Purpose Code S1505 - Deemed imports (between SEZ, EPZ and domestic tariff areas)

The S1505 purpose code is used when a unit in India's domestic tariff area pays an SEZ unit in foreign currency for goods or services it bought. Check when it applies, the customs and tax points, and the documents for this outward payment.

The S1505 purpose code is used when a payment in foreign currency is made for a deemed import between a special economic zone (SEZ) and the rest of India. The RBI description is "Deemed Imports (exports between SEZ, EPZs and Domestic tariff areas)". An SEZ is treated as outside India's customs area. So when goods move from an SEZ unit to a buyer in the domestic tariff area (DTA, the normal Indian market), the law treats it as an import, even though no border is crossed. When the DTA buyer pays for this in foreign currency, the bank reports it under S1505. Export processing zones (EPZs) named in the description have since been turned into SEZs. It is a current account transaction. A DTA buyer can buy foreign currency from its bank to pay an SEZ unit, where the SEZ unit's approval allows supply to the DTA against payment in foreign currency.

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:

• Goods bought from an SEZ unit - A DTA manufacturer buying parts or raw material from an SEZ factory and paying in US dollars.
• Services bought from an SEZ unit - A DTA company paying an SEZ-based IT or back-office unit in foreign currency, where its approval allows it.
• Capital goods cleared from an SEZ - Machinery sold by an SEZ unit to a DTA buyer against a foreign currency invoice.
• Payments from an EEFC account to an SEZ unit - A DTA exporter using its foreign currency account to settle an SEZ supplier's bill.
• Advance payments to an SEZ supplier - An advance in foreign currency against a confirmed order, where the bank allows it.

Do not use this code when:

• You import goods from a supplier abroad that are shipped into India (use S0101 for advance or S0102 for invoice payment instead).
• You pay an SEZ unit in Indian rupees (this is a domestic payment and needs no purpose code).
• You pay a foreign company for software or services delivered from abroad (use the matching service code, such as S0807 or S0802).
• You refund money received for a non-export transaction (use S1502 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 "S1505 – Deemed Imports (exports between SEZ, EPZs and Domestic tariff areas)" on Form A2 or the bank's foreign currency payment request.
2. Upload the SEZ unit's invoice in foreign currency and the Bill of Entry for clearance into the DTA.
3. Attach the SEZ unit's Letter of Approval clause that allows supply to the DTA against foreign currency.
4. The bank checks the documents, sells you the foreign currency and pays the SEZ unit's account.

Additional Notes:

• Goods cleared from an SEZ into the DTA pay customs duty, including IGST, on the Bill of Entry, as for any import.
• The SEZ unit is an Indian resident, so Form 145 and Form 146 (earlier 15CA and 15CB) for payments to non-residents are generally not needed.
• Payments under purpose code S1505 stay within India, so the funds usually reach the SEZ unit's account the same or next day.

• 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