Export Invoice: All you need to know
An export invoice holds a lot of importance for an exporter. It helps them to get paid, get clearance from the customs authorities during the inspection process, and stay compliant with global trade regulations.
In this blog, we have done a detailed breakdown of the above capabilities and covered types of export invoices to give you a comprehensive understanding.
What is an Export Invoice?
An export invoice is a legal document containing descriptive details about the goods sold or the services provided. It is also considered a contract between the exporter and the foreign buyer and doubles as proof of sale. Customs and government authorities also check the export invoice to calculate the customs duties and taxes and give the final clearance for sale. In the case of unprecedented events like goods damaged due to natural disasters, you can use the export invoice for insurance claims.
It's also important to understand that an export invoice is different from a normal GST tax invoice. While both GST regular tax invoices and export invoices record sales transactions, the latter is meant only for international transactions. It contains additional details like the Import Export Code (IEC) and other applicable foreign currency information.
What is the Importance of Export Invoices in India?
An export invoice plays many roles in India as follows:
Legal proof of export transactions: An export invoice is a legal document verifying a sale between an Indian exporter and a foreign buyer. It also serves as a legal proof in the case of any dispute
Customs clearance: As the export invoice includes details like quantity, rate, size, and volume, customs authorities use it to calculate taxes before handling the final clearance. Without an export invoice, it’s challenging for them to calculate tax, thereby stopping your products from export
Facilitation of payments: The payment terms and conditions are mentioned in an export invoice. So when the export invoice is made both parties adhere to those terms for a streamlined payment experience
Claiming export benefits: An Indian exporter can use the export invoice to claim rebates, tax credits, and incentives from the government. For example, The Remission of Duties and Taxes on Exported Products (RoDTEP) scheme provides a rebate to exporters on central, state, and local taxes
Compliance with international trade laws: By sharing an export invoice, an exporter complies with international trade laws like the World Trade Organization (WTO) agreements. Due to this they enjoy a good reputation and avoid facing legal issues.
What are the Different Types of Export Invoices?
Wondering which type of export invoice is relevant to your business? Following is the list of the most important export invoices for Indian exporters:
1. Commercial invoice
This is a primary document for any export transaction. There is no specific format for the commercial invoice, but it must contain details like product description, quantity, price, seller information, shipping details, and payment terms.
2. Proforma invoice
The exporter shares a proforma invoice with the buyer as a price quotation before the actual shipment happens. It outlines the estimated costs, transaction details, and other sales terms to build transparency between the parties.
3. Customs invoice
The customs authority of the importing country asks for a customs invoice. A customs invoice is similar to a commercial invoice but has extra details like the origin of goods, classification codes, freight, and insurance. The importer has to fill in the details in the specified format shared by the customs officials.
4. Tax Invoice
A tax invoice summarizes the tax applied at the time of sale. It is useful for an Indian exporter to claim GST refunds or export incentives under RoDTEP.
5. Packing list invoice
This invoice accompanies the shipment and gives a detailed breakdown of the shipment contents, item descriptions, packaging, and product dimensions. With the help of this invoice, both the importer and exporter can verify the items in the shipment.
6. Freight invoice
Freight invoices are issued by freight forwarders or logistics providers like Keuhne + Nagel, DHL or Nippon Express to describe the freight and transportation charges incurred. It might also include additional expenses like packing costs incurred at the time of transportation. Such an invoice is useful to an exporter for accounting the logistics expenses effectively.
When to Raise an Export Invoice?
As per Indian Law, the timing of raising an export invoice depends on whether the shipment is for goods or services:
1. For export of goods
In the case of goods, an export invoice is raised on or before the removal of goods for export. This applies to three forms of transport: air, sea and land.
2. For export of services
In the case of services, an export invoice can be raised before or after rendering the service. If it’s the latter, then it must be done within 30 days. The invoice timeline may vary in the case of continuous supply depending on the agreement.
What are the Contents of an Export Invoice?
Here is a comprehensive list of the contents of an export invoice:
1. Exporter’s Details
This includes the name, address, phone number, and email address of the exporter. In certain cases, it might also include the GSTIN and the Import Export Code (IEC)
2. Invoice Information
This includes the necessary information about the invoice like the unique invoice number and the date when the invoice was issued
3. Buyer’s Details (Consignee)
Similar to the exporter’s details, the export invoice includes crucial information about the buyer like their name, address, contact details, and importer's country.
4. Description of Goods or Services
An export invoice includes a detailed description of the goods or services rendered. This includes quantity, unit price, total value, weight of goods, and the Harmonized System of Nomenclature (HSN) or Service Accounting Code (SAC) of the goods or services.
5. Value Details
The value details specifically highlight the currency of the transaction (e.g. USD or Euro), Free on Board (FOB) or Cost Insurance and Freight (CIF) value, and the prevalent exchange rate if applicable.
6. Terms of Sale and Payment
In international trade, the seller might mention the International Commercial Terms (INCOTERMS) on an export invoice. The purpose of the INCOTERMS is to be clear about the delivery and risk transfer terms (eg. FOB, CIF, EXW), and the payment terms (eg. advance payment, Letter of Credit).
7. Bank Details
The exporter shares their bank name, account number, and SWIFT/BIC code in the export invoice to help the buyer make the payment.
8. Shipment Details
This contains details like the mode of shipment: sea, rail or road. It also mentions the port of loading and destination and the shipping bill number if available
9. Tax Declaration
The GST registration number of the exporter is displayed on the export invoice if applicable. It also mentions the GST tax rate, however, in the case of zero-rated exports, the invoice should contain a declaration that the export is eligible for zero-rated treatment under the GST regime.
10. Certifications and Declarations
The exporter affirms with a statement that the export meets the international regulations, signs it, and affixes their seal as a declaration
Export Invoice Format
This is a sample export invoice containing most of the details we mentioned above.
On the top left, the text boxes include the exporter’s, final and intermediate consignee’s details. On the right, it highlights other vital information like the order number, exporting carrier, origination state, destination country, loading terminal, and exporter’s contact number.
At the centre, the product details, unit price, and value are mentioned. At the bottom-right corner, the different fees like freight, handling and insurance are mentioned which are added to the total value of the goods to calculate the total amount due.
What Currency to Use in an Export Invoice?
The short answer to this question is: use your client’s currency in the export invoice. The long answer is, to consider multiple factors before making that decision. For example, if your client is based in the US, it makes sense to invoice them in US Dollars as it’s a stable currency.
However, you must also factor in the currency conversion fees the banks charge to credit your account in local currency. If the fees are very high, it may not be the best decision to invoice in the client’s currency.
The Reserve Bank of India (RBI) also allows Indian exporters to send export invoices in Indian currency (INR), it doesn’t necessarily has to be in a foreign currency.
Receive Seamless Export Payments with Skydo
An export invoice plays multiple roles in international trade. This single document helps an exporter stay compliant with international laws, get clearance from the customs authorities, and get paid on time.
Skydo is a trusted platform that streamlines and simplifies your payment experience from international clients. With Skydo, you can open a virtual account and bypass the SWIFT fees you must bear to receive bank account payments. Moreover, Skydo charges upfront fees and there are no hidden charges.
This is a sample export invoice containing most of the details we mentioned above.
On the top left, the text boxes include the exporter’s, final and intermediate consignee’s details. On the right, it highlights other vital information like the order number, exporting carrier, origination state, destination country, loading terminal, and exporter’s contact number.
At the centre, the product details, unit price, and value are mentioned. At the bottom-right corner, the different fees like freight, handling and insurance are mentioned which are added to the total value of the goods to calculate the total amount due.
What Currency to Use in an Export Invoice?
The Reserve Bank of India (RBI) also allows Indian exporters to send export invoices in Indian currency (INR), it doesn’t necessarily has to be in a foreign currency.
However, it is a good idea to use your client’s currency in the export invoice especially, if it is a stable currency. The long answer is, to consider multiple factors before making that decision. For example, if your client is based in the US, it makes sense to invoice them in US Dollars as it’s a stable currency.
However, you must also factor in the currency conversion fees the banks charge to credit your account in local currency. If the fees are very high, it may not be the best decision to invoice in the client’s currency.
The Reserve Bank of India (RBI) also allows Indian exporters to send export invoices in Indian currency (INR), it doesn’t necessarily has to be in a foreign currency.
Receive Seamless Export Payments with Skydo
An export invoice plays multiple roles in international trade. This single document helps an exporter stay compliant with international laws, get clearance from the customs authorities, and get paid on time.
Skydo is a trusted platform that streamlines and simplifies your payment experience from international clients. With Skydo, you can open a virtual account and bypass the SWIFT fees you must bear to receive bank account payments. Moreover, Skydo charges upfront fees and there are no hidden charges.
Can I use INR in export invoices?
Yes, the export invoices can be in INR. The RBI allows you to create an export invoice in any currency including the domestic currency of INR
When to raise an export invoice?
Is e-invoicing mandatory for exports?
What is a consular invoice?
