Thursday, 31st October 2013

The Caledonian Hotel, Edinburgh

Doing Business in India

Cherise Mascarenhas

Business Development Manager

SDI India

Doing Business in India

Mr. Oscar Kerketta

Consul General of India

Doing Business in India

Cherise Mascarenhas

&

Maneeta Sahmey

SDI India

Doing Business in India

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DOING BUSINESS IN INDIA

SDI’s Strategic Focus in India

Inward Opportunities Target key India

companies with strategic fit

for Scotland

Collaborative Pursuing collaborative

opportunities between

India and Scotland

Outward Opportunities:

Providing support to

Scottish companies

Scottish Investors In India

Indian Investors in Scotland

Snapshot..

Mobile phone users: 800 million (fastest gowing

market)- 1 billion by March 2014

Education Market In India expected to grow to $ 80billion

‘India - the world’s back office’

India exports software

to 90 companies. The

Indian IT-BPO

Industry has crossed

US $100 billion

India- At a glance….

• Second fastest growing economy

• Asian Development Bank predicts India's GDP

to grow by 6% for 2013-14.

• 29 States & 6 Union Territories

• 7th largest country in the world

• Population of 1.2 billion

• 22 Official Languages; 4000+ dialects

Political Set up

• Democratic Republic with a Parliamentary system of

Government

• The President of India is the Head of State, while the

Prime Minister is the Head of the Government

• The Lok Sabha (lower house) and the Rajya Sabha

(upper house) are the two parliament houses.

• Judicial Branch: The Supreme Court of India is the

apex body of the Indian legal system, followed by

other High Courts and subordinate courts.

Life Sciences in India

• $4 billion industry, projected to reach $8 billion by 2015

• India is ranked amongst the top12 biotech destinations in the world

• M&A activity on the rise; Global companies setting up a base in India

• The pharmaceutical industry in India is valued at USD 12 billion and is expected to

grow to USD 55 billion by 2020.

• India a major destination for generic drug manufacture.

• Indian companies are concerned about the lack of new drugs in their pipeline.

Opportunities in the Life Sciences sector

• Medical Technology and Diagnostics

• Bioinformatics

• Drug discovery

• Stem Cells and regenerative medicine

ICT In India

• £100bn industry

• Indian exports have grown by about 35% year on year in the last eleven years.

Contributes to 6.1% of the nation’s GDP

• Appetite for new products, technologies to create bespoke solutions

• Directly employs over 2.5 million people, 70% of which falls in the 26-35 age group

• Indian ICT companies continue to grow internationally largely via acquisiitons

Opportunities in the ICT Sector

• Telecomms

• E-commerce

• Gaming and Animation

• IT Education

• Other areas of opportunities are :

Software, electronics, cyber security, e-learning,

advance engineering, aerospace, marine and defense

• Indian HE largest in the world in terms of institutions and third largest in

terms of students with 620 Universities, 31,000 plus colleges and 15

million students

• As per 2009 estimates, size of the private education sector was about

$57bn, growing at 14%

• Expenditure on higher education likely to go up from US$ 10.3bn to US$

30bn by 2017-18

• Concurrent list--both federal and provincial governments have

jurisdiction over education sector

• Complex higher education system

• Vocational education, skill development and support services are

sectors of high growth

Education in India

• Institution to Institution linkages – articulation, faculty

development/exchange, research.

• Skills development – opportunities with state governments

• Corporate training – directly with companies, through training

companies

• Continuous Professional Development Courses

Opportunities - Education

• Retail is one of fastest growing industries in

India. Changing consumer preferences,

organized retail is gradually becoming popular.

• Only 5% Indian Retail is in the organized sector,

supermarkets & hypermarkets (2011 IGD).

India is largely disorganized retailers (family

owned kiranas).

• Government has initiated steps towards allowing

higher levels of Foreign Direct Investment,

paving way for foreign retailers to open

independent retail stores in India

Food & Drink in India

• Whisky

• Premium Grocery:

• Bakery & Confectionary

• Seafood

• Salmon

• Dairy

• Scottish Brands available in India –

– Gardiners of Scotland, Walkers, Deans of Huntly, Edinburgh Shortbread House, Borders Biscuits, Baxter Soups, Mackay Jams, Loch Duart, Highland Smoked Salmon, Lions Group- salmon

Opportunities – Food & Drink

• India is the world's second largest producer of textiles and garments.

• Abundant availability of raw materials such as cotton, wool, silk and jute

and skilled workforce have made India a sourcing hub.

• The size of Indian textile and apparel market was US$ 89 billion in 2011

and is expected to touch US$ 221 billion by 2020. Growing at the rate of

13%

• India's growing population has been a key driver of textile consumption

growth in the country. Changing lifestyle, rising incomes and increasing

demand for quality products are set to fuel demand for apparel.

• Dominated by Apparel - Menswear (43%), Women’s wear (38%) and then

Children’s wear (19%)

• Influx of premium brands in India through partnerships & JV’s

Textiles in India

• Fabric – High end fabric for menswear

• Interiors

• Accessories – scarves, stoles, shawls

• Existing brands – Reid & Taylor, Holland & Sherry

Opportunities – Textiles

• Liaison office :

– Represent parent company, promote export/import, communication channel to in market partners

– Cannot undertake any business activity to earn income

• Branch office :

– Export/import goods, offer professional services

– Represent partner company for buying/selling

– Cannot carry out retail trading, manufacturing or processing activities

• Subsidiary office:

– Wholly owned subsidiary under FDI guidelines.

– Collaborations via JV route with an Indian company

– Funding – foreign / local allowed

– Governed by Indian law including taxation

Setting up in India – Market Entry Options

SDI Support

• Preliminary research

• Organise and set up meetings with potential partners during overseas visit

• Introductions to consultants for market entry or other set-up requirements

• Engage with available Networks – GlobalScots, UK Trade & Investment, British

Business Group, Trade Associations

Doing Business in India - Essentials

• Prepare well for your visit to India :

– Understand the market, do preliminary research for your product and its

suitability for the market

• Carry business cards, marketing collateral, samples

• Choosing the right partner

• Due diligence

• Business works on relationships – Spend time on building trust

• Patience & persistence!

Nachiket Deo

Associate Director - India Tax Desk

EY

Doing Business in India

Doing Business in India

Edinburgh - 31 October 2013

Page 28

India - The Macro picture

3rd most attractive FDI

destination in the world for 2013-14

5th largest consuming country by 2025

Youngest country in the

world by 2020 with median age of 29

2nd highest number of

internet users by 2015, only behind China

US$9 billion worth

private equity across 534 deals in 2012

US$35 billion worth

M&A across 977 deals in 2012

Page 29

Political, legislative and economic overview

Recent legislative

development Political scenario

► Largest democracy of

the world

► Central Elections in

2014

► Possibility of a

coalition Government

at Centre ?

► New Companies Act

enacted

► Food security bill

signed aims to

provide subsidized

food grain to 1.2 bn

people

► Cost of exchequer to

be US$ 21 bn p.a.

► India’s GDP growth

was at 4.4% in June

quarter, lowest in four

years – but likely to

only improve

► Concerns over rupee

depreciation which

had declined appx 25

per cent – RBI

measures likely to

arrest the decline

Economic development

Page 30

Foreign Direct Investment (‘FDI’)

► FDI up by 12% to US$ 7.05 bn for

Apr-Jun 2013

► Total FDI for FY 2012-13 stood at

US$22.42 bn vis-à-vis US$36.5 bn

► Large investments announced by

companies such as Unilever, Ikea,

etc

► FDI in various sectors (like retail,

aviation, defence,

telecommunications etc) liberalized

► Certain regulations pertaining to

funding Indian operations

liberalized

FDI in India – a mixed bag….. Regulatory updates

Page 31

Limited Liability Partnership [concept recently introduced] is another option of establishing presence in

India.

Each of the options have their own commercial and tax advantages and disadvantages which would need

to be evaluated based on facts of the case.

For example if the Indian operation is to limited to preliminary functions of understanding the Indian markets

business , etc, the LO option could be considered. However, where the India expansion plans are

imminent, one would need to consider the BO or WOS option

Foreign Company

Operates as a foreign company

Establishes an Indian company

Branch Office [‘BO’]

Project Office [‘PO’]

Liaison Office [‘LO’]

Wholly Owned Subsidiary [‘WOS’]

Joint Ventures

India business presence - Overview of the forms

One would need to determine a suitable form of business presence in India based on the nature of

operations in India and the proposed business expansion plans

Page 32

Basic tax provisions In

dia

n d

om

es

tic

ta

x law

s

Taxable profit is computed in accordance with common business or accounting principles, subject

to specific limitations

Provisions of domestic law or relevant tax treaty, whichever is more beneficial to the taxpayer,

apply

For the purposes of corporate income-tax, tax year runs from April 1 to March 31 of the following

year.

Different tax rates for domestic and Indian companies. Also, one needs to consider Dividend

Distribution Tax (‘DDT’)

Robust ‘transfer pricing regulations’ governing cross-border transactions between related parties

Deduction is allowed only for business-related revenue expenses,

while capital expenditure [other than those specified] are not deductible

Page 33

India business presence Permanent Establishment (‘PE’) considerations

Agency PE

► Arises if Foreign Co has an agent in India who, inter alia, concludes contracts, secures orders or maintains

stock in India

► Agent of independent status is excluded from the purview

Fixed place PE

► Created if Foreign Co has premises in India at its disposal from where it carry

on its operations

► PE exclusion available to preparatory/auxiliary activities

Service PE

► Constituted if Foreign

Co furnishes services,

through employees or

other personnel in India

[subject to time

threshold]

► Some of India’s tax

treaties do not contain

this clause

Installation PE

► Constituted if Foreign Co

assembles or installs

equipment in India or

undertakes connected

supervisory activities in

India [subject to time

threshold]

► If a PE is constituted for Foreign Co in India,

income attributable to the PE would be

taxable at 42.23% on net income basis

► If the income constitutes Fees for Technical

Service / royalty and is not attributable to a

PE in India, India withholding tax on gross

basis applicable

The presence of a PE to be determined based on the relevant facts and tax treaty

Page 34

Recent tax updates

Key

updates

Tax Residency Certificate

considered necessary but not

sufficient for claiming tax treaty

benefits

GAAR - Applicable from 1

April 2015 in cases where

the aggregate tax benefit

exceed INR30m

Investment allowance on new

plant and machinery

Income derived from transfer

of investments made prior to

30 August 2010 not covered

by GAAR

Domestic law rate up from

10% to 25% on Royalties/FTS

Tax @ 20% on buyback of

shares

Page 35

Incentives

Page 36

India Relief available ► Weighted deduction of 200% of expenditure incurred (other than cost of land and

building) on scientific research on in-house research and development facility as

approved by the prescribed authority, would be available to companies engaged in

business of bio-technology or any business of manufacture or production of any

article or thing

Eligible expenditure ► Expenditure on scientific research other than cost of land or building

IP ownership requirement

► General requirement to own IP

R&D work performed in country

► Yes

Regional Tax Incentives Research & developments – overview

Page 37

Regional Tax Incentives Manufacturing – overview of direct tax incentives

India

Name of incentive ► Special Economic Zone Scheme

Corporate tax benefits ► Tax holiday

► 100% of profits from export for first 5 years and 50% of profits from export for next 5

years . From year 11 to 15, 50% of profits may are allowed as a deduction subject to

satisfaction of certain conditions.

► However, units will be liable to pay Minimum Alternate Tax on book profits

Duration

► 15 year tax holiday

Page 38

Regional Tax Incentives India – investment/expenditure linked tax incentives

Agricultural Extension Project

► Weighted deduction of 150% of expenditure incurred would be available to any taxpayer who incurs any expenditure on Agricultural

Extension Project notified by the Board in accordance with the prescribed guidelines.

Skill Development Project

► Weighted deduction of 150% of expenditure incurred, other than expenditure on land and building, would be available to company which

incurs any expenditure (other than on land & building) on Skill Development Project notified by Board in accordance with prescribed

guidelines.

Employment of new workmen

► An Indian company engaged in the manufacture or production of article or thing is eligible for deduction, from gross total income, of 30%

of additional wages paid to new regular workmen employed in the previous. The deduction is available on satisfaction of the prescribed

conditions. Further, the deduction is available for 3 years, including the year in which employment is provided.

Developers of SEZ

► Eligibility – Taxpayer being a developer, derives income by an undertaking or enterprise from business of developing SEZ, notified on or

after 1 April 2005 under SEZ Act, 2005.

► Quantum of deduction – 100% of the profits derived from such business for 10 consecutive years, at the option of the taxpayer, out of 15

years beginning from the year in which SEZ is notified.

Business of processing of bio-degradable waste

► Eligibility - Taxpayer engaged in the business of collecting and processing or treating of bio-degradable waste for:

i] Generating Power or ii] Producing bio-fertilizers or bio-pesticides or other biological agents or iii] Producing bio-gas or iv] Making pellets

or briquettes for fuel or organic manure.

► Quantum of deduction – 100% of the profits derived from such business for 5 consecutive years beginning from the year in which such

business commences.

Page 39

Specified business

► Weighted deduction for expenditure incurred is available to all taxpayers who incur capital expenditure (other than on land or

goodwill or financial instrument) wholly and exclusively for the purposes of specified business carried on during the year in

which expenditure is incurred.

► For the specified business of – i] Setting up & Operating a cold chain facility; ii] Setting up & operating a warehousing facility

for storage of agricultural produce; iii] Building & Operating a hospital anywhere in India with at least 100 beds; iv] Developing

& Building a housing project under a scheme for affordable housing framed by Government and notified by Board; and v]

Production of fertilizers in India, deduction is available up to 150% of the expenditure incurred.

► The quantum of deduction would be 100% of the expenditure incurred for the following specified business: i] Laying and

Operating a cross country natural gas or crude or petroleum oil pipeline network for distribution; ii] Building and Operating

anywhere in India a hotel of two star or above category; iii] Developing & Building a housing project under a scheme for slum

redevelopment or rehabilitation framed by Government and notified by Board; iv] Setting up and operating an inland container

depot or a container freight station; v] Bee-keeping and production of honey and beeswax; vi] Setting up & Operating a

warehousing facility for storage of sugar.

► Deduction is available subject to satisfaction of specified conditions.

Regional Tax Incentives India – investment/expenditure linked tax incentives

Thank you

This document is not meant to be a

comprehensive guide to any of the Indian tax

issues and is meant only for reference

purposes. Any action should be taken only

after obtaining professional guidance

Isabelle Henderson

International Trade Adviser

Smart Exporter

Doing Business in India

WHAT IS SMART EXPORTER?

• Smart Exporter is an international trade skills

programme designed to increase exporting skills and knowledge

amongst Scottish businesses

• This initiative is delivered by SDI and funded by ESF

• Smart Exporter services are available on a free or subsided basis to

businesses and individuals across Scotland

EXPORT ADVISOR SUPPORT

Access to support from an Experienced Export Advisor which

includes:

• An one to one meeting to discuss your international plans and how the Smart

Exporter programme can help your business

• Help with market research about the market potential for your product or service

or information about your competitors

• Access to free export training through workshops or online

• Practical advise on how to be paid from an overseas sale to help with distributor

agreements via Smart Exporter’s technical support

SMART EXPORTER – WHATS COMING UP

Market Awareness events

• Doing Business in India (31st October 2013, Edinburgh)

• Access Europe 2013 (6th November 2013, Edinburgh)

• Doing Business in Japan (28th November 2013, Glasgow)

• Doing Business in Russia (10th December 2013, Edinburgh)

• Emerging Europe 2014 (5th February 2014, Glasgow TBC)

Exporting workshops

- Introductory Programme (New Exporters) – Edinburgh (November 2013)

- Introductory Programme (New Exporters) – Glasgow (January 2014)

- Intermediate Programme (Inexperienced in international trade), Glasgow (Jan to March 2014)

- Intermediate Programme (Inexperienced in international trade), Stirling (Jan to March 2014)

Future International E-commerce events and workshops to be scheduled

All Smart Exporter Events: http://www.sdi.co.uk/Events.aspx

Networking Break

Sign up for one to one meetings at

the registration desk

Doing Business in India

Upcoming missions to India

• Food & Drink Learning Journey – Mumbai and Delhi

25-29 November 2013

• Horizontal Mission – Bangalore and Hyderabad

10-13 February 2014

• Bangalore India Bio - Bangalore and Hyderabad

10-12 February 2014

Andrew Wilson

Projects Director

BE Group

Doing Business in India

SDI Cross Sector

Mission to India

10 – 13 February 2014

Andrew Wilson

BE Group

Background

Funding

Notes from previous mission

Programme information

Benefits of attending

Cross Sector Mission to India – February 2014

• SDI Cross Sector Missions are aimed

primarily at SMEs who are either new

exporters or wish to develop and grow their

business in a particular market.

• It can also include large companies or very

experienced exporters who may be well

established in a market.

Background

Cross Sector Mission to India – February 2014

• We are targeting between 15 and 25

companies for each of the missions. SDI are

running 5 such missions per year up until end

March 2015.

• There is a set subvention grant for specific

markets, covering travel and hotel costs.

Cross Sector Mission to India – February 2014

• Project team is established for each mission

• We use SDImissions@scotent.co.uk

• Joint working with SDI Marketing Team

• Enquiries receive brochure + application form

• Applications are sent to SDI for approval

Cross Sector Mission to India – February 2014

• Countries visited so far:

– South Africa Nov 2012

– India Nov 2012

– USA / Canada Apr 2013

– Brazil Jun 2013

– China Sep 2013

– UAE / Qatar Apr 2013

Cross Sector Mission to India – February 2014

• Funding is provided by UKTI’s MVS (Market Visit

Support) service.

• The MVS funding level for India is £550

• Eligibility criteria apply – for example a company

needs to be new to market or not exceed a

certain level of exports.

• BUT – good news - SDI top up the UKTI funding

even if company not eligible for full subvention

Funding

Cross Sector Mission to India – February 2014

• Funding is provided retrospectively.

• We collect bank details and send the subvention

direct to the company.

• No travel receipts or complex documentation is

required.

• The completed Mission Application Form is all

that is needed.

Cross Sector Mission to India – February 2014

Notes from previous mission

Cross Sector Mission to India – February 2014

Mumbai and Pune 26 – 30 November 2012 10 companies attended

Cross Sector Mission to India – February 2014

Company Delegate Website

Bollywood Scotland Nick Scott www.bollywoodscotland.com

Enocell Gordon MacMillan www.enocell.com

Europharma Sunil Kadri www.europharma-uk.com

Future Factory Derek Peacock www.futurefactory.co.uk

Galloway Group Cameron Robertson www.gallowaygroup.co.uk

Glenglassaugh Distillery company Limited Stuart Nickerson www.glenglassaugh.com

Natural Fruit and Beverage Co Gerry Dunn www.naturalfruitandbeverage.co.uk

Restaurant Diary Mike Conyers www.restaurantdiary.co.uk

Scottish Investment Operations Alan Thornburrow www.sio.org.uk

Vets Now Richard Dixon www.vets-now.com

25th November Arrive Mumbai - welcome drinks hosted by SDI & GlobalScots 26th November Mission briefing by SDI India and PWC Overview of India and State of Maharashtra Business workshop – with GlobalScots One to one business meetings Scottish Business Network Reception 27th November One to one meetings / British Business Group Mumbai 28th November Individual meetings 29th November Travel to Pune Site visit to Tata Services Archive Centre One to one business meetings Scottish Business Network reception and whisky tasting 30th November One to one business meetings / Mission debrief

Cross Sector Mission to India – February 2014

2012 programme

• This mission is part of a wider continuing series:

– Turkey

– China

– West Africa

– Gulf

– Europe

• Updates will be shown on SDI website

Programme information

Cross Sector Mission to India – February 2014

• Perfect introduction to market

• Connect with SDI and further UKTI support

• Meet new customers

• Non-competitive environment

• Space for your own agenda / business meetings

• Pre-mission research / support can be provided

• Follow up support provided

Benefits of attending

Cross Sector Mission to India – February 2014

Benefits of attending

Cross Sector Mission to India – February 2014

“The support provided by SDI was outstanding. Entering a market such as India is difficult due to communication, logistics and understanding the cultural influences. The SDI team in India delivered real support at all levels throughout the visit thus allowing me to focus on opportunities and meetings, maximising our impact and time management.” Gordon Macmillan, Enocell

Alastair McGhee

Commercial Development Executive

Coatbridge College

Doing Business in India

Panel Session

Questions and Answers

Doing Business in India

Thank You!

Doing Business in India