Delays in Reporting FDI: Late Submission Fees (LSF)

11 July 2018 • Simratjeet Kaur

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Delays in Reporting FDI: Late Submission Fees (LSF)

11 July 2018 • Simratjeet Kaur

FDI reporting compliances involve coordination with the authorised dealer bank and the remitter bank; and it also involves compliances under other Regulations, like Companies Act.  Many Companies could not, therefore, make timely reporting under FEMA. These are only procedural lapses and the law only provided for adjudication process, or the company could have gone for compounding.

Now, the RBI vide notification dated 7th November 2017, has laid down a simple procedure for payment of late fees to regularise the instances of delay in reporting.  These sanctions such as late submission fees (LSF) will provide an incentive for the prompt filing of returns and is in the interests of good and efficient administration.

Master Direction on Reporting under Foreign Exchange Management Act, 1999 has laid down the amount of Late Submission Fees (LSF) that shall be laid down on the reporting delays that have taken place post 7th November 2017. The important points with respect to delayed submission and levy of late fees are as follows:

  1. Amount of late fees that shall be levied:
Amount involved in reporting (in INR) Late Submission Fees (LSF) as % of the amount involved* Maximum amount of LSF applicable
Up to INR 1,00,00,000

0.05 %

Lower of:

  • INR 10,00,000 or
  • 300% of the amount involved
More than INR 1,00,00,000

0.15 %

Lower of:

  • INR 1,00,00,000 or
  • 300% of the amount involved
*Note:

  1. The %age of LSF will be doubled every 12 months
  2. Minimum applicable LSF shall be INR 100.
  1. The payment of LSF is an option for regularizing reporting delays without undergoing compounding procedure.
  2. Calculation of amount of LSF to be done based on the following formula:

Amount involved X time rounded off to the next higher month ÷ 12X 0.05 % or 0.15 % as the case may be

In the case of ARF, the amount involved shall be the amount of inward remittance. And in the case of FC-GPR, the amount involved shall be the amount allotted to the non-resident person.

  1. The final acknowledgement shall be granted after the late submission fee is paid by the applicant.
  2. The date of reporting to the AD bank shall be deemed to be the date of reporting to the Reserve Bank provided the prescribed documentation is complete in all respects.
  3. In case the reporting form (whether in physical or electronic form) is incomplete, then the delay will continue till such time the form is received complete in all respects.
  4. The late submission fee is for reporting delays only and not for contraventions made for non-issue/ late issue of capital instruments or non-transfer/ late transfer of capital instruments etc.
  5. Mode of payment: The Late Submission Fee may be paid by way of a demand draft drawn in favour of “Reserve Bank of India” and payable at the Regional Office concerned.

It is to be noted that the Regional office of RBI has the discretion to levy LSF ranging from Minimum LSF as calculated by the aid of formula to the criteria mentioned for Maximum LSF (as detailed in the table above).

The reader can also look through other blogs based on New FEMA Regulations as notified on 7th November 2017, by clicking the following links:

  1. Issue of Securities: A Glimpse into the new FDI Regime
  2. Foreign Direct Investment In LLPs
  3. Reporting Requirements Under FEMA (Part 1)
  4. Reporting Requirements Under FEMA (Part 2)

35 comments

  1. LSF calculation is monthly or yearly. My client has a delay of 40 months for 1 cr, so .05% is charged monthly or annually?

    1. Dear Reader,
      As per RBI’s Master Direction on Reporting under Foreign Exchange Management Act, 1999, page no. 59, for calculating the LSF amount, the period of contravention shall be considered proportionately {(approx. rounded off to next higher month ÷ 12) X amount for 1 year}. The % of LSF will be doubled every 12 months.

      It can be deduced from the above quoted formula that in your case LSF at the rate of 0.05% will be charged annually. This rate will be doubled every 12 months.

      Hope this assists you in calculating the LSF.

  2. Form LLP1 has been filed with a delay of 26 months for an amount of 70 Lacs. Pls help with the calculation of LSF in this case.

    1. Dear Reader,

      LSF is to be calculated as per the rates given in this blog. Further, you are requested to connect with any Company Secretary nearby you location to seek professional advice in the matter.

  3. Sir, in our case, one of our resident individual shareholder has transferred shares of our company to our non resident parent company in July, 2015. In this case, no FC TRS has been filed by the resident transferor. RBI is not giving acknowledgment to one of out FCGPR filed after the such transfer (i.e. Jan 2016) citing the reason of non availability of FC TRS docs. How is company liable for this non filing of FC TRS and can RBI withhold the approval for FCGPR filed within time? Pls adivse.

    1. Dear Reader,

      Please be informed that the onus of filing Form FC-TRS lies on the transferor/transferee whosoever is resident in India. Hence, the Company is not liable to bear any consequences for the aforementioned non-filing.

      Further, in the user manual available on FIRMS portal, it is mentioned to attach the acknowledgement letter of Form FC-TRS of the original investment at the time of filing of Form FC-GPR. However, in your case, you can attach a clarification letter citing the reason of the failure to file Form FC-TRS, as the same is obligation of the resident transferor/transferee and not the Company.

  4. Hello Sir
    Thank you for the detailed article. Can you please share a copy of the RBI Notification in this regard or a link where the same is available.
    Kajal

  5. Dear Sir,
    We have opened a company in June-2014 with FDI amount of (1 Lakh INR). But FCGPR was not filed. Later after around one year we closed that company due to operation loses. Now after 7 years received a show cause notice from Enforcement Directorate. Don’t know what to do and what is the next step. Please can you suggest me the way forward. And if I have to pay the fine, then how much it will be maximum.

    1. Dear Reader,

      Please note, as per Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, form FC-GPR is mandatorily required to be filed within 30 days of issue of equity instruments.

      In your case, you can reply to the show cause notice received from the Enforcement Directorate (ED) on non-filing of FC-GPR stating the facts of the case and that the Company has been struck-off by the Registrar of Companies (RoC).

      However, we would like to bring to your kind notice the provisions of Section 248(7) of the Companies Act, 2013, which states that the liability of the directors and officers shall remain unaltered and enforceable notwithstanding the Company’s dissolution. Thus, in our opinion, you would be required to file the Form FC-GPR for making the default good.

      Further, you may also opt for compounding of contravention of non-filing of Form FC-GPR in terms of the Section 15 of the Foreign Exchange Management Act, 1999 (FEMA), after making the default good.

      The same was held in the in the matter of M/s. Orbitronics Enterprises Pvt Ltd, where the Company filed the Form FC-GPR and an application for compounding of contravention pursuant to the notice received from the Reserve Bank of India (RBI) after being struck-off by RoC, Chennai.

      Re the penalty which shall be imposed by the RBI,

      a) Upon filing of Form FC-GPR: a late submission fees (LSF) shall be imposed by the RBI. You can refer to our blog Delays in Reporting FDI: Late Submission Fees (LSF) to have an overview of tentative amount which shall be imposed by RBI.

      b) On Compounding: as per provisions of Section 13 of FEMA the amount imposed can be up to three times the amount involved in the contravention. However, you can also refer to the Foreign Exchange (Compounding Proceedings) Rules, 2000, which provides the basis of calculation of penalty amount under computation matrix.

  6. Dear Sir,

    One of our Company was incorporated on 14-05-2019 and Company received subscription amount from the foreign subscriber on 25-10-2020. In this case, what will be the date of allotment of shares to be mentioned in FC-GPR and do we need to go for compounding or only payment of LSF is enough ?

    1. Dear Reader,

      Please note, as per the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 vide Notification No. FEMA. 395/2019-RB read with FAQ’s issued by RBI on FDI, the reporting for issue of capital instruments of an Indian company is required to be done within 30 days from the date of issue of such capital instrument to RBI in form FC GPR. It is pertinent to note that pursuant to the provision of section 54(6)(a) of the Companies Act 2013 every company is required to deliver the share certificates to the subscribers within two months from the date of incorporation, however, in accordance with the provision of FEMA capital instruments shall be issued to the person resident outside India within sixty days from the date of receipt of the consideration. There is no separate provision under FEMA as to issue of share certificates at the time of incorporation. Therefore, for the purpose of filing of form FC-GPR, the date of allotment of shares shall be the date of issue of such shares, and the date of issues of shares shall be reckoned as the date of allotment of shares within 60 days from the receipt of foreign inward remittance.

      In the given our case, the date of allotment of shares for filing of form FC-GPR shall be the date when the Board of Directors of such Indian company passes a Board resolution for allotment of fully paid up shares. However, to synchronize with provisions of the Companies Act 2013, it is a general practice to issue share certificates with nil paid up value within two month from the date of incorporation and once the company receives the consideration money, it can issue the fully paid up equity shares to the subscriber. For better understanding you may refer our blog on Issue of Shares to Non-resident Subscribers after Incorporation under FEMA

      Further, late submission fee (LSF) is to be paid for delay in reporting of the form FC-GPR or other forms required to filed under FEMA, however, the compounding is required if the company has made any non-compliance to the regulation as stipulated under the law for the time being in force.

  7. Dear Sir,

    In case LSF was levied by RBI but it was not paid by the Company due to certain reasons. Now, RBI has rejected the FCGPR. If we go for compounding, is there a chance that RBI may reduce the LSF during adjudication of compounding application. Or the advisable option is to pay LSF only, as the RBI will not reduce the LSF in any case.

    1. Dear Reader,
      Please note that, LSF is an additional fees required to be paid for delay in reporting, while compounding is applied for when there is contravention of the provisions of the FEMA. For more details you may refer our blog on Late Submission Fees (LSF)- A Substitute to Compounding under FEMA.

      We understand from the facts of your case, that the form was rejected due to non-payment of LSF within the due date. In this scenario, you may write an email to the RBI explaining the reasons for non-payment of LSF within the due date and praying for additional time. Though, extension of time for payment of LSF shall be subject to the discretion of the RBI.

  8. Dear Sir/Mam,
    One of the company received a foreign contribution from a director and has delayed in filling of form FC-GPR. Now we are not aware that when should we pay LSF? whether after filing FC-GPR or before filing FC-GPR

    1. The amount of LSF is determined by the RBI depending on the delay in filing the form. You are advised to submit the Form FC-GPR with all the mandatory attachments. Once the form is approved, you will receive an intimation from RBI that the Form is approved subject to the payment of LSF at the intimation (e-mail) shall contain the determined amount of LSF. Once you know the amount, you can pay the LSF through a demand draft drawn in favour of RBI.

  9. My Company is not getting Kyc of foreign Applicant from last 1 Year due to lack of communication between indian bank and Foreign Bank, is their any remedy or solution available for the company

    1. KYC is a mandatory attachment to the Form FC-GPR. In absence of KYC, the Form will not be approved. Since you are facing issues in getting the KYC, it is advisable to contact the relationship manager or the AD Bank directly. Also, you can reach the AD bank on the contact details given on FIRMS portal.

      Further, in case of no response from the AD Bank, you can reach to the regional office of Reserve Bank of India.

  10. What is procedure for late filing of fcgpr, what all documentation is required, and How do we make payment of LSF .. along with FCGPR only we are required to pay.
    or have to make demand draft or other mode.

    1. The Company has to submit the form FC-GPR through FIRMS portal with all the necessary documents depending on the purpose of investment, like Board resolution, FIRC, and KYC of remitter, CS certificate, Declaration by the director, etc along with the clarification letter detailing the reason for delay in filing of form FC-GPR.

      The payment for LSF has to be done after FC-GPR has been approved by the RBI through a Demand Draft (DD) in favour of “The Reserve Bank of India” accompanied by a:-

      1. Covering Letter stating the reason for payment of LSF; and
      2. Copy of the acknowledgement of form FC-GPR received from RBI (wherein the company has been directed to pay LSF)

  11. We had allotted shares o 27th Aug-20. and due date for FCGPR filing was 26th Sep 20. Which was missed and FC GPR is filed on 28th Sep. Will the LSF be the same for 2 days delay as the delay of 30 days. As the calculation of LSF doesn’t speak about the delay by one/two days. Do RBI calculate LSF for month only or it also consider the days if it is only a small delay of a day or two?

    1. Dear Sir,

      It should be noted that LSF (Late Submission Fee) shall be applicable even for one day of delay (i.e any period exceeding the prescribed time of 30 days for FC-GPR Reporting).

  12. Suppose there has been a delay by2 years, then in that case what percentage should be used for calculating LSF ? As in for 1 year, should the percent by 0.15% and for the next year 0.30% or should it be 0.30% for the entire period of 2 years?

    1. The percentage of LSF will be doubled for every twelve months as per the applicable rate subject to the minimum LSF amount as Rs. 100/-.

      Therefore, in your case, if the amount involved is more than INR 1,00,00,000/- the LSF will be calculated as a percentage of the amount involved at the rate of 0.30% for 2 years i.e. for 24 months.

    2. Suppose LSF has been imposed by RBI for delay in reporting of FDI/ FC-GPR. Thereafter, whom should we approach for waiver/ reduction of LSF? Can such LSF be reduced by way of compounding?

      1. The concept of Late Submission Fees (LSF) was introduced by the Reserve Bank of India (RBI) in the interest of stakeholders to regularize the delay reportings without undergoing the compounding procedure. The Regional office of RBI has the discretion to levy LSF ranging from Minimum LSF (as calculated by the aid of formula provided in the regulation) to Maximum LSF. LSF is an additional resort available for regularizing the contravention in delay of reporting, hence there is no such remedy available for waiver of LSF.

        However, RBI on a letter from the Company may consider reduction in LSF on a case to case basis (provided you have a valid reason for the delay such as delay in issuance of FIRC or KYC by AD Bank)

        Further, one cannot file a compounding application for reduction in LSF since compounding application is filed to make the default good via payment of penalty. However, one can always apply for compounding in cases where LSF is levied by RBI.

  13. Company allotted shares in April 2015 but money received against that in November 2015.Can LSF be applicable in that case ?

    No reporting has done yet to rbi
    in that case
    what reportig has to be done for that case to rbi ?

    1. Pursuant to the provisions of the Companies Act, 2013, in case of further issue of shares, the shares are to be allotted after the receipt of the application money. When the shares are allotted to Non-Residents, FC-GPR is to be reported within 30 days of allotment. LSF is applicable in the case of delayed reporting to the RBI, therefore, the RBI has the discretion to levy LSF at the specified rate depending on amount of consideration.
      In case of any other contravention with FEMA Regulations, the RBI apart from levy of LSF for the delayed reporting, may order Compounding.

  14. Dear Sir,
    How are we supposed to pay Late submission Fees ? Can you guide us through the process of payment

  15. Regarding LSF on Form FC GPR
    We have incorporated JV Company recently. We have to file two form FC GPR one for initial subscription and second one is for further allotment of shares
    The FOrm FC GPR for initial allotment was filed delayed by 33 days due to Entity and Business Registration.
    However we could not file Form FC GPR for further allotment of share due to pending approval of earlier form. Its a technical error and meantime 30 days gone and we have filed Form FC GPR for further allotment of shares with a delay of 10 days

    My question whether LSF is applicable on 10 days delay ?
    Whether LSF is compulsory or RBI office may waive if the reason for delay is bonafied.

    1. Dear Sir,

      It should be noted that LSF (Late Submission Fee) shall be applicable even for one day of delay (i.e any period exceeding the prescribed time of 30 days for FC-GPR Reporting).

      LSF is compulsory. However, the Regional office of RBI has the discretion to levy LSF ranging from Minimum LSF to Maximum LSF, depending on the length of delay but it cannot be waived off by the RBI in any case

        1. The LSF is to be paid through a Demand Draft (DD) in favour of “The Reserve Bank of India” accompanied by a:-

          1. Cover Letter stating reason for payment of LSF; and
          2. Copy of the acknowledgement of form FC-GPR received from RBI (wherein the company has been directed to pay LSF).

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