Global capability centres and captive units that bill overseas group companies on a cost-plus basis are exporting services, and every outward cross-charge invoice to a foreign group entity belongs on the monthly EDF, one row per invoice, just like a third-party client. What makes captives different is the plumbing: several group recipients, payments routed through a regional treasury, year-end true-ups, and a strong temptation to net receivables against charges coming the other way.
Key takeaways
- Cost-plus invoices from an Indian captive to foreign group companies are exports of services and go on the EDF.
- If you bill several group entities, each invoice is its own row with its own recipient and country.
- If a treasury centre or another group company pays on the recipient's behalf, fill the third-party fields and note it.
- Year-end transfer pricing true-ups create new invoices or credit notes in the month they are raised.
- Netting against inbound cross charges is not something to do informally; it needs your AD bank's involvement.
Why captives need extra care
A captive's invoices are driven by a formula rather than a negotiation, which makes them feel like accounting entries. But FEMA sees them as exports. Each invoice goes into EDPMS once the bank receives the EDF, and each must be realised within 9 months of the invoice date.
The most common captive problems we see are structural:
- Invoices raised to one group entity but paid by another.
- Lump-sum group payments that do not map to invoices.
- Quarterly true-ups that leave old invoices partly unpaid.
- Inbound charges (for licences, management fees or shared services) quietly deducted from what the parent pays.
Each one is fixable, but it is far easier to design the process properly than to clean up EDPMS later.
Common captive billing models
| Model | How invoices look | EDF treatment |
|---|---|---|
| Single parent billed monthly | One invoice per month to the parent | One row per month |
| Multiple group entities billed by usage | Separate invoices to US, UK and Singapore entities | One row each, different recipients and countries |
| Billing a regional hub that recharges others | One invoice to the hub | One row; the hub is the recipient |
| Quarterly billing with monthly accruals | One invoice a quarter | Row in the month the invoice is dated |
| Year-end TP adjustment | Supplementary invoice or credit note | New row, or credit note reported to the bank |
The EDF follows the invoices. If your group invoices quarterly, you file an EDF only in the months when invoices are raised, though many captives prefer monthly invoicing to keep the realisation window manageable.
Third-party payers and treasury centres
Large groups often pay supplier invoices, including intra-group ones, from a central treasury or in-house bank. If your invoice is addressed to the UK subsidiary but paid by a treasury company in the Netherlands, the payer is not the recipient.
On the EDF:
- Field 1.15 asks about a third party; 1.16 asks for its relationship to the recipient. Fill both.
- Remarks in Part 2B can say "Payment by group treasury entity on behalf of recipient".
- Part 4 has an alternative to strike out: "buyer/third party". Keep the one that applies.
Tell your bank about the arrangement in advance. Our guide to third-party payments in the EDF covers the mechanics.
True-ups and the realisation window
Cost-plus billing usually runs on estimated costs during the year, with a true-up at year-end once actual costs and the agreed markup are known.
- An upward true-up is a new invoice, dated when raised, and goes on that month's EDF.
- A downward true-up is a credit note against earlier invoices. If those invoices are already on an EDF, inform your bank so the open EDPMS values are adjusted.
Avoid the pattern where the parent pays "on account" during the year and settles everything at year-end. If an April invoice is not realised until the following March, it has gone past 9 months. Either pay invoices on normal terms, or request an extension from the AD bank, with reasons, before each deadline.
Netting against inbound charges
Captives often receive charges from the group too: software licences, brand fees, shared IT costs. It is tempting to let the parent pay the net amount. Do not do this informally. Settling an export receivable against an import payable is a set-off, and set-off needs to go through your AD bank under the applicable rules. Read our article on set-off of export receivables before agreeing anything.
Worked example: Meridian Global Services India
Meridian Global Services India Pvt Ltd in Hyderabad is a captive of a US group. It bills three group entities monthly, at cost plus a markup set by the group's transfer pricing policy.
October 2026:
| Invoice | Recipient | Country | Currency | Amount |
|---|---|---|---|---|
| MGS/IC/10-01 | Meridian Inc. | USA | USD | 210,000 |
| MGS/IC/10-02 | Meridian UK Ltd | UK | GBP | 48,000 |
| MGS/IC/10-03 | Meridian Asia Pte Ltd | Singapore | SGD | 65,000 |
Payment for the UK invoice comes from the group's treasury company in Ireland, so the October EDF fills fields 1.15 and 1.16 for that row and notes it in remarks.
One small habit helps here: write foreign-currency amounts in international grouping (USD 210,000, not USD 2,10,000) and keep lakh-and-crore grouping for the rupee total, so nobody misreads a row. At illustrative rates (USD ₹84, GBP ₹110, SGD ₹63), the rupee total is ₹1,76,40,000 + ₹52,80,000 + ₹40,95,000 = ₹2,70,15,000. Due by 30 November 2026.
In April 2027, the year-end true-up adds USD 35,000 to Meridian Inc. That is a new invoice on the April 2027 EDF, due 30 May 2027.
GST, transfer pricing and the EDF
Transfer pricing determines whether your markup is arm's length; it is outside the EDF. GST export status for intra-group services depends on the Section 2(6) IGST conditions, including that the supplier and recipient are not merely establishments of a distinct person, and on place of supply. A separately incorporated Indian captive billing a foreign group company is a common case, but your CA should confirm the treatment.
The EDF does not change your GST or income-tax obligations. This is general information, not legal or tax advice.
Frequently asked questions
Do captive units file the EDF for intra-group invoices?
Yes. Invoices for services from an Indian captive to foreign group companies are exports of services. Each month's invoices go on one EDF to the AD bank, with a row per invoice.
How do I show a group treasury company paying our invoice?
Fill fields 1.15 and 1.16 in Part 1 to show the third party and its relationship to the recipient, note it in the Part 2B remarks, and keep "third party" in the Part 4 declaration. Inform your bank in advance.
Does a year-end transfer pricing true-up go on the EDF?
An upward true-up invoice goes on the EDF for the month it is raised. A downward adjustment by credit note should be reported to your bank so it can adjust the open entries.
Can the parent pay us net of the charges it bills us?
Only through a set-off approved and recorded by your AD bank under the applicable rules. Informal netting leaves export entries partly unrealised in EDPMS.
Should a captive invoice monthly or quarterly?
Either is permitted, but monthly invoicing with normal payment terms keeps each invoice well within the 9-month realisation window and makes matching simpler.
Bottom line
For captives, the EDF is easy once billing, payment and netting are designed cleanly. Prepare each month's multi-entity form with the free EDF form generator, and keep the EDF guide to hand for field questions.
This guide is general information for Indian businesses, not legal or tax advice. Rules and bank processes change — confirm specifics with your AD bank or chartered accountant.