A ccording to the World Bank's Ease of Doing Business 2020 report, India is 63rd among 190 countries, improving by 14 ranks from its rank of 77 in 2019. Like in any other country it is still difficult to navigate through regulatory, financial, bureaucratic and cultural complexities without the knowledge and partnership of a local expert. The following are some of the important legalities that your partner in India will have you consider while expanding into India.
India is a land where almost every kind of product and service is already available. Those companies that wish to expand into India must have to protect their intellectual property, that which sets them apart from their competitors in India. This includes technology, software, know-how, patents, etc. which are unique to the specific client. These intellectual property rights need to be evaluated carefully and quick and efficient steps need to be taken to protect them while.
Although India has increased its legal protection, copyright violation is still extensive due to negligent administration and enforcement practices.
Every company that has ever existed has a trademark. The trademark must be registered at the earliest stage possible before anything else. This helps protect your company from third parties seeking to use or register your company’s mark. Also, this prohibits third parties from trademark infringement.
Acquiring a land remains a complex process, due to the complications in establishing legal ownership and a ‘clean’ holding for purchase. Litigations due to inheritance, fragmented holdings, and demands by sellers to be paid in cash are some of the many issues that can be faced while purchasing land.
Once the land is purchased, next comes construction. Though it does take quite some time to purchase requests for construction, this number has decreased exponentially in recent years. According to “World Bank’s Ease of Doing Business” ranking 2020, India saw its ranking rise from 52 to 27 in dealing with construction permits. The score for construction permits is 78.7 on a scale of 100 and the number of procedures to be dealt with stands at 15 and the average time taken is 106 days.
The country’s standing in getting electricity has also moved substantially from 70 in 2016 to 22 in 2020 according to “World Bank’s Ease of Doing Business” ranking 2020. Electricity connection is given within 7 days if no Right of Way (RoW) is required and if it is required, then within 15 days. Also, the number of documents required for obtaining an electricity connection has been reduced to two and no physical documents are accepted.
When it comes to registering property, India was ranked 166th in 2016 and is now at 154th with a score of 47.6 percent. The number of procedures is 9 and number of days taken is 58 days. The stamp duty and registration charges are different in different cities. The registration charges are kept at 1% of the total market or agreed value of the property or Rs. 30,000 whichever is lesser while the stamp duty charges are 5% of the total market value of the property if it falls in the Panchayat area and 6% of the total market value of the property if it falls under municipal areas.
The Getting Credit rank for India has moved up from 42 in 2016 to 25 in 2020. The Central Government initiative of constantly working on the Registry of Securitization Asset Reconstruction and Security Interest (CERSAI) and The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) is attributed to the jump in the rank.
Companies Act, Securities Contracts (Regulation) Act, Consumer Protection Act, Depositories Act, and Listing Agreement of the Stock Exchanges are some of the provisions incorporated in diverse legislations to offer adequate protection to those investing in India. The Securities and Exchange Board of India (SEBI) has a new mechanism in place to improve investor grievance redressal. They have also increased the number of arbitration centres and simplified FPI (foreign portfolio investor) norms for investing in the market.
It is important that employees have a written employment agreement that abides by all legal circumstances to clearly outline their relationship with the company. It also aids to abate the risk of any claims made by an employee against the company in the event of a dispute or termination. The employee’s title and duties, limitations on their authority, salary, commission and bonus, benefits such as health and medical insurance, pension, protection of the company’s intellectual property, etc., are some of the important aspects that must be covered in the agreement.
Employment laws in India are complex and extensive and encompass law right from payment of gratuities to gender discrimination. The government of India is seeking to advance the legislative hurdles to ensure companies can employ indigenous Indians and foreign nationals.
The tax structure in India is one of the most complex structures and according to 2017, it takes an average of 214 hours a year to formulate and pay them. There is a gamut of laws, rules, regulations and practices that can prove to be confusing and when done without the help of an expert, foreign companies are known to overpay some taxes and underpay others. India has one of the highest corporate tax rates in the world, but effective tax liability changes across different industries and sectors. Currently, the Corporate Tax Rate in India for foreign companies stands at 40% with a 2% surcharge on net income greater than Rs. 1 Crore and less than Rs. 10 Crore. India has reduced corporate tax from 30% to 25% for mid-sized companies.
India came up with The Goods and Services Tax (GST) on the 1st of July 2017. It is a comprehensive, multistage, destination-based tax on the manufacture, sale and consumption of goods and services throughout India and it incorporates 8 taxes at the central and 9 taxes at the state level. It is one of the most complex tax structures in the world and has the second-highest tax rate as well.
“World Bank’s Ease of Doing Business” ranking 2020 saw India’s rank jump 12 places in the category of trading across borders. India has made this easier by enabling post-clearance audits, integrating trade stakeholders in a single electronic platform, upgrading port infrastructure and enhancing the electronic submission of documents.
Landing Charge, Countervailing Duty (CVD), Education Cess, Additional CVD, and Integrated Goods & Services Tax (IGST) are some of the custom duties that have to be paid. The duty, in general, varies from the range of 0-150% with the average rate being 11.90%. Customs duties can be value-based duties also called Valorem duties, quantity-based duties, called specific duties and duties on values plus other factors, known as compound duties.
India gained the most in resolving insolvency; Its rank moved from 108 to 52. It has made amendments to the Insolvency and Bankruptcy Code (IBC) to enforce a stricter time limit for dealing with troubled companies and to clarify the rights of all types of creditors. The process for insolvency is set to be finished within 90 days with a maximum grace period of another 45 days.
The Indian government is constantly working on making all the procedures related to the expansion of foreign businesses easy, but they have a long way to go. At Auroma Global Connect, our team has the expertise needed to help you not just strategize your entry and expansion in India but also partner with you to navigate through the legal complexities. We will be with you every step of the way and ensure that your company has a strong foothold in the Indian market.
