Latest Blogs from SBS and Company LLP

    Reporting of Foreign Investment under FEMA, 1999

    An Indian Entity (Company or LLP) receiving foreign investment has to report the same to Reserve Bank of India (RBI) through Authorised Dealer (AD) Category-I Banks. Reporting of Foreign Investment under FEMA, 1999 is governed Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations (“FEMA FDI Regulations, 2017”) dated November 07, 2017 and Part-IV of Master Direction No-18/2015-16 dated 1st January 2016, as amended from time to time. Non-compliance with the reporting of foreign investment provisions shall be reckoned as contraventions under FEMA, 1999 and could attract penal provisions.

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    Introduction:

    In General terms, Outsourcing is contracting of any task, operation, job or process that was originally performed by employees within the entity to a third party. About 40% to 50% of the Fortune 500 Companies in the world is leveraging on outsourcing for most of their business process, which demonstrates the importance and gamut of the outsourcing process. 

    India, China and the Philippines are major powerhouses in the industry. In 2017, in India the BPO industry generated US$30 billion in revenue according to the national industry association. 

    The objective of this article is to outline the significance of Outsourcing in a Manufacturing Sector and Risks and Rewards associated with it

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    • INTRODUCTION

    “Equalise" is to make something equal or distribute evenly and “Levy” is to impose or charge, thus Equalisation Levy creates a level playing field.

    Under the existing rules of International Taxation, the Country of Source (“COS”) can tax a non-resident, carrying Business through electronic means, without any physical presence, only if the non-resident has a permanent establishment (“PE”) in the COS. E-commerce companies do not need PE in any COS. They can set up the companies in tax havens and avoid tax in Country of Residence (“COR”) hereby avoiding payment of taxes in both the countries.

    E.g. Indian Company is receiving advertisement services from US Company. Here, COS is the Indian Company and COR is the US Company.

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    1. Introduction to MSME: 
    • The Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. It contributes significantly in the economic and social development of the country by fostering entrepreneurship and generating largest employment opportunities at comparatively lower capital cost, next only to agriculture. MSMEs are complementary to large industries as ancillary units and this sector contributes significantly in the inclusive industrial development of the country. The MSMEs are widening their domain across sectors of the economy, producing diverse range of products and services to meet demands of domestic as well as global markets. 

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