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)
LORD SHIVA’S
THIRD EYE
India is like Lord Shiva’s third eye, removing all the
obstacles to the growth of an investor, world-wide
Total Area
Capital
Population
Political System and
Government
Head of State
Head of Government
Territories
Literacy rate
Currency Unit
•3.29 million square kilometers
•New Delhi
•Over 1 Billion
•The Indian Constitution provides
for a parliamentary democracy
with a bicameral parliament and
three
•President
•Prime Minister
•There are 28 states and 7 Union
territories
•74.04 percent
•Indian Rupee (INR/Rs.)
The Constitution of India divides the areas of governance between the
Central Government and the State Governments. Some of the specified
areas fall within the jurisdiction of both the Central Government and the
State Governments. These areas are mentioned in the three lists
specified in Schedule VII of the Constitution of India. Set forth are interalia the areas, as specified in the three lists.
LIST I - UNION
LIST
LIST II – STATE
LIST
LIST III –
CONCURRENT
LIST
Defence
Agriculture
Transfer of property
Banking
Police
Economic and Social
Planning
Railways
Fisheries
Education
Airways
Public health and
sanitation
Factories
Foreign Affairs
Hospitals and
Dispensaries
Electricity

India has adopted a written Constitution which is the Supreme
Authority governing relationship between Legislature, Judiciary
and Executive and their respective roles.

Federal State

Rule of Democracy and Rule of Law


Right to Equality before Law is one of the Fundamental Rights
enshrined in Constitution
Fair and independent Judiciary





India has received total foreign investment of US$ 306.88 billion since
2000 with 94 % of the amount coming in during the last nine years.
During FY 2012–13, India attracted FDI worth US$ 22.42 billion.
India received cumulative FDI for April-October 2012-13 stood at US$
14.78 billion, -Department of Industrial Policy and Promotion (DIPP).
Korean South-East Power Company (KOSEP), part of South Korean
state-owned power generator Korea Electric Power Corporation, has
signed an initial agreement with Jinbhuvish Group, Mumbai, for
technical support for its Rs 3,450-crore (US$ 549.31 million) project in
Maharashtra. The 600 megawatt (mw) power plant, which will be set up
in Yavatmal district, is expected to be commissioned in 2016.
India and UAE have agreed to promote collaboration in renewable
energy, focusing in the areas of wind power and solar energy. A
Memorandum of Understanding (MoU) was signed by Dr Farooq
Abdullah, Minister of New and Renewable Energy of India and Dr
Sultan Ahmed Al Jaber, Minister of State of UAE in Abu Dhabi on
January 18, 2014.



Luxury watch brand Jaeger-LeCoultre from Switzerland has filed for a
100 per cent single brand application to enter the Indian retail market.
It thus became the first luxury company to apply for FDI through this
route. Geneva-based Richemont SA that owns the luxury brand filed
the application with the Department of Industrial Policy and
Promotion (DIPP).
France’s Lactalis, the biggest dairy products group in the world, will
most likely buy out Hyderabad-based Tirumala Milk Products for US
$275–300 million, according to sources. Lactalis has a yearly turnover
of about US $21 billion. Tirumala had a turnover of Rs 1,424 crore (US$
226.71 million) for FY 2012–13. The Hyderabad-based company, which
was founded in 1998, makes dairy products such as sweets, flavoured
milk, curd, ice-cream, etc.
Based on the recommendations of Foreign Investment Promotion
Board (FIPB) made on December 30, 2013, the Indian government has
agreed to five FDI proposals amounting to Rs 1133.41 crore (US$
180.16 million) approximately. On November 13, 2013, it had
approved 12 proposals of FDI amounting to Rs 821.63 crore (US$
130.73 million) approximately. The FIPB has also approved Swedish
clothing major Hennes & Mauritz (H&M) AB’s proposal to open 50
stores across India. The investment will be around Rs 720 crore (US$
114.61 million).
Foreign Direct Investment
FDI Policy Framework
India has been consistently opening up its markets for foreign
investments. Irrespective of whichever government has come
into power, economic reforms have continuously been
undertaken. The aim of all governments has been the economic
growth of India and one of the means thereof is by welcoming
foreign investors to contribute to India’s growth.
Accordingly, foreign direct investment upto 100% under the
automatic route is permitted in all sectors except defense, retail,
tea plantation, insurance, telecom, banking, asset reconstruction
companies, commodity exchanges, credit information
companies, infrastructure companies in the securities market,
power exchanges, brownfield investment in pharmaceutical
sector, information services, air transport services, satellite,
private security agencies.
INVESTING IN INDIA
Automatic Route
General rule
No prior permission
required
Prior Permission
(FIPB)
By exception
Prior Government
Approval needed
Mode of Investment
Issuance of
fresh shares
Acquisition
by way of
transfer of
existing
shares by a
person
resident in or
outside India
Transfer of
shares by a
Person
resident
outside India
Issue of
Rights /
Bonus shares
Transfer of
shares/conve
-rtible
debentures
from a
Resident to
Person
Resident
outside India
Issue of
shares under
Employees
Stock Option
Scheme
(ESOPs)
Issue of
shares under
American
Depository
Receipt /
Global
Depository
Receipt
Recently, the Central Government has relaxed FDI norms in certain
sectors as below with a view to attract more foreign investment:
 Allowing 49% FDI under the automatic route in single brand retail
and relaxing the conditions thereto;
 Allowing courier services under 100% automatic route;
 Allowing FDI upto 51% with conditions in multi-brand retail;
 Allowing 100% FDI in case of asset construction companies with 49%
under the automatic route;
 Allowing 49% FDI under the automatic route in commodity
exchanges;
 Allowing 74% FDI under the automatic route in credit information
companies;
 Allowing FDI upto 49% under the automatic route in infrastructure
companies in the securities markets
 Allowing 49% FDI under the automatic route in power exchanges.





Enacting new legislation, for instance the new Companies Act, 2013 is
being notified in stages to replace the existing Companies Act, 1956.
The Reserve Bank of India is about the award licenses to new banks
soon. Reinforcing India’s commitment to the growth of the banking
sector.
The Indian government announced the national manufacturing policy in
2011 with an aim to provide a boost to the manufacturing sector and
generate employment.
The proposed India-Israel free trade agreement (FTA) is likely to
increase the volume of trade between the two countries by US$2 billion.
India and Israel have set up a $40 million fund to leverage innovation
for economic collaboration through jointly developed technologies or
joint collaborations. The fund would help Israeli companies participate
in large Indian government-led ventures, foster collaboration of Israeli
and Indian companies in R&D projects and seek to adapt products
developed in Israel for the Indian market.
The new Companies Act, 2013 has been recently introduced to replace the
existing Companies Act, 1956. The new Companies Act is being notified in
stages. Some of its highlights are set-forth below:




One Person Company (OPC): One Person Company is a private company
with sole member. Only a person resident in India can form an OPC. (not
notified)
Small Company: A small company is a private company with a paid-up
capital of not more than Rs. Five lakhs or which has a turnover not
exceeding Rs. Two Crores. A small company is subjected to lesser
compliance than the other companies. (not notified)
Dormant Company: A company formed and registered under the new Act
for a future project or to hold an asset or intellectual property and has no
significant accounting transaction, such a company and a company which
has not been carrying any business or operation, or has not carried on
business or made any significant transaction during the last two (2)
financial years is termed as a dormant company and is treated
accordingly. (not notified)
Every company is required to have at least one (1) director who has stayed
in India for a total period of not less than one hundred and eighty-two
days in the previous calendar year. (not notified)



Central Government has recently notified the provision relating to
Corporate Social Responsibility (CSR) under new Companies Act,
2013 for companies having net worth of rupees five hundred crore
or more, or turnover of rupees one thousand crore or more or a net
profit of rupees five crore or more, during any financial year. Such
companies are required to constitute a Corporate Social
Responsibility Committee of the Board consisting of three or more
directors, out of which at least one director shall be an independent
director.
The companies which fall under the aforesaid limits, are required to
spend , in every financial year, at least two per cent (2%) of the
average net profits of the company made during the three
immediately preceding financial years, in pursuance of the
Corporate Social Responsibility Policy formulated by the company.
The companies are required to give preference to the local area and
areas around them where they operate, for spending the amount
earmarked for the Corporate Social Responsibility activities, as have
been categorically stated in the Companies Act, 2013
100 % FDI under automatic route is allowed in software and
electronics except in the aerospace and defense sectors.
Some of the important aspects of the Information
Technology (IT) industries



Indian IT industry is likely to add 1.5 lakh jobs during the FY
2013- 14.
The IT industry is expected to grow at 12-14 % as against 10.5 per
cent last year.
India is expected to spend around US$ 3.9 billion on cloud
services during 2013-2017, of which US$ 1.7 billion will be spent
on software-as-a-service (SaaS) - Gartner Inc.
Factors leading to growth in the IT/ITes sector are:

Technically qualified personnel easily available;

Rapid adoption of IT technologies in almost every sectors;

Use of new and emerging technologies such as cloud computing,
etc;

SEZ, STP, EOU, etc as growth drivers; as more of these are now
being set up in Tier II cities;
Government Initiatives

In the twelfth Five Year Plan (2012-17), the Department of
Information Technology is committed to strengthen and extend
the existing core infrastructure projects to provide more horizontal
connectivity, build redundancy connectivity, etc. The core
infrastructure including fibre optic based connectivity is also being
leveraged.
As mentioned earlier, 100 % FDI under automatic route is allowed in
software and electronics except in the aerospace and defense sectors.
Government Initiatives and Prospect




As a result of impressive growth of the economy, steadily increasing
purchasing power of the people and aspirations of the young, India is one
of the fastest growing markets for electronic gadget.
The Government has also launched Export Promotion Capital Goods
(EPCG) and Electronic Hardware Technology Park (EHTP) schemes to
allow import of electronic capital goods without paying any custom duty.
Indian electronics market is currently US$ 69.6 billion and is expected to
grow to about US$ 400 billion by 2020.
The sector has attracted strong investments in the form of mergers and
acquisitions (M&A) and other foreign direct investment (FDI) inflows.
Export Promotion Schemes
Special schemes are available for setting up Export Oriented Units for
the Electronics/IT Sector. These schemes are:






Export Oriented Unit (EOU) Scheme
Electronics Hardware Technology Park (EHTP) Scheme
Software Technology Park (STP) Scheme
Special Economic Zones (SEZ) Scheme
Export promotion Capital Goods (EPCG) Scheme
Duty Exemption and Remission Scheme
Sectoral Caps and Conditions


Foreign Investment upto 26% is allowed and needs approval of the
Government. Recently, the Government has allowed investment
beyond 26% - such investment beyond 26% needs approval of Cabinet
Committee on Security (CCS) on case to case basis, which ensure
access to modern and ‘state-of-art’ technology in the country. Defence
industry is subject to Industrial license under the Industries
(Development & Regulation) Act 1951.
Application for FDI up to 26% will follow the existing procedure with
proposals involving inflows in excess of Rs 1200 crore being approved
by cabinet committee on economic Affairs (CCEA). Applications
seeking permission of the Government for FDI beyond 26% will in all
cases be examined additionally by the Department of Defence
Production (DoDP) from the point of view particularly of access to
modern and ‘state-of- art’ technology.
Sectoral Conditions cont…


Based on the recommendation of the DoDP and FIPB,
approval of the Cabinet Committee on Security (CCS) will
be sought by the DoDP in respect of cases which are likely
to result in access to modern and ‘state-of-art” technology in
the country.
Proposals for FDI beyond 26% with proposed inflow in
excess of Rs 1200 crores, which are to be approved by CCS
will not require further approval of the Cabinet Committee
of Economic Affairs (CCEA).
Detailed Conditions




The applicant should be an Indian company / partnership firm;
The management of the applicant company / partnership should
be in Indian hands with majority representation on the Board as
well as the Chief Executives of the company / partnership firm
being resident Indians;
Full particulars of the Directors and the Chief Executives should
be furnished along with the applications;
The Government reserves the right to verify the antecedents of the
foreign collaborators and domestic promoters including their
financial standing and credentials in the world market. Preference
would be given to original equipment manufacturers or design
establishments, and companies having a good track record of past
supplies to Armed Forces, Space and Atomic energy sections and
having an established R & D base;
Detailed Conditions Cont…



There would be no minimum capitalization for the FDI. A proper
assessment, however, needs to be done by the management of the
applicant company depending upon the product and the
technology. The licensing authority would satisfy itself about the
adequacy of the net worth of the non-resident investor taking into
account the category of weapons and equipment that are proposed
to be manufactured;
There would be a three-year lock-in period for transfer of equity
from one non-resident investor to another non-resident investor
(including NRIs & erstwhile OCBs with 60% or more NRI stake)
and such transfer would be subject to prior approval of the
Government;
The Ministry of Defence is not in a position to give purchase
guarantee for products to be manufactured. However, the planned
acquisition programme for such equipment and overall
requirements would be made available to the extent possible;
Detailed Conditions Cont…



The capacity norms for production will be provided in the
licence based on the application as well as the
recommendations of the Ministry of Defence, which will
look into existing capacities of similar and allied products;
Import of equipment for pre-production activity including
development of prototype by the applicant company would
be permitted
Adequate safety and security procedures would need to be
put in place by the licensee once the licence is granted and
production commences. These would be subject to
verification by authorized Government agencies
Detailed Conditions Cont…


The standards and testing procedures for equipment to be
produced under licence from foreign collaborators or from
indigenous R & D will have to be provided by the licensee to the
Government nominated quality assurance agency under
appropriate confidentiality clause. The nominated quality
assurance agency would inspect the finished product and would
conduct surveillance and audit of the Quality Assurance
Procedures of the licensee. Self-certification would be permitted
by the Ministry of Defence on case to case basis, which may
involve either individual items, or group of items manufactured
by the licensee. Such permission would be for a fixed period and
subject to renewals.
Purchase preference and price preference may be given to the
Public Sector organizations as per guidelines of the Department of
Public Enterprises.
Detailed Conditions Cont…

Arms and ammunition produced by the private
manufacturers will be primarily sold to the Ministry of
Defence. These items may also be sold to other
Government entities under the control of the Ministry of
Home Affairs and State Governments with the prior
approval of the Ministry of Defence. No such item should
be sold within the country to any other person or entity.
The export of manufactured items would be subject to
policy and guidelines as applicable to Ordnance Factories
and Defence Public Sector Undertakings. Non-lethal
items would be permitted for sale to persons / entities
other than the Central of State Governments with the
prior approval of the Ministry of Defence. Licensee
would also need to institute a verifiable system of
removal of all goods out of their factories.
Government Initiatives




The Government has increased the allocation to the defence
ministry by 10 % amounting to INR 2.24 trillion (US$ 36.18
billion);
The Government of India is willing and eager to attract ‘state-ofart’ technology in the country;
India has emerged as the world's largest importer of major
conventional weapons worldwide;
India is one of the largest customer of Israeli military equipment
and Israel is one of the largest military partners of India. Defence
ties between the two countries are set to grow further. Hyderabadbased Electronics Corporation of India and Israeli conglomerate
Elbit Systems signed a letter of intent at the Defence Expo-2014 in
New Delhi.
FDI up to 100 per cent is permitted under automatic route for
projects in respect of renewable energy.
FDI up to 100 per cent is permitted under automatic route for
projects for electricity generation (except atomic energy),
transmission, distribution and power trading.
Position of India in World Energy Market


India has retained its position in top five world wind energy
markets in 2013.
The country remained the third largest market for new turbines
with capacity addition of 2,441 megawatt (MW). World’s wind
turbine capacity addition grew at 19 per cent to 44,609 MW.



The Ministry of Power has set a target for adding 76,000 MW of
electricity capacity in the 12th Plan (2012-17) and 93,000 MW in
the 13th Plan (2017-2022).
Under the Union Budget 2013-14, the Government of India has
approved a scheme for the financial restructuring of DISCOMS to
restore the health of the energy sector in India.
In a boost to power firms with plans to set up units in Special
Economic Zones (SEZ), the Government has exempted them from
the positive net foreign exchange (NFE) obligation applicable to
regular units in such enclaves.




Power sector to add 50,000 megawatt (MW) of thermal and
hydroelectricity.
Rajasthan is set to get the largest single-location solar plant of
4,000 megawatt (MW) in the world with an investment of Rs
30,000 crore (US$ 4.75 billion).
Jakson Power Solutions to install solar rooftop systems in
Bengaluru and Pune. The first order is to set up the 80 kilowatt
peak (KWp) solar rooftop.
Mytrah Energy Ltd plans to acquire 59.75 MW of existing
operational wind power assets in Tamil Nadu (TN) and
Maharashtra. The company expects to have a capacity of 370 MW
against previously anticipated 334 MW by 2013.
The power to levy taxes in
India vests with Union and
State Governments
• The tax regime has already
undergone
tremendous
reforms process and is
slated to undergo further
reforms in future by way of
introduction of direct tax
code.
• Unified GST proposed to be
introduced soon.
Union
Government
State
Government
Direct Taxes –
Income Tax &
Wealth Tax
Value Added Tax
(VAT)
Indirect Taxes –
Customs Duty,
Central Excise
Duty, Service Tax
Local levies like
entry tax, octroi etc
Central Sales Tax –
Levied by Union
and collected by
States
India has different tax rates for different classes and tax rates
are conditional upon specific terms.



The basic tax rate for a company incorporated in India is 30% which,
with applicable surcharge and education cess, result in a rate of either
30.90% or 32.445%.
Foreign companies that have a Private Equity or Branch /Project
Office in India are taxable at higher basis rate of 40% which, with
applicable surcharge and education cess, resulting in a rate of either
41.20% or 42.02%.
Minimum Alternate Tax (MAT) is applicable at a rate of 19.06% or
20.01% in case of Indian companies with applicable surcharge and
education cess, their basis rate of 18.5% on Book Profits (to be
computed as prescribed) applies if same is higher. Presumptive
taxation as stipulated and deemed taxation on gross basis may apply
to several income streams, particularly for Non-Residents.
”To succeed, you must have tremendous
perseverance, tremendous will.” Swami Vivekananda