Third Party Payment for Exports: RBI Guidelines and Process
Are you receiving a third party export payment and concerned if you’re compliant with the RBI rules? Or whether a tripartite agreement is mandatory for such payments?
This blog will help you figure that out as it covers the RBI guidelines, documentation, process, and common mistakes exporters make.
TL;DR - Summary
- What it is: - Third-party payment in exports means receiving payment from a company or entity other than the buyer on your invoice.
- RBI Rules: - RBI allows such payments if the payer is from a FATF-compliant country and the payment comes through an authorized banking channel.
- Compliance: - Third-party payments fully qualify for a FIRC and GST refund.
What is third party payment in export transactions
A third party payment in exports happens when the payment comes from someone other than the buyer.
This might sound confusing to you, but in international business, it is a common mode of trade payment. Trade payment means any payment you receive in exchange for goods or services sold abroad.
In most cases, a third party is a parent company paying for its smaller branch, group entity, or a buying agent who settles bills for their clients.
Practical example: An Indian IT firm finished a $50,000 software project for a new US-based startup. They sent the client an invoice, but the payment came from a large parent company in the UK.
Third party payments are very common in large multinational companies where all the money is managed from one central "treasury" office to keep things organized.
How is third party payment different from third party export
Third party payment and third party export sound similar, but they’re not the same.
Third party payment: You ship the goods to an international buyer, but the payment comes from someone else who is not involved in the transaction
Third party export: You ship to a country other than the buyer’s, but the buyer makes the payment. For example: the buyer is in Germany, you export your goods to Spain, but the buyer still pays for it.
Here’s a table comparing third party export payments vs third party export
Many exporters confuse these two terms and use them interchangeably. If you mix them up on your official paperwork, it can cause major delays or even get your shipment stuck at customs.
What are the RBI guidelines for third party export payments
Every third party export payment in India must fulfill these RBI regulatory norms to avoid severe penalties. Remember and save this list somewhere, so you can refer to it the next time you accept such a payment.
Tripartite Agreement Requirement
A tripartite agreement in simple terms means a three-way contract. It is a formal written agreement signed by you (the exporter), your buyer, and the third party who will send the money to your Indian bank account.
- By looking at the tripartite agreement, your bank knows why someone else is paying for the exports. For example, it says the buyer is a startup, and the third party is its large parent company handling all the international payments.
- Always submit the signed agreement to your Authorized Dealer (AD) bank before the payment. This gives them time to verify the transaction.
- According to the recent Foreign Exchange Management Act (FEMA) update, a formal tripartite agreement is not mandatory. Your bank can waive this requirement if it satisfies with the bona-fides of the transaction and export documents like invoice and Foreign Inward Remittance Certificate (FIRC).
FATF-Compliant Jurisdiction Rule
FATF stands for the Financial Action Task Force. The FATF is a global organization that continuously monitors illegal activities like terrorist financing and money laundering, and sets standards to mitigate them.
- India is an FATF-member. To comply with the standards, the RBI mandates that your payer is based in a FATF-member or FATF-compliant country.
- Your third party payer cannot be on any of the FATF “Black List,” which currently includes North Korea, Iran, and Myanmar.
Authorized Banking Channels and EDF Declaration
An Export Declaration Form (EDF) is an official government form where you declare what you are selling, the value of the goods, and how you will be paid.
- Every third party export payment must come through a SWIFT transfer or any other authorized banking channel. Other payment methods, like cash, hawala, or cryptocurrency, are against RBI norms.
- Mention that the third party will make the payment along with their name in the EDF.
- Make sure the payment reaches India within the 15-month window.
Restricted Countries and Entities
Besides the FATF-blacklisted countries, the RBI advises banks to be vigilant about third party export payments in the following ways:
- Do not allow payments from countries that are sanctioned or blocked by the RBI.
- Check if the company or person belongs to international watchlists maintained by organizations like the United Nations or Office of Foreign Assets Control (OFAC).
- Run a Know Your Customer (KYC) check on the third party to ensure their legitimacy before releasing the money
Even if your buyer's country is perfectly safe, your bank will reject the payment if the payer is in a restricted or high-risk jurisdiction.
What documents are required for third party export payments
Hover each card to see what it must contain
Commercial Invoice
RequiredMust include
Buyer's name plus a note stating a third party is paying on their behalf. Mismatch with FIRC causes GST refund issues.
Tripartite Agreement
RecommendedMust include
Names, addresses, and roles of all three parties — exporter, buyer, and payer. Sign before shipping, not after.
Shipping Bill
RequiredMust include
Third party payer's full name, country, and relationship to buyer. Customs will verify with your AD bank on receipt.
SWIFT Copy
RequiredMust include
Proof that payment came through a legal authorised banking channel — not cash, hawala, or crypto.
Bank Realization Certificate
Post-paymentMust include
Issued by the bank after crediting payment. Closes your export record on the DGFT portal via e-BRC.
FIRC
Post-paymentMust include
Third-party payer's name in remarks and a link back to the original invoice number and buyer's name. Critical for GST refunds.
This document list is what you need to ensure your trade is compliant, and the bank releases the payment on time:
- Commercial invoice: The invoice must include the buyer’s name and a note stating that a third party is paying on behalf of that buyer.
- Tripartite agreement: A simple three-way contract signed by you, your buyer, and the payer explaining why a third party is settling the bill.
- Shipping bill: This document must also mention that you’re expecting a third party to pay so that customs can verify the arrangement with your bank.
- SWIFT copy: This proves that the money moved through a legal banking route and not from illegal channels.
- Bank Realization Certificate (BRC): The bank generates a Bank Realization Certificate (BRC) after it credits the payment to your account to close export records.
- FIRC: This certificate is useful for your GST refunds and must link the third-party payer to your original invoice
Prepare the tripartite agreement before shipping. Retrofitting documentation post-shipment creates compliance delays.
How to receive third party payments in five steps
Agree on trade payment terms with all parties
Confirm which company will pay, where it is located, and the payment method (T/T, LC) before shipment.
Draft and execute the tripartite agreement
Include names, addresses, and roles of all three parties. Get authorised representatives to sign before shipping.
File shipping bill with third party declaration
Mention the payer's full name, country, and relationship to the buyer. Customs may flag this for verification with your AD bank.
Submit documents to authorised dealer bank
Submit invoice, shipping bill, and tripartite agreement. Bank runs FATF and KYC checks on the third party.
Respond quickly to any bank queries
Receive funds and generate e-BRC
Bank credits SWIFT transfer and issues FIRC. e-BRC closes the export record on the DGFT portal.
FIRC must link third party payer to original invoice
These are five simple tips that will save you from back and forth and keep everyone on the same page:
Step 1: Agree on trade payment terms with all parties
Even before you ship the goods, confirm the payment details. Ask: Which company will make the payment, and where is it located? Also decide the payment method: bank transfer (T/T), Letter of Credit (LC), or some other international payment method.
Step 2: Draft and execute the tripartite agreement
The next step is to execute the tripartite agreement in writing. It must include the names, addresses, and specific roles of all three parties. Get the agreement signed by the authorized representatives of all the parties.
Step 3: File shipping bill with third party declaration
When you file the shipping bill, mention the third party payer’s full name, their country, and a brief note explaining their relationship to the buyer. The customs department might flag this information and verify with your AD bank when the payment reaches India.
Step 4: Submit documents to authorized dealer bank
After shipping the goods, submit the commercial invoice, a copy of the shipping bill, and the tripartite agreement to your AD bank. The bank will run a FATF-compliance and Know Your Customer (KYC) check to ensure the money is coming from a legitimate source. Respond quickly if your bank asks for extra proof or email trails
Step 5: Receive funds and generate e-BRC
The last step is when you receive the SWIFT transfer in your bank account. The bank issues a Foreign Inward Remittance Certificate (FIRC), which is the official proof you need for GST refunds.
Then, the bank generates an Electronic Bank Realization Certificate (e-BRC) to close your export record on the DGFT portal.
How third party payments affect FIRC and GST refunds
Do third-party export payments affect FIRC and GST refunds? This is a common confusion for exporters.
FIRC issuance for third party payments
An FIRC remains unaffected for third-party payments as long as it complies with the RBI norms.
However, pay attention to these areas:
- Ensure the bank includes the third-party payer’s name in the FIRC remarks
- The FIRC must link back to your original invoice number and the actual buyer’s name
- Banks often miss these specific details, which can cause headaches when you try to close the trade records.
IGST and ITC refund eligibility
Receiving money from a third party does not disqualify you from getting IGST and ITC refunds if your documentation is perfect.
The most-common error is when the name on the FIRC doesn’t match the buyer’s name on the invoice. The GST department might raise queries if that happens.
Keep your tripartite agreement handy to resolve such queries.
What are common mistakes exporters make with third party payments
Watch out for these common mistakes that can delay payments or get you involved in compliance hassles
- Missing tripartite agreement: While rules are more flexible now, preparing this agreement before you export is not a bad idea
- Payer in non-FATF country: Check the FATF blacklist before accepting an order. No matter how good your paperwork is, banks will reject payments from a non-FATF-compliant country
- Incomplete shipping bill declaration: Customs and banks need a third party payment declaration upfront on the shipping bill. Else they can hold the payment for a long duration
- Delayed bank submission: Submit your export documents to your bank within 21 days of shipping. Late submissions mean RBI queries and potential penalties.
- FIRC-invoice mismatch: Ask the bank to add a note to the FIRC linking the third-party payer to the original invoice.
How Skydo simplifies third party export payments
Third party export payments have a lot of moving pieces: tight documentation, multiple compliance norms, and FIRC follow-ups with banks. The best way to manage this is by using modern payment platforms like Skydo.
Here’s how Skydo helps:
Virtual accounts in multiple currencies: Get third party payments from companies in the US, UK, EU, Singapore, Australia, and Canada without opening foreign bank accounts. No SWIFT fee or intermediary bank charges are involved.
Automated compliance documentation: Skydo assists you at every step of the third-party payment documentation process so you miss nothing.
Free FIRC generation Every payment you receive comes with a FIRC. No extra charges, no follow-up calls, and GST refund-ready.
Transparent flat fees: With Skydo, you always know how many fees you are paying. No hidden FX markups.
Real-time payment tracking: You get real-time notifications as payments move through different stages. No more chasing banks for status updates or asking clients for MT103.
Is a tripartite agreement always required for third party payments?
RBI made this rule more flexible. Your AD bank can accept the payment without a formal tripartite agreement if your invoice or export order clearly names the third-party payer, or if you have documentary evidence that explains the arrangement. Banks may still ask for a tripartite agreement if the transaction looks unusual or high-risk.
Can a buyer's relative or group company make the export payment?
What is the difference between T/T payment terms and letter of credit payment in third party transactions?
Is there a limit on third party payment amounts under RBI guidelines?
Which countries are restricted for receiving third party export payments?
