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US firms want more clarity on India’s tax policies: official

"Companies working in India's infrastructure sector note that the permitting process is often confusing and inefficient. Some report that they need to obtain as many as 110 clearances before starting a project."

By: PTI | Washington | Published: January 13, 2017 2:02:19 pm
FDI, american companies, FDI india, foreign investment india, india tax policy, US companies, indo US trade, indo american trade, indian tax regulations, us investment in india, american companies investment in india, barack obama, obama administration, US Assistant Secretary of Commerce for Global Markets, arun kumar, india foreign policy, india FDI policy, india investment policy, india news, US news, international news (Thinkstock image)

American companies are keen on investing in India but they want to see improvement in business climate like clarity in tax policies and streamlining of “complex” regulations, a top Obama Administration official has said. “US companies are optimistic about doing business in India. They see the reforms as a positive sign of India’s willingness to make the needed improvements to its business climate,” US Assistant Secretary of Commerce for Global Markets, Arun Kumar told PTI. With roots in Kerala, Kumar is also Director General of US and Foreign Commercial Service and one of the top ranking Indian-Americans in the outgoing Obama Administration.

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“Given the growth potential of the Indian market, US companies will be monitoring the situation closely over the next year to see how these reforms are implemented,” he said.

Specifically, US companies will be eagerly following the implementation of GST to see if it provides greater predictability and consistency in the application of taxes, he said.

Kumar said US companies will also be interested to see progress in implementing the 25 recommendations made at the 2016 US-India CEO Forum, which offered suggestions for opening up trade and investment in diverse areas ranging from healthcare to energy to defence.

Responding to a question, Kumar said while US companies have responded positively to these reform efforts, they will continue to seek improvement in business, climate issues such as clarity in tax policies, less burdensome regulations, and protection and enforcement of intellectual property rights.

“Companies working in India’s infrastructure sector note that the permitting process is often confusing and inefficient. Some report that they need to obtain as many as 110 clearances before starting a project,” he noted.

“Streamlining India’s permitting process and reforming land and labour regulations can help to unlock new investments in India’s infrastructure and smart cities sectors,” he said.

In addition, companies seek a more transparent and predictable policy environment, including consistent notice and comment procedures in the rule-making process, in order to plan investments and inform long-term business decisions, he added.

“We should also focus on encouraging open trade and investment policies with a goal of enabling India to be seamlessly integrated into global supply chains,” he said.

In a wide-ranging interview, Kumar appeared bullish on India-US trade and business relationship.

“The big picture is that we enjoy a thriving trade and investment relationship. In 2015, US-India bilateral trade reached $109 billion, up from $37 billion in 2005,” he said.

Kumar said while India has made commendable strides in opening up FDI in certain sectors, there are still constrains in the implementation of FDI rules.

“For instance, US companies have requested greater clarity on the application of FDI rules in the insurance and defence sectors,” he noted.

“By creating greater certainty, transparency, and higher standards of protection for investors, a Bilateral Investment Treaty (BIT) would also represent a major step forward for US and Indian investors and businesses,” he said.

Kumar said industry also sees promising opportunities to facilitate trade further through streamlining complex and cumbersome customs processing procedures, increasing predictability and efficiency in government approvals and inspections related to cross-border trade, including through effective implementation of the new Single Window Interface for Facilitating Trade (SWIFT) introduced by the Central Board of Excise and Customs in April and developing a single window approach to government licensing at both the central and state levels.

Noting that US companies recognise that India is a promising market, with a rising middle class, talented workforce and growing appetite for American products and services, he said these companies are encouraged by the economic reforms that Prime Minister Narendra Modi has passed over the past two years.

These include Goods and Services Tax (GST); Insolvency and Bankruptcy Code; liberalisation of Foreign Direct Investment caps in strategic sectors such as railways, defence, civil aviation, pharmaceuticals, and e-commerce; and encouraging a competitive “race to the top” at the state level to attract trade and investment.

“The US India commercial relationship has never been stronger than it is now. I am personally delighted to have had this opportunity, working with Secretary Penny Pritzker, to help drive this heightened engagement as President Barack Obama and Modi took our overall bilateral relationship to a new level,” Kumar said.

A significant marker of the advance in the relationship was the launch of the US-India Strategic and Commercial Dialogue (S&CD) in 2015 as a collaborative, whole-of-government platform where economics and commerce are central to the conversation along with other strategic issues.

The S&CD was announced at the time of President Obama’s Republic Day visit to India in 2015.

Kumar said the US India CEO Forum deliberations were tightly coupled with the S&CD, allowing for business input to inform the government conversations.

The CEO Forum identified priorities and launched joint work streams which worked in close collaboration with the bilateral government initiatives.

Responding to a question on achieving the goal of increasing the bilateral trade to $500 billion, Kumar said to make this ambitious goal a reality, there is need to continue to pursue a proactive economic agenda between the two governments and private sectors.

“Most importantly, we should continue to make tangible progress on ease of doing business and in addressing trade and investment barriers. The S&CD and CEO Forum present excellent mechanisms for cooperation in this regard,” Kumar said.

The Commerce Department official said potential issues of focus include promoting a clear and predictable tax regime, an area where there been progress from transfer pricing agreements to the GST.

It also includes protecting and enforcing intellectual property rights through the Trade Policy Forum.

The Government of India’s National IPR Policy provides an opportunity for stakeholders to further engage in a constructive dialogue on this matter, he said and called for encouraging a transparent and consistent regulatory environment.

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