Purpose Code P1505 - Deemed exports (exports between SEZ, EPZs and Domestic Tariff Areas)

The P1505 purpose code is for receiving foreign currency payment for deemed exports, such as supplies from the Domestic Tariff Area to an SEZ unit. Check when it applies, how it differs from regular export codes, and the documents for this inward remittance.

Purpose code P1505 is used when a supplier receives foreign currency payment for deemed exports. The P1505 purpose code covers supplies between Special Economic Zones (SEZs), Export Processing Zones (EPZs) and the Domestic Tariff Area (DTA), meaning the rest of India. The RBI description is "deemed exports (exports between SEZ, EPZs and Domestic Tariff Areas)". In these cases the goods do not leave India, but trade rules treat the supply as an export. It is a current account receipt. The code records the payment. Whether a supply counts as an export for benefits is decided by SEZ and trade policy rules, not by the purpose code.

This Purpose Code should be used only where the transaction fits its defined regulatory scope. Here's when you should and shouldn't use this code:

You should use this code when:

• DTA supply to an SEZ unit - Foreign currency payment for goods sent from the rest of India to an SEZ unit.
• Supplies to an SEZ developer - Payment for materials supplied for the SEZ's authorised operations.
• Payments routed from the SEZ unit's foreign currency account - Settlement made by the SEZ unit from its foreign currency funds.
• Deemed export payments on zone supplies - Receipts on other supplies between zones and the DTA that are treated as exports.

Do not use this code when:

• The goods physically leave India on a shipping bill (use the export of goods code, such as P0102, or P0103 for advances).
• The SEZ unit pays you in Indian rupees (no foreign inward remittance purpose code applies).
• You sell goods abroad without them entering India (use P0108 instead).
• You are paid for services, not goods (use the service code for that work instead).

RBI purpose codes are mandatory under FEMA to classify the nature of cross-border transactions entering or leaving India. They allow banks and regulators to accurately track foreign exchange flows and apply the correct regulatory, tax, and reporting treatment.

For individuals, businesses and institutions, correct purpose code usage:

• Ensures transactions are classified correctly under FEMA.
• Enables accurate reporting to the RBI and other regulators.
• Reduces delays caused by compliance checks or misclassification.
• Supports clean audit trails and tax reconciliation.

Bottom-line:

Using the correct purpose code helps ensure smooth processing, regulatory compliance, and faster credit of funds.

1. Select "P1505 – Deemed exports" when the bank asks for the purpose of the inward remittance.
2. Upload the invoice, the bill of export or SEZ entry documents, and the purchase order.
3. Give a FEMA declaration that the payment is for a deemed export supply, where asked.
4. The bank checks the documents, credits your account and issues an e-FIRA or FIRC.

Additional Notes:

• Supplies to an SEZ for authorised operations are zero-rated under GST, under an LUT or with IGST refund.
• Keep SEZ endorsement on your documents. It supports both the zero-rating and the bank's checks.
• Supplies to EOUs or under advance authorisation can be "deemed exports" under GST, which has its own rules and often rupee payment.

• Using a generic or incorrect purpose code instead of the exact RBI-prescribed purpose code can lead to misclassification of the transaction under FEMA and trigger additional compliance checks by the bank.
• Mismatch between purpose code, invoice, and remittance narration may place the transaction on hold until clarification is provided.
• Submitting unclear or incomplete supporting documents that do not clearly describe the nature of the transaction often result in delays, as banks rely on documentation to validate FEMA compliance.
• Missing mandatory PAN or incomplete KYC documentation can prevent banks from releasing funds until verification is completed.
• Using service-related purpose codes for non-service transactions like capital receipts, investments, gifts, or refunds can result in incorrect regulatory treatment and potential reporting issues.
• Assuming small or recurring transactions do not require accuracy and repeated misclassification can attract regulatory scrutiny over time.

Cross-border payments require accurate purpose code selection and complete compliance documentation. Xflow helps businesses and individuals receive international payments while staying aligned with RBI and FEMA requirements.

With Xflow, you can:

• Select the correct purpose code with clarity
• Organize and maintain supporting documents
• Reduce compliance back-and-forth with banks
• Support FEMA compliant inward remittances