Business & Economy Current Affairs 2017

Singapore replaces Mauritius as the top source of FDI in India

As per the data of the Department of Industrial Policy and Promotion (DIPP), during the financial year 2013-14, India received $5.98 billion in FDI from Singapore, whereas it was $4.85 billion from Mauritius. With this, Singapore has replaced Mauritius as the top contributor to India’s FDI.  FDI inflow recorded in 2013-14 is the highest ever received from Singapore since 2006-07 which accounts for around 25% of total FDI inflow in India.

Experts believe that the Double Taxation Avoidance Agreement (DTAA) with Singapore incorporates Limit-of-Benefit (LoB) clause which has provided comfort to overseas investors based there. LoB clause in India-Singapore treaty justifies the substance in Singaporean entities, bringing certainty and avoiding possibilities of litigations.

FDI inflows from Mauritius have begun enervating on apprehensions over the impact of General Anti Avoidance Rules (GAAR) and possible re-negotiation of the tax avoidance treaty. The debatable General Anti Avoidance Rules provision, which seeks to curb tax avoidance by investors routing their funds through tax havens, will come into effect from April 1, 2016 in India. The rule will be applicable to entities claiming tax benefit of at least Rs 3 crore. It will apply to Foreign Institutional Investors (FIIs) that have claimed benefits under any DTAA.

The DTAA signed between India and Mauritius DTAA is under revision amid concerns that Mauritius is being used for round-tripping of funds into India even though that country has always maintained that there have been no strong evidence of any such misuse.

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RBI eases gold import to promote its export under its 20:80 formula

Star trading houses — big importers and exporters has been permitted by the RBI to import gold under its existing 20:80 scheme. Thus far, the facility was available to select banks only and other big entities like star trading houses were forbidden from importing the yellow metal.

As per the extant rules, importers can buy gold, on a condition that 20% of it is exported as finished products. In July 2013, the RBI had imposed severe restrictions on gold imports in order to curb surging Current Account Deficit (CAD) and the declining rupee. The central bank had tied imports with exports and prescribed a 20:80 formula.

As per the 20:80 scheme, an importer has to ensure that at least 20% of every lot of imported gold is exclusively made available for exports as finished good and the balance for domestic use.

The RBI has also permitted banks to provide gold metal loans to domestic jewellery manufacturers, out of the eligible domestic import quota of 80%.

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