A-Insights – Page 9 – Aureus Law Partners

Commercial Courts Act – Recent Amendments

Case Update: Supply of foods/beverages on-board a train to be treated as pure supply of goods

Taxpayer is involved in the business of supplying food to passengers travelling via Rajdhani Trains and other mails/express trains on basis of the menu approved by Indian Railway. Primarily, the Taxpayer was supplying food via three different modes. Firstly, supply of food through the food plaza / food stalls on the railway platforms; Secondly, supply of food on board the trains, including mandatory supply of newspapers; Thirdly, supply of food on board the mail/express trains. The Taxpayer preferred the application for advance ruling under Section 97 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) before the Authority for Advance Ruling (“Authority”). On basis of the materials and records placed before the Authority, an advance ruling was sought in relation to the rate of GST applicable on the said supply of foods/beverages, and the mandatory supply of newspapers on board the trains by the Taxpayer.

Taxpayer was of the view that the supply of foods/beverages from food stalls / food plazas at the platforms and on board the trains would be taxable at the rate of 5% integrated tax (“IGST”) in terms of the Entry No. 7 of Notification No. 11/2017 – Central Tax (Rate) dated June 28, 2017 (“Rate Notification”). Further, the supply of newspaper would be exempt from GST as per the Entry No. 120 of Notification No. 2/2017 – Central Tax (Rate) dated June 28, 2017 (“Exemption Notification”). The jurisdictional Commissioner (CGST) agreed to the views of the Taxpayer except with respect to supply of foods/beverages on board the trains, which would be taxable at the rate of 18% IGST, being the supply of ‘outdoor catering’ services.Basis the perusal of contracts / agreements, the Authority observed that for supply of food on the trains, there are three transactions, one between the passengers and the Indian Railways, second between Indian Railways and Indian Railway Catering and Tourism Corporation (“IRCTC”) and third between IRCTC and the Taxpayer. The present application pertains to the third transaction vis-à-vis between IRCTC and the Taxpayer.

The Authority observed that the train is a mode of transport and hence cannot be treated as a restaurant, eating joint, canteen, etc. Accordingly, the catering services provided on-board a train are not covered under S. No. 7(i) of the Rate Notification, as claimed by the Taxpayer. Further, with respect to the treatment of said supply of food/beverages on-board a train as composite supply of services, the Authority ruled that since no element of service is involved, the same shall be treated as pure supply of goods. In similar terms, the supply of foods/beverages from the food stalls on the platform shall be treated as pure supply of goods. Further, the supply of newspapers, which is separately invoiced, shall be exempted from GST in terms of the S. No. 120 of the Exemption Notification. Accordingly, the application for Advance Ruling was disposed off by the Authority.

(In Re: Deepak and Company; Advance Ruling No. 02/DAAR/2018; Authority for Advance Ruling, New Delhi)

In case of any queries or clarifications on this subject, please feel free to reach out to Manish Parmar, Senior Associate, Aureus Law Partners at manish.parmar@aureuslaw.com. Views are personal.

Liquidated Damages – Implications under the Goods & Services Tax Laws

Liquidated damages (“LD”) mean a fixed or pre-determined sum that is required to be paid upon breach of a contract, which may arise due to non-fulfilment of the obligations, delay in fulfilling the obligations or abandonment or termination etc. Hence, LD damages are directly connected to the actual injury and losses incurred by a party due to failure or delay in performance of obligations under the contract by either party. These LD clauses/ obligations are prevalent in construction contracts where the provisions relating to timely and milestone performance of the project are incorporated. For instance, EPC onshore/ offshore sub-contracts have milestone-based implementation, hence any delay in execution / completion of the same causes huge losses to the project owners. LDs cover this contingency.

Commercially, the LDs are considered to be a measure of compensation for a pre-determined loss arising out of breach of contract. However, in a recent matter of In re Maharashtra State Power Generation Company Limited dated May 18, 2018, the Authority for Advance Ruling, Maharashtra (“Authority”) under GST ruled that the amount of LD deducted from the payments made to the contractor/ vendors would amount to supply of service by the project owner / Taxpayer. The said ruling along with the factual background is discussed hereunder:

Factual Background

The Taxpayer approached the Authority under Section 97 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) seeking an advance ruling on levy of GST on the amount of LD deducted from the contract price agreed with the contractors/ vendors. The main issue for this ruling was as to: (i) whether the LD would be treated as ‘sale’; and (ii) whether this would be liable to GST as separate from the contract value/ price. The Taxpayer relied upon the ruling in GSTR 2003/11 issued by the Australian Tax Office under the Australian Goods and Services Tax Act, 1999, wherein the deduction from the contract price was held to be towards deficiency in the provision of services, and therefore the same would not attract GST. Also, reliance was placed in the matter of Commissioner of C. Ex., Chandigarh-I v. H.F.C.L. (Wireless Division) reported as 2015 (11) TMI 893 – CESTAT- New Delhi, wherein it was held that if a taxpayer is liable to pay a lesser amount than the generically agreed price as a result of a clause stipulating variation in the price, on account of liability to ‘liquidated damages’ on account of delay in delivery of manufactured goods then such resultant price would be the ‘transaction value’. Further, the Taxpayer submitted before the Authority that the provision of such a clause in the contract is to ensure that the completion of the project does not get delayed.

Observations of Authority

The Authority observed that contract price and LD are two distinct aspects of the contract, and deduction of LD from the contract price merely facilitates the settlement of accounts. The Taxpayer contended that LD helps in mitigating the impact of higher costs in form of interest during construction and administrative charges. Taxpayer further contended that it was never its intention to get supplies/ project delayed nor did the contractors want to make delay and thereby causing it to tolerate. Therefore, LD could not be termed as service provided to the contractor. However, the Authority observed that the provision of LD in the contract is squarely covered by the clause (e) of the Para 5 of the Schedule II annexed to the CGST Act. The said entry provides that ‘agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act’, shall be treated as supply of services. The Authority ruled that the amount of LD deducted from the payments made to the contractor/ vendors is income in the hands of the Taxpayer and would amount to supply of service by the Taxpayer. Accordingly, the Authority held this would be classified under Heading 9997, and GST at the rate of 18 percent would be levied on the amount of LD deducted from the contract price.

Conclusion

While the said ruling is binding on the Taxpayer and the Revenue in respect of the particular issue in question, the same may have a persuasive precedential value. Also, it may have a bearing on how the clauses relating to LD is negotiated in contracts in the future.

Aureus’ New Office – Defence Colony

Over the past 5 years, Aureus Law Partner's Delhi office was working out of Chittaranjan Park in New Delhi - fondly called '1778' by us. 1778 gave us our first office, from where we launched, and how! We expanded to Mumbai, to Dehradun/Haldwani, Kolkata and recently to Bhopal. Our team size grew, progress was heady, but we treaded cautiously, 'slow and steady' was the mantra. 1778 was a little out of the way, a little further off from the courts than is usual, and needed a visitor to enter the heart of what is known as Delhi's "Mini Calcutta". We did feel that we should move to a location closer to the courts as our litigation practice steadily grows. Also, access was to perhaps be an issue going forward on account of development of Delhi Metro stations leading to traffic congestions at various key points of entry and exit to CR Park.

We shortlisted Defence Colony - a veritable "Wall St." for lawyers of Delhi, as it were. D-306, Defence Colony has now been finalised as Aureus' new home, and the move from CR Park stands completed.

The location is perfect to catch up for a meeting while you wait for a hearing in the Supreme Court or the Delhi High Court. Along with various senior counsels in close proximity, D-306 offers the required comfort to be able to prepare, visit and conduct an effective briefing as well as hearings, without spending inordinate time on travel.

Do give us a call and feel free to visit us at D-306, Third Floor, Defence Colony. Coffee, conversation and an eclectic company of colleagues await you.

Our other details remain the same.

Applicability of Limitation Act to Insolvency & Bankruptcy Code, 2016

The Limitation Act, 1963 (“Limitation Act”) is a law of repose, peace and justice which bars the remedy after lapse of a particular period by way of public policy and expediency without extinguishing the right in certain cases. This is based on a public policy principle that a claimant who has slept over its claim cannot seek to enforce the said claim/rights at a later stage, as it will prejudice the right of the other party. Therefore, when the Insolvency and Bankruptcy Code, 2016 (“Code”) is silent on the applicability of the Limitation Act on the proceedings brought under the Code it poses some interesting issues: which have been discussed in the recent past in a number of cases before the National Company Law Tribunal (“NCLT”) and National Company Law Appellate Tribunal (“NCLAT”). This article aims to highlight some of the said important judicial pronouncements.

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Corporate Brief: Amendments to Insolvency and Bankruptcy Code, 2016

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Presentation on Union Budget 2018-19

Run Up to the Budget 2018-19

Economic Survey of India 2017-18:

Policy Reforms in Zeitgeist of Stigmatized Capitalism

Economic Surveys have sometimes been seen as portends of the Budget that follows. It is often used to engage in a sort of crystal ball gazing and guess work to predict the Budget proposals. However, a more useful manner of looking at these is that the Economic Surveys provide a much needed context to the Budget.

Economic Survey 2018-19¹ in much the same manner is not only a report card of the Government for the year past, but also provides a context in which the Budget proposals would arrive. In the following paragraphs, we have attempted to flesh out those areas that we perceive may see an amount of thrust in the Budget proposals. Not just that, we believe that the following paragraphs will supply you, the reader, with a certain amount of clarity vis-a-vis the "Why" of the Budget proposal, providing, as it were, the context within which the Finance Minister would stand to deliver his speech. Between these lines, there could be technical monsters that present themselves - for instance, certain tax proposals may be a necessary concomitant of what the Government may seek to achieve via the Budget in the context of the economic scorecard of the country. These have, in some places, been sought to be presented as separate highlights within this page.

Our reading of the Survey indicates that while at an overall level, there are no immediate causes for alarm, nonetheless, the Government has a tight rope walk ahead of it, in balancing the need for economic growth with the deficit levels. This nuance appears in paragraph 1.29, and therefore, in the very first chapter, where the Economic Survey notes:

"It is that zeitgeist (or Maahaul) of stigmatized capitalism—an accumulated legacy inherited by the government—that made policy reforms so difficult and makes the recent progress in addressing the Twin Balance Sheet challenge noteworthy."

In any event, based on High frequency indicators² in its outlook for 2017-18, the Economic Survey suggests that a robust recovery is taking hold. However, the level of indicators remain below potential.

The CSO³ has forecast the real GDP⁴ at 6.5 percent. However, the Economic Survey pegs this the expectation of GDP growth in 2017-18 at 6.75 percent. The Current Account Deficit remains well below the 3 percent of GDP threshold beyond which vulnerability emerges, and foreign exchange reserves are at US$432 billion (spot and forward) at end December 2017 (well above prudent norms, as the Survey notes).

On GST

GST revenue collections are robust. The Survey predicts the GST revenue growth as compared to the Annual revenues of indirect taxes in 2016-17 at 12 percent.

GST Revenue Collection (in lakh crores)

Particulars of collection agency and tax	2016-17 (Annual)	Nature of Tax (in GST regime)	2017-18 (Estimated Annual Steady State revenues)
States	4.4	SGST	2.5
Center	5.3	CGST	2.5
Excise	1.4	IGST	4.9
Service	2.5	Cesses	0.9
CVD / SAD	1.4	Not applicable
Total			10.9
*Estimated Growth of GST*			*12%*

With the rate of growth in GST being 12 percent (on an estimate basis), and the nominal GDP growth of 10.5 percent projected in the Survey, the buoyancy of GST amounts to 1.14. This is a major change from the historic buoyancy of indirect tax that has been at around 0.9 percent.

GST as an information mining tool

"The GST has been widely heralded for many things, especially its potential to create one Indian market, expand the tax base, and foster cooperative federalism. Yet almost unnoticed is its one enormous benefit: it will create a vast repository of information, which will enlarge and surely alter our understanding of India’s economy."⁵ With this statement the Survey establishes GST as a game changer in the information that it acts as a tool to gather. Some exciting new findings arising out of GST data mining are highlighted here:

the assumption that the B2C firms (i.e. the smaller firms) would opt for composition has been proved wrong as such firms nonetheless purchase from large enterprises
distribution of GST base among the states appears closely related to their Gross State Domestic Product allaying fears that the shift to GST would undermine major producing states' tax collections
there is a strong correlation between export performance and states' standard of living
Internal trade of India is a whopping 60 percent of the GDP, which beats the estimates by 10 percent
India's formal non-farm payroll is substantially greater than believed - social security measures hint at 31 percent of the non-agricultural work force as formal sector payroll, but GST data suggests formal sector payroll of 53 percent

Other Determinants of Growth

Personal income tax collections have been pegged at 2.3 percent for the FY 2017-18 at the back of measures such as demonetization and GST. The other two significant aspects that have been highlighted by the Survey are:

Exports (hailed, as it were, as the biggest source of upside potential) and
Implementation of the Insolvency and Bankruptcy process

Based on the above, inter alia, the Survey pegs the growth rate between 7 and 7.5 percent.⁶

Timely Justice - A Measure of Ease of Doing Business

It has been widely acknowledged, and stated extremely succinctly by Amrit Amirapu that "Justice Delayed is Development Denied".⁷ Especially taken note of are tax cases - with the average pendency of 6 years per case, the situation has been rather politely deemed to be acute! Per illustrative data quoted by the Survey, the value of government projects in six infrastructure ministries that are currently stayed by court injunctions, as well as the average duration of their stays has been tabulated as given below:

Stayed Projects - Stock (6 ministries as on October 31, 2017)

Ministry	Stayed Projects	Total Value (Rs. Crores)	Duration of Stay (Years)
Shipping	2	2,620	5.9
Power	11	23,913	3
Road	30	11,216	3
Petroleum	2	342	0.9
Mines	12	106	3
Railways	12	13,882	3
Total	52	52,081	4.3

The total legal expenditure of the Corporate India between 2015-16 was close to 20 thousand crores. Other damning statistics relate to tax cases where the Survey notes that the success rate of the Department at all three levels of appeal - Appellate Tribunals, High Courts, and Supreme Court - and for both direct and indirect tax litigation is under 30 percent. "The Department unambiguously loses 65 percent of its cases. Over a period of time, the success rate of the Department has only been declining, while that of the assessee has been increasing".

From a Policy perspective, the Survey suggests the following measures:

Expanding judicial capacity in the lower courts and reducing existing burden on the higher courts via additional capacity to deal with economic and commercial cases at the lower levels, reducing the original side jurisdiction from the High Courts and lesser exercise of discretionary jurisdiction by the higher courts
Tax department should limit its appeal - recognizing the bureaucratic risk aversion, the survey suggests the constitution of an independent panel to decide on further appeals
Increasing state expenditure on judiciary
Creation of more subject matter and stage specific benches
Reduction of reliance on injunctions and stays and stricter timelines for decision on these
Better court case management and court automation on the lines of Crown Court Management Services of the UK

Deep Dive - Selected Highlights of the Survey

Fiscal Developments during the year

The Survey notes that there are 3 distinct patterns on revenue front till November 2017.

the gross tax collections are reasonably on track
non tax revenues have visibly underperformed
non-debt capital receipts, mainly proceedings from disinvestments are doing well

%age Growth in Items of Receipt (April to November)

	2014-15	2015-16	2016-17	2017-18
Gross tax revenue	6.5	20.8	21.5	16.5
Net tax revenue	4.3	12.5	33.6	12.6
Non tax revenue	20.5	34.9	1.0	-29.7
Total revenue receipts	7.8	17.8	24.8	1.1
Non-debt capital receipts	-17.3	180.3	57.1	89.9
Non-debt receipts	7.3	20	25.8	4.6

In contrast to revenue, the expenditure had been robust - which in the present context of the data, appeared to be a euphemism for "tearaway". In any event, the rationale provided by the Survey appears to be sound inasmuch as that:

due to advancing of the budget cycle the spending agencies planned in advance and could implement their expenditure plans effectively, and before time, as it were and
front loading of certain expenditure as a pat of prudent expenditure management

In any event, this had led to a certain amount of pressure on the revenue and fiscal deficit on a year on year basis - note the inordinately high percentages for 2017-18 in the table below.

Deficit Indicators (%age of BE)

	2015-16	2016-17	2017-18
Revenue Deficit	87.5	98.6	152.2
Fiscal Deficit	87	85.8	112

Renegotiation of PPAs⁸ by certain states

One of the key objectives of the Electricity Act, 2003 is promotion of competition in the electricity sector. Section 63 of the Act specifies that (notwithstanding anything contained in section 62), the Appropriate Commission shall adopt the tariff if such tariff has been determined through transparent process of bidding in accordance with the guidelines issued by the Central Government. A tariff order shall, unless amended or revoked, continue to be in force for such period as may be specified in the tariff order. The revised tariff policy was published in January, 2016.

With the recent rounds of auctions, very low tariffs came to be discovered. Auction for wind based power held by SECI ⁹ held in February 2017 realised a tariff of INR 3.46/unit. The lowest feed in tariff for wind on the other hand is at INR 4.16/unit. Second wind auction led to a tariff of INR 2.64/unit - which while welcome in some ways, led to renegotiations of PPAs already signed from certain discoms. Per CRISIL, such renegotiations have the potential of risk to investment worth INR 48000 crores. The Survey takes note of this risk and suggests that "affordable financing holds the key for financing sustainable energy projects". The Survey notes that risk mitigating instruments such as payment guarantee fund or a foreign exchange fund available to developers could be a way forward. Renewable energy has already been placed under the priority sector lending and the bank loan for solar roof-top systems is to be treated as a part of home loan/home improvement loan with subsequent tax benefits. Currently, the levelized tariff is approaching grid parity. The Survey advocates a case for revisiting the subsidies and incentives being given to the renewable energy sector.

Logistics - Challenges and Suggested Plan

With GST, the next big step has to be logistics, given the avowed objective of a single market economy. However, there is much to be desired in this sector. Amongst the challenges are multiple policy making bodies, unfavourable modal mix, and general apathy towards logistics, that plagues the industry. If the benefits of GST are to be harnessed, logistics would have to play a key part therein. The Survey suggests certain key action plans

Formulation of National Integrated Logistics Policy to bring in greater transparency and enhance efficiency in logistics operations
Develop integrated IT Platform as a single window for all logistics related matters and act as a Logistics marketplace
Usher in ease of documentation, faster clearance, digitization.
Bring down logistics cost to less than 10% of GDP by 2022
Faster clearances for setting up of logistics infrastructure like Multi-modal logistic parks (MMLPs), Container Freight Station (CFS), Air Freight Station (AFS) & Inland Container Depot (ICD).
Introduce professional standards and certification for service providers
Promote introduction of high-end technologies like high-tech scanning equipment, RFID, GPS, EDI, online Track & Trace systems in the entire logistics network.
Improve Logistics skilling in the country and increase jobs in Logistics sector to 40 million by 2022

Hybrid Annuity Model in Infrastructure Development

While addressing Industry and Infrastructure sector, the Survey takes a special note of the Hybrid Annuity Model. This model, mooted for road construction, is a combination of EPC (Engineering, Procurement and Construction) model and BOT - Annuity (Build, Operate, Transfer) model. Under the EPC model, the private players construct the road and have no role in the road’s ownership, toll collection or maintenance. National Highways Authority of India (NHAI) pays private players for the construction of the road. The Government with full ownership of the road, takes care of toll collection and maintenance of the road.

Under the BOT model

private players have an active role in road construction, operation and maintenance of the road for a specified number of years as per agreement. After the completion of the years of operation, the private players transfer the asset back to the Government.
the private players arrange all the finances for the project, while collecting toll revenue (BOT toll model) or annuity fee (BOT annuity model) from the Government, as agreed.

In the BOT annuity model, the toll revenue risk is taken by the Government. The Government pays private player a pre-fixed annuity for construction and maintenance of roads.

Hybrid Annuity Model combines EPC (40 per cent) and BOT-Annuity (60 per cent) Models. On behalf of the Government, NHAI releases 40 per cent of the total project cost, in five tranches linked to milestones. The balance 60 per cent is arranged by the developer. The developer usually invests not more than 20-25 per cent of the project cost, while the remaining is raised as debt.

In BOT toll model, the private players did not show their willingness to invest, since they had to fully arrange for the entire finances, either through equity contribution or debt. NPA-riddled banks were reluctant to lend to these projects. Since there was no compensation structure such as annuity, the developers had to take entire risk in low traffic projects. The essence of Hybrid Annuity Model arose due to requirement of better financial mechanism where the risk would be spread between developers and the Government.

Issue of vacant housing

The Survey takes a special note of the issue of vacant housing. Of the total residential stock. the Survey finds that 12.38 percent are vacant. The Survey states that "India’s housing requirements are complex but till now policies have been mostly focused on building more homes and on home ownership. The above data suggests that we need to take a more holistic approach that takes into account rentals and vacancy rates. In turn, this needs policy-makers to pay more attention to contract enforcement, property rights and spatial distribution of housing supply vs. demand." However, with a strong stress on this issue, the possibility of tax proposals impacting vacant housing could be expected.

In Conclusion

Amongst the various issues discussed in the Economic Survey, the aspects analysed by us are essentially areas of concern that may potentially impact both policy making and law in relation to taxation as well as other sectors. One of the factors stressed upon in the Economic Survey is effective enforcement of contracts, through a more effective judicial process; this will significantly contribute to the ‘ease of doing business’.

From this analysis of the Economic survey, the key policy measures in the near to medium term could be in the road, logistics, judicial and energy sectors.

We believe it relevant to mention that this is the first in the many exercises to be undertaken by us with respect to the analysis of the upcoming Budget. We would be happy to have you, our readers, researching and reflecting on our analysis to engage with us about your thoughts and perceptions to encourage fluid dialogue.

With special thanks to Siddharth Sharma and Shivangi Nanda.

Team Aureus.

#IndiaBudget2018Aureus

Footnotes

Amendments in FDI Policy – January, 2018

Viineet V. Srivastav & Astha Srivastava

The following amendments have been introduced by Department of Industrial Policy and Promotion (DIPP) in the Foreign Direct Investment (FDI) regime on January 10, 2018:

100% FDI in single brand retail

The prevailing FDI policy allowed 49% FDI through the automatic route and beyond 49% and upto 100% through the Government approval route in single brand retail trade (SBRT) sector, the said limit has been increased to 100% through automatic route.

Single brand retailing entities would be allowed to begin incremental sourcing of goods from India for global operations during the first 5 years from the first day of the opening of the first store against the mandatory sourcing requirement of 30 percent purchases from India. After completion of the said 5 year period, the entities would be required to meet the mandatory sourcing requirement of 30 percent purchases from India.

A non-resident trading entity or entities, whether owner of the brand or otherwise, would be permitted to undertake SBRT in the country for the specific brand, either directly by the brand owner or through a legally tenable agreement executed between the Indian entity undertaking SBRT and the brand owner.

Civil Aviation

Foreign airlines have been permitted to invest upto 49% in Air India under approval route, subject to the following conditions:

FDI in Air India including that of foreign airline(s) shall not exceed 49% either directly or indirectly

Substantial ownership and control of Air India would continue to vest in Indian Nationals.

Construction Development

It has been clarified that since real-estate broking service does not amount to real estate business, therefore the same would be eligible for 100% FDI through automatic route.

Power Exchanges

While the existing FDI policy provided for 49% FDI through automatic route in Power Exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010, however, Foreign Portfolio Investors (FPI) / Foreign Institutional Investors (FII) purchases were restricted to the secondary market only. Accordingly, the Government has allowed FPIs/FIIs to invest in Power Exchanges in the primary market as well.

Other Approval Requirements under FDI Policy

Issue of shares against non-cash considerations like pre-incorporation expenses, import of machinery etc. would be permitted under automatic route in case of sectors under automatic route.

FDI in an Indian company engaged only in the activity of investing in other Indian companies or LLPs and in Core Investing Companies would be aligned with the FDI provisions in the “Other Financial Services” category. Accordingly, if the said investor companies in India are regulated by any financial sector regulator, then foreign investment upto 100% under automatic route would be allowed and if they are not regulated by any Financial Sector Regulator or where only part is regulated or where there is doubt regarding the regulatory oversight, foreign investment up to 100% would be allowed under approval route, subject to conditions including minimum capitalization requirement, as may be decided by the Government.

Competent Authority for examining FDI proposals from countries of concern

The competent authority for dealing with FDI proposals will be the Department of Industrial Policy and Promotion (DIPP) for investments in automatic route sectors requiring approval only on the matter of investment being from Countries of Concern. The competent authority would be concerned Administartine Department/ Ministry in the case of investments made in sectors requiring government approval and also requiring security clearance with respect to Countries of Concern.

Pharmaceuticals

With respect to the Pharmaceuticals industry, it has been decided to change the definition of medical devices under the existing policy. Further, the existing policy provided that medical devices with respect to FDI policy would be defined with reference to the Drugs and Cosmetics Act and since the definition in the FDI policy is complete in itself, it has been decided to do away with this reference to the Drugs and Cosmetics Act.

Prohibition of restrictive conditions regarding audit firms:

In cases where the foreign investor specifies a particular auditor/ auditing firm having international network for the Indian investee company, then audit of such company would take place in the form of a joint audit in which one of the auditors should not be from the same network.