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Branch Offices/Units in SEZs
It has been decided to grant general permission to foreign companies to establish branch offices/units in special economic zones (SEZs) to undertake manufacturing and service activities.
Such permission would, however, be subject to the conditions that such branches/units -
(i) are functioning in those sectors where 100 per cent foreign direct investment is permitted;
(ii) comply with part XI of the Companies Act (Section 592 to 602);
(iii) function on a stand-alone basis ("stand alone basis" means such branch offices would be isolated and restricted to the SEZ alone and no business activity/transaction will be allowed outside the SEZs in India, which includes branches/ subsidiaries of its parent office in India); and
(iv) shall approach an authorised dealer with the following documents in the event of winding-up of business and for remittance of winding-up proceeds :
(a) Auditor's certificate -
# Indicating the manner in which the remittable amount has been arrived and supported by a statement of assets and liabilities of the applicant, and indicating the manner of disposal of assets.
# Confirming that all liabilities in India including arrears of gratuity and other benefits to employees etc., of the branch/office have been either fully met or adequately provided for;
# Confirming that no income accruing from sources outside India (including proceeds of exports) has remained unrepatriated to India.
(b) No-objection or tax clearance certificate from Income- Tax authority for the remittance.
(c) Confirmation from the applicant that no legal proceedings in any court in India are pending and there is no legal impediment to the remittance.
To provide full flexibility to all exporters and reducing the paper work associated with seeking extension of time or reduction in invoice value or write-off, it has been decided to allow all exporters (including status holder) to -
(i) write-off (including reduction in invoice value) outstanding export dues, and
(ii) extend the prescribed period of realisation beyond 180 days or further period as applicable.
This facility would be available provided, the aggregate value of such export bills written-off (including reduction in invoice value) and bills extended for realisation does not exceed 10 per cent of the export proceeds due during the calendar year and such export bills are not under investigation by Enforcement Directorate/Central Bureau of Investigation or any other investigating agencies. This facility would be available in respect of export proceeds falling due from January 1, 2004. In other words, the new facility would be available for exports made after July 1, 2003 and proceeds due for realisation on January 1, 2004 (ie., within the prescribed period of 180 days). In the case of exports where the Reserve Bank has prescribed longer period of realisation, this facility would be available for exports made prior to July 2003, but proceeds of which are due for realization within the prescribed period of one year.
Exporters dealing with more than one authorised dealer can avail of this facility through each AD, i.e., the limit of 10 per cent for self write-off (including reduction in invoice value) and extension of time for realisation of export proceeds would be applicable for export bills lodged for realisation with that AD.
Exporters operating under a consortium of banks or with multiple banks would also have the option of computing the 10 per cent limit on an aggregate basis with all the banks, provided the lead bank of the consortium or in case of multiple banking, a nodal bank undertakes to verify the exporters' annual performance on behalf of all the banks.
Exporters should submit a statement to the concerned AD, within a month from the close of the calendar year, giving details of export proceeds due, realised and not realised. Export bills due in the year 2004, for which the exporter has extended the period of realisation on his own (within the 10 per cent limit) or sought extension of time from the AD, but unrealised as at the end of calendar year 2004, would be computed for export proceeds due in the following year.
The AD would be required to verify the statement with his records and review the export performance of the exporter during the calendar year to ascertain that in cases where the 10 per cent limit of self extension, writeoff (including reduction in invoice value) and non-realisation has been breached, the exporter has sought necessary approval for write-off, reduction in invoice value or extension of time, as the case may be, for the excess over the 10 per cent limit before the end of the calendar year. In cases where exporters have failed to comply with this requirement, ADs should promptly advise the concerned exporter to seek extension of time/reduction in invoice value/write-off in respect of non-realisation in excess of the 10 per cent limit, failing which, the AD should inform the exporter about the withdrawal of this facility of self write-off/ extension of time, within a month, under advice to the concerned regional office of the Reserve Bank.
Limits Raised for Remittances without Documentation
To further liberalise the availability of foreign exchange to individuals, the limit for foreign exchange remittance for miscellaneous purposes without documentation formalities, has been raised from USD 500 to USD 5000 with immediate effect.
The Reserve Bank has clarified that authorised dealers need not obtain any document, including Form A-2, as long as the exchange is being purchased for a permissible current account transaction; the amount does not exceed USD 5000 or its equivalent; and the payment is made by a cheque drawn on the applicant's bank account or by a demand draft. ADs may, however, obtain a simple letter from the applicant containing the basic information, viz., name and address of the applicant and the beneficiary, amount to be remitted and the purpose of remittance.