Project Visa for expats in Power & Steel Sectors

The Government of India has introduced a separate visa regime -- called `P' (Project) Visa -- within the employment visa regime for foreign nationals coming to India for execution of projects in the power and steel sectors. Initially the project Visa will cover only Power & Steel Sectors.

Project Specific Visa:

(i) Visa would be project Specific. A specific endorsement of Visa sticker would indicate the name & location of project.
(ii) The Project Visa would be issued only for skilled/highly skilled persons.
(iii) Only those the foreign nationals employed in the power and steel sector shall be allowed to take advantage of this Visa.

Multiple Entry facility:

(i) The guidelines for `P' Visa clearly say that its validity will initially be for the duration of the project/contract with multiple-entry facility. "It, however, cannot exceed one year.

Period of ‘P’ Visa:

(i) The period of Visa would be determined on case to case basis.
(ii) The period of visa would be initially for a period of one year or for the actual duration of the project / contract, whichever is less.
(iii) P Visa can be extended only with the prior approval of MHA.

Required documents and information:

(i) The Project visa would be issued based on submission of the relevant documents clearly establishing that the project/contract has been assigned to the particular foreign company by the Indian company/organization concerned.
(ii) A separate application form for Project Visa has been devised. The same may be obtained from the website of Ministry of Corporate affairs or alternatively our offices may be contacted in this regard.

Time:

(i) Project Visa will be issued only after approval from concerned authorities in India, the processing of which may take 45-50 days

Conditions for grant of ‘P’ Visa:

(i) A Project Visa holder cannot engage in another project either of the same company or of a different company and his or her work will be restricted to the location of the project.
(ii) In no circumstances would the person be allowed to be engaged in another project either of the same company or of a different company.
(iii) A person coming on Project Visa will not be allowed to take up employment in the same Indian company for a period of two years from the date of commissioning of the project.
(iv) The foreigner coming on Project Visa will have to register himself/herself with the FRRO/FRO concerned within 14 days of arrival if the validity of visa is for more than 180 days. If the validity of visa is for a period of 180 days or less, registration would not be required.
(v) The Indian Company engaging the foreign national for executing the project / contract would be responsible for the conduct of the foreign national during his/her stay in India and also for the departure of such foreign national upon expiry of visa.

Comparison between Liaison Office & Branch Office

It a comparison between Liaison office and Branch office in India on various aspect. Click on the picture for large view.

Write us for more information on setting up Liaison office or Branch office in India.

New Class of Visa: "E" category

The Government has decided to issue a special class of visa “E” category only for the power or Steel projects. It is to be remembered that visa norms for employing foreign personnel were tightened last year citing security concerns over the presence of large number of Chinese personnel in various projects.

Later, it was observed that power and steel projects using equipment from China had not been able to achieve their targets as visa restrictions forced Companies to hire local unskilled or semi-skilled workers to fill gaps.

The ministry of home affairs has now decided that under the sector-specific dispensation, new power and steel projects may have foreign skilled manpower up to 10% of the workforce employed per million tone or megawatt capacity, or 300 persons, whichever is lower. For expansion projects of existing plants, this number will be 5%, or 150 persons.

Power and cement projects will now also be allowed to employ two foreign chefs and translators/interpreters under the `E' category. Foreign experts or skilled workers will now also get business visa if they are coming for commissioning of a project. However, a person coming on project visa will not be allowed to take up employment in the same Indian company within two years of the commissioning of a plant.

India Briefing (October 2010): An Expatriate Manager’s Introduction to India

In this issue of India Briefing, we provide an expatriate manager’s introduction to India. From key country facts and figures to the country to cultural etiquette and communication issues, we take a look at one of the fasting growing destinations for foreign investment. India today represents a great investment opportunity. Knowledge of India business practices and an understanding of Indian culture are priorities to success in this market. We analyze the top reasons to invest in India, cover basic business etiquette and cultural issues such as making appointments and negotiating a deal, and discuss some of the communication challenges that expatriates experience when working in India.

In This Issue:
(i) An Introduction to India, Key Facts and Figures;
(ii) Top Reasons to Invest in India Now;
(iii) Indian Business Etiquette and Culture; and
(iv) Communication Challenges when Working in India

You may purchase the October 2010 issue of India Briefing, which can be found in the Asia Briefing Bookstore. Companies requiring assistance may contact any Dezan Shira & Associates' five national offices at india@dezshira.com for advice or visit www.dezshira.com.

REVISED CONSOLIDATED POLICY ON FDI

The Government of India has issued consolidated FDI Policy vide circular 2 of 2010 effective from October 1, 2010. The Consolidated FDI Policy makes all information on FDI policy available at one place and subsumes Government’s policy on FDI announced through earlier Press Notes/ Press Releases/ Clarifications issued by the DIPP, which were in force and effective as on date.

Earlier the Government of India has issued released the Circular 1 of 2010- Consolidated FDI Policy on March 31, 2010, effective from April 01,2010 and It was decided that the consolidated FDI Policy would be issued every six (6) months to update the FDI policy.

The Circular has been issued with the sunset clause of six months. A new Circular consolidating all amendments to the FDI Policy shall be issued on March 31, 2011 superseding the present Circular.

GIST OF NEW CONSOLIDATED POLICY:

(i) Wholesale cash-and-carry trading: It has been decided to remove the restriction on internal use.

(ii) Non-banking finance companies (NBFCs): NBFCs with 100 per cent foreign investment and a minimum capitalization of $50 million (around Rs 225 crore), can set up subsidiaries for specific NBFC activities, without bringing additional capital towards minimum capitalization.

(iii) Construction development projects: It has been clarified that the lock-in period of three (3) years will be applied from the date of receipt of each tranche of FDI or from the date of completion of minimum capitalization, whichever is later.

(iv) Downstream investments: Downstream investments through internal accruals are now permissible.

(v) Tobacco product manufacturers: Manufacturing of tobacco products has been formally included in the list of activities in which FDI is prohibited.

Please click here to read the revised consolidated Policy.

SEZ documents cannot be kept confidential

The Bombay High Court has recently ruled that development of SEZs are of Public interest and the documents related to it cannot be kept confidential and it has to be public domain.

A division bench of Justice B H Marlapalle and Justice N D Deshpande was hearing a petition filed by SKIL Infra that had challenged the RTI commissioner's order asking Cidco to provide a Navi Mumbai resident with documents of the Navi Mumbai SEZ Pvt Ltd. The petition stated that the company had tied up with Cidco, the development authority, to set up the Navi Mumbai SEZ and the two had agreed on a deal that documents pertaining to this joint venture would be kept confidential.

The Bombay High court said that in a case where public interest was involved, a confidentiality clause between the Private Parties would not be applicable and documents would have to be made public.

FDI Rules governing JVs may be relaxed.

The Government of India has issued a discussion paper on FDI policy regarding foreign / technical collaboration in case of existing Joint ventures in India.

The purpose of this discussion paper is to solicit the comments and suggestion from public at large that any relaxation in FDI policy regarding JV & technical Collaboration / trademark agreement is required or not. This discussion paper also seeks the people’s views on the scope of relaxation.

The current move of Government of India is in furtherance of its continued effort to make FDI sector more attractive and investor friendly. Earlier, Government of India has also proposed relaxation of FDI policy in Multi-brand retail and in Defence sector.

Under the existing FDI regime, foreign investor, who entered into India before January 12, 2005 are not eligible for Automatic route for bringing in FDI, technology transfer or Trademark Agreement. It is necessary to take Government approval. Further, the foreign investor has to prove to the satisfaction of the government that the new proposal would not in any manner jeopardize the interest of existing joint-venture or technology / trademark partner or other stake holders.

However, the proposed relaxation of FDI policy shall not be applicable to Joint Ventures entered into after January 12, 2005. The reason behind it that as per PRESS NOTE 1 (2005 SERIES) all the Joint Ventures entered after January 12, 2005 are eligible for Automatic approval except in certain cases and also the onus to prove that the new joint venture shall not jeopardize the earlier one, is equally on Foreign & domestic companies. Further, the “Conflict of Interest” clause in JV could be embodied to safeguard the interest of Joint venture Partners.

The proposed relaxation aims at minimizing discrimination between foreign investors who had invested prior to 2005 and those who invested later. Further, the proposed relaxation shall promote healthy competition in this field and sustained long-term growth. Today the Indian industry is at par with its foreign counter-parts and hence there is absolutely no need of the clauses that brings onus only upon foreign investor that new proposal would not in any manner jeopardize the interest of existing joint-venture.

Most favoured FDI Sector: Telecom

The telecommunication sector, including radio paging, cellular mobile, basic telephone services, is the most favoured Foreign Direct Investment (FDI) sector. The telecom sector has attracted $891 million FDI in April-May 2010-11, the first two months of current fiscal.

The Second most favoured is the service sector that attracted $578 million investment during the same period. Further, metallurgical industries and power sector clinched third and fourth place with an investment of $461 million and $313 million respectively.

This is the result of the continued effort of Government to make the FDI policy more attractive and investors friendly. Recently, Department of Industrial Policy & Promotion (DIPP) has invited comments/ suggestions on the consolidated FDI Policy - Circular 1 of 2010 by 31st August, 2010. It is also expected that DIPP shall release Revised Consolidated FDI Policy i.e., Circular 2 of 2010 on 30th September, 2010. The Revised Consolidated FDI Policy may introduce the more relaxed policy regarding FDI in Multi-Brand Retail trading and Defense Sector.

Further, according to the latest official data by the Government, Mauritius is again the top investing Country in India with an investment of $1.29 billion during April-May 2010-11. The other top investing Countries are Singapore ($854 million), Japan ($369 million) and the Netherlands ($298 million) for the same period.

Revised Consolidated FDI Policy

The nodal agency for foreign investment policy, Department of Industrial Policy & Promotion will release Revised Consolidated FDI Policy Circular i.e., Circular 2 of 2010 on 30th September, 2010, which will incorporate all the changes effected in FDI policy post issue of Circular 1 of 2010.

It is to be noted that the Department of Industrial Policy & Promotion (DIPP) has released the Circular 1 of 2010- Consolidated FDI Policy on 31.03.2010, effective from 01.04.2010.

Further, the Department has invited comments/ suggestions on the Circular 1 of 2010 by 31st August, 2010.

The Consolidated FDI Policy makes all information on FDI policy available at one place and subsumes Government’s policy on FDI announced through earlier Press Notes/ Press Releases/ Clarifications issued by the DIPP, which were in force and effective as on date. It was earlier decided that the consolidated FDI Policy would be issued every six (6) months to update the FDI policy.

It is expected that revised Consolidated policy would contain change in the policy regarding cigarette and cigar manufacturing and may introduce the more relaxed policy regarding FDI in Multi-Brand Retail trading, Defence Sector. The recent changes in FDI Policy shows that the government is making continued efforts to make the FDI policy regime more attractive and investor friendly.

Consolidated FDI Policy - Circular 1 of 2010 is available here.

India Singapore Tax Treaty: Tax waiver for Advisory services

The Authority for Advance Ruling (AAR) has recently held that the fees paid by Indian Company for technical services of a foreign Company will not be taxed in India under the India-Singapore Treaty (“Treaty”). The rationale given behind this decision is that advisory services such as comments and suggestions do not fall within the purview of the term ‘Fee for Technical Services’ under Article 12 of the treaty. This ruling of AAR came in the wake of the application filed by the Bharati AXA General Insurance Co. Ltd. (“BAGICL”) to know that if the foreign Company AXA ARC has any liability to pay tax in India in respect of the fee received from the BAGICL.

This ruling has come as a relief to those foreign companies who render support services so as to ensure uniformity and flawless quality in the business dealings of the group entities. Further, this ruling can provide some respite to the companies which do not have a permanent establishment in India as this ruling also state that the payment received by the companies having no permanent establishment in India cannot be taxed as business profits under the Treaty.

It has been noted that AAR has decided similar issues in the application filed by Ernst & Young Pvt Ltd (AAR No. 820 of 2009) on the above lines.

We would like to remind our readers that although the ruling is binding to the parties appear before the authority and the transaction in relation to which the ruling was given because the ruling was rendered on a set of facts and cannot be of general application. However, it may have persuasive value.

FDI IN LLP

The Government may allow foreigners to set-up Limited Liability Partnership (LLP) in sectors where 100 % foreign investment is allowed.

The nodal agency for foreign investment policy Department of Industrial Policy & Promotion (DIPP), has written to the Ministry of Finance suggesting the broader scope in the proposed Foreign Investment framework for LLPs by allowing foreign Investment in LLPs with prior approval.

It is also expected that a discussion paper may be released in this regard in public domain so as to enable the Government to take an appropriate policy decision at the appropriate time.

It is important to note here that earlier this year after initial discussions, DIPP was not in favour of opening this form of entity for foreigners while the apex financial institution of the country's financial system Reserve Bank of India (RBI) as well as the finance Ministry has favoured FDI in LLP.

The Limited Liability Partnership (LLP) is viewed as an alternative corporate business vehicle that provides the benefits of limited liability but allows its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement

The Government has enacted Limited Liability Partnership Act, 2008, which extends to the whole of India.

Authority on Advance Ruling

The Finance Act, 1993, Chapter XIX-B of the Income Tax Act introduced the scheme of Advance ruling, which came into force from 1st June, 1993.

Advance ruling means written opinion or authoritative decision by an Authority empowered to render it with regard to tax consequences of a transaction or proposed transaction or an assessment in regard thereto.

The scheme of Advance ruling helps the non-residents and the residents having transaction with non-residents to bring the certainty of income tax liability and thus help them to plan their tax affairs in advance. It is faster and less expensive than litigation in the courts.


Following category of person can request for the advance ruling under Income Tax Act:
(i) Non-resident applicants
(ii) Resident applicants having residents having transactions with a non-resident.
(iii) Public sector companies

One of the salient features of the scheme of advance ruling is that it provides expeditious solutions to the income-tax problems. The time limit prescribed for the authority to pronounce its ruling is within 6 months from the date of receipt of the application.

Another important feature of this scheme is that it provides binding solution. Although the ruling is binding to the parties appear before the authority and the transaction in relation to which the ruling was given because the ruling was rendered on a set of facts and cannot be of general application. However, it may have persuasive value. It is important to note that no proceeding before, or pronouncement of advance ruling by, the Authority shall be questioned or shall be invalid on the ground merely of the existence of any vacancy or defect in the constitution of the Authority.


However, certain restrictions have been imposed on the admissibility of an application:

i. If the question is pending before any other authority;
ii. If the question related to the determination of market value of the property
iii. If the purpose of application is to avoid the income tax

Further, if the authority finds that the advance ruling pronounced by it, has been obtained by the applicant by fraud or misrepresentation of facts, the same may be declared void ab initio.

Eligible applicant can make a request for advance ruling in the prescribed form stating the question. The application should be accompanied by an account payee demand draft for requisite amount in favour of the Authority for Advance Rulings and made payable at New Delhi.

The application may be withdrawn within 30 (thirty) days from the date of the application.

No “Minimum Alternate Tax” for Companies without local base

According to the recent verdict of Authority for Advance Ruling Minimum alternate Tax (MAT) is not payable by foreign Companies not having a permanent establishment in India.

Minimum alternate Tax (MAT) is a levy typically aimed at collecting tax from Companies enjoying exemptions. Minimum alternate Tax under 115JB of the Income Tax Act was incorporated with the specific purpose of bringing under the tax net companies that avoid paying tax by taking advantage of the various incentives offered by the Government.

The AAR’s verdict, dated July 23, 2010, was on an application filed by Mauritius-based Praxair Pacific. The foreign company asked AAR to clarify whether it is liable to pay MAT under Section 115 JB of the Income-Tax Act, on account of the transfer of shares to its Indian subsidiaries. The Mauritius company was proposing to transfer 74% of its shareholding in Indian subsidiary Jindal Praxair to its wholly-owned Indian subsidiary Praxair India.


The AAR clarified that Praxair Pacific is not liable to pay MAT in India. AAR contention is based on Section 115 JB of Income-Tax Act which is not applicable to foreign companies. The AAR pointed out that amendments in Section 115 JB brought in by the 2002 Finance Bill had clarified that MAT is applicable only to domestic companies. The AAR further said that Section 115 JB of Income-Tax Act is not designed to be applicable to a foreign company who has no presence or permanent establishment in India.

RESTRICTION ON IMPORT OF TELECOM DEVICES

The Indian Government has restricted the import of Multichannel GSM/CDMA receivers, transmitters and transreceivers capable of receiving or transmitting or both in two or more frequencies simultaneously. (Ministry of Commerce and Industry, Notification no. 53/2009-2014) Now, only the actual user i.e. manufacturer of the telecom equipments shall be able to import those devices against the license issued by the government. The intermediary assemblers, traders and unauthenticated manufacturers shall no longer be able to import those devices.

NEW RUPEE SYMBOL

Indian Rupee is soon going to have distinct identity like Euro, Pound, Dollar and Yen. The Indian cabinet has approved the new symbol of Indian Rupee. The new symbol is the blend of Devenagri Script “Ra” and Roman script “R”.

This new Rupee symbol has been designed by a Post Graduate student of the Department of Design at Indian Institute of Technology (IIT), Guwahati. The new symbol can easily be incorporated in the existing software system, typewriters and computer keyboards.

However, there is no immediate plan to introduce the symbol in new currency.

File IT Returns with Digital Signature

The Central Board of Direct Taxes (CBDT) has amended the Rules relating to electronic filing of income tax returns vide Notification No.49/2010 dated 9th July 2010. The amended Rules will apply with effect from the date of notification in the official gazette.

As per the amended Rules, it is now mandatory for all companies to file income tax return electronically in Form No.ITR-6 with digital signature. Earlier, companies could file their electronic returns with or without digital signature.

Further, now all individuals and Hindu Undivided Families (HUFs), who are required to get their accounts audited under section 44AB of the Income Tax Act 1961, are also required to file their income tax return in Form No.ITR-4 electronically with or without digital signature. Earlier, this condition was applicable only to companies and partnership firms.

Accounts are required to be audited under the income tax law, if turnover or gross receipts from business exceeds Rs.40 lakh (Rs.60 lakh from assessment year 2011-12 onwards), or if turnover or gross receipts from profession exceeds Rs.10 lakh (Rs.15 lakh from assessment year 2011- 12 onwards).

New Taxable Services

Central Board of Excise & Custom (“CBEC”) has notified 8 new taxable Services w.e.f. 1.7.2010 vide Notification No.24/2010-Service Tax dated 22.6.2010.

The following are the new taxable Services introduced w.e.f. from 1.7.2010.

1. Games of chance (zzzzn)

2. Health services (zzzzo)

3. Maintenance of medical records (zzzzp)

4. Promotion of a ‘brand’ of goods, services, events, business entity etc. (zzzzq)

5. Commercial use or exploitation of any event organized by a person or organization (zzzzr)

6. Electricity Exchange Service (zzzzs)

7. Copyrights on Cinematographic films and sound recording (zzzzt)

8. Providing of preferential location or external / internal development of complexes (zzzzu)


Click here to see the full notification.

FDI in multi Brand retail in India: A good or Bad move?

The government on Tuesday took the first step towards opening up the multi-brand retail sector for foreign direct investment (FDI) by releasing a discussion paper on the issue. The discussion paper is available at the website of Department of Industrial Policy & Promotion. The proposed 100 per cent FDI in multi brand retail, however, seems to be in consistency with the UPA government’s emphasis on technology up-gradation and flow of investments into the retail sector

FDI in Multi-Brand retailing is prohibited in India. FDI in Single- Brand Retailing is permitted to the extent of 51%. The discussion paper, which will be open for comments from stakeholders until July 31, does not suggest an upper limit on foreign investment in multi-brand retail. According to this discussion paper, the foreign companies in multi brands will also have to follow stringent rules on Job reservations for local youth, local sourcing requirements and make mandatory investments in local supply chain.

It is widely acknowledged that FDI can have some positive results on the economy, triggering a series of reactions that in the long run can lead to greater efficiency and improvement of living standards, apart from greater integration into the global economy. This will improve the quality of merchandise as well as improve the product availability and lower prices. Moreover, it will be a win-win situation for the customers. It can also be harnessed, to boost exports out of India through Clear Clauses of Investments in Sourcing & Exports out of India.

It has been observed by the big-wigs of retail sector that there is an urgent need to encourage foreign investment in this sector and if the policy process is strategically done, it can create a synergy between the small retailer and the larger retail chains.

Earlier attempts to open up retail trade have met with stiff resistance. A major concern is that it would lead to unfair competition and ultimately result in large-scale exit of domestic retailers, especially the small family managed outlets, leading to large scale displacement of persons employed in the retail sector. Another concern raised by the people opposing FDI in retail trade is that the Indian retail sector is still under-developed and in a nascent stage and it is allowed to grow and consolidate first, before opening this sector to foreign investors end.

YOUR COMMENTS & SUGGESTIONS:

Comments and suggestions are read and very welcome. We really appreciate your time. Thanks in advance.

DISCLAIMER:

The opinions expressed herein are for informational purposes only. Nothing herein shall be deemed or construed to constitute legal advice or opinion.

DISHONOUR OF CHEQUE: A READY RECKONER

(i) The cheque should be presented within its validity period. Generally a cheque is valid for six months, but there are cheques whose validity period is of lesser period.

(ii) Cheque drawn returned unpaid for any of the following reasons:
 Amount in the account is insufficient to honour the cheque; or
 Amount of the cheque exceeds the amount to be paid from that account by an agreement made with the bank.

(iii) A written notice must be sent to the drawer of cheque within 30 (thirty) days of the receipt of information by him from the bank regarding the return of the cheque unpaid. "Service of Notice under Section 138 of Negotiable Instruments Act imperative in character to make the complaint maintainable." If in the notice an omnibus demand is made without specifying what was due under the dishonoured cheque , the notic emight fail to meet the legal requirement and may be regarded as bad. [Rahul Builders vs. Arihant Fertilizers and Chemical and Anr. 2007 (2) UJ SC 1335]

The object of the notice is to give a chance to the drawer of the cheque to rectify his omissions.

CLICK HERE to see the smaple of Notice to be sent under Section 138 of Negotiable Instrument Act.

(iv) If the drawer of the cheque fails to make the payment of the said amount of money within 15 (fifteen) days of the receipt of said notice.

(v) The Court shall take cognizance of the offence only if the written complaint has been made by the appropriate person (payee or holder in due course, as the case may be) within 1 (one) month from the date on which the cause of action arises. The cause of action arises when the drawer of the cheque fails to make payment after 15 days of the receipt of written notice.

(vi) The circumstances under which such dishonour takes place shall be totally ignored. There is a strict liability hence the existence of guilty intent is not an essential ingredient to constitute this offence.

(vii) There is a presumption that the holder of cheque received the cheque for the discharge in whole or in part of a legally enforceable debt or other liability. However, if the contrary is proved then this offence under Section 138 of Negotiable Instrument Act shall not be attracted.

(Viii) If the cheque is drawn by a Company has been dishonoured, then every person who was in charge of and was responsible for the conduct of business of the company as well as the Company shall be guilty of the offence.

(ix) A person guilty of offence for dishonor of cheque shall be liable for imprisonment for a term which may extend to 2 (two) years; or Fine which may extend to twice the amount of cheque; or both

(x) It is important to note here that this offence is a compoundable offence.

YOUR COMMENTS & SUGGESTIONS:

Comments and suggestions are read and very welcome. We really appreciate your time. Thanks in advance.

DISCLAIMER:

The opinions expressed herein are for informational purposes only. Nothing herein shall be deemed or construed to constitute legal advice or opinion. Discussions on, or arising out of this, blog between contributors and other persons shall not create any attorney-client relationship.

(I am thankful to my Seniors and friends for helping me to write this blog.)