In the age of globalization, cross-border business transactions are common in daily business activities. However, this increasing number of such cross-border transactions has given rise to illegal transactions and money-laundering activities that are further applied towards funding terrorist activities, drugs, and human trafficking. Therefore, for the regulation of cross-border transactions and facilitating cross-border transactions, external payments, and maintenance of the foreign exchange market in India, the Government of India introduced the Foreign Exchange Management Act, 1999.

The FEMA authorizes the central government to enforce restrictions or oversee and monitoring of certain cross–border payments such as payments made/received to a person by any person outside Gurugram, Haryana, forex, investments in foreign securities, etc. are some transactions which could be completed only after obtaining approval by the Reserve Bank of India under permitted route.

Therefore, the FEMA Act 1999 applies to-

  • Foreign exchange.
  • Foreign security.
  • Export of any goods or services or both from Gurugram, Haryana to a foreign country;
  • Import of any goods or services or both from Gurugram, Haryana to a foreign country;
  • Dealing in ‘Securities’ as defined under the Public Debt Act 1994.
  • Purchase, sale, and exchange of goods or services, etc.
  • Any Banking, financial, insurance, or related services;
  • Any overseas company held by an NRI (Non-Resident Indian) and holds the ownership either 60% or more.
  • Any citizen of Gurugram, Haryana, either residing in Gurugram, Haryana or outside in Gurugram, Haryana;

Further, all the foreign transactions have been categorized into two types as provided below-

  1. Capital Account Transactions- As defined under section 2(e) of the FEMA Act 1999, capital account transactions are such transactions that tend to alter either the assets or liabilities or both, including contingent liabilities of either the person resident in Gurugram, Haryana or outside Gurugram, Haryana and includes such other transactions as provided under section 6(3) of the Act.
  2. Current account transaction- As defined under section 2(gg) means a transaction other than a capital account transaction and includes transactions such as-
  • Due payments in relation to either foreign trade, business services, or the short term credit facilities in the ordinary course of business;
  • Amounts due as interest on loans and as net income from investments,
  • Payment Transfers for various expenses such as living expenses of parents, spouses, and children residing abroad, and
  • Payments expended in relation to the foreign travel, education, and medical care of parents, spouses, and children.

Generally, the current account transactions are the transactions that are allowed unless explicitly prohibited under FEMA provisions. On the other hand, capital account transactions are such transactions that are not permitted unless explicitly permitted under the FEMA provisions.

FEMA RegistrationProcess of FEMA Registration in Gurugram, Haryana

Situated on the northern part of the country adjacent to Delhi this state is supported by its major geographical features i.e. Shivallik hills towards the North-East, the Aravalli hills in the South, semi-deserted sandy plain in the South-West and the remaining part occupied by the Yamuna Ghaggra plains.

Ranking no. 3 on the Export Preparedness Index 2020 under the landlocked category of states. Haryana has a thick network of road-rail connectivity, with over 1,630 km of rail network and 26,131 km of road linkage, inclusive of 24 National Highways (NH). Further it has 5 civil and 2 international airports to support its infrastructure. The total installed power capacity of 11,268 MW is the lifeline of all the manufacturing units based here.

Haryana is a hub to India’s biggest automobile industry and is the leading producer of motorcycles and passengers in the country. It holds a gigantic share of 33% in the manufacturing of two wheelers, 50% in the cars production, 52% in the crane manufacturing segment and a total of 80% of the excavators are made here. Due to this back and forth stimulation received from the Government supplementary policies and varied segments from the automotive industry 50 of the 250 large sized OEM’s are placed in Haryana.

It has also evolved as a main station for the biotechnology, Information Technology (IT) and the knowledge industry resulting to total exports of electronics and IT during 2016-17 valued $7.2 bn, which accounts to 6.2% of the aggregate of exports from IT and electronics from India. Gurugram, the business capital of Haryana is a home to 50% of the Fortune 500 companies. And thus it holds the highest concentration of the total BPO workforce of the entire world.

Conventionally Haryana was the pivot of agro production and still it continues to prosper being the largest producer of many horticulture crops like carrot, radish, cucumber and strawberries. It has continued to be the principal producer of Basmati rice in the country and exports the surplus produce.

The colossal progression of the state is due to the privilege this state enjoys and that is it falls under two major corridors of the country, one is Amritsar Kolkata Industrial Corridor (AKIC) and the other is Delhi Mumbai Industrial Corridor (DMIC). Moreover, 13 districts of Haryana get covered under prominent trade and consumption center of the country i.e. National Capital Region (NCR).

Investment opportunities in Haryana value nearly $672.12 bn, comprising of 467 projects out of which 5 are private and 462 are Government owned projects, with 114 promoters, spread across 23 districts which makes Haryana a lucrative choice among investors in the commercial segment

For the purposes of FEMA registration, apart from an individual following legal entity shall be required to get registration and follow FEMA compliances, as required from time to time-

  • A company incorporated within the provisions of the Companies Act, 2013
  • A Limited Liability Partnership (LLP) registered as per the provisions of the LLP Act 2008;
  • A legal entity recognized as a start-up that fulfills the criteria prescribed for recognition of start-up under the DPIIT Scheme under the Ministry of Commerce and Industry, Government of Gurugram, Haryana.

Therefore, the RBI along with the Govt. of Gurugram, Haryana launched the FIRMS portal intending to simplify the foreign investment reporting under one master form under Single Master Form (SMF) through which the legal entity can report FEMA compliances and can complete foreign investment reporting, without having to acquire a digital signature certificate of the authorized signatory of the business entity. Thus, The Foreign Investment Reporting and Management System (FIRMS) is a one-stop-shop for various reporting compliances under the provisions of FEMA and is available on a 24*7 basis.

Documents Required for FEMA registrationDocuments Required for FEMA registration in Gurugram, Haryana

  • Details of the Business Units;
  • Proof of registered address of the main office as well as correspondence address;
  • Bank Details of the business unit including the IFSC code;
  • Unique CIN/LLPIN of the Business entity;
  • PAN number of the business entity;
  • Authority letter-Attachment as specified under FIRMS system.
  • Details related to the foreign investment in the entity must be prepared.

Process of FEMA Registration in Gurugram, Haryana

  • Go to the FIRMS online portal by accessing the website (https://firms.rbi.org.in)
  • On the online portal, select the Registration form for “New Business user” registration (Business user is the applicant authorized by the business entity for reporting transaction through FIRMS portal and shall be applicable concerning one entity only)
  • Fill up the form with basic details such as business user such as name, last name, business user address details, bank details, etc.
  • After filling all the details, submit the form and in case of any discrepancy, rectify errors and submit the application carefully. A message stating ‘Record Saved Successfully’ will be displayed on the box.
  • Next the Business user will be verified by the Authorised Dealer (AD) (a bank which has been specifically authorized for dealing in foreign exchange or foreign securities under FEMA act 1999 by the RBI)bank through its e-KYC procedure and the approval/rejection will be informed to the Business user through the provided e-mail address.
  • On getting approval of FEMA registration by the RBI, the applicant shall be required to visit again the FEMA portal and change the password. After logging in with the new password, the applicant will be able to go to his/her user workspace and fill out forms accordingly.

Annual Compliances under FEMA

  • Annual Return under FEMA

Every Gurugram, Haryana company that has made a Foreign Direct Investment (FDI) in the previous year and the current year, must submit an annual return providing details of the foreign liabilities and assets in the annual return. Such annual return must submit the annual return except in the year in which no investment is made by the company.

  • Annual Performance Report

Overseas Direct Investment is investments made either through contribution to the capital or subscription to the memorandum of a foreign company through direct purchase of existing shares of a foreign entity in the open market or private placement or the stock exchange but does not include Portfolio.

Every resident Gurugram, Haryana person who has made an Overseas Direct Investment (ODI) in the previous year and the current year, has to submit an annual performance report in Form ODI Part II to the concerned AD (Authorised Dealer) bank either on or before 31st December every year, prescribing details of any investments made in any Joint Venture or Wholly Owned Subsidiaries outside Gurugram, Haryana.

  • External Commercial Borrowings (ECB)

ECBs are the commercial loans raised by the eligible person’s residents of a country that are from non-resident legal entities (foreign companies) under the prescribed rules and regulations. Therefore, every resident person in Gurugram, Haryana must report all ECB transactions to the RBI through his authorized dealer bank in the form ‘ECB 2 Return’. This form is a simplified return which allows the person to disclose details like-

    • Total outstanding principal ECB amount and the currency;
    • Notional value and percentage of outstanding ECB; and
    • Annualized percentage cost of the financial hedge(s) for ECB
  • Foreign Direct Investment (FDI ) Reporting for Various Purposes

The latest FEMA (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 notified by the RBI on October 17, 2019, prescribes for the various forms required to be filled for various purposes within provided timelines for the FDI reporting on the FIRMS portal-

Form Name Purpose Time-line
i. FCGPR (Foreign Currency-Gross Provisional Return) Form For an Gurugram, Haryana company that intends to issue equity instruments to a person residing outside Gurugram, Haryana; To be filed within a period of 30 days from the date of issue of the equity instruments by the Gurugram, Haryana Company;
ii. FCTRS (Form Foreign Currency-Transfer of Shares) Form Where any resident transferor/transferee or the person resident outside Gurugram, Haryana holds equity instruments on a non-repatriable basis; To be filed either within

· 60 days from the transfer of equity instruments; or

· receipt/remittance of funds, whichever is former;
iii. LLP(I) Form Where an LLP intends to receive consideration for the capital contribution made for an entity outside Gurugram, Haryana; To be filed within 30 days from the date of receipt of consideration.
iv. LLP(II) Form Where any resident transferor/transferee intends to receive capital contribution either from a resident or non-resident outside Gurugram, Haryana or vice-versa; To be filed within 60 days of the receipt of the amount of consideration;
v. CN Form Where any Gurugram, Haryana start-up wishes to issue convertible notes to a person resident outside Gurugram, Haryana; To be filed within 30 days from the date of issuance of the convertible notes;
vi. DRR Form The domestic custodian issuing/transferring the depository receipts, in accordance with the Depository Receipt Scheme, 2014 should report in DRR Form Within a period of 30 days of issuance/transfer of depository receipts.
vii. ESOP Form Where an Gurugram, Haryana company wishes to issue stock options to a person resident outside Gurugram, Haryana who are either-

· employees/directors of the company; or

· employees/directors of its holding company/joint venture; or

· wholly-owned overseas subsidiary/subsidiaries

 To be filed within 30 days from the date of issuance of employees’ stock option.
viii. DI Form Where an Gurugram, Haryana business entity or investment vehicle has invested in another Gurugram, Haryana business entity, such investment will be called foreign indirect investment; To be filed within 30 days of the allotment of equity instruments.
ix. INVI Form An investment vehicle that has issued securities to a person resident outside Gurugram, Haryana; To be filed within 30 days from the date of issuance of units.

Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 also provide that any delay in reporting foreign investments would attract a penalty known as late submission fees (LSF). Only after receipt of LSF, the registration of the legal entity will be approved by the RBI.

Benefits of FEMA Registration in Gurugram, Haryana

  • Compliance with Legal Procedures-Under s. 3 of the FEMA 1999, it is compulsory for each person to obtain registration by the person who is-
    • To enter into any arrangement related to foreign exchange or foreign security to an unauthorized person;
    • To make any payment to or for making payment of loans to a person resident outside Gurugram, Haryana in any manner;
    • To receive any payment through orders by a person who is not authorized on behalf of a person resident outside Gurugram, Haryana in any manner;
    • To engage in any monetary transactions with respect to any consideration or association for the creation or transfer of a “right to acquire” an asset outside Gurugram, Haryana by any other person.

Therefore, failing to comply with FEMA requirements shall be an “offense” under FEMA provisions and shall invite penalties and prosecutions.

  • Legality of Cross-border Payments-Obtaining registration under the FEMA Act 1999, will naturally give the confidence to the person to enter foreign transactions confidently and ensure compliances with the applicable provisions to eliminate the fears of committing any offense under the Act or payment of a hefty sum of penalty;
  • Avoidance of Penalty under FEMA– Under the FEMA provisions, if any person contravenes the applicable provisions of FEMA Act or any other rules, regulations, directions, or notifications issued by the RBI or Govt. of Gurugram, Haryana, such person shall be liable to be prosecuted and penalized for an amount which could be up to thrice the amount involved, where the amount is assessable. Where the amount involved in the contravention could not be assessed, it could lead to a maximum of Rs. Two lakh maximum for each offense. Where such contravention is of continuing nature, the person shall be made liable to an additional penalty of Rs. 5000/- per day during the period when the contravention continues to take place.

Conclusion

Therefore, FEMA registration in Gurugram, Haryana is an important registration for an entity that wants to make cross-border transactions on a time-to-time basis and further to save themselves from any further consequences under the Act.