S1002 Purpose Code: Trade related services, commission on exports or imports

Purpose code S1002 is used when an Indian business pays a foreign party for trade related commission on its export or import transactions.

What is the S1002 purpose code?

Purpose code S1002 is used when an Indian business sends money abroad to pay commission or brokerage related to its export or import trade. This covers commission to overseas agents, brokers or intermediaries who help secure orders, arrange buyers or suppliers, or otherwise facilitate cross border trade for your Indian entity. It applies to the commission service itself, while the underlying goods import or export is reported under the relevant goods purpose code. Under RBI FEMA guidelines, this outward payment is classified under other business services and reported accordingly.

When to use S1002 purpose code?

Use S1002 when you are paying an overseas agent or intermediary commission that is directly linked to your export or import transactions. It is the correct RBI purpose code for trade related commission services bought from a foreign party, whatever your business structure. S1002 covers the commission or brokerage fee for facilitating trade, not the value of the goods themselves.

When to use a different code:

• Use the import of goods purpose codes when the payment is for the value of goods supplied to you
• Use the export of goods purpose codes when the transaction relates to payment for goods you have supplied
• Use the matching P code when you are receiving money rather than paying

Who typically uses S1002 purpose code?

Indian exporters and importers that pay overseas commission agents, buying agents, selling agents or brokers for facilitating trade deals. It applies whether you operate as a private limited company, LLP, partnership or proprietorship, as long as the commission service is provided from outside India.

Examples of transactions covered

• Commission payment to a foreign buying agent for sourcing raw materials from overseas suppliers for your India factory
• Success fee to an overseas sales agent for securing a large export order from a foreign buyer for your Indian business
• Monthly retainer plus performance commission to a foreign trade representative managing your export market in a specific country
• Brokerage payment to an international intermediary who arranged a long term import contract with an overseas manufacturer

When NOT to use S1002 purpose code

• The payment is for the value of imported goods themselves, not commission (use the appropriate import of goods purpose code)
• The payment is for the value of exported goods being shipped from India (use the appropriate export of goods purpose code)
• The payment is for unrelated business or professional services such as consulting, legal or technical fees (use the matching services purpose code instead)
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S1002, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S1002 Purpose Code declared?

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

1. Receive the commission invoice: Your overseas trade agent or broker bills you, clearly describing the commission linked to your export or import transactions.
2. Determine taxability: Establish whether the commission 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 S1002 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 goods with commission: Tagging the entire invoice value under S1002 when only the agent's commission belongs here and the goods themselves use a separate import or export code.
2. Code and invoice mismatch: The purpose code not matching what your commission invoice or agency agreement describes, which flags the payment.
3. Assuming a Rule 220(3) exemption: Skipping Form 145 on a commission payment that is not on the specified exempt list, which carries a ₹1,00,000 penalty per instance.
4. Incomplete documents: Missing commission 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 S1002 to money coming in instead of using the matching P code for commission income.

How Skydo helps with payments under S1002 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 S1002 as your default for these commission 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 agent or broker gets paid without a branch visit or a week of back and forth.