NRI Biz Matters: India emerges as a destination of technologically advanced products
ANSWER: India has made significant headway in the past 10 years, with several top international companies using the country as a manufacturing base. Manufacture of electronic goods in India was non-existent a decade ago and products which were designed outside India and manufactured in East Asian countries were sold in the country. There is now a complete transformation with more and more foreign companies setting up factories in India to manufacture their products and export them. This metamorphosis across the value chain — design, manufacturing and testing – has been made possible by the government's emphasis on import substitution and export promotion. Digitization has played an important role as products manufactured in India using artificial intelligence have ensured that the quality of the final product is of international standards. Thus, after Covid, India's footprint has grown in the global value chain. India has emerged as a destination of technologically advanced products and for developing new applications. Further, the country is co-developing many technologies with global partners based in the United States and Europe. Several joint research programmes are being undertaken with technologically advanced countries like Japan, South Korea and Singapore. State governments in India are competing with each other to attract foreign investment in the manufacturing and technology sectors. This has led to the creation of more jobs for the educated and technically skilled youth, apart from employment opportunities being thrown up by Global Capability Centres set up in India by multinational companies.
Question: Accounting standards in India have been different from global standards. I believe there is some debate going on in the country to upgrade Indian standards. Has there been any progress in this regard?
ANSWER: The National Financial Reporting Authority (NFRA) has recently updated and revised four audit standards to align them with global norms. The notification of the revised standards is expected to be done by the government shortly through the Ministry of Corporate Affairs. Audit standard SA600 which has been aligned with the global standard will apply to public companies in India. This should give boost to investor confidence and ensure greater credibility to the financial data presented by publicly listed companies. The revised standards have been approved by regulators, namely, Securities & Exchange Board of India, Reserve Bank of India, and the Comptroller & Auditor General. These standards will not apply to public sector entities and branches of Government run banks. The NFRA which has been notified as an Authority under the Companies Act is responsible for developing the ecosystem for auditors. Its objective is to strengthen inspections and enable use of technology on an increasing scale in order to fix any gaps or loopholes.
Question: Do Indian tax authorities get information from Interpol in respect of persons who have fled to foreign countries to escape the tax net? Are other foreign authorities also being contacted by the Indian tax counterpart?
ANSWER: Interpol is the world's largest international police organisation having 194 countries as its members. Therefore, the Indian tax department has set up a standard operating procedure for initiating requests to Interpol to give information on the current location, front entities and details of properties in respect of persons who have evaded Indian tax laws. The tax authorities in India also seek cooperation of other foreign authorities under Mutual Legal Assistance treaties which have been entered into by India with 42 countries. Indian Courts also have the power to issue Letter Rogatory (LR) seeking information from foreign authorities. The nature of requests would be to obtain evidence as well as take statements from the fugitive tax evaders. Foreign authorities have the power to undertake searches and seizures and confiscate proceeds of crime as well as recover embezzled funds. Foreign authorities are very often requested to preserve data pertaining to a tax offender. Under Double Tax Avoidance Agreements which India has entered into with foreign countries, exchange of information is routinely done in respect of tax evaders who are residents of each of those countries.
H. P. Ranina is a practising lawyer, specialising in corporate and tax laws of India.
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