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Setting up an industry in Kerala, (InfoPark) |
Setting up IT Software and Services operations in India has certain rules and
regulations Indian company / individual An Indian citizen can set up IT software
and services operations in India through the following: As an Individual /
Proprietor As a Partnership / Firm / Trust As a Company registered under the
Companies Act, 1956 No prior permission of the Government of India is required
to set up IT / Software units in India.
Overseas company / individual
A Foreign Company is one that has been incorporated outside India and conducts
business in India. These companies are required to comply with the provisions of
Companies Act, 1956.A foreign company or individual planning to set up business
operations in India can do so as: A foreign company through a Liaison Office /
Representative Office, Project Office or a Branch Office an Indian company
through a Joint Venture or a Wholly Owned Subsidiary Register the Company
Liaison Office / Representative Office A liaison office is not allowed to
undertake any business activity in India and earn any income here. The role of
such offices is limited to collecting information about possible market
opportunities and providing information about the company and its products to
prospective Indian customers.
The Foreign Exchange Regulation Act (FERA) regulates the opening and operation
of such offices. Also, approval of Reserve Bank of India (RBI) is required for
opening of such offices. These offices have to ensure the following: Expenses of
such offices are met entirely through inward remittances of foreign exchange
from Head Office abroad. These offices do not undertake any trading or
commercial activities. Commercial activities should be limited to collecting and
transmitting information between its overseas Head Office and potential Indian
customers. Such offices should not charge any commission or receive other income
from Indian customers for provision of liaison services. Project Office Foreign
companies planning to execute specific projects in India can set up temporary
project/ site offices in India with the approval of RBI. Such approval is
generally accorded in respect of projects approved by designated authorities or
projects financed by an Indian bank/ financial institution or a multilateral/
bilateral international financial institution. The tenure of the office is
dependent upon the duration of the project and normally approval is not accorded
for more than 3 years. Further, a separate approval is required for each project
proposed to be undertaken.
Branch Office Foreign companies engaged in manufacturing and trading activities
abroad may set up Branch offices in India, with the permission of RBI, for the
following purposes: To represent the parent company / other foreign companies in
various matters in India e.g. acting as a buying / selling agents in India. To
conduct research work in the area in which the parent company is engaged
provided the results of the research work are made available to Indian
companies. To undertake export and import trading activities. To promote
possible technical and financial collaborations between Indian companies and
overseas companies. A branch office is not permitted to carry out manufacturing
activities on its own but is permitted to sub-contract these to Indian
manufacturers. As an Indian Company A foreign company can commence operations in
India through incorporation of a company under the provisions of Indian
Companies Act 1956.
Foreign equity in such Indian companies can be up to 100 percent depending upon
the business plan of the foreign investor, prevailing investment policies of the
Government and on receipt of requisite approvals. Joint Venture with an Indian
Partner Foreign companies can set up their operations in India by forming
strategic alliances with Indian partners. Setting up of operations through a
Joint Venture may provide the following advantages to a foreign investor:
Already established distribution / marketing set up of the Indian partner.
Available financial resources of the Indian partner. Already established
contacts of the Indian partner that help ease the process of setting up
operations. Foreign investments are approved through two routes as under:
Automatic Route: Approvals for foreign equity up to 50 percent, 51 percent and
74 percent are given on an automatic basis subject to fulfilment of prescribed
parameters in certain industries as specified by the Government. RBI accords
automatic approval to all such cases.
Government Approval: Approval in all other cases where the proposed foreign
equity exceeds 26 percent, 50 percent, 51 percent or 74 percent in the specified
industries or if the industry is not in the specified list, it requires prior
specific approval from Foreign Investment Promotion Board (FIPB). Wholly Owned
Subsidiary The foreign investor has the option of setting up a wholly owned
subsidiary (WoS), wherein the foreign company owns 100 percent share of the
Indian company. As above, foreign investments may be approved through the
Automatic Route or Government Approval. Automatic route is available for
establishing WoS in the Information Technology sector. Investment Promotion And
Management Cell The IT units that are setting up operations in Kerala are
invited to register with the Investment Promotion and Management Cell (IPMC) of
Kerala State IT Mission.
Benefits of registering with IPMC
· Facilitates the initial entry phase of business into the state
· Directs enquiries to registered IT units · Promotes IT units at tradeshows.
· Registration is compulsory as a first step towards availing of the eligible
incentives announced in the IT Policy.
The Units can register with the IPMC through the simple web-based Form provided
by IPMC. The registration no. assigned by IPMC will have the status of
provisional registration given by Industries Dept. of the Government of Kerala.
Registered IT units will be informed of the latest developments in IT in Kerala,
including information on upcoming events, trade shows, seminars & conferences as
well as latest Government Orders, guidelines & notifications related to IT
sector within the state Incentives in IT Sector All IT units registered with
IPMC in the Kerala State IT Mission can apply for eligible incentives.
Process of applying
· On line applications are available as side link on this web page. The relevant
application is to be filled and submitted to the Coordinating Officer under
whose jurisdiction the unit falls. GM-DIC, MD-KSIDC and CEO's of IT Parks are
the Coordinating Officers. · CO's shall forward the application to the
consultant (empanelled CA firm)
· CO / CA firm shall verify the application based on site visit and perusal of
relevant documents
· The application is then forwarded to KSITM with the recommendation
· The unit will offer a Bond of Indemnity along with personal guarantees given
by the directors in the prescribed format to the extent of incentives received.
The guarantee shall be invoked along with 14% interest if (a) the unit ceases to
be in operation within 3 years of receiving this incentive (b) misrepresent
facts
· Disbursements will be effected from KSITM
· Service charge for the CA firm is to be paid by the applicant unit (incentive
will be deducted to that extent) Other Conditions
· Amount sanctioned as incentives can be adjusted against Govt dues.
· Units financed by KVIC / KVIB will not be eligible for SIS
· If a proprietor / partner has 60% or more profit share in any other IT firm
that has already claimed for SIS, he is not eligible. A self declaration will be
required. If a co has minimum of 51% share holding in any other co or
controlling interest in proprietary / partnership firm, such co’s are not
eligible. A board resolution is required.
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