Reserve Bank Of India Guidelines

RBI has issued Master direction for Establishment of Branch Office (BO)/ Liaison Office (LO)/ Project Office (PO) or any other place of business in India by foreign entities.
ebook.mca.gov.in/default.aspx

Foreign Exchange Management Act, 1999
FEMA provides for India’s foreign exchange management regime and regulates the inflow and outflow of foreign exchange and investment into/from India) and the regulations issued thereunder, together with the rules/circulars/press notes/guidelines issued by the Government of India setting out the foreign investment policy (including sector-specific requirements);
https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10327&Mode=0
FDI Policy

http://dipp.nic.in/foreign-direct-investment/foreign-direct-investment-policy

External Commercial Borrowings(ECB)

ECBs are commercial loans raised by eligible resident entities from recognised non-resident entities and should conform to parameters such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc. The parameters apply in totality and not on a standalone basis.

The ECB Framework enables permitted resident entities to borrow from recognized non-resident entities in the following forms:

Loans including bank loans;

Securitized instruments (e.g. floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares / debentures);

Buyers’ credit;

Suppliers’ credit;

Foreign Currency Convertible Bonds (FCCBs);

Financial Lease; and

Foreign Currency Exchangeable Bonds (FCEBs)

Read the updates on the following link.

https://rbi.org.in/scripts/FAQView.aspx?Id=120

SEZ & STPI Norms

 The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs, including foreign investment include:-
Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units
100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years.
Exemption from minimum alternate tax under section 115JB of the Income Tax Act.
External commercial borrowing by SEZ units upto US $ 500 million in a year without any maturity restriction through recognized banking channels.
Exemption from Central Sales Tax.
Exemption from Service Tax.
Single window clearance for Central and State level approvals.
Exemption from State sales tax and other levies as extended by the respective State Governments.

http://www.sezindia.nic.in/instructions.asp

Software Technology Park Scheme
The Software Technology Park (S.T.P.) Scheme is a 100 percent Export Oriented Scheme for the development and export of computer software, including export of professional services using communication links or physical media.
This scheme is unique in its nature as it focuses on one product / sector, i.e. computer software. The scheme integrates the government concept of 100 percent Export Oriented Units (E.O.U.) and Export Processing Zones (E.P.Z.) and the concept of Science Parks / Technology Parks, as operating elsewhere in the world.
“The unique feature of the S.T.P. scheme is the provisioning of single-point contact services for member units, enabling them to conduct exports operations at a pace commensurate with international practices”
Scheme Benefits & Highlights

Approvals are given under single window clearance scheme.

A company can set up S.T.P unit anywhere in India.

Jurisdictional S.T.P.I authorities clear projects costing less than Rs.100 million with Indian Investment.

100% Foreign Equity is permitted.

All the imports of Hardware & Software in the S.T.P units are completely duty free, import of second hand capital goods also permitted.

Re-Export of capital goods is also permitted.

Simplified Minimum Export Performance norms i.e., ” Positive Net Foreign Exchange Earnings”

Use of computer system for commercial training purposes is permissible subject to the

Condition that no computer terminals are installed outside the S.T.P premises.

The sales in the Domestic Tariff Area (D.T.A.) shall be permissible up to 50% of the export in value terms.

S.T.P. units are exempted from payment of corporate income tax up to 2010.

The capital goods purchased from the Domestic Tariff Area (D.T.A.) are entitled for benefits like exemption of excise Duty & reimbursement of Central Sales Tax (C.S.T).

Capital invested by Foreign Entrepreneurs, Know-How Fees, Royalty, Dividend etc., can be freely repatriated after payment of Income Taxes due on them, if any

The items like computers and computers peripherals can be donated to recognized non-commercial educational institutions, registered charitable hospitals, public libraries, public funded research and development establishments, organizations of Govt. of India, or Govt of a State or Union Territory without payment of any duties after two years of their import.

100% Depreciation on Capital Goods over a period of five years.

https://www.stpi.in/11025

Direct Taxes

India has a federal level Income tax structure – governed by the provisions of Income tax Act, 1961
Scope of total income
Resident in India is liable to pay taxes on its world wide income.
Non resident in India is liable to tax on income received or deemed to be received in India or any income accr ued or arising or deemed to be accrue or arise in India.
(A foreign company is considered as a non-resident and an Indian company will be considered a resident )
India has comprehensive Transfer Pricing regulations encompassing International and Domestic transact ions

http://www.incometaxindia.gov.in/Pages/default.aspx#skipcontent
Transfer Pricing
Transfer pricing Laws have been enumerated under Sections 92 to 92F of the Indian Income Tax Act and cover intra-group cross-border transactions. Rules and regulations prescribe that income arising from International Transactions or Specified Domestic Transactions between Associated Enterprises (AE), should be computed having regard to the arm’s-length price.
The term ‘arm’s-length price’ is defined to mean a price that is applied or is proposed to be applied to transactions between persons other than Associated Enterprises in uncontrolled conditions. The following methods prescribed as per the Act for the determination of the arm’s-length price:
Comparable uncontrolled price (CUP) method.
Resale price method (RPM).
Cost plus method (CPM).
Profit split method (PSM).
Transactional net margin method (TNMM)
Such other methods as may be prescribed

https://www.incometaxindia.gov.in/Pages/international-taxation/transfer-pricing.aspx

Safe harbour rules

Section 92CB of the Income-tax Act provides for framing of safe harbour rules. The determination of arms length price u/s 92C or 92CA of the Act is subject to these safe harbour rules. The definition of safe harbour rule provided in section 92CB means circumstances in which the Income-tax Authority shall accept the transfer price declared by the assessee.
It is applicable to international transactions at the option of the Taxpayer
Introduced in India by Finance (No.2) Act, 2009 w.r.e.f. 1.4.2009 and new Section 92CB inserted in the Act
Safe harbours generally aim to provide certainty , administrative simplicity and reduced litigation.
Recent changes:-
https://www.incometaxindia.gov.in/Lists/Press%20Releases/Attachments/632/Press-Release-SAFE-HARBOUR-8-06-2017.pdf

Withholding tax
Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest referred to in section 194LB or section 194LC) or section 194LD or any other sum chargeable under the provisions of this Act (not being income chargeable under the head “Salaries”) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force
Please see the following link
http://www.incometaxindia.gov.in/Pages/international-taxation/withholding-tax.aspx

Indirect Taxes

GST
‘G’ – Goods
‘S’ – Services
‘T’ – Tax
“Goods and Service Tax (GST) is a comprehensive tax levy on manufacture, sale and consumption of goods and service at a national level.
GST is a tax on goods and services with value addition at each stage having comprehensive and continuous chain of set-of benefits from the producer’s/ service provider’s point up to the retailer’s level where only the final consumer should bear the tax.”
GST is expected be levied only at the destination point, and not at various points (from manufacturing to retail outlets). It is essentially a tax only on value addition at each stage and a supplier at each stage is permitted to setoff through a tax credit mechanism which would eliminate the burden of all cascading effects, including the burden of CENVAT and service tax.
All goods and services, barring a few exceptions, will be brought into the GST base. There will be no distinction between goods and services.

GST on Export
The salient features of the scheme of export under GST re-gime are as follows:

The goods and services can be exported either on pay-ment of IGST which can be claimed as refund after the goods have been exported, or under bond or Letter of Undertaking (LUT) without payment of IGST.

In case of goods and services exported under bond or LUT, the exporter can claim refund of accumulated ITC on account of export.

In case of goods, the shipping bill is the only document required to be filed with the Customs for making ex-ports. Requirement of filing the ARE 1/ARE 2 has been done away with.

The supplies made for exports are to be made under self-sealing and self-certification without any intervention of the department officer

Source-Document:-
For GST rates, please go to the following link.
https://cbec-gst.gov.in/gst-goods-services-rates.html

Competition Act

An Act to provide, keeping in view of the economic development of the country, for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto. The Monopolies and Restrictive Trade Practices Act, 1969 [MRTP Act] repealed and is replaced by the Competition Act, 2002, with effect from 01st September, 2009 [Notification Dated 28th August, 2009].
http://www.mca.gov.in/MinistryV2/competitionact.html

Double Taxation Avoidance Agreement (DTAA)

India has Double Taxation Avoidance Agreement (DTAA) with 88 countries, but presently 85 has been in force. The DTAA treaty has been signed in order to avoid double taxation on the same declared asset in two different countries
https://www.incometaxindia.gov.in/Pages/international-taxation/dtaa.aspx

Other Policies & Notifications

Labour laws

Latest Notification/Amendments | Ministry of Labour & Employment
Foreign trade policy 2015-20
http://dgft.gov.in/exim/2000/highlight2015.pdf