S1501 Purpose Code: Refunds, rebates or reduction in invoice value on account of exports

Purpose code S1501 is used when an Indian business pays a foreign buyer or counterparty for export-related refunds, rebates or reductions in invoice value.

What is the S1501 purpose code?

Purpose code S1501 is used when an Indian exporter sends money abroad to settle export-related refunds, rebates or reductions in the original invoice value. This covers situations where you have already exported goods or services and need to partially return funds to an overseas buyer, such as post-sale discounts, quality claims, or commercial adjustments that reduce the net export value. It is meant for these export settlement adjustments and not for unrelated imports, services or fresh overseas purchases. Under RBI FEMA guidelines, this outward payment is classified under Others and reported accordingly.

When to use S1501 purpose code?

Use S1501 when you are sending money back to an overseas buyer because the value of a past export invoice has reduced due to refunds, rebates, discounts or claim settlements. It is the correct RBI purpose code for export-related downward value adjustments that require an outward payment, whatever your business structure. S1501 covers commercial settlements linked to an export, not new purchases from the same party.

When to use a different code:

• Use the export of goods code when you are shipping goods out of India and receiving payment
• Use the export of services code when you are providing services to a foreign client and receiving payment
• Use the matching P code when you are receiving money rather than paying

Who typically uses S1501 purpose code?

Indian exporters, manufacturers, D2C brands, SaaS companies and agencies that need to remit export-related refunds or rebates to overseas buyers after the original export transaction. It applies whether you operate as a private limited company, LLP, partnership or proprietorship, as long as the outward payment is a commercial adjustment against an earlier export.

Examples of transactions covered

• Refund to an overseas customer for a quality claim on a previously exported shipment where part of the invoice value is reversed.
• Rebate paid to a foreign distributor after agreeing to a post-sale discount that reduces the original export invoice amount.
• Settlement payment to an international client for overcharged export service fees identified during reconciliation.
• Credit note adjustment paid out to an overseas buyer to align export proceeds with a revised contract price.

When NOT to use S1501 purpose code

• The payment is for importing goods from overseas rather than adjusting a past export.
• The payment is for services purchased from a foreign vendor, such as software, consulting or marketing support.
• The payment is an outward remittance for investments, loans, capital transfers or other capital account purposes.
• You are receiving money rather than paying (use the matching P code).

Documents required

To send a payment under S1501, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S1501 Purpose Code declared?

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

1. Receive the adjustment documents: Your overseas buyer shares the claim, credit note or settlement communication showing the refund, rebate or reduction in export invoice value.
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 S1501 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. Treating a new purchase as an export refund: Using S1501 for fresh imports or service purchases from the same foreign party instead of the correct import or service code.
2. Code and invoice mismatch: The code not matching what your adjustment documents and export invoices describe, which flags the payment.
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 export invoice, credit note, settlement correspondence 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 S1501 to money coming in instead of the matching P code for export refunds received.

How Skydo helps with payments under S1501 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 S1501 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 counterparty gets paid without a branch visit or a week of back and forth.