The Narendra Modi led Government, which completes its first anniversary this month, continued its focus on simplifying procedures for ease of doing business in India. The annual updation to the consolidated foreign direct investment policy was published this month. The controversial MAT levy is being relooked into.
FDI Policy – The Consolidated FDI Policy of India was published with effect from May 12, 2015. This is a consolidation of the FDI policy as on date including all amendments relating to FDI done in the past 1 year. There were no surprises here. The proposal to remove 51% FDI in multi-brand retail, being an agenda item on the ruling party’s election manifesto last year, was not put into effect. However, recent reports have quoted the Minister of Commerce and Industry, Nirmala Sitharaman, stating that she will not entertain any proposal for multi-brand retail and also not allow foreign players to set up supermarkets. She was also quoted as saying that the Government will prevent back door entry in multi-brand retail through FDI in e-commerce.
Ease of doing business: A slew of measures were taken by the Government in the past year to improve India’s ease of doing business index. A few of the important actions are mentioned below:
- The process for applying for an industrial licence (IL) (applicable to specific industries) and Industrial Entrepreneur Memorandum (IEM) (applicable to all other industries) has been made online at the eBiz website (www.ebiz.gov.in). Hence the filing can be done any time now. Further it will also act as a single window portal for obtaining government clearances for 14 services such as employer registration with social security authorities, permanent account number (for income tax), allotment of directors’ identification number, importer exporter code (IEC) etc.
- The initial validity of IL has been increased from 2 to3 years. Further the Ministry of Home Affairs (MHA) will grant security clearance on IL applications within 12 months. Also, application forms for Industrial Licence (IL) and Industrial Entrepreneur Memorandum (IEL) have been simplified
- The security manual for Licensed Defence Industry has been issued removing requirement for obtaining affidavit signed before Judicial Magistrate to confirm that applicants will comply with the safety and security guidelines of the Ministry of Defence and MHA.
- Process of applying for Environment and Forests clearances has been made online through Ministry of Environment and Forests’ portals http://environmentclearance.nic.in/ and http://forestsclearance.nic.in/
- DIPP has requested all Secretaries of Government of India and Chief Secretaries of the States/Union Territories to simplify and rationalize the regulatory environment. In order to improve the regulatory business environment they have been requested to take the following measures on priority:
- All returns should be filed on-line through a unified form;
- A check-list of required compliances should be placed on Department’s web portal;
- All registers required to be maintained by the business should be replaced with a single electronic register;
- No inspection should be undertaken without the approval of the Head of the Department; and
- For all non-risk, non-hazardous businesses a system of self-certification should be introduced.
- The issue of time taken in registration with social security authorities, Employees Provident Fund Organization (EPFO) and Employees State Insurance Corporation (ESIC), was taken up with the Ministry of Labour and Employment, Director General, ESIC and Central Provident Fund Commissioner. Both the processes have been automated and ESIC registration number is being provided on a real-time basis.
- An Investor Facilitation Cell has been created in ‘Invest India’ to guide, assist and handhold investors during the entire life-cycle of the business. Here is the website link: http://www.investindia.gov.in/contact-us/
Country-wise Restriction on FDI to be removed – it is proposed that current restrictions and checks initiated prior to any foreign investment from countries would be removed. Instead the checks and balances would be introduced through individual contract clauses to ensure that post the investment internal security norms are adhered to. Further industry specific policies will be introduced to ensure relevant and applicable compliances.
Committee to look into MAT levy on FIIs – The Finance Minister has set up a committee to a Committee to be headed by Justice A.P. Shah, Chairman of the Law Commission, and refer specific issue of MAT on FIIs with a request to give its recommendation on the issue expeditiously. The Government will consider the recommendations of the Committee and take an appropriate decision as early as possible.