TaxTMI 
TaxTMI 
Review of Foreign Direct Investment (FDI) policy on various sectors
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....or article or thing with a different chemical composition or integral structure. Para 6.2.5 of the FDI Policy is amended to read as under: Subject to the provisions of the FDI policy, foreign investment in `manufacturing' sector is under automatic route. Further, a manufacturer is permitted to sell its products manufactured in India through wholesale and/or retail, including through e-commerce without Government approval. 3. Para 3.2.5 of the FDI Policy is amended to read as under: FDI in LLPs is permitted, subject to the following conditions: (a) FDI is permitted under the automatic route in LLPs operating in sectors/activities where 100% FDI is allowed, through the automatic route and there are no FDI- linked performance conditions. (b) An Indian company or an LLP, having foreign investment, will be permitted to make downstream investment in another company or LLP in sectors in which 100% FDI is allowed under the automatic route and there are no FDI-linked performance conditions. (c) FDI in LLP ....
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.... (iv) For the purpose of downstream investment, the Indian companies/LLPs making the downstream investments would have to bring in requisite funds from abroad and not leverage funds from the domestic market. This would, however, not preclude downstream companies/LLPs, with operations, from raising debt in the domestic market. Downstream investments through internal accruals are permissible, subject to the provisions of paragraphs 3.10.3 and 3.10.4.1. For the purposes of FDI policy, internal accruals will mean as profits transferred to reserve account after payment of taxes. 7. Para 3.10.3.3 of the FDI Policy is amended to read as under: For undertaking activities which are under automatic route and without FDI linked performance conditions, Indian company which does not have any operations and also does not have any downstream investments, will be permitted to have infusion of foreign investment under automatic route. However approval of the Government will be required for such companies for infusion of foreign investmen....
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....malgamation, merger/demerger, acquisition etc. or (iv) The ownership of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares and/or fresh issue of shares to non-resident entities through amalgamation, merger/demerger, acquisition etc. (v) It is clarified that Foreign investment shall include all types of foreign investments i.e. FDI, investment by Flls, FPIs, QFIs, NRIs, ADRs, GDRs, Foreign Currency Convertible Bonds (FCCB) and fully, mandatorily & compulsorily convertible preference shares/debentures, regardless of whether the said investments have been made under Schedule 1, 2, 2A, 3, 6 and 8 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations. (vi) Investment by NRIs under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations will be deemed to be domestic inves....
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....nery, waste management systems as prescribed by the National Livestock Policy, 2013 and in conformity with the existing 'Standard Operating Practices and Minimum Standard Protocol.' (b) Poultry breeding farms and hatcheries where micro-climate is controlled through advanced technologies like incubators, ventilation systems etc. (iii) In the case of pisciculture and aquaculture, scope of the term 'under controlled conditions' covers (a) Aquariums (b) Hatcheries where eggs are artificially fertilized and fry are hatched and incubated in an enclosed environment with artificial climate control. (iv) In the case of apiculture, scope of the term 'under controlled conditions' covers- (a) Production of honey by bee-keeping, except in forest/wild, in designated spaces with control of temperatures and climatic factors like humidity and artificial feeding during lean seasons. 13. Para 6.2.2 of the FDI Policy is amended to read as under: Sector/Activity Foreign Investmen....
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....sp;(Development & Regulation) Act, 1951 49% Automatic up to 49% Above 49% under Government route on case to case basis, wherever it is likely to result in access to modern and 'state-of- art' technology in the country. 6.2.6.2 Other Conditions (i) Infusion of fresh foreign investment within the permitted automatic route level, in a company not seeking industrial license, resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, will require Government approval. (ii) Licence applications will be considered and licences given by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, in consultation with Ministry of Defence and Ministry of External Affairs. (iii) Foreign investment in the sector is subject to security clearance and guidelines of the M/o Defence. (iv) Investee company should be structured to be self-sufficient in areas of product design and development. The investee/joint venture company along with manufacturing faci....
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....r Section 2 (72) of the Companies Act, 2013, as the case may be. The term `largest Indian shareholder', used in this clause, will include any or a combination of the following: (I) In the case of an individual shareholder, (aa) The individual shareholder, (bb) A relative of the shareholder within the meaning of Section 2 (77) of Companies Act, 2013. (cc) A company/group of companies in which the individual shareholder/HUF to which he belongs has management and controlling interest. (II) In the case of an Indian company, (aa) The Indian company (bb) A group of Indian companies under the same management and ownership control. (B)For the purpose of this Clause, "Indian company" shall be a company which must have a resident Indian or a relative as defined under Section 2 (77) of Companies Act, 2013/ HUF, either singly or in combination holding at least 51% of the shares. (C)Provided that, in case of a combination of all or any of the entities mentioned in Sub-Clauses (I) and (II) of clause 4.1.3(v)(d)(A) above, each of the parties shall have entered....
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....datory requirement; and (c) Flls/FPIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding. 21. Para 6.2.11 of the FDI Policy is amended to read as under: Sector/Activity Foreign Investment Cap Entry Route 6.2.11.1 Construction-development projects (which would include development of townships, construction of residential/commercial premises, roads or bridges, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure, townships) 100% Automatic 6.2.11.2 Each phase of the construction development project would be considered as a separate project for the purposes of FDI policy. Investment will be subject to the following conditions: (A) (i) The investor will be permitted to exit on completion of the project or after development of trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage. (ii) Notwithstanding anything contained at (A) (i) above, a foreign inves....
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....ounting to transfer, will not amount to real estate business. (ii) Condition of lock-in period at (A) above will not apply to Hotels &Tourist Resorts, Hospitals, Special Economic Zones (SEZs), Educational Institutions, Old Age Homes and investment by NRIs. (iii) Completion of the project will be determined as per the local bye-laws/rules and other regulations of State Governments. (iv) It is clarified that 100% FDI under automatic route is permitted in completed projects for operation and management of townships, malls/ shopping complexes and business centres. Consequent to foreign investment, transfer of ownership and/or control of the investee company from residents to non-residents is also permitted. However, there would be a lock-in-period of three years, calculated with reference to each tranche of FDI, and transfer of immovable property or part thereof is not permitted during this period. (v) "Transfer", in relation to FDI policy on the sector, includes,- (a) the sale, exchange or relinquishment of the asset ; or (b) the extinguishment of any rights therein ; or (c) the compulsory acquisition the....
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....undertake 'single brand' product retail trading in the country for the specific brand, directly or through a legally tenable agreement with the. brand owner for undertaking single brand product retail trading. The onus for ensuring compliance with this condition will rest with the Indian entity carrying out single-brand product retail trading in India. The investing entity shall provide evidence to this effect at the time of seeking approval, including a copy of the licensing/franchise/sub-licence agreement, specifically indicating compliance with the above condition. The requisite evidence should be filed with the RBI for the automatic route and SIA/FIPB for cases involving approval. (e) In respect of proposals involving FDI beyond 51 %, sourcing of 30% of the value of goods purchased, will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors. The quantum of domestic sourcing will be self-certified by the company, to be subsequently checked, by statutory auditors....
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....s and/or companies which are owned and controlled by resident Indian citizens. (v) Government may relax sourcing norms for entities undertaking single brand retail trading of products having 'state-of-art' and 'cutting-edge' technology and where local sourcing is not possible. 24. After para 6.2.16.4 of the FDI Policy, following new para is added: Sector/Activity Foreign Investment Cap Entry Route 6.2.16.5 Duty Free Shops 100% Automatic (i) Duty Free Shops would mean shops set up in custom bonded area at International Airports/International Seaports and Land Custom Stations where there is transit of international passengers. (ii) Foreign investment in Duty Free Shops is subject to compliance of conditions stipulated under the Customs Act, 1962 and other laws, rules and regulations. (iii) Duty Free Shop entity shall not engage into any retail trading activity in the Domestic Tariff Area of the country. 25. Para 6.2.18.2.2.4(i) of the FDI Policy is amended to read as under: The permissible l....