The "Master Circular on Establishment of Liaison / Branch /Project Offices in India by Foreign Entities", it states that "Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Offices in India with specific approval of the Reserve Bank."
This specifically states only manufacturing and trading companies.
It does not speak about service industry.
There is ambiguity in the master circular regarding foreign service companies to open a branch office in India.
If you analyse the following Permissible Activities
a). Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Offices in India with specific approval of the Reserve Bank. Such Branch Offices are permitted to represent the parent / group companies and undertake the following activities in India:
I. Export / Import of goods
II. Rendering professional or consultancy services.
The master circular says " companies incorporate outside India " and engaged in manufacturing or trading activities" and the word trading includes the following ;
- dealing
- merchandising
- selling
- swapping
Hence , a company incorporated outside India can engage in trading of services also .
Further , sub-clause II says Rendering professional or consultancy service also.Hence , according to me , a foreign company which is involved in service sector can open a branch office in India with prior approval from RBI.
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