RBI reporting under Single Master Form
The reserve bank of India has announced the new reporting structure for FDI related transactions during which they need combined different reporting into one combined form i.e., the only Master Form (‘SMF’) which subsumed all the prevailing reporting in numerous forms like ARF, FCGPR, FCTRS etc. Also, by the implementation of this new structure, a replacement reporting online portal (FIRMS) has been introduced in situ by EBIZ.
FIRMS, RBI is an internet reporting platform for reporting foreign investments in India in SMF. It provides a web platform, 24*7 reporting facilities for the users sitting at their respective locations without going/visiting anywhere.
Introduction of recent System of Reporting in Single Master Form (Reporting structure- FDI)
The bank of India has introduced two phases for creating required reporting under the new system.
Such a new reporting system was introduced by RBI, in order to have a smooth reporting system in respect of transactions related to FDI. All forms which are used for creating required reporting to RBI are combined in one form so users can access one common platform for all reporting.
WHAT IS AN ENTITY MASTER FORM (“EMF “)?
The Indian entities (Companies, LLPs or startup) which have received foreign investment within the past are required to register them by filing this type. The window to enter the knowledge within the EMF was initially opened from 28/06/2018 to 20/07/2018 but the RBI again reopened the window from 01/09/2018, for those Indian entities, which were unable to upload their details under the EMF by submitting the rationale for the delay together with authority letter (prescribed by RBI).
For new Companies, LLPs or startups which are founded after 30.07.2018, the EMF window is usually open for them with no delay letter.
Note: Entity will authorize one person by issuing authority letter in his/her favour and through the Board Resolution and who are going to be eligible to add/update the foreign investment details of an Entity within the Entity Master and would be entirely liable for the info entered and such authorized person shall possess the valid PAN no.
If the entity wishes to vary the Entity user, it's going to contact RBI helpdesk, the small print of which are available under “Contact Us” on https://firms.rbi.org.in/firms/. Also, the Entity may send a letter of invitation to firstname.lastname@example.org for updating the registered email id and resetting the password.
Authority letters submitted by the entity user is verified by RBI and after RBI’s approval, the user will receive the password on their registered email ID from RBI email ID email@example.com.
(Note: If the user doesn't receive the mail notification for approval/rejection of the registration within the following 48 hrs. he/she may contact at firstname.lastname@example.org).
WHAT IS A SINGLE MASTER FORM (“SMF “)?
on 01/09/2018 and merged 9 reporting forms into one form, RBI also released a user manual (the “SMF Manual “) which clearly prescribed the procedure for filing one master form (the “SMF “). After the introduction of SMF, ARF stands discontinued effect from September 01, 2018. Now, a user is required to create a report of FDI received within the section under FCGPR only.
REPORTING IN SMF
After getting the Entity user registration, the entity is required to urge the business user registration similarly. For this, you wish to travel to https://firms.rbi.org.in/firms/ and choose Registration Form for Business User and fill the mandatory details and fasten the authorization letter (the format of this letter is given in user manual for SMF). Please note that this registration may be availed by a private within the case where a resident individual is required to report.
AD Banker is permitted to process such Business user application therefore one should contact AD bank to whom the reporting was made (as per the IFSC chose or branch at the time of Business User registration).
IMPLEMENTATION OF REPORTING IN SINGLE MASTER FORM
Reserve Bank of India has introduced two phases for creating required reporting under the new system.
- In the FIRST PHASE: Entity Master Form (the “EMF “), was made available. Under this, the Indian entities (Companies, LLPs or startup) which have received foreign investment within the past are required to register them by filing this manner. The window to enter the knowledge within the EMF was initially opened from 28/06/2018 to 20/07/2018 but the RBI again reopened the window from 01/09/2018, for those Indian entities, which were unable to upload their details under the EMF by submitting the rationale for the delay together with authority letter (prescribed by RBI). An entity will authorize one person by issuing an authority letter in his/her favour and who are eligible to add/update the foreign investment details of an Entity within the Entity Master and would be entirely accountable for the information entered.
- In the SECOND PHASE: RBI has introduced SMF on 01/09/2018 and merged 9 reporting forms into one form, RBI also released a user manual (the “SMF Manual “) which clearly prescribed the procedure for filing one master form (the “SMF “). REPORTING IN SMF (provide one platform for creating a special quiet reporting) The SMF form has merged 9 forms and can be filed through SMF only.
REPLACEMENT OF E-BIZ REPORTING BY THE RBI SINGLE MASTER FORM (SMF) REPORTING
In September 2018, this new system was brought out, the RBI Single Master Form (SMF) reporting. Under the previous e-biz portal, there have been different forms available for reporting foreign investment. Under the RBI Single Master Form, the reporting for all nine varieties of investment is allotted through one Master Form. If an application for foreign investment should be made, then only the only Master Form is employed. The SMF has replaced the nine forms. the subsequent are the nine forms used for foreign investment:
· FC-GPR- the shape which is employed for the issue of capital instruments by an Indian Company to someone resident outside India
· FC-TRS – the shape is employed for the transfer of capital instruments from a far-off resident to an individual in India.
· LLP-I- the shape is employed for Foreign Direct Investment, which is required by an LLP.
· LLP-II-The form which is employed for Divestment or transfer of capital contribution in an LLP
· CN – the shape which is employed for the problem or to transfer convertible notes
· DRR- the shape which is employed for the issue of transfer of depository receipts
· ESOP- the shape which is employed for issuing employee stock options or equity shares
· DI- the shape which is employed for reporting of downstream investment or some kind of foreign indirect investment in a very business
· InVi- the shape used for reporting of investment by a distant investor in an investment machine.
Apart from replacing the nine forms for foreign investment, the RBI Single Master Form provides the applicant to observe the status of the applying.
Process of Reporting In The Single Master Form
Under the one Master Form system, the net application is processed through the FIRMS website (Foreign Investment and Reporting Management Systems) under which an Indian entity is required to supply certain information to the RBI. this may only be relevant if the entity has some kind of an instantaneous or indirect kind of foreign investment present. There are two forms considered under the FIRMS website. One is that the Entity Master Form and also the other is that the Single Master Form. The entity master form (EMF) is required to grasp the quantity of foreign investment that's needed for the respective entity.
Initially, the RBI had opened the EMF window on the FIRMS website from 28 June 2018 to twenty July 2018 (“Previous Window”). However, the RBI has clarified that this window would again reopen after 01 September 2018. The entities would be allowed to submit the EMF after this era. However, entities would want to state the explanations for not uploading information within the Previous Window. The entity would wish to produce the authority letter as a relevant document with this.
The RBI Single Master Form requires all Indian Entities to submit information regarding any foreign investment from 01 September 2018. Previously there was a two-step process of filing the necessity of foreign investment in India. Firstly, there was a requirement of submitting a remittance form- The Advanced Remittance Form (ARF) and so the shape FC- GPR. within the current process, there's no requirement of the two-stage process. An entity is simply required to fill the FC-GPR. this is often considered as a benefit for the applicant as there's a lesser requirement to produce information.
PROCEDURE UNDER THE RBI SINGLE MASTER FORM
In the previous system, the Authorized Bank acted as a mode of processing the interchange form. the application form would be filled by the applicant and would be forwarded to the authorized bank. After the authorized bank scrutinizes the appliance, this is able to be forwarded to the RBI. The RBI has the ability to either accept the application for interchange or reject the application for exchange. However, within the new system, the Authorized Dealer would only handle the appliance regarding interchange. Hence, because of this RBI Single Master Form System, the responsibility of the RBI has significantly reduced because the Authorized Dealer scrutinizes applications for exchange.
The applicant has got to make an application on the RBI Single Master Form. The transaction details need to be mentioned. this can be done by logging on to the FIRMS website and providing information. If the applicant wants to represent another entity, then they need to register themselves on the FIRMS website separately.
After this step is completed, the applicant would choose an appropriate IFSC code for the needs of electronic KYC verification. The electronic KYC verification must be done by the Authorized Bank. The applicant would wish to complete the electronic KYC before submitting the shape. However, the verification of electronic KYC is completed by the Authorized bank. With the electronic KYC submitted, the applicant would even have to supply an authority letter within the prescribed format. The authority letter with the prescribed format is found within the SMF manual. For verification of electronic KYC, the banks have up to 3 working days.
Once the verification is complete, the applicant will need to provide information about the corporate, like the following:
- CIN Number- Corporate Identity Number
- Type of Foreign Investment- Whether it's direct or indirect foreign investment
- Sectoral Caps on the worth of the investment
- Concerned certificate regarding the valuation from a licensed accountant or an organization Secretary
All the above information must be provided within the FIRMS website. The application form, together with all the relevant documentation within the FIRMS website, would be scrutinized by the Authorized dealer/bank. The authorized dealer/bank has seven working days to simply accept the appliance for interchange or reject the application for interchange. The authorized bank can evoke recommendations from the RBI on the SMF. However, the authorized bank can only raise these sorts of representations if there's some delay with the appliance online. The RBI would act in such circumstances and guide the authorized bank on whether to just accept the appliance for exchange or reject the applying.
When the authorized bank has scrutinized the applying, the main points under the Entity Master Form are going to be automatically updated. this is often beneficial to the applicant as foreign investment applications within the future don't require any application.
DELAY IN REPORTINGS UNDER SMF
The user has to attach the explanation for the delay in reporting to AD bank which can be forwarded to the respective regional office. RBI will advise on Late Submission Fee (LSF) as is also decided by the Federal Reserve Bank, in consultation with the Central Government, for any delays in reporting. The payment of LSF is a further facility for regularizing reporting delays without undergoing the compounding procedure.
However, this doesn't mean that the applicant cannot apply for compounding. Both options are available to the applicant for the transactions undertaken on or after November 7, 2017.
The late submission fee relates to the delay in reporting the information. Contravention for non-issue/ late issue of capital instruments or non-transfer/ late transfer of capital instruments and other contraventions of the provisions FEMA 20(R) are proceeded against as per the procedure laid down in sections 13 and 15 of FEMA, 1999.
The LSF could also be paid by way of a requirement draft drawn in favour of the “Reserve Bank of India” and payable at the Regional Office concerned.
In case of non-compliance of the above-mentioned provisions by an entity, the same would attract severe penalty provisions under FEMA. Apart from this, if the applicant provides any misleading information or delays in providing information with no reasonable cause, then they might not be allowed to receive any foreign investment for winding up their activities.
AMOUNT OF PENALTY PRESCRIBED BY RBI FOR DELAY REPORTING:
AMOUNT TO BE REPORTED (RS)
LATE SUBMISSION FEE. AS PRESCRIBED IN % OF THE AMOUNT TO BE REPORTED
MAXIMUM CAP OF LSF
UP TO 10 MILLION
RS.1 MILLION OR 300% OF THE AMOUNT INVOLVED, WHICHEVER IS LOWER
MORE THAN 10 MILLION
RS.10 MILLION OR 300% OF THE AMOUNT INVOLVED, WHICHEVER IS LOWER
* THE % OF LSF WILL BE DOUBLED EVERY TWELVE MONTHS; THE FLOOR (MINIMUM APPLICABLE AMOUNT) FOR LSF WILL BE RS. 100
Hence, it is often understood that the new system of the RBI Single Master Form (SMF) to receive foreign investment is simplified and simple. The new system has abolished the need of getting multiple forms under the e-biz portal. there's no requirement for the applicant to fill the shape of remittance, like the ARF. they might just require filing the shape FC-GPR. The role played by the RBI is minimized because it doesn't act because of the ultimate authority for reviewing all the applications. within the previous system, the RBI was the foremost authority in scrutinizing applications, and also the authorized bank just acted as a medium through which applications are sourced. within the RBI Single Master Form system, the authorized bank only should work on the applications, thus reducing the burden for the RBI.
The new system was introduced for smoothening the reporting system for transactions that are FDI related. All forms which used for creating required reporting to RBI has been combined in one form in order that user can access one common platform for all reporting but unfortunately, this new system also brought some difficulties which make this technique complicated for users.
Manual for SMF FIRMS application specified some instructions to AD(s) for handling the reporting but still, users face plenty of difficulties while making the reporting like inquiring for additional documents, no resubmission is allowed because of which user has to file fresh form anytime resulting into chances lately fees, etc.