Indian subsidiaries of foreign firms eligible for SFIS benefits

New Delhi: In a relief to Indian subsidiaries of foreign companies, the Delhi high court on Tuesday held that such companies cannot be denied the benefits of the Served from India Scheme (SFIS) framed under the Foreign Trade Policy (2009-14) only on the grounds that they are units of overseas entities.

The decision came on pleas by Yum Restaurants India Pvt. Ltd, the owner of KFC, Pizza Hut and Taco Bell in India; Nokia Solutions and Networks India Pvt. Ltd and EI DuPont India Pvt. Ltd, whose applications under the scheme had been rejected at different points of time between 2009 and 2012.

The Director General of Foreign Trade (DGFT) had denied the benefits of the scheme to these companies as according to it, they were not “Indian brands” and did not contribute in creating a powerful and unique “served from India brand”, in line with the objective of the scheme, which was to accelerate growth in export of services from India.

Terming the DGFT’s decision “unsustainable”, justice Vibhu Bakhru has held that “the expression ‘all service providers’ cannot be interpreted to exclude service providers, which are subsidiaries of foreign entities” and the DGFT had introduced a completely new concept in the eligibility criteria of the scheme by limiting the incentives only to companies with trade names that reflect their association with India. The judgement said “the expression ‘served from India brand’ must be read in the context of the object to accelerate growth in export of services from India”.

SFIS entails providing duty credit scrips equivalent to 10% of free foreign exchange earned during the current financial year—as an incentive—to eligible service providers.

Yum declined to comment without perusing the judgement. Email queries to DuPont remained unanswered. Nokia could not be reached for comment.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.