What Is the P0108 Purpose Code?

The P0108 purpose code covers the money an Indian trader receives from the overseas buyer in a merchanting trade. Regulation 16 of the 2026 Regulations describes the two legs as an outward remittance to the overseas seller and an inward remittance from the overseas buyer. The Foreign Trade Policy 2023, para 2.39 describes merchanting trade as goods shipped between two foreign countries. The inward leg is the one reported under P0108. The payment to the overseas seller is an import side payment and uses an S code.

P0108 vs P0104: P0104 is "Receipts against export of goods not covered by the GR /PP /SOFTEX /EC copy of shipping bill etc. (under Intermediary/transit trade, i.e., third country export passing through India)". Both codes appear together as intermediary exports in the FETERS file coverage table. P0104 refers to third country exports passing through India. P0108 refers specifically to merchanting trade. If your goods physically pass through India, ask your AD bank which code applies. See the merchanting trade guide for the rules on merchanting.

Use the P0108 purpose code when you receive money from an overseas buyer for goods you bought from an overseas seller and sold on, and the goods move between the two foreign countries without entering India. Under Regulation 16 of the 2026 Regulations the AD bank handles both legs and the gap between the two remittances must not exceed six months. The bank usually reports the code, so confirm it with them.

• Use P0101 instead: Use P0101 (Value of export bills negotiated / purchased/discounted etc. (covered under GR/PP/SOFTEX/EC copy of shipping bills etc.) – Other than Nepal and Bhutan) when you export Indian goods and your bank negotiates, purchases or discounts the export bill.
• Use P0104 instead: Use P0104 (Receipts against export of goods not covered by the GR /PP /SOFTEX /EC copy of shipping bill etc. (under Intermediary/transit trade, i.e., third country export passing through India) when your bank treats the receipt as third country goods passing through India.
• Use P0103 instead: Use P0103 (Advance receipts against export contracts, which will be covered later by GR/PP/SOFTEX/SDF – other than Nepal and Bhutan) when the buyer pays in advance for goods that you will ship from India later.

The P0108 purpose code is used by Indian traders and trading companies that run merchanting trades, buying from one foreign supplier and selling to another foreign buyer. The AD bank reports the receipt under FETERS in line with A.P. (DIR Series) Circular No. 84 of February 29, 2012, and it records both legs under the merchanting framework in Regulation 16.

• For example, a trading firm in Delhi buys electronic components from a supplier in Taiwan and sells them to a buyer in Germany, with the goods shipped directly between the two, and the inward payment from Germany is reported under P0108.
• For example, a trader in Mumbai buys chemicals from a producer in South Korea, resells them to a distributor in Brazil, and receives the Brazilian payment under P0108.
• For example, a trading company in Ahmedabad sources fabric from a mill in China and sells it to a garment maker in Bangladesh, and its bank reports the inward receipt under P0108.
• For example, a trader in Chennai pays an overseas seller first and receives the buyer's money three months later, and the AD bank links the two legs and reports the inward leg under P0108.

• The goods are made or bought in India and shipped from an Indian port under a shipping bill. Use P0101 (Value of export bills negotiated / purchased/discounted etc. (covered under GR/PP/SOFTEX/EC copy of shipping bills etc.) – Other than Nepal and Bhutan).
• The goods are third country exports passing through India under intermediary or transit trade. Use P0104 (Receipts against export of goods not covered by the GR /PP /SOFTEX /EC copy of shipping bill etc. (under Intermediary/transit trade, i.e., third country export passing through India).
• The buyer pays before shipment for goods that you will export from India. Use P0103 (Advance receipts against export contracts, which will be covered later by GR/PP/SOFTEX/SDF – other than Nepal and Bhutan).
• You provide software, design or consulting services and no goods are traded. Use A code from the services groups that matches the work. See the [purpose code list for exporters](/blog/rbi-purpose-codes-list-for-exporters)..

For the P0108 purpose code, the key documents are the purchase contract, the sale contract or order, the invoices and the transport documents. Regulation 16(1)(c) of the 2026 Regulations requires documents that show the merchanting trade is genuine. Each AD bank must publish its own list of documents, timelines and charges under Regulation 19(1)(a).

• Purchase contract: Keep the contract with the overseas seller showing goods, price and delivery terms.
• Sale contract: Keep the sale contract or order from the overseas buyer, since the bank wants to see both legs.
• Invoices: Keep both invoices with matching goods descriptions, values and currencies.
• Transport papers: Keep the bill of lading or airway bill that shows the goods moving between the two foreign countries.
• Goods check: Confirm that the goods are not in the CITES or SCOMET lists, which FTP 2023, para 2.39 excludes from merchanting trade.

1. Confirm the goods move between two foreign countries and are not on the CITES or SCOMET lists.
2. Read your AD bank's published policy for merchanting trade, including documents, timelines and charges.
3. Complete the first leg, either paying the overseas seller or receiving from the overseas buyer, through the AD bank.
4. Tell the bank the inward payment is the export leg of a merchanting trade and share the contracts and invoices.
5. Check the credit advice shows P0108 and complete the second leg within the six month gap.

• FIRA/FIRC: The inward remittance advice from your AD bank normally records the purpose of the payment. Keep it with both contracts and both invoices. See the FIRA guide and ask your bank about its format.
• GST status: Goods in a merchanting trade do not enter India, so ask a GST professional how the trade is treated. Section 16 of the IGST Act covers zero rated supplies, and section 2(5) defines export of goods as taking goods out of India.
• Income tax: The purpose code does not change how trading income is taxed. The Income-tax Act, 2025 replaced the 1961 Act from 01.04.2026. Take advice from a tax professional on how the margin is treated.
• Six month gap: Under Regulation 16 of the 2026 Regulations, the gap between the outward and inward remittances must not exceed six months. Read the merchanting trade guide for the rest of the framework.
• Penalty: Contraventions of Regulation 16 may lead to action under FEMA. Check with your AD bank or a FEMA adviser before you correct a late leg.

• Wrong leg: Reporting the payment to the overseas seller under P0108, though P0108 is for the inward export leg.
• Goods in India: Using P0108 for goods that come into India and are shipped out under a shipping bill.
• Gap exceeded: Letting more than six months pass between the outward and inward remittances.
• Prohibited goods: Trading CITES or SCOMET goods, which the Foreign Trade Policy excludes from merchanting trade.
• No contracts: Not sharing both contracts with the AD bank, which weakens the proof that the trade is genuine.
• Old process: Following the superseded merchanting circulars after October 01, 2026, instead of Regulation 16 and the bank's current policy.

The code, its official description and every rule on this page are linked to RBI and other official sources, checked on the dates below.

1. RBI: Guidelines for Submission of Data, Foreign Exchange Transactions Electronic Reporting System (FETERS), purpose code list, Purpose codes for receipts, file coverage table and group listing (checked 9 Oct 2026)
2. RBI A.P. (DIR Series) Circular No. 84 dated February 29, 2012: Compilation of R-Returns, Reporting under FETERS, Paragraph 3: AD banks to report all foreign exchange transactions as per the revised purpose code list from April 2012 (checked 9 Oct 2026)
3. RBI Notification No. FEMA 23(R)/2026-RB: Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 (amended up to September 22, 2026), Regulations 1(2), 3, 5, 16, 18(2) and 19(1)(a) (checked 9 Oct 2026)
4. RBI A.P. (DIR Series) Circular No. 20 dated January 16, 2026: Export and Import of Goods and Services, Paragraphs 4 and 7: Master Directions superseded from October 01, 2026 (checked 9 Oct 2026)
5. Foreign Trade Policy 2023, Chapter 2 (DGFT), Para 2.39 Merchanting Trade (checked 9 Oct 2026)
6. IGST Act, 2017, Section 2: Definitions (CBIC tax information portal), Section 2(5) export of goods; section 2(6) export of services (checked 9 Oct 2026)
7. IGST Act, 2017, Section 16: Zero rated supply (CBIC tax information portal), Section 16(1) and 16(3) (checked 9 Oct 2026)
8. Income Tax Department e-filing portal: Objective and scope of the New Act, FAQ 2: the 1961 Act stands repealed on 01.04.2026 (checked 9 Oct 2026)