World Trade Organization Organisation Mondiale du Commerce Organización Mundial del Comercio

Retail trading (except single brand product retailing).

Atomic energy.

Lottery business.

Gambling betting.

Business of chit fund.

Nidhi company.

Trading in transferable development rights (TDRs).

Activities/sector not opened to private sector investment.

According to Companies Act, a branch is defined as any new physical outlet of a business. There seems to be no definition of a branch of a foreign company in the meaning of representative entity in India (except for financial services).

11. 
    Could India clarify
    

i) The definition of a branch in its legislation, including listing the differences in different sectors;

ii) The definition of the representative office in its legislation, if it exists;

iii) The differences in treatment of branches of companies incorporated in India and direct branches of foreign companies?

Reply: For the purpose of FEMA (Foreign Exchange Management Act) Regulations "Branch" shall have the meaning assigned to it in sub section (9) of Section 2 of the Companies Act, 1956 (1 of 1956).The details of FEMA can be seen at www.finmin.nic.in. For the purpose of FEMA regulations "liaison office" means a place of business to act as a channel of communication between the principal place of business or head office by whatever name called and entities in India but which does not undertake any commercial/trading/industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channel

The branch of a foreign company (set up with the approval of RBI under FEMA) can only undertake limited activities including some commercial activities as permitted under the extant FEMA regulations. However, a company incorporated in India by a foreign company (either as WOS or JV) can conduct full fledged operations akin to any other domestic company albeit in compliance with the permitted activities under the extant FDI policy and FEMA regulations. Further any office established by it would also be able to conduct all activities akin to a branch of a domestic company albeit in compliance with the extant FDI policy.

11. 
    Does India envisage a change of the current branch definition to allow for the concept of direct branch of foreign company as a non incorporated representative entity, which may have more than one outlet in different geographical locations in India?
    

Reply: No change in definition is envisaged. However, a non resident entity can open multiple branches in India after taking due approval of the Reserve Bank of India under the relevant FEMA regulations.

WTO Secretariats report, page 33, table II.8

11. 
    Could India confirm that the list in table II.8 covers all sectors where foreign direct investment is prohibited? In particular, could India confirm that FDI is allowed in legal services, auditing and news agency services?
    

Reply: The list in table II.8 covers sectors in which FDI is prohibited under the FDI policy. However, any investment, including foreign investment, is subject to applicable laws/sectoral rules/regulations/security conditions, which may contain restrictions

WTO Secretariat's report, page 33, para. 41

According to the report, India applies investment restrictions to nationals and companies of certain neighbouring countries.

11. 
    Could India clarify how its GATS commitments are honoured for citizens of WTO Members, including those with double nationality where one nationality is that of a neighbour to which the restrictions apply and for juridical persons incorporated in these countries, but owned by other WTO Members' persons?
    

Reply: The policy on FDI has been steadily liberalised and is reviewed from time to time, with a view to increasing its investor friendliness. In keeping with this thrust towards an increasingly open policy environment, country specific restrictions on investment, which had earlier found a place under the policy on FDI, have also been gradually reduced over time.

WTO Secretariat's report, page 32 33, paragraph 39 40

The report by India highlights the liberal and transparent investment policy of India, while the report by the Secretariat indicates that the number of sectors where FDI is restricted has increased in recent years, and that sectoral restrictions  even in sectors with no ownership caps  remain more restrictive than an explicit investment cap.

In this regard, the EU would like India to provide related information concerning the following sectors:

11. 
    As for accounting services, what steps are being taken to allow Indian companies to have their audit reports signed by locally incorporated foreign firms using internationally recognised names, as well as to end the restrictions on the number of partners? By when can this be expected?
    

Reply: The existing ICAI (Institute of Chartered Accountants of India) Act and regulations framed thereunder regulate the profession of Chartered Accountants which inter alia also includes the operation of Chartered Accountancy firms in India including the manner of registration and the name of such firms which are approved by ICAI.

11. 
    Concerning legal services, what are India's plans as regards opening the legal services for foreign investment?