INDO-SINGAPORE TRADE RELATIONS

INTRODUCTION

The economic relation between Sinapore-India happens to be the major pillar for the relations between the two countries. For the year of 2021,the value of trade between India and ASEAN region amounted for to over 78 Billion US dollars in Fiscal Year 2021.The largest portion of this trade came from singapore ,valued at over 21 Billion dollars.Singapore was also India’s top source of FDI in FY 2019/20.

Singapore enjoys excellent ,broad-based and multifaceted bilateral relations with India ,underpinned by several Economic treaties between the two countries.Major agreements include the CECA(2005),the Double Taxation? Avoidance Agreement (1994).Singapore consistently continues to be one of India’s major trend partners globally and one of it’s major ASEAN partners.

The look East policy?

• It was in the midst of India’s currency crisis that the Look East policy emerged.It was an effort by the Indian government to cultivate extensive economic and strategic relation with South East regions.
• India recognized the need to liberate it’s Economy to generate economic growth.
• It is the policy that formed the foundation of India’s South East Asian Foreign (Economic) Policy with Singapore occupying the Central position.
• The leaders of both countries –PM Goh Chok Tong and PM Narasimha Rao took an interest in collaborating and the Bilateral project ‘The Bangalore Information And Technology Park’ worth $ 150 US Million begun.

DTA (DOUBLE TAXATION AVOIDANCE AGREEMENT)

• DTA came into affect in 1994 .It’s a tax treaty between the two countries to eliminate the double taxation of income between Singapore and India and reduces the overall tax burden of the residents of both countries.
• This encourages the income flow between both countries and in turn ,encourages trade.
• The DTA was modified in June 29,2005 and it’s 2nd protocol came into effect in 2011.

KEY PROVISIONS

• Increase in Business profits : the profits of an enterprise are taxable only in the state where the business operations are carried out. If a Singapore-based business has a permanent establishment in India, the profits attributable to the permanent establishment will be taxed only in India.

• The DTA rates for royalty ,interest and dividends is lower than the tax rates applicable in the countries .For instance ,without the treaty, the withholding tax rate in Singapore for any interest paid to non-residents is 15% whereas in India the rate ranges from 5 – 20% (depending on the type of interest) plus surcharge and cess. Under the DTA the tax on interest is as follows:

1. 10% of the gross amount, if interest is paid on the loan which is granted by a bank carrying on banking business or any such financial institution.
2. 15% of the gross amount in all other cases.

• Capital gains : Article 13 of The DTA specifies the state in which capital gains are subject to tax.?

THE AMENDMENT IN 2005 : In 2005, the India-Singapore DTA was amended. The amendment provides?that any capital gains that arise on the sale of property or shares are taxable only in the country where the investor resides.This was to encourage the investment by singapore and was very? advantageous for Singapore as Singapore did not levy any taxes on capital gains ,India would be giving away an advantage from their side.

THE LOB CLAUSE : However, to avoid the misuse of this exemption especially by third-country residents who establish holding companies in Singapore to avail the capital gains exemption, the treaty added a “Limitation of Benefits (LOB)” clause. Under this clause, a Singapore incorporated company will not be entitled to the exemption from capital gains if the sole purpose of the establishment of the company was to avail of this benefit. Additionally, companies that have negligible business operations in Singapore, with no continuity in business activities will not be entitled to this benefit. As a result of the LOB clause, the agreement is not applicable to shell companies.

CECA :

• It’s significance cannot be understated.It comprises a Free Trade Agreement between the two countries but goes beyond what a standard FTA entails .Apart from the standard agreement on tariff reduction/ elimination on trade of goods, CECA includes a free trade area to be established for trade in services.
• It was the first comprehensive FTA that India signed and the first FTA that Singapore signed with a South Asian country.
• It is a bilateral agreement to invest,promote and cooperate and it introduced an improved DTA.
• CECA was established in India to bring in large amount of investments(FDI ,portfolio investments ).There was the intention to build up areas like telecommunication ,infrastructure and would create jobs for those proficient in the IT sectors .
• For singapore ,the CECA was advantageous as it provided a good destination for Singapore Investors ,opened up a large market for it’s manufacturers and a supply of workers.

?INDIA-SINGAPORE COOPERATION IN MODI’S ERA?

Modi’s visit to singapore not only? strengthened the ties between singapore and India but during his visit there was an initiative to collaborate in a new aspect :building a bridge in the start up landscape .A MOU was signed between Entrepreneurs Singapore , a government agency engaged in developing private entrepreneurs and the Singapore and TiE (Indus entrepreneurs) a Sillicon valley -based association on Entrepreneurs.The Prime Minister had in the India-Singapore Economic 2015 convention reiterated the view that India regards Singapore as it’s biggest ally in the south east asian trade.

CONCLUSION

The 1990s liberalized the economy of India .Building upon that the Singapore –India relations have evolved over decades and presently they are significant trade partners to one another.

Singapore facilitates Indian re-exports, has?signed several free trade agreements?and has a wide DTAA network, provides viable funding options for Indian firms and start-ups incorporated in the country, excellent infrastructural and logistics support, as well as an easy and stable business environment. Its recognition as a global financial hub makes it the primary choice among Indian businesses who aim to internationalize.?

Singapore’s investment in India in the covid-19 pandemic has been impressive .Presently India’s attractive corporate tax rates, swift response in combating the COVID-19 pandemic, impressive mobile and internet penetration, and technology uptake are making India a primary destination to invest.

RESOURCES?

India, Ministry of Foreign Affairs Singapore, https://www.mfa.gov.sg/SINGAPORES-FOREIGN-POLICY/Countries-and-Regions/South-Asia/India (last visited Mar 9, 2022).?

India – singapore relations introduction - mea.gov.in, , https://mea.gov.in/Portal/ForeignRelation/Singapore_2015_07_02.pdf (last visited Mar 8, 2022).?

Singh, Sinderpal, and Syeda Sana Rahman. “India-Singapore Relations: Constructing a ‘New’ Bilateral Relationship.” Contemporary Southeast Asia, vol. 32, no. 1, 2010, pp. 70–97. JSTOR, https://www.jstor.org/stable/41288804. Accessed 8 Mar. 2022.?

Published by Statista Research Department & Feb 24, India: Trade value with ASEAN countries 2021 Statista (2022), https://www.statista.com/statistics/650795/trade-value-asean-countries-with-india/ (last visited Mar 9, 2022).?

India-Singapore Double Tax Avoidance Agreement (DTAA) - 2021 guide, CorporateServices.com (2022), https://www.corporateservices.com/singapore/india-singapore-double-tax-treaty/ (last visited Mar 9, 2022).?

Book reference:

https://ccs.in/internship_papers/2009/india-singapore-ceca-234.pdf.

Mea.gov.in. 2022. [online] Available at: <https://www.mea.gov.in/Portal/ForeignRelation/Brief__for_MEA_s_website_-_Jan_2013-1.pdf> [Accessed 8 March 2022].

https://www.think-asia.org/bitstream/handle/11540/8623/CO18128.pdf?sequence=1