India Regulatory Brief: FIPB Abolished, Pending Transition Rules and GST Rates Approved
FIPB formally abolished by federal government
On May 24, the Union Cabinet finalized the end of the Foreign Investment Promotion Board (FIPB). Introduced as a foreign direct investment (FDI) reform in the Union Budget for 2017-18, scrapping the FIPB will ease greater foreign investments inflows by reducing bureaucratic transactions.
The FIPB was an inter-ministerial body under the Department of Economic Affairs in the finance ministry. It was responsible for processing and recommending FDI proposals if the investment amount exceeded US$466.27 million (Rs 3,000 crore).
Going forward, FDI proposals can be approved by individual departments in the government in consultation with the Department of Industrial Policy and Promotion (DIPP). The DIPP will issue a standard operating procedure (SOP) to facilitate the processing of FDI applications. Only proposals for FDI in sensitive sectors will require a separate security clearance from the Ministry of Home Affairs (MHA).
No Integrated GST on imports under export promotion schemes in India
The Indian government remains keen to promote exports, which is why imports under various export promotion schemes, including those to special economic zones, will be exempt outright from the goods and services tax (GST).
This relaxation is also extended to the re-import of goods exported under any claim of export promotion schemes, such as drawback, re-import of cut and polished precious stones sent abroad for treatment, as well as for those imported items that are subject to international commitments.
Similarly, no GST will be charged on imports by the staff of diplomatic missions. Goods imported for Bhutan and Nepal will also be exempt from GST. A complete and updated list has been notified by the Central Board of Excise and Customs.
Pending rules and GST rates finalized by GST Council
The Goods and Services Tax (GST) Council has cleared the pending transition rules for the rollout of the GST from July 1 and fixed the GST rates for the remaining goods segments.
The Council raised the limit on input tax credit (ITC) claimed against excise duty payment to 60 percent from 40 percent of GST liability on items with a tax rate above 18 percent. This should bring some respite to businesses on their sale of inventories stocked up before July 1.
Finally, GST tax rates were fixed at three percent for gold and five percent for trademarked packaged foods, agri-machinery, and for apparel priced below US$15.54 (Rs 1,000). Footwear priced below US$7.77 (Rs 500) will attract five percent GST, otherwise the segment will be subject to 18 percent GST. Lastly, readymade garments will be subject to 12 percent GST, natural yarn and fabric cotton to 5 percent, and man-made yarn 18 percent. Jute, however, will not be taxed.
New guidelines for government agencies handling personal data
In response to the outcry over data protection under the Aadhaar Act, the ministry of electronics and information technology (MEIT) released fresh guidelines for government agencies handling personal information on May 22. These guidelines expand on the rules laid down in the Information Technology Act of 2000 and Aadhaar Act of 2016.
Government agencies working with personal data will need to ensure that end-users are made aware of this data collection and usage; their consent must be taken either in writing or electronically.
Sensitive personal information, such as passwords, financial information (bank account, credit card, debit card, and other payment instrument details), medical records and history, sexual orientation, physical and mental health, and biometric information cannot be stored by agencies without encryption.
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