DIPP issues amendments in FDI policy for various sectors

Feb 02, 2018 | by Avantis RegTech Legal Research Team

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Department of Industrial Policy & Promotion (DIPP) vide press note has issued amendments in the Consolidated FDI Policy Circular of 2017 (FDI Policy). Vide this amendment-

·      Prohibition of restrictive conditions regarding audit firms- Wherever the foreign investor wishes to specify a particular auditor/audit firm having international network for the Indian investee company, then audit of such investee companies should be carried out as joint audit wherein one of the auditors should not be part of the same network.

·         Foreign investment into an Indian company engaged only in the activity of investing in the capital of other Indian company/ies-Foreign Investment in Investing Companies registered as Non-Banking Financial Companies (NBFC) with the Reserve Bank of India, being overall regulated, would be under 100% automatic route

·         Single Brand Product Retail Trading-Foreign Investment in Single Brand product retail trading is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices.FDI in Single Brand product retail trading would be subject to the following conditions:

(i)      Products to be sold should be of a ‘Single Brand’ only

(ii)    Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India

(iii)   Single Brand’ product-retail trading would cover only products which are branded during manufacturing.

(iv)  A non-resident entity or entities, whether owner of the brand or otherwise, shall be permitted to undertake ‘single brand’ product retail trading in the country for the specific brand, either directly by the brand owner or through a legally tenable agreement executed between the Indian entity undertaking single brand retail trading and the brand owner.

(v)    In respect of proposals involving foreign investment 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, from the duly certified accounts which the company will be required to maintain. This procurement requirement would have to be met, in the first instance, as an average of five years’ total value of the goods purchased, beginning 1St April of the year of the commencement of the business i.e. opening of the first store. Thereafter, it would have to be met on an annual basis. For the purpose of ascertaining the sourcing requirement, the relevant entity would be the company, incorporated in India, which is the recipient of foreign investment for the purpose of carrying out single-brand product retail trading.

(vi)  Subject to the conditions mentioned in this Para, a single brand retail trading entity operating through brick and mortar stores, is permitted to undertake retail trading through e-commerce.

(vii)Single brand retail trading entity would be permitted to set off its incremental sourcing of goods from India for global operations during initial 5 years, beginning 1St April of the year of the opening of first store, against the mandatory sourcing requirement of 30% of purchases from India. For this purpose, incremental sourcing will mean the increase in terms of value of such global sourcing from India for that— single brand (in INR terms) in a particular financial year from India over the preceding financial year, by the non—resident entities undertaking single brand retail trading, either directly or through their group companies. After completion of this 5 years period, the SBRT entity shall be required to meet the 30% sourcing norms directly towards its India’s operation, on an annual basis

[IPP File No.: 5/2/2018-FDI Policy]


URL: http://dipp.nic.in/sites/default/files/pn1_2018.pdf


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