Ministry of Finance Current Affairs

Finance Ministry asks Ministries to decide on FDI proposals within 60 Days

The finance Ministry has asked all those ministries tasked with clearing foreign direct investment proposals in the 12 sectors that require government’s nod to take a decision on such proposals within 60 days. Last month, the Cabinet abolished the Foreign Investment and Promotion Board (FIPB), which was the authority for clearing foreign direct investment (FDI) proposals for a period of 25 years.

A timeline of 4 weeks has been fixed for the transfer of all pending applications with the FIPB to the respective administrative ministries.

Salient Highlights

Department of Industrial Policy and Promotion (DIPP) would come up with standard operating procedures to process FDI proposals in consultation with the administrative ministries. This will be helpful in ensuring consistency of treatment and uniformity of approach.

A panel led by the secretaries of the department of economic affairs (DEA) and the department of industrial policy and promotion (DIPP) will be conducting a quarterly review on the pending proposals.

Ordinary FDI applications pertaining to non-resident Indian (NRI)/export-oriented unit (EOU), food processing, single-brand retail trading and multi-brand retail trading proposals need to be decided in 60 days.

FDI proposals by NRIs/EoUs requiring approval of the government will be dealt by the DIPP. DIPP will be the administrative ministry for this purpose. In addition, the DIPP will handle the applications related to imports of capital goods or machinery.

Applications involving investments from “countries of concern” which require security clearance under to the Foreign Exchange Management Act (FEMA) will be cleared by the Home Ministry. In addition, applications pertaining to private security agencies would be decided by the home ministry.

The Department of Economic Affairs (DEA) will be the authority to clear the proposals of financial services not under a regulator, or where there is more than one regulator or there is a doubt about the regulator.

If the FDI proposals lacks clarity on the administrative department, then the DIPP will help in identifying the ministry.

FDI proposal with respect to banks will be approved by the Department of Financial Services.  

Foreign investment proposals above Rs 5,000 crore will be cleared by the Cabinet Committee on Economic Affairs (CCEA).

FDI Approving Authorities after FIPB Abolition

Mining: Ministry of Mines

Defence: Department of production, Ministry of Defence

Small arms: Ministry of Home Affairs.

Broadcasting & Print Media: Ministry of Information and broadcasting

Print Media: Ministry of Information and broadcasting

Civil Aviation: Ministry of Civil aviation

Satellites: Department of Space

Telecom: Department of Telecommunications (DoT), Ministry of Communications.

Trading (Single brand and food products retail trading): Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry

Financial Services not regulated by a regulator or where there is more than one regulator or in respect of which there is a doubt about the regulator: Department of Economic Affairs, Ministry of Finance.

Banking (Private & Public): Department of Financial services, Ministry of Finance.

Pharmaceuticals: Department of Pharmaceuticals, Ministry of Chemicals and Fertilisers


GST Council Finalises 4-slab Service Tax Structure

The GST Council headed by finance Minister Arun Jaitley has finalised a 4-slab service tax structure at the rates of 5, 12, 18 and 28 per cent as against the single rate of 15% levied on all taxable services. GST regime is scheduled to be implemented from July 1. In the next GST Council meeting, tax rates on gold and other precious metals will be taken up for discussion.

Salient Highlights

Luxury hotels, gambling, race club betting and cinema services will attract a tax rate of 28%.

Education, healthcare and non-AC rail travel will remain exempted from the GST tax regime. However, the states will be given the option to levy additional taxes on cinema to compensate for the revenue losses entailed due to merging of entertainment tax with GST. At present, the total tax incidence on cinema including entertainment and service tax is in the range of 55%. The states need to use the legislative route if it wants to levy additional tax on cinema.

States will also be permitted to levy any new tax as the taxation powers of the states have only been restricted and not abolished after the rollout of GST.

Telecom and financial services will be taxed at a rate of 18%.

Transport services will be taxed at the rate of 5%. Cab aggregators like Ola and Uber will have to pay 5% under GST in place of 6%. AC rail travel will attract 5% tax. Economy class air travel will attract 5 % GST while business class will attract 12%. Travelling on metro, local train and religious travel such as Haj Yatra would be exempted from GST.

The e-commerce players like Flipkart and Snapdeal would be required to shell out 1% Tax Collected at Source (TCS).

Non-AC restaurants and AC restaurants will attract a GST of 12% and 18% respectively.

Advertisements published in newspapers will attract 5% GST. At present it is exempt from service tax.