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October 2012

A. P. (DIR Series) Circular No. 28 dated 11th September, 2012 Trade Credits for Import into India

By Gaurang Gandhi, Chartered Accountant
Reading Time 1 mins
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Presently, trade credits upto INRNaN million per import transaction with a maturity period of more than one year and less than three years (from the date of shipment) can be availed of for the import of capital goods. This circular permits companies in the infrastructure sector to avail trade credit upto five years (instead of upto three years) for import of capital goods subject to the following: –

(i) The trade credit must be initially contracted for a period not less than 15 months and must not be in the nature of short-term roll overs.

(ii) Banks cannot issue Letters of Credit/Guarantees / Letter of Undertaking (LOU)/Letter of Comfort (LPC) in favour of the overseas supplier/bank /financial institution for the period beyond three years. The all-in-cost ceiling of the trade credit, with maturity period upto five years will be 350 basis points over six months, LIBOR for the respective currency of credit or applicable benchmark. The all-in-cost ceiling will include arranger fee, upfront fee, management fee, handling/processing charges, out of pocket and legal expenses, if any.

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