The following topics have been covered here with respect to Late submission fee: I. TIME LIMIT II. PENALTY III. PROCEDURE
I. TIME LIMIT FOR FILING SINGLE MASTER FORM
The time limit for reporting the Foreign Direct Investment (FDI) under Single Master Form (SMF) is provided under Regulation 4 of Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019
1) Form Foreign Currency-Gross Provisional Return (FC-GPR): An Indian company issuing equity instruments to a person resident outside India and where such issue is reckoned as Foreign Direct Investment, defined under the rules, shall report such issue in Form FC-GPR, not later than thirty days from the date of issue of equity instruments. Issue of ‘participating interest / rights’ in oil fields shall be reported in Form FC-GPR.
(2) Annual Return on Foreign Liabilities and Assets (FLA): An Indian Company which has received FDI or an LLP which has received investment by way of capital contribution in the previous year including the current year, shall submit form FLA to the Reserve Bank on or before the 15th day of July of each year.
Explanation: Year for this purpose shall be reckoned as April to March.
(3) Form Foreign Currency-Transfer of Shares (FC-TRS):
(a) Form FCTRS shall be filed for transfer of equity instruments in accordance with the rules, between:
1. a person resident outside India holding equity instruments in an Indian company on a repatriable basis and person resident outside India holding equity instruments on a non-repatriable basis; and
2. a person resident outside India holding equity instruments in an Indian company on a repatriable basis and a person resident in India,
The onus of reporting shall be on the resident transferor / transferee or the person resident outside India holding equity instruments on a non-repatriable basis, as the case may be.
Note: Transfer of equity instruments in accordance with the rules by way of sale between a person resident outside India holding equity instruments on a non-repatriable basis and person resident in India is not required to be reported in Form FC-TRS.
(b) Transfer of equity instruments on a recognised stock exchange by a person resident outside India shall be reported by such person in Form FC-TRS.
(c) Transfer of equity instruments prescribed in Rule 9(6) of the Rules, shall be reported in Form FC-TRS on receipt of every tranche of payment. The onus of reporting shall be on the resident transferor / transferee.
(d) Transfer of ‘participating interest / rights’ in oil fields shall be reported Form FC-TRS.
The form FCTRS shall be filed within sixty days of transfer of equity instruments or receipt / remittance of funds whichever is earlier.
(4) Form Employees’ Stock Option (ESOP): An Indian company issuing employees’ stock option to persons resident outside India who are its employees / directors or employees / directors of its holding company / joint venture / wholly owned overseas subsidiary / subsidiaries shall file Form-ESOP, within 30 days from the date of issue of employees’ stock option.
(5) Form Depository Receipt Return (DRR): The Domestic Custodian shall report in Form DRR, the issue / transfer of depository receipts issued in accordance with the Depository Receipt Scheme, 2014 within 30 days of close of the issue.
(6) Form LLP (I): A Limited Liability Partnerships (LLP) receiving amount of consideration for capital contribution and acquisition of profit shares shall file Form LLP (I), within 30 days from the date of receipt of the amount of consideration.
(7) Form LLP (II): The disinvestment / transfer of capital contribution or profit share between a resident and a non-resident (or vice versa) shall be filed in Form LLP(II) within 60 days from the date of receipt of funds. The onus of reporting shall be on the resident transferor/transferee.
(8) LEC(FII): The Authorised Dealer Category I banks shall report to the Reserve Bank in Form LEC (FII) the purchase / transfer of equity instruments by FPIs on the stock exchanges in India.
(9) LEC(NRI): The Authorised Dealer Category I banks shall report to the Reserve Bank in Form LEC (NRI) the purchase / transfer of equity instruments by Non-Resident Indians or Overseas Citizens of India on stock exchanges in India.
(10) Form InVI: An Investment vehicle which has issued its units to a person resident outside India shall file Form InVI within 30 days from the date of issue of units.
(11) Downstream Investment
1. An Indian entity or an investment vehicle making downstream investment in another Indian entity which is considered as indirect foreign investment for the investee Indian entity in terms of the Rules, shall notify the Secretariat for Industrial Assistance, DPIIT within 30 days of such investment, even if equity instruments have not been allotted, along with the modality of investment in new / existing ventures (with / without expansion programme).
2. Form DI: An Indian entity or an investment Vehicle making downstream investment in another Indian entity which is considered as indirect foreign investment for the investee Indian entity in terms of Rule 22 of the Rules shall file Form DI with the Reserve Bank within 30 days from the date of allotment of equity instruments.
II. PENALTY FOR LATE FILING
Regulation 5 of the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 deals with the Late Submission Fee (FSF) which provides that the person / entity responsible for filing the reports provided in Regulation 4 above shall be liable for payment of late submission fee, as may be decided by the Reserve Bank, in consultation with the Central Government, for any delays in reporting.
The Late submission fee has been recently revised by RBI vide RBI circular no. RBI/2022-23/122 A.P. (DIR Series) Circular No.16 dated September 30, 2022 which is given hereunder:
|S. No||Type of Reporting delays||LSF Amount (INR)|
|1||Form ODI Part-II/ APR, FCGPR (B), FLA Returns, Form OPI, evidence of investment or any other return which does not capture flows or any other periodical reporting||Rs. 7500|
|2||FC-GPR, FCTRS, Form ESOP, Form LLP(I), Form LLP(II), Form CN, Form DI, Form InVi, Form ODI-Part I, Form ODI-Part III, Form FC, Form ECB, Form ECB-2, Revised Form ECB or any other return which captures flows or returns which capture reporting of non-fund transactions or any other transactional reporting||[7500 + (0.025% × A × n)]|
a) “n” is the number of years of delay in submission rounded-upwards to the nearest month and expressed up to 2 decimal points.
b) “A” is the amount involved in the delayed reporting.
c) LSF amount is per return. However, for any number of Form ECB-2 returns, delayed submission for each LRN will be treated as one instance for the fixed component. Further, ‘A’ for any ECB-2 return will be the gross inflow or outflow (including interest and other charges), whichever is more.
d) Maximum LSF amount will be limited to 100 per cent of ‘A’ and will be rounded upwards to the nearest hundred.
e) Where an advice has been issued for payment of LSF and such LSF is not paid within 30 days, such advice shall be considered as null and void and any LSF received beyond this period shall not be accepted. If the applicant subsequently approaches for payment of LSF for the same delayed reporting, the date of receipt of such application shall be treated as the reference date for the purpose of calculation of “n”.
f) The facility for opting for LSF shall be available up to three years from the due date of reporting/ submission. The option of LSF shall also be available for delayed reporting/submissions under the Notification No. FEMA 120/2004-RB and earlier corresponding regulations, up to three years from the date of notification of Foreign Exchange Management (Overseas Investment) Regulations, 2022.
g) In case a person responsible for any submission or filing under the provisions of FEMA, neither makes such submission/filing within the specified time nor makes such submission/filing along with LSF, such person shall be liable for penal action under the provisions of FEMA, 1999.
III. PROCEDURE OF PAYMENT OF LATE SUBMISSION FEE
For the purpose of payment of late submission fee, you will receive an email from the Reserve bank of India specifying the amount to be paid as Late submission fee (LSF) under “Remarks”. This LSF is to be paid within 15 days by way of Demand Draft in favour of Reserve Bank of India.
It is important to note here that Demand Draft to be drawn in favour of Reserve Bank of India should be payable at the concerned Regional Office which is also mentioned in the email received from Reserve Bank of India.
You need to prepare a covering letter and attach it along with Demand Draft and submit it either personally or by speed post at the concerned regional office of Reserve Bank of India
Thereafter, you need to e-mail the following soft copy documents at the email address of the concerned Regional office of the Reserve Bank of India and mark in CC the email addresses of the AD Bank which are available on the FIRMS portal:
1. Covering Letter
2. Soft copy of Demand draft
3. Speed post receipt
4. LSF email received from RBI
Thereafter, you will receive an email from the Reserve Bank of India confirming the receipt of Demand Draft. You need to save this email for your reference.
IMPOTANT NOTE: It’s very important to note here that time provided of filing the Single Master Form (SMF) under Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 shall be counted from that Single Master Form (SMF) which is approved by the AD Bank/ Reserve Bank of India. Those forms which are rejected by the Bank will not be counted for the purpose of time limit for filing the form.
Further, when we file any Single Master File (SMF) beyond the due date, it is processed by the Reserve Bank of India (RBI) so we can expect more detailed examination and delay in approval.
Further, the LSF is applicable only for delay in reporting. For any other non-compliance, the provisions of Compounding by Reserve Bank of India are still applicable.
Disclaimer: The article has been prepared considering the provisions under FEMA/Relevant regulations/ Circulars/ Master Directions issued by RBI and CG. However the readers are requested to cross-check the provisions before acting upon the same. The author will not be liable for any damages or penalties caused.
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CS Gaurav Joshi | B.Com (H), ACS, LL.B | +91-7042085539 | firstname.lastname@example.org