1. Industry of the Month
“Tourism In India”
eBizWire
Vol . I Issue. I, February 2012
Insight
Biz India News 2
Biz Policy Updates 2
Market Entry for Tourism Business in India 3-7
Business Idea of the Month 7
StartBizIndia Discussion Platform 8
Upcoming Business Summit 9
Contact us 10
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2. Biz India News Headlines
• India Inc raised US$ 1.6 billion through external commercial borrowings (ECBs) in India Inc raises $1.6 bn via
November 2011. Under the automatic route, 78 companies raised US$ 1.3 billion. At ECBs in Nov 2011
present, the Government allows the companies to raise up to US$ 750 million under the
automatic route in a year.
• German luxury car maker Mercedes-Benz plans to invest Rs 1,000 crore (US$ 191.41 Mercedes plans volume
million) in India. "We want to grow our sales over three-fold to 25,000 units by 2016 and models to regain top spot
to 90,000 units by the end of the decade," as per Debashis Mitra, Director (Sales &
Marketing), Mercedes-Benz India Ltd (MBIL).
• Taj Group of hotels plans to open its doors in Yunnan Province of China. The Indian Taj plans 2 hotels in China's
Hotels Company Ltd has signed a memorandum of co-operation for a joint venture with Yunnan province
Yunnan Tourism Co Ltd to engage in the development, construction, operation and
management of two hotels in Kunming Expo Garden located in Yunnan province
• Moody's rating agency has upgraded its credit rating on short-term deposits in foreign Moody's upgrades India's
currency from 'Not Prime (NP)' to 'P-3'. P-3 denotes prime and such a rating indicates short-term foreign currency
acceptable ability to repay short-term obligations, according to a statement by Ministry of rating
Finance
• The Government of India has approved 20 proposals of foreign direct investment (FDI) Sterlite Grid project among 20
worth Rs 1,935.24 crore (US$ 373.92 million), according to an official statement. The FDI proposals cleared
approvals were given, based on the recommendations of the Foreign Investment
Promotion Board (FIPB).
Nippon Life picks 26% in
• Nippon Life Insurance has signed a memorandum of understanding (MoU) to acquire 26
per cent stake in Reliance Capital Asset Management (RCAM) for Rs 1,450 crore (US$ Reliance AMC for Rs 1,450 cr
288.30 million). This is the largest foreign direct investment (FDI) in the Indian mutual
fund sector.
"India is a key element in Ford's global strategy," said Alan Mulally, President and
CEO, Ford Motor Company
Biz Policy Updates Legal Headlines
• RBI announced that eligible borrowers can raise foreign currency convertible bond RBI raises FCCB limit to $750
(FCCB) up to US$ 750 million or equivalent per financial year for permissible end-uses million
• RBI has made it mandatory for banks to acknowledge all loan applications, submitted
either manually or online, by micro, small and medium enterprise (MSME) borrowers. Banks must acknowledge,
Banks have also been asked to ensure that a running serial number is recorded on the streamline MSME loan
loan application form as well as the acknowledgement receipt applications: RBI
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3. Market Entry For Tourism Business In India India Travel and
“The one land that all men desire to see and having seen once, by even a glimpse,
would not give the glimpse for all the shows of all the rest of the globe combined”
Tourism Demand
Mark Twain for India
Tourism Industry in India has pulled off growth of 7.2% in terms of Foreign Tourist Arrival
(FTA) in 2010, more than the projected growth rate of 5% to 6% for the world by
UNWTO’s. Currently in the initial six months of 2011 FTAs in India were 2.91 million with
a growth of 10.9 per cent and the foreign exchange earning (FEE) was US$ 7,811 million
with a growth of 14.2 per cent as compared to 2010. On the same persistence FTA in
India is expected to grow with a CAGR of 7.9% along with parallel growth of FEE for the
period spanning 2010-2015 whereas Domestic tourist visits is expected to increase with a
CAGR of 12.29% for the period spanning 2008-2015 as per the renub research report. By
2020, Tourism in India could contribute Rs 8,50,000 crores to the GDP. (Source- WTTC).
India's share in the global medical tourism industry will reach around 3 per cent by the
end of 2013. The government is making tremendous effort in the areas of investment and Source: ―Travel and tourism economic impact:
India, 2010,‖ World Travel and Tourism Council
infrastructure with an overall aim to boost the tourism industry. Indian government has
website, www.wttc.org, accessed 2 December
given more than INR 1,000 Crore to Ministry of Tourism under union budget 2010 and the 2010.
Budget for Incredible India campaign increased by INR 62.3 Crore for 2010-11 for the E: Estimate; F: Forecast
promotion of tourism. Growth trend and Indian Government initiatives have flourish the
investment opportunity in Indian Tourism Industry. According to World Travel and
Tourism Council, India will be a tourism hotspot from 2009 -2018 having the highest 10-
year growth potential
Various Sectors Under
1. Formation of Company and / or LLP for setting up a business
Tourism Sector
Each Foreign Resident can setup business in India either by registering a company or a
LLP under the laws of land, however an NRI may also invest in partnership firm subject • Travel Agencies
to the compliance of the applicable conditions, though the amount invested in firm shall
not be eligible for repatriation outside India. • Tour operating Agencies
• Tourist Transport
Companies Act 1956: Either a Public or Private Company can be formed depending on
the business requirements of the investors. A private Company restricts the right to
Operating Agencies
transfer its shares, limits to the number of shareholders to 50 (excluding employees and • Adventure Tourism
former employees), Prohibit invitation to the public to subscribe to shares and
debentures, Prohibits acceptance of deposits from persons other than shareholders, • Religious Tours
directors and their relatives. Private Corporate Structure is suitable for businesses, • Sports and cultural
where there is not larger number of shareholders and management of the company is
limited only in the hands of key person and not large public interest is involved
programmes Tourism
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4. Market Entry – Tourism Business In India Formation of Entity
Public Limited Company does not have the restrictions as carried out in the private limited • Company
companies and keeping the public interest public Companies are far more regulated than • LLP
Private Companies.
• Partnership
Taxation: Flat rate of 30% + Surcharge of 5% of the net income exceeds Rs. 1 crore +
The education cess is 2% & The Secondary and higher education cess 1% of the income
tax and surcharge*
Besides this Dividend Distribution Tax at an effective rate of 16.2225% would be
charged in case of distribution of dividend.
Entity Comparative
LLP Act 2008: LLPs shall be registered under the LLP Act 2008. These are self
governed form of business, but the major flaw back is FDI in LLP structure is allowed
Chart
under government approval route, in all sectors where 100% FDI is allowed under
automatic route, so with the entity structure of LLP the investor has to seek the Entity Tax DDT
government approval. Rate
Company 33.99 16.2225%
Taxation: Flat rate of 30% + The education cess is 2% & The Secondary and higher
education cess 1% of the income tax and surcharge*.
Dividend Distribution Tax : NIL LLP 30.09 Nil
Partnership 30.09 Nil
Partnership Firm: NRI may invest in partnership firm subject to the compliance of the
applicable conditions, though the amount invested in firm shall not be eligible for
repatriation outside India. Foreign Nationals are not permitted to invest in Partnerships.
Taxation: Flat rate of 30% + + The education cess is 2% & The Secondary and higher
education cess 1% of the income tax and surcharge*.
FDI Tourism Sector
Dividend Distribution Tax : NIL
2. FDI in Tourism Sector in India
To heighten the tourism industry in India, Indian Government has allowed 100 per cent Entity FDI Route
foreign investment under the automatic route in the hotel and tourism related industry
which covers travel agencies, tour operating agencies and tourist transport operating Company 100% Automatic
agencies, Units providing facilities for cultural, adventure and wildlife experience to
tourists, Surface, air and water transport facilities for tourists, Convention/seminar units LLP 100% Approval
and organisations.
Partnership 100% Approval
However Foreign Investment in LLP will be allowed only after taking the approval of
Ministry of Finance, Government of India.
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5. Market Entry – Tourism Business In India
Foreign Technology Agreements in Tourism Industry
For foreign technology agreements concerned with the tourism industry, automatic
approval is granted if up to 3% of the capital cost of the project is proposed to be paid
for technical and consultancy services including fees for architects, design, supervision,
etc. up to 3% of net turnover is payable for franchising and marketing/publicity support
fee, and up to 10% of gross operating profit is payable for management fee, including
incentive fee.
3. Business Registrations
Registration and compliances under India taxation laws are to be ensured including Pan
& Tan registration, service tax registration, vat registration (For hotel industry), while
Biz Registrations
considering the tax perspective the DTAA agreement with the country has crucial role to
play for avoidance of double taxation.
Registration under Shop and Establishment Act for the establishment of business in
India differs from state to state.
• PAN Registration
• TAN Registration
4. Licence for Tour Operator/Travels Agents • VAT Registration
• Shop & Establishment
The entity shall get license as Tour operators from the concerned state tourism • Licence for Tour
department where it is operating. Like in NCT of Delhi no one can operate in without Operator
grant of license, as per rules 2(t) and 81 of Delhi Motor Vehicles Rules, 1993
irrespective of the size of business turnover.
The State Department after verification of the entity from concerned agencies, state
OperationalFunctioning
police authority and compliance of the specified conditions shall grant License to the
entity for 5 years, subject to renewal thereof.
5. Operational Functioning & Business Agreements
One Staff Member having
Entity shall hire employees as per the needs and requirement of the state tourism
•
department, like for Delhi, at least one staff member should have Degree/Diploma in
Degree/Diploma in
travel/tourism from recognized university/IITTM/Institution approved by AICTE OR 3 years
working experience in the Travel and Tourism Industry. These Academic qualifications travel/tourism from
may be relaxed in case of Airlines, Shipping, Transport, PR Agencies and those who have recognized university
experience with MOT approved tour operators all depends on the laws of the respective approved by AICTE
state of operation.
Or
The other agreements besides the employment agreement to be signed and contracted
by the entity include agents & transporters agreement, hotel & agent agreement. An •
agreement will ensure smooth functioning of the business. years working
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6. experience in the Travel and Tourism Industry declared tariff of Rs. 1000 per day and
revision of service tax rates on air travel
has increased the cost but the bullish
tourism market is still locking the
Market Entry – Tourism Business In India
investors.
6. Recognition of DOT
For capturing the market at massive scale in addition to the marketing efforts, the travel
Companies need to be recognized by Department of Tourism. Although it is a voluntary
scheme open to all travel agencies and tour operators’ enterprises but the companies
recognized by DOT are entitled to incentives and constituencies granted by govt. from time
to time.
The Companies to be recognized by DOT shall have an IATA license of GSA (general
service agent) of IATA member airlines, approved by RBI to book foreign tourist, approved
by ministry of external affairs to handle document, passports, visas and such another
items, recognized by railways and airways, registered under shop and establishments Act.
.
7. Tourism Industry Attractions
The Indian government has taken up a number of initiatives to enhance the tourism and
hospitality sector performance and profits.
Tax Incentives or Tax holiday
In the budget 2010 it has extended the benefit of 100% investment linked tax deduction
on capital expenditure (excluding land, goodwill and financial instrument) for building
Tax INCENTIVE
and operating a new hotel from selected locations to across the country. The five year
tax holiday under the Income tax Act has been provided for two, three and four star • 100% investment linked
category hotels located in all united nations educational, scientific and cultural tax deduction on Capital
organisations (UNESCO) world heritage sites (except Mumbai and Delhi) for hotels Expenditure
starting operations from 1st April 2008 to 31st March 2013.
• Five year tax holiday
The State Governments in order to attract investment has taken initiatives, Uttarakhand
under the Income tax
State Government has launched 100 per cent tax exemption program to exempt
multiplex projects, amusement parks, and other tourist facilities for a period of five years Act has been provided
under the Vision 2020, Rajasthan has reduced the luxury tax level to 8 per cent from the for two, three and four
existing 10 per cent levels. Kerala, Madhya Pradesh, Orissa and Gujarat have entered star category hotels at
into Private Public Partnerships (PPP) to promote travel and tourism to attract tourists. selected Location
Besides this Delinking credit for hotel projects from real estate by RBI, enabled hotel
• 100 per cent tax
projects to avail of credit at relaxed norms.
exemption program to
exempt multiplex
However the application of Service tax on air conditioned restaurants possessing projects, amusement
licenses to serve alcoholic beverages and on hotel accommodation, in excess of parks, and other tourist
facilities for 5 years in
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7. Uttrakhand
• Reduction of luxury tax level to 8 per cent from the existing 10 per
cent levels in Rajasthan
Market Entry – Tourism Business In India Tourist VISA
Tourist Visa on Arrival
• Tourist Visa on Arrival
Various schemes have been introduced to boost the tourism industry, scheme of for citizens of 11
granting Tourist Visa on Arrival (T-VoA) introduced for the citizens of 11 countries countries
including Finland, Japan, Luxembourg, New Zealand and Singapore. The government
has developed 37 destinations within the last two years, and executed of 600 projects
for 300 tourist spots across the country with an investment of over US$24 million.
The basic aim of any investor is the safe investment, Indian Government in the past few
years has taken initiatives to gain the faith of the investors, various government portals India with the simplified laws,
have been developed to check out the NRI/Foreign investment issues, simplication of specialized assistance and no
laws, various Private specialized consultancies is being offered for taking care of sector
doubt with tremendous growth
and state specific laws, rules and regulations that would help the investor to be focused
rate will be a tourism hotspot from
on the business.
2009–2018 having the highest 10-
India with the simplified laws, specialized assistance and no doubt with tremendous year growth potential.
growth rate will be a tourism hotspot from 2009–2018 having the highest 10-year growth
potential. Source: World Travel and Tourism
Council
Business IDEA OF THE Month
SPA is a place devoted to overall well-being through variety of
professional services that encourage the renewal of mind, body and
spirit. SPA can be Ayurvedic Spa, Club Spa, Cruise Spa, Day Spa,
Dental Spa, Garden Spa, Medical Spa or Resort/Hotel Spa. With
everybody being so busy and stress-filled these days, starting a spa
business is an excellent choice for a new business venture. The initial
investment to get a day spa up and running is substantial. However,
the income potential is outstanding. Location is probably the most
important aspect of this new enterprise, so be sure to carefully
research the area where you intend to open for business. Providing
day spa clients with a wide variety of services such as manicures,
seaweed wraps, aromatherapy and massage options is guaranteed to
make the business a popular destination for new and repeat clients.
You should have no problem charging top bucks for your services,
provided you offer exceptional personalized service to your clients.
Marketing a day spa service would be through traditional advertising
media. Be sure to print and distribute two-for-one discount coupons for
the initial grand opening. You may have to sacrifice some revenue, but
discount coupons are a terrific way to gain interest from potential
customers quickly. The income and profit potential will greatly depend
on a number of factors, such as services offered, customer volumes
and business location. However, attaining combined income and
business profits in the range of 50, 00,000 per year is achievable.
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8. StartBizIndia Discussion Platform
 How to start and implement a restaurant business in Chennai?
Provide me the compliances and setting up etc?
Compliances for starting a restaurant business in Chennai, India are as
follows;
• Incorporation & Registrations- Incorporation of business entity
which can be a Company (Private or Public) Or Limited Liability
Partnership Or Partnership. Tax Registrations such as PAN,
TAN, Service Tax, VAT
• Business Licenses & Approvals- Trade License, Food & Liquor
Licence, License under Food and Drug Control Act,
Medical/Health Certificate for Kitchen Staff, Shops &
Establishment Certificate, Police Registration Certificate, ESIC
for shop employing staff more than 10, Provident Fund
Registration if number of staff is more than 20 employees
• IPR Registration for Brand Name Reservation
• Domain Name Registration & Web designing
 IS RBI approval required to start a partnership firm? I am resident in
United States and I would like to start a trading Partnership in India
with my elder brother. Do I need prior approval from RBI to start a
partnership firm in India? The other partner is my elder brother and
he is a resident Indian. I can provide capital contribution from US
account as well?
A NRI/POI resident outside India can invest in the capital of
partnership firm in India on non-repatriation basis provided certain
conditions. However, NRIs/POIs may seek prior permission of Reserve
Bank for investment in Partnership firm with repatriation basis. As far
as procedure is concerned, certain documents needs to be filed with
RBI in prescribed format. Your Business being, import and export of
metal & water treatment equipments, you need to get Import Export
Code as well.
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9. Upcoming Business Summit
 STARTUPS ACROSS ASIA TO MEET @ SMASHUP 2012
Smashup! Is a giant mashup of creative energy, product showcases,
networking opportunities and an insightful agenda covering key startup
issues & challenges. Smashup! Atmosphere and format encourages
participants to bond in an informal, open, interactive culture that will
enable them to share and collaborate, help them learn from experience
and create new ideas. It will bring together:-
• New Entrepreneurs, startups and idea stage entrepreneurs
• Veteran entrepreneurs and seasoned professionals
•
•
Angel investors and Venture capitalist
Mentors & Advisors
National
• Smashup 2012
Date: 10th Feb 2012 • E Week India 2012
Venue: EPICENTRE, At Apparel House,
Sector 44, Gurgaon
 E Week India 2012 Theme: Invent the Future
E Week India focuses public attention on today's biggest opportunities and Inter National
encourages participants to reflect on their role as leaders and innovators.
The campaign is led by the National Entrepreneurship Network and • Global
supported by the Wadhwani Foundation. Entrepreneurship
Training
The theme of E Week 2012 ‘Invent the future’ hopes to inspire all into • New Orleans
Entrepreneurs Week
donning the lens of an intrepid entrepreneur and delving into local issues
and fundamental challenges of water scarcity, garbage, traffic problems,
power, pollution, etc.
Date: 11TH -18TH Feb 2012
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10. Contact Us
Visit us at
Arun Gupta
E: arun@indiacp.com
D: +91.11.40622214
A Venture of
Neha Seth
D- 28, South Extn. Part I New Delhi – 110049
neha@indiacp.com T: 40622200 F: 91.40622201
E: info@startbizindia.com
D: +91.11.40622239
Disclaimer:
This paper is a copyright of Corporate Professionals (India) Private Limited. The entire content of this paper is developed have
been developed for the new startups. The author and the Company expressly disclaim all and any liability to any person who has
read this paper, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such
person in reliance upon the contents of this paper.
For more info on Business setup visit www.startbizindia.in
P a g e | 10 For Business setup queries email at
neha@indiacp.com or call at 011 40622239