Business / Industry Sectors
Doing Business in India: the first steps
28/04/2013

Background

 

The Republic of India is a vast country which has existed in one form or another for many millennia. Bound by cultural commonalities, independent India is the second largest country in the world — home to about a sixth of the human population — and the seventh largest country by sheer land mass.

 

Following the liberalization of India’s economy in 1991, India experienced unprecedented growth and has become an integral part of the global economy. India is now the world’s fourth largest economy and has been growing at an astounding annual rate of 7.8% since 2002.

 

This paper attempts to introduce the basic legal regime governing the conduct of business in India and answer questions and issues commonly raised by foreign investors Though liable to change, we  believe this paper  will provide clarity regarding trade & commerce procedures in India.  However, it should not be used as a legal opinion on any specific matter.  

 

Entering India

Investors seeking to set up operations or make investments in India need to appraise and structure their activities on three pillars:

  • Strategy
    Observing the economic and political environment in India from the perspective of the investment

 

  • Law
    Exchange Control Laws: Primarily the Foreign Exchange Management Act, 1999 (“FEMA”)  circulars, notifications and press notes issued under the same

 

  • Tax
    Domestic Taxation Laws: The Income Tax Act, 1961; indirect tax laws including laws relating to value added tax, service tax, customs, excise; International Tax Treaties: Treaties with favorable jurisdictions such as Mauritius, Cyprus, Singapore and the Netherlands.

 

Foreign Direct Investment

Setting up India operations or investing in India requires conformity with India’s foreign exchange regulations, specifically, the regulations governing foreign direct investment (“FDI”). Most aspects of currency transactions with India, including investments, are governed by FEMA and the delegated legislation there under. FDI, up to 100%, is permitted in most sectors in India under the ‘automatic route’ - no prior permission is required from RBI or the Central Government.

 

 

Satish Kanodia is a professional providing a wide range of services – set up fro inbound and outbound servicesm direct and indirect taxes, transfer pricing and all corporate services. He was the Founder President of the Federation of Indo-Israel Chambers of Commerce.

 

He can be contacted at: satish@kcco.in

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