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NRI Problems.

I want to have some details as I have business interests in India.

I am told that the foreign trade policy announced by the Indian government has changed the rules and regulations for import and export of gold and jewellery. I want to have some details as I have business interests in India.

S.K. Jain, Dubai

The Foreign Trade Policy, which was announced on April 1, 2015 has laid down certain restrictions with the object of reducing round-tripping of gold. Round-tripping is resorted to by import of gold, followed by its export with minimum value addition. This is done to get certain benefits.

It has now been provided that the wastage norm has been reduced from 3.5 per cent to 2.5 per cent. However, the requirement for value addition has been raised from three per cent to fouru per cent. It is, therefore, expected that round-tripping will become unviable, but genuine jewellery exports will not be affected. Further, the value addition norm for machine made jewellery has been increased from 1.5 per cent to two per cent.

In many western countries, like the UK, Germany, Italy, etc, professional firms provide multi-disciplinary services. In India, professionals like chartered accountants, company secretaries, work independently. Is any change on the anvil?

P.K. Laxman, Doha

The Institute of Chartered Accountants of India, the Institute of Cost Accountants and the Institute of Company Secretaries are presently working on framing guidelines to make multi-disciplinary partnerships (MDPs) operational in India. Hopefully, MDPs may become a reality in the current financial year 2015-16 once the guidelines are finalised and approved by Indian regulatory authorities. Given the complexity of business structures, MDPs will be better placed as a single firm to provide accounting, legal, tax and business consultancy services.

Therefore, foreign investors will greatly benefit because they would be able to get the services of securing a licence, launching a project, mobilising funds from the market as well as for restructuring of businesses, mergers and acquisitions, etc. Such firms will also be able to provide advice on statutory compliances of various laws. Some safeguards will be introduced to provide that the consultancy fee cannot be more than the audit fees. Further, an audit partner's approval will be necessary if consultancy work is to be done for the same client.

There was a news report that an International Financial Service Centre is coming up in Gujarat. Many foreign banks and institutions are keenly awaiting this experiment. Are there any stringent guidelines for setting up of such institutions?

L.K. Dhingra, Abu Dhabi

Foreign banks will be permitted to set up IFSC banking units (IBUs) in India subject to Reserve Bank of India (RBI) guidelines for setting up branches in India. An additional requirement is that the regulator of the home country should grant approval for the setting up of the banking unit in an IFSC in India. Parent banks would be required to provide a minimum capital of $20 million or an equivalent amount in any foreign currency.

The liabilities of IBUs will be exempt from both cash reserve ratio and statutory liquidity ratio requirements of the RBI. The IBUs will be allowed to borrow in foreign currencies only from persons who are not resident in India. However, the funds can be deployed with non-residents as well as with resident Indians. The IBUs will not be permitted to issue bearer instruments or cheques and all payment transactions will need to be undertaken through bank transfers.

The writer is a practising lawyer, specialising in tax and exchange management laws of India.

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Publication:Khaleej Times (Dubai, United Arab Emirates)
Geographic Code:9INDI
Date:Apr 19, 2015
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