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    Key Compliance Requirements for Project Office in India

    Published Thu, 31 Dec 2020 | Updated Wed, 17 Mar 2021 Company Law

    A Project Office (PO) means a place of business in India to represent the interests of the foreign company executing a project in India.
     
    After a PO has received an approval for establishment from AD Category –I Bank as per guidelines of Reserve Bank of India (RBI), it will be subject to following compliance requirements:

     

    Key Points:

    A. Compliance under Companies Act, 2013 read with allied Rules
    B. Compliance under FEMA Regulations
    C. Compliance under Income Tax Act, 1961
    D. Compliance under Goods and Services Tax Act, 2017

    A. Compliance under Companies Act, 2013 read with allied Rules

           1. Registration with Ministry of Corporate Affairs [Section 380]

     
    Every foreign company establishing its PO in India is required to register itself with Ministry of Corporate Affairs (MCA) by filing Form FC-1 within a period of thirty days of the establishment of PO. List of documents required to be submitted along with Form FC-1 include:

    • Certified true copy of the charter, statues or memorandum and articles of the foreign company or other instrument constituting or defining the constitution of the company
    • List of directors and secretary of the foreign company
    • Power of attorney or board resolution in favour of authorized representative in India
    • RBI approval letter
    • declaration that none of the directors of the company or the authorised representative in India has ever been convicted or debarred from formation of companies and management in India or abroad
    • Complete address of registered or principal office

     

           2.  Preparation and filing of Financial Statement [Section 381]

    The foreign company shall prepare a Financial Statement of its PO in India in accordance with Schedule III or as near thereto as may be possible for each financial year. A copy of such a Financial Statement shall be filed with the Registrar of Companies in Form FC-3 within a period of six months of the close of every financial year of the foreign company. Along with Financial Statement, in Form FC-3, a list of all the places of business established by the foreign company in India as on the date of the Balance Sheet is required to be submitted with the Registrar.
     

            3. Audit of accounts [Rule 5 of the Companies (Registration of Foreign Companies) Rules, 2014]

    Every foreign company shall get its accounts, pertaining to the PO audited by a practicing Chartered Accountant in India or a firm or limited liability partnership of practicing chartered accountants.
     

           4.Filing of Annual Return [Rule 7 of the Companies (Registration of Foreign Companies) Rules, 2014]

    Every foreign company shall prepare and file annual return of its PO within a period of sixty days from the last day of its financial year with the Registrar in Form FC-4.

    B. Compliances under FEMA Regulations

    1. Foreign Liabilities and Assets (FLA) Return: Every Project Office is required to file FLA return on or before July 15 of each year, if any foreign assets or foreign liabilities are outstanding as on reporting date.
    2. Annual Activity Certificate (AAC): Every PO is required to file an Annual Activity Certificate as at March 31 each year with the designated AD Category -I bank as well as Director-General of Income Tax (International Taxation), New Delhi.

    C. Compliance under Income Tax Act, 1961

    1. Obtaining Permanent Account Number (PAN): APO must obtain PAN from Income Tax Authorities
    2. Statutory Audit: Financials are liable for Statutory Audit by a Chartered Accountant
    3. Filing of Income Tax Return: A Project Office registered and operating in India is treated as a foreign company and is accordingly liable to file an Income Tax return every year under Section 139(1) of the Income Tax Act, 1961. 
    4. Tax Audit of accounts: If the gross receipts or turnover of the foreign company from PO exceed the threshold as provided under Section 44AB, then it has to get its accounts audited by a chartered accountant in practice by 30th September and submit the Tax Audit Report by 30th November of the following year. At present, the threshold for Tax Audit is as provided below:
    5. Rs. 1 Crore- in case of business;
    6. Rs. 50 Lacs- in case of the profession;
    7. Rs. 5 Crore (applicable from AY 2021-22): For a business whose aggregate of all receipts in cash does not exceed 5% of such receipts during the previous year and aggregate of all payments in cash does not exceed 5% of such payment during the previous year

    D. Compliance under Goods and Services Tax (GST) Act, 2017

    Various compliance applicable on PO under GST Act is summarized in the table below:
     


    S. No.
    Compliance Form Due-date Remarks
      Immediately after Incorporation

    1.

    GST Registration   Within 30 days of crossing the threshold limit Mandatory if annual turnover exceeds specified limit.
    Currently, Rs 40 Lacs for businesses other than specified state and Rs 20 Lacs for service providers
      Monthly

    1.

    Reporting of Outward Supply (Turnover exceeding Rs. 1.50 Crore) GSTR-1 10th of the following month  

    2.

    Monthly summary of outwards supplies, tax credits, payment of tax, etc. GSTR-3B 20th of the following month  

    3.

    Return by an Input Service Distributor GSTR-6 13th of the following month  
      Quarterly

    1.

    Reporting of Outward Supply (Turnover upto Rs. 1.50 Crore) GSTR-1 Last day of the month following the quarter  

    2.

    Tax payment by taxpayer registered under the composition levy CMP-08
     
    18th of the month following the quarter
     
    CMP-08 is a statement cum challan having details of outward &  inward supplies including the taxes paid etc
      Annually

    3.

    Annual Return for a taxpayer registered under the composition levy GSTR-4 by 30th April of subsequent year
     
    Until FY 2018-19, the due date was 18th of the month after the end of the quarter.

    4.

    Annual Return for normal tax payer GSTR-9 by 31st December of subsequent year Optional for the registered person having turnover up to 2 Crore for FY 2017-18 and 2018-19

    5.

    Annual Return for taxpayer registered under the composition levy anytime during the year GSTR-9A by 31st December of subsequent year Filing for FY 2017-18 and 2018-19 is waived off.

    6.

    GST Audit by Chartered Accountant GSTR-9C by 31st December of the subsequent year Applicable if turnover exceeds Rs. 2 crores for given financial year.
    (Turnover limit is increased to Rs. 5 Crore for FY 2018-19)

     

    These are broad compliances which need to be ensured by a foreign company establishing its Project Office in India. However, there may be some additional compliance required under different laws depending upon the industry, nature of business, and other factors. The list may not be exhaustive and subject to vary with various amendments in relevant laws, accordingly, it is advisable to take professional opinion before acting upon the same.

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