On June 7th, 2018, the Reserve Bank of India (RBI) had introduced two new forms (namely Single Master Form and Entity Master Form) vide a circular (RBI Circular), with the aim of simplifying reporting under the Foreign Exchange and Management Act, 1999 (FEMA). Our earlier blog post contained details of the two forms and our in-depth analysis of the same. On June 27th, 2018, RBI released a User Manual for Entity Master – FIRMS (User Manual) which provides detailed instructions and the process for filing the Entity Master Form.
Reporting on FIRMS Application
RBI has introduced FIRMS, an online application which provides the interface for filing of EMF and SMF. Online reporting on FIRMS has to be made in two phases:
- In the first phase, the first module viz. the interface for filing EMF has been made available online.
- In the second phase, the second module containing the SMF would be made available online with effect from August 1st, 2018.
It is important to note that with the implementation of SMF, the reporting of Foreign Direct Investment (FDI), which is presently a two-step procedure viz., Advance Remittance Form (ARF) and Form for reporting Foreign Currency – General Permission Route (Form FC-GPR) will be merged into a single revised Form FC-GPR under SMF. Recently, there was some ambiguity around whether Indian entities are still required to file ARF or whether it would be subsumed under SMF. RBI has now clearly clarified that ARF would be merged under Form FC-GPR under the SMF.
The final structure of SMF and the operational instructions will be made available in the RBI Master Direction on Reporting under FEMA (the same is not yet available).
Entity Master Form
The interface for filing EMF has now been made available to the public for entering the required data until July 12th, 2018. All Indian entities (companies, LLPs and start-ups) which have foreign investment (including indirect foreign investment) are required to compulsorily provide data in respect of all foreign investment they have received till date, irrespective of whether the regulatory reporting for the same has been made to RBI or not and whether the same has been acknowledged by RBI or not.
Any Indian entity which does not comply with this pre-requisite will not be permitted to receive any foreign investment (including indirect foreign investment) going forward and will be declared non-compliant with FEMA.
Reporting under EMF is a one-time requirement. RBI has not changed its previous stance on the penalty for not filing the EMF by July 12th, 2018 and the penalty continues to be a complete prohibition on receiving any form of foreign investment in the future.
All Indian entities, subsidiaries, joint venture companies etc. which have any form of foreign investment should ensure that they complete the EMF before July 12th, 2018. Any non-compliance will have an adverse impact on foreign investors as well since they will no longer be allowed to make any further investment in that particular Indian entity.