FREQUENTLY ASKED QUESTIONS
1. What What are the the forms forms in whih whih !"sine !"siness ss an !e on#" on#"te te# # !$ a forei forei%n %n om&an$ in In#ia'
Ans. "Ent Entry ry Str Strate ategie gies s for for foreig eign n inv invest estors ors"" is avai availa labl ble e unde underr the the "Pol "Polic icy y & Procedures" menu of the website by clicking "Secretariat for Industrial Assistance" of DIPP ebsite !htt#$$di.nic.in !htt#$$di.nic.in %. oreign comanies can make investments or oerate their business in a number of ways as given below# ' (iaison$reresentative office)
•
•
Pro*ect +ffice)
•
,ranch +ffice)
•
)-- holly owned subsidiary/
•
0oint venture comany/
inancial$1echnical$1 inancial$1echnical$1echno'financial echno'financial aroval is given by ). 2nder Automatic route through 3,I /. 4overnment$ 4overnment$IP,$ IP,$3,I 3,I automatic aroval is governed governed by Press 5ote 5o. / of /--sub*ect to sectoral cas as given in Anne6 I7. Any comany set u with DI has to be incororated under the Indian 8omanies Act with the 3egist 3egistrar rar of 8oman 8omanies ies and all Indian oerations would be conducted through this comany. (.
Is forei%n om&an$ treate# as #omesti om&an$'
Ans. 9es: a foreign comany incororated under the 8omanies Act is treated at ar with any domestic Indian comany within the scoe of aroval and sub*ect to all Indian laws.
1
).
*ow #oes a forei%n om&an$ in+est in In#ia'
Ans. Either through#' a. Automatic Aroval ' by the country;s 8entral ,ank: the 3eserve ,ank of India !3,I%:
rve ,ank of India is ava available for all i. A"toma "tomati ti A&&ro+ &&ro+a0 a0 thro thro"%h "%h 3eserve item items$ s$act activ ivit itie ies s e6cet e6cet a few as give given n in the the Pre Press ss 5ote 5ote 5o. 5o./!//!/---- ser series ies%% dated ))././---. 1he sector secific guidelines in this regard are given in Anne6ure I7 of the
within within >-
re=uired red for for all all othe otherr ro roos osal als s not not elig eligib ible le for for Autom utomat atic ic ii/ FI,- a&&ro+a0 a&&ro+a0 is re=ui Aroval. Alications to be submitted in orm I('8 I('8 or on lain aer aer with full full details details to the Secretariat Secret ariat for Indust Industrial rial Assistance Assistance !SIA% for the cases involving 53I$+8, 53I$+8, investment investment and )-- E+2. or remaining cases: the alications may be submitted to Deartment of Econ Econom omic ic Affai ffairs: rs:
Invest Investors ors are are re=uired re=uired to give give the descr descrit ition ion of activ activiti ities es as er the the 5ational Indust Ind ustria riall 8la 8lassi ssific ficati ation on of all Eco Econom nomic ic Ac Activ tiviti ities es !5I !5I8%: 8%: )?@ )?@:: while submitting submitting alications to the 3,I$SIA.
Ans.
8oi 8oies es of the 5I8: 5I8: )?@ )?@ ubl ublis ishe hed d by the
2
:.
What is the FI,-'
Ans. IP, is a cometent body to consider and recommend oreign Direct Investment !DI%: which do not come under the automatic route. 1he IP, has been reconstituted as under # )% Secretary: Deartment of Economic Affairs
8hairman
/% Secretary: Deartment of Industrial Policy & Promotion >% Secretary: Deartment of 8ommerce % Secretary !Economic 3elations%:
1he ,oard would be able to co'ot Secretaries to the 4overnment of India and other to officials of financial institutions : banks and rofessional e6erts of industry and commerce: as and when necessary.
;. What are the fators onsi#ere# !$ the FI,- whi0e e
Ans. 1o imart greater transarency to the aroval rocess: guidelines have been issued which govern the consideration of DI roosals by the IP,. 1hese are given at Anne6ure III of the
. Who is the Offier onerne# in $o"r De&artment for FI,- re0ate# matters' Ans. Director (Foreign Collaboration/Foreign Direct Investment Policy) Mr. Deepak Narain (Tel:!"!!"#$%&$$' Fa* !"!!"#$%&#&#& e"mail: narain.+,nic.in ) may be contacte+ -or FDI policy matters. t oint 0ecretary level 1ork is being looke+ a-ter by 02ri 3opal 4ris2na(Tel : !"!!"#$%$ Fa*: !"!!"#$%&!%$' 6mail : g.kris2na,nic.in ). 4. ,0ease 0et "s =now the stat"s of the a&&0iation ma#e to FI,-'
1he status of the IP, alication can be seen on the website of Deartment of Economic Affairs !htt#$$finmin.nic.in%. owever: status for the alications involving 53I$+8, investment and )-- E+2 is available at "SIA Alication status" link on the oening age of the DIPP website !htt#$$di.nic.in% wherein following three categories are given. Ans.
a% Daily Status of Alications for 53I $ +8, investment and )-- E+2 for the week .
3
b% eekly Status of Alications for 53I$+8, Investmebt and )-- E+2 for the week ending c% Date of osting of aroval letters of alications for 53I$+8, investment and )-- E+2 1he cases that are listed but do not figure in the aroved $ re*ected categories: fall under the deferred category viB. cases which are still under consideration. It may be ossible that alications in such cases: need additional clarification from other
3. Whih are the setors7 whih attrats 0imit on forei%n ownershi&' Ans9
The fo00owin% ati+ities attrat e>"it$ a& for FDI9
S. No.
Setor
FDI a& in ?/
Ati+ities
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1elecom
?
basic: cellular: value'added services: global mobile ersonal communications by satellite
internet service roviders with gateways: radio aging and end'to'end bandwidth
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8oal & (ignite
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ublic sector undertakings
C-
other than ublic sector undertakings
for e6loration & mining of coal or lignite for cative consumtion
e6loration and mining of diamonds and recious stones
4
.
Private Sector ,anking
?
rivate banking sector
C.
Insurance
/F
insurance sector !sub*ect to obtaining license from I3DA%
F.
Domestic Airlines
-
no direct or indirect e=uity articiation by foreign airlines
.
Petroleum
F-
in unincororated *oint venture
!+ther than refining%
C)
in incororated *oint venture
C)
etroleum roducts and ielines sector
in infrastructure related marketing and marketing of etroleum roducts
/F
for ublic sector undertakings
investment through such vehicle is treated as resident e=uity
3efining
@.
Investing comanies in Infrastructure$Service sectors
?
?.
Atomic minerals
a. mining and mineral searationG b. value additionG
c. integrated activities.
)-.
Defence sector
)).
,roadcasting
industry
/F
for arms and ammunition and allied items of defence e=uiment: defence aircraft and warshis
5
Setting u hardware facilities: such as ulinking: 2,: etc.
?
Private comanies incororated in India with ermissible II$53I$+8,$PI+ e=uity within the limits !as in the case of telecom sector DI limit u to ? inclusive of both DI and ortfolio investment% to set u u linking hub !teleorts% for leasing or hiring out their facilities to broadcasters Footnote9 As regards satellite broadcasting: all
? 8able network
1.7. 8hannels irresective of the ownershi or management control to ulink from India rovided they undertake to comly with the broadcast !rogramme and advertising% code oreign investment allowed u to ? !inclusive of both DI and ortfolio investment% of aid u share caital. 8omanies with minimum C) of aid u share caital held by Indian citiBens are eligible under the 8able 1elevision 5etwork 3ules !)??% to rovide cable 17 services.
/Direct'to'ome
1errestrial ,roadcasting <
/- !ortfolio investment%
8omanies with a ma6imum of foreign e=uity including DI$53I$+8,$II of ? would be eligible to obtain D1 (icense. ithin the foreign e=uity: the DI comonent not to e6ceed /-. 1he licensee shall be a comany registered in India under the 8omanies Act. All share holding should be held by Indians e6cet for the limited ortfolio investment by II$53I$PI+$+8, sub*ect to such ceiling as may be decided from time to time. 8omany shall have no direct investment by foreign entities: 53Is and +8,s. As of now: the foreign investment is ermissible to the e6tent of /- ortfolio investment. 5o rivate oerator is allowed in terrestrial 17 transmission
)/
Small Scale Industries !SSI% sector
/
if DI in an SSI unit e6ceeds / of the aid u caital: the comany loses its SSI status. urther: if the item$s of manufacture is$are reserved for SSI sector: the comany has to obtain an industrial license and undertake a minimum e6ort obligation of C- of annual roduction on such roducts
6
)>.
Satellites
Establishment and oeration of Satellites
).
1ea Sector
)--H
DI ermitted in 1ea sector: including tea lantations re=uiring rior 4overnment aroval H sub*ect to comulsory divestment of /F e=uity of the comany in favour of an Indian artner$Indian ublic within a eriod of five years.
)C.
Print
HH
In Indian entities ublishing scientific$technical and seciality magaBines$eriodical$*ournals
/FHH
In Indian entities ublishing newsaers and eriodicals HH sub*ect to guidelines notified by
1@. What is the o+ernment ,o0i$ for Te0eom Setor
Ans. or ma*or sector secific guidelines including 1elecom Sector : lease refer to Anne6ure I7 at the
11. What is the in+estment &o0i$ for tra#in% om&anies'
Ans. 1rading is ermitted under automatic route with DI u to C) rovided it is rimarily e6ort activities: and the undertaking is an e6ort house$trading house$suer trading house$star trading house. owever: under the IP, route # i. )-- DI is ermitted in case of trading comanies for the following activities# •
e6orts:
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bulk imorts with e6'ort$e6'bonded warehouse sales:
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cash and carry wholesale trading:
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other imort of goods or services rovided at least C is for rocurement and sale of goods and services among the comanies of the same grou and not for third arty use or onward transfer$distribution$sales. •
ii. The fo00owin% =in#s of tra#in% are a0so &ermitte#7 s"!Bet to &ro+isions of ECI ,o0i$9
a. 8omanies for roviding after sales services ! that is not trading er se% b. Domestic trading of roducts of 07s is ermitted at the wholesale level for such trading comanies who wish to market manufactured roducts on behalf of their *oint ventures in which they have e=uity articiation in India. c. 1rading of hi'tech items$items re=uiring secialised after sales service d. 1rading of items for social sector e. 1rading of high'tech: medical and diagnostic items. f. 1rading of items sourced from the small scale sector under which: based on technology rovided and laid down =uality secifications: a comany can market that item under its brand name. g. Domestic sourcing of roducts for e6orts. h. 1est marketing of such items for which a comany has aroval for manufacture rovided such test marketing facility will be for a eriod of two years : and investment in setting u manufacturing facilities commences simultaneously with test marketing. i. DI uto )-- ermitted for e'commerce activities sub*ect to the condition that such comanies would divest /F of their e=uity in favour of the Indian ublic in C years: if these comanies are listed in other arts of the world. Such comanies would engage only in business to business !,/,% e'commerce and not in retail trading.
1(. Whether who0esa0e tra#in% ati+it$ is o+ere# on the a"tomati ro"te' Ans9
No7 &rior a&&ro+a0 of FI,- is re>"ire#.
1). Whether FI,- a&&ro+a0 is re>"ire# for 1@@? EOUs in+o0+in% FDI from forei%n om&anies' Ans.
+nly where the activity roosed does not fall on the automatic route.
1. *ow are in+estments in 1@@? E<&ort Oriente# Units EOUs/ a00owe#' 8
1here are four schemes for such units. 1hey are the )-- E+2s: Electronics ardware 1echnology Parks !E1Ps% : Software 1echnology Parks !S1Ps% and Secial Economic Jones !SEJ% . DI$53I$+8, investment u to )-- in these units is eligible for automatic route sub*ect to fulfilling arameters rescribed in Press 5ote 5o./ !/--series% dated ))././---. 1his Press 5ote is available on the website htt#$$di.nic.in Ans.
1:. Is a 1@@? forei%n owne# s"!si#iar$ a00owe#' Whether FI,- a&&ro+a0 is re>"ire#'
9es: e6cet in sectors that attract e=uity ca. 1he criteria for allowing such investments have been detailed in the guidelines given at Anne6ure I7 of the
IP, aroval is re=uired if the activity does not fall on the automatic route. )F. Is investment by 5on'3esident Indians!53Is% ermitted Ans. 1he 4overnment attaches imortance to investments by 53Is and +verseas 8ororate ,odies!+8,s% i.e. cororate bodies in which 53Is hold at least F- of e=uity. 4overnment has rovided a liberalised olicy framework for aroval of 53I investments through both the Automatic and the 4overnment route. 53I$+8,s are ermitted to invest uto )-- e=uity in the 3eal Estate and 8ivil Aviation Sectors. Automatic Aroval is given by the 3,I to all 53I$+8, roosals with their investment uto )-- for all items$activities e6cet a few e6cetions mentioned in Press 5ote / !/--- series% read with sector secific guidelines. 4overnment aroval is given for all roosals not =ualifying for Automatic Aroval. 15. *ow is FDI &ermitte# in the Sma00 Sa0e Setor'
E=uity articiation in the Small Scale Sector u to / by any other Industrial undertaking is allowed. or e=uity articiation in e6cess of this or if a non'SSI unit whishes to manufacture a reserved item: it would be re=uired to obtain industrial licence and undertake a minimum e6ort obligation of C- of roduction. Ans.
14. 2an &rofits7 #i+i#en#s7 ro$a0t$7 =nowhow &a$ments !e re&atriate# from In#ia' Ans.
All rofits: dividends: royalty: knowhow ayments that have been aroved by the 4overnment$3,I can be reatriated. Some sectors like 53I Investment in real estates may attract a lock'in eriod.
9
13. Whether FDI is &ermitte# in On0ine Lotter$ -"siness'
1he lottery business: including "+nline (ottery ,usiness" is not oened to foreign direct investment. Ans9
/-. hat is the rocedure of issuing shares to foreign collaborator Ans# 1he issue of shares to the foreign collaborator is governed by the guidelines issued by 3,I $ SE,I and 8omanies Act. (1. Whi0e a0"0atin% ei0in% on forei%n ho0#in%s7 are &referene shares in0"#e#'
9es: if it is convertible into e=uity shares. 5on'convertible redeemable reference shares are not included for calculating DI limit. Ans9
((. Is FI,- a&&ro+a0 re>"ire# for the swa& of shares' Ans9
9es: IP, aroval is re=uired.
(). Whether iss"e of &referene shares an !e ma#e on the a"tomati ro"te' Ans9
9es: sub*ect to the activity concerned falling under the automatic route.
/. hat are the formalities a *oint venture comany has to do to increase the foreign e=uity holding Ans# 1he following formalities are re=uired for the *oint venture that want to increase in their foreign e=uity holding by ac=uisition of shares or by any other means. a% If only the =uantum of foreign e=uity increased without change in ercentage then Press 5ote no. !)??? series% may be followed. b% or increase in ercentage of foreign e=uity by way of e6ansion of caital base: automatic route or IP, $ 4overnment route would aly deending uon the nature of roosal in terms of Press 5ote 5o. / !/--- series% c% 8ases involving increase in ercentage in foreign e=uity by way of ac=uiring e6isting shares in an Indian comany would necessarily re=uire rior aroval of IP,$4overnment. d% In cases involving inclusion of an additional foreign collaborator: guidelines laid down in Press 5ote 5o. )@ !)??@ series% would have to be satisfied. (:. What is the &o0i$ of on+ersion of non8re&atria!0e shares into re&atria!0e shares'
10
IP, aroval is re=uired. here original investment was made in foreign e6change: the change is allowed without any conditionsG if not: the sale roceed will have to be reatriated to India by oening an 53+ account. Ans.
/F. Is there any time limit within which Indian comany have to make their Euro issues or AD3s$4D3s after having received the aroval from IP, Ans
1here is no time limit as er e6tant guidelines.
/. In a ublic limited comany having less than )-- foreign e=uity articiation under the automatic route: whether it can be increased to )-- e=uity articiation under the automatic route Ans. As long as the activity is covered on the automatic route and there is no sectoral ca and no ac=uisition of e6isting shares is involved. /@. Is it ossible that a foreign comany rovide a non interest bearing or interest bearing loan to an Indian comany Ans#
9es: sub*ect to conformity with the E8, 4uidelines of
(3. Whether FI,- a&&ro+a0 is re>"ire# for ons"0tan$ ser+ies7 researh an# #e+e0o&ment7 software #e+e0o&ment et.'
1he above activities fall under automatic route and: therefore: do not re=uire IP, aroval. Ans9
)@. *ow are forei%n tehno0o%$ a%reements a&&ro+e#' Ans.
A&&ro+a0 is %rante# !$ two ro"tes
a. Automatic aroval by 3,IG
11
i% Available for any roosal with lumsum ayment not e6ceeding 2SK / million: and royalty of uto C on domestic sales and @ on e6orts.1his is alicable to technical collaborations with technology transfer. 1here is no limit on duration of royalty ayment by a +S to its offshore arents. ii% Payment of royalty u to / of e6orts and ) for domestic sales on use of trade marks and brand name of the foreign collaborator without technology transfer b. 4overnment aroval in all other cases. )1. Whether ro$a0ties for tehno0o%$ transfer an# other ro$a0t$ an !e &ai# for same &ro#"t on "se of tra#emar=s an# !ran# name' Ans.
5o: both royalties cannot be aid together on the same roduct.
i% 8ases involving transfer of technology will be eligible for royalty ayment at the rescribed rate on the automatic route. ii% 8ases not involving any transfer of technology and only involving the use of brand names and trademarks will be eligible to ayment of trademarks or brand name royalty at the rescribed rate on the automatic route.
)(. Is it &ossi!0e to "se forei%n !ran# names6tra#e mar=s in In#ia an# is 0"m& s"m fee &ermissi!0e "n#er ro$a0t$ &a$ment for "se of !ran# name an# tra#emar=s'
9es: it is ossible to use foreign brand names$trade marks in India. owever: lum sum fee is not ermissible: only running royalty ayment is ermissible as er rescribed rate. Ans.
>>. hat is the mechanism for ubliciBing the changes in the DI Policies Ans. 8hanges in DI olicies are brought out in the form of Press 5otes by Deartment of Industrial Policy & Promotion !DIPP% . Soon after releasing the Press 5otes to the media: it is also loaded on the Deartmental website ! htt#$$di.nic.in%. ). What &ro&osa0s re>"ire an In#"stria0 LieneIL/ an# how is it o!taine#'
In the 5ew Industrial Policy: all industrial undertakings are e6emt from licencing e6cet for those roducts given in Anne6ure I and II and those reserved for the Small Scale Sector . 1he ro*ect should not be located within /C kilometres of a city with a oulation of more than one million !Anne6ure v%. Ans.
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1he 4overnment has substantially liberalised the rocedures for obtaining an Industrial (icence. An I( is aroved by the 4overnment. 1he alication in form I('8 should be filed with the SIA. Arovals normally granted within F'@ weeks. ):. What is the &roe#"re for a #e0iense# setor' Ans.
An In#"stria0 "n#erta=in% e
information in the Industrial Entrereneurs
Ans. Please refer to the !htt#$$delhi.vsnl.net.in$bis.org%
website
of
,ureau
of
Indian
Standards
)5. *ow to ontat the No#a0 Offiers of the De&artment of In#"stria0 ,o0i$ ,romotion who are res&onsi!0e for monitorin% the a&&ro+e# ,roBets of a &arti"0ar state'
Ans# Please visit the website of the Deartment of Industrial Policy & Promotion at htt#$$di.nic.in by clicking IIA.
#
i) Atomic Energy ii) Lottery Business iii) Gambling and Betting iv) Business of Chit Fund v) Nidhi Company vi) Agricultural e!cluding Floriculture" #orticulture" $evelopment of seeds" Animal #usbandry" %isciculture and cultivation of vegetables" mushrooms" etc. under controlled conditions and 13
services related to agro and allied sectors) and %lantations activities other than &ea %lantations) c.f. Notification No. FE'A (*+,,-/B dated 0une 12" +,,-). vii) #ousing and /eal Estate business e!cept development of to3nships" construction of residential*commercial premises" roads or bridges to the e!tent specified in Notification No. FE'A 1-4*+,,5/B dated 0uly 1(" +,,5). viii) &rading in &ransferable $evelopment /ights &$/s). i!) 'anufacture of cigars " cheroots" cigarillos and cigarettes " of tobacco or of tobacco substitutes. %lease also see the the 3ebsite of $epartment of 6ndustrial %olicy and %romotion $6%%)" 'inistry of Commerce 7 6ndustry" Government of 6ndia at 333.dipp.gov.in for details regarding sectors and investment limits therein allo3ed "under F$6)
Q)3. What is the &roe#"re to !e fo00owe# after in+estment is ma#e "n#er the A"tomati Ro"te or with o+ernment a&&ro+a0' Ans. A two8sta%e re&ortin% &roe#"re has to !e fo00owe# 9. • On receipt of share application money:
8ithin -, days of receipt of share application money*amount of consideration from the non resident investor" the 6ndian company is re9uired to report to the Foreign E!change $epartment" /egional :ffice concerned of the /eserve Ban; of 6ndia"under 3hose
•
•
Name and address of the foreign investor*s> $ate of receipt of funds and the /upee e9uivalent> Name and address of the authorised dealer through 3hom the funds have been received>
•
$etails of the Government approval" if any> and
•
?@C report on the nonresident investor from the overseas ban; remitting the amount of consideration.
&he 6ndian company has to ensure that the shares are issued 3ithin 12, days from the date of in3ard remittance 3hich other3ise 3ould result in the contravention * violation of the FE'A regulations. • Upon issue of shares to non-resident investors:
ithin >- days from the date of issue of shares: a reort in orm 8'4P3' PA31 A together with the following documents should be filed with the oreign E6change Deartment: 3egional +ffice concerned of the 3eserve ,ank of India. 14
L 8ertificate from the 8omany Secretary of the comany acceting investment from ersons resident outside India certifying that# •
1he comany has comlied with the rocedure for issue of shares as laid down under the DI scheme as indicated in the 5otification 5o. Erd
L 1he investment is within the sectoral ca $ statutory ceiling ermissible under the Automatic 3oute of the 3eserve ,ank and it fulfills all the conditions laid down for investments under the Automatic 3oute: L +3 L Shares have been issued in terms of SIA$IP, aroval 5o. ''''''''''''''''''''' dated '''''''''''''''''''' !enclosing the IP, aroval coy% L 8ertificate from Statutory Auditors$ SE,I registered
II - Foreign Technical Collaboration 1 .Wha ta r et hepa y me ntpa r a me t e r sf orf or e i gnt e chnol ogyt r a ns f e runde rt he Aut omat i cRout eofReser veBankofI ndi a?How shoul dr oyal t ybecal cul at ed?
Pa y mentf orf or ei gnt ec hnol og yc ol l abor at i onb yI ndi anc ompani esar ea l l o wedundert he aut omat i cr out es ubj ec tt ot hef ol l owi ngl i mi t s : Lumpsum payment snotexceedi ngUS$2mi l l i on. Royal t ypayabl ebei ng l i mi t ed t o 5percentf ordomest i csal es and 8percentf or e xpor t s ,wi t houtanyr e st r i c t i onont hedur at i onoft her oy al t ypa yment s . Ther oy al t yl i mi t sar enetoft ax esandar ec al c ul at edac cor di ngt os t andar dc ondi t i ons . Ther oy al t ywi l lbec al c ul at edont hebas i soft henete xf ac t or ys al epr i c eoft hepr oduc t , e x c l us i v eofe x c i s edut i es ,mi nu st hec os toft hes t andar dbou ght outc ompon ent sandt he l andedc os tofi mpor t edc omponent s ,i r r es pec t i v eoft hes our c eofpr oc ur ement ,i nc l udi ng oc eanf r ei ght ,i ns ur anc e,c us t om dut i es ,et c . RBIhas del egat ed t he power st o ADs t o mak e paymentofr oyal t y undersuch agr eement s.The r equi r ementofr egi st r at i on oft he agr eementwi t ht he Regi onal OfficeofReser veBankofI ndi ahasbeendoneawaywi t h.
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