P0108 Purpose Code: Goods sold under merchanting / Receipt against export leg of merchanting trade

Purpose code P0108 is used when an Indian merchant receives payment from an overseas buyer for goods bought from one foreign supplier and sold on to another, without the goods entering India.

What is the P0108 purpose code?

Purpose code P0108 covers the money coming in on the export leg of a merchanting trade. In a merchanting transaction an Indian resident buys goods from a non-resident supplier and resells the same goods to another non-resident buyer, and the goods never enter Indian territory, moving directly between the two foreign countries. That absence is what defines merchanting: if the goods arrive in India at any point, the transaction is an ordinary import followed by an ordinary export and reports under those codes instead. A merchanting trade has two legs, and this code covers only the receipt, with the payment to your overseas supplier going out separately under the intermediary trade code. Under RBI FEMA guidelines, this inward payment is classified under Exports (of Goods) and reported accordingly.

When to use P0108 purpose code?

Use P0108 when your overseas buyer pays you on the export leg of a merchanting trade and the goods have moved between two foreign countries without touching India. It is the correct RBI receipt code for that inflow, whatever margin you are making on the resale. Merchanting trade runs under its own RBI framework, which sets conditions on the goods, the timing between the two legs, and how the transaction is routed, so confirm your arrangement qualifies before relying on this code.

When to use a different code:

• Use P0104 when the goods are a third country export passing through India rather than moving directly between two foreign countries
• Use P0102 when the goods were exported from India and the bill was sent on collection
• Use the matching S-code when you are paying a foreign vendor rather than receiving money

Who typically uses P0108 purpose code

Indian trading companies and intermediaries who source goods in one country and sell them into another without routing the cargo through India, including commodity traders, sourcing agents operating on their own account, and businesses serving buyers in one region from suppliers in another. It applies whether you trade as a proprietorship, a partnership, or a registered company.

Examples of transactions covered under P0108 purpose code

• Payment received from a buyer in one country for goods bought from a supplier in another and shipped directly between them
• Proceeds on resale of a commodity cargo that moved from the loading port to the discharge port without calling in India
• Money received on the sale leg of a sourcing arrangement where the goods went straight from the overseas factory to the overseas customer
• Settlement received from an overseas buyer against goods your business owned but never took delivery of in India

When NOT to use P0108 purpose code

• The goods are a third country export passing through India rather than moving directly between two foreign countries (use P0104)
• The goods entered India at any point, which makes the transaction an ordinary import and export rather than merchanting
• The payment is for arranging or brokering the trade on commission rather than for goods you bought and resold, which reports under the trade related services codes
• You are paying your overseas supplier on the import leg rather than receiving on the export leg (use S0104, intermediary trade)

Documents required for P0108 purpose code

To receive a payment under P0108, keep the following documents ready so your bank or platform can verify the transaction and report it correctly under FEMA.

• Purchase invoice from your overseas supplier - Evidences the import leg and what you paid for the goods
• Sale invoice to your overseas buyer - Evidences the export leg and the amount being received
• Transport documents for the shipment - Show the goods moving between the two foreign countries without entering India, which is the central fact on this code
• Purpose declaration form and KYC (if requested) - The inward remittance form stating the purpose, plus verification of your business
• There is no shipping bill here, since nothing shipped from India. The transport documents do the work a shipping bill does on an ordinary export.

How is a P0108 Purpose Code declared?

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

1. Confirm the trade qualifies: Check with your bank that the arrangement meets the merchanting trade conditions before either leg moves.
2. Complete both legs: Buy from your overseas supplier and sell to your overseas buyer, with the goods moving directly between the two.
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 both invoices and the transport documents so the bank can verify the goods never entered India.
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 P0108 purpose code

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

1. Treating the code as the whole framework: Assuming P0108 is all that governs a merchanting trade, when the transaction sits under RBI conditions covering the goods, the timing between the two legs, and how it is routed. The code classifies the receipt, it does not authorise the trade.
2. Confusing merchanting with transit trade: Using P0108 when the goods passed through India on the way to the buyer, which belongs under P0104. Whether the cargo touched Indian territory is the whole distinction.
3. Code and document mismatch: The code not matching what your two invoices and transport documents describe, which flags the payment.
4. Incomplete documents: Missing either invoice or the transport documents, so the bank cannot establish that the goods stayed outside India 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 the import leg going out instead of the intermediary trade code.

How Skydo simplifies inward remittance under P0108 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 P0108 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.