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Para 6.3 - Payment Terms | KartavyaDesk

Goods Manual

Original Rule Text

6.3. Terms of Payment for Domestic Goods 1. Terms of Payment may be decided by the procuring entity safeguarding its interest based on the terms of delivery, nature of goods, type of inspection, mode of transport and risks in such situations. The following payment terms are suggested for various terms of delivery. 2. Where the term of delivery is FOR destination/ delivery at site, the usual payment term is 100 (hundred) per cent on receipt and acceptance of goods by the consignee and on the production of all required documents by the supplier. 3. Where the terms of delivery are FOR Dispatching Station, the payment terms, depending on the value and nature of the goods, mode of transportation, and so on, may be 60 to 90 (sixty to ninety) per cent on proof of dispatch and other related documents and balance on receipt at site and acceptance by the consignee. 4. Where goods to be supplied also need installation and commissioning by the supplier, the payment terms are generally: a) For a contract with terms of delivery as FOR dispatching station -- 60 (sixty) per cent on proof of dispatch along with other specified documents, 30 (thirty) per cent on receipt of the goods at the site by the consignee and a balance of 10 (ten) per cent on successful installation and commissioning and acceptance by the consignee;

What This Means

Para 6.3 of the Manual for Procurement of Goods, 2017, deals with how government departments should pay suppliers for goods they purchase. It's all about ensuring fair and secure payment terms that protect the government's interests. The rule acknowledges that different types of deliveries and goods require different payment structures. It affects all government departments and agencies involved in procuring goods, as well as the suppliers who provide those goods.

The rule suggests different payment schedules based on the delivery terms. If the supplier delivers the goods directly to the final destination (FOR destination), the standard practice is to pay 100% upon receiving and accepting the goods, provided all necessary paperwork is in order. However, if the goods are delivered to the dispatching station (FOR Dispatching Station), a partial payment (60-90%) can be made upon proof of dispatch, with the remaining balance paid after the goods are received and accepted at the final destination. For goods requiring installation and commissioning, a phased payment approach is recommended, with portions paid upon dispatch, receipt, and successful installation.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

  • •Payment terms should safeguard the procuring entity's interests.
  • •100% payment is generally made on receipt and acceptance of goods for 'FOR destination' deliveries.
  • •Partial payment (60-90%) can be made on proof of dispatch for 'FOR Dispatching Station' deliveries.
  • •For goods requiring installation, payment is typically phased: dispatch, receipt, and commissioning.
  • •The nature of goods, mode of transport, and risks should be considered when deciding payment terms.

Practical Example

The Department of Rural Development needs to purchase 100 water pumps for a remote village. The supplier, 'Aqua Solutions Pvt. Ltd.', offers 'FOR destination' delivery. According to Para 6.3, the department should pay Aqua Solutions 100% of the agreed amount (say, ₹5,00,000) only after the water pumps are delivered to the village, inspected, and accepted by the designated officer, Mr. Sharma, and after Aqua Solutions provides all the necessary invoices and delivery challans.

In another scenario, the Department procures specialized medical equipment that requires installation. The delivery term is 'FOR Dispatching Station'. The department can pay 60% of the contract value (₹10,00,000) upon receiving proof of dispatch, 30% upon receipt of the equipment at the hospital, and the remaining 10% after successful installation and commissioning by the supplier's engineers, as verified by the hospital's biomedical engineer.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Frequently Asked Questions

What does 'FOR destination' mean in the context of payment terms?▼
'FOR destination' means the supplier is responsible for delivering the goods to the specified final destination. Payment is typically made upon receipt and acceptance at that destination.
Can we deviate from the suggested payment terms in Para 6.3?▼
Yes, the rule states that payment terms may be decided by the procuring entity, safeguarding its interest. The suggested terms are guidelines, but you can adjust them based on the specific circumstances of the procurement.
What documents are required for proof of dispatch?▼
Proof of dispatch typically includes documents like the transport receipt (e.g., lorry receipt, railway receipt), invoice, packing list, and any other documents specified in the purchase order.
How is 'acceptance' of goods determined?▼
Acceptance is usually determined by a designated officer or committee after inspecting the goods and verifying that they meet the specifications outlined in the purchase order. A formal acceptance report is generally prepared.
What happens if the goods are damaged during transit in a 'FOR Dispatching Station' scenario?▼
The responsibility for the goods during transit in a 'FOR Dispatching Station' scenario usually lies with the procuring entity after dispatch. The specific terms regarding insurance and risk should be clearly defined in the contract.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Test Your Knowledge

Question 1 of 3

According to Para 6.3 of the Manual for Procurement of Goods, 2017, which of the following factors should a procuring entity consider when deciding on the terms of payment for domestic goods?

Related Rules

Para 9.4Manual for Procurement of Goods, 2024 - Para 9.4 - Chapter 9Para 9.5.5Manual for Procurement of Goods, 2024 - Para 9.5.5 - Chapter 9Para 1.8.2Manual for Procurement of Goods, 2024 - Para 1.8.2 - Chapter 1Para 2.2.2Manual for Procurement of Goods, 2024 - Para 2.2.2 - Chapter 2Para 2.2Manual for Procurement of Goods, 2024 - Para 2.2 - Chapter 2

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