Back to Back Inland Letter of Credit

Back to Back Inland Letter of Credit :

Instead of applying for an Advance Release Order, an Advance Licence holder (except Advance Licence for intermediate supply) and holder of DFRC may avail the facility of Back to Back Inland Letter of Credit from the Banks.

For this purpose, the Advance Licence Holder may approach a Bank for opening an Inland Letter of Credit in favour of an indigenous supplier. Before the opening of an L / C the Bank will ensure that necessary Bank Guarantee or Letter of Undertaking has been executed by the Advance Licence Holder and an endorsement to that effect has been made on the Licence.

However, execution of BG / LUT shall not be required against DFRC. After opening the Inland Letter of Credit, the Bank shall make the endorsement specifying that the value of Advance Licence stands reduced by the value of inland L / C so opened on the (i) Exchange Control copy of the Advance Licence for Physical Exports / Deemed Exports / Annual Requirement / DFRC (ii) Customs copy of the such Advance Licence and (iii) DEEC Book.

The licence shall be invalidated by the bank for direct import only in respect of the full quantity and value of the item being sourced indigenously.

The non negotiable copy of inland L / C together with the photocopy of the Advance Licence along with DEEC duly carrying endorsements made by the bank shall be sufficient for the indigenous supplier to claim deemed export benefits. L / C issued against DFRC shall, however, be entitled only to benefit of Deemed Export Drawback, whereas L / C for other categories shall be entitled to benefits of Deemed Export Drawback and Refund of Terminal Excise Duty.

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