World Trade Organization Organisation Mondiale du Commerce Organización Mundial del Comercio

US 72:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (vii) Export support: Page 84, paragraph 155:

The Secretariat's report states that firms, including those within the textiles and garment industries, that are established within a Special Economic Zone (SEZ) "benefit from several incentives subject to generating foreign exchange earnings within five years of operation." Specifically, the Secretariat's report notes that SEZ units, including those within the textiles and garment industries, are exempt from various taxes, such as income tax, central sales tax, and minimum alternate tax, as well as from a series of state taxes (i.e. sales taxes, stamp duty, and electricity duty). The Secretariat's report states that both SEZs and EOUs are exempt from various taxes, including income tax, until March 31, 2011. Could India confirm whether all of these incentives ended on March 31, 2011, or whether some or all of them have continued past that date? If they have continued, please provide the expected date of termination, if any.

Reply: Provisions relating to EOUs are provided in Chapter VI of the Foreign Trade Policy 2009 14, which may be viewed on http://dgft.gov.in. Income Tax exemption for EOUs has been withdrawn with effect from 1.04.2011.

Facilities available for SEZ units and SEZ developers are provided in the SEZ Act 2005 and SEZ Rules 2006, which may be viewed on www.sezindia.gov.in. Minimum alternate tax (MAT) at 18.5% has been imposed on SEZ units and developers with effect from 1 April 2012. Similarly SEZ developers are now required to pay dividend distribution tax (DDT), on which exemption was available previously.

US 73:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (vii) Export support: Page 85, table III.20:

Will India consider extending to investors that sell in the domestic market the same incentives afforded to investors in export oriented units, e.g., 100 percent foreign direct investment through the automatic route, no requirement for import licenses, single window clearance for central and state level approval procedures, and permission to import second hand capital goods?

Reply: The policy on foreign direct investment, which is equally applicable to export oriented and other units, is specified under the Consolidated Circular on FDI policy ("Circular 1 of 2011"). It is reviewed on a continuing basis, with a view to further liberalising it and increasing its investor friendliness.

US 74:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (viii) Export promotion and marketing assistance: Page 88, paragraph 169:

The Secretariat's report describes various schemes providing "assistance for setting up new export promotion parks and zones (including SEZs) and complementary infrastructure such as road links to ports, container depots, and power supply," unspecified assistance to Export Promotion Councils (EPCs) in their "export promotion activities," as well as "assistance for research on potential export markets." The Report additionally notes that "EPCs and commodity boards also continue to promote exports of specific products" such as textiles, chemicals and leather. Will India notify these financial assistance programs in this regard in light of its obligations under Article 25 of the Subsidies Agreement? If not, please explain why these programs are not subject to those obligations.

Reply: India has notified the programme relating to preferential tax policies relating to setting up of special economic zones (SEZs) and the SEZ units in the notification G/SCM/N/186/IND dated 18 October 2010. Export promotion activities carried out by the export promotion councils (EPCs) need not necessarily be subsidies within the meaning of Article 1 of ASCM. Likewise, subsidies for development of general infrastructure do not require to be notified.

US 75:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (4) Measures Affecting Production and Trade: (i) Incentives: Page 91, paragraph 175:

As the Secretariat points out, India maintains several subsidy programs at the sub central level. However, India has not included any of these sub central programs in its subsidy notifications under Article 25 of the SCM Agreement. Please explain why India has not notified, pursuant to Article 25 of the SCM Agreement, the state level programs which are detailed throughout the Secretariat's report? Does India accept the obligation to notify sub central government programs pursuant to Article 25 of the SCM Agreement? If so, why has India never done so?

Reply: India is making efforts to gather the information relating to support programmes of state governments at sub central level so that these may be notified to the WTO, if required.

US 76:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (4) Measures Affecting Production and Trade: (i) Incentives: Page 91, paragraph 177:

Opening the multi brand retail sector to foreign direct investment (FDI) could provide a stimulus to take advantage of the tax incentive for capital expenditure in the cold chain sector. What are the prospects for FDI liberalization in multi brand retail?

Reply: The existing policy allows for 51% foreign direct investment (FDI), only in single brand retail trade, subject to specified conditions. FDI in multi brand retail trading is presently prohibited. Government of India had released a Discussion Paper on the subject of "Foreign Direct Investment in Multi Brand Retail Trading", in order to obtain stakeholder comments, for informed policy making. Comments were received from a number of stakeholders. The discussion papers, as well as the comments received thereon, are in the public domain. The Government has not taken a final decision in this regard.

US 77:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (4) Measures Affecting Production and Trade: (ii) Role of state owned enterprises (other than state trading companies), and disinvestment: Page 96, Paragraph 190:

The Secretariat's Report describes the role of central public sector enterprises in the Indian economy, noting that they continue to play an active role in the economy, and that they hold significant market share in a number of infrastructure sectors. According to the Report, divestments during the review period have been focused almost exclusively in the energy sector. What is India's long term plan for public sector involvement in the economy, particularly in areas such as telecommunications and financial services, sectors of interest to private and foreign investors, and the expansion of which are critical to India's continued economic growth?

Reply: The observation that divestments during the review period have been focused almost exclusively in the energy sector is not correct since disinvestments have been made in other sectors too, for example, mining, shipping etc.

The Government has made a clear commitment to empowering the CPSEs and their managements. It was recognised that public enterprises could not compete effectively with private entrepreneurs without freedom to function and operate commercially. Thus, the concept of Navratna and Mini Ratna was introduced with greater delegated authority, both financial and managerial so as to provide them comparative advantages and to give them greater autonomy to compete in the global market. Government has realized that "Navratnas", "Mini ratnas" and other CPSEs are required to grow and deliver on the promises they have made to their stakeholders. Other reforms have also been announced, such as professionalisation of the Boards of Directors of public sector enterprises and evaluation of performance of CPSEs through memorandum of understanding (MOU).

The government established the Maharatna status in 2009, which raises a company's investment ceiling from Rs 1,000 crore to Rs 5,000 crore. The Maharatna firms can now decide on investments of up to 15% of their net worth in a project while the Navaratna companies could invest up to Rs 1,000 crore without explicit government approval.

US 78:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (4) Measures Affecting Production and Trade: (ii) Role of state owned enterprises (other than state trading companies), and disinvestment: Pages 96 98, paragraph 191 and table III.26:

When will the partial disinvestments approved for certain companies in 2011 take place? Will foreign investors be able to participate in these disinvestments?