The Reserve Bank of India (“RBI“) after providing relief to the borrowers and entities in the financial sector, ambit the uncertainties and economic disruption caused on account of the COVID – 19 pandemic, has through its press release dated April 01, 2020 (“Press Release“) attempted to address inter- alia the issues contemplated to be faced by exporters in relation to realization of the export proceeds.
Detailed analyses of the relaxation provided by the Press Release is as under:
REGULATORY FRAMEWORK
Prior to March 31, 2020 the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015 (“Regulations“) mandated export proceeds to be realized and repatriated to India within 9 months from the date of export. However, in cases where the goods are exported to a warehouse established outside India with the permission of the RBI, the amount representing the full export value of goods exported is required to be paid to the authorised dealer as soon as it is realised and in any case within 15 months from the date of shipment of goods.
On March 31, 2020 the Regulations were amended inter-alia to substitute the said period of 9 months to read as ‘The amount representing the full export value of goods / software/ services exported shall be realised and repatriated to India within nine months or within such period as may be specified by the Reserve Bank, in consultation with the Government, from time to time, from the date of export‘
Accordingly, in pursuance of the flexibility made available, the RBI through the Press Release extended the period for realization and repatriation of exports proceeds to 15 months from the earlier period of 9 months. The Press Release further states that this relaxation shall be available for all exports made up to or on July 31, 2020. The aforementioned period of 15 months, in relation to export of goods to a warehouse has not been revised or substituted by the RBI.
INDIA’S RANKING IN TERMS OF EXPORTS
India is the 17th largest export economy in the world1, with top export destinations being the United Sates, the United Arab Emirates, China, Hong Kong and Germany. The top exports of India are refined petroleum, diamonds, packed medicaments, jewelry and rice.
Accordingly, a notable chunk of India’s earnings comes from export of goods. One may observe that only a few of India’s top exports items consists of essentials or necessities in situations such as that of a global pandemic.
BENEFITS TO EXPORTERS
The aforementioned relaxation provided by the RBI shall help the exports in dual manner, as under:
– Exporters shall be able to realize their receipts, in accordance with law, especially from COVID-19 affected countries; and
– Availability of greater flexibility to the exporters to negotiate future export contracts with buyers abroad.
The said relaxation may also be well used as a marketing tool by the exporters to increase their business, more specifically when the demand for the goods is less and customers ask for more credit time for remittance of payments.
APPLICATION OF EXTENSION TO EXPORTS FROM WHICH DATE?
The RBI in its Press Release has merely stated ‘In view of the disruption caused by the COVID-19 pandemic, the time period for realization and repatriation of export proceeds for exports made up to or on July 31, 2020, has been extended to 15 months from the date of export’.
The Press Release nowhere mentions that the said relaxation shall be available in respect of exports made on and from which date, i.e. it merely specifies the end date as July 31, 2020 and no start date as such.
Therefore, one may argue that since the start date hasn’t been specified, the relaxation shall apply in respect of export consignments as old as those of January 2019 as well.
However, the relaxation is required to be read and interpreted in accordance with the prevailing circumstances, intent of RBI for providing such relaxation and the regulatory framework.
The law on interpretation of legislation has been a question of dispute in various cases, which has been settled inter – alia by the Hon’ble Bombay High Court through its judgement dated September 03, 2019, in the matter of Shri Vishwas Bajirao Patil v. the State of Maharashtra through the Secretary, Urban Development Department & Others wherein it provided that, it is settled beyond pale of controversy that all laws are presumed to be prospective unless the legislature unequivocally expresses its intent for the operation of such provisions retrospectively. Such an intent may be discerned from the express words employed by the legislature or by overwhelming evidence of necessary implication. The presumption of prospective operation of all laws is premised on a sublime philosophy that is aptly captured by two principles of law having immemorial antiquity. The first principle being, Nova Constitutio Futuris Formam Imponere Debet, Non Praeteritis which literally translates to mean that a new law ought to be construed to interfere as little as possible with vested rights. The second tenet of law is expressed as Lex prospicit non respicit which broadly implies that law looks forward and not backward.
The said judgement further relied upon an order dated January 31, 2018 passed by the Hon’ble Supreme Court in the matter of CIT vs. Essar Teleholdings Ltd. in Civil Appeal No. 2165 of 2012, wherein it was held that it is a settled principle of statutory construction that every statute is prima facie prospective unless it is expressly or by necessary implications made to have retrospective operations. The Supreme Court observed that the legal maxim nova constitutio futuris formam imponere debet non praeteritis i.e. a new law ought to regulate what is to follow, not the past, contains a principle of presumption of prospectivity of a statute.
Taking into consideration the aforementioned judgements, the Press Release would have a prospective application. In this case the prospective application is to realize and repatriate the export proceeds and it is irrelevant as to when the export was made. If the due date for realization or repatriation of the export proceeds has not expired before the date of the Press Release, then it can be realized and repatriated within the additional period granted thereunder.
It may be concluded that the said relaxation may well apply only in respect of exports, for which the time period of 9 months had not expired on or before March 31, 2020. In other words, such relaxation shall only apply wherein the period of 9 months was due to expire on or after April 01, 2020. Therefore, the extended period of 15 months shall be available only in respect of those exports made in or after July 2019.
Accordingly, exporters cannot take the benefit of the relaxation in respect of any exports made before July 2019, since back then there was no scenario of a global pandemic and an economic slowdown.
Additionally, it is relevant to note that RBI has not laid down any restriction as to the relaxation shall apply to export of which all commodities or to which countries. Therefore, it may be assumed that such extension shall be available to all the exports, including those categorized as non-essential, made world over on or after the cutoff date.
CONCLUSION
The reliefs being provided by the RBI has managed to bring in some short-term cheer. However, it will be interesting to watch how and to what extent will these reliefs prove to be beneficial to the masses, more specifically in this phase of economic slowdown world over, with uncertainties relating to business operations commencing, still existing.
Footnote
1 https://oec.world/en/profile/country/ind/
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