General
What Are the Most Used Purpose Codes for Export?
Some regulations are sacrosanct in exports, meaning you must follow them. The purpose codes for inward remittance are one of them. It is part of the RBI guidelines for inward remittances, which export businesses receive as payment for their transactions with overseas customers.
Let’s explore the purpose code list and its role in exports.
What is a purpose code?
A purpose code is a unique identifier used to identify the type of international transaction. It is used to check whether transactions are reported correctly and meet regulatory standards. The country's central bank usually issues the purpose code to ensure uniformity and easy identification of international transactions.
What role does the purpose code play?
The purpose code is the identifying factor for an international transaction and is critical to filing shipping bills and facilitating remittances. The purpose code list has been created so that it can be added to documentation used for customs clearance. It makes SWIFT (Society for Worldwide Interbank Financial Telecommunications) messages in banking easy to sort and identify based on the purpose code.
Are purpose codes uniform across countries?
Not really. Specific codes will vary by country. However, as per RBI guidelines, we have some commonly used purpose codes in the purpose code list for exports in India. These purpose codes help various authorities quickly identify the taxes, exemptions, duties, and schemes that will apply to the transaction.
Here’s a list of common-purpose codes used for exports
| Purpose Code | Title | Description |
|---|---|---|
| P0101 | Export of goods except software | This code is used while exporting physical products like textiles, food items, machinery, and other tangible goods. |
| P0102 | Export of software | This code represents the export of software and software-related products and services, such as IT services and software consultancy. |
| P0103 | Export of services | Apply this code when exporting services like business services, consulting, technical support, or any other professional services to clientele abroad |
| P0301 | Advance payment against exports | Enter this code while receiving advance payment from the buyer or importer for the goods or services being provided |
| P0302 | Receipt from export agencies | Utilize for the receipts your business gets from export houses or agencies, which function as intermediaries in international transactions |
| P0104 | Re-export of goods | This is for goods that are re-exported once they have been imported. Instances include temporary import-export schemes |
| P0105 | Merchanting trade | Applicable where the transaction involves goods procured from another country and sold to another without entry into the home country |
| P0099 | Other receipts | Towards transactions that will not fall into any other category |
When must exporters use purpose codes?
Here are some of the main situations where exporters will use purpose codes:
Receiving payments for their export orders
When receiving payment from foreign buyers, exporters use the correct purpose code to identify the nature of the transaction.
Submitting export-related data
Exporters must add the proper purpose code when they submit information to the Export Data Processing Monitoring System (EDPMS). Banks will require the code to match transactions with the payments.
For advance payments
Exporters must add purpose codes when receiving advance payments from international buyers against their orders.
Foreign currency conversion
When converting foreign currency earnings into INR, the exporter must provide the purpose code to ensure compliance with FEMA requirements.
Adjustments and refunds
Issuing a refund by the exporter to a buyer or adjusting payments against export bills requires a purpose code to document the transaction.
Exporting services
Exporters offering services rather than products will use the proper purpose code to identify the service category.
The purpose code list and its correct usage during export are essential for facilitating payments, meeting and fulfilling compliance requirements, and keeping the business going. While you focus on production-related and business aspects, we have the right platform and solutions to support your efforts and ensure smoother operations and financial transactions.
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