Guidance for doing business with India

Report
PRESENTED BY:
Mr. Som Mandal
Managing Partner, Fox Mandal
OUR OFFICES
In India:
New Delhi, Noida, Bangalore,
Bhubaneswar,
Chandigarh,
Chennai,
Hyderabad,
Kolkata,
Mumbai and Pune with associate
offices at Cochi, Trivandrum
In Other Countries:
United Kingdom (London), France
(Paris), Guinea (Conakry) and
Bangladesh (Dhaka)
Liaison Office
(cannot earn
income)
Operates as a
foreign
company
Branch office (can
earn
profits/revenues)
Project Office
(can earn
profits/revenues)
Foreign
Company
Established as
Indian
Company
Joint Venture
Wholly Owned
Subsidiary
COMPANIES
PRIVATE COMPANIES
PUBLIC COMPANIES
PRIVATE COMPANY
SHARE-HOLDERS
Minimum: 2
Maximum: 200
MINIMUM PAID-UP
CAPITAL:
INR 1 LAKHS
DIRECTORS:
Minimum: 2
Maximum: 12
PUBLIC COMPANY
SHARE-HOLDERS
Minimum: 7
Maximum: No Limit
MINIMUM PAID-UP :
INR 5 LAKHS
DIRECTORS
Minimum: 3
Maximum: 12
Benefits of Joint Ventures

Shorten the Learning Curve

Enhance Company Credibility

Create New Profit Channels

Pooling of resources

Access to new markets

Limited Period

Concentration on core business





Screening of prospective partners
Ascertaining each others’ strengths and weakness and how the
combination can be beneficial for all parties
Joint development of a detailed business plan
Undertaking detailed due diligence by each party - checking the
credentials of the other party
Entering into detailed Joint Venture Agreement
Wholly owned subsidiary is an incorporated company formed and
registered under the Companies Act, 1956 or Companies Act, 2013.
Wholly owned subsidiaries can be formed as either private
companies or public companies. Generally wholly owned
subsidiaries are preferred to be formed as private companies because
certain exemptions are granted to private companies under the
Companies Act.
Liaison Office can undertake only liaison activities. It is not allowed to
undertake any business activity in India. A body corporate
incorporated outside India, desirous of opening a Liaison Office in
India is required to obtain permission from the Reserve Bank of India.
Set forth below are the specific activities that can be undertaken by a
Liaison Office:

Representing in India the parent company / group companies.

Promoting export / import from India.


Promoting technical/ financial collaborations between parent/
group companies and companies in India.
Acting as a communication channel between the parent company
and Indian companies.
Companies incorporated outside India and engaged in manufacturing
or trading activities are allowed to set up Branch Offices in India with
specific approval of the Reserve Bank of India. Such Branch Offices are
permitted to represent the parent/ group companies and can undertake
the following activities in India:

Export/ Import of goods.

Rendering professional or consultancy services.

Carrying out research work, in areas in which the parent company
is engaged.

Promoting technical or financial collaborations between Indian
companies and parent or overseas group company.

Representing the parent company in India and acting as buying /
selling agent in India.

Rendering services in information technology and development of
software in India.

Rendering technical support to the products supplied by
parent/group companies.

Foreign airline / shipping company.

Branch Office should be engaged in the activities in which the
parent company is engaged.

The profits earned by the branch office are freely remittable from
India, subject to payment of applicable taxes.

Branch Office is not allowed to carry out manufacturing or
processing activities in India, directly or indirectly. Further, it is
not permitted to undertake any retail trading activities.
Typical terms of approval for establishing Branch Office

Not to expand its activities or undertake any new trading,
commercial or industrial activity other than that is expressly
approved by the RBI.

The entire expenses in India will be met either out of the funds
received from head office through normal banking channels or
through income generated by it in India.
Reserve Bank of India has granted general permission to foreign companies
to establish Project Offices in India, provided they have secured a contract
from an Indian company to execute a project in India, and:




The project is funded directly by inward remittance from abroad; or
The project is funded by a bilateral or multilateral International
Financing Agency; or
The project has been cleared by an appropriate authority; or
A company or entity in India awarding the contract has been granted
Term Loan by a Public Financial Institution or a bank in India for the
project.
However, if the above criteria are not met, the foreign entity has to
approach the Reserve Bank of India, Central Office, for approval.

A Special Economic Zone (SEZ) is typically a designated
territory within the geographical boundary of a country
where exports along with certain other economic activities
are promoted.

In India, the Special Economic Zones Act has been enacted in
2005. This Act along with the Rules made there under forms
the
broad
legal
framework
for
the
establishment,
development and management of SEZs in India.
The major incentives and facilities available to SEZ
developers include:





Exemption from customs/excise duties for development of SEZs
for authorized operations approved by the prescribed authority.
Income Tax exemption on income derived from the business of
development of the SEZ in a block of 10 years in 15 years under
the Income Tax Act.
Exemption from minimum alternate tax under the Income Tax
Act.
Exemption from dividend distribution tax under the Income Tax
Act.
Exemption from Central Sales Tax (CST).
Exemption from Service Tax under the SEZ Act.
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 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 the Income Tax
Act.
External commercial borrowing by SEZ units up to 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.
“Arise, awake and stop not till the
desired end is reached.”
- Swami Vivekananda

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