Wt/tpr/M/313/Add. 1 31 July 2015

EU Question 94: With which countries has ICAI concluded mutual recognition agreements on the recognition of professional qualifications of foreign accountants if any?

Reply: ICAI has signed MOU/MRA with accounting institutes in Republic of Ireland, Canada (North America), UK, New Zealand, Australia, Republic of Djibouti, UAE, Oman, Bhutan and Saudi Arabia.
Page 130, para 4.151- Tourism
EU Question 95: Can India provide more information on the licensing system, mentioned in point 4.151? Can India provide more information on the eligibility criteria that services providers need to fulfil to obtain a licence?

Reply: The Ministry of Tourism has a scheme of approving Travel Agents, Tour Operators, Adventure Tour Operators and Tourist Transport Operators (service providers) to ensure high quality and standards in their service delivery so as to promote Tourism in India. This is a voluntary scheme open to all bonafide agencies. This is not a licensing scheme, rather an accreditation system.
Information regarding the eligibility criteria that the service providers need to fulfil to obtain the recognition from Ministry of Tourism is available on the website of the Ministry.
Page 131, para 4.153- Tourism
EU Question 96: Can India provide more information on taxes as mentioned in 4.153 (A service tax (12.36%), an education cess (2%) and a secondary and higher education cess (1%)) that are levied on travel agents, tour operators, and on tourist transport operators)? Given that India did not commit tourist guides service in GATS, could India clarify whether foreign tourist guides can provide services in this area?

Reply: Service Tax is a tax levied on the transaction of certain services specified by the Central Government under the Finance Act, 1994. It is an indirect tax (akin to Excise Duty or Sales Tax) which means that normally, the service provider pays the tax and recovers the amount from the recipient of taxable service.

Education Cess: Education cess is an additional levy on the basic tax liability.

Secondary and higher Secondary education Cess: It is the Cess imposed to finance secondary and higher education.
Clarification on Foreign tourist Guides providing Services in India:
Under India's autonomous /applied regime, foreign tourist guides can come to India for providing services subject to their meeting the entry regulations as inscribed in India's Employment Visa Guidelines, available under the website of the Ministry of Home Affairs of India (http://mha1.nic.in/foreigDiv/OverviewVisa.html).
Further, as part of preferential treatment to LDC services and service suppliers under LDC Services waiver in the WTO, India has agreed to commit a quota of 250 tourist guides conversant in a foreign language other than English language from among the LDCs. These services are to be offered either as a contractual service suppliers (CSS) or as an Independent Professional (IP) who are permitted entry based on contract with a company in India for a limited duration.
WT/TPR/G 313- Report by the Government of India

Para 3.2 and Para 3.3 on the business climate

The EU does not share the view that doing business has become easier since last TPR. The EU would like to stress that the lack of predictability of the legal environment may well be counterproductive to the attraction of FDI that the government is looking for. For example, the cases of the application of a retroactive taxation on companies (e.g. the Vodafone case).

EU Question 97: Could India explain if the Government is considering measures and regulations to avoid this kind of retroactive negative effects, in particular in the case of taxation?

Reply: The Finance Minister in his Budget Speech, 2014 has outlined the policy of the Government that the Government will not ordinarily bring about any change retrospectively which creates a fresh liability. Further, it was decided that all fresh cases arising out of the retrospective amendments of 2012 in respect of indirect transfers and coming to the notice of the Assessing Officers will be scrutinized by a High Level Committee which has been constituted by the CBDT before any action is initiated in such cases. Further, a Committee has also been set up to look into the issue of liability of MAT on FIIs for the period prior to 1.4.2015.

Page 9, para 2.26 - export of services' statistics and policies

EU Question 98: The EU would like to congratulate the Government for the Global Exhibition on Services, held in New Delhi recently.  What further steps are planned to contribute to realise India's potential as an exporter of services, in particular professional services? What are the reforms is India looking at to build its services sector? What were the main outcomes from the GES?

Reply: For promotion of international trade in services, the Government of India follows a multipronged strategy of negotiating commercially meaningful market access through multilateral, plurilateral and bilateral trade agreements, trade promotion through participation in and organization of international fairs/exhibitions, focused strategies for specific markets and sectors, increasing competitiveness through domestic regulatory reforms and provision of fiscal benefits through schemes like Service Exports from India Scheme (SEIS). The SEIS shall apply to many service sectors including professional services like legal and accounting services, architectural services, engineering and integrated engineering services, and various health related professional services. The details of the SEIS are available at the website of the Department of Commerce (http://www.commerce.nic.in).

As far as domestic reforms are concerned, these are targeted at improving the competitiveness of the domestic service sectors so as to help us increase our services exports.

The main objective of the Global Exhibition on Services (GES), 2015 was to serve as a platform to enhance strategic cooperation and develop synergies between competitive players of the services sector in India with their global counterparts. About 60 countries and 18 Indian states participated in GES 2015. The exhibition saw 350 exhibitors exhibiting their services and about 3000 B2B meetings taking place. Seminars on various services sectors were also held. The GES is now a calendar event with the next edition to be held from 24th -26th February, 2016.

Page 10, para 2.31- Agriculture and Food Security
EU Question 99: Given the limitations highlighted and to help future agricultural growth, what planned initiatives are there to increase agricultural productivity in areas listed?  

Reply: To increase agriculture productivity, Government has been supporting programmes like agriculture research, pest and disease control, training, extension and advisory services, inspection services and marketing promotion services including marketing infrastructure.
Page 12 paragraph 3.5- Reforms in FDI policy
EU Question 100: Could India define what is meant by "state of the art" technology" in order to allow FDI in defence above 49%?

Reply: Press Note 3 of 2014 of Department of Industrial Policy and Promotion elaborates the list of defence items requiring industrial license/prior government approval. The same is available on the official website http://www.dipp.nic.in.
Page 14, para 4.4 - FDI opening in the defence sector
EU Question 101: Could India give examples of the high potential and high-technology products and products which are important for regional value chains that it is seeking to achieve further growth in?

Reply: Under the "Make in India" initiative, 25 sectors in manufacturing, infrastructure and service activities which will be the focus for promoting the industrial base in the country. Some of these sectors include pharmaceuticals, biotechnology, chemicals& petrochemicals, textiles etc. Apart from promoting growth, India is also exploring the possibility of being part of part of regional value chains in these sectors.
Page 16, para 5.6- WTO negotiations
EU Question 102: Could India provide information on the timeline for finalizing its categorization of commitments under the Trade Facilitation Agreement? Is there a timeline to constitute the National Trade Facilitation Committee?

Reply: India is in the process of consulting all stakeholders and finalizing the category A commitments. The National Trade facilitation Committee is being constituted by the Department of Commerce, Government of India. It will be an inter-departmental committee with adequate representations from all stakeholders.
Page 12 Para 3.2 "New reform agenda. Make in India"
EU Question 103: Could India elaborate what impact would the implementation of the "make in India programme" have on India foreign trade policy, including on its trade liberalization commitments in the framework of the Doha Round of the WTO as well as on opening up Indian market to import from third countries in the framework of its ongoing bilateral and regional negotiations listed in the report?
Reply: The "Make in India" initiative of the Government of India aims to encourage manufacturing in India.

The focus is on 25 sectors of the economy for job creation and skill enhancement. Some of these sectors are: automobiles, chemicals, IT, pharmaceuticals, textiles, ports, aviation, leather, tourism and hospitality, wellness, railways, auto components, design manufacturing, renewable energy, mining, bio-technology, and electronics.

It is expected that the initiative will increase GDP, exports and imports, and attract capital and technological investment in India from all over the world. As explained in the Foreign Trade Policy (FTP) Statement 2015 and other documents on the new Foreign Trade Policy for 2015-2020, (available at www.dgft.gov.in), there is a synergy between the "Make in India" initiative and the objectives of India's multilateral, regional and bilateral trade engagements.

European Union

Follow-up Questions

EU Question 13: Are there any benefits and incentives schemes that are available to foreign entities that would contribute to support the MSMs sector in India?
Reply: No such scheme is operating under Ministry of MSME.
Page 34 Para 2.42 on BIT model
EU Question 14: India recently published its new model BIT. Could India clarify the timeframe for further developing its BIT model? Could India indicate if it has intentions to replace or modify its existing BITs? If so, could India provide further information regarding the planned steps in this regard?
Reply: The Draft Indian Model Bilateral Investment Treaty (BIT) is awaiting the approval of the Competent Authority. Once the model BIT text is approved, BITs would be negotiated on the basis of this model.
EU follow up question: Could India further clarify if it plans to renegotiate its existing BITs on the new model or only apply the new model for subsequent, new negotiations?
Reply: Decision with regard to new negotiations would be taken once the draft model BIT is approved by the competent authority.
Page 38 Para 3.18 - applied tariffs
India applies a complex system of tariffs with separate published MFN and effective rates in addition to ad-hoc exemptions notified by Customs Notifications that decreases predictability and can act as impediment to trade.
EU Question 19: Does India intend to modernize its tariff information system so as to provide information to traders in a single form or gateway?
Reply: The current rate of Customs duties for each tariff line is available at the ICEGATE "Customs Duty Calculator" [https://www.icegate.gov.in/Webappl]
EU follow up question: The "Customs Duty Calculator" shows the published MFN duty for each entry, but this is not necessarily the actual applied tariff for those given goods originating from a given source country. The current system of Indian tariff exemptions means that a trader needs to be aware of all the different, sometimes dozens of notification that relate to the product beforehand to be able to select the right entry for the actual applied duty. Could India consider making the "Customs Duty Calculator" more user friendly? Would India consider including the "European Union" in the menu of import sources?
Reply: The effective rate of Basic Customs Duty on most items is collated in Notification No. 12/2012-Customs dated 17.03.2012 [as amended from time to time]. There are a few other standalone exemption notifications for specific purposes such as import by diplomatic persons, import by specified importers, exemptions on the basis of specified countries of origin etc.
The Customs Duty calculator [https://www.icegate.gov.in/Webappl] offers an interactive drop down menu wherein the importer can select the appropriate exemption notification from a menu of choices. The text of all exemption notifications is available on website of the Central Board of Excise and Customs (CBEC).
It also provides an option to select preferential notification in case of imports under FTA/PTA. Inclusion of European Union in the menu of import sources is not relevant for the present since there is no FTA/PTA with the European Union.
Page 47 para 3.40 - Import prohibitions
EU Question 25: The report states that "import prohibitions are mainly for health reasons and safety reasons and include a wide range or products." Can India provide a scientific justification for the prohibition of the items listed in table 3.8.? Could India explain the rationale for prohibiting the imports of mat and offal of wild animals and animal fats? Could India clarify whether a similar ban on domestic production and commerce of animal fats is in place?
Reply: Prohibition on imports of certain products and the reasons thereof are:-

1. 
   Import of Wild Animals (including their Parts and Products ) as defined in the Wild Life (Protection) Act, 1972 is "Prohibited".
   

2. 
   Animal fats under Chapter 15 of ITC (HS) is "Prohibited" in terms of Principles of restrictions related to protection of human, animal or plant life and health
   

EU follow-up questions: Could India clarify if it considers all wild animals as protected/endangered? Could India further clarify if it allows the domestic production and commerce of animal fat? If so, could India provide explanation for banning the import of animal fat? If India prohibits the production and domestic sale of animal fat, could India provide the reference to its relevant domestic regulations?
Reply: The domestic regulation in this regard is the Indian Wildlife (Protection) Act, 1972 and the details are available at the following link: http://envfor.nic.in/legis/wildlife/wildlife1.html.
Page 51, para 3.51-and para 3.53 import quotas and import restrictions
EU Question 26: Regarding the import quotas on marble and similar stones, how does India justify such quantitative restriction to imports, effetely depriving its processing industry of a supply source? In relation to Trade Notice No. 12/2014 of 8^th January 2015 on the Allocation of Quantity of Rough Marble and Travertine Blocks for import, can India confirm that the 472 companies listed in annex cannot import more than the quantity allocated, which results in a de facto maximum import limit per applicant? Could India explain why imports of new motor vehicles are restricted to specified ports? Could India provide further justification regarding the obligation to import second hand cars only through a single port?
Reply: Marble is a sensitive item for India because of ecological and health safety reasons. A fine balance has to be maintained between requirement of mineral resource vis-à-vis environment/ecological concerns. On account of this, mining is allowed only after environmental clearance and there are several conditions stipulated in mining licenses.
Regarding motor vehicles, Import clearance requires assessment of value, duty, compliance to quality and other parameters. Whereas , most of the items are allowed to be imported from all Custom designated ports, port restriction criteria has been introduced for few items where the above mentioned parameters (assessment of value, duty, compliance to quality and other parameters) cannot be assessed in all ports. The designated ports ensure quick clearance of the goods for imports and exports purposes.
EU follow up question: Could India provide further clarification how the limitation of import of marble contributes to lessening the exhaustion of its domestic marble resources?
Reply: Limitation of import of marble is only one of many conditions that govern Marble import policy.
Page 60, para 3.94 - TBT notifications
EU Question 28: India appears to have notified relatively few, 11 TBT measures to the WTO between 2011 and 2014. The EU had requested India – via the India WTO-TBT enquiry point - in several cases to notify Indian measures that fell under the scope of the WTO TBT Agreement. Those were not notified or in some cases, the TBT notification was carried out only after the adoption of the measure (such as in IND/47). Could India clarify if there is a systematic approach in the government that aims at ensuring that all relevant TBT measures are notified at an early stage in order to allow other WTO members to comment on? Does India have plans to improve the timeliness and frequency of its notification procedures?
Reply: Since few products have been brought under technical regulation, the notification to WTO TBT Committee has also been few. It is a continuous process and as and when TRs are adopted, it is being notified to WTO Secretariat.
EU Follow up questions to EU Question 28: Could India indicate if it has an inter agency mechanism in place to ensure that all relevant regulatory changes are notified to the TBT Committee pursuant to India's obligation?
Reply: All regulatory agencies in India notify all the relevant regulatory changes through Department of commerce, which is the nodal Department, to the WTO as per the provisions of WTO TBT Agreement.
Page 60 para 3.96 – certification and conformity assessment
The report states that 92 types of products are subject to the mandatory BIS certification mark. The Indian authority's state that fees are fixed based on the cost of operations.
EU Question 31: Could India provide clarification regarding the cost structure of certification that appears to be based on the number of products marketed (whether marketed in India or not)? In particular, can India explain why it charges a marking fee per product with the BIS mark (unit fee)? Can India explain why it charges the BIS mark fee also on products with the BIS mark even when not sold in the Indian market? Could India provide explanations on how the varying fees are considered to be covering only the cost of certification of a product? Could India provide further information if the budget of BIS is segregated depending on its different functions i.e. certification and standardization in order to check if certification fees only cover the cost of certification services provided? Could India explain what is the rationale for the "advance minimum marking fee for the production likely to be marked", especially in the light of the fact that it depends on the product to be marked?
Reply: The cost structure of product certification is based on the Marking Fee Policy and based on this policy the advance minimum marking fee for a licence is charged by BIS to partly cover its administrative expenses, cost of market samples, cost of testing of samples and other overhead expenses. The calculated marking fee or the minimum marking fee whichever is higher is to be paid by the manufacturer every year. Based on the quantum of production, sampling can be done for more number of samples, however no extra charge is levied upon the manufacturers for the same. The marking and overall fees are equal to the fees levied by BIS to its domestic manufacturers and there is no disparity. Even if domestic manufacturers are exporting product with BIS mark to outside India they have to pay making fee to BIS. This fee is charged to cover the travelling and other costs in case complaint is received from outside India for a BIS marked product.
The marking fee is based on the quantum of product marked with the BIS standard mark. In case the BIS standard Mark has been used on the product it is imperative that the manufacturer shall pay the marking fee for all such products, as per practice at international level.
The cost varies from product to product since the cost of sample and testing charges vary from product to product.
Even though there is separate budgeting, the cost of Standardization is recovered from certification fees since BIS is a self-supporting organization.
The marking fee is taken in advance since cost of certification in a year (which includes cost of purchase of sample, analysis of samples drawn from factory as well as market) is borne out of the advance marking fee submitted by the manufacturer. This advance marking fee is adjusted on completion of operative period of licence as per the actual production covered with BIS Standard Mark.

The last TPR in 2011 highlighted that there were 81 products subject to the mandatory BIS certification mark, now 92. One of them, planned by that time, has already been implemented. It is the case of import pneumatic tyres into India which according to mandatory certification must bear an ISI logo on each tyre and pay a fee for it; their manufacturers must deposit a bank guarantee not required to nationals; the certification cannot be done in European facilities in compliance with EU or UN norms.
EU follow up question: Could India provide further indications how the certification and standardisation activities of BIS are separated in its budget and on the use of its revenue? Could India provide figures of BIS revenue from certification activities?
Reply: Allocation of budget and use of revenues in certification and standardization activities of BIS is done keeping into consideration various attributes which inter-alia includes manpower allocation in that particular activity.
The revenue generated from BIS Certification activity in the financial year 2013-14 under Foreign Manufacturers' Certification Scheme is 62.25 million Indian Rupees.
Page 61 para 3.98– certification and conformity assessment
EU Question 33: Does India contemplate raising any additional fees related to market surveillance for compliance with BIS standards and, if so, could India elaborate on their rationale?
Reply: Under BIS Product Certification Scheme, BIS does not charge any fee other than the marking fee based on production or minimum marking fee, whichever is higher.
EU follow up question: Could India confirm that it has no plan to introduce additional fee(s) to cover the cost of market surveillance in addition to the existing marking fee?
Reply: Presently there is no proposal to introduce additional fee to cover the cost of market samples under Products Certification Marks Licensing Scheme, at this stage. 
Page 60 para 3.97- foreign producers' mandatory certification
EU Question 36: In order to obtain a BIS license, a foreign manufacturer must set up a liaison/branch office in India. Taking into account the requirement that a foreign manufacturer must have a legal representative in India, could India give the rationale for requiring a bank guarantee (which is an additional requirement that is only applicable for foreign manufacturers, not for domestic ones)?
Reply: The performance bank guarantee is intended to protect the Bureau of Indian Standards (BIS) during the tenure of the license and is invoked only in case of breach of any condition of the agreement signed between BIS and licensee. Rationale for bank guarantee is preventive security measure to cover the loss of revenue which may arise out of any liability/unpaid fee, penalty etc. on part of foreign manufacturers and also takes care of legal expenses if any, on account of supply of standard mark product in a country other than India. The marking and overall fees are comparable to the fees charged by other members of similar schemes and are equal to the fees levied by BIS to its domestic manufacturers. In case of breach of Marking Fee by domestic manufacturers there are other national laws and legal framework for recovery of dues, penalties, liabilities etc., the provision of bank guarantee has not been imposed for domestic manufacturers. However, this Law of land cannot be enforced in foreign countries. Therefore, to protect BIS interest, Performance Bank Guarantee is sought which is approved by Law Ministry.