RBI Amendments to Late Submission Fee (LSF) – step towards ease of doing business

27 October 2022 • Ridhima Arora

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RBI Amendments to Late Submission Fee (LSF) – step towards ease of doing business

27 October 2022 • Ridhima Arora

There was a general view prevailing in the industry that the reference and calculations of Late Submission Fee (LSF) in the RBI Notification are very complicated and unless an expert is engaged, it wasn’t possible for easy verification of accuracy of LSF mentioned in the approval letter of RBI.

As a brief introduction, RBI vide its notification dated 7th November, 2017 launched the concept of LSF to regularise the instances of delay in reporting.  The payment of LSF is an additional option for regularising reporting delays without undergoing the compounding procedure.

Foreign Exchange Management Act, 1999 (FEMA) is administered through the authorised persons (Authorised Dealer or Banks or AD Bank) and the transactions are undertaken by them based on the declarations and averments made by the intending party while making submission of prescribed reports and forms to the Reserve Bank. Therefore, accurate compilations and timely submission of these reports to AD Banks are of critical importance as they not only act as a supervisory tool but also help in fine-tuning the policies relating to foreign exchange transactions regulated under FEMA.

In line with the objective and demand of the industry, the LSF calculation matrix provided under the RBI Notification, ECB Circular, and ODI Circular have been superseded by the RBI circular A.P. (DIR Series) Circular No. 16 dated September 30, the 2022 (LSF Circular) in order to bring uniformity in LSF determination for reporting delays across different cross-border transactions (Foreign Investment, External Commercial Borrowing, and Overseas Investment). The reference and calculation of LSF is now fairly simple and can be verified by the in-house compliance person as well.

The newly imposed Standard LSF across Categories:

Compared to the old matrix, the RBI has amended the calculation structure of LSF by introducing a fixed amount in relation to reporting delays. Details of slabs and their LSF calculation as per the amended regime are tabulated below. This shall come into force for any delayed filings made on or after September 30, 2022.

S. No Type of Reporting delays LSF Amount (INR) (per return)
1.
  • Form ODI Part-II/ APR,
  • FCGPR (B),
  • FLA Returns,
  • Form OPI,
  • Evidence of investment or any other return which does not capture flows or any other periodical reporting.
7,500
2.
  • FC-GPR
  • FCTRS
  • Form ESOP
  • Form LLP(I)
  • Form LLP(II)
  • Form CN
  • Form DI
  • Form InVi
  • Form ODI-Part I
  • Form ODI-Part III,
  • Form FC
  • Form ECB
  • Form ECB-2
  • Revised Form ECB or any other return which captures flows or returns which capture reporting of non-fund transactions or any other transactional reporting
[7,500 + (0.025% × A × n)]

*n” is the number of years of delay in submission rounded-upwards to the nearest month and expressed up to 2 decimal points.

**“A” is the amount involved in the delayed reporting.

Maximum Limit: This circular has brought uniformity in levy of maximum LSF payable across various functions by capping it to the 100% of the amount involved in the delayed reporting. LSF amount is per return. However, for any number of Form ECB-2 returns, delayed submission for each LRN will be treated as one instance for the fixed component. Further, ‘A’ for any ECB-2 return will be the gross inflow or outflow (including interest and other charges), whichever is more.

Timeline: The facility for opting for LSF for regularising reporting delayed submissions under the earlier FDI regulations and the revised ODI regulations shall be available for a period up to three years from the due date of reporting/ submission. In case of delayed reporting under Notification No. FEMA 120/2004-RB and earlier corresponding regulations, the LSF option shall be available up to three years from the date of notification of Foreign Exchange Management (Overseas Investment) Regulations, 2022 (i.e., 22.08.2022).

Consequences of non-payment of LSF: LSF not paid within 30 days from the date of issuance of advice, shall be considered as null and void and any LSF received beyond this period shall not be accepted. If the applicant subsequently approaches for payment of LSF for the same delayed reporting, the date of receipt of such application shall be treated as the reference date for the purpose of calculation of “n”.

  • In case a person responsible for any submission or filing under the provisions of FEMA, neither makes such submission/filing within the specified time nor makes such submission/filing along with LSF, such person shall be liable for penal action under the provisions of FEMA, 1999.

Option for Compounding continues to exist: LSF is only an additional option for regularizing reporting delays, while the option of compounding continues to exist. The RBI in its FAQs dated 7 May 2018, clarified that the payment of LSF is an additional facility for regularizing reporting delays without undergoing the compounding procedure. Therefore, the option compounding is always available for an applicant.

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