Set-off of export receivables against import payables: what changes in October 2026
You bill a Singapore company $18,000 for a quarter of design work. In the same quarter, you license software from that same company and owe them $6,000. Two wires cross in opposite directions, each one picking up correspondent charges, each one landing as its own entry in a reporting system — yours in EDPMS, theirs in IDPMS. The obvious question is why you cannot just send one wire for $12,000 and call it square.
From 1 October 2026 you often can, with your bank's blessing. It is one of the quieter liberalisations in the new export-import regulations, and also one of the easiest to get wrong — because the version of the rule most people half-remember is narrower than the new one, and the version circulating in commentary is broader.
What Regulation 7 permits
Under Regulation 7 of FEMA 23(R)/2026-RB, an Authorised Dealer may allow set-off of your export receivables against your import payables to or from the same overseas buyer or supplier — or that party's overseas group or associate companies — provided it happens within the period allowed for realisation of the export proceeds, including any extension your AD has granted.
Three things are doing work in that sentence. The decision sits with your bank, not with you. The counterparty has to be the same one on both legs, or its group. And the netting has to happen inside the realisation clock, not whenever the two amounts happen to line up.
Same counterparty, not "anyone you happen to owe"
This is where most people's mental model breaks. Set-off is not a general right to net your dollar income against your dollar spending. If you invoice a US client $30,000 and separately pay $4,000 a month to a cloud provider, those are two unrelated parties and there is nothing to set off. You have export proceeds to realise and an outward remittance to make, and they run on separate tracks no matter how neatly the currencies match.
The test is a mutual debt. You and the overseas party each owe the other, arising from trade, and the amounts can be identified against specific invoices. The 2026 wording widens this usefully to the counterparty's overseas group or associate companies — so if you export to a client's Dutch entity and buy from its Irish entity, that is within scope where the group relationship is established. It does not stretch to your own group: your Indian company's receivable is not your subsidiary's payable.
The realisation clock still governs
Set-off is a way of realising your export proceeds, not an exemption from having to realise them. The netting has to fall inside the window that applies to the export, and that window has moved twice in the past year, so check which one your invoice sits under before you plan anything around it.
Exports made between 5 June and 30 September 2026 carry a nine-month window, following the amendment of June 2026. From 1 October, the general period is fifteen months from the date of invoice for services, or eighteen months where the invoice is raised or settled in Indian rupees. Your AD can extend on reasons cited, and an extended period counts for set-off purposes. The full picture of what changes on 1 October is in our FEMA 2026 guide for service exporters.
The reason to care about the timing is what sits at the other end of it. Once proceeds are unrealised more than a year past their due date, Regulation 13 restricts your further exports to that market to full-advance or irrevocable-LC terms. Netting a mutual debt promptly is one of the cleaner ways to stop an entry ageing into that territory.
"To the AD's satisfaction" — what that means in practice
The regulation hands your bank discretion and asks it to be satisfied about the bona fides of the transaction. In practice that means your request has to be legible on paper: which export invoice, which import invoice, which counterparty, what the group relationship is if the two legs sit in different entities, and why the two are genuinely mutual obligations rather than an arrangement built to net two unrelated flows.
Expect this to vary by bank, at least at first. Discretion plus a new regulation plus no settled practice tends to produce inconsistency, and the standard operating procedures that banks must publish under Regulation 19 had not appeared at the time of writing. Ask your relationship manager how they intend to handle set-off requests before you assume the answer.
The goods-versus-services question everyone is asking
Under the framework these regulations replace, there was a bar on crossing categories: a receivable for the export of goods could not be set off against a payable for the import of services, or the other way round. A number of Big Four and law-firm notes on the 2026 regulations read the new rules as having dropped that bar, which matters to anyone who sells software and buys hardware, or sells services and imports components.
That reading looks right, and it is worth being precise about why, because "the old restriction is gone" and "the regulation permits it" are not the same claim. Regulation 7 reads, in full: "An Authorised Dealer may allow set-off of export receivables against import payables from/to the same overseas buyer or supplier or with their overseas group or associate companies, within the stipulated period for realisation of export proceeds or extended period, if any, allowed by the Authorised Dealer." That is the whole of it. There is no mention of goods or services anywhere in the regulation — no category qualifier attached to "import payables" at all. The old bar sat in the Master Direction and the circulars that these regulations supersede, not in the regulation itself, which is why the commentary reads it as having gone.
So the text does not stand in your way. What decides your case is your AD bank's standard operating procedure, and those are not published yet — Regulation 19 requires every Authorised Dealer to disclose its policy and the main features of its SOP on its website, and that obligation starts with the regulations themselves. Until your bank's version appears, put a cross-category request in writing, ask for the answer in writing, and keep a fallback if it comes back no. If both your legs are services, or both goods, none of this uncertainty touches you.
Three things that are not set-off
A third-party payment is when someone other than your buyer pays your invoice — a parent company, a platform, a group treasury centre. That sits under Regulation 8, also at your AD's discretion, and it is a different permission with different documentation. We covered it separately in our guide to third-party payments in export.
A reduction in export value or a write-off is what you do when money is not coming at all. Regulation 6 allows a reduction, including for non-realisation, on your own declaration up to a threshold, with the entry closed accordingly. That is an admission that proceeds are lost, not a settlement between two live obligations — and it has consequences for your GST position that set-off does not.
Netting inside your own accounting is not set-off either. Booking the two invoices against each other in your ledger changes nothing about FEMA; the export entry stays open until the proceeds are realised in a manner your AD recognises. If you have been offsetting mutual balances in the books and assuming the compliance followed, that gap is worth closing before October.
What to put in front of your bank
Assemble it as a single request rather than a conversation. The export invoices and the import invoices you want netted, listed with dates and amounts. The contract or purchase orders behind both legs. Evidence of the group relationship if the counterparties differ. A short note setting out the net amount and which direction it moves. And your calculation of where each export invoice sits against its realisation deadline, so the bank can see the request is inside the window without doing the arithmetic itself.
Then think about the tax side separately, because it does not move in step. A netted settlement still has to leave you able to show that your export of services was paid for in convertible foreign exchange — the condition your zero-rating under GST depends on. How a set-off is evidenced for that purpose is a question for your CA, and it is worth asking before you net rather than at refund time.
When netting is not the answer
Most Indian service exporters do not have a mutual-debt problem. They have a collection problem: money arriving through correspondent banks with charges deducted somewhere in the chain, conversion happening at a rate nobody quoted them, and documentation that has to be requested rather than received. Set-off does nothing for any of that. A Winvesta Global Collections Account does — your client pays into local account details in their own currency, you get an e-FIRA against each payment with the purpose code on it, and the conversion cost is published rather than buried. What it does not do is grant permissions: a set-off still needs your AD bank's approval under Regulation 7, and no product changes that.
Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute financial or legal advice. Winvesta makes no representations or warranties about the accuracy or suitability of the content and recommends consulting a professional before making any financial decisions.
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You bill a Singapore company $18,000 for a quarter of design work. In the same quarter, you license software from that same company and owe them $6,000. Two wires cross in opposite directions, each one picking up correspondent charges, each one landing as its own entry in a reporting system — yours in EDPMS, theirs in IDPMS. The obvious question is why you cannot just send one wire for $12,000 and call it square.
From 1 October 2026 you often can, with your bank's blessing. It is one of the quieter liberalisations in the new export-import regulations, and also one of the easiest to get wrong — because the version of the rule most people half-remember is narrower than the new one, and the version circulating in commentary is broader.
What Regulation 7 permits
Under Regulation 7 of FEMA 23(R)/2026-RB, an Authorised Dealer may allow set-off of your export receivables against your import payables to or from the same overseas buyer or supplier — or that party's overseas group or associate companies — provided it happens within the period allowed for realisation of the export proceeds, including any extension your AD has granted.
Three things are doing work in that sentence. The decision sits with your bank, not with you. The counterparty has to be the same one on both legs, or its group. And the netting has to happen inside the realisation clock, not whenever the two amounts happen to line up.
Same counterparty, not "anyone you happen to owe"
This is where most people's mental model breaks. Set-off is not a general right to net your dollar income against your dollar spending. If you invoice a US client $30,000 and separately pay $4,000 a month to a cloud provider, those are two unrelated parties and there is nothing to set off. You have export proceeds to realise and an outward remittance to make, and they run on separate tracks no matter how neatly the currencies match.
The test is a mutual debt. You and the overseas party each owe the other, arising from trade, and the amounts can be identified against specific invoices. The 2026 wording widens this usefully to the counterparty's overseas group or associate companies — so if you export to a client's Dutch entity and buy from its Irish entity, that is within scope where the group relationship is established. It does not stretch to your own group: your Indian company's receivable is not your subsidiary's payable.
The realisation clock still governs
Set-off is a way of realising your export proceeds, not an exemption from having to realise them. The netting has to fall inside the window that applies to the export, and that window has moved twice in the past year, so check which one your invoice sits under before you plan anything around it.
Exports made between 5 June and 30 September 2026 carry a nine-month window, following the amendment of June 2026. From 1 October, the general period is fifteen months from the date of invoice for services, or eighteen months where the invoice is raised or settled in Indian rupees. Your AD can extend on reasons cited, and an extended period counts for set-off purposes. The full picture of what changes on 1 October is in our FEMA 2026 guide for service exporters.
The reason to care about the timing is what sits at the other end of it. Once proceeds are unrealised more than a year past their due date, Regulation 13 restricts your further exports to that market to full-advance or irrevocable-LC terms. Netting a mutual debt promptly is one of the cleaner ways to stop an entry ageing into that territory.
"To the AD's satisfaction" — what that means in practice
The regulation hands your bank discretion and asks it to be satisfied about the bona fides of the transaction. In practice that means your request has to be legible on paper: which export invoice, which import invoice, which counterparty, what the group relationship is if the two legs sit in different entities, and why the two are genuinely mutual obligations rather than an arrangement built to net two unrelated flows.
Expect this to vary by bank, at least at first. Discretion plus a new regulation plus no settled practice tends to produce inconsistency, and the standard operating procedures that banks must publish under Regulation 19 had not appeared at the time of writing. Ask your relationship manager how they intend to handle set-off requests before you assume the answer.
The goods-versus-services question everyone is asking
Under the framework these regulations replace, there was a bar on crossing categories: a receivable for the export of goods could not be set off against a payable for the import of services, or the other way round. A number of Big Four and law-firm notes on the 2026 regulations read the new rules as having dropped that bar, which matters to anyone who sells software and buys hardware, or sells services and imports components.
That reading looks right, and it is worth being precise about why, because "the old restriction is gone" and "the regulation permits it" are not the same claim. Regulation 7 reads, in full: "An Authorised Dealer may allow set-off of export receivables against import payables from/to the same overseas buyer or supplier or with their overseas group or associate companies, within the stipulated period for realisation of export proceeds or extended period, if any, allowed by the Authorised Dealer." That is the whole of it. There is no mention of goods or services anywhere in the regulation — no category qualifier attached to "import payables" at all. The old bar sat in the Master Direction and the circulars that these regulations supersede, not in the regulation itself, which is why the commentary reads it as having gone.
So the text does not stand in your way. What decides your case is your AD bank's standard operating procedure, and those are not published yet — Regulation 19 requires every Authorised Dealer to disclose its policy and the main features of its SOP on its website, and that obligation starts with the regulations themselves. Until your bank's version appears, put a cross-category request in writing, ask for the answer in writing, and keep a fallback if it comes back no. If both your legs are services, or both goods, none of this uncertainty touches you.
Three things that are not set-off
A third-party payment is when someone other than your buyer pays your invoice — a parent company, a platform, a group treasury centre. That sits under Regulation 8, also at your AD's discretion, and it is a different permission with different documentation. We covered it separately in our guide to third-party payments in export.
A reduction in export value or a write-off is what you do when money is not coming at all. Regulation 6 allows a reduction, including for non-realisation, on your own declaration up to a threshold, with the entry closed accordingly. That is an admission that proceeds are lost, not a settlement between two live obligations — and it has consequences for your GST position that set-off does not.
Netting inside your own accounting is not set-off either. Booking the two invoices against each other in your ledger changes nothing about FEMA; the export entry stays open until the proceeds are realised in a manner your AD recognises. If you have been offsetting mutual balances in the books and assuming the compliance followed, that gap is worth closing before October.
What to put in front of your bank
Assemble it as a single request rather than a conversation. The export invoices and the import invoices you want netted, listed with dates and amounts. The contract or purchase orders behind both legs. Evidence of the group relationship if the counterparties differ. A short note setting out the net amount and which direction it moves. And your calculation of where each export invoice sits against its realisation deadline, so the bank can see the request is inside the window without doing the arithmetic itself.
Then think about the tax side separately, because it does not move in step. A netted settlement still has to leave you able to show that your export of services was paid for in convertible foreign exchange — the condition your zero-rating under GST depends on. How a set-off is evidenced for that purpose is a question for your CA, and it is worth asking before you net rather than at refund time.
When netting is not the answer
Most Indian service exporters do not have a mutual-debt problem. They have a collection problem: money arriving through correspondent banks with charges deducted somewhere in the chain, conversion happening at a rate nobody quoted them, and documentation that has to be requested rather than received. Set-off does nothing for any of that. A Winvesta Global Collections Account does — your client pays into local account details in their own currency, you get an e-FIRA against each payment with the purpose code on it, and the conversion cost is published rather than buried. What it does not do is grant permissions: a set-off still needs your AD bank's approval under Regulation 7, and no product changes that.
Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute financial or legal advice. Winvesta makes no representations or warranties about the accuracy or suitability of the content and recommends consulting a professional before making any financial decisions.
Get paid globally. Keep more of it.
No FX markups. No GST. Funds in 1 day.