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    13 FDI PROPOSALS CLEARED
    Whether leasing out of tankers is chargeable to service tax under the category of “Banking and Financial Services”
    Review of External Commercial Borrowings (ECB) Policy
    FEMA - Payment made to non-residents – Undertaking and CA certificate to be submitted
    Liability of 'money changers' to pay service tax under 'banking and other financial service'
    Budget 2007 – Service Tax – Highlights with critical analysis
    Budget 2007 - Service Tax – Scope of Existing Services to be extended
    Budget 2007 - Service Tax - New Services shall be liable to Service Tax
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    October 5, 2007
    Show AI Summary
    Foreign Direct Investment approvals confirming equity inductions and operating cum holding conversions, with referrals for post facto regularisation and PAB review.
    Thirteen FDI proposals were approved by the Foreign Investment Promotion Board covering equity inductions, conversions to operating cum holding companies to permit downstream investments, and sector specific undertakings in manufacturing, heavy industry, telecommunications, information and broadcasting, commerce, industrial policy, information technology and urban development. Several approvals note percentage foreign equity limits and reference Press Note 1 (2005 series). One proposal was deferred and one rejected; three applicants were advised to seek RBI post facto regularisation for past FDI policy violations; three proposals were remitted to the Project Approval Board for fee/royalty issues beyond automatic limits; one activity was advised to be treated under the automatic route.
    September 12, 2007
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    Leasing of tankers not treated as banking and financial service, affecting service tax classification and recovery measures.
    Leasing of cryogenic tankers by a manufacturer for hire is a commercial equipment-leasing activity ancillary to manufacture and distribution and does not fall within Banking and Financial Services for service tax classification; the tribunal so concluded and accordingly considered interim measures on recovery and pre-deposit of the disputed demand.
    August 8, 2007
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    ECB approval requirement limits large external borrowings and forbids their domestic use, with prior approval needed for rupee expenditures.
    ECB policy mandates prior approval of the Reserve Bank for borrowings above the prescribed threshold and bars use of those borrowings for domestic purposes on a per-financial-year basis; smaller borrowings per company per year may be remitted into India only after prior approval for rupee expenditure. Other ECB rules remain unchanged, and borrowers with existing loan agreements and Reserve Bank loan registration numbers are exempt from these conditions.
    August 1, 2007
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    FEMA payment compliance requires remitters to submit prescribed undertaking and CA certificate for trade-related payments.
    A remitter of foreign exchange must submit a prescribed undertaking and a Chartered Accountant certificate when making payments to non-residents; this requirement covers all trade-related payments and is not limited to transactions on which tax is to be deducted at source.
    March 13, 2007
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    Service tax on money changing clarified as not leviable where activity is not foreign exchange broking, reversing prior guidance.
    Administrative guidance initially treated money changing as falling within foreign exchange broking and taxable as a banking and financial service; a later circular reversed that view, stating service tax is not leviable on money changing per se because the activity does not constitute foreign exchange broking, raising questions about taxpayers harmed by reliance on the earlier incorrect instruction.
    March 2, 2007
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    Service tax threshold increase expands registration relief; tax base broadened to include renting, works contracts and asset management.
    The exemption threshold for small service providers and the registration trigger are raised, while the service tax base is expanded to add or redefine taxable categories including renting of immovable property for business use, works contract services (with specified inclusions and infrastructure exclusions and a proposed composition option), mining, content development and supply, asset and fund management, and design services; scope amendments further adjust definitions for advertisement space, rent-a-cab, event and social-function related services, producing refund opportunities and raising compliance and litigation issues.
    February 28, 2007
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    Service tax expansion extends to advertising space, vehicle rentals, events and financial services under clarified definitions.
    Amendments expand the service tax base by: excluding certain commercial publications from the term "book" to tax sale of advertising space; widening the definition of "cab" to include larger passenger vehicles while exempting specified educational rentals; including marriage events within mandap, pandal and event management services; defining manpower recruitment to cover pre recruitment screening; altering banking service language to "commercial concern," removing the exclusion for cash management so such services become taxable, and defining financial leasing; and clarifying that maintenance or repair of computer software is taxable while software development remains outside this service.
    February 28, 2007
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    Telecommunication service expansion consolidates telecom activities and broadens taxable recipients under service tax.
    The Finance Bill, 2007 widens the service tax base by creating comprehensive heads: Telecommunication service merges several distinct telecom services and removes the subscriber-only recipient requirement; Mining service covers exploration and exploitation activities including outsourced and subcontracted mining work; and new services for renting of immovable property, the services portion of specified works contracts (with an optional composition scheme), development and supply of content, asset and fund management, and expanded design services are specified with defined inclusions and exclusions.

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      13 FDI PROPOSALS CLEARED

      October 5, 2007

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      Finance Minister, Shri P. Chidambaram has approved 13 Foreign Direct Investment proposals recommended by Foreign Investment Promotion Board (FIPB) in its meeting held on 20th September, 2007. The approval amounts to Rs. 393.36 crore.  The proposals are related to Ministries/Departments,  namely, Commerce,  Heavy Industry,  Industrial Policy & Promotion, Information Technology, Information & Broadcasting,  Telecommunications Urban Development and Economic Affairs. The major investment proposals pertain to the Ministries/Departments of Commerce, Heavy Industry  & Telecommunications.    

      The details of the proposals approved are as follows:

      Sl. No.

      Name of the applicant

      Particulars of the proposal

      FDI/NRI inflows (Rs. In crore)

      COMMERCE

      1

      M/s. NCH Corporation, USA

      Induction of foreign equity of up to 100% in a company engaged in the business of manufacturing, importing, exporting, marketing, selling of specialty maintenance chemicals, and lubricant products in India and abroad under the brand 'certified laboratories'. Proposal attracts Press Note 1 (2005 series).

      1.00

      2

      M/s. South Asia Breweries Pvt. Ltd. Delhi

      Conversion of a 100% foreign owned operating company in the field of manufacture and sale of alcoholic and non-alchoholic products into operating cum holding company and for downstream investment by fresh subscription and acquisition of existing shares upto 60% in Parag Breweries Limited and Agnes Impex Private Limited

      2.71

      3

      M/s. Maruti  Udyog Limited, New Delhi

      To set up a new JV with Futaba Industrial Co. Ltd., Japan, with foreign equity of upto 51% to be engaged in the manufacture and sale of Exhaust System Components for automobiles, limited to exhaust pipes and mufflers for YN 4 and YY 4. Proposal attracts Press Note 1 (2005 series)

      45.90

      HEAVY INDUSTRY

      4

      M/s. KVK Energy and Infrastructure Private Limited, Hyderabad

      Induction of foreign equity upto 70% in the Indian company to make investments in downstream operating companies engaged in implementation of power sector projects

      97.06

      INDUSTRIAL POLICY & PROMOTION

      5

      M/s. Metal One Corporation, Japan

      Induction of foreign equity of up to 5% in a joint venture company with Tata Metalliks (51%) and Kubota Corp., Japan (44%) engaged in the manufacture and sale of ductile iron pipes, fittings and accessories. Proposal attracts press Note 1(2005 series)

      3.75

      INFORMATION TECHNOLOGY

      6

      M/s. Citigroup Global Services Ltd, Mumbai

      Conversion of foreign owned operating company into operating cum holding company to make further downstream investment by incorporating a new wholly owned subsidiary, in the field of providing ITES to banking and financial services industry

      No fresh inflow

      INFORMATION & BROADCASTING

      7

      M/s. MGM Programming Service India Pvt. Ltd. Mumbai

      Induction of foreign equity upto 100% in a company proposing to  undertake activities relating downlinking non-news and current affairs television channel to subscribers in India.

      1.5

      8

      M/s. Nagarjuna Oil Corporation Ltd, Chennai

      Issue of equity shares against payables for supply of second hand equipments to Uhde Gmbh Germany

      No fresh inflow

      ECONOMIC AFFAIRS

      9

      M/s. DIC Asia Pacific Pte. Ltd. Singapore

      Acquisition and induction of foreign equity upto 100% in a company proposed to be engaged in manufacture of printing ink.  Proposal attracts Press Note 1 (2005 series)

      0.01

      INFORMATION & BROADCASTING

      10

      M/s. Bloomberg L.P. USA

      To undertake additional activities of down-linking activities and also increase in paid up capital

      0.85

      URBAN DEVELOPMENT

      11

      M/s. A Rank Holdings Pvt. Ltd.

      Conversion of operating company into 100% operating-cum-holding company, and also to make downstream investment, by way of acquisition of existing shares, in two companies engaged in auto component sector.

      8.00

      TELECOMMUNICATIONS

      12

      M/s. Aster Infrastructure Pvt. Ltd.  Secunderabad

      Induction of foreign equity upto 72.5% in a company engaged in the activity of telecom infrastructure provider, Category -I

      232.58

      13

      M/s. Axis Risk Consulting Services Pvt. Ltd.

      Transfer of shares partly by way of cash and party by way of sware swap.

      No fresh inflow

      Total Rs. 393.36 crore

      The proposal of M/s. ICD Ltd, Hong Kong has been deferred.

      The proposal of M/s. Ford Automotive Finance Company India Pvt. Ltd. has been rejected.           

      In the following 3 (three) proposals, the applicants have been advised to approach RBI, since the requests are for post facto approval and regularization of past violations of FDI policy by the applicants:

      Sl. No

      Name of the applicant

      Particulars of the proposal

      1

      M/s. Devas Multimedia Pvt. Ltd.

      Post-facto approval for conversion of operating company into operating-cum-holding company for making downstream investments.

      2

      M/s. Manipal Universal Learning Private Limited, Bangalore

      Post facto approval of conversion of operating company engaged in imparting education into a holding company for making downstream investment

      3

      M/s. IBSS Techno Park Ltd. (now known as M/s. Taksheel Solutions Ltd.)

      Post-facto approval for allotment of shares in lieu of acquisition of business

      The following 3 (three) proposals have been recommended to be remitted to the Project Approval Board (PAB) for consideration:

      Sl. No

      Name of the applicant

      Particulars of the proposal

      Reasons for remitting to PAB

      1

      M/s. Premier Travel Inn India Ltd, UK

      Payment of franchisee fee equal to 2% and marketing fee of 1% of the gross revenue to the franchisor, in the hotel sector

      Proposal is only for payment of franchisee fee above the limit of automatic permission, and does not involve approval for foreign investment. The foreign equity in this sector is on automatic route without any sectoral cap.

      2

      M/s. Denso Kirloskar Industries Pvt. Ltd.

      Payment of Application Works Cost fee of up to US $ 5.00 million for up gradation of technology, in manufacturing of radiators, air conditioners etc.

      The company has existing approval and the current proposal is only for payment of lump sum fee for technological collaboration above the limit of automatic permission. The current amendment request does not involve approval for foreign investment

      3

      M/s.  MTV India Pvt. Ltd.

      payment of royalty for use of trademarks/brands and fees for technical assistance and other consultancy services, in the broadcasting sector

      Proposal is only for payment of royalty for technical assistance and brand royalty above the limit of automatic permission. The current amendment proposal does not involve approval for foreign investment

      In the following proposal, the Board after consideration found the activity/ transaction to be falling under automatic route and has recommended the applicant to be advised accordingly:

      Sl. No

      Name of the applicant

      Particulars of the proposal

      Reasons for recommendation

      1

      M/s. Rural Electrification Corporation Ltd, New Delhi

      Disinvestment of 10% of the shareholding of REC by way of transfer and also to make public issue of fresh equity capital of 10%, by way of offer for sale, including to SEBI registered FIIs, FVCIs and NRIs.

      The Board recommended that the activity of REC is to be treated as 'Leasing and Finance' and hence RBI and REC be advised that it does not require

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