What Is Epc Contract in India

In a typical EPC contract, the following types of warranties can be provided: The scope of detailed inspections, testing and commissioning depends on the complexity of the project and/or facility being built. The complexity of contracts depends on their functionality and specifications. For example, if the project involves the construction of infrastructure, it is less likely that detailed testing and commissioning will be included. However, if the project involves the construction of a power plant, detailed testing and commissioning will be carried out to determine the stability and/or use of the plant to ensure that all aspects are in perfect working order before handover in accordance with specifications. Functional testing is also a key aspect in all EPC contracts where the project includes mechanical and electrical equipment. The dispute resolution clause sets out how the dispute is resolved and the procedure by which the parties settle all disputes arising from the contract. Forms of dispute resolution include negotiation, mediation, conciliation, court proceedings, arbitration and arbitration. Here`s an example of a dispute settlement clause: India`s economic growth over the past two decades has led multinationals («MNEs») to increase their commercial presence in India on several occasions. Many multinationals have won turnkey engineering, procurement and construction («EPC») projects. An EPC contract typically covers the supply of both offshore and onshore goods and services. These contracts may be either a composite contract, i.e.

without apportionment of the consideration for the goods and services or, on the contrary, without division of the consideration. This article aims to highlight the income tax issues that typically arise in the context of such projects. India follows a mix of residency-based taxation and withholding tax. The contractual framework limits the taxation of multinational corporations in relation to the profits of their Indian companies without legal capacity only in cases where a permanent establishment is established in India or where the income is «fees for technical services». A clause of the applicable law is often used and allows the contracting parties to indicate which law of the country applies to the interpretation of the contract and the resolution of all disputes arising from the contract. It is especially important in any contract, especially if a contract involves parties from different jurisdictions. In most, if not all, construction contracts, it is common for the contractor to provide a performance guarantee to protect the employer`s interests in the event that the contractor fails to meet its contractual obligations. This also applies to EPC contracts.

Performance assurance can take the following forms: A limitation of liability clause limits the EPC contractor`s liability up to a certain percentage of the contract amount. Although different contracts have different percentages of the limitation period, the joint limitation of liability is limited to 100% of the contract amount. A limitation of liability is the best method for the EPC contractor to limit their overall risk. Here is an example of a «limitation of liability clause» from the FIDIC Contractual Terms for EPC/Turnkey Projects: Here is an example of a «Subcontracting and Assignment» clause from the FIDIC Contractual Terms for EPC/Turnkey Projects: Some of the overly detailed EPC contracts list the following procedures: The employer may suspend the contract for a short period, but the contractor has the right to resume work within a certain period after such suspension. If the takeover is not approved by the employer, the contractor may terminate the termination of the contract. EPC stands for Engineering, Procurement, Construction and is an important form of contractual agreement in the construction industry. The engineer and contractor perform the detailed technical design of the project, procure all the necessary equipment and materials, and then build to deliver a work facility or asset to its customers. Companies that carry out EPC projects are commonly referred to as EPC contractors. Engineering, Procurement and Construction (hereinafter «EPC») is a special form of contractual agreement that is often used in many countries where the EPC contractor is held responsible for all activities from the design, procurement, construction, commissioning and delivery of the project to the end user or owner. Here is the list of the main EPC contractors or EPC companies. Here we have compiled the list of EPC companies in India, foreign EPC companies operating in India.

The companies listed below also include EPC companies in Mumbai, Pune, Chennai, Kolkata, Bangalore, Hyderabad and also from all other major Indian cities. Offshore supplies are not expected to have conceptual tax implications in India [see endnote 2]. Contracts sometimes state that delivery is complete and ownership of the goods passes only after certain conditions have been met in India. In such cases, tax authorities have sometimes sought to tax offshore supply. This happens especially if there is a total price [see endnote 3] for the contract. In exceptional cases, the tax authorities have found that the consideration for non-taxable offshore supplies is excessive in order to reduce the tax impact on taxable onshore activities [see final note 4]. A justification of price allocation (in the sense of a transfer pricing study) is mandatory in such cases. Offshore services such as design, drawings, documentation, etc. are an integral part of offshore procurement and are generally entitled to similar treatment. A thorough examination of the facts and documents has revealed in some cases that what is supposed to be a payment for the transfer of a design is legally a payment in the form of a fee for technical services and is taxable under the source rule. The EPC contract may include a provision for «care facilities» so that the contractor is responsible for the care and custody of the facilities until the project is handed over. Few contracts also include provisions for the payment of a premium upon project completion before the agreed time, while some may have the option to mobilize the advance.

The procedure for mobilising the advance is also mentioned in the Treaty. The contract contains a clause according to which the employer and the contractor treat the data shared by one party with the other confidentially and do not disclose it to third parties without written consent. Provisions for the payment of price changes according to the formula are provided for in the contract. It should be noted that price changes apply from a certain date mentioned in the contract and are calculated according to the formula specified in the contract. All price fluctuation conditions based on the RBI index are recorded in the contract. The contract sets out the terms of payment in detail, including, but not limited to, the following: the employer will notify the contractor of the defect and request the following situations. It can terminate the contract if the contractor still does not comply with it: the EPC contract also provides for a severability clause – that is, if a provision or condition of the contract is prohibited or rendered invalid or unenforceable, this provision/condition does not affect the validity or enforceability of other terms/conditions of the contract. The Contractor may not assign the Contract to third parties without the prior written consent of the Employer.

The presence of PE can result in taxes on 40% of P/E income compared to the standard corporate tax rate of 30%. In general, multinationals have a project office in India to effectively execute the EPC contract. In some cases, Indian courts have found that a permanent establishment of a foreign company arose because the project office in India determined that the installation activities, etc., were carried out through such an office [see endnote 1]. In general, a period of 6 months is required to invoke the PE installation/supervision, and the time threshold for each project is set individually. .