Professional Documents
Culture Documents
Ey Doing Business in India
Ey Doing Business in India
Business
in India
November 2022
2
Foreword
Measures taken by the Government in Foreign Direct incentivizes domestic production in strategic growth
Investment (FDI) policy reforms, investment facilitation sectors where India has comparative advantage. This
and ease of doing business have resulted in increased includes strengthening domestic manufacturing,
FDI inflows into the country, thereby endorsing India’s forming resilient supply chains, making Indian
status of being a preferred investment destination industries more competitive and boosting the export
“This is the best time to invest in India”, amongst global investors. India has attracted its highest
ever total FDI inflow of US$83.57 billion during the
potential.
Budget 2022, with a view to boosting exports, is
Hon’ble Prime Minister Narendra Modi said in his virtual address at the World Economic Forum, financial year (FY) 2021-22 overtaking last year’s FDI
looking at replacing the Special Economic Zones Act
by US$1.60 billion, despite global upheavals such as the
Davos Agenda 2022. This ethos was echoed by the Finance Minister when she presented the with a new legislation that will enable the states to
military operations in Ukraine and COVID-19 pandemic.
Union Budget 2022. become partners in Development of Enterprise and
Make in India, the flagship program of the Government Service Hubs (DESH). This will cover all large existing
of India (GoI) that aspires to facilitate investment, foster and new industrial enclaves to optimally utilize
innovation, enhance skill development, and build best- available infrastructure and enhance competitiveness
in-class manufacturing infrastructure, completed its of exports. With nearly 40% of approved SEZ’s yet to
8 years of path-breaking reforms in September 2022. become operational, this will surely be a booster dose
The program is transforming the country into a leading for the stakeholders to invest, export and generate
global manufacturing and investment destination. The employment.
initiative is an open invitation to potential investors and
In a bid to boost Data Centres and Energy Storage
partners across the globe to participate in the growth
Systems, including dense charging infrastructure
story of ‘New India’.
and grid-scale battery systems in the country, the
To strengthen Make in India initiative, several other Government has granted it infrastructure status. This
measures have been taken by the GoI. The reform grant of status is a positive move by the Government
measures include amendments to laws, liberalization and is an acknowledgement of the growing
of guidelines and regulations to reduce compliance dependency of the success of technology enabled
burden and enhance the ease of doing business in India. sectors on Data Centres.
Burdensome compliances to rules and regulations have
In India, policymakers may have to contend with the
been reduced through simplification, rationalization,
ongoing inflationary pressures while maintaining a
decriminalization, and digitization, making it easier to
robust growth of 7% plus. A recent Bloomberg survey
do business in India. Additionally, labor reforms have
has highlighted that many advanced economies may
brought flexibility in hiring and retrenchment.
suffer a recession in the next 12 months. However,
Deep reforms like the launch of PM Gati the survey rules out such a possibility for India. In
Shakti in October 2021, a National the context of India at 75- and 100- years post-
Master Plan for Multi Modal independence, there has been considerable interest
Connectivity, essentially a digital in examining the growth performance so far and
platform to bring 16 Ministries, potential for the next 25 years and beyond.
including Railways and Roadways,
We have developed this guide with the intent of giving
together for integrated planning
stakeholders an overview of the demographic profile
and coordinated implementation
of India, key sectors, an insight into the regulatory
of infrastructure connectivity
framework, form of business enterprises, funding
projects will surely attract foreign
options and relevant tax regimes in India in a concise
investors.
manner. The information provided in this guide has
Production Linked been validated up to 31 July 2022.
Incentive (PLI)
The companies that are doing business in India, or
scheme across 14 key
planning to do so, would be well advised to obtain
manufacturing sectors, was
current and detailed information from our experienced
launched in 2020-21 as a
professionals.
big boost to Make in India
initiative. The PLI Scheme
Rajiv Chugh
Partner and National Leader
Policy Advisory & Speciality Services, EY India
A India at a glance 06
F Repatriation of funds 27
J Labor laws 37
M Direct tax 50
N Transfer pricing 56
O Indirect taxes 58
Compliance Calandar 66
Contents
6 Doing Business in India 7
A India at a glance
fact
Capital New Delhi Literacy rate ► A
► pprox. 74% (male: 82%, female: 65%)
1 ► India has one of the world’s largest school-age
Administration 28 states and 8 union territories
population and a well-developed education system
sheet
Neighboring Afghanistan, Bangladesh, Bhutan, China, 8
countries Myanmar, Nepal, Pakistan and Sri Lanka Labor force 471.3 million in 2021
1
Total area 3.29 million sq km (90% land, 10% water)
Trade (FY22 ► M
► erchandise imports: US$611.9 billion
11
Demographic profile estimates )
► M
► erchandise exports: US$419.7 billion
5 ► M
► erchandise trade deficit: US$192.2 billion
Population ► 1
► .41 billion (2022 estimates)
► Population growth5: 0.95% (YoY)
FDI cap from 49% to 74% under The key policies that govern the Australia) have resolved to invest
B
5
automatic route, Corporatization Aerospace and Defence sector US$50 billion on infrastructure
of Ordnance Factory Board (OFB), include the DAP 2020 (in vogue) development in the Indo-Pacific
bifurcation of the capital budget which accords highest priority to region over the next five years
for procurement from indigenous acquisition of indigenously designed as part of a series of measures
Key sectors: sources only, setting up of a Project
Management Unit (PMU) under
developed and manufactured
systems. Vendors are required
announced under the Quad initiative.
India regained its fourth spot in the of the total equity FDI during the The Indian capital markets have Indian stock exchanges (BSE and
9
largest automotive markets in the period . The recently approved made steady progress in view of the NSE including SMEs) ranked 12th
world, overtaking Germany in March PLI scheme will attract a further continued regulatory developments in the world in terms of the number
7
2022 , and is on track to become investment of US$5.74 billion by aimed at enhancing disclosures, of Initial Public Offerings (IPO) in
10
the third largest automotive market 2026 . Government’s focus on investor protection and market year-to-date (YTD) 2021. The IPO
behind USA and China, expecting promoting clean mobility ecosystem practices. SEBI, the capital market momentum of a blockbuster 2021
8
to reach US$300 billion by 2026 . through local manufacturing is regulator, is established to protect has not carried over to 2022 so
The Auto industry has also attracted expected to drive further investment the interests of the investors in far. Issuance and proceeds are well
significant FDI, foreign investments in the auto sector in the near future. securities as well as to promote off last year’s pace, as geopolitical
amounting to US$32.84 billion development of the capital market. uncertainty along with other macro
between April 2000 and March It regulates all intermediaries factors continues to affect investor
13
2022, accounting for around 6% of the capital market (such as sentiment.
stockbrokers, merchant bankers,
That said, recently, the market
underwriters, etc.), as well as
witnessed the largest IPO (of LIC)
prohibits unfair trade practices in
Banking the securities market.
in Indian capital markets and the
successful closure of other IPOs.
The Indian banking system consists The RBI regulates the sector. Key
of 12 public sector banks, 22 private enactments governing this sector
sector banks, 46 foreign banks, 56 include the Banking Regulation Act,
regional rural banks, 1,485 urban 1949; the RBI Act, 1934; and the Healthcare
cooperative banks and 96,000 Companies Act, 2013. RBI regularly
rural cooperative banks. In FY18- reviews and refines the regulatory
FY21, bank assets across sectors and supervisory policies to enable
increased. Total assets across the a strong capital base, effective risk The Indian healthcare industry is one thereby accounting for around 10%
banking sector (including public and management and best corporate of the largest and rapidly growing of world’s production by volume and
14 15
private sector banks) increased to governance standards in the banking markets in the Asia-Pacific region . 1.5% by value .
US$2.48 trillion in FY21. During sector. Healthcare comprises primarily of
The Department of Pharmaceuticals
FY16-FY21, bank credit increased pharmaceutical, biotech, hospitals
Foreign investment in private aims to make the country a hub for
at a Compound Annual Growth and medical equipment. While the
banks is capped to 49% of the total end-to-end drug discovery under its
Rate (CAGR) of 0.29%. As of FY21, government was always focused on 14
equity under the automatic route Pharma Vision 2020 .
total credit extended surged to healthcare, the sector has received a
and maximum of 74% after getting greater focus post COVID-19. As part of the budget speech of
US$1,487.60 billion. During FY16-
an approval from the government. 2022-23, there is a proposal by the
FY21, deposits grew at a CAGR of
12.38% and reached US$2.06 trillion
Further, at all times, at least 26% of Pharmaceuticals Government to promote thematic
the paid-up capital will have to be funds for blended finance for certain
by FY21. Bank deposits stood at India is the largest provider
held by residents, except in case of a sunrise sectors including Pharma
INR162.41 trillion (US$2.17 trillion) of generic medicines globally,
wholly owned subsidiary of a foreign with its share being restricted to
as of 31 December 2021. According 12 occupying a 20% share in global
bank. 20% and the funds being managed
to India Ratings and Research, credit supply by volume. It also meets 50%
growth is expected to hit 10% in 14 by private fund managers.
of global demand for vaccines .
2022-23 which will be a double-digit India ranks third in the world for FDI is permitted up to 100% in
11
growth in eight years. production of pharmaceuticals greenfield projects and up to
14
by volume and 14th by value , 74% in brownfield projects under
12 Doing Business in India 13
automatic route and beyond 74% in the medical devices industry in India Digital Mission wherein every
such projects requires government is estimated to be US$11 billion and citizen will get a Digital Health
approval. is expected to reach US$50 billion by ID and their health record will be Information technology
14
2025 . Currently, FDI is permitted digitally protected.
In order to retain India’s position as
up to 100% under automatic route
a world leader in pharmaceuticals, 3. Launch of ‘Medicine from the
in medical devices sector. To propel
the GoI has undertaken the following Sky’ project which will pave the India’s IT sector is one of the fastest Business Process Management to enable citizen services. The
11 this segment for further growth, the
initiatives : way for drone delivery of life growing industry, while global (BPM) (US$44 billion): Growing government continues to focus
GoI has undertaken the following
3 saving medicines and jabs in far economy and multiple industries demand of platform-based on areas such as cybersecurity,
1. In March 2022, under initiatives :
flung regions of the country. struggle to stay afloat, India’s services and automation driving hyper-scale computing, artificial
the Strengthening of
Pharmaceutical Industry
A 4. Introducing a credit incentive
technology industry has seen BPM. intelligence and blockchain.
tremendous growth of 15.5% (YoY)
Scheme, a total outlay of INR5 PLI scheme to promote domestic program worth INR500 billion Software products (US$13 Up to 100% FDI is allowed in Data
growth, from US$196 billion in FY21
billion for the period FY21-22 to manufacturing of medical devices which will enable the expansion 16 billion): SAAS based products processing, Software development
to US$227 billion in FY22.
FY 25-26 has been announced. was introduced with total financial of hospital capacity or medical focused on cyber-security, and Computer consultancy services;
outlay of INR34,200 million where supplies and strengthen IT sector contributes 51% of communication, collaboration Software supply services; Business
2. In June 2021, the government 16
42 applications have been approved. COVID-19 related health relative share in services exports driving this segment. and management consultancy
announced an additional
infrastructure in smaller towns. services, Market research services,
outlay of INR1,970 billion to B 4.5 lakh net new hires by IT sector Engineering R&D (US$36 billion): Technical testing and Analysis
be utilized over five years for taking total workforce to 5.1 Growth merging out of negative
Medical device park: it is aimed 16 services, under automatic route.
pharmaceutical PLI scheme in million growth in FY21.
at development of medical device
13 key sectors.
parks in India (with a proposed India has now become largest tech
Hardware (US$17 billion): Make in
3. Scheme for promotion of bulk budget outlay of INR1,000 start-up hub in the world with more
India initiative is pushing growth
drugs: aimed at granting aid for million per medical park). It would than 2500+ start-ups and 42 new
16 for the Indian hardware segment.
3 bulk drug parks for creation provide for common infrastructure unicorns
of Common Infrastructure facilities, which is expected to 16 The government of India has taken
IT sector is segmented into :
Facilities up to INR1,000 crore reduce cost of manufacturing of some major initiatives to promote
4
per park . The tenure of the the medical devices in the country. IT services (US$116 billion): the IT/ ITeS sector in India. Both
Scheme is from FY 2020-21 to The government has in-principally Consulting services and digital central and state governments
2024-25 and proposals from approved 4 parks in Himachal transformation demand is in India have taken steps toward
13 States have been received Pradesh, Tamil Nadu, Madhya fuelling growth for IT services. developing technology solutions
under the scheme which are Pradesh and Uttar Pradesh.
under evaluation.
Hospitals
Biotechnology Insurance
The hospital industry in India
India is among the top 12 accounts for 80% of the total
destinations for biotechnology in healthcare market. It is witnessing
the world, with approximately 3% a huge investor demand from both 11
Insurance is an important sector There are presently 57 registered was 4.2% in FY21, providing a
share in the global biotechnology global as well as domestic investors.
11 in the Indian economy. The sector insurance companies in India huge underserved market.
industry . India is also the leader The hospital industry is expected to
is regulated by the Insurance of which 24 are engaged in life
in the global supply of DPT, BCG reach US$132 billion by 2023 from Premiums from India’s life insurance
15 Regulatory and Development insurance business and 34 are
and measles vaccines . By 2025, US$61.8 billion in 2017; growing at industry is expected to reach
14 Authority of India (IRDAI). In engaged in non-life insurance 11
the Indian biotechnology industry is a CAGR of 16%-17% . 11 US$317.98 billion by FY 2031 .
11 2021, the government amended business . Additionally, there are
expected to reach US$150 billion . The sum insured for the life
Currently, FDI is permitted up to regulations to permit upto 74% FDI 12 reinsurers (including foreign 11
Presently there are around 5,075 insurance industry grew at 25.50%
100% under the automatic route. in Indian Insurance companies under reinsurance branches and Lloyd’s
Biotech startups which are expected in 2021-22 (until January 2022).
14 automatic approval route, subject India) in India.
to reach 10,000 by 2025 . To propel further growth of this The overall gross underwritten
to prescribed terms and conditions. 11
segment, the Government has taken Insurance penetration is measured premium increased by 12.99% for
Additionally, 100% FDI is permitted
Medical devices 11
the following initiatives : as a percentage of insurance non-life insurance market.
into insurance intermediaries, under
premium to GDP and insurance
The Indian medical devices industry 1. As of 18 November 2021, the automatic approval route. IRDAI
density is calculated as ratio of
consists of large multinationals, with 638 e-Hospitals have been has also permitted foreign reinsurers
insurance premium to the total
extensive service networks, as well established across India as part to set-up a branch in India.
population. Overall insurance
as small and medium enterprises of ‘Digital India’ initiative.
penetration (premiums as % of GDP)
(SMEs). The current market size of
2. Launch of Ayushman Bharat
14 Doing Business in India 15
In 2021, the Indian Media & In 2021, when India’s nominal resumed for television, OTT and The oil and gas industry is among Exploration and Licensing Policy,
Entertainment (M&E) sector has GDP grew 19%, advertising growth film. While the implementation of India’s eight core industries. India is Discovered Small Field Policy,
17
redefined itself fuelled by the growth outperformed and grew 25% . The the government’s Animation, Visual the third largest consumer of crude Coal Bed Methane policy, National
of digital infrastructure, digital highest growth was in television effects, Gaming and Comics policy oil and petroleum products in the Policy on Biofuels etc. to encourage
media adoption, and digital assets. advertising of INR62 billion, followed is critical for the segment to achieve world and second largest refiner in investments. FDI under the
11
“Go Digital” has been the mantra for by digital advertising of INR55 its potential, the key risk factor is Asia . automatic route is permitted up to
M&E players who have broadened billion and then of INR29 billion the availability of quality talent, 100% in upstream and private sector
17 The industry is under the
their businesses and are increasingly from a resilient print . Overall, for which much needs to be done refining projects. The FDI limit of
administrative ambit of the Ministry
adopting newer technologies and subscriptions grew INR15 billion, around training and upskilling. 49% for petroleum refining by public
of Petroleum and Natural Gas. The
infrastructure such as opening with film, print, and digital showing sector undertakings (PSUs) without
As the world talks about new government has enacted various
up platforms to facilitate the a combined growth of INR42 billion, any disinvestment or dilution of
technologies and of Metaverse, policies under oil and gas sector
monetization of physical and digital while television saw a drop of INR27 domestic equity in the existing PSUs.
17 Immersive experience, Virtual which inter-alia include Hydrocarbon
assets. Gamification in e-commerce billion .
productions and multisensory
apps is of the many strategic shifts
India is amongst the largest content experiences, one can expect nothing
which was witnessed in 2021. A
producers in the world with 150k short of a revolution in the way
new class of competitive games is
hours of TV content, 2,500 hours content is created and is consumed.
emerging which is being viewed as
of premium OTT content and 2,000 Acknowledging the growth of such
vocation and/or asset class. Ports
hours of filmed content produced in new technologies, the Finance Act
17
The Indian M&E sector is expected to 2021 . 2021 remained a subdued 2022 introduced a tax regime on
17%
grow by year for the filmed entertainment “virtual digital assets” to clear the
segment, with lockdowns and fog around Cryptocurrency, Non- India is the Port Authorities Bill 2020, which The Ministry of Ports, Shipping and
16
several restrictions on production fungible tokens and other digital seeks to decentralise decision- Waterways has identified 31 projects
and exhibitions across states. assets. th making and reinforce excellence in for private sector participation to
Despite the restrictions, over 750 major port governance, was passed improve the capacity utilisation of
in 2022 to reach INR1.89 trillion The FDI inflows in the information 11
films were released during the year, in February 2021 by the Parliament existing assets . These projects are
(US$25.2 billion) and recover its and broadcasting sector (including largest maritime 20
as compared to just 441 releases of India . Some of the key divided across the country’s nine
2019 levels, then grow at a CAGR 17 print media) in the period April country in the world
in 2020 . Over 100 films released legislations formulated to govern major ports. Between FY22 and
of 11% to reach INR2.32 trillion 2000 to December 2021 stood at
directly on streaming platform, a Indian ports include the Indian Ports FY25, the total estimated outlay for
17 US$9.60 billion, as per data released with coastline of about 7,517 km, 11
(US$30.9 billion) by 2024 . This trend which seems here to stay for Act, 1908, which is common to all these projects is US$1.96 billion .
by the Department for Promotion of which encompasses 12 major and
impressive growth factors various certain genres. 18 11 ports and the Major Port Authorities 13 projects with an estimated
Industry and Internal Trade . ~205 notified non-major ports .
opportunities for Indian media Act, 2021. capex of US$938.07 million
All M&E segments grew in 2021 The total traffic handled at major
100
businesses with an aim to make a There were over will be tendered in the current
except for in-cinema advertising and ports from April 2021 to March In the Union Budget 2022-23,
healthy contribution towards India’s fiscal year, followed by 10 more
TV subscription. Video remained the 2022 was 720.29 million tonnes allocation for the Ministry of
US$10 trillion aspiration by 2030. projects with an estimated capex
largest earning segment in 2021 as against 671.82 million tonnes Shipping stands at US$223.31 11
of US$634.05 million in FY23 . In
The Indian M&E sector has as work-from-home and school- handled during the corresponding million. The government has allowed
addition to the above, the Ministry
rebounded by 16.4% to INR1.61 from-home remained significant for M&E deals in 2021 period of the previous year, showing FDI up to 100% under the automatic
17 19 of Ports, Shipping and Waterways
trillion (US$21.5 billion) in 2021 , most Indians. Compared to 2019, an overall increase of 7.2% . route for projects related to the
and most investment were made identified a total of 400 projects
still 11% short of pre-pandemic 2019 52% of consumers spent more-time construction and maintenance of
in digital media and gaming, with In India, ports are under the worth US$31 billion investment
levels, due to the second wave of streaming entertainment content in ports and harbours. Indian ports 11
one marquee deal in TV. With the administration of the concurrent list potential . In addition, the Indian
COVID-19, which impacted the April– 2021, making this growth the third received cumulative FDI inflow worth
emergence of category leaders in of the Indian constitution. The major Ports Association, under the aegis of
June quarter. Digital media solidified highest in the world. US$1.63 billion between April 2000
digital and gaming, we will continue ports are governed by the GoI, while 11 the Ministry of Shipping, has taken
its position as a firm number two and June 2021 .
Animation, visual effects, and post- to see heightened deal activity non - major ports are administered steps towards improving operations
segment and it grew by INR68 billion
17 production was the fastest-growing specially M&A and expect to see by state governments. The Major through implementation of Port
in 2021 , followed by a resurgent
category as content production very strong inbound interest for Community System, Direct Port
print. 11
established players. Delivery, and Direct Port Entry .
16 Doing Business in India 17
23
The Indian power sector has evolved FY 22, as compared to ~12% in There is a strong focus on promoting The Indian retail sector grew FDI in multi-brand retail is permitted Fabrics and Products of Technical
significantly in the past decade. FY11. In the clean energy space, Green Hydrogen as well as Battery 10% YoY from US$630 billion to through Government Route and Textiles for enhancing India’s
There has been growth in demand the country has committed to Storage. The first phase of the around US$690 billion in 2021 and 100% FDI under Government route is manufacturing capabilities and to
at ~4% CAGR in the last 10 years, achieve net zero emissions by Green Hydrogen Policy, launched in employs about 8% of India’s working permitted for retail trading, including enhance exports. The approved total
14
the energy deficit has reduced from 2070, along with commitments on February 2022, addresses matter population . It is further expected through e-commerce, in respect of financial outlay by the government
21
9.8% in FY 11 to 0.4% in FY 21 . carbon intensity reduction, emission such as Open Access pricing and to create 25 million employment food products manufactured and or is to the tune of INR1,06,830 million
12
There has been rise in installed reduction and non-fossil fuel energy accessibility and provides added opportunities by 2030 . It is one of produced in India. over a five-year period and a total of
capacity at ~9.7% CAGR in the past capacity growth, in the recent 26th impetus on Renewable purchase the fastest growing major market 61 applications have been selected
14 Additionally, as a result of the
ten years, with current capacity at Conference of parties (COP 26) Obligations. Similarly, the National in the world and is fourth-largest as the beneficiaries under the
22 outbreak of COVID-19 and even
402 GW , as on May 2022. The summit. With the country aiming to Mission on Transformative Mobility global destination in the retail Scheme.
post COVID-19, the number of
key drivers to the rising electricity meet 50% of its energy needs from and Battery Storage focuses on PLI space and is expected to reach
active internet users has increased Previously, wholesalers and retailers
demand are increase in economic renewables and achieving 500 GW scheme for Advanced Chemistry Cell approximately US$1.5 trillion by
11 manifold. This increased user base were kept outside the ambit of
activity and enhanced electrification of non-fossil fuel capacity by 2030, (ACC) Battery Storage as part of 2030 .
in turn has given an impetus to the Micro, Small and Medium Enterprises
in rural areas. as announced at COP 26, significant promoting domestic manufacturing.
To provide a boost to the sector, e-commerce retail trade. For entities (MSMEs). The GoI has now included
expansion and strengthening of
There is seen a clear movement the Indian Government has been undertaking e-commerce activities, the wholesalers and retailers
the transmission infrastructure is 26
towards green energy. Today, relaxing FDI norms. Currently, 100% the permitted FDI stands at 100% within the ambit of MSMEs . This
22 expected.
renewables contribute ~28% of FDI is allowed under automatic through the automatic route, subject inclusion would enable the retailers
24
the total installed capacity as on route for entities undertaking Cash to certain conditions . and wholesalers to avail the benefit
and Carry wholesale trading, Single of ‘Priority Sector Lending’ which
Further, the Government approved
Brand retail trading, subject to 25 would provide an impetus to the
PLI Scheme for promotion of Man-
certain conditions. However, 51% retail industry.
Made Fibre (MMF) Apparel, MMF
Real estate
The contribution of real estate key role going forward in growth of construction of residential/ Roads and highways
sector to India’s GDP is estimated the sector. The market size of Indian commercial premises, educational
11
to be about 13% by 2025 . real estate sector is estimated to institutions, city and regional level
11
The sector comprising housing reach US$1 trillion by 2030 . infrastructure, roads or bridges
India has the second-largest road In Budget 2022, US$26.04 billion has been allocated to the
including affordable housing, and Real Estate Investment Trusts
FDI is prohibited in real estate network in the world, spanning a Ministry of Road Transport and Highways for FY 2022-23.
retail, hospitality and commercial (REITs) registered and regulated 27
business which has been defined to total of 6.22 million km . More than FDI up to 100% is allowed under the automatic route in the
including warehousing will play a under the SEBI (REITs) Regulations,
be dealing in land and immovable 60% of all goods in the country are road and highways sector.
critical role in building the requisite 2014 or earning of income from
property with a view to earing profit transported through roads and 85%
infrastructure for India to match its leasing of property.
there from. However, it does not of passenger traffic in the country is
growth ambitions. Student Housing,
include development of townships, handled by roads. India has 140,152
co-living and data centres will play a 28
kms of national highways. During
FY 2021-22, National Highways
Authority of India has accomplished
the highest-ever highway
29
construction of 4,325 kms . The
GoI aims to develop 200,000 kms
of National highway network by FY
29
2025 , with the aim of constructing
18,000 km of National Highways in
2022-23 at a record speed of 50km
per day.
18 Doing Business in India 19
C
Telecommunications
Investment
India is currently the world’s The Government vide Union
climate and
second-largest telecommunications
market in terms of the number
Budget 2022 has, inter alia,
announced following initiatives for
foreign trade
30 33
of subscribers . The country the telecom sector :
has 1,166.93 million telephone
Spectrum auctions to be
connections, including 1,142.09
conducted in 2022 to facilitate
million wireless telephone
roll out of 5G mobile services in
connections as on 31 March 2022.
Financial Year 2022-23 by private
The overall tele-density of the
31 telecom operators.
country is 84.88% .
Scheme for design-led
The Telecom sector is the third
manufacturing to be launched
largest sector in terms of FDI
equity inflows, contributing 7%
as part of PLI Scheme to build a Foreign Exchange Management Act 1999 (FEMA),
strong ecosystem for 5G mobile
of total FDI equity inflow. For the
services.
as it stands today, encompasses provisions relating
period April 2000 to March 2022,
to all such transactions which have international
the total cumulative inflows stood Affordable broadband and mobile
9
at US$38.33 billion . The FDI is services proliferation to be financial implications. The act envisages the RBI to
deregulated and relaxed to 100% facilitated in rural and remote have a controlling role in the management of foreign
32
in the telecom sector under areas.
exchange. Currently, the RBI has delegated majority
automatic route. However, an entity
Optical fiber network expected to of its powers to authorized dealer bankers who are
which shares land border with India
be laid in every village by 2025.
or where beneficial owner of an required to exercise their jurisprudence and discretion
investment into India is situated in or The Department of
to adhere to the given regulatory framework.
is a citizen of any such country, can Telecommunications (DoT), vide
invest only under the Government notification dated 25 October 2021, Most of the changes taken by the government are
3
route . amended Unified License Agreement
for calculation of Adjusted Gross
towards making India an investor-friendly destination
Revenue (AGR) for computation of along with securing the interest of the Indian
license fee. As per the aforesaid Companies. These changes also reflect a progressive
amendments, non-telecom revenue
shall be excluded from the definition
movement towards the government’s Make in India
of AGR .
34
initiative that recognizes ease of doing business as a
key factor to promote entrepreneurship. The initiative
encourages companies to manufacture their products
Digital and e-commerce in India.
D
Components of 3
March 2021-22 are estimated to
foreign investment be US$669.65 billion, exhibiting
a positive growth of 34.50% over
in India the same period last year. Non-
The following table gives a snapshot of some of the commonly preferred business forms in India: Particulars Liaison office Project office Private Limited Company Limited Liability
(LO) (PO)/Branch Partnership
Particulars Liaison office Project office Private Limited Company Limited Liability
office (BO) (LLP)
(LO) (PO)/Branch Partnership
office (BO) (LLP) Income tax rate An LO is not Liable to tax on • L► iable to tax on global income • L► iable to tax
subject to tax in income earned in @ different corporate tax rates on global
Legal Represents the Both BO and PO Independent status Independent 3
India, since it is India @ 40% . (15%/22%/25%/30%) depending income @
parent company are extended status 3
not permitted to upon the nature of activities, 30%
and acts only as arms of the
undertake any annual turnover and fulfilment
a communication parent company. • A
► n LLP is
business activity. of certain conditions (please
channel of the A PO is generally liable to
refer section ‘M’ for details on
foreign parent set-up for specific Alternate
applicable tax rates)
company projects, whereas Minimum
a BO is set-up for • C
► ompany is liable to Minimum Tax (AMT) @
3
carrying activities Alternate Tax (MAT) @ 15%³ on its 18.5% on its
in the course of book profit. book profits.
1
the business .
Approval for • R
► equired from • R
► equired A company can be set up subject to An LLP can be
commencement an authorized from an AD FDI guidelines. set up subject to
Repatriation of Not applicable A BO/PO is N
► o statutory approval required; N
► o statutory
dealer bank Bank, which FDI guidelines.
accumulated as LO is not permitted to procedural compliances to be approval
(AD Bank), is subject to
profits permitted to remit post- undertaken. required;
which is fulfilment of
undertake any tax profits procedural
subject to prescribed
2 business activity. outside India compliances to
fulfilment of conditions .
upon fulfilling be undertaken.
prescribed
2 • R
► equired procedural
conditions .
from RBI in compliances.
• R
► equired exceptional
from RBI in scenarios. Ease of exit Prior approval Prior approval of • I► t may be complex depending on • I► t may be
exceptional of AD Bank and AD Bank and ROC the strategy adopted. complex
scenarios. Registrar of is required. depending on
• E► xit can be through sale of shares
Companies (ROC) the strategy
Permitted • Liaison • R
► estricted Activities specified in Memorandum Activities or liquidation.
is required. adopted.
activities activities scope of Association of the company, specified in LLP
• No • Activities listed
subject to FDI guidelines. agreement, • E► xit can be
subject to FDI through sale
commercial/ by the RBI are
guidelines. of interest or
business only allowed to
dissolution.
activities are be undertaken.
permitted.
24 Doing Business in India 25
E
Preference share capital
Rights issue • E► CBs are commercial loans categories (such as ECBs raised
Issue of shares to existing shareholders in proportion of their raised by eligible resident entities for working capital purpose
shareholdings from recognized non-resident or general corporate purpose,
entities and should conform to ECB raised by manufacturing
Employee stock options the parameters such as minimum companies, etc.), where average
Issue of shares to employees under a stock option scheme maturity, permitted and non- maturity period can range
permitted end-uses, maximum between 1 year to 10 years.
Private placement of shares all-in-cost ceiling, etc.
• E► CBs can be availed under two
Issue of shares to an identified group of persons/entities
• T► he framework for raising loans routes, namely, automatic route
through ECB comprises of the and approval route. All ECBs can
Partly paid equity shares/share warrants following two options: be raised under the automatic
Issue and transfer of equity shares may be subject to pricing route if they conform to the
guidelines • F► oreign currency dominated
parameters prescribed under
ECBs in any freely convertible
the ECB framework. Under the
foreign exchange
approval route, the prospective
• I► ndian Rupee dominated ECBs borrowers are required to send
their requests to the Reserve
• T► he minimum average maturity
Bank of India through their AD
period for an ECB is three years
bank for examination.
except for certain specified.
26 Doing Business in India 27
F
Debentures and borrowings
Dividend
• P
► rofits earned by an Indian company can be repatriated as
American Depositary Receipts dividend, subject to availability of sufficient free reserves without
(ADRs), Global Depository Receipts the RBI’s permission. The repatriation is also subject to compliance
with other specified conditions.
(GDRs) and Foreign Currency
Convertible Bonds (FCCBs) • Dividend taxable at 20% (plus applicable surcharge and cess),
subject to beneficial tax rates provided in the applicable treaty in
the hands of shareholders.
• Q
► ualifying Indian companies can restrictions under the FDI
raise equity capital overseas by regulations.
• R
► epatriation can be completed within a week.
issuing ADRs, GDRs or FCCBs
• T► he FCCBs need to conform to
(rupee denominated equity Buy back
ECB guidelines as specified above.
shares/bonds) which are subject
to sectoral caps and end-use • Buy back restricted up to 25% of the share capital and free
reserves in a financial year subject to satisfaction of the
prescribed conditions.
• C
► ompanies who are buying back shares are liable to pay tax @ 20%
Funding of an LLP (plus applicable surcharge and cess) on consideration paid less
1
amount received on issue of shares .
• N
► o tax on shareholders in case of buy back of shares.
• I► nvestment in an LLP is through • F► DI in LLPs is permitted in sectors • B► uy back price will be subject to pricing conditions prescribed
under the FDI regulations in case of non-resident shareholders.
capital contribution of partners where 100% FDI is allowed
and is subject to conditions under under automatic route and there • B
► uy back of unlisted shares can be completed within six weeks.
the FDI policy. are no FDI-linked performance
conditions.
28 Doing Business in India 29
G
Capital reduction
• N
► ational Company Law Tribunal (NCLT) driven process, subject to
conditions prescribed under FDI regulations.
• C
► onsideration to the extent of accumulated profits is taxable at
the rate of 20% (plus applicable surcharge and cess) in the hands
Forms of business
of shareholders subject to the beneficial tax rates provided in the
applicable treaty.
enterprises
• C
► onsideration in excess of accumulated profits subject to capital
gains tax in the hands of shareholders.
• C
► apital reduction can be completed within four to six months
(subject to NCLT’s vacations and protracted litigation). Sole proprietorship
• C
► apital reduction should be in compliance with the FEMA guidelines.
• P
► rofits or losses are borne by the • N
► RIs/PIOs cannot invest in
Royalties and fee for technical services owner solely proprietary concerns engaged in
specified sectors
• N
► o separate legal existence
• I► nvestments can be made through
• U
► nlimited liability of the proprietor
Indian companies are permitted Remittances to foreign companies in inward remittance or out of
to make payments to foreign the nature of royalties and fees for • I► n case a sole proprietor is an NRI specified accounts held by an NRI
entities under foreign collaboration technical services are subject to tax or a PIO residing outside India, or a PIO
agreements, subject to certain withholding at 10% (plus applicable it is eligible to carry business in
prescribed conditions. The payment surcharge and cess) as per section India
can be for: 115A of the IT Act subject to
beneficial tax rates provided in the
• R
► oyalties and technical know-how
applicable treaty. Furthermore,
• F► ees for technical services the said payments will be subject Partnership firms
to arm’s length test in case the
The companies need to substantiate
transaction is between associated
genuineness of such payments.
enterprises.
Persons who have agreed to share • N
► RIs/PIOs residing outside
the profits/losses of a business India are allowed to invest in an
conducted by them or any of them Indian partnership firm on non-
on their behalf is called partnership. repatriable basis. Repatriation
Other remittances Some of the features of this form of benefits are available with prior
a business enterprise are: approval from the RBI
• P
► artners’ liability is unlimited • N
► RIs or PIOs cannot invest in
Profits earned by Indian branches Profit earned by LLPs can be a partnership firm engaged in
• M
► inimum two partners and
of foreign companies (other than repatriated by way of distribution specified sectors
maximum 50
banks) can be repatriated to their of profits to partners/withdrawal
• A
► person resident outside India
head offices subject to payment of capital. Repatriation of the • The firm and its partners are
(other than an NRI or a PIO) can
of the applicable taxes. Proceeds profit by the LLP to its partners is legally a single entity
make investments in a partnership
from the winding-up of a branch of a exempted from tax in the hands of
• P
► artnership interest is non- firm after obtaining an approval
foreign company in India can also be the partners.
transferable (except for existing of the RBI or Foreign Investment
repatriated.
partners) Promotion Board (FIPB)
30 Doing Business in India 31
H
Uniform financial year for the financial year Tax reporting
requirements
a company which is a holding (CBDT) needs to be followed by all
or a subsidiary of a company • A
► ny explanatory note annexed taxpayers following the mercantile
incorporated outside India and to, or forming a part of, any system of accounting for the
is required to follow a different document referred to above purpose of computation of business
financial year for consolidation income or income from other
of its accounts outside India, may In case a company has one or sources chargeable to income tax in
approach NCLT to allow different more subsidiaries, associate or India.
period as its financial year. The joint venture companies, it is also
required to prepare a consolidated ICDS are applicable to all taxpayers,
NCLT may, if it is satisfied, allow any
financial statement in addition to including non-resident taxpayers
A
► ll listed companies and non- listed companies having a net period as its financial year.
the standalone financial statements (corporate or non-corporate),
worth of INR2.5 billion and their holding, subsidiary, joint
(subject to a few exceptions). irrespective of the turnover or
venture or associate companies have to prepare their financial
quantum of income. Presently, 10
statements as per the Indian Accounting Standards (‘Ind AS’). Audit ICDSs have been notified by the
Business Responsibility and central government.
All companies need to get their
Sustainability Reporting Separate maintenance of books
accounts audited by an auditor
(BRSR) is not required for the purpose of
who is a practicing member of the
B
► anking and insurance regulators in India have deferred ICDS. However, it may necessitate
Institute of Chartered Accountants BRSR is applicable to top 1,000
implementation of Ind AS. The implementation timeline for these maintenance of memorandum
of India and the auditors‘ report listed companies by market
entities will be notified separately by the respective regulators. records. Disclosures required under
should be attached to every financial capitalization voluntarily for FY
statement. Under the Companies 2021‑22 and will be mandatory ICDS is to be included in the annual
Act, an auditor is appointed for a from FY 2022–23. The BRSR seeks Tax Audit Report (TAR) and return
term of five years. Furthermore, disclosures from listed entities on of income (RoI).
all listed companies and those their performance against nine ICDS does not impact MAT for
I► nd AS applies to both standalone and consolidated financial
belonging to a prescribed class prescribed principles and covers corporate taxpayers, which can
statements of the companies covered above. Companies that
cannot appoint or reappoint the both environmental and social continue to be based on book profit
do not meet the net worth threshold of INR2.5 billion can either
auditor for more than two terms of aspects such as climate action, determined on the basis of the
adopt Ind AS voluntarily or continue to prepare their financial
five consecutive years, if the auditor responsible consumption and applicable accounting standards.
statements in accordance with Accounting Standards notified
is an audit firm or for more than one production, gender equality, working
under the Companies (Accounting Standards) Rules, 2006. Any
term of five consecutive years, if the conditions, etc.
such company opting to follow Ind AS will be required to follow
the Ind AS for all the subsequent financial statements. Once auditor is an individual.
Being relevant to multiple aspects
Ind AS is adopted voluntarily, this option will be irrevocable and of a business, sustainability is a
such companies will not be required to prepare another set of part of the mandate of multiple
statutory financial statements in accordance with the existing Financial statement Board committees. The ownership
standards. of a corporate’s sustainability
Every company needs to prepare agenda is still evolving and varies
financial statements for every across companies. While having a
financial year, which gives a true and specialized Environment, Social and
fair view of the state of affairs of Governance (ESG) committee is not
I► ndia has adopted the convergence approach instead of fully
the company. Financial statement in mandated in India, it was felt that
adopting International Financial Reporting Standards (IFRS) as
relation to a company includes: having such committees comprising
issued by the International Accounting Standards Board (IASB).
members with relevant skills and
As a result, financial statements prepared in accordance with Ind • B
► alance sheet at the end of the commitment to ESG should be the
AS may not be fully compliant with IASB IFRS. financial year eventual goal.
• P
► rofit and loss account, or in
the case of a company carrying
on any activity not for profit, an
34 Doing Business in India 35
I
Protection of intellectual property rights
and regulations General Agreement on Tariffs and The Trade Marks Act, where a given quality, reputation or
Trade (GATT) and Trade-Related 1999 (TM Act) and the other characteristic of such goods
Aspects of Intellectual Property Trade Marks Rules, is essentially attributable to its
Rights (TRIPS) agreement, has geographical origin.
2017 (TM Rules)
complied with the obligations therein
by enacting necessary statutes
The TM Act and TM Rules provides
governing the following:
for protection of trademarks for The Indian Patents Act,
The Indian Contract Act, 1872 (ICA)
Copyrights and other related services and goods, including 1970
rights collective marks and for the
The ICA governs the formation, implementation and conclusion of assignment and transmission of The Patents Act, 1970 provides
a contract. It also provides remedies in case there is breach of a Trademarks trademarks. The registration of for grant, revocation, registration,
contract. ICA defines a contract as an agreement enforceable by the trademark is sine qua non for a license, assignment and
law. To be enforceable by law, a contract must contain the following person claiming to be the proprietor infringement of patents in India.
Geographical indications of a trademark wherein, the prior Any infringement of a patent is
essential elements:
use of the trademark is not a pre- punishable under the Patents Act.
requisite for its registration.
Patents
Free Parties A contract A contract A contract
consent must be should be must be should
The Geographical The Designs Act, 2000
of the competent for a lawful with a not be Industrial designs
(Designs Act) and the
parties to a consideration lawful expressly Indications of Goods
Design Rules, 2001
contract object declared by (Registration and
the ICA to (Design Rules)
The Copyright Protection) Act,
be void
Act, 1957 and the 1999 (GI Act) and the
The Designs Act and the Design
Copyright Rules, 1958 Geographical Indication Rules were enacted to fulfill India’s
Along with dealing in the general principles of law of contract, ICA also of Goods (Regulation obligations under WTO agreements.
The Copyright Act, 1957 read with
deals with special kind of contracts such as contract of indemnity and
the Copyright Rules, 1958 governs and Protection) Rules, The Designs Act protects novel
guarantee; contract of bailment and pledge; and contract of agency. designs formulated by an owner with
copyright protection in India. As per 2002 (GI Rules)
However, it does not cover contracts covered in separate independent the objective of applying them to
the said law, copyright subsists with
legislations such as contract of partnership, contract for sale of specific articles, to be manufactured
the author of the original literary, In compliance with the obligations
goods, etc. and marketed commercially for a
dramatic, musical and artistic work, in the TRIPS agreement and the
a cinematographic film and sound specific period of time.
Paris Convention for the Protection
recording. In India, copyright is an of Industrial Property, India
inherent right of the author towards enacted the GI Act along with the
its creation and therefore, the GI Rules that governs the present
registration of copyright is not sine geographical indications regime in
qua non. India.
The Copyright Act provides for As per the GI Act, a geographical
both civil and criminal remedies indication means an indication
for an infringement of a copyright. which identifies particular
When an infringement is proved, goods as agricultural, natural or
the copyright owner is entitled to manufactured goods that originated
the remedies by way of injunction, or manufactured in the territory of
damages, rendition of account of
profits and order for seizure as well
as destruction of infringing articles.
36 Doing Business in India 37
J
Anti-trust regulation
Some of the key current central labor laws along with the impact of the legislation are listed below: Current status of the central labor codes is as under:
The Payment of Wages Requires employer to pay wages to certain class of employees within prescribed time Final Central / State Rules under Labor codes yet to be notified
Act, 1936 limit, without any unauthorized deductions and subject to specified conditions Date of entry into force yet to be notified
The Payment of Bonus Requires employer to pay statutory bonus to certain class of employees at specified
Act, 1965 rate based on profits or production or productivity
The key central labor laws subsumed within the four labor codes are listed below:
The Employees’ Requires employer to make contributions towards social security for employees, i.e.,
Provident Fund and provident fund (defined contribution scheme), pension fund (defined benefit scheme) Legislation Details of the current laws subsumed
Miscellaneous Provisions and deposit-linked insurance fund. Employees are entitled to avail lumpsum withdrawal
Act, 1952 / pension benefits on satisfaction of specified conditions The Code on Wages, • T
► he Equal Remuneration Act, 1976
2019 • T
► he Minimum Wages Act, 1948
The Employees’ State Requires employer to make contributions towards insurance scheme for certain class of
Insurance Act, 1948 employees. Employees are entitled to claim benefits in the event of sickness, maternity • T
► he Payment of Wages Act, 1936
or injury suffered during employment • T
► he Payment of Bonus Act, 1965
The Payment of Gratuity Requires employer to pay gratuity (one-time lump-sum payout) to employees on The Code on Social • T
► he Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
Act, 1972 termination of employment subject to specified conditions Security, 2020 • T
► he Employees’ State Insurance Act, 1948
The Maternity Benefit Requires employer to provide maternity benefit to women employees for a prescribed • T
► he Payment of Gratuity Act, 1972
Act, 1961 period before and after childbirth, adoption, abortion or surrogacy
• T
► he Maternity Benefit Act, 1961
The Employee’s Requires certain employers to pay compensation to employees in case of injury by • T
► he Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
Compensation Act, 1923 accident
• T
► he Cine-Workers Welfare Fund Act, 1981
The Factories Act, 1948 To govern the health, safety and welfare of the factory workers. Also provides • T
► he Building and Other Construction Workers’ Welfare Cess Act, 1996
regulations for functioning of factories (including provisions around working hours /
• T
► he Employee’s Compensation Act, 1923
annual leave) and procedures related to the inspection, registration and licensing of
factories • T
► he Unorganised Workers’ Social Security Act, 2008
The Occupational Safety, • T
► he Factories Act, 1948
The Contract Labour To regulate the employment of contractual labor (employment through third party) in
Health and Working • T
► he Contract Labour (Regulation and Abolition) Act, 1970
(Regulation and certain establishments and to provide for its abolition in certain circumstances and for
Conditions Code, 2020
Abolition) Act, 1970 matters connected therewith (such as - registration as principal employer, obtaining • T
► he Inter-State Migrant Workmen (Regulation of Employment and Conditions of
license by contractor, obligations of principal employer, etc.) Service) Act, 1979
The Industrial Disputes To provide for procedure for investigation and settlement of industrial disputes between • T► he Plantations Labour Act, 1951
Act, 1947 employers and workers relating to terms of employment or conditions of labor • T► he Mines Act, 1952
The Industrial Requires employer to define the conditions of employment for the workers by issuing • T► he Working Journalists and other Newspaper Employees (Conditions of Service) &
Employment (Standing standing orders or implementing service rules and to make the conditions known to Misc. Provisions Act, 1955
Orders) Act, 1946 workers employed under them • T► he Working Journalists (Fixation of Rates of Wages) Act, 1958
The Trade Unions Act, To provide for the registration of trade unions and to define applicable rules for • T
► he Motor Transport Workers Act, 1961
1926 registered trade unions • T
► he Beedi and Cigar Workers (Conditions of Employment) Act, 1966
• T
► he Sales Promotion Employees (Conditions of Service) Act, 1976
• T
► he Cine-Workers and Cinema Theatre Workers (Regulation of Employment) Act,
1981
• T► he Dock Workers (Safety, Health and Welfare) Act, 1986
• T► he Building and Other Construction Workers (Regulation of Employment &
Conditions of Service) Act, 1996
40 Doing Business in India 41
Legislation Details of the current laws subsumed Aspect Details Impact for employees Impact for employers
Social Security Work arrangements outside the traditional Social security Additional cost /
The Industrial Relations • T► he Industrial Disputes Act, 1947 for gig workers / employer-employee relationship have been coverage for gig administrative burden
Code, 2020 • T► he Industrial Employment (Standing Orders) Act, 1946 platform workers given recognition under the central labor workers / platform for organizations
• T► he Trade Unions Act, 1926 codes. The central government has been workers engaging gig / platform
authorized to notify specific social security workers
schemes for gig workers and platform
workers. Such social security schemes may
provide life and disability cover, accident
Some of the key impact areas of the central labor codes for employers and employees are explained below:
insurance, health and maternity benefits,
old age protection, creche and other
Aspect Details Impact for employees Impact for employers
benefits to such individuals.
Reference ‘wage’ All employee benefits to be calculated on Higher quantum Additional cost for
for computation new reference ‘wage’ as defined under of benefits such employer towards An onus has been put on aggregators who
of benefits the labor codes as against the current as higher gratuity, employee benefits are digital intermediaries and run online
practice of generally calculating only on overtime pay and marketplaces, who make use of services
basic salary. Under the new definition of leave encashment of these gig and platform workers, to
‘wages’, all salary components except contribute a certain percentage of their
specific exclusions are covered. Also, there annual turnover (between 1% to 2%)
is a 50% ceiling on exclusions, meaning at towards social security schemes for such
least 50% of gross remuneration will now workers.
be covered under ‘wages’ for all employee
benefits calculations. Digitization of Employers permitted to maintain all - Enhances ease of doing
compliance and registers and records digitally under the business but requires
Employee Employers will need to classify their ‘Workers’ will be Additional cost for enforcement labor codes albeit prescriptive formats compliance with state
vs Worker employee population as ‘employees’ or eligible for additional employer towards for these registers and records have been specific rules
classification ‘workers’. While all individuals employed benefits from specific benefits payable provided in the proposed central and
in an organization will be ‘employees’, employers such as only to ‘workers’; state rules supporting the labor codes.
individuals who do not have managerial overtime and annual The Government also plans to do random
Additional compliance
or supervisory roles may potentially be leave encashment web-based inspections under the online
requirements for
‘workers’. With this, even individuals in inspection scheme.
‘workers’ such as setting
so-called white collared jobs working in an
up a grievance redressal
office may qualify as ‘workers’ if they are Focus on “Inspectors-cum-facilitators” have been Employees have been May lead to labor law
committee
not managers or supervisors. enforcement made responsible for not just inspecting given more voice litigation
but also advising employers and employees under the Labor codes
Recognition Central labor codes open doors for a Fixed term employees Option available for Stringent penalties /
on matters relating to compliance.
to fixed term different approach to flexi hiring called eligible for gratuity employer to hire prosecution for non-
employment - fixed term employees. There are no after one year of individuals on a fixed Employees can directly approach courts on compliances
restrictions on the number of or period service term basis any matter under the Code on Wages.
for which fixed term employees can be For enforcement of compliance, monetary
employed. penalties have been prescribed for first
While hiring of contract labor through non-compliance under the labor codes
third parties is not permitted in core but imprisonment proceedings kick-in for
functions in an organization (subject to second non-compliance by the employer.
exceptions), there is no such restriction
on hiring fixed term employees. However,
such employees should be offered the
same benefits as permanent employees for
similar roles and are eligible for gratuity
after one year of service.
42 Doing Business in India 43
K
State labor laws
Apart from the central labor laws listed above, the state governments also Mergers and
acquisitions
have the power to make laws governing labor and employment. While the
new central labor codes subsume various current central labor laws, it will
not impact the applicability of various state labor laws. Thus, employers will
have to continue to ensure compliance under the applicable state laws as
well.
L
Mode Merger Demerger Slump sale Share acquisition
Relaxations NCLT’s approval is not mandatory for merger/ Not applicable Recognizes
under the demerger between small companies and between enforceable contracts
immigration
law authorities is required. refusal, liquidation
preference, tag/drag
NCLT may allow an unlisted transferee company
along rights, etc.
to remain unlisted post-merger/demerger of a
listed company.
Foreign nationals must register with requires this registration. Certain Liability for income tax
the local FRRO/FRO within 14 days categories of visitors are also
Liability for income tax is governed by the residential status of individuals during the tax year. Residential status of
from their date of arrival in India if required to register with the police
an individual is determined based on the conditions prescribed in the table below:
their visa is valid for longer than 180 authorities.
days or if the visa stamp specifically
Period of stay in India Residential status
≥ 60* days in the tax year and ≥ 365 days in four years
Accompanying legal spouses and employment visa–dependents. immediately preceding the tax year
dependent children of the individuals Spouses or dependents of working
visiting India for the purpose of expatriates must obtain a separate A citizen of India, having total income, other than income from Deemed Resident
business or employment, are employment visa if they need to be foreign sources, exceeding INR15 lakh during the tax year, who is
required to apply the visas such employed in India. not liable to tax in any other country or territory by reason of his
as business visa-dependents or domicile or residence or any other criteria of similar nature
Rates of income tax for tax year 2021-22 on any long-term capital gains No deduction in respect of any
Equity shares in a company and on the dividend income for expenditure or allowance or set-off
A simplified personal income tax regime which is optional, can be opted for by a taxpayer in which case, the taxpayer
a taxpayer being an individual, a of any loss shall be allowed against
will have an option to pay taxes at the reduced slab rates (mentioned below) which are applicable without certain Units of equity oriented mutual Hindu undivided family (HUF) and at the time of transfer of income
exemptions and deductions. This option can be exercised every year by furnishing the RoI. fund an association of persons, a body of VDA, except for cost of acquisition.
Taxpayers earning business or professional income, can opt into the simplified personal income tax regime only individuals and an artificial juridical
*VDA has been defined
once on irrevocable basis. Such option will apply to all the subsequent tax years and in case where such an option is Units of business trust person.
exhaustively and broadly includes
withdrawn by the taxpayer, the taxpayer shall not be eligible to avail the concessional slab rates in subsequent years
The income tax and surcharge the following:
until the taxpayer ceases to have business or professional income. Short-term capital gains on
calculated (as applicable), based on
aforesaid specified assets on which • C
► ryptographic assets; or
The slab rates along with its comparison with the slab rates under the simplified personal income tax regime the rates specified above, is further
STT is paid (if assets are sold within • N► on-fungible tokens or any token
are as below: increased by health and education
one year) are chargeable at a special of similar nature, as notified by
cess of 4%.
Income levels (INR) Slab rate (%) Slab rate under the simplified regime (%) rate of 15%. central government; or
Effective 1 April 2022, any income
The rate of surcharge on long term • A
► ny other digital asset notified by
arising from the transfer of Virtual
0-250,000* Nil Nil capital gain arising on transfer central government
Digital Asset (VDA)* will be taxed at
of any long-term capital asset is
250,001-500,000 5% 5% the rate of 30%, plus surcharge (as
restricted to 15% of Income-tax.
applicable) and health and education
500,001-750,000 20% 10% The increased rates of surcharge cess of 4%.
of 25% and 37% are not applicable
750,001-1,000,000 20% 15%
All taxpayers, including non- Residents (excluding not ordinary even if the income does not exceed
*INR250,000 is substituted by INR300,000 for resident individuals who are 60 years old or more but less than 80
residents (NRs), must file a RoI if residents), who hold foreign assets the maximum amount that is liable
years, and INR500,000 in the case of resident individuals of 80 years of age or more.
their income exceeds the maximum or income from any source outside to tax.
A rebate of INR12,500 or actual tax payable, whichever is less, is available for resident individuals with total income amount that is not liable to tax. India are required to furnish RoI
up to INR500,000.
The due date for filing RoI by individuals is as follows:
Income levels (INR) Surcharge An individual who is required to submit tax audit report in Form 3CD 31 October
In cases where surcharge is applicable, marginal relief is allowed to ensure that the additional amount of income tax
payable, including surcharge, on the excess of income over the respective limits of INR5,000,000, INR10,000,000,
INR20,000,000 and INR50,000,000 is limited to the amount by which the income exceeds such limits.
Long-term capital gains are not taxed according to the above slab rates but are generally taxed at a base rate of 20%
plus applicable surcharge and cess.
Long-term capital gains exceeding INR100,000 arising from the sale of the following specified assets, on which
securities transaction tax (STT) is paid, are chargeable to tax at special rates of 10% :
50 Doing Business in India 51
M
Corporate income tax
For Indian income tax purposes, a Corporations resident in India are as in tax treaties, to tax profits
corporation’s income comprises of taxed on their worldwide income from business. The term business
Direct taxes the following heads of income: arising from all sources. connection is considered wider in its
scope than PE.
• I► ncome from house property Non-resident corporations are taxed
• I► ncome from business on the income earned through a Double Taxation Avoidance
business connection in India or Agreement (DTAA)
• C ► apital gains on disposition of
any source in India or transfer of a
capital assets Provisions of the IT Act or the
capital asset situated in India.
• R
► esidual income arising from non- DTAA, whichever is more beneficial
The central government levies direct taxes by way of
business activities (i.e. income The term business connection is are applicable to a non-resident
income tax. Its administration, supervision and control from other sources) used in Indian IT Act instead of a taxpayer. Accordingly, the taxability
lie with the Central Board of Direct Taxes (CBDT). permanent establishment (PE), is likely to be restricted or modified.
Domestic and foreign corporations are subject to a tax at a specified basic tax rate and depending upon the total
The Indian tax year starts from 1 April of a year and ends at 31 March income, the basic rate is increased with a surcharge. There is an additional levy of health and education cess at the
of the subsequent year. The due date for filing RoI is as follows: rate of 4% of the tax payable.
Non-resident corporations are also required to file a RoI in India if they Manufacturing companies or electricity generation companies established and registered 15%
earn income in India or have a physical presence or economic nexus on or after 1 October 2019 and commencing manufacturing or electricity generation up
with India. However, RoI is not required to be filed in India in case the to 31 March 2024 without availing specified deductions or incentives (optional regime)
income earned from India consists of only interest or dividend or royalty
or fee for technical services subject to fulfillment of certain conditions. Domestic companies may opt for concessional tax rate provided they do not avail 22%
specified deductions or incentives
Effective from 1 April 2022, taxpayers are permitted to file an updated
RoI to correct the errors committed in computing tax liability and on Foreign company 40%
payment of additional tax subject of fulfillment of certain conditions.
The updated RoI can be filed within three years from the end of the LLP 30%
relevant tax year. Updated RoI can also be filed even if original RoI was
not filed. The rates listed above must be increased by applicable surcharge rate (refer table below for surcharge rates) and
health and education cess of 4%.
Corporate tax liability needs to be estimated and discharged by way of
advance tax on a quarterly basis.
Domestic company opting for concessional tax rate of 15% or 22% 10% 10%
Depreciation on capital assets is balance method using varying rates,
Domestic company (other than above) 7% 12%
allowed on the basis of reducing depending on the nature of assets.
Foreign company 2 5
LLP 12 12
There is no repatriation tax cost while profits are distributed by an LLP, as the share of such profits in the hands of Tax on dividend income
the partner(s) is exempt.
Withholding tax rates Dividend received from domestic deductible expenses. Dividend
companies is taxable in the hands distributing companies are required
Withholding tax rates Tax rates in % (corresponding note)
of shareholders. Interest expenses to withheld taxes at the applicable
Paid to a domestic company Paid to a foreign company up to 20% of dividend income are rates.
Notes
VDAs have gained tremendous 2022. No deduction is allowed on
(a) The rates listed above for withholding tax must be increased by applicable surcharge with reference to the income slabs as popularity in recent times and the computation of income, except cost
indicated in the surcharge table above and health and education cess of 4%. volumes of trading in such digital of acquisition of VDA. Further, Gift
(b) This rate of 5% only applies to interest on foreign currency loans. Any other interest is subject to tax at a normal applicable assets have raised substantially. of VDA is also taxable in hands of
rate of 20% to foreign corporations. Accordingly, a special tax regime recipient.
(c) Royalty or FTS: foreign corporations are axed with respect to royalties or FTS at the rate of 10% on a gross basis. has recently been launched in India
(d) If PAN of the payee (PAN or other specified details/documents in case of a non-resident payee) is not available, tax will be for taxation of VDA, a specifically Consideration paid to a resident
withheld at an applicable rate or at a penal rate of 20%, whichever is higher. for transfer of VDA, is subject to
defined asset which covers crypto
(e) Reduced withholding tax rate of 2% to apply on royalty paid to residents in consideration for sale, distribution or exhibition of currencies/assets, non-fungible withholding @1% w.e.f. 1 July 2022.
cinematographic films.
tokens and any other assets to be Loss arising from transfer of VDA
(f) Withholding tax rate of 2% will apply in case of fees for technical services (not being a professional service) and 10% in other
notified by the CG as VDA. can neither be set off against any
cases.
Any income from transfer of VDA income, nor carried forward to
is taxable @30% w.e.f. 1 April subsequent years.
Taxes are required to be withheld at a higher penal rate (twice of applicable rate or 5% whichever is higher) if:
• RoI has not been furnished by the payee (includes a NR who has a PE in India) for the tax year immediately preceding the
financial year in which tax is required to be withheld, for which the time limit for furnishing RoI has expired; and
• the aggregate withholding tax in his case is INR50,000 or more in the said year
Relief for losses
Business losses, other than from set off, are permitted to be carried
Books of accounts and tax audit
speculation businesses, are forward for setting off against
permitted to be set off against business profits arising in the eight
income from any other source subsequent years. Unabsorbed
Every company engaged in a business is required to maintain books of (except income from employment, depreciation is permitted to be
accounts and get them audited by an accountant if its total sales, turnover i.e., salary income) in the same year. carried forward for an unlimited
or gross receipts exceed INR10 million (INR100 million provided cash Business losses, which cannot be so period.
transactions are less than 5% in value) during the year.
54 Doing Business in India 55
Non-residents are also taxed on date exceeds INR100 million and assets are exempted from indirect DTAAs entered into by India with tax paid by them in other countries
capital gains arising on any share represents at least 50% of the value transfer tax. Moreover, indirect several other countries govern subject to fulfillment of certain
or interest in a company or entity of all assets owned by a foreign transfer of shares of an Indian foreign tax relief to avoid double requirements. The credit amount
registered or incorporated outside corporation. corporation pursuant to merger/ taxation. If there is no such is the lower of Indian effective rate
India, deriving its value substantially demerger of foreign corporations, agreement, resident corporations of tax or the tax rate of the said
Small shareholders holding 5% or
from assets located in India, where subject to satisfaction of specified can claim a foreign tax credit for the country on the doubly taxed income.
less of the total voting power/share
the fair market value (FMV) of conditions is not taxable.
capital, in the foreign corporation
an Indian asset on a specified
or entity directly holding the Indian
Authority for Advance Ruling (AAR)
MAT/Alternate Minimum Tax (AMT) An advance ruling scheme is or fact in relation to the tax liability
available to achieve certainty on of the non-resident arising out of a
the income tax liability of eligible transaction undertaken or proposed
Indian tax law requires MAT to be The credit for MAT paid is allowed and cess) is applicable to LLPs taxpayers (including non-residents), to be undertaken. Additionally, a
paid by corporations on the basis to be carried forward for 15 years and certain other taxpayers (other to plan their income tax well in resident applicant can also approach
of profits disclosed in their financial and set off against the income tax than companies) who are availing advance and to avoid lengthy and the AAR for determining its tax
statements where the tax payable payable under the normal provisions specified profit-linked tax incentives. expensive litigation. liability arising out of a transaction
according to regular tax provisions is of the IT Act to the extent of the Unadjusted AMT credit can be undertaken or proposed to be
A ruling can be obtained by an
less than 15% (excluding surcharge difference between tax according to carried forward for 15 years and undertaken with a non-resident
applicant (resident or non-resident)
and cess) of their book profits. normal provisions and tax according set off against income tax payable valuing INR1000 million or more in
with respect to any question of law
MAT is not applicable on domestic to MAT. under the normal provisions of the aggregate.
companies opting for concessional IT Act to the extent of the difference
A modified version of MAT, AMT
tax rate of 15% or 22%. between tax according to normal
at 18.5% (excluding surcharge
provisions and tax according to AMT.
General Anti-Avoidance Rule (GAAR)
N
Safe Harbor Rule (SHR)
Transfer Pricing
price declared by a taxpayer to be at arm’s length. The SHR (applicable for
the period FY 2016-17 to FY 2020-21) has also been made applicable for FY
2021-22.
In case the aggregate value of SDT exceeds INR200 million, within the
Interest limitation rules
ambit of TPRs, the same shall be computed having regard to ALP. The
transactions covered under TPR(s) include all transactions with related
domestic companies or units eligible for tax holiday, or new domestic These provisions limit the amount of deductible interest expenditure (in
manufacturing companies chargeable to a lower tax rate. respect of amount lent by a non-resident AE or a third-party debt guaranteed
by an AE) to 30% of EBITDA. Excess interest, if any, shall be allowed to be
carried forward up to eight successive years.
58 Doing Business in India 59
0
3
Rate classification for services
The GST is based on a dual levy model. Both the center and the state are
empowered to levy equal amounts of tax (in the form of Central Goods
and Services Tax (‘CGST’) and State Goods and Services Tax (‘SGST’)
on the same taxable base (supply of goods and services). In case of
inter-state transitions, center has the authority to levy Integrated Goods
Electronic invoicing and Dynamic Quick Response (QR) Code
and Service Tax (‘IGST’), a part whereof is transferred by the central
government to the destination state.
Electronic invoicing (B2B invoice reference number (IRN) is affix a Dynamic Quick Response (QR)
Further, imports would be subject to IGST, while exports would continue transactions) generated for each invoice. Code for a tax invoice issued to an
to be zero-rated. unregistered person.
The GoI has made electronic invoices Relaxation from IRN and QR code
4
mandatory w.e.f. 1 October 2020 generation has been passed on to Relaxation from Dynamic QR code
for registered persons with the the following category of suppliers: generation has been provided to the
2
Rate classification for goods aggregate turnover of INR5 billion.
• S► upplier of taxable services being
following category of suppliers:
The government with an intent to
make e-invoicing applicable for all
insurers/banking institution/ • S► upplier of taxable services being
financial institution/non-banking insurers/banking institution/
taxpayers has reduced the said
financial companies (NBFCs) financial institution/non-banking
threshold in a phased manner to
Exempt Electrical energy, newspapers, milk, credit scrips, food • G ► oods transport agencies financial companies (NBFCs)
INR200 million.
grains (other than pre-packaged and labelled) • G ► oods transport agencies
Electronic invoicing aims to bring
• S► uppliers engaged in passenger
5% Apparels valued less than INR1,000, fly ash, fishing net and transportation services • S► uppliers engaged in passenger
fishing hooks, aircraft engines, biogas interoperability of invoices across
• S► uppliers engaged in exhibition of transportation services
the entire GST ecosystem and data
12% Articles of apparels exceeding INR1,000, biodiesel, specified cinematographic film in multiplex • S► uppliers engaged in exhibition of
consistency across the different
parts of sewing machine, furniture wholly made of bamboo screens cinematographic film in multiplex
government platforms. It also curbs
or cane screens
issuance of fake invoices.
18% Printing ink, Forklift, lifting and handling equipment, Dynamic QR Code (B2C
transactions)
• S► upply of Online Information
transmission apparatus for radio and television Electronic invoicing primarily
Database Access and Retrieval
broadcasting, chocolates, slabs of marbles and granite involves reporting of an invoice 5
The GoI has made it mandatory for (OIDAR) services by any person
generated by a tax payer to the
28% Air-conditioners, dish washing machines, digital cameras, the registered persons with annual located in non-taxable territory
central system (called Invoice
monitors and projectors, motor car aggregate turnover exceeding INR5 and received by a non-taxable
Registration Portal), for the purpose
28% + Cars, pan masala, cigars billion rupees in any of the financial online recipient
of de-duplication check of the
cess years from 2017-18 onwards to
invoice, to ensure that a unique
60 Doing Business in India 61
P
Other indirect taxes
Other than GST, the central government levies indirect taxes comprising of customs duty, stamp duty, profession tax Tax incentives
in India
and property tax. Post the implementation of GST, the states continue to levy profession tax and state Value Added
Tax only on selected items like petroleum products alcohol, etc. Various other taxes that were hitherto levied by the
states like entry tax, octroi, etc. have been subsumed with GST.
Customs duty Rate of customs duty - 30.98% Customs duty is levied on import of goods into India
(actual rate varies depending on and is typically payable by the importer. Make in India scheme
classification under the customs tariff,
Components of customs duty:
which is aligned with the International
Harmonized System of Nomenclature) • B ► asic customs duty On 25 September 2014, the Indian Prime Minister, Narendra Modi
• I► GST leviable under the Customs Tariff Act, 1975 unveiled the ambitious Make in India campaign with an aim to turn India
• S► ocial welfare surcharge into a global manufacturing hub. The campaign is a major national
program designed to facilitate investment, foster innovation, enhance
Stamp duty Varies across the states It is a tax on transactions in the form of stamps on skill development, protect intellectual property and build best-in-class
instruments affecting such transactions. manufacturing infrastructure.
The government has come out with several policy initiatives such as
Profession tax Varies across the states It is a state levy on persons engaged in any
rationalizing duty structure for a wide range of products, extending
profession, trade, or employment in a state.
differential duty structure to components, corporate tax exemptions,
Property tax Varies with each municipal authority It is a municipal tax imposed on the owner of the increasing ease of doing business with a focus on start-ups, promoting
property (usually real estate) for the maintenance skill development, R&D and innovation. These announcements have been
of basic civic services in a city. The amount of tax well-received by industry partners and manufacturers.
is calculated on the value of the property that is In order to resonate well with the Make in India program, various tax
sought to be taxed (ad valorem basis) as prescribed incentives are available for existing and newly setup companies in India.
by each municipal authority. These are broadly divided into three categories:
Entertainment tax Varies across states Local governments, with the authority of the
respective state government can levy entertainment
tax on various entertainment and amusement Location based Export linked Industry specific
activities such as exhibitions, cable or DTH
subscriptions, video games, amusement parks and • Special • B
► enefit for R&D • I► nfrastructure and
events. Economic Zone expenditure power facilities
incentives • E► mployment of • O
► il and gas
• T► ax holiday new workmen • C
► old chain and
in specified • B
► usiness of warehousing
locations, viz., collecting and • H ► ospitals
the northeastern processing
regions of India • F► ertilizer
bio- degradable
production
• S► tate-level waste
incentives like • A
► ffordable housing
• P
► roject Import
project schemes
stamp duty Scheme for
exemption, initial set-up • H
► ospitality and
electricity duty or substantial tourism, etc.
exemptions, etc. expansion
of specified
projects
62 Doing Business in India 63
Some of the tax deductions and tax incentives have been highlighted below: Indirect tax benefits available to registered dealer under the following Budget Speech for the Financial
SEZ developers/units options: Year 2022-23 specified that the
Activity Benefits (subject to specified conditions) Special Economic Zones Act will
Import of goods and services • U
► pfront exemption by way of
be replaced with a new legislation
All taxpayers, whose total sales, turnover or gross Additional deduction of 30% of the cost incurred on a new execution of a bond or a legal
Exemption that will enable the states to
receipts exceed INR10 million employee undertaking
Import of goods and services has become partners in ‘Development
Scientific research and development 100% deduction on expenditure been specifically exempted from • G
► ST paid by a registered dealer/ of Enterprise and Service Hubs’.
levy of IGST. However, the SEZ service provider and refund shall This will cover all large existing and
Deduction in respect of specified business 100% deduction on capital expenditure
developer/unit shall be required be claimed subsequently by the new industrial enclaves to optimally
categories such as cold chain facilities,
to execute a bond-cum-legal registered dealer/service provider utilize available infrastructure and
warehousing facilities for storage of agricultural
produce, cross-country distribution of natural gas undertaking for claiming an upfront enhance competitiveness of exports.
Stamp duty exemption/
1
oil, infrastructure facilities, etc . custom duty exemption on import of
reimbursement
goods.
Expenditure on skill development projects 100% deduction on expenditure incurred on a notified skill States offer additional incentives in
development project by a company the form of stamp duty exemption
Domestic procurement of goods
on land related transactions in an
Start-up businesses engaged in innovation, 100% tax holiday for three consecutive years out of 10 years, and services
SEZ (subject to state laws).
development, deployment or commercialization deduction to eligible start-ups set-up before 1 April 2023 with An SEZ developer/SEZ unit shall
of new technology- or intellectual property- driven a turnover of less than INR1 billion be eligible to avail tax benefit on The Finance Minister in the
products, processes or services domestic procurements from a
Companies located in International Financial • 1 ► 00% tax holiday for 10 consecutive years out of 15 years
Service Centers (IFSCs) • R ► educed Minimum Alternate Tax rate of 9%
• S► pecified relaxation from Securities Transaction Tax, Long-
term Capital Gains Tax and Commodities Tax Incentives under Foreign Trade Policy 2015-20 (FTP)
Trade facilitation is a priority of and export trade vide FTP. The FTP The FTP (2015-20) which was
Special Economic Zones (SEZs) in India the government to cut down the provides a framework for increasing earlier extended upto 30 September
transaction cost, thereby rendering exports of goods and services as 2022, has been extended by six
Indian exports more competitive. well as generation of employment months and shall be valid up to 31
To achieve the said objective, the and increasing value addition in the March 2023. Accordingly, various
SEZs are specifically delineated duty-free enclaves deemed to be a foreign territory for the limited purpose of trade
GoI has provided various incentives country thereby integrating the benefits provided under the current
operations, duties/tariffs. With the SEZ scheme, the government aims to create hassle-free environment for exports,
such as Advance Authorization, Duty Make in India, Digital India and Skill FTP (2015-20) shall remain in
supported by an integrated simplified infrastructure and a package of incentives to attract foreign and domestic
Free Import Authorization etc., for India initiatives of the government. force up to 31 March 2023, unless
investment.
the benefit of stakeholders of import otherwise specified.
Direct tax incentives for SEZ
Undertakings/units located Deduction is available to units’ setup in a SEZ in a phased manner as under:
in SEZs and engaged in the
• 1
► 00% deduction in respect of export profits for first five years
manufacture or production/
provision of services. • 5► 0% deduction in respect of export profits for the next five years
• 5 ► 0% of export profits, provided that the profits are transferred to a Special
Economic Zone Reinvestment Reserve Account for the purpose of acquiring
plant or machinery within three years
(The aforesaid tax holiday is only available for SEZ units approved by 31 March
2020 and which commence operation by 30 September 2020)
MAT/AMT of 15% (plus surcharge and cess) is applicable on book profits/taxable income of the SEZ unit. However,
MAT/AMT credit can be carried forward for 15 years and set-off against tax liability in future.
64 Doing Business in India 65
April 2022
11 Electronically filing details of outward supplies of taxable goods and/or services in Form GSTR-1 for March
Key tax
2022
13 Electronically filing details of outward supplies of taxable goods and/or services in Form GSTR-1 for the
quarter January 2022 to March 2022 by taxpayers having turnover less than INR15 million in preceding
compliance calendar
financial year
20 Electronically filing Form GSTR-3B to discharge GST tax liability for March 2022 by taxpayers having
turnover above INR50 million in the preceding financial year
22 Electronically filing Form GSTR-3B to discharge GST tax liability for March 2022 by taxpayers having
1
turnover up to INR50 million in the preceding financial year for the specified states
1 April 2022 to 31 March 2023 24 Electronically filing Form GSTR-3B to discharge GST tax liability for March 2022 by taxpayers having
turnover up to INR50 million in the preceding financial year for the states/UTs other than those mentioned
above
May 2022
11 Electronically filing details of outward supplies of taxable goods and/or services in Form GSTR-1 for the
month of April 2022
2
20 Electronically filing Form GSTR-3B to discharge GST tax liability for April 2022 by taxpayers having
turnover above INR50 million in the preceding financial year
22 Electronically filing Form GSTR-3B to discharge GST tax liability for April 2022 by taxpayers having
1
turnover up to INR50 million in the preceding financial year for the specified states
24 Electronically filing Form GSTR-3B to discharge GST tax liability for April 2022 by taxpayers having
turnover up to INR50 million in the preceding financial year for the states/UTs other than those mentioned
above
3
25 Payment of due tax in PMT-06 for the month of April 2022 for the taxpayers filing return under Quarterly
Return Monthly Payment (QRMP) scheme
31 Electronically file quarterly (January to March 2022) withholding tax returns in Form 24Q/26Q/27Q
June 2022
11 Electronically filing details of outward supplies of taxable goods and/or services in Form GSTR-1 for the
month of May 2022
15 Payment of advance tax (not less than 15% of the estimated tax for the tax year 2022-23)
20 Electronically filing Form GSTR-3B to discharge GST tax liability for May 2022 by taxpayers having
turnover above INR50 million in the preceding financial year
22 Electronically filing Form GSTR-3B to discharge GST tax liability for May 2022 by taxpayers having
1
turnover up to INR50 million in the preceding financial year for the specified states
24 Electronically filing Form GSTR-3B to discharge GST tax liability for May 2022 by taxpayers having
turnover up to INR50 million in the preceding financial year for the states/UTs other than those mentioned
above
25 Payment of due tax in PMT-06 for the month of May 2022 for the taxpayers filing return under QRMP
scheme
68 Doing Business in India 69
7 Payment of taxes withheld in June 2022 24 Electronically filing Form GSTR-3B to discharge GST tax liability for August 2022 by taxpayers having
turnover up to INR50 million in the preceding financial year for the states/UTs other than those mentioned
11 Electronically filing details of outward supplies of taxable goods and/or services in Form GSTR-1 for June above
2022
25 Payment of due tax in PMT-06 for the month of August 2022 for the taxpayers filing return under QRMP
13 Electronically filing details of outward supplies of taxable goods and/or services in Form GSTR-1 for the
scheme
quarter April 2022 to June 2022 by taxpayers having turnover less than INR15 million in preceding
4
financial year 30 Filing of tax audit report (in Form 3CD) by the taxpayer liable to file its tax return by 31 October
20 Electronically filing Form GSTR-3B to discharge GST tax liability for June 2022 by taxpayers having
turnover above INR50 million in the preceding financial year October 2022
22 Electronically filing Form GSTR-3B to discharge GST tax liability for June 2022 by taxpayers having 7 Payment of taxes withheld in September 2022
1
turnover up to INR50 million in the preceding financial year for the specified states
11 Electronically filing details of outward supplies of taxable goods and/or services in Form GSTR-1 for
24 Electronically filing Form GSTR-3B to discharge GST tax liability for June 2022 by taxpayers having September 2022
turnover up to INR50 million in the preceding financial year for the states/UTs other than those mentioned
above 13 Electronically filing details of outward supplies of taxable goods and/or services in Form GSTR-1 for the
quarter July 2022 to September 2022 by taxpayers having turnover less than INR15 million in preceding
31 Electronically file quarterly (April to June 2022) withholding tax returns in Form 24Q/26Q/27Q financial year
31 Filing income tax return by the taxpayers who are not subject to tax audit and transfer pricing provisions, 20 Electronically filing Form GSTR-3B to discharge GST tax liability for September 2022 by taxpayers having
for tax year 2021-22 turnover above INR50 million in the preceding financial year (due date has been extended upto 21 October
2022)
August 2022 22 Electronically filing Form GSTR-3B to discharge GST tax liability for September 2022 by taxpayers having
1
turnover up to INR50 million in the preceding financial year for the specified states
7 Payment of taxes withheld in July 2022
24 Electronically filing Form GSTR-3B to discharge GST tax liability for September 2022 by taxpayers having
11 Electronically filing details of outward supplies of taxable goods and/or services in Form GSTR-1 for July turnover up to INR50 million in the preceding financial year for the states/UTs other than those mentioned
2022 above
20 Electronically filing Form GSTR-3B to discharge GST tax liability for July 2022 by taxpayers having 31 Intimation by a designated constituent entity, who is a resident in India, of an international group in Form
turnover above INR50 million in the preceding financial year no. 3CEAB for the tax year 2021-2022
22 Electronically filing Form GSTR-3B to discharge GST tax liability for July 2022 by taxpayers having 31 Intimation to be filed by a resident constituent entity of an international group whose parent is a non-
1
turnover up to INR50 million in the preceding financial year for the specified states resident (CbC Report) for the tax year 2021-22 (Assuming consolidated financial statements ending on 31
December) [Form 3CEAC]
24 Electronically filing Form GSTR-3B to discharge GST tax liability for July 2022 by taxpayers having
turnover up to INR50 million in the preceding financial year for the states/UTs other than those mentioned 31 Filing of income tax return by the non-corporate taxpayer liable to only tax audit, foreign/domestic
5
above companies (non TP cases) and partners of the firm/LLP liable to tax audit, for the tax year 2021-22
25 Payment of due tax in PMT-06 for the month of July 2022 for the taxpayers filing return under QRMP 31 Filing of tax audit report (in Form 3CD) and/or TP certification (in Form 3CEB) for taxpayers subject to TP
scheme compliance and maintenance of TP documentation, for the tax year 2021-22
6
31 Electronically file quarterly (July to September 2022) withholding tax returns in Form 24Q/26Q/27Q
September 2022
11 Electronically filing details of outward supplies of taxable goods and/or services in Form GSTR-1 for August 7 Payment of taxes withheld in October 2022
2022 11 Electronically filing details of outward supplies of taxable goods and/or services in Form GSTR-1 for
15 Payment of advance tax (not less than 45% of the estimated tax for the tax year 2022-23) October 2022
20 Electronically filing Form GSTR-3B to discharge GST tax liability for August 2022 by taxpayers having 20 Electronically filing Form GSTR-3B to discharge GST tax liability for October 2022 by taxpayers having
turnover above INR50 million in the preceding financial year turnover above INR50 million in the preceding financial year
22 Electronically filing Form GSTR-3B to discharge GST tax liability for August 2022 by taxpayers having 22 Electronically filing Form GSTR-3B to discharge GST tax liability for October 2022 by taxpayers having
1
turnover up to INR50 million in the preceding financial year for the specified states
1 turnover up to INR50 million in the preceding financial year for the specified states
70 Doing Business in India 71
24 Electronically filing Form GSTR-3B to discharge GST tax liability for October 2022 by taxpayers having 7 Payment of taxes withheld in January 2023
turnover up to INR50 million in the preceding financial year for the states/UTs other than those mentioned 11 Electronically filing details of outward supplies of taxable goods and/or services in Form GSTR-1 for
above January 2023
25 Payment of due tax in PMT-06 for the month of October 2022 for the taxpayers filing return under QRMP 20 Electronically filing Form GSTR-3B to discharge GST tax liability for January 2023 by taxpayers having
scheme turnover above INR50 million in the preceding financial year
30 Report in Form No. 3CEAA by a constituent entity of an international group for the tax year 2021-2022 22 Electronically filing Form GSTR-3B to discharge GST tax liability for January 2023 by taxpayers having
1
turnover up to INR50 million in the preceding financial year for the specified states
30 Filing of income tax return by taxpayers subject to TP compliance and maintenance of TP documentation
for the tax year 2021-22 24 Electronically filing Form GSTR-3B to discharge GST tax liability for January 2023 by taxpayers having
turnover up to INR50 million in the preceding financial year for the states/UTs other than those mentioned
above
December 2022 25 Payment of due tax in PMT-06 for the month of January 2023 for the taxpayers filing return under QRMP
scheme
7 Payment of taxes withheld in November 2022
11 Electronically filing details of outward supplies of taxable goods and/or services in Form GSTR-1 for
November 2022 March 2023
15 Payment of advance tax (not less than 75% of the estimated tax for tax year 2022-23) 7 Payment of taxes withheld in February 2023
20 Electronically filing Form GSTR-3B to discharge GST tax liability for November 2022 by taxpayers having 11 Electronically filing details of outward supplies of taxable goods and/or services in Form GSTR-1 for
turnover above INR50 million in the preceding financial year February 2023
22 Electronically filing Form GSTR-3B to discharge GST tax liability for November 2022 by taxpayers having 15 Payment of advance taxes up to estimated tax liability for the tax year 2022-2023
1
turnover up to INR50 million in the preceding financial year for the specified states
20 Electronically filing Form GSTR-3B to discharge GST tax liability for February 2023 by taxpayers having
24 Electronically filing Form GSTR-3B to discharge GST tax liability for November 2022 by taxpayers having turnover above INR50 million in the preceding financial year
turnover up to INR50 million in the preceding financial year for the states/UTs other than those mentioned
22 Electronically filing Form GSTR-3B to discharge GST tax liability for February 2023 by taxpayers having
above 1
turnover up to INR50 million in the preceding financial year for the specified states
25 Payment of due tax in PMT-06 for the month of November 2022 for the taxpayers filing return under
QRMP scheme 24 Electronically filing Form GSTR-3B to discharge GST tax liability for February 2023 by taxpayers having
turnover up to INR50 million in the preceding financial year for the states/UTs other than those mentioned
31 Electronically file GST annual return and audit report (if applicable) for the period 2021-22 in form GSTR-9
above
and GSTR-9C, respectively
25 Payment of due tax in PMT-06 for the month of February 2023 for the taxpayers filing return under QRMP
scheme
January 2023 31 Filing of a CbC Report by an Indian parent entity or Indian constituent entities of an international group
7 Payment of taxes withheld in December 2022 where exchange of information agreement has not been signed, in respect of tax year 2021-22 (in Form
3CEAD)
11 Electronically filing details of outward supplies of taxable goods and/or services in Form GSTR-1 for
December 2022
Note: The calendar pertains to compliances to be undertaken under the central laws.
13 Electronically filing details of outward supplies of taxable goods and/or services in Form GSTR-1 for
the quarter October 2022 to December 2022 by taxpayers having turnover less than INR15 million in 1. Specified states are Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana,
Andhra Pradesh, the Union territories of Daman and Diu and Dadra and Nagar Haveli, Puducherry, Andaman and Nicobar
preceding financial year Islands or Lakshadweep.
31 Electronically file quarterly (October to December 2022) withholding tax returns in Form 24Q/26Q/27Q 2. The due date for filing of GSTR-3B for the month of April 2022 for the taxpayers with turnover more than INR50 million has
20 Electronically filing Form GSTR-3B to discharge GST tax liability for December 2022 by taxpayers having been extended upto 24 May 2022.
turnover above INR50 million in the preceding financial year 3. The due date for payment of due tax in PMT-06 for the month of April 2022 for the taxpayers with turnover upto INR50 million
has been extended upto 27 May 2022.
22 Electronically filing Form GSTR-3B to discharge GST tax liability for December 2022 by taxpayers having
1
turnover up to INR50 million in the preceding financial year for the specified states 4. The due date for filing of tax audit report for these taxpayers for the tax year 2021-22 has been extended from 30 September
2022 to 07 October 2022 vide Circular no. 19/2022 dated 30 September 2022
24 Electronically filing Form GSTR-3B to discharge GST tax liability for December 2022 by taxpayers having
5. The due date for filing of return of income for the tax year 2021-22 has been extended from 31 October 2022 to 07
turnover up to INR50 million in the preceding financial year for the states/UTs other than those mentioned
November 2022 vide Circular no. 20/2022 dated 26 October 2022.
above
6. The due date for filing of withholding tax return (Form 26Q) for the second quarter (July to September 2022) has been
31 Electronically file quarterly (October to December 2022) withholding tax returns in Form 24Q/26Q/27Q extended from 31 October 2022 to 30 November 2022 vide Circular no. 21/2022 dated 27 October 2022.
72 Doing Business in India 73
Glossary
Abbreviation Description Abbreviation Description
Environment, Social and IC Indigenous content
ESG
Governance
ICA Indian Contract Act, 1872
ESOP Employees stock ownership plan
Income Computation and
Foreign currency convertible ICDS
FCCB Disclosure Standards
Abbreviation Description Abbreviation Description bond
Indian Customs Electronic
FDI Foreign direct investment ICEGATE
AAR Authority for advance rulings COP 26 26th Conference of parties Gateway
Foreign Exchange Management International Financial Reporting
ACC Advanced Chemistry Cell COVID-19 Coronavirus Disease 2019 FEMA IFRS
Act, 1999 Standards
AD Bank Authorized dealer bank CSR Corporate social responsibility FII Foreign institutional investor International Financial Service
IFSC
Centres
ADR American depositary receipt CST Central Sales Tax Foreign Investment Promotion
FIPB Integrated Goods and Services
Board IGST
AE Associated enterprise DAP Defence acquisition procedure Tax
FMV Fair market value
AGR Adjusted gross revenue Development of enterprise and International Labour
DESH ILO
service hubs FPI Foreign portfolio investment Organization
ALP Arm’s length price
Designs Act The Designs Act, 2000 Ind AS Indian Accounting Standard
FRO Foreigner's Registration Office
AMT Alternate Minimum Tax
Designs Rules The Design Rules, 2001 Foreigner Regional Registration INR Indian Rupees
FRRO
APA Advance pricing agreement Offices
Department of IOR Indian Ocean Region
DoT
b Billion Telecommunications FTP Foreign Trade Policy
IPO Initial public offering
Defence Production and Export
BC Body corporate DPePP FTS Fee for technical services
Promotion Policy 2020 Insurance Regulatory and
IRDAI
BCG Bacillus calmette–guérin FY Financial year Development Authority of India
DPM Defence procurement manual
IRN Invoice reference number
BEPS Base erosion and profit shifting DPT Diphtheria, pertussis and tetanus GAAR General Anti-Avoidance Rule
Information technology &
BO Branch office Defence Research & General agreement on tariffs and
DRDO GATT IT & ITES information technology enable
Development Organization trade
services
BPM Business process management
Double Taxation Avoidance GDP Gross domestic product
DTAA IT Act Income-tax Act, 1961
Business responsibility and Agreement
BRSR GDR Global depository receipt
sustainability reporting km Kilometres
DTH Direct-to-home television
BSE Bombay Stock Exchange Geographical Indications
Earnings before interest, tax, GI Act of Goods (Registration and LLP Limited Liability Partnership
EBITDA
BTA Business transfer agreement depreciation and amortization Protection) Act, 1999
BTP Bio technology park ECB External commercial borrowing Geographical Indication of Goods LO Liaison office
GI Rules (Regulation and Protection)
CAGR Compound annual growth rate EDI Electronic data exchange Rules, 2002 M&A Mergers and acquisitions
Abbreviation
MSMEs
Description
Micro, small and medium
enterprises
Abbreviation
RBI
Description
Reserve Bank of India
Sources
REIT Real Estate Investment Trusts
NBFC Non-banking financial companies
ROC Registrar of companies
NCLT National Company Law Tribunal A
Remission of duties and taxes on
Non-convertible preference RoDTEP
NCPS exported products 1. https://knowindia.india.gov.in/
shares
2. www.knowindia.net
ROI/RoI Return of income
NGO Non-governmental organizations 3. www.iwai.nic.in
ROR Resident and ordinarily resident 4. https://indiainvestmentgrid.gov.in/sectors/transport/airports-and-aviation-infrastructure
Negotiable Instruments Act,
NI Act 5. World Population Prospects 2019, United Nations
1881 SAAS Software as a service 6. World Bank
NOC No objection certificate 7. Census 2011
SDT Specified domestic transaction
8. As per the World Bank Group estimates
NOR Not ordinarily resident Securities and Exchange Board
SEBI 9. Estimated using figures in INR from Ministry of Statistics and Programme Implementation (MoSPI), GoI and an
of India average exchange rate of 74.5 INR/US$ for FY22
NR Non-resident
SEZ Special economic zone 10. MoSPI, GoI
NRI Non-resident Individual 11. Ministry of Commerce and Industry, GoI
SGST State Goods and Service Tax
NSE National Stock Exchange
SHR Safe Harbor Rule
OCI Overseas citizen of India
SME Small and medium enterprises
B
Optionally convertible preference
OCPS
shares STT Securities Transaction Tax 1. Stockholm International Peace Research Institute
Organization for Economic Co- 2. EY Tax Alert on Union Budget 2022 – Defence Sector
OECD t Trillion 3. www.pib.gov.in
operation and Development
4. Data published by Department of Defence Production
OFB Ordnance Factory Board TAR Tax audit report
5. Quad Joint Leaders’ Statement (mea.gov.in)
Online information database TM Act Trade Mark Act, 1999 6. Data published by Ministry of Defence, Indian Army, Indian Navy and Indian Air Force
OIDAR 7. OICA - Organisation Internationale des Constructeurs d’Automobiles.
access and retrieval
TM Rules Trade Marks Rules, 2017 8. Society of Indian Automobile Manufacturers
OTT Over the top 9. Fact Sheet on Foreign Direct Investment (FDI) Inflow from April 2000 to March 2022 (dpiit.gov.in)
TP Transfer pricing
PAN Permanent Account Number 10. Ministry of Heavy Industries
TPR Transfer pricing regulations 11. As per data released by India Brand Equity Foundation
PE Permanent establishment 12. Foreign Exchange Management (Non-debt Instruments) Rules, 2019
Trade-related aspects of 13. EY India IPO Trends Report Q2 2021
TRIPS
PIB Press Information Bureau intellectual property rights 14. https://www.investindia.gov.in
PIO Person of Indian origin UK United Kingdom 15. https://pharmaceuticals.gov.in/pharma-industry-promotion
16. NASSCOM strategic Review 2022
PLI Production linked incentive US The United States of America 17. Tuning into consumer – India’s Media & Entertainment report by EY and FICCI (March 2022)
18. FDI statistics published by the Department for Promotion of Industry and Internal trade for the period starting
PMU Project management unit US$ US dollar
from April 2000 still December 2021
PO Project office UT Union territory 19. Data published by Ministry of Shipping (https://shipmin.gov.in/sites/default/files/1%20Major%20March%20
2022.pdf
PSU Public sector undertaking VAT Value Added Tax 20. Ports Wing | Ministry of Ports, Shipping and Waterways (shipmin.gov.in)
21. CEA Annual Report, 2020-21, Energy Requirement for FY11 is 861,591 MU and FY21 is 1,275,534
QFI Qualified foreign investors VDA Virtual digital asset
22. Executive Summary, May 2022 and May 2011, Central Electricity Authority (CEA)
QR Quick response WTO World Trade Organization 23. It includes subsectors - alcoholic drinks, beauty and personal care, consumer health, home care, hot drinks,
foods, soft drinks, tissue and hygiene, tobacco products, apparel, footwear, furniture and furnishings,
Quarterly return monthly YoY Year on year appliances, books, stationery and others.
QRMP
payment 24. As per the Consolidated FDI policy dated 15 October 2020
YTD Year-to-date
R&D Research and development 25. Notification No. F. No. 12015/03/2020-IT. Dated 24 September 2021 issued by Ministry of Textiles
76 Doing Business in India 77
26. Office Memorandum dated 02 July 2021 by GoI, Ministry of Micro, Small and Medium Enterprises (Policy
Division) K
27. As per PIB Bhartamala, Nov 2021
28. As of August 2021 1. As per Foreign Exchange Management (Cross Border Merger) Regulations, 2018 dated March 20, 2018
29. Ministry of Road Transport & Highways 2. Capital gains are required to be computed basis the recently prescribed rules / mechanism. Capital gains tax rate
30. Annual_Report_06042022_0.pdf (trai.gov.in) may vary between 20%-40%, depending upon the period of holding and the residency status. The rates exclude a
31. https://www.trai.gov.in/sites/default/files/PR_No.32of2022.pdf maximum surcharge of 5% in case of foreign entities, and 12% in case of domestic companies, and cess of 4%.
32. Press note 4 of 2021 (dpiit.gov.in) 3. Capital gains tax rate may vary between 5%- 40%, depending upon the period of holding and the residency
33. Union Budget 2022 highlights.pdf (ey.com) status. The rates exclude a maximum surcharge of 5% in case of foreign entities, and 12% in case of domestic
34. Amendment in Unified License Agreement for Adjusted Gross Revenue by DoT(dot.gov.in) companies, and cess of 4%
4. Indirect transfer tax implications are required to be evaluated basis separate mechanism and computation
5. Applicable to listed companies only
6. Subject to any NCLT vacations and protracted litigations
C
1. https://dpiit.gov.in/sites/default/files/FDI_Factsheet_March_2022_23May2022.pdf
2. Services sector includes financial, banking, insurance, non-financial / business, outsourcing, research & O
development, courier, technology testing and analysis
3. The trade data for FY 2021-22 is per the data published by Press Information Bureau 1. Notification No. 9/2017 – Central Tax dated, 28 June 2017
2. Notification No.1/2017 - Central Tax Rate, 30 June 2017
3. Notification No.11/2017 - Central Tax Rate F.No.354/117/2017-TRU Dated 28 June 2017 and Notification
No.12/2017 - Central Tax Rate F.No.334/1/2017-TRU Dated 28 June 2017
D 4. Notification No. 13/2020 - Central Tax Dated 21 March 2020
5. Notification No. 14/2020 - Central Tax Dated 21 March 2020
1. BOs are permitted to represent the parent company and undertake activities, such as export/import of goods,
rendering professional services, carrying out research work, etc. in India.
2. For setting up a BO/LO, a foreign entity should further have a financially sound track record and should satisfy
profitability and net worth conditions and other conditions prescribed under the Master Directions issued by the
RBI for establishment of a BO/LO/PO or any other place of business in India by foreign entities dated 01 January
P
2016 (updated on 18 May 2021). 1. Certain advanced technology areas such as semi-conductor fabrication, solar photo voltaic cells, lithium storage
3. Rates mentioned above needs to be increased by applicable surcharge rate as well as by health and education batteries, solar electric charging infrastructure, computer servers, laptops, etc. are yet to be notified.
cess of4%. (Please refer section ‘M’ for more details).
F
1. Rule 40BB of the Income-tax Rules, 1962 states the provisions for calculation of ‘amount received on issue of
shares’ in scenarios such as mergers, asset acquisition, ESOPs, etc.
G
1. An LLP to be engaged in sectors where 100% FDI is allowed under automatic route and FDI linked performance
conditions do not exist.
78 Doing Business in India 79
Our offices
Ernst & Young LLP is a Limited Liability Partnership, registered under the Limited
Liability Partnership Act, 2008 in India, having its registered office at 22 Camac
Street, 3rd Floor, Block C, Kolkata - 700016
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ED None
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ey.com/en_in
@EY_India EY EY India EY Careers India @ey_indiacareers