ABC Exports Ltd., an Indian exporter, entered into an agreement to export machinery to a foreign buyer under the Rupee State Credit Route. As per…

Under the provisions of the Foreign Exchange Management Act, 1999 and the rules relating to transactions for which drawal of foreign exchange is prohibited, it includes- Payment of commission on exports under Rupee State Credit Route, except commission up to 10% of invoice value of exports of tea and tobacco. Accordingly, in the given question, Payment of commission on exports under the Rupee State Credit Route is prohibited. Since, the export is of machinery and not of tea or tobacco, the payment of 8% commission is not permissible. Hence, the transaction is invalid.In the case of export of tea, commission is permitted only up to 10% of the invoice value. Since the commission paid is 12%, it exceeds the permitted limit. Therefore, the payment to the extent exceeding 10% is not permissible, and the transaction is not fully valid under FEMA.