Module: General Practice
Q39: Scenario: An Indian 'Unicorn' startup, TechVeda, raises $100 Million by selling 15% of its shares to a Japanese Venture Capital fund. Simultaneously, it pays $2 Million as a "facilitation fee" to a Singapore-based investment bank for arranging the deal.
How are these two amounts recorded?
✅ Correct Answer: B
Analysis of $100M: This involves the issuance of Equity Shares to a non-resident.
It creates a claim (Asset for Japan, Liability/Equity claim on India). Hence, Capital Account (FDI). Analysis of $2M: This is a fee paid for "Financial Services." Even though it is linked to the deal, the fee itself is a payment for a service consumed.
Hence, Current Account (Services). This distinction is vital for tax (GST/Withholding tax) and FEMA reporting.
The $100M comes under FCGPR (Foreign Currency Gross Provisional Return) reporting, while the $2M is a standard service import remittance.
It creates a claim (Asset for Japan, Liability/Equity claim on India). Hence, Capital Account (FDI). Analysis of $2M: This is a fee paid for "Financial Services." Even though it is linked to the deal, the fee itself is a payment for a service consumed.
Hence, Current Account (Services). This distinction is vital for tax (GST/Withholding tax) and FEMA reporting.
The $100M comes under FCGPR (Foreign Currency Gross Provisional Return) reporting, while the $2M is a standard service import remittance.