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August 2013

A. P. (DIR Series) Circular No. 119 dated June 26, 2013

By Gaurang Gandhi, Chartered Accountant
Reading Time 1 mins
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External Commercial Borrowings (ECB) Policy – Import of Services, Technical know-how and License Fees

Presently, eligible borrowers can avail of ECB for import of capital goods for new projects/modernisation/ expansion of existing production units in the real sector, infrastructure sector and service sector. This circular permits eligible borrowers to avail ECB (under the Automatic Route/Approval Route, as the case may be) for import of services, technical knowhow and payment of license fees as part of import of capital goods by the companies for use in the manufacturing and infrastructure sectors as permissible end uses of ECB, subject to the following: –

(i) There must be a duly signed agreement between the service provider and the borrower company.

(ii) The original invoice raised by the service provider as per the payment schedule in the agreement must be duly certified by the borrower company.

(iii) The importer must give a declaration to the effect that the entire expenditure on import of services will be capitalised.

(iv) The importer must give a declaration to the effect that the entire expenditure on import of services forms part of project cost.

(v) Bank has to ensure the bonafides of the transaction.

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A. P. (DIR Series) Circular No. 120 dated June 26, 2013