At a time when the government is leaving no stone unturned to boost India's image as an investment destination, Commerce Minister Anand Sharma has proposed curbs on royalty and technical services fee payments by Indian subsidiaries to overseas companies, reports CNBC-TV18’s Rituparna Bhuyan. Sharma has written to his colleague finance minister P Chidambaram, proposing to either reintroduce caps on outflows related to royalty and technical fee or tax them.
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In his letter, Sharma said: “Given the current economic situation and high quantum of outflows on this account, a view needs to be taken on whether the ceiling on royalty payments and fee for technical services should be reintroduced in the FDI policy so as to check the large outflows and also to prevent possible misuse of the window. Alternatively, royalty payments could be subject to tax”.
According to Sharma, outflows on account of royalty and fee for technical services accounted for 16-33 percent of the FDI inflows between FY10 and FY13.
The government had removed caps on royalty payment sand technical fees to overseas companies through press note 8 of 2009.
Sharma also called for establishing a monitoring mechanism for royalty payment outflows from the country. “A draft press note on post reporting system was forwarded to the DEA for comments vide letter dated April 27, 2012. The response of DEA is awaited,” according to Sharma’s.
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