Foreign Investment Promotion Board Calls for Less Undue FDI Scrutiny

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Apr. 13 -The Foreign Investment Promotion Board (FIPB) has asked the Department of Revenue to lessen its scrutiny of foreign direct investment proposals to cut delays.

Following FIPB rules, a proposal need only to be vetted by the original ministry and any related ministry when recommended by the board. Official sources said that the Department of Revenue, under the Ministry of Finance, has started scrutinizing all proposals even when not required or directed to do so, reports The Business Standard.

Extra scrutiny from the Department of Revenue is slowing the process for new foreign investment proposals. The department has been looking at each proposal to verify its legitimacy regarding the source of funds, end use, investor credentials and overseas track record; taking care to determine if its truly a foreign investment or an attempt by an Indian company to launder money back to India.

“If a foreign investment proposal gets approved and gets a favourable tax treatment according to a treaty but the investors are routing their money from foreign origin to into India through a fake project, it not only hampers foreign investment but hampers revenue as well,” a tax official told The Business Standard.

Should there be a delay in the proposal’s clearing time because of the Department of Revenue, even when their comments are not required, such proposals get cleared “in principle,” sources say.