings can’t be initiated under Section 74 when tax liability is already discharged along with interest

Establishment of Non-SEZ IT/ITES business in IT/ITES Special Economic Zones| Insertion of Rule 11B to SEZ Rules

Streamlining Company Registration in India: A Digital Transformation

How to Start a Startup Company in India

MCA imposed Penalty for failure to issue and transfer shares in Demat form

Others

MCA imposed Penalty for failure to issue and transfer shares in Demat form

As per Section 29(1A) of Companies Act read with Rule 9A of The Companies (Prospectus and Allotment of Securities) Rules, 2014, every unlisted public company shall ensure that before issuance of any securities entire holding of securities of its promoters, directors, key managerial personnel has been dematerialised in accordance with provisions of the Depositories Act 1996. Further, every shareholder of an unlisted public company is required to dematerialise its securities before transfer, if such transfer is made on or after 2nd October, 2018.

23/04/2024 No Comments

Proceedings can’t be initiated under Section 74 when tax liability is already discharged along with interest

Judgements

Proceedings can’t be initiated under Section 74 when tax liability is already discharged along with interest

The petitioner is engaged in the business of generation of electricity through solar plants. The GST returns filed by the petitioner for the period of July, 2017 to March, 2019 were subject to audit. The petitioner was informed about tax liability during audit proceedings on account of wrong availment of ITC and ITC availed with respect to exempted supply. Upon receipt of initial audit observation, the petitioner discharged the entire tax liability alongwith interest. The final audit report was issued much after payment of GST liability. Post audit, the respondent issued show cause notice to the petitioner under Section 74 of CGST Act and confirmed the demand through DRC-07. The petitioner contended that it falls under purview of Section 73(1) and 73(5) of CGST Act and therefore, SCN under section 74 is not sustainable. Whereas, the respondent contended that this is the case of fraud and willful misstatement.

23/04/2024 No Comments

Establishment of Non-SEZ IT/ITES business in IT/ITES Special Economic Zones| Insertion of Rule 11B to SEZ Rules

Information

Establishment of Non-SEZ IT/ITES business in IT/ITES Special Economic Zones| Insertion of Rule 11B to SEZ Rules

Post COVID-19, there are many corporate entities which are allowing employees to work on Complete Work From Home (WFH) basis or on hybrid basis, i.e., Employees are required to come to office on selected days. This approach has reduced occupancy of physical premises by corporate offices and caused vacation of various rented premises.

23/04/2024 No Comments