S0109 Purpose Code: Payments made for Imports from Nepal and Bhutan, if any

Purpose code S0109 is used when an Indian importer pays a supplier in Nepal or Bhutan for goods imported into India.

What is the S0109 purpose code?

Purpose code S0109 is used when an Indian business sends money abroad to pay for goods imported from suppliers in Nepal or Bhutan. It covers commercial imports of physical goods, such as raw materials, finished products or equipment, sourced from those countries and brought into India. It does not apply to service payments to vendors in Nepal or Bhutan, which fall under the relevant service import purpose codes. Under RBI FEMA guidelines, this outward payment is classified under imports and reported accordingly.

When to use S0109 purpose code?

Use S0109 when you are paying a supplier in Nepal or Bhutan for goods that are being imported into India under a valid trade invoice and import documents. It is the correct RBI purpose code for physical imports from these neighbouring countries, whether you import as a trader, manufacturer, or service business that also brings in goods. S0109 covers the import of goods, not services.

When to use a different code:

• Use the appropriate services import code when the payment is for professional or technical services instead of goods
• Use the relevant capital account code when the payment is for investments or loans rather than trade imports
• Use the matching P code when you are receiving money rather than paying

Who typically uses S0109 purpose code?

Indian importers, traders and manufacturers that buy raw materials, components or finished goods from suppliers located in Nepal or Bhutan. It applies whether you operate as a private limited company, LLP, partnership or proprietorship, as long as you are importing goods into India from those countries.

Examples of transactions covered

• Payment to a Nepalese supplier for importing handicraft products for resale in India
• Advance remittance to a Bhutanese manufacturer for industrial components being shipped to your Indian factory
• Settlement of a credit invoice for food products imported from a vendor in Nepal
• Balance payment against a shipment of construction materials sourced from a supplier in Bhutan

When NOT to use S0109 purpose code

• The payment is for professional or technical services provided from Nepal or Bhutan rather than goods (use the relevant services import code)
• The payment is for investing in or lending to an entity in Nepal or Bhutan (use the applicable capital account code)
• The payment is for imports from countries other than Nepal or Bhutan (use the standard import of goods purpose code that matches your transaction)
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S0109, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S0109 Purpose Code declared?

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

1. Receive the supplier documents: Your Nepalese or Bhutanese exporter issues a commercial invoice and related shipping documents for the goods imported into India.
2. Determine taxability: Establish whether the payment is chargeable to tax in India, since that decides which part of Form 145 you file.
3. File Form 145: Submit the declaration before remitting, with Form 146 from your CA where the taxable amount exceeds ₹5 lakh in the Tax Year.
4. Complete Form A2: State the purpose of the outward remittance as S0109 and submit the supporting documents to your bank.
5. Get your MT103: Once the payment is sent, request the SWIFT MT103 as proof and retain your Form A2 record.
6. With a traditional bank you handle each step of the payment journey. But with a platform built for cross-border payments, you can preselect a default purpose code so the payments go out smooth.

Common mistakes to avoid

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

1. Confusing import of goods with services: Tagging a payment for professional or technical services to a Nepalese or Bhutanese vendor as S0109 instead of the correct services import code.
2. Code and invoice mismatch: Using S0109 when the supplier invoice does not describe goods imported from Nepal or Bhutan, which can flag the payment.
3. Assuming a Rule 220(3) exemption: Skipping Form 145 on a payment that is not clearly covered by the specified exemptions, which carries a ₹1,00,000 penalty per instance.
4. Incomplete documents: Missing invoice, contract, Bill of Entry or Form A2, so the bank holds the remittance until provided.
5. Missing PAN or KYC: Incomplete verification stops the bank from releasing the payment.
6. Using an outward code for an inward receipt: Applying S0109 to money coming in instead of the matching P code for receipts.

How Skydo helps with payments under S0109 Purpose Code

With a bank, you fill a fresh Form A2 and chase documents for every single vendor payment. With Skydo, your outward payments run on the same account you already collect into.

1. One account, both directions: Receive from international clients and pay overseas vendors from a single onboarded account, with one KYC.
2. Purpose code applied consistently: Set S0109 as your default for these payments so every remittance is tagged the same way.
3. Documentation in one place: Your invoices, Form A2 records and payment proofs stay together, ready for your CA and your AD bank.
4. A rate you can see: You get the live mid-market rate with a transparent fee, instead of a markup hidden inside the bank's rate.
5. Payments that go out on schedule: Your vendor gets paid without a branch visit or a week of back and forth.