Connecting Businesses with Opportunities in India

investing in india

Submitted by CA Shashi Mohan on Sun, 11/11/2018 - 6:57am.

Year 2018 being the last year when the existing government would bring its full fledged budget before the upcoming elections in 2019. In continuation of its efforts, the Union Cabinet further simplified the Foreign Direct Investment (FDI) Policy to provide an ease of Doing Business in India. With these amendments, government has removed entry barriers in single brand retail companies concerns regarding local sourcing and FDI in multi-brand retail still need to be looked upon. A brief of the recent decisions are summarized as follows:
 
1. Single Brand Retail Trading (SBRT)
Existing policy allows 49% FDI under Automatic Route. Beyond 49% and upto 100%, FDI was allowed under Government Approval Route.  Following changes have been approved:
  • Government approval no longer required for FDI in SBRT
  • Non-resident entity can be the brand owner or it can also operate otherwise 
  • Specific brands can be traded directly by the Brand Owner or through legally tenable agreement executed between any Indian entity & the Brand owner
  • Incremental sourcing of goods from India for global operations can be set off during initial 5 years
  • After completion of initial 5 year period, the SBRT entity shall be required to meet the 30% sourcing norms directly towards its India’s operation, on an annual basis.
2. Civil Aviation
Foreign Airlines were allowed to invest upto 49% in Indian companies operating scheduled and non-scheduled air transport services except in Air India. The following changes have been introduced:
  • Foreign airlines can invest up to 49% under approval route in Air India. Total FDI directly or indirectly  not to exceed 49% 
  • Substantial ownership and effective control of Air India shall continue to be vested in Indian National.
3. Other Important Changes
  • It’s clarified that the real-estate broking service does not amount to real estate business and is therefore, eligible for 100% FDI under automatic route.
  • It has now been decided that issue of shares against non-cash considerations like pre-incorporation expenses, import of machinery etc. shall be permitted under automatic route in case of sectors under automatic route.
  • Definition of ‘medical devices’ to be amended as contained in the current FDI Policy. Earlier a reference was sought from Drugs and Cosmetics Act which is not required now.
  • Wherever required FDI applications would be processed by Department of Industrial Policy & Promotion (DIPP) for Government approval
About Author: With over 15 years of experience, Shashi Mohan has been responsible for the set up and operational management of over 150 overseas brands in India.
Contact: ca.shashi@rakchamps.com or +91 9818700482
Shashi is also a Co-Founder at Excelor India Cons. Pvt. Ltd, www.excelorindia.com
Keywords: Doing Business in India, Investing in India, India Civil Aviation Opportunities
Keyphrases: doing business in india, retail business in India, Investing in India
Submitted by CA Shashi Mohan on Mon, 07/23/2018 - 12:27pm.

‘Ease of Doing Business’ may be on most priority list of the Indian Government, the administration bodies, however keep inventing new tools to challenge the process.  Mandatory Annual KYC of all Directors of all companies may be considered as one of such tool, which needs to be complied with on or before August 31, 2018. Non-compliance will result in de-activation of DIN and consequently such Directors will not be able to function as ‘Director’.

Every private limited company in India requires minimum 2 Directors and out of them at least 1 Directors must be a Resident in India (has stayed min. of 180 days in last Calendar year). As a general practice, where ever 2 Directors are Foreign Nationals or Non- Resident in India, a 3rd Director, who is ‘Resident in India’ needs to be appointed. In a Public Limited Company, there are minimum 3 Directors.

MCA is validating data of all Directors in all companies identify inactive directors, ghost directors, directors who are in default and also update the ‘KYC’ of all Directors, with latest documents of Identification, address, email IDs, Phone Numbers etc

As every document at MCA need to be digitally signed and uploaded electronically, hence a  check need to be carried out about readiness of these documents to meet the compliance due dates and avoid late fee & other consequences.

Who needs to comply?

Every Director (Resident or Non-Resident) in an Indian Company, who has been allotted DIN on or before 31st March, 2018 

What’s required to be done?

  1. Indian Nationals Directors will required Digital Signature, which is PAN based. In earlier days DSC used to be prepared even without PAN.
  2. Foreign Nationals/Foreign Residents Directors’ will require that their name as mentioned in Digital Signature application form, is exactly matched with his/her name in DIR-3 KYC form. Getting a PAN is not necessary however Passport is a mandatory document.
  3. Get the corrections done in the DSC as per above requirements, well in advance.
  4. Be ready with Unique Personal Mobile Number and Personal Email ID. Any other persons/other employees/any representatives Mobile Number or Email ID are not allowed.

Can Directors do it themselves?

  1. DIR-3 KYC form also need to be approved by any practicing professional (Chartered Accountant, Company Secretary etc before uploading/filing
  2. DSC of the practicing professional (Chartered Accountant, Company Secretary etc to be arranged.

What about non-compliance?

  1. MCA21 system of Ministry of Corporate Affairs, India will mark such DINs as ‘Deactivated’
  2. Filing of the eForm DIR-3 KYC after August 31, 2018 or in respect of such deactivated DINs shall be allowed only upon payment a specified fee of INR 5,000.

How to get DSC?

  1. DSC is a digital form of signature which are issued by Licensed Certifying Agencies under Ministry of Information Technology, India and it’s stored in a physical USB/Dongal.  There are plenty of vendors who are authorised by the Licensed Certifying Authorities to prepare DSC.
  2. A simple form, signed by the applicant is required to be submitted along with ‘Self Attested’ address & Identification proof to the DSC vendor
  3. DSC is prepared for a validity of 1 or 2 years and once it gets expired, it needs to be prepared again. On availability of required documents, it may take 2-4 working days to prepare a new DSC. Hence one needs to keep a track on the expiry date of DSC.
  4. In case of Foreign Nationals/Foreign residents, Notorised/Appostiled documents of Address Proof (bank Certificate, Utility Bills) and Identity Proof (Passport, Country Identification card, Bank Certificate etc) required. In case of several countries getting the required documents Translated in English, Notorisation, Apostilation and making them available in India may take 1-3 weeks time.
  1. Starting July 2018, a short Video Clip of the applicant also needs to be captured & uploaded as a part of process to prepare a DSC. 

Source

Please click on the link below for more information

http://www.mca.gov.in/Ministry/pdf/CompaniesAppointmentQualificationRules_06072018.pdf

Glossary

KYC: Know Your Customer

DIN: Director Identification Number

DSC: Digital Signature

PAN: Permanent Account Number

MCA: Ministry of Corporate Affairs

MCA21: e-Governance initiative of MCA

About the Author

With over 15 years of experience, Shashi Mohan has been instrumental in formulating strategy for Entry India, Business Set-up and Operational Management of over 150 overseas brands from USA, Europe, GCC and South East Asian countries in India. He is a member of our ‘Expert Panel’ at Entry India. Shashi can be reached at shashi.m@excelorindia.com or +91 9818 700 482

Submitted by Ashish Porwal on Sun, 01/21/2018 - 12:58am.

India, a land of opportunities, is one of the few countries in the world which has demonstrated a sustained economic growth despite a not-so-good global economic scenario. India is blessed with two of the most important factors for economic growth - abundance of natural resources and a deep consumption market.

India has a fairly liberalized foreign investment regime and a regular revamp of the foreign direct investment policy on a continuous basis has ensured that India stays on top of the development scenario. India offers multiple options and avenues for a foreign investor to invest into businesses in India and / or to set up business presence in India. Depending upon an investor’s preference and business objective, there are various options to have difference kinds of business presence viz. representative office, branch office, liaison office, project office, joint venture, wholly owned subsidiary or other forms of direct and indirect investments.

Certain forms of business presence like representative office, branch office, and project office require prior approval of the banking and foreign exchange regulator in India i.e., the Reserve Bank of India (“RBI”). The foreign investment in business entities is primarily regulated under the provisions of the Foreign Exchange Management Act, 1999 (“FEMA”) and the Foreign Direct Investment Policy (“FDI Policy”) issued by the Government of India, from time to time. The FDI Policy and the FEMA contemplate foreign investments in Indian companies under two routes viz., automatic route and approval route. Most of the investment attractive sectors like IT, ITES, software services, manufacturing, construction development, infrastructure etc., are under the automatic route. The sectors where the foreign investment is subject to approval route require prior approval of the Government of India. The foreign investment can also be made in form of debt in accordance with policy relating to the external commercial borrowing as contemplated under the FEMA.

Since the time the Indian economy was opened up for foreign investment in the year 1991, there has been a significant evolution in the FDI regime. Except for few strategic and core sectors, almost all the sectors have been opened up for foreign investment. In several sectors foreign investment upto to the extent of 100% is allowed, thereby making it possible to set up completely foreign owned ventures in India. Under the FDI Policy, foreign investors can invest into Indian business using various investment instruments like equity shares, convertible preference share, convertible equity shares etc. Subject to compliance with certain investment conditions, exit is also convenient and does not contemplate any lengthy and complicated process.

India offers an open investment regime with a stable legal and taxation system The financial and the capital market in India is also very deep and mature, offering investors and other entities a very effective and competent infrastructure. The Government of India is also constantly working towards rationalizing the process of setting up business in India and has undertaken several notable steps to improve the ease of setting up and doing business in India. The recent legal and taxation reforms like coming into effect of the Insolvency and Bankruptcy Code and the Goods & Services Tax clearly demonstrate India’s resolve to emerge as one of the most business friendly jurisdictions in the world. The flagship programs of the Government of India like ‘Make in India’ and ‘Digital India’ have only added to the impetus and have clearly demonstrated India’s resolve to make India as one of the most attractive investment destinations in the world.
Given the Government initiatives like Start-up India and Digital India, the start-up culture in India is also witnessing a tremendous boom. This offers immense investment opportunities for investors who wish to be part of this new phenomenon wherein young ventures, with disruptive business propositions, are changing the way businesses are run and are creating great value for all the stakeholders.
India is on the path of being an economic superpower and therefore it is imperative for global entrepreneurs and investors to have pie of the India’s growth story.

Keywords/Phrases: Doing Business in India, Investing in India, Indian Legal System, Starting a company in India

Author: Ashish Porwal

Ashish is the founder of Hreem Legal. Hreem Legal is a corporate law firm specializing in India entry strategies and aspects relating to investments in India and setting up business presence in India. The author can be reached out at ashish@hreemlegal.com

Submitted by CA Shashi Mohan on Tue, 11/17/2015 - 10:02pm.

Background

PAN Card or Permanent Account Number is a MUST for both a Non-Resident Indian (NRI) and a Non-Resident organization in case they receive income and need to file income tax return in India. Indian Income Tax Authority keeps a track and consolidates financial transactions through PAN and it is regarded as a Tax Registration Number in India. Legislation has accordingly mandated to quote PAN at several financial transactions. As a practice, requirement of PAN is also considered mandatory in non-financial activities such as opening a Bank Account or becoming a “Director” (getting Director Identification Number) in a company registered in India.

Now days, it works as an Identity card in India. Similar to an EIN or Social Security Number in USA, a PAN in India is a 10 digit alphanumeric number issued by Income Tax Department.  It’s a unique number issued for lifetime. In certain cases, it can also be surrendered or cancelled under a valid reason. Having more than one PAN is not permitted and one can be penalized for having more than 1 PAN.

What makes PAN card a Mandatory requirement?

There are specific transactions which cannot be carried out unless valid Pan is presented. Relevant authorities simply deny such transactions in absence of a PAN. Below are a few examples:

  • Opening a Bank Account, getting a Credit Card, apply for a Loan
  • Getting a Digital Signature of obtaining a Director Identification Number (for being appointed as a Director in Indian Companies).
  • Insurance Payment, Other Financial transactions > INR 50,000
  • Transaction in Property, Vehicles >INR 500,000
  • Investment in Shares, Mutual  Fund
  • Utility connections (Telephone, Electricity, Gas etc)
  • Domestic registrations such as Service Tax, Value Added Tax, Import Export Code

NRIs and Foreign Companies that are doing business in India also need a PAN

Every recipient of income from India needs to furnish PAN. It is also required that in the absence of PAN, the tax withholding rate will be higher (20%) even if a lower rate is prescribed in Double Taxation Avoidance Agreement (DTAA) with that particular country. The following are the sample cases in which PAN is required by NRIs and foreign companies doing business in India.

  • Carry out financial or investment related transactions
  • Employment or rendering of professional services
  • Trading in Shares through a Depository or even a Broker
  • Invest in Mutual Funds
  • Purchase Land (not Trading) or some property in India
  • Being appointed as a Director in Indian Companies
  • Being appointed as a “Authorised Representative” in a Liaison Office, Branch Office, Project Office
Submitted by Navin Pathak on Wed, 12/08/2010 - 8:23pm.

Driven by a growth rate of over 8% in 2010 and a 350 million strong middle-class with growing purchasing power and appetite to spend, the Indian market is reshaping the world’s economy. Investment in almost every sector (Education, Food, Energy, Health care and Retail) of the Indian economy has a promise of high returns that has caught the attention of investors and businesses across the world.

Indian economy is, however in transition and so are its tax and investment laws. New guidelines, policies, programs, and incentives for investment are being introduced into the system regularly and frequently.

Indian government is offering various incentives for the foreign companies and investors who want to

  • Lower labor costs
  • Explore new market/s (in and around India)
  • Develop and Commercialize/Industrialize new products and services
  • Open up export oriented units in India

Government incentives include:

  • Duty free import of capital goods and raw materials
  • Reimbursements of Central Sales Tax
  • Tax holiday for specified period
  • 100 per cent repatriation of profits for subcontracting facilities
  • and more

However, there is a considerable risk for players who are not fully prepated to do business in India and may not fully understand how local markets operate in India. Hence the challenge of the investor is to assess what opportunity to tap and how to minimize the associated risk.

I outline below an eight step plan with action, resources and contacts to help you benefit from the booming Indian Economy while minimizing your risk.

 

 1. Know WHAT you want..

Have clear objectives for your company and ensure that your India strategy is aligned with your objectives.

Buyusa.gov provides excellent information on assessing your objectives and provides what you need to know for doing business in India.

 

2. Understand the Economy you are investing in

India is a diverse country with many languages, different business norms and a complex regulatory structure. In addition, foreigners must know how to deal with corruption, bureaucracy and labor market rigidities at the state and the central level.

World Bank's Doing Business site provides excellent information on these topics. Read through the following papers and presentations:

- Doing Business 2010 ‘India’ by the World Bank Group

- Doing Business in India by Ernst & Young

 

3. Identify and Assess Opportunities in India

You need to do a thorough market research to qualify the opportunity for selling your products/services or for making other investments in India. Get the research tailored to your needs from the following resources: 

- Market Research Reports are available on buyusa.gov

- The country commercial guide for India from US Department of Commerce

Indian Brand Equity Foundation group from India

- Wealthtree for custom market research

 

4. Are you ready?

Assess if your company is prepared to do business or invest in India. Is your company committed to succeeding in India? Is there a market for your product? Is your product/service unique enough? Are the regulatory requirements straightforward to implement?

 

5. Attend Trade Events

Trade events are probably the best way to identify opportunities, meet subject matter experts, showcase your products and services, connect with potential partners, suppliers and buyers and check out your competition.

Upcoming Events by Entry India is an excellent source for upcoming business events in US and India.

 

6. Find one or more local partners in India

It is essential to have a local partner who understands the language and culture of the country. This will make it easy to negotiate, develop sales and distribution channels, price the product and services appropriate for the target market segment, and to protect intellectual property of your company. Due diligence and sound contractual agreement with the partner are a must for success.

US Department of Commerce has excellent services for US companies to find the right Indian partner.

 

7. Market Entry Options

Options include creating a wholly owned subsidiary, a joint venture with a local company or opening a branch or liaison office in India.

Department of Industrial Policy and Promotion under government of India provides excellent information for foreign companies pursuing entry into India.

 

8. Know Industry and Professional Associations in India

Through membership with key Industry associations, businesses gain access to local business resources, make valuable contacts, keep track of changing laws governing their business etc.

- Depending on the industry/sector of interest Confederation of Indian Industry, FICCI, AMCHAM, ASSOCAM, and NASSCOM are a few industry associations that a foreign business must look into.  India One Stop provides a comprehensive list of professional organizations in India that foreign companies must know.

- Export Assistance from US: The U.S. Commercial Service helps U.S. companies to expand their business to worldwide markets and has the largest presence, outside US, with 7 offices in India. U.S. Commercial Service offices are located in 107 U.S. cities and 145 U.S. Embassies and Consulates worldwide to take advantage of.

 

Summary:

A thorough planning before expanding your business to India or making your investments in India will go a long way for a profitable and worry-free operation in India.