India Business Guide—Startup to Set-up

Chapter 1 Introduction …………………………………………………………………………………….1
¶1-010 Start-ups Revolution in India ……………………………………………………………… 3
Chapter 2 Advantage India ……………………………………………………………………………..7
¶2-010 Market Place………………………………………………………………………………………………7
¶2-020 Manufacturing and Service Sectors…………………………………………………………..8
¶2-030 Communication and Information Technology…………………………………………9
¶2-040 Low Cost and Skilled Manpower……………………………………………………………10
¶2-050 Strong Banking and Financial Sector ………………………………………………………12
¶2-060 Reforms in Infrastructure ………………………………………………………………………..13
¶2-070 Liberalisation of Foreign Investment and Foreign Trade Regulations …..16
¶2-080 International and Regional Trade Agreements ………………………………………17
Chapter 3 Constitutional Framework ……………………………………………………………19
¶3-010 Governance Framework ………………………………………………………………………….19
¶3-020 Hierarchy of Courts for Civil Matters……………………………………………………..22
¶3-030 Alternate Dispute Resolution (ADR) ………………………………………………………25
Chapter 4 Establishing Presence in India …………………………………………………….. 27
¶4-010 Entry Option for Foreign Investors …………………………………………………… 27
¶4-020 Incorporation of Company ……………………………………………………………….. 34
¶4-030 Limited Liability Partnerships in India …………………………………………….. 39
¶4-040 Foreign Exchange Guidelines on Investment……………………………………. 41
¶4-050 Setting up a Legal Structure for a Non-profit Entity in India……………. 41
Chapter 5 Foreign Investment in India …………………………………………………………49
¶5-010 Policy on Foreign Direct Investment ………………………………………………… 49
¶5-020 Eligibility for Investment in India — Who can Invest? …………………….. 51
¶5-030 Entry Routes ……………………………………………………………………………………… 67
,xii India Business Guide – Start-up to Set-up
¶5-040 Prohibition on Investment in India …………………………………………………… 71
¶5-050 Types of Instruments Eligible for Foreign Investment ……………………… 72
¶5-060 Entities into which Foreign Investment can be made ……………………….. 74
¶5-070 Issue of Instruments ………………………………………………………………………….. 78
¶5-080 Transfer of Instruments …………………………………………………………………….. 84
¶5-090 Pricing Guidelines …………………………………………………………………………….. 92
¶5-100 Reporting Obligations ………………………………………………………………………. 94
¶5-110 Downstream Investment …………………………………………………………………… 98
¶5-120 Calculation of Total Foreign Investment …………………………………………. 103
¶5-130 Taxes, Remittance and Repatriation ……………………………………………….. 107
¶5-140 Violations and Consequences …………………………………………………………. 108
¶5-150 Sector-Specific Policy ………………………………………………………………………. 110
Chapter 6 Tax Laws …………………………………………………………………………………….. 149
¶6-010 Chargeability of Income Tax …………………………………………………………… 152
¶6-020 Residential Status ……………………………………………………………………………. 152
¶6-030 Scope of Income ………………………………………………………………………………. 153
¶6-040 Tax Year…………………………………………………………………………………………… 154
¶6-050 Rates of Income Tax ………………………………………………………………………… 154
¶6-060 Aligning Scope of “Business Connection” under the Indian
Domestic Tax Laws with Modified PE Rule as per Multilateral
Instrument (MLI) …………………………………………………………………………….. 155
¶6-070 “Business Connection” to Include “Significant Economic presence” 156
¶6-080 Place of Effective Management ……………………………………………………….. 157
¶6-090 Heads of Income ……………………………………………………………………………… 163
¶6-100 Computation of Profits and Gains from Business or Profession …….. 163
¶6-110 Exemption on gift restricted to Individuals/HUF ………………………….. 168
¶6-120 Cost of Acquisition under “Offer-For-Sale” in IPO…………………………. 169
¶6-130 Abolition of Angel Tax ……………………………………………………………………. 170
¶6-140 Equalization levy …………………………………………………………………………….. 171
¶6-150 Tax incentives to IFSC …………………………………………………………………….. 171
¶6-160 Computation of profits of Life Insurance business …………………………. 172
¶6-170 Income from letting out residential house property ……………………….. 173
¶6-180 Transfer Pricing ………………………………………………………………………………. 174
¶6-190 Anti-Avoidance Rules …………………………………………………………………….. 175
¶6-200 Master File and Country-by-Country (CbC) Reporting –
BEPS Action Plan …………………………………………………………………………….. 180
¶6-210 Withholding Tax ……………………………………………………………………………… 182
¶6-220 Minimum Alternative Tax (MAT) …………………………………………………… 183
¶6-230 Alternate Minimum Tax………………………………………………………………….. 184
,Detailed Contents xiii
¶6-240 Securities Transaction Tax ………………………………………………………………. 184
¶6-250 Taxation of Dividend Income………………………………………………………….. 184
¶6-260 Taxation of Dividends Received from Foreign Subsidiaries …………… 185
¶6-270 Buyback of shares by the Indian company ……………………………………… 186
¶6-280 Return of Income …………………………………………………………………………….. 188
¶6-290 Books/Records to be Maintained and Audited ………………………………. 188
¶6-300 Assessment and Dispute Resolution……………………………………………….. 188
¶6-310 Appeals: Administrative, Quasi-Judicial and Judicial Hierarchy …… 191
¶6-320 Board for Advance Rulings …………………………………………………………….. 191
¶6-330 Advance Pricing Arrangement ……………………………………………………….. 192
¶6-340 Mutual Agreement Procedure ………………………………………………………… 194
¶6-350 Bilateral Investment Promotion and Protection Agreement …………… 197
¶6-360 Closure of Business …………………………………………………………………………. 198
¶6-370 Corporate Restructuring: Tax Implications …………………………………….. 199
¶6-380 Effect of the order of the Tribunal or Court in respect of
business reorganization – Section 170A of the ITA …………………………. 200
¶6-390 Administration ………………………………………………………………………………… 201
¶6-400 GST Overview …………………………………………………………………………………. 201
¶6-410 GST – Structure ………………………………………………………………………………… 201
¶6-420 Taxes Subsumed under GST …………………………………………………………… 202
¶6-430 Taxes outside GST …………………………………………………………………………… 202
¶6-440 Types of Taxes under GST ………………………………………………………………. 203
¶6-450 Levy of GST …………………………………………………………………………………….. 203
¶6-460 Place of Supply………………………………………………………………………………… 204
¶6-470 Valuation under GST ………………………………………………………………………. 205
¶6-480 Exceptions to Transaction Value …………………………………………………….. 205
¶6-490 Rate of GST ……………………………………………………………………………………… 206
¶6-500 Time of Supply ………………………………………………………………………………… 206
¶6-510 Input Tax Credit ……………………………………………………………………………… 207
¶6-520 Reverse Charge Mechanism ……………………………………………………………. 208
¶6-530 Import of Services and Goods …………………………………………………………. 209
¶6-540 Export of Goods and Services …………………………………………………………. 209
¶6-550 Cross-border Services between Related Parties ………………………………. 211
¶6-560 Registration……………………………………………………………………………………… 212
¶6-570 Returns and Payment under GST……………………………………………………. 213
¶6-580 Documentation under GST ……………………………………………………………… 214
¶6-590 Input Service Distributor…………………………………………………………………. 214
¶6-600 Special Economic Zones ………………………………………………………………….. 215
¶6-610 Job Work Transactions ……………………………………………………………………. 215
,xiv India Business Guide – Start-up to Set-up
¶6-620 Composite Supply and Mixed Supply ……………………………………………. 215
¶6-630 Composition Scheme ………………………………………………………………………. 216
¶6-640 Anti-Profiteering……………………………………………………………………………… 216
¶6-650 Tax Deduction at Source (TDS) ……………………………………………………….. 216
¶6-660 Compliance Rating ………………………………………………………………………….. 217
¶6-670 Administrative Control over Assessee ……………………………………………. 217
¶6-680 Chargeability of Customs Duty ………………………………………………………. 217
¶6-690 The Levy of Customs ………………………………………………………………………. 218
¶6-700 Export Duties ………………………………………………………………………………….. 218
¶6-710 Import Duties ………………………………………………………………………………….. 218
¶6-720 Rate of Duty…………………………………………………………………………………….. 220
¶6-730 Input Tax Credit ……………………………………………………………………………… 221
¶6-740 Classification of Goods ……………………………………………………………………. 221
¶6-750 Advance Ruling ………………………………………………………………………………. 221
¶6-760 Administration of Rules of Origin under Trade Agreement …………… 223
¶6-770 Administration ………………………………………………………………………………… 223
¶6-780 Special Economic Zone ……………………………………………………………………. 223
¶6-790 Foreign Trade Policy under Foreign Trade (Development and
Regulation) Act, 1992 ………………………………………………………………………. 223
Chapter 7 Labour and Industrial Laws ……………………………………………………….. 228
¶7-010 Background …………………………………………………………………………………….. 228
¶7-020 Laws Relating to Industrial Relations ……………………………………………… 231
¶7-030 Laws Relating to Wages ………………………………………………………………….. 233
¶7-040 Laws Relating to Social Security ……………………………………………………… 235
¶7-050 Laws Relating to Working Hours, Conditions of Service and
Employment ……………………………………………………………………………………. 238
¶7-060 Laws Relating to Equality and Empowerment of Women ……………… 241
¶7-070 Prohibitive Labour Laws…………………………………………………………………. 243
¶7-080 Laws Relating to Employment and Training ………………………………….. 246
¶7-090 e-Kranti: e-Governance Initiative of the Ministry ……………………………. 247
¶7-100 Start-up India Action Plan: An Initiative of the Government of
India Providing Several Relaxations to Start-ups ……………………………. 248
¶7-110 Labour Law Reforms ………………………………………………………………………. 249
Chapter 8 Important Considerations for Expatriates Working in India ……. 259
¶8-010 Engagement of Foreign Personnel ………………………………………………….. 259
¶8-020 Taxability under the Double Taxation Avoidance Agreements ……… 265
,Detailed Contents xv
Chapter 9 Competition Policy and Law ………………………………………………………. 281
¶9-010 Competition Laws in India — An Overview ………………………………….. 281
¶9-020 Growth of Legislations Governing Competition in India ……………….. 282
¶9-030 Recent Developments in Competition Law in India ……………………….. 293
Chapter 10 Intellectual Property Laws ………………………………………………………….. 302
¶10-010 Introduction …………………………………………………………………………………….. 303
¶10-020 Introduction …………………………………………………………………………………….. 304
¶10-030 Procedure of Registration of Trademark in India …………………………… 307
¶10-040 Renewal of Registration ………………………………………………………………….. 309
¶10-050 Rectification of Trademark ……………………………………………………………… 309
¶10-060 Assignment, Transmission and Licensing of Trademarks in India …. 309
¶10-070 Background …………………………………………………………………………………….. 310
¶10-080 Procedure for Grant of a Patent in India …………………………………………. 311
¶10-090 Filing of Application for Grant of Patent in India by Foreigners …….. 312
¶10-100 Pre-grant Opposition ………………………………………………………………………. 312
¶10-110 Post-grant Opposition …………………………………………………………………….. 312
¶10-120 Grounds for Opposition ………………………………………………………………….. 312
¶10-130 Term of Patent …………………………………………………………………………………. 313
¶10-140 Payment of Renewal Fee …………………………………………………………………. 313
¶10-150 Restoration of Patent ……………………………………………………………………….. 313
¶10-160 Patent of Biological Material …………………………………………………………… 313
¶10-170 Rights Granted by a Patent ……………………………………………………………… 314
¶10-180 Maintainability of Secrecy by the Indian Patent Office (IPO) …………. 314
¶10-190 Compulsory Licensing ……………………………………………………………………. 314
¶10-200 Infringement of Patent …………………………………………………………………….. 316
¶10-210 Licensing and Assignment of Patent ………………………………………………. 316
¶10-220 “Work” Protected in India ………………………………………………………………. 317
¶10-230 Registration of Copyright ……………………………………………………………….. 317
¶10-240 Need for Registration of Copyright ………………………………………………… 317
¶10-250 Enforcement of Copyright in India …………………………………………………. 317
¶10-260 Protection to Foreign Works in India………………………………………………. 318
¶10-270 Licensing and Assignment of Copyright ………………………………………… 318
¶10-280 Duration/Term of Copyright ………………………………………………………….. 318
¶10-290 Registrability of Designs …………………………………………………………………. 318
¶10-300 Term of Design………………………………………………………………………………… 319
¶10-310 Process of Registration of Design ……………………………………………………. 319
¶10-320 Cancellation, Protection and Enforcement of Designs ……………………. 319
¶10-330 Registration of Geographical Indications ………………………………………… 321
,xvi India Business Guide – Start-up to Set-up
¶10-340 Duration of Protection …………………………………………………………………….. 321
¶10-350 Infringement of Geographical Indications ………………………………………. 321
¶10-360 Procedure for Registration ………………………………………………………………. 322
¶10-370 Duration of Protection …………………………………………………………………….. 322
¶10-380 Rights under the Plant Act………………………………………………………………. 322
¶10-390 Infringement of Plant Varieties and Farmers’ Rights ……………………… 322
¶10-400 Registrability of Layout-Design ………………………………………………………. 323
¶10-410 Duration of Protection …………………………………………………………………….. 323
¶10-420 Infringement of Layout-Design ………………………………………………………. 323
¶10-430 Trade Secrets …………………………………………………………………………………… 323
¶10-440 Authorities Involved in the Execution of Orders of Courts…………….. 324
¶10-450 Competent Court …………………………………………………………………………….. 325
¶10-460 Border Control Measures for Enforcement of IPR ………………………….. 325
¶10-470 Information Technology Act, 2000 …………………………………………………. 329
Chapter 11 Insolvency and Bankruptcy Code ………………………………………………. 334
11-010 Background of Insolvency Laws in India………………………………………… 334
11-020 Institutional Framework in the Code………………………………………………. 335
11-030 Adjudicating Authority under the Code …………………………………………. 337
11-040 Corporate Insolvency Resolution Process……………………………………….. 339
11-050 Insolvency Resolution and Bankruptcy of Individuals and
Partnership Firms ……………………………………………………………………………. 360
11-060 Applicability of the Limitation Act, 1963 ………………………………………… 364
Chapter 12 Regulation of Real Estate in India………………………………………………. 365
¶12-010 Introduction …………………………………………………………………………………….. 365
¶12-020 Registration of Real Estate Projects …………………………………………………. 366
¶12-030 Functions, Duties and Obligations of Promoter ……………………………… 371
¶12-040 Registration and Functions of Real Estate Agents …………………………… 376
¶12-050 Rights and Duties of Allottees…………………………………………………………. 377
¶12-060 Transfer of Real Estate Projects ……………………………………………………….. 378
¶12-070 Return of Amount and Compensation ……………………………………………. 379
¶12-080 Investigation and Adjudication ………………………………………………………. 381
¶12-090 Violations and Consequences …………………………………………………………. 383
Chapter 13 Consumer Protection Law…………………………………………………………… 387
¶13-010 Introduction …………………………………………………………………………………….. 387
¶13-020 Background …………………………………………………………………………………….. 387
¶13-030 Scope ……………………………………………………………………………………………….. 388
¶13-040 Consumer Protection Council …………………………………………………………. 389
,Detailed Contents xvii
¶13-050 Redressal Machinery under the Act ………………………………………………… 389
¶13-060 Applicability of the Law of Limitation ……………………………………………. 390
¶13-070 Remedies under the Act ………………………………………………………………….. 390
¶ 13-080 Special Features of the Act ………………………………………………………………. 390
¶13-090 Interplay with Real Estate and Arbitration ……………………………………… 391
¶13-100 Legal Metrology Act, 2009 ………………………………………………………………. 392
Chapter 14 Environment Laws ……………………………………………………………………… 393
¶14-010 Background …………………………………………………………………………………….. 393
¶14-020 The National Green Tribunal Act, 2010 …………………………………………… 394
¶14-030 The Air (Prevention and Control of Pollution) Act, 1981 ………………… 395
¶14-040 The Water (Prevention and Control of Pollution) Act, 1974 ……………. 395
¶14-050 The Environment Protection Act, 1986 ……………………………………………. 396
¶14-060 Hazardous Wastes Management Regulations ………………………………… 396
¶14-070 The Wildlife Protection Act, 1972 ……………………………………………………. 399
¶14-080 The Forest Conservation Act, 1980 ………………………………………………….. 399
¶14-090 The Indian Forest Act, 1927 …………………………………………………………….. 400
¶14-100 The Public Liability Insurance Act, 1991 …………………………………………. 400
¶14-110 The Biological Diversity Act, 2002 …………………………………………………… 400
¶14-120 The Compensatory Afforestation Fund Act, 2016 …………………………… 401
Chapter 15 Special Schemes for Export Promotion
(SEZs/ EOUs/STPs/ EHTPs/ BTPs/IFSC) ……………………………….. 402
¶15-010 Special Economic Zones ………………………………………………………………….. 402
¶15-020 Export Oriented Units (EOUs) ………………………………………………………… 412
¶15-030 Software Technology Parks (STPs)………………………………………………….. 414
¶15-040 Electronics Hardware Technology Parks (EHTPs)………………………….. 415
¶15-050 Bio-technology Parks (BTPs) …………………………………………………………… 415
¶15-060 International Financial Services Centre (IFSC)………………………………… 416
Chapter 16 Anti Money-Laundering Laws ……………………………………………………. 418
¶16-010 Introduction …………………………………………………………………………………….. 418
¶16-020 Offence of Money-Laundering………………………………………………………… 418
¶16-030 Attachment of Property under PMLA …………………………………………….. 420
¶16-040 Arrest under PMLA ………………………………………………………………………… 421
¶16-050 Bail under PMLA …………………………………………………………………………….. 421
¶16-060 Summon, Survey & Search ……………………………………………………………… 422
¶16-070 Retention of Records under PMLA …………………………………………………. 423
¶16-080 Interconnected Transactions……………………………………………………………. 423
,xviii India Business Guide – Start-up to Set-up
¶16-090 Presumptions & Onus of Proof ……………………………………………………….. 423
¶16-100 Offences of Cross-Border Implications ……………………………………………. 425
Chapter 17 Black Money Act, 2015 ……………………………………………………………….. 426
¶17-010 Introduction …………………………………………………………………………………….. 427
¶17-020 Background …………………………………………………………………………………….. 427
¶17-030 Applicability and the Scope of the BMA …………………………………………. 428
¶17-040 Chargeability under the BMA …………………………………………………………. 429
¶17-050 Valuation Methodology ………………………………………………………………….. 430
¶17-060 Penal consequences …………………………………………………………………………. 433
¶17-070 Assessment Procedure…………………………………………………………………….. 434
¶17-080 Appellate Procedure ……………………………………………………………………….. 435
¶17-090 Miscellaneous ………………………………………………………………………………….. 436
¶17-100 Impact of BMA on Assessees ………………………………………………………….. 438