Modi government to provide launchpad for disruptive ideas: Startup Act in works

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The Narendra Modi government wants to provide a powerful launchpad for startups by drastically simplifying the rules and ensuring that innovators are able to take advantage of such an enabling environment, thus unleashing entrepreneurial energiesBSE 1.29 % and creating jobs.

At the heart of the initiative is distilling the cumbersome process of compliances under 22 different laws into a two-page Startup Act, a senior government official told ET. The Department of Industrial Policy and Promotion (DIPP) is looking to turn India into a startup haven.

It plans to cut through the thicket of regulations that holds back creativity and stunts the rapid evolutionary cycle that’s a feature of the sector.
“Compliances are a big issue for aspiring startups,” said the official. “We are trying to see whether we can bypass the multiple laws and draft a separate legislation instead.”

Already home to the fourth largest startup community in the world, India wants to create a robust ecosystem in which entrepreneurship can flourish as envisaged by the Startup India, Stand Up India initiative of Prime Minister Modi announced in this year’s Independence Day address. Jobs created by Indian startups are expected to rise to 2,50,000 by 2020 from 80,000, according to a Nasscom report.
The government plans to unveil a detailed Startup India plan next month. The DIPP is drawing up a clear definition for startups to ensure that the regime is available only to companies that practice innovation. This is necessary because the government is also considering tax incentives for startups, which it doesn’t want other companies to take advantage of.
Companies that qualify for the tag are likely to be less than five years old, providing an innovative product or service. They will also need to conform to financial norms to ensure that the incentives are not spread too thin.
The new policy will address delays in incorporation, employee stock options, lack of initial funding, cumbersome Foreign Exchange Management Act (Fema) documentation and access to external commercial borrowings.
“It will be a colossal help if the government can do something about this,” said Rohan Malhotra, founder of Investopad, a startup incubator and financing company.

“In the US, you can incorporate a company in a few hours. In India, it is a nightmare to do even basic administration work.” Entrepreneurs feel their energies are sapped by the need to negotiate their way through the bureaucratic maze.

“Most startups have a backlog on compliances and simply get a professional to handle these matters when they want to raise funds,” said Gaurav Kachru, founder, 5ideas Startup Superfuel. “Some of it is a waste of time.”

Last week, DIPP held discussions with leaders of the startup community including SoftBank president Nikesh Arora, Snapdeal CEO Kunal Bahl, Oyo Rooms founder Ritesh Agarwal and former Infosys director Mohandas Pai to draw up a list of action points.

Commerce ministry firming up Africa-focused export strategy

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The commerce department is firming up an export strategy focused on Africa, giving a new dimension to the government’s strategic push for ties with the continent that could offer a large market for Indian goods at a time of slowing global demand.

While India has offered a $10 billion credit line to Africa, the department has extended the benefits under the Merchandise Exports from India (MEIS) scheme to many goods headed for Africa to make the most of this credit. Senior government officials led by commerce minister Nirmala Sitharaman will next week apprise Parliament’s consultative committee on plans to address India’s continuously falling exports, with a focus on Africa and the country’s neighbours. The meeting is to be in held in Goa on November 6-7.

“Since the situation is not good globally, we have decided to focus on exports to Africa and our neighbouring countries. We can use our competitiveness in these markets to increase exports. We are working on an export strategy for next week’s meeting,” said a commerce department official, who did not wish to be named.
At the meeting the committee will also discuss Foreign Trade Policy (FTP) 2015-20 and its implications on exports, the official said. The steady decline in exports has triggered apprehensions that India may even miss last year’s exports figure of $310.5 billion. Merchandise exports fell nearly a quarter in September, the tenth straight month of decline, raising worries that shipments may fall short of last year’s levels.
The Directorate General of Foreign Trade (DGFT) has included exports of textiles and ready-made garments including cotton fabrics, both woven and knitted, and made-ups to the African countries under the MEIS. The industry, which has been grappling with falling exports, has approved of this strategy.

Following the revision, exports of value-added and labour intensive products such cotton dyed and printed fabrics, and made-ups, to African countries such as Mauritania, Mali, Niger, Benin, Angola, Senegal, Togo, Ghana, Kenya and Tanzania are expected to receive a huge boost. “This is a very positive step taken by the government and has come as a huge relief to the exporters of cotton textiles who are faced with declining exports,”Texprocil chairman RK Dalmia said in a statement.

SEBI cuts IPO paperwork drastically

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From December 1, companies filing for a public issue of securities (IPO/FPO and the like) have to come out with abridged prospectus containing all material and appropriate information on the issue to enable informed decision-making by investors.

Amending its public issue regulations, equities and commodities market regulator SEBI said the abridged prospectus should consist of five sheets of paper printed on both sides in A4 size booklet form.

SEBI has mandated that information given in tabular format should not be repeated in text format in the abridged prospectus. The abridged prospectus would also contain the application form in a manner by which tearing off the application form would not mutilate the prospectus, SEBI said.

Generic information not specific to the issuer shall be brought out in the form of a General Information Document, said SEBI.

Govt approves 16 FDI proposals worth Rs 4,722 cr

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The government has cleared 16 foreign investment proposals, including that of HDFC Capital and Ageon Religare Life Insurance Company, amounting to Rs 4,722 crore.
The investment proposals were approved following the recommendation for the same by the Foreign Investment Promotion Board (FIPB), headed by economic affairs secretary Shaktikanta Das.
“The government has approved 16 proposals of foreign direct investment amounting to Rs 4,722 crore,” the finance ministry said in a statement.
However, it rejected 8 proposals including that of Cipla Health Limited and Apollo Hospitals Enterprise Limited.
The Board cleared proposal of HDFC Capital Advisors Limited which alone entails investments of Rs 2,400 crore.
The company sought approval for issue of units to Green Light, it said.
“HDFC Fund proposes to make investments in equity, equity linked instruments, redeemable preference shares, non-convertible debentures and other debt securities of listed or unlisted investee companies engaged in real estate construction development projects which are permitted under the SEBI AIF Regulations as a Category II AIF,” it said.
Besides, Ageon Religare Life Insurance’s proposal worth Rs 559.96 crore was cleared by FIPB.
The approval was sought for the transfer of shares to Aegon India Holding thereby raising the foreign shareholding from 26 percent to 49 percent.
Among others, Sun Pharma Research Advanced Company Ltd’s proposal worth Rs 250 crore, Synergia Life Sciences Pvt Ltd (Rs 40 crore) and the post facto approval for Aditya Birla Nuvo’s Rs 377 crore plan were cleared during a meeting held on 29 September.

Govt proposes patent rule changes to boost ease of doing business

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The government on Thursday proposed amendments to the rules under the Patents Act to streamline the application process, as part of its efforts to improve the ease of doing business in India.

The government on Thursday proposed amendments to the rules under the Patents Act to streamline the application process, as part of its efforts to improve the ease of doing business in India. The rules also seek to encourage the manufacturing sector by offering expeditious processing of patent applications in cases where an investor has committed to use that innovation for its manufacturing activity in India.

Having a robust intellectual property rights (IPR) regime is one of the priorities of Prime Minister Narendra Modi, who recently agreed with his US counterpart Barack Obama to conduct annual technical dialogue between the nations in this area and take steps that would foster innovation and job creation.

The Indian Patent Amendments (Amendment Rules), 2015 released by the Department of Industrial Policy and Promotion (DIPP) on Thursday seeks to fast-track the patent application and processing procedure, and clarifies the manner in which certain information and supporting drawings are to be furnished. Stake holders have 30 days to give their feed back. The rules, however, do not touch substantive parts of the law — the demands from pharma MNCs for the removal of Section 3(d), the extra filter for patentability, have not been met. While some quarters allege that Section 3(d) is a TRIPS-plus provision, India has long maintained that it is meant to prevent ‘evergreening’ of patents by way of incremental changes sans therapeutic value, and is fully in conformity with the TRIPs.

The new rules also introduce ‘expedited examination of applications’ under certain circumstances that include cases where an applicant in the corresponding international application has designated the Indian Patent Office as the International Searching Authority.

Expedited examination is also available when the applicant or his assignee or prospective manufacturer (licensee) has already started manufacturing of the invention in India, or has undertaken that the manufacturing shall commence within two years from the grant of patent.

Relaxed tax residency rules to help MNCs

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While Indian-incorporated firms (Indian companies) are taxed at 30% plus dividend distribution tax (DDT), non-resident (foreign) companies are taxed at 40% on Indian income without DDT.

Foreign companies with Indian shareholders won’t have to pay taxes here for their worldwide income unless they are managed from India on an everyday basis. If these foreign companies are managed from outside India, whether or not they are promoted by resident Indians, they will have to pay taxes in India only for the income they earn in the country.

This major relaxation is being built into the place of effective management (POEM) rules being finalised by the finance ministry, government sources told FE. The POEM concept that was included in the I-T Act early this fiscal had raised fears among many multinational companies with Indian promoters or major shareholders that New Delhi would lay claim to taxes on their incomes attributable to other geographies.

While Indian-incorporated firms (Indian companies) are taxed at 30% plus dividend distribution tax (DDT), non-resident (foreign) companies are taxed at 40% on Indian income without DDT. Although the tax rates on foreign companies are higher, the prospect of subjecting the worldwide income to taxation here could have potentially hit many MNCs with Indian stakeholders.

The proposed lenient POEM rule, analysts said, would give the likes of UK’s Jaguar Land Rover (which has the Indian parent Tata Motors) a chance to convince the Indian tax authorities that the UK firm’s commercial decisions are taken by the local management there and avoid paying taxes for the income in the UK and elsewhere in India.

Similarly, foreign subsidiaries of state-owned oil companies such as ONGC Videsh’s Imperial Energy incorporated in Cyprus and ONGC Nile Ganga doing oil exploration in Sudan, Syria and Venezuela can potentially show that their managerial and commercial decisions are ‘in substance’ made at the local level although OVL, the Indian holding company, is under the direct administrative control of the government of India. The same is true for HPCL’s Singapore subsidiary Prize Petroleum International.

“Putting a management in place is a shareholder decision, not a management decision. Promoters getting into any other role would amount to overstepping shareholder rights, going by the strict interpretation of law. The POEM as a principle must cover only management decisions,” said Rahul Garg, leader, direct tax, PwC India.

According to experts, seeking permission from an Indian parent on a decision taken by an overseas subsidiary to see if it is in line with the global policy of the parent may not ordinarily amount to the parent exercising management control, unlike the parent passing on a centrally taken decision to the foreign associate. However, where the senior management of foreign associates of Indian firms are based in India or have common board members based in India, the overseas entity may find it hard to prove that management decisions are taken from outside India. Also, foreign associates of Indian companies lacking skilled managerial personnel or do not assume business risks on its own, could have a tough time convincing the taxman in India that they are not Indian residents.

Prior to the Finance Act, 2015, a company was considered an Indian resident if its control and management were wholly in India throughout the financial year. Since some Indian companies sought to avoid resident status and taxes on their worldwide income by holding one or two board meetings outside India, the government changed the residence definition saying that any company, the ‘place of effective management’ of which is in India, would also be a resident company. Tax residence is a place from where key management and commercial decisions necessary for running the company are, in substance, made. According to experts, this OECD definition of tax residence relies on the substance of the organisation’s structure than its legal form. The government is bringing out clarifications as there is not much global guidance on the concept.

Points to note:

* Mere shareholder rights with Indians won’t result in resident status
* Only managerial decisions taken here will make foreign firms Indian residents and liable to pay tax for entire global income here
* Foreign firm has to prove management independence to avoid tax residence if board members are common with that of Indian ones.

Source: http://www.financialexpress.com/article/economy/relaxed-tax-residency-rules-to-help-mncs/156692/

 

India takes fresh guard to boost trade and economic ties

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The slowdown in China provides India another opportunity to make deep inroads into the African continent, strengthen business and economic ties.

The India-Africa summit will be a perfect setting for business communities from India and African nations to explore areas of cooperation and provide a roadmap to their governments.

Economic and trade relations between India and Africa have been on the slow track despite several Indian companies having a presence in the continent. The current trade is estimated around $75 billion. Experts say there is potential for this to go past $100 billion. But Commerce and Industry Minister Nirmala Sitharaman is cautious not to cite a number. More than 165 Indian companies invested in Africa between January 2003 and July 2015 in telecom, infrastructure, pharmaceuticals, healthcare and elsewhere.

India official says deeper cooperation in agriculture and agro-processing, engineering, textiles, leather and pharmaceuticals would have a positive impact on food security, raise health standards and create jobs in Africa and India. Food processing is a key area identified by both sides. Tourism too holds promise.

“There is clear intention that we will participate in African manufacturing and they’ll do whatever they can do to Make in India,” says Rajan Bharti Mittal, vice chairman of Bharti Enterprises.

Several African countries have high growth and are keen to engage with India.

Others would want Indian expertise in various sectors to speed up economic expansion. “There’s been growing interest in many African countries to do more business with the East and that includes India and China… Africa is opening to everybody who wants to do business,” says Zimbabwe trade minister Mike Bimha.

But there are issues to be addressed for smoother trade ties. Connectivity, banking links and security issues must be resolved. Trade experts say India needs to reorient strategy to boost ties.

“For the Africa-India trade potential to be realised, India must adopt an investment-led approach. We should support our African partners in development projects and handhold them in executing these efficiently,” says Biswajit Dhar, professor at JNU.