Draft RBI Rule May Increase Compliance Burden for Service Exporters

The Reserve Bank of India (RBI) shall be introducing a new regulation requiring all service exporters to declare their exports to banks. While this aims to enhance monitoring and regulation, it may also lead to significant compliance challenges.

Key Points to Note:

— Declaration Requirement:
Service exporters must now submit a declaration of the full export value to the specified authority and provide relevant documents within 21 days from the date of invoice. This was not required under the earlier regulations, except in a few cases.

— Reconciliation with GST:
This new requirement may necessitate reconciliation between the turnover reported in GST returns and the turnover declared to banks. GST officials may seek to verify that these figures match, thereby increasing the compliance burden.

— Impact on Refunds:
Exporters may face increased documentation and scrutiny from GST officials to ensure consistency in reported figures, potentially affecting refund processes.

— Interplay with Schedule I of GST:
Schedule I includes activities treated as supply even if made without consideration. The new RBI regulation requires accurate declaration of export values, ensuring all exports, including those without consideration, are reported appropriately. Will Schedule I be an exception?

— Interplay with GST Valuation:
Can the principles of Rule 28 (related party valuation) be adopted for RBI reporting, particularly in the context of declaring the full export value of services?