P1002 Purpose Code: Trade related services - Commission on exports/imports

Purpose code P1002 is used when an Indian agent or intermediary receives commission from abroad for arranging or facilitating an export or import.

What is the P1002 purpose code?

Purpose code P1002 covers commission earned for arranging trade rather than for trading yourself. An Indian agent who finds suppliers for an overseas buyer, or represents a foreign seller into the Indian market, is paid a commission for that work, and this code records it. The test that settles it is ownership: here you never take title to the goods, you are paid for bringing the parties together and managing the transaction. Where you buy the goods and resell them, the money is trade rather than commission and reports under the goods codes instead. Under RBI FEMA guidelines, this inward payment is classified under Other Business Services and reported accordingly.

When to use P1002 purpose code?

Use P1002 when an overseas principal pays you commission for arranging or facilitating an export or import. It is the correct RBI purpose code whether you act for the buyer or the seller, and whether the commission is a percentage of the transaction, a flat fee per shipment, or a retainer against volumes. What settles it is that you were paid for the service of arranging the trade rather than for goods you owned.

When to use a different code:

• Use P0108 when you bought the goods and resold them under merchanting rather than earning commission on someone else's trade
• Use P1006 when the payment is for business or management consultancy rather than trade commission
• Use the matching S-code when you are paying a foreign vendor rather than receiving money

Who typically uses P1002 purpose code

Indian sourcing agents, buying houses, export agents and trade intermediaries earning commission from overseas principals, including agents finding Indian suppliers for foreign buyers and representatives handling a foreign seller's business into India. It applies whether you operate as an individual agent, a proprietorship, or a registered company.

Examples of transactions covered under P1002 purpose code

• Commission received from an overseas buyer for sourcing goods from Indian suppliers
• Agency commission paid by a foreign seller on shipments placed into the Indian market
• Percentage commission on an export shipment arranged for an international principal
• Retainer received from an overseas principal against trade facilitated during the period

When NOT to use P1002 purpose code

• You bought the goods and resold them rather than earning commission on someone else's trade (use P0108 for merchanting, or the export codes where goods left India)
• The commission is on placing insurance rather than arranging trade (use P0605)
• The commission is on securities transactions rather than trade (use P0702)
• You are paying a foreign vendor rather than receiving (use the matching S-code)

Documents required for P1002 purpose code

To receive a payment under P1002, keep the following documents ready so your bank or platform can verify the transaction and report it correctly under FEMA.

How is a P1002 Purpose Code declared?

Declaring the code is pretty straightforward. Here's how the payment gets tagged and reported.

1. Arrange the trade: Source the suppliers, place the business, or manage the transaction for your overseas principal.
2. Raise your commission invoice: Bill the principal for the commission due on the shipments or period.
3. Declare the purpose: State the purpose of the inward remittance, on your bank's form or through your platform.
4. Submit supporting documents: Provide the agency agreement and commission statement so the bank can verify the transaction.
5. Get your FIRA: Once processed, your FIRA is issued as proof and the payment is reported under FEMA.
6. With a traditional bank you handle each step of your payment journey. But with a platform built for cross-border payments, you can preselect a default purpose code so that the payments land smooth.

Common mistakes to avoid while using P1002 purpose code

A few common slips can hold up your payment or cause compliance issues. Here's what to watch for.

1. Confusing commission with trading: Using P1002 when you bought and resold the goods, which is merchanting under P0108. Whether you took ownership is the question that separates the two, and your role can look identical from the outside.
2. Coding all commission the same way: Applying P1002 to commission on insurance or securities, which have their own codes. The RBI files commission by what was being arranged rather than by the fact that you arranged something.
3. Code and invoice mismatch: The code not matching what your commission statement describes, which flags the payment.
4. Incomplete documents: Missing the agency agreement or commission statement, so the bank cannot establish the basis for the payment and holds funds until provided.
5. Missing PAN or KYC: Incomplete verification stops the bank from releasing the payment.
6. Using an inward code for an outward payment: Applying a receipt code to money you're sending out instead of the matching outward code.

How Skydo simplifies inward remittance under P1002 Purpose Code

With a bank, you declare the purpose code on your own for every single payment. With Skydo, you can preselect your code once and every payment gets tagged automatically.

1. Preselect the code once: Set P1002 as your default and Skydo tags every incoming payment for you, so there's no form to fill on each one.
2. No repeat declarations: A bank makes you restate the purpose for every remittance. Skydo does it in the background, the same way each time.
3. Instant, free FIRA: Your remittance proof is generated and stored on every payment, ready for your CA, GST, and audits, with no request and no fee.
4. Zero FX markup: You get the live mid-market rate with a flat, visible fee, instead of a markup hidden inside the bank's rate.
5. Settled in 24 hours: Your payment reaches your Indian bank within a day, fully reported and compliant.