Page 178 - GSTL_6th August 2020_Vol 39_Part 1

104 GST LAW TIMES [ Vol. 39
5.2 Master Direction No. 10/2015-16, dated 1-1-2016 as updated from
time to time, issued by the Reserve Bank of India states that “Establishment of
branch office/liaison office/project office or any other place of business in India
by foreign entities is regulated in terms of Section 6(6) of Foreign Exchange Man-
agement Act, 1999 read with Notification No. FEMA 22(R)/2016-RB, dated
March 31, 2016”.
5.3 Section 6(6) of Foreign Exchange Management Act, 1999 states that
“Without prejudice to the provisions of this section, the Reserve Bank may, by regulation,
prohibit, restrict, or regulate establishment in India of a branch, office or other place of
business by a person resident outside India, for carrying on any activity relating to such
branch, office or other place of business”.
5.3.1 In exercise of the powers conferred by sub-section (6) of Section 6
of the Foreign Exchange Management Act, 1999 (42 of 1999), and in supersession
of Notification No. FEMA 22/2000-RB, dated May 3, 2000, as amended from time
to time, the Reserve Bank of India has made certain regulations to prohibit, re-
strict and regulate establishment in India of a branch office or a liaison office or a
project office or any other place of business by a person resident outside India,
vide Notification No. FEMA 22(R)/2016-RB, dated 31-3-2016, as amended from
time to time [Foreign Exchange Management (Establishment in India of a branch
office or a liaison office or a project office or any other place of business) Regula-
tions, 2016], (hereinafter referred to, as the FEMA Regulations).
5.3.2 As per Sr. No. 2(f) of the FEMA Regulations, a “Project Office’
means a place of business in India to represent the interests of the foreign company exe-
cuting a project in India but excludes a Liaison Office.
5.3.3 Sr. No. 3 of the FEMA Regulations states that “No person resident
outside India shall without prior approval of the Reserve Bank open in India a branch
office or a liaison office or a project office or any other place of business by whatever name
called except as laid down in these Regulations”.
5.3.4 The eligibility conditions for opening a Project Office, the permis-
sible activities that can be carried out by the Project Office, the application form
for opening a Project Office, etc. are all mentioned in the FEMA Regulations and
therefore it is seen that such offices are regulated by law.
5.4 We find that as per the above provisions a company, resident out-
side India, may initiate business in India by setting up a project office or any oth-
er place of business by whatever name called after taking prior approval of the
RBI. A foreign company can establish a project office in India either on a tempo-
rary basis or a permanent project office, provided the foreign company has been
awarded a project to be executed by them in India from the government or pri-
vate sector. Registration of Project Office with Reserve Bank of India & Registrar
of Companies must be completed before it starts operating and certain conditions
are required to be fulfilled before an application can be made for registration of a
Project Office.
5.5 A project office can be considered as a branch office set up with the
limited purpose for executing a specific project and to execute the project. The
Project Office can enter into transactions for receipt of supply of goods and ser-
vices which would enable them to complete the project. Foreign companies en-
gaged in turnkey construction or installation projects normally set up a project
office for their operations in India. A ‘Project Office’ represents the interests of

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