Black money SIT tells ED to probe 788 exporters  

The Supreme Court-constituted Special Investigation team on black money has told the enforcement directorate (ED) to probe nearly 788 exporters who failed to bring back export earnings into India within the stipulated time frame as per existing laws.

The exporters, who have been identified, have more than ₹ 100 crore each of export earnings that have not been brought back within one year.

It also directed the Reserve Bank of India (RBI), which maintains a record of exporters bringing in export proceeds, to develop a mechanism and the information technology system to red flag such violations and share the data with the enforcement directorate (ED) and the directorate of revenue intelligence (DRI).

All exporters have to bring foreign exchange into the country as export proceeds within one year of the date of exports, according to RBI regulations. Failure to bring back the earnings within a year is a violation of the foreign exchange management act.

“Not bringing export proceeds is a violation of Foreign Exchange Management Act (FEMA) as it amounts to illicitly parking funds abroad,” the SIT said, observing that data provided by the RBI shows a huge amount of export proceeds have not been realised.

It asked ED to take necessary action under FEMA against 216 companies who had violated norms before 1 March 2016 and 572 Companies who were in the wrong for the period after 1 March.

It also directed DRI to check its database for exporters who have claimed duty drawback for taxes paid on inputs that go into the exported items but not brought back the export proceeds as and when the RBI starts sharing data on such exporters.

“The country thus loses on two counts – first by not getting proceeds of exports...and secondly wrongful claim of duty drawback,” the report said.

Ajay Sahai, director general and chief executive officer at the Federation of Indian Exports Organization, pointed out that there may be some genuine reasons for the default.

“The global economic situation is challenging. Many economies in Latin America, Africa and Middle East are facing liquidity problems. Due to this, Indian exporters who have not exported against an advance or a letter of credit, may be not realizing the payment and may have a very genuine reason to default on the time frame,” he said. “It is important to distinguish between genuine cases of default and unscrupulous exporters,” he added.

At present, given the volatility in the rupee, the RBI mandates that exporters have to bring back the export earnings within 9 onths. However, exporters can approach the so-called authorized dealer banks to seek up to two extensions of six month each. For a further extension, exporters can approach RBI. To be sure, the authorized dealer banks and RBI will check the exporter’s track record and the genuineness of claims before granting the request.

The SIT, headed by former Supreme Court judge M.B. Shah, was constituted in 2014 by the National Democratic Alliance government on the Supreme Court’s orders to look at ways to bring back black money from outside India as well as check the creation of black money.

Over the last two years, the SIT in its various reports has made a number of recommendations to curb black money. Last week, it recommended capping cash transactions at ₹ 3 lakh and the cash holding limit at ₹ 15 lakh.

It had also sought a tightening of rules governing participatory notes—instruments through which some foreign investors invest in Indian markets and which could be used to launder money.

Indian authorities suspect that some of the money coming to India through participatory notes may be black money stashed overseas returning in the garb of foreign capital.