Purpose Code S1002 - Commission on exports and imports

The S1002 purpose code is used when an Indian exporter or importer pays commission to a foreign agent who helped close a trade deal. See the rules, documents and tax points for this outward remittance.

Purpose code S1002 is used when an Indian business pays commission to an overseas agent for trade it helped arrange. The RBI description is "Trade related services – commission on exports / imports". The agent might find buyers or source suppliers abroad. S1002 covers only the agent's fee, not the goods. It is a current account transaction. Banks generally allow export commission only after the shipment is made, under their own checks.

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:

• Export sales commission - A percentage of order value paid to an overseas agent who brought in the buyer.
• Buying agent commission - A fee to a foreign agent who found and vetted suppliers for your imports.
• Trade broker fees - Brokerage on a specific export or import contract, such as for commodities.
• Indent agent commission - Commission to an agent who placed orders for you with foreign suppliers.

Do not use this code when:

• Paying the supplier for the goods themselves (use S0101 or S0102 instead)
• Paying a general commission agent not tied to a specific export or import deal (use S1020 instead)
• Reducing an export invoice or refunding a foreign buyer (use S1501 instead)
• Paying a marketing agency for ads or trade fair space (use S1007 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 "S1002 – Commission on exports / imports" on your bank's outward remittance request or Form A2
2. Upload the agency agreement, the commission invoice and the linked shipping bill or import invoice
3. Submit Form 145 (earlier Form 15CA), plus Form 146 (earlier Form 15CB) from a chartered accountant where the payment is taxable and above Rs 5 lakh in the year
4. The bank checks the commission against the trade documents and sends the payment

Additional Notes:

• For export commission, the shipment must already have been made, and the commission should match what was declared on the shipping bill or SOFTEX form.
• Banks may refuse commission on exports made as equity into your own overseas joint venture or subsidiary.

• 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