Purpose Code S0109 - Imports from Nepal and Bhutan

The S0109 purpose code is for paying a supplier in Nepal or Bhutan for goods imported into India. Check when it applies, why these payments are made in rupees, and the documents your bank needs for this outward remittance.

The S0109 purpose code is used when an Indian importer pays a supplier in Nepal or Bhutan for goods brought into India. The RBI description is "payments made for imports from Nepal and Bhutan, if any". India treats trade with these two neighbours separately. Under FEMA rules on how payments are made, imports from Nepal and Bhutan are settled in Indian rupees, not in US dollars or another foreign currency. They also do not go through the Asian Clearing Union, the netting system India uses with some other South Asian countries. Like all payments for goods, S0109 is a current account transaction, meaning a normal trade payment, not an investment. Your bank still checks it against import documents such as the Bill of Entry (the customs import document).

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:

• Agricultural goods - A trader in Bihar pays a Nepalese exporter for cardamom, ginger or lentils.
• Industrial inputs - A manufacturer pays a Bhutanese firm for ferro-alloys, dolomite or cement.
• Advance for a shipment - A deposit sent to a Nepalese supplier before the truck leaves for the border.
• Invoice settlement - The balance due once the goods have cleared the Land Customs Station.
• Consumer products - A distributor pays for juices, handicrafts or carpets made in Nepal.

Do not use this code when:

• The supplier is in any other country (use S0101 for an advance or S0102 for invoice settlement instead).
• The goods only pass through Nepal or Bhutan but come from a third country seller (use S0102 instead).
• You are paying a Nepalese or Bhutanese firm for a service, such as consultancy (use the matching service code, for example S1006, instead).
• You are paying the transporter or customs agent, not the supplier (use the matching transport code, such as S0220 for road freight, 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 "S0109 – Payments for imports from Nepal and Bhutan" on Form A2 or your bank's import payment screen.
2. Upload the supplier's invoice and, for a post-shipment payment, the Bill of Entry and the transport document.
3. Give your IEC (Importer Exporter Code); Form 145/146 (earlier Form 15CA/15CB) is usually not needed for paying for goods.
4. The bank checks the documents, matches the payment to the import and sends rupees to the supplier's bank.

Additional Notes:

• Ask the supplier to invoice in Indian rupees. Payment in a foreign currency is generally not allowed for imports from Nepal or Bhutan.
• Under the FEMA export and import rules in force from 1 October 2026, payment is due within the period in your contract. Advances above your bank's own limit may need a bank guarantee.
• Many goods from Nepal and Bhutan enter duty free or at a lower rate under trade treaties, if they meet origin rules. Keep the certificate of origin.

• 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