The evolution of India as a global investment hub
Following the launch of the ‘Make in India’ programme by Prime Minister Narendra Modi in September 2014, the Indian Government has introduced various initiatives to make India a more conducive place to do business. Here are some of the most significant developments.
Relaxation of FDI norms
In a bid to woo foreign investors, the Government eased foreign direct investment (FDI) norms in November 2015 across 15 key sectors, including defence, construction, civil aviation, media, single-brand retail and private banking. These reforms have rationalised and simplified the process of foreign investment in India, including the provision of an automatic route to many sectors.
Exemption from MAT for foreign investors
The Minimum Alternate Tax (MAT) is an 18.5% tax on a company’s book profits, which targets companies that pay minimal or no tax through the use of various available tax reliefs. The Government has clarified that the MAT provisions will not apply to foreign institutional investors and foreign companies that do not have permanent establishment in India. This has had the intended effect of allaying the fears of numerous foreign investors currently active in the country.
In a significant policy statement, Modi has made assurances that India will no longer resort to retrospective taxation. This has considerably enhanced the outlook for potential investors who had been sceptical after the previous Government’s hawkish stand on the issue.
The Government has also constituted a ten-member panel to overhaul the provisions of Indian direct tax laws in order to reduce litigation arising from the ambiguous drafting of laws. It’s another example of the Government’s commitment towards helping make India a world-class place to invest.
The Government is also bringing in a long-awaited indirect tax reform through the introduction of the Goods & Service Tax (GST). This will be a national value added tax planned to be brought in from 1 April 2016.
Commitment to reform
As stated in a recent World Bank report, India is considered to be the world’s fastest-growing emerging market, with GDP expected to grow by 7.5% in the 2015/16 financial year.
Through its enactment of such wide-ranging reforms, the Modi Government has demonstrated its commitment to making India a popular destination for overseas investors, thereby turning the nation into a truly global investment hub.
For more information, contact:
Apurv Gandhi or Amol Haryan
Chaturvedi & Shah, India
T: +91 022 3021 8500