Govt Route--- FIFP


The Foreign Investment Facilitation Portal (FIFP) is the new online single point interface of the Government of India for investors to facilitate Foreign Direct Investment. This portal is being administered by the Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce & Industry. This portal will continue to facilitate the single window clearance of applications which are through approval route. Upon receipt of the FDI application, the concerned Administrative Ministry/Department shall process the application as per the Standard Operation Procedure (SOP). If the online filing of application is with digital signature by authorised signatory, physical submission of the copy is not required. For applications without digital signature, once the e-filing of the application is completed, the applicant is required to file/courier only SINGLE signed copy of the printed version of the online application, along with the duly authenticated copy of the documents attached with the application, to the Nodal Officers of the concerned Administrative Ministry/Department as per the SOP. The additional features such as: e-communication, quicker processing, reduced paperwork, SMS/email alert and many more continue to exist. Before you log in for the online application form, please take some time off to register on portal.


1. Foreign investment is of two kinds ֠

  • Foreign Direct Investment (FDI)
  • Foreign Portfolio Investment

Foreign Direct Investment (FDI) in India is : – undertaken in accordance with the FDI Policy which is formulated and announced by the Government of India. The Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India issues a “Consolidated FDI Policy Circular ” on an yearly basis on March 31 of each year (since 2010) elaborating the policy and the process in respect of FDI in India. The latest “Consolidated FDI Policy Circular” dated April 10,20126is available in public domain and can be downloaded from the website of Ministry of Commerce and Industry, Department of Industrial Policy and Promotion –
– http://www.dipp.nic.in/English/Policies/FDI_Circular_01_20126pdf governed by the provisions of the Foreign Exchange Management Act (FEMA), 1999. FEMA Regulations which prescribe amongst other things the mode of investments i.e. issue or acquisition of shares / convertible debentures and preference shares, manner of receipt of funds, pricing guidelines and reporting of the investments to the Reserve Bank. The Reserve Bank has issued Notification No. FEMA 20 /2000-RB dated May 3, 2000 which contains the Regulations in this regard. This Notification has been amended from time to time.


2. Entry routes for investments in India
Under the Foreign Direct Investments (FDI) Scheme, investments can e made in shares, mandatorily and fully conv
Automatic Route: Under the Automatic Route, the foreign investor or the Indian company does not require any approval from the Reserve Bank or Government of India for the investment.
• Government Route: Under the Government Route, the foreign investor or the Indian company should obtain prior approval of the Government of India, Ministry of Finance, Foreign Investment Promotion Board (FIPB) for the investment.


3. Eligibility
  • A person resident outside India2 (other than a citizen of Pakistan and Banagladesh) incorporated outside India, (other than an entity incorporated in Pakistan and Bangladesh) can invest in India, subject to the FDI Policy of the Government of India. 
  • FII can invest in capital of Indian companies under as FDI Policy or Portfolio Investment Scheme subject to certain restrictions. 
  • Non Resident Indian (NRI) resident in Nepal and Bhutan as well as citizens of Nepal and Bhutan are permitted to invest in the capital of Indian companies on repatriation basis subject to the condition that the amount of consideration for such investment shall be paid by way of inward remittances in free foreign exchange through normal banking channels.

4. Reporting of Inflow

An Indian company receiving investment from outside India for issuing shares / convertible debentures / preference shares under the FDI Scheme, should report the details of the amount of consideration to the Regional Office concerned of the Reserve Bank through the Category I Authorized Dealer not later than 30 days from the date of allotment of shares in the prescribed Form along with the copy(s) of the FIRC/s evidencing the receipt of the remittance along with the KYC report in the prescribed format on the non-resident investor from the overseas bank remitting the amount in FIRMS Application Foreign investment in India - Reporting in Single Master Form

Introduction

1.1 The Reserve Bank, in the First Bi-monthly Monetary Policy Review dated April 5, 2018 announced that, with the objective of integrating the extant reporting structures of various types of foreign investment in India, it will introduce a Single Master Form (SMF) subsuming all the existing reports.

1.2 In order to implement this announcement, the Reserve Bank is introducing an online application, FIRMS (Foreign Investment Reporting and Management System), which would provide for the SMF. FIRMS would be made online in two phases. In the first phase, the first module viz., the Entity Master, would be made available online. Instructions in this regard were already issued through A. P. Dir. Series Circular No. 30 dated June 07, 2018.

1.3 In the second phase, the second module containing 9 reports would be made available with effect from September 01, 2018. With the implementation of SMF, the reporting of FDI, which is presently a two-step procedure viz., ARF and FC-GPR would be merged into a single revised FC-GPR. The SMF also introduces reporting of indirect foreign investment through form DI and reporting of inflows in investment vehicles through Form InVi. Further, the reporting in FC-TRS, LLP-I, LLP-II, ESOP, DRR and CN would also be made in SMF only. The finalized structure of SMF and operational instructions thereof would be made available in the Master Direction on Reporting under FEMA, 1999.

1.4 The first module will be available to the public for data entry between June 28 (at 1:00 PM) and July 12, 2018. The date was extended till July 20, 2018. It would provide an interface for Indian entities [as defined in Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2017 dated November 07, 2017 and as amended from time to time] to input their existing foreign investment (including indirect foreign investment) data. Entities shall provide data with respect to all foreign investments received, irrespective of the fact that the regulatory reporting to the Reserve Bank for the same has been made or not and whether the same has been acknowledged or not.

1.5 Indian entities not complying with these instructions will not be able to receive foreign investment (including indirect foreign investment) and will be treated as non-compliant with Foreign Exchange Management Act, 1999 (FEMA) and regulations made thereunder and liable for action as laid in FEMA or the regulations made thereunder.

1.6 Where the entities have not been able to register for the Entity master, they may do so from September 01, 2018. However, they may provide the reasons for not registering within the time period along with the authority letter.



5. Prohibited Sectors in FDI policy in which no Foreign Investment is allowed

 

 


(i) Foreign investment in any form is prohibited in a company or a partnership firm or a proprietary concern or any entity, whether incorporated or not (such as, Trusts) which is engaged or proposes to engage in the following activities:
a. Business of chit fund, or
b.  Nidhi company, or
c.  Agricultural or plantation activities, or
d.  Real estate business, or construction of farm houses, or 
e.  Trading in Transferable Development Rights (TDRs).

(ii) It is clarified that “real estate business” means dealing in land and immovable property with a view to earning profit or earning income therefrom and does not include development of townships, construction of residential / commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships.
It is further clarified that partnership firms /proprietorship concerns having investments as per FEMA regulations are not allowed to engage in print media sector.
(iii) In addition to the above, Foreign investment in the form of FDI is also prohibited in certain sectors such as:
(a) Retail Trading (except single brand product retailing)
(b) Lottery Business including Government /private lottery, online lotteries, etc.
(c) Gambling and Betting including casinos etc.
(d) Business of Chit funds
(e) Nidhi company
(f) Trading in Transferable Development Rights (TDRs)
(g) Real Estate Business or Construction of Farm Houses
(h) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes

(i) Activities / sectors not open to private sector investment e.g. Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems).
Note : Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities.

 I.  Explanation 1:Transfer of Development Rights (TDR) is a zoning technique used to permanently protect farmland and other natural and cultural resources by redirecting development that would otherwise occur on these resource lands to areas planned to accommodate growth and development)

  II.   Explanation 2: Further, the real estate business shall not include development of townships, construction of residential/commercial premises, roads or bridges and real estate investment trusts (REIT).

 III.   Explanation 3: Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities

 IV.   Explanation 4: In terms of Regulation 4(b) (i) of Notification No. FEMA 1/2000-RB dated 3rd May 2000, no person resident outside India shall make investment in India, in any form, in a company or partnership firm or proprietary concern or any entity, whether incorporated or not, which is engaged or proposes to engage “in the business of chit fund”. But as per A. P. (DIR Series) Circular No.107 date June 11 2015, Non-Resident Indians (NRIs) to subscribe to the chit funds, without limit, on non-repatriation basis subject to the following conditions: (Exception)

F  The Registrar of Chits or an officer authorised by the State Government in accordance with the provisions of the Chit Fund Act in consultation with the State Government concerned, may permit any chit fund to accept subscription from Non-Resident Indians on non-repatriation basis;

F  The subscription to the chit funds shall be brought in through normal banking channel, including through an account maintained with a bank in India.

F  a person who is citizen of  Bangladesh /Pakistan  and  Entity incorporated in Pakistan / Bangladesh Can invest in Indian Company only under Government route  in sectors other than defence, space, atomic energy and prohibited sectors (Reg. 15)

 


6. Reporting of issue of shares

After issue of shares fully, mandatorily & compulsorily convertible debentures / fully, mandatorily &  compulsorily convertible preference shares, the Indian company has to file Form FC-GPR (Part A), in the prescribed format in FIRMS through the Category I Authorized Dealer within whose jurisdiction the registered office of the company is situated, not later than 30 days from the date of issue of shares along with following documents:

  • Documents in compliance with Paragraph 9 (1) (B) of Schedule 1 to Notification No. FEMA 20/2000-RB dated May 3, 2000:
    (i) A certificate from our Company Secretary certifying that
    (a) all the requirements of the Companies Act, 1956 have been complied with;
    (b) terms and conditions of the Government approval, if any, have been complied with;
    (c) the company is eligible to issue shares under these Regulations; and
    (d) the company has all original certificates issued by authorised dealers in India evidencing
    receipt of amount of consideration in accordance with paragraph 8 of Schedule 1 to Notification No.
    FEMA 20/2000-RB dated May 3, 2000.

    Incase Right issue additional one more declaration require.

    • Shares issued on rights basis to non-residents are in conformitywith Regulation 6 of the RBI Notification No FEMA 20/2000-RBdated 3rd May 2000, as amended from time to time.
  • A certificate from Statutory Auditor or Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.
  • Copy(ies) of the FIRC & KYC to be attached in FIRMS software