Department for Promotion of Industry and Internal Trade (“DPIIT”) has released the Consolidated FDI Policy, 2020 (“new Policy”) which shall be effective from 15th day of October, 2020 incorporating all the changes made in the policy recently. The consolidated policy is a compilation of various decisions taken by the Government with regard to FDI in different sectors.
Key changes in the FDI Policy 2020:
1. The Government has come up with a ‘Consolidated FDI Policy Circular of 2020’ incorporating the restrictions notified earlier this year on Foreign Direct Investment from entities or citizens of neighbouring countries sharing land border with India, including China, allowing such investments to be made only through the government route. The Consolidated FDI Policy circular of 2020 has stated that an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government Route.
2. The new policy puts in the 26 per cent cap on FDI in uploading or streaming of news and current affairs through digital media. The government’s decision of permitting FDI up to 26 per cent through the government approval route on entities engaged in the news digital media sector has also mentioned in the Consolidated FDI Policy for 2020.
3. The consolidated circular also mandates e-commerce marketplace entities with FDI to obtain and maintain a report of statutory auditor by September 30 every year for the preceding financial year confirming compliance of the e-commerce guidelines.
4. The conditions laid down for a wholly owned subsidiary set up in India by a non-resident entity, operating in a sector where 100 percent foreign investment is allowed in the automatic route and there are no FDI linked conditionalities, may issue equity shares or preference shares or convertible debentures or warrants to the said non-resident entity against pre incorporation/ pre-operative expenses incurred by the said non-resident entity up to a limit of five percent of its capital or USD 500,000 whichever is less has been removed as per the Consolidated FDI Policy, 2020. These conditions were as follows:
a) Within thirty days from the date of issue of equity shares or preference shares or convertible debentures or warrants but not later than one year from the date of incorporation or such time as Reserve Bank of India or Government of India permits, the Indian company shall report the transaction in the Form FC-GPR to the Reserve Bank
b) The valuation of the equity shares or preference shares or convertible debentures or warrants shall be subject to the provisions of Paragraph 5 of Schedule 1 of these Regulations
c) A certificate issued by the statutory auditor of the Indian company that the amount of pre-incorporation/pre-operative expenses against which equity shares or preference shares or convertible debentures or warrants have been issued has been utilized for the purpose for which it was received should be submitted with the FC-GPR form.
5. As per changes made under FDI policy 2020, Single Brand Product Retail Trading has been capped now at 100 percent FDI under automatic route. Earlier 49% FDI investment was under Government Route.
For your reference, the Consolidated FDI Policy, 2020 has been provided in the hyperlink below.
Source: Department of Industrial Policy and Promotion
