S0206 Purpose Code: Booking of passages abroad, Shipping companies

Purpose code S0206 is used when an Indian business pays a foreign shipping company for booking passages abroad.

What is the S0206 purpose code?

Purpose code S0206 is used when an Indian business sends money abroad to pay a foreign shipping company for booking passages on vessels outside India. This covers payments for reserving cargo space or other passage bookings on ships operated by overseas carriers, typically for moving goods on international routes. It does not cover the underlying import of goods themselves, which falls under the import of goods purpose codes in the S0101 to S0109 range. Under RBI FEMA guidelines, this outward payment is classified under transport and reported accordingly.

When to use S0206 purpose code?

Use S0206 when you are paying an overseas shipping company for booking passages on ships, such as cargo slots or space on vessels operating between foreign or foreign and Indian ports. It is the correct RBI purpose code for service payments to foreign shipping lines for passage bookings that support your import or export activities. S0206 covers the shipping service, not the value of the goods being transported.

When to use a different code:

• Use the import of goods codes in the S0101 to S0109 series when the payment is primarily for the goods themselves rather than the shipping service
• Use the relevant transport code for other kinds of freight, handling or logistics services that are not passage bookings with a shipping company
• Use the matching P code when you are receiving money rather than paying

Who typically uses S0206 purpose code?

Indian importers, manufacturers, traders and logistics companies that book cargo space with overseas shipping lines and pay those foreign shipping companies directly. It applies whether you pay as a private limited company, LLP, partnership or proprietorship, as long as the passage booking service is provided by a shipping company based outside India.

Examples of transactions covered

• Payment to a foreign shipping line for booking container space from a European port to India for your import consignment
• Advance paid to an overseas shipping company to reserve break-bulk cargo space on a vessel sailing between two foreign ports
• Settlement of a monthly account with an international carrier for multiple passage bookings arranged through their head office abroad
• Charges paid to a foreign shipping company for last-minute booking of additional cargo slots on a regularly scheduled international route

When NOT to use S0206 purpose code

• The payment is mainly for the imported goods themselves rather than the shipping service (use an import of goods code in the S0101 to S0109 range)
• The payment is for other transport or logistics services such as inland haulage, warehousing or port handling that are not passage bookings with a shipping company (use the appropriate transport service code)
• The payment is for non-transport services like consulting, software, marketing or professional fees to an overseas vendor (use the matching service import purpose code)
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S0206, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S0206 Purpose Code declared?

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

1. Receive the vendor invoice: Your overseas shipping company bills you for the passage booking, clearly describing the vessel, route, cargo space and freight charges.
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 S0206 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 freight with goods value: Tagging the full invoice, including the value of imported goods, under S0206 instead of using import of goods codes for the product portion.
2. Code and invoice mismatch: Using S0206 when the invoice clearly relates to a non-shipping service, which can flag the payment for additional checks.
3. Assuming a Rule 220(3) exemption: Skipping Form 145 on a payment that is not on the specified list, which carries a ₹1,00,000 penalty per instance.
4. Incomplete documents: Missing invoice, contract 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 S0206 to money coming in instead of the matching P code for receipts.

How Skydo helps with payments under S0206 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 S0206 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.