• Govt to keep vigil on FDI in real estate projects
• RBI nixes move to allow FDI via share options
• New SEZ rules to ‘house’ more facilities for workers
• Commerce ministry mulls 3-yr extension of EoU tax breaks
• According to sources, the department of industrial policy and promotion (DIPP) will set up a monitoring cell to track FDI inflows into real estate companies to ensure the funds cleared by the department are not diverted to projects for which foreign investment clearance has not been taken. The department has observed that many Indian companies divert foreign funds into projects not cleared for foreign investment. FIPB is of the view that foreign investments should be monitored after they have been approved. The modalities of the monitoring mechanism are being worked out by DIPP. The DIPP may ask realty companies to submit bi-yearly financial reports so that fund flow could be scrutinized and the process could continue so long as the project is not completed. (ET)
• RBI has said that foreign investors can’t use share options – which gives investors the right to engage in a future transaction in shares of a company at a pre-determined price and time, without the obligation to buy those shares, to invest in Indian companies through the FDI route. DIPP was in favour of allowing share options through the FDI route. The issue came up in GSR Sugars’ case wherein GSR Sugars had proposed to issue share options convertible into 4.7 crore shares to HBP Holdings and sought FIPB’s approval. FIPB in turn had sought RBI’s views. In reply RBI has said that only those instruments that are fully and mandatorily convertible into equity within a specified time period would be considered as part of equity under the FDI policy and hence eligible to be issued to foreign investors. (ET)
• Govt has amended the rules for SEZs asking developers to voluntarily build housing facilities for workers and staff within the tax-free enclaves. The developers can avail of duty concessions for bringing materials for constructing these facilities into the SEZ. This means all the developers will have to redraw their plans to include residences for workers in the non-processing area, housing all the other social amenities like hospitals, schools and recreation facilities as well. Govt also amended SEZ Rules to extend tax benefits and other concessions to sub-contractors also. Earlier such benefits were given only to developers and contractors. In the amended rules, the government also made it easier for suppliers in the domestic tariff area (area outside the SEZs) who supply goods to SEZs to claim export incentives like duty drawbacks in the domestic currency. Earlier, this facility was denied since the domestic suppliers could not have foreign currency accounts. (FE)
• Commerce ministry is learnt to have proposed a three-year extension of tax benefits given to Export-oriented Units (EoUs) under Section 10(B) of the Income Tax Act, wherein EoUs do not need to pay tax on profits provided they fulfil some conditions. This benefit is to expire at the end of next fiscal 2009-10. The move is an attempt to encourage export industries at a time when global demand is expected to slump further. A decision on this is likely to be finalised only after a new government takes over after the general elections, likely to take place after April. (BS)
