JV with Welly Investments

Proposed Indian Operations – Overview of Indian Tax and Regulatory Framework

December 2009
Overview

• Our Understanding

• Overview of Indian taxes

- Direct Tax

- Indirect Tax

• Why NMA

• Our Team

December 2009
NMA Slide 2
 Our Understanding

December 2009
NMA Slide 3
Our Understanding

• India Company (Mr. Mehra and Mr. Rama being shareholders) to initially

set up factory in Pollachi for manufacturing ‘coir fibre bales’ and trade

them entirely in the international market

• Indian Company to subsequently enter into a JV with Welly Investment

Ltd, Hongkong (‘Welly’)

• Welly to take approx 70% stake:

- Total investment to be around $350,000

- Welly to invest $250,000 and balance $100,000 to be contributed by

the Indian promoters

December 2009
NMA Slide 4
Overview of Indian taxes

December 2009
NMA Slide 5
Direct Tax – Bird’s eye view
• Income tax a central law in India

• Uniform tax year for all tax payers (Tax year April 1 ~ March 31)

• Detailed transfer pricing regulations

• Advance Rulings permissible in case of non-residents

• Carry forward of tax loss for 8 years; tax depreciation for indefinite period

• Aggressive interpretation of Permanent Establishment (PE) by Indian tax

authorities

December 2009
NMA Slide 6
Indirect Tax – Bird’s eye view

Customs Duty Transaction Taxes

• Tax on import of goods • No Transaction tax on import of goods

• Service Tax (10.3%) - tax on provision/acquisition
• Peak rate of customs duty -10% of specified services

• Effective rate of customs duty – 24.42% • CENVAT (8.24%) - tax on manufacture of goods

• Central Sales Tax (2%) – tax on inter-State sale of

goods

• State Value Added Tax (4% to 12.5%) - tax on

intra-State sale of goods

• Entry Tax - tax on entry of goods into a State

• Other local levies

India moving towards unified GST

regime by April 2010 December 2009
NMA Slide 7
Investment Strategy
• Review of the Master Circular 2009 issued by RBI to check the approval
route for investing in the JV

• To check whether the proposed industry falls under the Small Scale
Industry (SSI) status

• Review the Press Note 1, 2005 Series to check whether the proposed
investor holds any other JV stake in India

December 2009
NMA Slide 8
 About RSM
Why NMA
• NMA is a boutique chartered
accountancy firm engaged in
providing auditing tax and accounting New Delhi
services to large corporations
• NMA is a leading firm providing
 Audit services;
 Accounting support;
 Taxation & business advisory.

• NMA has been in the practice for

around 7 years and currently has
offices in Delhi, Kolkatta and Chennai
with a mix of chartered accountants,
Kolkatta
company secretaries and lawyers

• We constantly aim to provide high-

quality and efficient services to our
clients at the optimum economic
value
Chennai

December 2009
NMA Slide 9
 Our Range of Services . . .
Our Range of Services

Indirect Transaction
Tax Support
Services Services

Tax &
Business
Advisory

Attest & Risk

Transfer Pricing Consulting
Services Services

December 2009
NMA Slide 10
What NMA can offer..
• Assistance in initial set-up and incorporation of the Indian Company (including assistance in
opening Indian bank account)

• Assistance in incorporation of the JV and the investment route

• Structuring of transactions from a tax optimal perspective

• Assistance in setting-up of the production facility

• Assistance in initial registrations such as:

• Permanent Account No (PAN), Tax Account No (TAN),Directors Identification No

(DIN),

• Import-Export Code (IEC), Excise registration, Service tax registration and VAT/CST
registrations

• Assurance and audit related functions

• Assistance in formulating finance and operational policies and procedures

• Outsourcing of routine finance, accounting and regulatory/tax functions (wherever required)

Thank you