FDI in Single Brand Product Retail Trading in India
Transkript
FDI in Single Brand Product Retail Trading in India
A non-resident entity can invest in India subject to the Consolidated FDI Policy (effective 17 April 2014) except in those sectors/activities that are prohibited. FDI in retail trading in India is permitted according to the following broad categories: 1. Single Brand Product Retail Trading (SBRT) SBRT is the retail trading of products under a single brand name worldwide. 100% FDI allowed 2. Multiple Brand Retail Trading (MBRT) MBRT is the retail trading of products of different brands owned by a single company. With a view to integrating the Indian economy with the world market and to encourage further FDI in India, the government has allowed 51% FDI in MBRT, subject to prior approval from the government and certain conditions. While both models facilitate growth in the retail sector, MBRT has typically been tightly regulated, considering the associated economic and political challenges. On the other hand, SBRT regulations have been consistently liberalised over the years. This has provided the necessary impetus to the sector and has increased the number of international brands accessible to Indian consumers. FDI in Single Brand Product Retail Trading 1. Objective FDI in single brand product retail trading aims to: Attract investments in production and marketing; Improve the availability of goods for consumers; Encourage increased sourcing of goods from India; and Enhance competitiveness of Indian enterprises through access to global designs, technologies and management practices. 2. Current Scenario Available route 3. % of FDI permitted Automatic Up to 49% Government approval Beyond 49% FDI exceeding 49% in a company that proposes to undertake SBRT in India would require permission from the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion (DIPP). The applications should specify the product/product categories that are proposed to be sold under a ‘single brand’. For FDI up to 49%, the list of products/product categories proposed to be sold except food products should be provided to the Reserve Bank of India (RBI). Any addition to the product/product categories to be sold under the ‘single brand’ would require a fresh approval from the government. Conditions The liberalisation of the sector comes with a set of prescribed conditions: Condition Remarks Single brand Products to be sold should be of a ‘single brand’ only. Same brand internationally Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India. Branding during manufacturing SBRT would cover only products that are branded during manufacturing. Investment by more than one non-resident entity A non-resident entity or entities, whether owner of the brand or otherwise, shall be permitted to undertake SBRT in the country for the specific brand, directly or through a legally tenable agreement with the brand owner for undertaking SBRT. In cases where FDI exceeds 51%, sourcing of 30% of the value of goods purchased by the SBRT entity will be done from India, preferably from micro, small and medium enterprises (MSMEs), village and cottage industries, artisans and craftsmen. It is sufficient to comply with the 30% sourcing condition cumulatively in the first five years of FDI investment. Thereafter, the sourcing requirement must be complied with on an annual basis. The quantum of domestic sourcing will be self-certified by the company and in turn by its auditors. The company that is the recipient of FDI for the purpose of SBRT will have the onus of ascertaining the sourcing requirement. Sourcing E-commerce prohibited Retail trading, in any form, by means of e-commerce would not be permissible for companies with FDI engaged in SBRT. Conclusion The government is progressively undertaking reforms and liberalising the retail sector to attract foreign investments. It has gradually eased the regulatory environment with respect to retail trading to pave the way for retail innovation and enhance competitiveness of Indian enterprises through access to global designs, technologies and management practices. The opening of the retail industry to global competition is expected to spur a retail rush to India. It has the potential to not only transform the retail landscape but also the nation’s ailing infrastructure. About us SKP is a long established and rapidly growing professional services group located in six major cities across India. We specialise in providing sound business and tax guidance and accounting services to international companies that are currently conducting or initiating business in India as well as those expanding overseas. We serve over 1200 active clients including multinationals, companies listed on exchanges, privately held and family-owned businesses from more than 45 countries. From consulting on entry strategies to implementing business set-up and M&A transactional support, the SKP team assists clients with assurance, domestic and international tax, transfer pricing, corporate services, and finance and accounting outsourcing matters, all under one roof. Our team is dedicated to ensuring clients receive continuity of support, right across the business lifecycle. Contact Mumbai 19, Adi Marzban Path Ballard Estate, Fort Mumbai 400 001 T: +91 22 6730 9000 Chennai Office No. 3, Crown Court 128 Cathedral Road Chennai 600 086 T: +91 44 4208 0335 Pune VEN Business Centre Baner–Pashan Link Road Pune 411 021 T: +91 20 6720 3800 Bengaluru Office No. 312/313, Barton Centre Mahatma Gandhi Road Bengaluru 560 001 T: +91 80 4140 0131 Hyderabad 6-3-249/3/1, SSK Building Ranga Raju Lane Road No. 1, Banjara Hills Hyderabad 500 034 T: +91 40 2338 6912 Toronto 269 The East Mall Toronto ON M9B 3Z1 Canada T: +1 647 707 5066 New Delhi B-376 Nirman Vihar New Delhi 110 092 T: + 91 11 2242 8454 www.skpgroup.com Connect with us skpgrp.info@skpgroup.com www.linkedin.com/company/skp-group www.twitter.com/SKPGroup www.facebook.com/SKPGroupIndia http://goo.gl/NF29sj Subscribe to our alerts Disclaimer The contents herein are solely meant for communicating information and not as professional advice. It may contain confidential or legally privileged information. The addressee is hereby notified that any disclosure, copy, or distribution of this material or the contents there of may be unlawful and is strictly prohibited. Also the contents can not be considered as any opinion/advice and should not be used basis for any decision. Before taking any decision/advice please consult a qualified professional advisor. While due care has been taken to ensure the accuracy of the information contained herein, no warranty, express or implied, is being made by us as regards the accuracy and adequacy of the information contained herein. SKP Business Consulting LLP shall not be responsible for any loss whatsoever sustained by any person who relies on this material. © 2015 SKP Business Consulting LLP. All rights reserved.