Understanding the role of the bill of exchange
A bill of exchange is a kind of instrument that is present in a written form carrying unconditional orders, which are signed by the creator, which directs a person to pay a certain amount to the order of an authoritative person or we can say the bearer of the instrument. This is stated by the Negotiable Instruments Act, 1881.
Features of the bill of exchange?
It is compulsory to have the bill of exchange in a written form
It should possess a confirm order informing you to make a payment not only the request.
They should not carry any kind of condition
It should be definite
The bill of exchange should be signed by both the parties; drawer and drawee
The amount that is mentioned on the bill of exchange should be paid on-demand or within a fixed time.
The beneficiary of the bill will receive it, against a fixed order, to a specific person.
What are the types of bills of exchange?
Accommodation bill- This is one that is sponsored, drawn, and accepted without any conditions.
Inland Bill- This kind of bill is paid within the country and is applicable to any other foreign country. This is completely opposite of what is a foreign bill.
Foreign Bill- This is the kind of bill which is paid outside of our country, India, this is known as a foreign bill. Export bills and Import bills are two kinds of foreign bills.
Documentary bill- This kind of bill of exchange is assisted by valid documents that guarantee the genuineness of the transaction that occurred between the seller and the buyer.
Demanded Bill- This kind of bill is paid when it is demanded. It doesn’t carry a fixed date of payment you have to pay whenever it is presented.
Usance Bill- This can be said as a time-bound bill as the buyer has to pay it within the time period mentioned on the bill.
Trade Bill- This is the bill that is related only to the trade nothing else is included in it.
Supply Bill- A supply bill is a kind of bill withdrawn by the contractor or the supplier from the government department.
Accommodation Bill- the bill that doesn’t carry any kind of condition, which is sponsored, drawn, or accepted as it is, called an accommodation bill.
Clean bill- The interest rate on this bill is higher than the other bills since there is no proof of a document.
Why should you choose a bill of exchange?
Legal Document- The drawer can easily recover the amount the drawee is not able to pay as it carries a legal document with it.
Discounting Facility- If the drawer needs cash immediately, he or she can discount the bill from a bank for a nominal fee.
Endorsement Possible- This is a flexible bill of exchange that can be changed from one individual to another if required to adjust the debt.
What are the parties involved in this bill of exchange?
It has three parties involved in a bill of exchange-
(1) Drawer:
The person who makes the bill of exchange is known as the drawer
The bill is approved and signed by the drawer himself/herself.
The person who is entitled to receive the payment is a creditor who can make a bill of exchange.
(2) Drawee:
The person on whom the bill of exchange is drawn is known as the drawee.
Drawee is the person also known as the debtor who has to pay the amount to the drawer.
The drawee can also be known as the ‘Acceptor’.
(3) Payee:
The payee is the party to whom the payment has to be made.
The payee can be the drawer or some other party.
What do you mean by Advance Authorization Scheme?
The duty-free imports of inputs are possible due to the Advance Authorization Scheme. In an export product, these are physically blended. Many other things, the addition of products like oil, fuel, packaging material, or any catalyst which is utilized/consumed during the process of production of the export product is also permitted in this.
During the manufacturing process, the wastage that is generated is specified by the number of inputs permitted for a given export product. The DGFT gives a sector-specific list of (SION) Standard Input-Output Norms. This is the list under which the exporters decide to apply. However, the exports are allowed to apply their ad-hoc norms if the SION does not suit the person who is exporting.
Those who are eligible for Advance Authorisation are manufacturer exporters or merchant exporters who are linked to supporting manufacturer(s).
What is EPCG Scheme & License
EPCG License is just like the Importer Exporter Code, which is of concern and interest to indigenous businesses that either have a large sum of export or import to the businesses in foreign countries. It is the scheme that was initiated by the government of India to encourage exports. Along with that, it can also promote the betterment of companies and industries covering every sector. It also consists of the waving of the import duties on the products that are imported in exchange for performance or discharge of export demands or obligations in return for the multiple import duties that are saved with the preset time.
It is necessary for export obligations of 8 times the Duty Saved to be fulfilled within a period of 8 years in order for the government to grant Import Duty at just 3% of the stipulated charge. This obligation can be extended to 12 years in some exceptional situations, but it is not easy for Medium and Large Scale Enterprises to take advantage of this provision since it only applies to export obligations exceeding 100 crores.
What are the Third-Party Exports
Under this scheme, third-party exports are allowed, for example. It is possible for a company that produces cotton using imported machinery to export it itself and then record the export in its own name, or it can sell the finished goods to a third party, which is still considered a fulfillment of the export obligation, as long as the finished goods that the company manufactured using the imported machinery have been exported. The company cannot, however, claim that it has discharged its export obligation for goods or products that have no connection to what it manufactures.
Summing Up
There is another note known as a Promissory Note which is an instrument in writing (not a banknote or currency note) containing an unconditional undertaking signed by the maker, to pay a certain sum of money only to or on behalf of a certain person, or to the bearer. There are two kinds of parties involved in this Promissory Note. The two parties are the Maker and the Payee.
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