- Newsletter
- June 28, 2016
To boost the employment and job creation in India, the government, in a meeting chaired by Prime Minister Narendra Modi on 20 June 2016, further liberalised the foreign direct investment (FDI) regime. These changes come as a part of the second round of reformative steps following the initial announcement in November 2015. Now, most sectors would fall under the automatic approval route, except for a small negative list.
As per the announcement, changes introduced in the policy include increasing sectoral caps, bringing more activities under the automatic route and easing of conditionalities for foreign investment. These amendments seek to further simplify the regulations governing FDI in the country and make India an attractive destination for foreign investors. Details of these changes are given below.
100%
100% FDI in brownfield projects is allowed under the automatic route.
FDI up to 49% is allowed under the automatic route and beyond 49%, under the government approval route.
|
Sector |
Changes in FDI norms |
Sectoral Cap |
Liberalisation |
|
Food industry |
FDI under the government approval route for trading, including through e-commerce, with respect to food products manufactured or produced in India, is permitted |
100% |
FDI allowed in the sector. |
|
Defence sector |
FDI permitted under:
|
100% |
FDI beyond 49% is allowed under the government approval route for cases resulting in the access to modern technology in the country or for the reason to be recorded. The condition of access to ‘state-of-art’ technology has been done away with. |
|
Pharmaceutical |
Brownfield
|
100% |
FDI up to 74% in brownfield projects is allowed under the automatic route. |
|
Broadcasting carriage services |
New entry routes/sectors introduced: 1. Teleports (setting up of up-linking HUBs/teleports); 2. Direct to Home (DTH); 3. Cable networks (Multi System Operators (MSOs) operating at a national or state or district level and undertaking upgradation of networks towards digitisation and addressability); 4. Mobile TV; 5. Headend-in-the-Sky broadcasting services (HITS) 6. Cable networks Infusion of fresh foreign investment, beyond 49% in a company not seeking license/permission from a sectoral ministry, resulting in a change in the ownership pattern or transfer of stake by existing investors to new foreign investors, will require FIPB approval. |
100% |
The entry route for the sector has been reviewed and new sectoral caps have been prescribed. |
|
Civil aviation sector |
Brownfield
Scheduled Air Transport Service/Domestic Scheduled Passenger Airline and regional Air Transport Service
|
100%
100% |
100% FDI in brownfield projects is allowed under the automatic route. FDI up to 49% is allowed under the automatic route and beyond 49%, under the government approval route. |
|
Private security agencies |
FDI permitted under:
|
74% |
FDI up to 49% is allowed under the automatic route and beyond 49% but up to 74% is permitted under the government approval route. |
|
Animal husbandry |
FDI in animal husbandry (including breeding of dogs), pisciculture, aquaculture and apiculture is permitted under the automatic route. |
100% |
It has been decided to do away with the requirement of ‘controlled conditions’ for FDI in these activities. |
Other changes in the FDI Policy
Establishment of branch office, liaison office or project office
If the principal business of the applicant is defence, telecom, private security or information/broadcasting and it proposes to establish a branch office, liaison office, project office or any other place of business in India, there is no need for RBI approval or separate security clearances (where FIPB approval or license/permission by the concerned Ministry/Regulator has already been granted).
Single brand retail trading
Approval for the proposed relaxed local sourcing norms up to three years and a relaxed sourcing regime for another five years for entities undertaking single brand retail trading of products having ‘state-of-art’ and ‘cutting-edge’ technology.
The aforesaid changes introduced in the FDI Policy will take effect as per due process.
For more details reach us at [email protected]
- Newsletter
- June 24, 2016
South Korea and India have agreed to enter into talks aimed at re-negotiating the terms of their existing bilateral Comprehensive Economic Partnership Agreement (CEPA), particularly to improve the list of traded goods subject to reduced tariffs.
In a statement following the second meeting of the Joint Ministerial Committee held to review the CEPA in New Delhi on June 18, the South Korean Ministry of Trade, Industry, and Energy confirmed that the percentage of tariffs eliminated or reduced in the current agreement (which entered into force on January 1, 2010) is less than in the free trade agreements subsequently concluded by South Korea with other jurisdictions.
The Ministry confirmed that, presently, only about 85 percent of South Korean exports to India (both in terms of the number of items and their value) are tariff free or pay a reduced rate of import duty. With regard to Indian goods exported to South Korea, only 93 percent by number of items (or 90 percent by value) are subject to tariff elimination or reduction.
The Indian Government has become concerned at the increasing trade deficit being seen recently by India in its trade with South Korea. In reply, during the meeting, the South Korean Minister of Trade, Industry, and Energy, Joo Hyunghwan, stressed that his country is open to increasing trade with India and to allowing Indian exporters greater market access on a reciprocal basis.
India’s Commerce Minister Nirmala Sitharaman looked for greater market access in South Korea for the Indian agricultural, marine, information technology and service sectors. On the other hand, South Korean exporters might expect to see improved terms for its steel, electrical and electronic, and automotive parts industries, within a CEPA renegotiation.
For more details reach us at [email protected]
- Newsletter
- June 23, 2016
RIYADH: Saudi Arabia has completed the process for endorsing the WTO Trade Facilitation Agreement.
The Kingdom is the second country to endorse the treaty, according to the Ministry of Commerce and Investment, local media reported on 15.06.2016.
Minister of Commerce and Investment Majed Al-Qassabi said on 14.06.2016 that the agreement is one of the most important trade accords with the WTO.
The agreement seeks to ease the procedures and documentation demands that are required by authorities and government parties concerned with exporting and importing to bring them in line with world standards without compromising government-established monitoring systems.
This will include the removal of obstacles to commercial movements across borders.
He said that this will benefit small and medium-size enterprises that Saudi Arabia is very keen to promote in light of Vision 2030, adding that this will also increase transparency in the market.
Ahmad Al-Haqabani, foreign trade undersecretary of the ministry, said that studies by the WTO and World Bank support the application of this agreement and state that the new measures will reduce the cost of international trade by one percent.
For more details reach us at [email protected]
- Newsletter
- June 23, 2016
The Financial and Economic Cooperation Committee in the Gulf Cooperation Council will hold an extraordinary meeting in Riyadh, Saudi Arabia, 24.05.2016 to discuss the introduction of taxes.
The official Saudi Press Agency (SPA) reported that the meeting will discuss a number of topics, including the recommendations regarding the draft of a unified agreement on value added tax (VAT) and selective taxes in GCC member states.
It is expected that the Gulf states will introduce VAT of five per cent to by 2018 to combat the reduction in revenue due to the drop in oil prices. This will be the first time such a tax will be introduced in the region.
Last November, GCC states agreed to impose a selective tax on tobacco.
The Gulf Cooperation Council consists of six countries: Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain and Oman.
For more details reach us at [email protected]
- Newsletter
- June 23, 2016
New Delhi: India announced on 20.06.2016, sweeping reforms to rules on foreign direct investment, opening up its defence and civil aviation sectors to complete outside ownership and clearing the way for Apple to open stores in the country.
The move comes two days after central bank governor Raghuram Rajan, a darling of financial markets but under pressure from political opponents at home, announced he would not seek another term, a surprise move that raised concerns about whether reforms he set in motion will stall.
Prime Minister Narendra Modi hailed the changes to the foreign direct investment (FDI) rules, stressing his government’s reform credentials. He tweeted that the changes would make India “the most open economy in the world for FDI” and provide a “major impetus to employment and job creation”.
“These changes are fairly significant, particularly if you look at them in the context of what happened over the weekend with Governor Rajan’s decision to step down,” said Shilan Shah, India economist at Capital Economics in Singapore.
“It might be the government’s way to illustrate its commitment to reforms and mitigate any investor fallout following Rajan’s decision.”
The last time Modi’s government announced a loosening of FDI norms was after his nationalist political party suffered a heavy defeat in a state election last autumn.
The new reform measures also relax restrictions on inbound investments in pharmaceuticals and single-brand retail.
Apple is expected to be a beneficiary of a three-year relaxation India is introducing on local sourcing norms with an extension of up to five years possible if it can be proven that products are “state of the art”.
“We will inform Apple to indicate whether they would like to avail new provisions,” Rajesh Abhishek, secretary of the Department of Industrial Policy and Promotion, told a news conference.
Other single-brand retailers like furniture giant IKEA also stand to benefit.
Defence contractors that have been reluctant to transfer technology to manufacture equipment in India would get the right to own local operations outright, with government approval, up from a cap of 49 per cent previously.
In other changes, India allowed 100 per cent FDI in civil aviation, following on launch of a new policy that lowered barriers to entry for airlines that want to fly international routes.
The government also allowed foreign companies to own up to 74 per cent in ‘brownfield’ pharmaceuticals projects without prior government approval. India already allows 100 per cent ownership of greenfield pharma businesses.
For more details reach us at [email protected]
- Article
- June 23, 2016
This is an update to the attached Tax alert sent on June 9, 2016 with regard to the grace period of implementing the revised UAE Commercial Companies Law (CCL) that was coming to an end in June. The UAE Cabinet recently approved a proposal by Sultan bin Saeed Al Mansouri, Minister of Economy, to extend the period for existing companies in the UAE to comply with the law to one year. The adjustment of positions now starts from July 1, 2016 and ends on 30 June, 2017.
The extension came after Al Mansouri received several requests from the Securities and Commodities Authority, the Departments of Economic Development across all the emirates, and a number of existing companies in the UAE to have more time to adjust to the new law given the substantial time needed to complete the statute amendments and obtain government approvals and the effort required for holding general assemblies for some companies.
During this period companies covered by the new Commercial Companies Law are requested to make the necessary adjustments in accordance with the law’s provisions.
Notice:
In case of Late Adjustment companies will be fined Dh2,000 per day of delay calculated from the day following the expiry date of the applicable period for such purpose as per article 357.
Should existing companies fail to adjust their positions within the extended grace period, the company shall be deemed as dissolved in accordance with the provisions of this Law.
For more details reach us at [email protected]
- Article
- April 23, 2016
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