Indian Cabinet Agrees Economic Cooperation Agreement With Singapore

by Mary Swire, Tax-News.com, Hong Kong

22 June 2005

The Indian Cabinet has approved a Comprehensive Economic Cooperation Agreement (CECA) with Singapore, which encompasses agreements on trade in goods and services and investments, and amends the current double taxation avoidance agreement between the two countries.

“CECA would be a milestone in further cementing India’s traditional ties with Singapore... This is India's first CECA with any country. It is also for the first time that India is entering into a Bilateral Economic Integration Agreement in Services," observed Shri Kamal Nath, Union Minister of Commerce & Industry, at a press briefing on Monday.

The Agreement is an integrated package comprising trade in goods and services, an agreement on investments, mutual recognition agreements in conformity assessment of standards in goods, a mutual recognition agreement in services, cooperation agreements in customs, science and technology, education, e-commerce, intellectual property and media.

The existing Agreement on Double Taxation Avoidance (DTAA) has also been amended through a protocol which provides for, among other issues, sharing of information and improved tax treatment.

“Singapore has offered all products made in India entry at zero duty into Singapore. It is expected that CECA would be helpful in developing supply chains from India, since Singapore is a known trading hub," Mr Kamal Nath added.

He continued that:

"The mutual recognition agreements in goods provided in CECA would increase India’s exports especially in areas like milk and milk products and poultry. The liberalisation of the services sector would improve efficiency in economy, while the mutual recognition of education degrees would provide new avenues to Indian professionals."

"Furthermore, a major gain would be that CECA will substantially increase investments in India with Singapore. Already, Singaporean investments in India increased by about 114% in 2004-05. Interest has already been generated in Singapore for making investments in India in infrastructure projects and in the Special Economic Zones (SEZs)."

According to the Indian government, sufficient safeguards have been built in to the Agreement to prevent third country goods from coming in through Singapore. Stringent Rules of Origin comprising simultaneous application of change in tariff heading, value addition of 40% and some well-defined insufficient operations have been prescribed under CECA to ensure that only the goods which are actually manufactured in Singapore and India benefit under this Agreement.

In services, India and Singapore have taken commitments beyond their offer at the WTO. In particular, in financial services, deeper integration with the Singapore financial services sector is expected to take place.

A crucial component in the services agreement is the provision relating to movement of natural persons (Mode 4) which is a very important mode of supply of services for India.

“In Mode 4, mutual recognition agreements will be entered into within a period of 12 months in architecture, accountancy and medicines. Around 120 professions are being recognised from India for the purpose of obtaining visas,” Shri Kamal Nath noted.

India and Singapore have committed to opening investments on a positive list basis with features in-built for protecting investments made by each other in either country.

The Agreement is scheduled to be signed by the Prime Ministers of India and Singapore on 29th June, 2005 during the visit of the Singapore Prime Minister to India. The CECA is expected to come into effect from 1st August, 2005.

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