BCAS - FDI Trading Activity of PROI - 06.08.2013

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  • Brand should be international means it should be sold in one or more countries… what if a new product is launched in India? In SBRT sourcing requirement of 30% triggers only when foreign shareholding exceeds 51% . While the policy does not specifically state so, the Govt. views is clear that Indian sourced product should be retailed by single brand retailer. should not be exported or distributed through any other channel Brand owner need not necessarily to be equity participant.
  • whether a company having various sub-brands may be classified as multi-brand? It has created unnecessary uncertainty for various major retailers who own ‘sub-brands’ or ‘co-brands’ under flagship The scope of eligible investment in back end infrastructure was restricted , since expenditure on land and rental (even if back end) is excluded. This means that large investors will able to do MBRT in India. Front end stores should be owned and company operated only . This restrict their flexibility to restructure its franchisee arrangement.
  • BCAS - FDI Trading Activity of PROI - 06.08.2013

    1. 1. 6th August 2013 P. P. Shah & Associates 1 FDI Policy-Trading Activity of PROI and relevant Provisions of FEMA Presented by: Mr. Paresh P. Shah P.P. Shah & Associates Chartered Accountants Email: paresh@bom3.vsnl.net.in BCAS FEMA Study Circle Meeting
    2. 2. 6th August 2013 P. P. Shah & Associates 2 Overview of Discussion  Foreign Investment and Trading activities of PROI – A review  Regulatory framework  Government policy on Trading-Statistics etc  Regulatory framework – comparison  Nature of trading activities and its meaning  Government of India’s Plan & Preparedness  Retail trading – A rationale and critical analysis  International scene  Summary of issues at the study circle
    3. 3. 6th August 2013 P. P. Shah & Associates 3 Trading activities of PROI – A review  Priority of sector and its rationale  Foreign Investment in India & FDI  Trading activities and entry option to PROI  Trading activities under policy of the Government  Trading activities permitted to NRIs only  Prohibited activities to PROI
    4. 4. Foreign Investment in India Foreign Investment 6th August 2013 P. P. Shah & Associates 4 Foreign direct investment (Sch 1) Foreign Portfolio Investment Foreign Venture Capital Investment (Sch 6) Other Investment(G- sec, NCD) (Sch 5) Investment on Non repatriation basis Automatic route Government route FIIs (sch 2) NRIs, PIO (Sch 3) SEBI regd FVCIs VCF, IVCUs FIIs NRIs, PIO NRIs, PIO (Sch 4) Investment made by QFI (Sch 8) IDR by companies resident outside India (Sch 7)
    5. 5. Definition of FDI  As per Consolidated FDI Policy- Investment by Non resident entity/Person resident outside India in the Capital of an Indian Company under Schedule 1 of Foreign Exchange Management ( Transfer or issue of Security by a person resident Outside India) Regulation 2000  As per Regulation 14 of Notification 20 of FEMA- Investment received by an Indian Company from non-resident entities regardless of whether the said investments have been made under Schedule 1,2,3,6 and 8 of Notification No. FEMA 20/2000- RB dated May 3,2000,as amended from time to time. 6th August 2013 P. P. Shah & Associates 5
    6. 6. 6th August 2013 P. P. Shah & Associates 6 Trading activities-Regulatory framework  Trading activity and Entry options  Liaison office, Branch and Project office of PROI – Notification No. 22/2000-RB, dt. 3rd May 2000 . Cir. No. 29 dt. 30/12/2009  Automatic route of FDI under Notification No. 20; Schedule I for companies ( Annex A inserted vide notification No. 242 dt 19/10/2012 w.e.f 20/9/2012) .[A trading company incorporated in India may issue shares or convertible debentures to the extent of 51% of its capital to PROI [eligible persons as referred to in paragraph 1 to the schedule 1of the regulation 5 of the Notf. 20 of FEMA] subject to the conditions that remittance of dividend to the shareholders outside India is made only after the company has secured registration as an Export Trading / Star Trading / Super Trading House from the Directorate General of Foreign Trade, Ministry of Commerce, Government of India, New Delhi. Annexure B refers that activity of such company to be primarily Export activities.(Omitted- Notification No. 179/2008-RB)]  Wholesale cash & Carry trade: Guidelines for Cash & Carry Wholesale Trading/Wholesale Trading (WT): (a)For undertaking WT, requisite licenses/registration/ permits, as specified under the relevant Acts/Regulations/Rules/Orders of the State Government/Government Body/Government Authority/Local Self-Government Body under that State Government should be obtained. (b) Except in case of sales to Government, sales made by the wholesaler would be considered as „cash & carry wholesale trading/wholesale trading‟ with valid business
    7. 7. Trading activities-Regulatory framework customers, only when WT are made to following entity: (I) Entities holding Sales tax /VAT registration/ service tax /Excise duty registration; or (II)Entities holding trade licenses i.e. license/ registration certificate /membership certificate/registration under Shops and Establishment Act, issued by a Government Authority/ Government Body/ Local Self-Government Authority, reflecting that the entity/person holding the license/ registration certificate/ membership certificate, as the case may be, is itself/ himself/herself engaged in a business involving commercial activity; or (III) Entities holding permits/license etc. for undertaking retail trade (like tehbazari and similar license for hawkers) from Government Authorities/Local Self Government Bodies; or (IV) Institutions having certificate of incorporation or registration as a society or registration as public trust for their self consumption. Note: An Entity, to whom WT is made, may fulfill any one of the 4 conditions. ( c) Full records indicating all the details of such sales like name of entity, kind of entity, registration/license/permit etc. number, amount of sale etc. should be maintained on a day to day basis. 6th August 2013 P. P. Shah & Associates 7
    8. 8. Trading activities-Regulatory framework (d) WT of goods would be permitted among companies of the same group. However, such WT to group companies taken together should not exceed 25% of the total turnover of the wholesale venture (e) WT can be undertaken as per normal business practice, including extending credit facilities subject to applicable regulations (f) A Wholesale/Cash & carry trader cannot open retail shops to sell to the consumer directly.  Automatic route of FDI under Notification No. 20; Schedule 4 for Non Resident Indians. Paragraph 1: “No purchase of shares or convertible debentures of an Indian company shall be made under this scheme if the company concerned is a Chit fund or a Nidhi company or is engaged in agricultural/plantation activities or real estate business or construction of farm houses or dealing in TDRs  Trading activity through proprietary and partnership concern in India. Notification No. 24 states, the firm or the proprietary concern is not engaged in any agricultural/plantation activity or real estate business or print media sector 6th August 2013 P. P. Shah & Associates 8
    9. 9. 6th August 2013 P. P. Shah & Associates 9 Trading activities-Regulatory framework  Activity of a branch or unit in SEZ  Permitted Trading activity & Government Policy www.dipp.nic.in  Statistics & History  Types of Activities  Prohibited Activities  Condition, Benefits, Challenge & Issues  Direct & Indirect Investment  Meaning of Trading & its types
    10. 10. Branch Activities under FEMA Permitted activities for a branch in India of a person resident outside India- i) Export/Import of goods(1) ii) Rendering professional or consultancy services. iii) Carrying out research work, in which the parent company is engaged. iv) Promoting technical or financial collaborations between Indian companies and parent or overseas group company. v) Representing the parent company in India and acting as buying/selling agent in India. vi) Rendering services in Information Technology and development of software in India. vii) Rendering technical support to the products supplied by parent/group companies viii) Foreign airline/shipping company. [Notf. 22 of FEMA (1) Procurement of goods for export and sale of goods after import are allowed only on wholesale basis [Master circular 07/2013-14 dt 01/07/2013 ] 6th August 2013 P. P. Shah & Associates 10
    11. 11. Branch Activities & SEZ  Reserve Bank has given general permission to foreign companies for establishing branch/unit in Special Economic Zones (SEZs) to undertake manufacturing and service activities. The general permission is subject to the following conditions: i) such units are functioning in those sectors where 100 per cent FDI is permitted; ii) such units comply with part XI of the Companies Act,1956 (Section 592 to 602); iii) such units function on a stand-alone basis. 6th August 2013 P. P. Shah & Associates 11
    12. 12. Branch Activities & SEZ As per SEZ Act 2005 : Export: Export means- i) Taking goods , or providing Services, out of India , from a SEZ , by land a or air or by any other mode , Whether physical or otherwise or ii) Supplying goods , or providing services , from the Domestic Tariff Area to a Unit or Developer ;or iii ) Supplying goods, or providing services, from one Unit to another Unit or Developer in the same or different SEZ Import: Import means- i) Bringing goods or receiving services, in a Special Economic Zone, by a Unit or Developer from a place outside India by land, sea or air or by any other mode , whether physical or otherwise or; ii) Receiving goods, or services by, Unit or Developer from another Unit or Developer of the same Special Economic Zone or a different Special Economic Zone; 6th August 2013 P. P. Shah & Associates 12
    13. 13. Branch Activities & SEZ  Entrepreneur: Entrepreneur means a person who has been granted a letter of approval by the Development Commissioner under sub-section (9) of section 15;  Person: Person includes an individual, whether resident in India or outside India, a Hindu undivided family, co-operative society, a company, whether incorporated in India or outside India, a firm, proprietary concern, or an association of persons or body of individuals, whether incorporated or not, local authority and any agency, office or branch owned or controlled by such individual, Hindu undivided family, co-operative, association, body, authority or company;  Sec 51 of SEZ Act 2005-The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. 6th August 2013 P. P. Shah & Associates 13
    14. 14. History Statistics-Retail Trade The Indian retail industry has experienced growth of 10.6% between 2010 and 2012 and is expected to increase USD 750-800 billion by 2015. Food and grocery is the largest category within the retails sector with 60% share followed by Apparels and mobile Segment. 6th August 2013 P. P. Shah & Associates 14
    15. 15. Government Policy  Background:  1995- WTO’s general agreement on trade in services, which include both wholesale and retailing service , come into effect  1997- 100 % FDI In cash and carry (Wholesale) allowed under Govt. approval route  2006- FDI in cash and carry (Wholesale) brought under automatic route Up to 51% investment in Single brand retail outlet permitted  2011- 100% FDI in Single brand retail permitted  2012-- 51% FDI in Multi Brand Retail permitted  2013-August- FDI in Single Brand retailing up to 49% brought under Automatic Route. Press release dt 2nd Aug 2013,MOC,GOI. Type of Trading Activities: Wholesale, Retail- Single & Multi Brand, Business Supply, Social Sector, Test Marketing, Bulk Import for Exports, B2B, B2C, E- Commerce  6th August 2013 P. P. Shah & Associates 15
    16. 16. 6th August 2013 P. P. Shah & Associates 16 Prohibited Sector -Press note No. 5 (2012 series) & Con.Policy.  FDI is prohibited in: A) Lottery Business, including Government/Private Lottery, Online Lotteries etc. B) Gambling and betting, including casinos etc. C) Chit fund D) Nidhi Company E) Trading in Transferable Development Rights (TDRs) F) Real Estate Business or Construction of Farm Houses G) Manufacturing of Cigars, Cheroots, Cigarillos and Cigarettes, of tobacco or of tobacco substitutes H) Activities / Sectors not open to private sector investment e.g. Atomic Energy and railway Transport ( Other than Mass Rapid Transport System) Foreign Technology Collaboration in any form, including licensing for franchise, trademark, brand mark, management contract, is also prohibited for lottery business and Gambling and Betting activities.
    17. 17. Single Brand Retailing  Product to be sold should be ‘Single Brand’ only.  Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India.  ‘single brand’ product-retail would cover only products which are branded during manufacturing  A non-resident entity or entities, whether owner of the brand or otherwise shall be permitted to undertake ‘Single Brand’ product retail trading in the country for the specific brand, directly or through a legally tenable agreement with the brand owner for undertaking single brand product retail trading.”   However, the onus for ensuring compliance with above condition will rest with the Indian entity carrying out single brand product retail trading in India.  The investing entity shall provide evidence to this effect at the time of seeking approval, including a copy of the licensing/ franchise/sub-license agreement, specifically indicating compliance with the above condition.  The requisite evidence should be filed with the Reserve Bank of India (RBI) for the automatic route and Secretariat for Industrial Assistance (SIA)/Foreign Investment Promotion Board (FIPB) for cases involving approval of the Government i.e. where the investment in single- brand retail is between 49 percent and 100 percent.(P.note 1 of 2013 and PR Dt 2 nd Aug 13) 6th August 2013 P. P. Shah & Associates 17
    18. 18. Single brand retailing(contd.)  In respect of proposal involving FDI beyond 51%, sourcing of 30% of the value of goods purchased, will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsman, in all sectors. this procurement requirement would have to be met, in the first instance, as an average of 5 years’ total value of the goods purchased, beginning 1st April of the year during which the first tranche of FDI received.  Retail trading, in any form, by means of e- commerce, would not be permissible, for companies with FDI, engaged in the activity of single-brand retail trading.  Application seeking permission of the Government for FDI exceeding 49% in a company which proposes to undertake single brand retail trading in India would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy and Promotion (DIPP).”  “The applications would specifically indicate the product/ product categories which are proposed to be sold under a ‘Single Brand’. Any addition to the product/ product categories to be sold under ‘Single Brand’ would require a fresh approval of the Government. In case of FDI up to 49% the product/ product categories proposed to be sold except food products would be provided to the RBI 6th August 2013 P. P. Shah & Associates 18
    19. 19. 6th August 2013 P. P. Shah & Associates 19 Multi Brand Retailing  A)Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meat products may be unbranded  B) Minimum amount to be brought in, as FDI ,by the foreign investor, would be US$ 100 million  C) At least 50% of total FDI brought in the first tranche of US$ 100 million, shall be invested in 'backend infrastructure' within three years, where 'back-end infrastructure' will include capital expenditure on all activities, excluding that on front-end units. For instance, back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc. Expenditure on land cost and rentals, if any, will not be counted for purposes of backend infrastructure. Subsequent investment in the back-end infrastructure would be made by the MBRT retailer as needed, depending upon his business requirements”.  D) At least 30% of the value of procurement of manufactured/ processed products purchased shall be sourced from Indian micro, small and medium industries which have a total investment in plant & machinery not exceeding 2.00 million. This valuation refers to the value at the time of installation, without providing for depreciation. The 'small industry' status would be reckoned only at the time of first engagement with the retailer and such industry shall continue to qualify as a 'small industry' for this purpose even if it outgrows the said investment of 2.00 million, during the course of its relationship with the said retailer. Sourcing from agricultural co-operatives and farmers cooperatives would also be considered in this category. The procurement requirement would have to be met, in the first instance, as an average of five years' total value of the manufactured/ processed products purchased, beginning 1st April of the year during which the first tranche of FDI is received. Thereafter, it would have to be met on an annual basis”.
    20. 20. 6th August 2013 P. P. Shah & Associates 20 Multi Brand Retailing(Contd.)  E)Self-certification by the company, to ensure compliance of the conditions at serial no B,C and D above which could be cross-checked, as and when required.  F) Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per the 2011 Census or any other cities as per the decision of the respective State Governments, and may also cover an area of 10 kms around the municipal/urban agglomeration limits of such cities; retail locations will be restricted to conforming areas as per the Master/Zonal Plans of the concerned cities and provision will be made for requisite facilities such as transport connectivity and parking”.  G) Govt. will have first right to procurement of agricultural products.  H) the policy is an enabling policy only and the state governments/Union Territories would be free to take their own decision in regard to implementation of the policy.  I) Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with FDI, engaged in activity of multi brand retailing  J) Applications would be processed in the DIPP , to determine whether the proposed investment satisfies the notified guidelines, before being considered by the FIPB for govt. approval. (Note: The amendment has been made by Union Cabinet in point C,D & F to extend the benefits of the FDI policy in multi-brand retail trading to a larger constituency of small industries. The amendment in the provision regarding 'back-end infrastructure' will give more clarity to the policy. The amendment to the provision regarding location of retail outlets will bring in parity in the policy as it is proposed to extend such dispensation to all States.
    21. 21. Execution Challenge The advent of FDI Policy of September 2012 can pave the way of modernization of Indian Retail sector. However journey ahead is challenging  Availability of Retail Space: Hypermarket require more than 60,000 sq. ft. and Departmental store requires more than 20,000 sq. ft.  High Rental Cost: According to Industry estimate , rental comprise approx 40% of total cost to sales in the retail sector  Political risk: The opposition party have opposed FDI in retail and some of its leader have indicated that they will scrap the policy if their party comes to power.  Currency fluctuation:  Infrastructure Challenge: 6th August 2013 P. P. Shah & Associates 21
    22. 22. Factors- FDI in Retail Industry Land & Space Requirements: According to the Land and Property Law only the Indians have right to land and property in India and this law has in a way inhibited the entry of foreign players in India. Taxation: Tax structure of India is also unfavorable for the foreign players. The Corporate tax rate for the domestic Companies is 30% whereas it is 40% for the foreign Companies. In India, VAT is a state levy and Companies operating across the country find it difficult to configure different state tax rates for the same product. The changing Sales tax as well as Value added Tax is also not favorable. Transfer Pricing litigation : Transfer Pricing(TP) has become the single largest topic of tax litigation for MNC’s in India. One of the main point of contention is determining who should bear the expense and enjoy the fruits of creating marketing intangibles in the country of operation of the distributors. 6th August 2013 P. P. Shah & Associates 22
    23. 23. Benefits of FDI  India’ s retail market is majorly dominated by unorganized sector. Organized sector segment account for 8% of retail landscape  Fear of Inflation & Price rise etc.- Some Politician say price will go up : Is this possible? Before telecom sector was opened up, the cost of long distance call was 20/min, which translate into 60 at today's value of the rupee . And we have to wait for 3 days to get call connected . What is the cost of the same call today? 50 paisa/min , less than1 % freeing up of market and increased competition leads to reduction in price not increment in price – no matter what form of economics one follow 6th August 2013 P. P. Shah & Associates 23
    24. 24. Benefits (Contd.)  Better infrastructure will wipe out inefficiencies of our system; Colossal losses of Perishable goods, Lack of processing and storage facility, Supply Chain Mgt etc.  Curb the inflation: The gap between gate price of agricultural produce and retail price(In India) are amongst the highest in the world as also amongst the emerging market. A farmer can be approached by retailers directly not through intermediaries, which will also help bring down price by 25%.  India gets modern storage and warehousing infrastructure using funds brought from FDI.  In both single and multi brand retail, e- commerce is not permitted. This in effect means creating of more real estate infrastructure and front end showroom sales that bring more employment and local taxes. 6th August 2013 P. P. Shah & Associates 24
    25. 25. Issues of FDI in Single brand 6th August 2013 P. P. Shah & Associates 25 Single Brand Who shall be permitted to undertake single brand retail trading-FDI by MFGs /Licencee Products to be sold should be of ‘Single Brand ‘ only Product should be branded during manufacturing FDI allowed up to 100 %with conditions -comparison 30% of Value of goods purchased to be sourced from SME ,if FDI is beyond 51% Up to 49% - Automatic route, 2ND Aug 2013(PR) Transaction with Whole sale Trader
    26. 26. Issues of FDI in Multi brand 6th August 2013 P. P. Shah & Associates 26 MBRT $100 million Front end store Population/ Non FDI state Stores owned & Operated by Multi Brand Retailer Back end Infrastructure of Whole sale Trader An independent from Whole sale Trading Transaction with Wholesale Trader30% of input manufactured/processed products
    27. 27. Clarification on FDI in Multi Brand Retail Trading  The DIPP on June 6, 2013 has issued a clarification on the queries of the prospective investors with respect to the provision on Multi Brand Retail Trading  Certain key Clarifications : 1. Mandatory Local sourcing: 30% of procurement of manufactured goods and products from small industry ….. Such procurement has to be sold through the ‘front end retail , and not through wholesale (B2B) or cash and carry approach. 2.50% of the FDI to be invested in Back end infrastructure: FDI in MBRT will require fresh investment in back end infrastructure rather than buying an existing one. 3.Franchise arrangement: It is now clarified that franchisee model is not permissible by MBRT entities and the front end stores set up by MBRT entity will have to be company owned and company operated only. 4.State Discretion: The States/Union territories which have agreed to allow FDI in MBRT in their States/Union territories cannot amend the main policy on MBRT as the same is under the domain of central government . However states shall have the prerogative of imposing additional conditions under the applicable state laws and regulation. 5.Non FDI agreeing states/Union territories: If foreign investor approaches a state government/union territories that is not included in list of the states/union territories supporting FDI in MBRT , as per the prevalent FDI policy ,consent given by such states will be acceptable , and a suitable amendment will be undertaken by Central govt. Further, investment in back end infrastructure can be made in any state even if such states may not have agreed to FDI policy on MBRT 6th August 2013 P. P. Shah & Associates 27
    28. 28. Bharti Walmart Case  Investment of Rs. 455.8 crore made by Walmart in Cedar support service, a subsidiary of Bharti venture and holding of Bharti Retail by way of unsecured CCD was termed to be illegal and went against FDI rules under FEMA and Prevention of money laundering act . The allegation is that while FDI was obtained for Cedar support service ,which was suppose to operate in service and real estate consultancy sector, the investment was later channelised to Bharti Retail, which was in the business of MBRT not opened for FDI . 6th August 2013 P. P. Shah & Associates 28
    29. 29. 6th August 2013 P. P. Shah & Associates 29 Direct & Indirect Foreign Investment  Rules for computation of direct & indirect foreign investment in Indian Companies (PN 2 of 2009 & Regulation 14 of Notification 20 –Inserted vide Notification No. 278 dt. 07/06/2013 )  Direct Foreign Investment : Investment directly by a non resident entity into Indian Company regardless of whether the said investment have been made under Schedule 1,3,6 and 8 of Notification No. FEMA 20/20000-RB dated May 3 2000, direct foreign investment = % of equity held  Indirect Foreign Investment: Investment through Indian Companies  Owned and Controlled by resident Indian citizens and/or Indian Companies which are owned and controlled by resident Indian citizens, i.e. more than 50% equity and power to appoint majority of directors with residents, Indirect FDI = Nil  Owned and Controlled by non resident entities as WOS: Indirect FDI = % of equity held in investing Indian Company Other: Indirect FDI = % of equity held by investing Indian Company
    30. 30. 6th August 2013 P. P. Shah & Associates 30 Computation of Direct Foreign Investment NRE A Co B Co 75% 26% 20% Foreign Investment in B Co Direct - 20% Indirect – 26% NRE: Non Resident Entity
    31. 31. 6th August 2013 P. P. Shah & Associates 31 Computation of Indirect Foreign Investment NRE A Co B Co 49% 100% NRE A Co B Co 75% 26% NRE A Co B Co 75% 80% NRE A Co B Co 75% 100% Indirect FI NIL 26% 80% 75% NRE: Non Resident Entity FI: Foreign Investment
    32. 32. 6th August 2013 P. P. Shah & Associates 32 Trading - Activity of Branch & Companies  Differentiate between the activity of branch of PROI & companies with FDI by PROI  Permitted activities  Approval or Auto route  Branch is under auto route but types of the trading activities available to company are wide  Branch requires approval of RBI/ADs whereas Single brand trading above 49% and other cases of trading except whole sale trading requires FIPB approval  Distinction is narrowed down after 30th December 2009 [Refer AP (DIR Series) Cir. No. 23]
    33. 33. 6th August 2013 P. P. Shah & Associates 33 Meaning of ‘Trading’ & Nature of Activities  “Wholesale” trading [P. No. dt. Feb 7, 2001] The wholesale trader is a one who sells his/its goods to retailers and not to consumers  “Cash and carry wholesale” Cash and carry implies “quick delivery of goods” but not as distinguished from “credit” vis-à-vis cash [Clarification dt. 6th August 01] Thus cash and carry wholesale includes credit  “Retail trading” The activity of buying and selling whereby dealer sells the goods to consumers
    34. 34. 6th August 2013 P. P. Shah & Associates 34 Meaning & Nature of Activities  Commonly known nature  Wholesale & Retail  Nature of activity & Regulatory framework  Trading activity of the Export House (Schedule 1 to regulation 5 of Notification No. 20), [ deleted vide Notification No. 179 dt. 22/08/2008]  Trading in TDRs  Cash & carry wholesale trading  “Single brand” retail trading  Multi Brand Retail trading  Government Policy  Exports  Bulk imports with export/Ex bonded warehouse sales  Cash & carry wholesale trading  Other import of goods & services provided at least 75% is for procurement and sale of goods & services among the companies of the same group
    35. 35. 6th August 2013 P. P. Shah & Associates 35 Other Trading Activities subject to Exim Policy  Companies providing after sale service  Trading of High tech item/s requiring specialised after sale service  Trading of items for social sector  Trading of items sourced from small scale sector under its Brand name by companies  Domestic sourcing of products for Exports  Test marketing  B2B E-commerce activities
    36. 36. 6th August 2013 P. P. Shah & Associates 36 Present Government Policy & rationale  Trade deficit  Thrust is priority on sector – Infrastructure & financial sector  Trading approval so far and fate of the applications  Concept of “organised retail trade”  Protection to small vendors in villages & town  Proposal by Ministry of Food Processing industry, GOI  Working group in Ministry of consumer affairs
    37. 37. 6th August 2013 P. P. Shah & Associates 37 International factors – Retail trade  Presence of MNCs in India – Supply chain management & its impact  WTO & Retail trade  Brazil, China and major countries have opened up the sector  Flood Gate of Foreign Exchange Reserves
    38. 38. Trading Activity of PROI-Overall  Trading activity of PROI 6th August 2013 P. P. Shah & Associates 38 Prohibited Activities in India Non Repatriation basis Repatriation basis Schedule 4 of Notf. 20 Notf. 24 of Fema Single Brand Retailing Wholesale Cash and Carry Branch, Project Office & Branch in SEZ Multi Brand Retail Trading Other Activiti es51% allowed from 10th Feb. 2006 >51% with Condition from Sept 2012 Automatic route upto 49% from 2nd Aug 2013 FIPB from 20th Sept 2012 Notf. 20 upto Aug 2008 in case of Star Export house •Branc h •Notific ation 22 •Company •Notif. 20 •Auto Route from 10th Feb 2006
    39. 39. 6th August 2013 P. P. Shah & Associates 39 Thank YouThank You

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