Ease time limits for bringing in e-commerce export proceeds: Report

India should deploy some of the learning from China’s model for export promotion through e-commerce as it plans to give a filip to the fast-growing sector, a new report said. The country should have a framework for setting up e-commerce hubs and consider other relaxations in payment regulations, it added.

The  report,  prepared by EY, in association with Assocham, recommend that the time limit for realisation export proceeds should be liberalised. China puts no time limit realising payments against e-commerce exports while in India, Reserve Bank of India (RBI) guidelines mandate foreign exchange receipt within nine months of shipment, creating challenges for e-commerce operators, as some shipments are sold over 12 to 18 months, making the stipulated reconciliation time frame not feasible.

According to the report, time for payment realisation and repatriation for e-commerce exports should be increased to 18 months from 9 months. RBI has recently come out with draft export-import regulations for public comments where relaxation of time frame for repatriation of export proceeds and enhanced variation in declared value of exports and actual realisation has been proposed. 

India’s e-commerce exports hover around $ 4-5 billion or just 1.14% of its total shipments in FY24 while China’s exports through this route are $ 250 billion or 6.4% of its total merchandise exports in 2023. India wants its e-commerce exports to grow to $ 200-300 billion by 2030 when its total exports would be $ 1 trillion. Looking at the targets it seems that 36-54% of the incremental exports in the next six years will have to come from e-commerce.

To bolster e-commerce exports, the report also suggests amendments to the Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 which includes increasing the consignment limit of courier exports to $50,000 (Rs 41 lakh) from $ 12,000 (Rs 10 lakh). China has a limit of $ 50,000 on every e-commerce export consignment. 

China sets no variance limit on realised payment against exports. Sellers bear the profit or loss generated through foreign exchange while in India rules mandate that forex received must not vary more than 25% of the value stated in the export document. The 25% variation clause for receipt of export proceeds should be removed, the report suggested. Given price uncertainty due to discounting and potential returns (a prominent feature of e-commerce sales), a 25% cap is restraining, the report said.

In India  payment reconciliation for exports happens for every shipment bill leading to significant burden on the e-commerce operators in terms of documents and compliance while in China it is once a month. Each reconciliation in India costs Rs 1,500 to Rs 3,000 while in China it is 1% to 2.5% of value, E-commerce shipments do not have a high value and India should also shift to percentage of value of shipments.

The responsibilities of sellers and e-commerce operators should be clearly defined in India, the report recommended. In China sellers are only mandated to obtain company or product specific licence, create marketplace accounts and list products. E-commerce operator takes charge of export, custom clearance and payment reconciliation.

In India there is no segregation in responsibilities necessitating sellers to participate intensively in the entire process of custom clearance, payment reconciliation, obtaining licences leading to increased focus on compliances and impacting ease of doing business. Even the process of dealing with items that will come back as returns needs to be simplified.

The government is actively working on the policy framework for e-commerce export hubs.

Source: FINANCIAL EXPRESS