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Service Tax & Income Tax Consultants Bangalore, Accounting Services, Audit Firm in India.

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Budget 2018: Arun Jaitley offers 40% tax exemption on NPS corpus for non-salaried employees : 02-02-2018


Budget 2018: The non-employee subscribers, interested in investing in NPS, must be feeling escalated with the Finance Minister proposing 40 percent exemption of the total amount payable to the pension scheme subscriber on closure of his account or withdrawing his case. It ensures that the non-salaried people now come at par with the salaried individuals, after budget 2018. Up till now, only a salaried employee was granted exemption of 40 percent on the total amount payable to him at the time of closing the account or withdrawing from it under clause (12A) of section 10 of the Act. With this announcement in budget 2018, government has ensured a level playing field for all subscribers of NPS. The amendment will come into effect from 1 April, 2019.

The benefit of exemption for withdrawal up to 40 percent from National Pension System Trust (NPS) has been proposed to to all subscribers and not only to salaried subscribers, said Finance Minister Arun Jaitley in his budget speech.

Under NPS a subscriber can accumulate his savings during his working life. A subscriber can withdraw partially under the scheme in specific cases. In case of salaried employees, an investment up to 10 percent of salary is deductible from the taxable income. An additional investment up to Rs 50,000 is also deductible from taxable income under Section 80CCD (1B).

In budget 2018, Finance Minister Arun Jaitley aimed at reducing distress in agricultural sector and creating more jobs both in rural and urban economies, in order to boost growth of economy. The budget has also displayed enough prudence with respect to the fiscal situation of the economy.

The budget 2018 holds immense importance since it was the first after the introduction of the historic goods and services tax (GST) and the last one ahead of the general election scheduled in 2019. The budget mainly focussed on the agriculture, healthcare and rural infrastructure.

Source : Financial Express

 

Budget 2018: Finance minister Arun Jaitley leaves rich poorer, poor not much richer : 02-02-2018


When it comes to personal income tax, finance minister Arun Jaitley gave with one hand and took away with the other. While he reintroduced standard deduction — it was scrapped in 2004-2005 — Jaitley did away with medical and transport allowance, except for differently abled persons, and hiked cess from existing 3% to 4%.

The standard deduction is now Rs 40,000, which will translate into a small saving of Rs 194 for a taxpayer with an income of Rs 5 lakh and Rs 150 for an assessee with income of Rs 10 lakh. But for taxpayers in a higher income bracket, the new tax measures will actually increase liability.

According to a calculation provided by PWC, the tax liability on income of Rs 25 lakh will increase by Rs 3,713 and the liability for income of Rs 75 lakh by Rs 20,584. In fact, at an income of Rs 12,62,400, the benefit from Rs 40,000 standard deduction will be completely offset by the loss due to additional 1% cess.

Under the earlier regime, an assessee could get deduction of medical expenses up to Rs 15,000 upon production of bills under Section 17(2) and a transport allowance of Rs 19,200 under Section 10(14)(ii).

In total, an assessee used to avail deduction of Rs 34,200 against medical and transport allowances. In the new system, there is a lumpsum standard deduction of Rs 40,000.

The one benefit is that now an assessee will not have to save and furnish medical bills. So far, as transport allowance goes, bills are not required to be produced even today.

Though there was an expectation that tax slabs would be revised, the FM left them unchanged. He also stressed an important point — the average tax paid by a salaried class taxpayer is higher at Rs 76,306 as against average tax of Rs 24,753 paid by individual business taxpayer.

He said apart from reducing paper work and compliance, the decision to allow standard deduction will also benefit the pensioners, who normally do not enjoy any allowance on account of transport and medical expenses. Standard deduction is essentially a flat amount subtracted from the salary income before calculation of taxable income.

It was a part of the Income-tax Act until former finance minister P Chidambaram withdrew it in the Union Budget of 2005-06.

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Source : Times of India

 

Decoding Mr Arun Jaitley’s poll-bound Budget 2018 : 02-02-2018


This was the Modi government’s last full Budget before 2019 Lok Sabha polls. Focusing on India’s largest vote bank — rural millions — the Finance Minister, speaking in English and Hindi to address both India and Bharat, presented a whole bouquet for the country’s voting classes. The politics of the Budget explained .

1) Offered farmers a higher MSP

Finance Minister Arun Jaitley addressed India’s farmers directly when he pegged the minimum support price at 1.5 times the cost of inputs. Clearly, the government was responding to criticism it faced from the farm sector in Gujarat and other states. Farmers across the country have had two complaints on the MSP. One, it would often be below the actual cost of production, and two, the state government would not procure enough. The fi nance minister has targeted both this time. Instead of six different parameters that the Commission for Agricultural Costs and Prices considered for fixing MSP, including demand and market prices, now MSP will be solely based on cost of production. The Niti Aayog will find a mechanism to ensure all farmers benefi t from the MSP.

2) And FM did not stop there

A house with a gas connection, electricity and a toilet for the poor is a clear poll promise from the finance minister .

Ujjwala Scheme 

Free LPG connections will be given now to 8 cr poor women instead of 5 cr. Out of which 3.34 Cr connections released so far

Saubahagya Yojana 

4 Crore poor households to get electricity, with an outlay of Rs 16000 crore

Housing 

1 crore houses to be built for poor by 2019, as part of target of ‘Housing for All’ by 2022. 54% increase in outlay for Smart City Mission to Rs 6,000 crore

3) …Eye on major poll-bound states…

 

* Chhattisgarh: Farmers protest against minimum support price for rice
* Karnataka: Plagued by 4 years of drought, state has seen 3,500 farmer suicides in the period
Madhya Pradesh: MP reported drop in wheat sowing; complaints of poor MSP procurement .

* Rajasthan: As government procurement is low, farmers sell at lower prices; oilseed acreage down

4) Towards universal healthcare

If something was taken out of BJP’s manifesto for 2019, it had to be this peek into what the Modi government plans to ultimately unveil – a Universal Healthcare Scheme. Earlier, the NDA government had introduced price control on stents needed for angioplasty to around Rs 30,000. However, the full angioplasty procedure could easily cost Rs 2 lakh. Now, with the Rs 5 lakh comprehensive family fl oater type of coverage for 10 crore  families, almost all surgeries will be within their reach. With the Lok Sabha elections only a year away, it is highly likely that this revamped National Health Protection Scheme will see an early rollout.

5) And a better rural economy

* 22,000 rural haats to be developed & upgraded into Gramin Agricultural Markets to protect the interests of 86% small and marginal farmers .
* Re-structured National Bamboo Mission gets Rs 1,290 crore, finance minister terms Bamboo, ‘Green gold’
* Loans to Women Self-Help Groups will increase to Rs 75,000 crore in 2019 from Rs 42,500 crore last year
* Two New Funds of Rs 10,000 Crore announced for Fisheries and Animal Husbandry sectors

6) Dalit outreach continues
FM Arun Jaitley needed to show that the government has not taken its eye off welfare of the dalit and backward classes. This government has put together all schemes under different ministries and topped it up

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7) Keeping the Prez and Veep happy

At a time when GoI barely gave the middle class relief and hiked taxes on the affl uent, FM proposed salary hikes for President (from Rs 1.5 lakh to Rs 5 lakh), VP (from Rs 1.25 lakh to Rs 3.5 lakh), Governors (from Rs 1.10 lakh to Rs 3.5 lakh) and MPs (automatic revision of emoluments every 5 years indexed to infl ation)

8) Ekalavya Model Residential Schools

To provide quality education to tribal children in their own environment by 2022 in every block with over 50% ST population .

9) Rise

‘Revitalising Infrastructure & Systems in Education (RISE)’, with an investment of Rs 1 lakh crore in next 4 years, to step up investments in research & related infrastructure in educational institutions .

10) Operation Greens

Rs 500 Cr-project launched to address price fluctuations in potato, tomato and onion for benefi t of farmers and consumers .

11) Tackling Pollution in Delhi-NCR

Special scheme to support efforts of governments of Haryana, Punjab, UP, and Delhi and subsidise machinery required for in-situ management of crop residue .

12) Gobar-dhan

Launch of Galvanizing Organic Bio-Agro Resources Dhan (GOBAR-DHAN) to manage and convert cattle dung and solid waste in farms to compost, bio-gas and bio-CNG

Source : Economic Times

 

Bidders in a fix after Insolvency and Bankruptcy Code Amendment : 01-02-2018


Bulge-bracket bidders for bankrupt companies are working overtime to ensure that they don’t fall afoul of the amended provisions of the bankruptcy law with Seema Jajodia, sister of Sajjan Jindal of the JSW Group and wife of Sandeep Jajodia, the promoter of Monnet Ispat, taking the extreme step of transferring her shares in the company as a gift. Jajodia has also requested that she be excluded from the promoter group of Monnet IspatBSE -3.44 % in a recent filing to the stock exchanges.

Explaining the reason for her action, Jajodia said she was not involved in the formation, management and control of the company from inception and that her classification of promoter was ‘incidental’ to her miniscule holding in the company.

What is left unsaid is that she is the sister of Sajjan Jindal, whose company, JSW, is a bidder for Monnet Ispat and a clarification and request for exclusion from the promoter group will pave the way for JSW to be on the right side of the law and possibly win the bid for the bankrupt company without any legal hassles.

Section 29 C of the Insolvency and Bankruptcy Code has been clarified and expanded to now extend to persons who are in the management or in control, or are promoters of a corporate debtor whose account is classified as an NPA for more than a year. The code also bars bidders if ‘connected people’ like close kith and kin have defaulted on loans. Bidders will also be barred if they or their affiliate, associate companies have been convicted of any offence and been punished with a fine or a prison term of two years.

Mirroring the same legal hurdle and in the same predicament are other bidders such as LN Mittal’s Arcelor Mittal. Arcelor is one of the promoters of Uttam Galva, which has been referred to the bankruptcy courts. Also, Mittal’s brothers, Pramod and Vinod Mittal, had defaulted on loans when they were running Ispat Int’l, a steel company subsequently taken over by Sajjan Jindal’s JSW Steel.

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Can they, and more importantly, the Ruia brothers wriggle out of what is an ironclad clause which puts them in a category of defaulters? The jury is still out. Arcelor Mittal is a promoter of Uttam Galva, along with the Miglani family, by virtue of their 29% in the firm. Uttam Galva defaulted on its loans and thus the resolution applicant process has to be tested, legal circles say. 

Another hurdle facing ArcelorMittal is the ‘connected people’ clause which covers close kith and kin like brothers and the resolution application can be rejected, say legal experts. 

If a brother is a defaulter under RBI guidelines for more than 12 months, then the participation of the applicants can be challenged.

ET reached out to ArcelorMittal. “There is no legal basis to these claims. Arcelor-Mittal is a minority shareholder of Uttam Galva with no control, no management influence and no board representation. ArcelorMittal has no relationship with said individuals,” a spokesperson for company said.

“We are sure and confident we will be able to participate, should we decide to move forward with the opportunity,” the spokesperson added. ArcelorMittal also says that their promoters were never on the board of Uttam Galva. But legal circles argue that this needs to be tested. After all, holding a significant stake in Uttam Galva they could influence decisions of the Indian company.

MR Umarji, former executive director of Reserve Bank of India and one of the key people to draft the Insolvency and Bankruptcy Code said, without going into the specifics of any company: “When it comes to approving a decision of a company in an Annual General Meeting, a person holding over 26% shareholding will have a say because 75% has to accept it. Once you hold more than 26%, you have a casting vote which can tilt any decision this way or that way.”

 

Source : Financial Express

 

Recap of what the taxpayer got from Budget 2017 : 01-02-2018


Expectations are high from Arun Jaitley’s budget which he will present in the Parliament. People are hoping for everything from a hike in exemption limits, to a return of standard deduction and a possible introduction of long-term capital gains tax on equity (something no one is really looking forward to). 
But do you remember what Jaitley announced in last year’s Budget? Well, here is a recap what was announced for taxpayers in the previous budget. 
Change in lowest income tax slab and rebate under section 87A 
The tax rate for individuals in the lowest tax bracket – Rs 2.5 lakh to Rs 5 lakh – was cut to 5 percent from 10 percent. Added to this, the existing rebate under Section 87A of the Income-tax Act, 1961 (which was earlier given to people earning up to Rs 5 lakh) was also reduced to Rs 2,500 from Rs 5,000 for those earning between Rs 2.5 lakh and Rs 3.5 lakh. 
Hence, due to the combined effect of the new rebate under Section 87A and the reduction in the lowest slab to 5 percent, the tax burden for those earning up to Rs 3 lakh would be nil, and for those in the Rs 3 lakh to Rs 3.5 lakh bracket would be Rs 2,500. 
The maximum rebate for the highest tax payer was of Rs 12,500

5% TDS on rent above Rs 50,000 

It was announced in the budget last year that individuals and HUFs paying rent of Rs 50,000 or more per month will now have to deduct 5% tax at source. This move is aimed at ensuring that recipients of large rental incomes come into the tax net as they would be forced to report the full rental income in their tax returns in order to claim benefit of the TDS amount. 
The existing provisions of section 194-I of the Act provide for TDS at the time of credit or payment of rent to the payee beyond a threshold limit. Currently, this provision is applicable to Individuals or Hindu undivided family (HUF) which is liable for tax audit under section 44AB. 
Ban on high value cash transactions
The Finance Minister, in his 2017 Budget speech, had proposed a ban on cash transactions above Rs 3 lakh, subject to certain exceptions. The proposal was made with respect to the quantum and menace of black money, which adversely affects government revenues. Black money is generally transacted in cash and a large amount of unaccounted wealth is stored and used in the form of cash. 
Later on the limit was revised to Rs 2 lakh. 
Source : PTI

Key Highlights from Budget 2018: Ease of Living is new catch-phrase : 01-02-2018


Finance Minister Arun Jaitley’s fifth and last full Budget comes amid subdued economic growth, challenging fiscal situation and farm distress. What makes it all the more important is the upcoming elections in eight states this year and the Lok Sabha election next year, all of which put tough demands on him. How has Jaitely managed to balance populist demands, the need to support economic growth and Prime Minister Narendra Modi’s focus on fiscal discipline and reforms? Read the highlights from Budget 2018 below to find out:

Overview

“Four years ago, we pledged to the people of the nation an honest government,” the Finanace Minister began by saying. Jaitley stressed on the structural reform implemented by PM Narendra Modi that have enabled the government to positively transform India from being one of the fragile five.

Jaitley said the indirect tax system had been simpler, and the use of technology has enabled the government to increase the tax base.

Jaitley said India achieved an average 7.4% GDP growth in the last 3 years of the BJP government, in addition to the manufacturing sector being back on the growth path. Jaitley also said exports are expected to grow at 17% this fiscal.

He also said the government hopes the economy will grow at 7.2% to 7.4% in the second half of 2018-’19.

Jaitley said the Indian economy was on track to become the 5th largest in the world, while already being the 7th largest. Jaitley stressed on an often overlooked point that India is the third largest economy in purchasing power parity terms.

The Finance Minister also said that the focus would now switch from Ease of Doing Business to Ease of Living.

Agriculture

The government’s emphasis will be on generating higher incomes for farmers, by helping them produce more with lesser cost, and in turn, earn higher income for their produce.

Jaitley stressed on the fact that India’s agricultural production is at a record high level today. 275 million tonne foodgrains and 300 million tonne fruits and vegetable have been produced in the country.

The FM said the government wants farmers to earn 1.5 times the production cost, and the Minimum Selling Price (MSP) for the Kharif Crops has been set at 1.5 times the produce price. Jaitley said the Centre will work with states to ensure that all farmer get a fair price .

Agricultural market and infra fund of Rs 2000 crore fund will be set up to strengthen the market connectivity.

Source : Economic Times

All eyes on Arun Jaitley’s last ‘hurrah’ with Budget 2018: Will it really impact Modi in 2019? : 31-01-2018


If one thing the Narendra Modi government may successfully claim credit for in the last four years, it has almost ended elements of surprise, curiosity, shock and awe that used to mark the days preceding Union Budgets in previous governments. Take for instance Union Finance Minister Arun Jaitley’s last Budget presentation in the Parliament. It was dull, on the expected lines and came days after Prime Minister Modi had already delivered his famous New Year’s Eve speech, which was dubbed by many analysts as a “mini-Budget”. The speech became more famous as Modi surprised his admirers by not using the word “Mitron” in the address to the nation. One more issue that restricted the Union government from announcing any surprise sops was the upcoming Assembly elections in five states.

Budgets are not made in a day. It is anyone’s conclusion that what Jaitley delivered through his speech in 2017 was well thought out in advance and synchronized with the so-called “mini-Budget” speech of Modi that was made after the completion of 50 days of Demonetisation.

As Arun Jaitley prepares for what is his last hurrah with the Union Budget before 2019 elections, two questions are on everyone’s mind – Will the surprise factor return in Budget 2018? And, will Budget 2018 help Narendra Modi in General Elections 2019?

The return of surprise factor, for the general public, would mean the announcement of sops, tax rebates etc. However, after the GST rollout last year, much of the “surprise factor” is gone. Jaitley may still spring a surprise with income tax and corporate tax limits.

Secondly, in the last four years, Modi government has given primacy to fiscal prudence. Hence it is highly unlikely that Budget 2018 will have any big bang vote-catching element, especially when the government has already announced some big investment decisions like bank recapitalization, infrastructure spends etc.

Coming to the second question: Will Budget 2018 help Narendra Modi in General Elections 2019? We all know that Budget 2019 will be an interim Budget ahead of the next Lok Sabha elections. So, it will contain essential standard statements of expenditures and revenue. To effectively answer the second question, we need to find an answer to another question – that is: Do people really vote after reading budget announcements? Or, do voters really get influenced by Budget promises?

The general understanding is that people are influenced by the effective implementation of what that has already been announced in previous years. Modi government will be taken to task in 2019 if people are convinced that it has failed in implementing what it announced earlier. So, if the Centre has failed in implementing previous announcements, it is unlikely it can do so by announcing something big in this Budget, just a year before next Lok Sabha elections.

India is a data-starved country, literally. As Niti Aayog member and Prime Minister’s economic advisor Bibek Debroy said in an article for Financial Expressin the wake of Demonetisation, “Many problems with policy-making in India stem from paucity of data, understandable for an economy that is largely self-employed, informal/unorganised and even rural.”

Debroy went on to say, ” Indeed, the present National Statistical Commission is examining ways to revamp India’s statistical system. Sometimes, there are holes in data. Sometimes, there are time-lags.”

The way people will vote in 2019 will be different from previous General Elections. For the first time, most of the voters would in the category of “youth” who would vote after experiencing five-years of a majority government and a “strong” leader in Narendra Modi. In 2019, it is highly likely that people will vote for the “leader” and not just a party or an ideology. It can be said with the benefit of the hindsight of the last few Assembly elections.

Some examples: In Delhi 2015, Arvind Kejriwal was the clear leader. Similarly, in Bihar 2015 and Punjab 2017, Nitish Kumar of JD(U) and Amarinder Singh of Congress were the “only” prominent leaders of their respective states. Interestingly, in states where there was no the presence of strong leaders, or where there were doubts, like in Uttar Pradesh where Akhilesh Yadav was fighting a bitter family feud, people mostly voted in the name of Narendra Modi – the Prime Minister.

Source : Financial Express

CII seeks easier GST compliance procedures in Budget : 31-01-2018


Ahead of the Budget, industry chamber CII today sought redressal of issues related to GST compliance including filing of returns, matching of invoices and getting timely input tax credit.

According to the chamber, simplification of Goods and Services Tax (GST) compliances would result in higher number of returns filed, increased collection of revenues, and easier working capital management by trade and industry. The GST Network (GSTN) functioning and return filing formats could be tweaked to ensure acceptance of invoices, it added.

CII also stressed upon the need for designing a fool- proof and effective return filing system where seamless and speedier input tax credit (ITC) can be availed by the recipient, as against the current requirement of filing three GST returns.

The landmark tax reform was introduced on July 1, 2017.

In a statement, CII said it is in agreement with the proposals presented to the GST Council by Nandan Nilekani, former chairman of the Unique Identification Authority of India and chairman, InfosysBSE -0.76 %.

“If the buyer accepts supplier invoices on the GST System, this automatically determines the input tax credit. In the proposed model, there will be no mismatch or reversal,” the statement quoted Nilekani as saying.

“Currently, the buyer is responsible for ensuring tax payment by suppliers to avail ITC. Mismatch in invoices due to filing errors leads to funds being held up. A successful model should align with the natural business process,” Nilekani added.

He further suggested that the proposed process will offer multiple channels for upload and acceptance of invoices and filing of returns.

Small taxpayers with no automated accounting systems can view and accept pending invoices directly on the portal, and SME taxpayers with some level of automation can use Excel- based offline tool to download, compare and accept pending invoices.

CII had earlier recommended similar measures for easier invoice matching at the time of initial release of the Model GST law.

“The recommendations made by Nilekani seem practical and are expected to be business friendly for the successful transition to GST,” CII said. It also suggested trials and tests before introduction of such a system

Further, to keep the system simple, it is also suggested that uploading of invoices with total amount with GSTN of recipient should suffice instead of invoices at line-item level.

Acceptance of invoices by buyers and suppliers as per normal business process should be used for ITC payment. This will pave the way for smoother implementation of GST and simplification of return filing system, which it turn will enhance tax revenues towards a successful Good and Simple Tax, the industry body said.

Source : PTI

Popular Modi can afford to keep his fiscal promises : 31-01-2018


With elections in sight, India’s government is under pressure to loosen fiscal policy in its budget on Thursday. Tempting as this may seem, it would be a mistake.

Chief economic adviser Arvind Subramanian has made the most candid argument for relaxing the country’s tough fiscal stance: Given the political calendar, promises to honor the targets simply wouldn’t be believed. He has a point — but the answer is to do a better job of explaining why the targets make sense.

The Indian economy was jolted by the overnight withdrawal of high-value currency notes in November 2016 and last July’s introduction of a complicated goods-and-services tax. Plummeting crop prices have caused widespread distress in the rural areas where most Indians live. Facing upcoming state polls, as well as another general election in 2019, Prime Minister Narendra Modi is expected to loosen the purse strings. Indeed, many investors seem to want him to, because they’d like to see him reelecte .

Nonetheless the government ought to stick to its goal of reducing the deficit to 3 percent of gross domestic product next year. The target for this financial year is likely to be exceeded regardless. Overshooting it again would dent the hard-won confidence that earned India its first debt-ratings upgrade in years last November .

The most recent fiscal numbers have already contributed to a rout in sovereign bonds — lately the worst-performing in Asia. Benchmark 10-year yields rose again after Subramanian’s comments and are up almost 40 basis points since the beginning of December. A budget that raises the cost of borrowing any further will undercut any benefit that additional public spending might bring.

Crude-oil prices compound the problem: They’re climbing, which threatens both to worsen the government’s subsidy bill and to push up inflation, already at a 17-month high. The government has often expressed its frustration with the Reserve Bank of India for failing to cut rates faster. A populist budget would threaten further increases in inflation and could even force the RBI to raise rates, choking off any potential expansion.

Even without a fiscal boost, the economy is likely to do somewhat better next year. On current policy, the government predicts growth will rise from 6.5 percent to somewhere between 7 percent and 7.5 percent. Exports are up and supply chains have begun to recover from the shock of demonetization. As businesses adjust and the new goods-and-services tax is further streamlined, tax receipts should rise as well.

The best way to support this improvement is not with fiscal indiscipline but by addressing India’s bad-loan problem, which would free up banks to lend and companies to invest. The government has made a good start on this, and needs to keep at it.

More than any Indian leader in recent memory, Modi has the political space to do the right thing. He faces a weak opposition that’s unlikely to pose much threat even in 2019. Voters have shown that they’re willing to tolerate pain so long as they see the prime minister as acting in their long-term interests. Even the fallout from demonetization and the new GST haven’t seriously dented Modi’s astronomical approval ratings.

By insisting that the government honors its fiscal pledges, Modi could burnish his image as a special kind of politician while maintaining India’s fiscal credibility. That’s the best course for his government and his country.

Source : Economic Times

Budget 2018 expectations: After Economic Survey, much now depends on what FM Arun Jaitley has in store : 30-01-2018


Budget 2018: In its own #MeToo moment, the Economic Survey this year was released with a symbolic pink cover and a dedicated chapter on India’s notorious gender issues. The Survey, over the last few years under Arvind Subramanian, has provided a refreshing take on resolving the challenges facing the Indian economy. In the past, he has given quite a few out-of-the-box policy recommendations like the establishment of a bad bank for resolution of the problem of bad loans and implementation of a universal basic income to do away with the inefficiency of subsidies. The document this year is no less insightful.

The Survey places the GDP growth estimate for the current fiscal at 6.75 per cent. This figure is a tad higher than the Central Statistics Office’s projection at 6.5 percent, as in its own estimates, it has not incorporated the pick-up in growth in the latter half of the year. Moreover, the Survey estimates that, as a result of the reforms undertaken this year, real GDP growth will rise by 7 to 7.5 percent in the next fiscal. This would reinstate India’s position as the fastest-growing major economy in the world. On India’s economic growth in the recent past, the Survey highlights an interesting aspect. Over the last 4-6 quarters, India’s growth has temporarily decoupled with that of the world economy. Until early 2016, economic growth in India was accelerating while that of other countries was decelerating. Since then the opposite has been true.

This was due to a combination of five factors. First, until mid-2016, real interest rates were following the downward global trend after which India’s rates deviated and started shifting upwards. This affected investment activity negatively and resulted in an appreciation of the rupee, which subdued export activity. The second and third factors were the twin effects of demonetisation and the Goods and Services Tax (GST). The fourth was the twin balance sheet (TBS) challenge of banks and corporates while the final factor was the uptick in oil prices over the first three quarters of 2017-18.

However, of late, India is displaying a robust revival in growth along with the world economy, signalling an end of the temporary decoupling it witnessed. The story of revival in the Survey is also punctuated with warnings of risk factors within the economy. The biggest challenge in the upcoming fiscal arises from the rise in oil prices. The Indian economy always finds its growth story challenged by twin deficits within its fiscal and current accounts owing to variability in the global oil prices. The economy needs to find a sustainable solution to this historical macro-economic vulnerability by rapidly ramping up its strength on the export front, preferably in manufactured goods.

The second risk factor highlighted by the Survey, which could impact India’s growth in the near future, is a possible correction in the stock markets. As this column has previously highlighted, Indian stock markets have displayed a puzzling trend over the last few years. Since December 2015, the Sensex has risen 46 percent in rupee terms while economic growth and corporate profits have decelerated. This trend has largely been driven by expectations of a revival in growth and a sudden change in the savings pattern of households after demonetisation. However, as the Survey points out, a sharp correction cannot be ruled out in case future growth of the economy and corporate earnings do not remain in line with current expectations.

Such a correction in stock markets could trigger the classic emerging market “stall” in capital flows and force further hikes in interest rates, which will be quite inimical to economic growth. Hence the duality of growth and risk is the current saga of the India story.

So, what do the findings of the Economic Survey tell us about the focus of Budget 2018?

First, as expected, the agriculture sector will be in deserving focus on February 1. The Survey stresses on giving adequate support to the sector. However, in a major setback to Modi’s aim of doubling agricultural income, the Survey provides a key finding that, due to climate change, annual agricultural incomes could reduce by 15-18 percent on an average. In unirrigated areas, this figure could climb up as high as 20-25 percent.

This provides some crucial Budget 2018 recommendations. Higher investment needs to be made towards expanding irrigation with the implementation of efficient drip and sprinkler technologies. Moreover, a plan to provide direct income support to farmers can be put in motion to replace inefficient agricultural subsidies.

Second, the Budget 2018 needs to address the perpetual problem of employment. Although India’s unemployment rate is around 3.5 percent, the unemployment rate in the 15-24 age group stands at 10.5 percent, as per recent International Labour Organisation estimates. Therefore, India has an abysmally low capacity to provide jobs to first-time workers. The only solution for India is to strengthen its manufacturing sector.

Providing incentives to labour-intensive export sectors in the Budget can kill two birds with one stone. Apart from providing jobs, growth in the export sector will imply higher current account surplus for the Indian economy which can provide a cushion against swings in the global oil prices. Therefore, it would go a long way in reducing India’s historical macro-economic vulnerability that the Survey highlights.

There are various other aspects of the economy that will hopefully be addressed when Finance Minister Arun Jaitley stands up in Parliament on the fateful day. Reviving investment activity, stabilising the GST and, most importantly, the question of sticking to the fiscal deficit targets; quite a lot hangs in balance on the upcoming Budget. It will be interesting to see the course that the government decides to take.

Source : Financial Express

 

Heaping taxes on investors in India is a terrible idea : 30-01-2018


Sending investors the bill for a shortfall from India’s new goods and services tax is a bad idea. Finance Minister Arun Jaitley should resist the temptation. A long-term capital-gains levy on equity can be problematic in a country perennially short of domestic savings. In a frothy stock market, it’s like crying “fire” in a crowded room.

Profits from selling shares that were bought more than a year earlier has been tax-exempt in India for a decade and a half. It was replaced 14 years ago by an imposition on all securities transactions, regardless of gains or losses. Every year, there’s talk of bringing back a capital-gains charge. Speculation is unusually intense ahead of the Feb. 1 federal budget, with Deloitte Touche Tohmatsu India LLP calling capital-gains tweaks “low-hanging fruit.”

But from a poisonous tree.

Bloomberg

Granted, collections from last year’s GST have been lackluster. Evasion may be part of the story; but multiple rates, constant tinkering with slabs and deadlines and complicated filing may be bigger reasons. It may take another year for the tax to stabilize. However, going after stock investors to plug the deficit would backfire.

The securities transaction tax, which is 0.1 percent for both buyers and sellers of cash equity, is easy to administer. While it brings in about $1 billion, a mere 1.5 percent what New Delhi collects on corporate profits, it’s a stable source of revenue.

Destabilizing a levy everyone’s come to accept, and replacing it with a tax that works only when markets go up, is pointless tinkering. The benchmark index is within striking distance of its peak price-to-earnings valuation of 19.5 — there’ll be nothing for Jaitley to collect in a falling market.

Most brokers agree that reimposing the capital-gains tax could push down the stock market. Should negative sentiment persist, the government may find it hard to speed up asset sales. State-run banks, too, would struggle to raise the equity they need to boost their degraded lending capacity. Unless Jaitley garners at least $10 billion from sales of state assets, and another $8 billion from auctioning telecom spectrum, the burden of state subsidies plus the extra interest he’ll have to pay on  recapitalization bonds (being issued to mend the broken balance sheets of government-owned lenders) would fall on additional borrowings. That might displease bond vigilantes.

Bloomberg

 

Rather than reintroducing long-term tariffs, India needs to review some of the harsher short-term levies

On current plans, dollar-denominated futures contracts on Indian stocks will kick off in Singapore next month. Already, futures on the benchmark Nifty 50 Index are a big draw in the city-state. Should more foreign investors trade Indian equity derivatives there to avoid a 30 percent capital-gains tax in India, well-paying finance jobs in Mumbai would be at risk.

At a time when Jaitley’s No. 1 priority before next year’s general election is to boost investment and employment, dismantling a transactions-tax regime that works, only to chase an uncertain pot of gold, would be nothing short of an own goal.

Source : PTI

 

Corporate tax cuts may have to wait as Modi faces budget squeeze : 30-01-2018


Businesses waiting for Indian Prime Minister Narendra Modi to follow through on a pledge to cut corporate taxes may need to wait a bit longer.

In his last full budget before 2019 elections, Modi is facing a revenue squeeze that may make it difficult to deliver on a promise to lower the basic corporate tax rate over time to 25 percent from 30 percent. It’s a catch-22 situation for the premier, who is also trying to lure foreign investors at a time when the U.S., U.K. and other countries are lowering business taxes.

Here’s a look at Modi’s challenge ahead of the government’s budget on Thursday.

Why Cut?

Modi pledged in 2015 to bring down corporate taxes over four years, but businesses are still waiting for a roadmap on how that will happen. It’s part of his mission to improve India’s investment climate: he is also reducing red-tape, spurring the liquidation of assets to speed-up the recovery of bad loans, and introduced a national sales tax last year to cut down business costs. India is ranked 119 out of 190 countries when it comes to ease of paying taxes, aaccording to the World Bank’s Doing Business index.

bloomberg
While those reforms have helped India win a credit rating upgrade and record foreign direct inflows last year, Modi needs to keep investment going to help support an economy that’s set to expand at its slowest pace in four years. 
Tax competition around the world is heating up. The U.S. lowered corporate taxes by 14 percentage points to 21 percent, with companies like Apple Inc., Wal-Mart Stores Inc. and JPMorgan Chase & Co. announcing plans to raise investment, hiring or wages. 
“The U.S. has made corporate tax rates competitive and India needs to respond,” said Jayesh Sanghvi, a tax partner at EY in Hyderabad. If it doesn’t, corporates will examine arbitrage opportunities given the 10-15 percentage point difference, he said. 
Despite the fiscal squeeze, businesses are still expecting Finance Minister Arun Jaitley will follow through with the government’s promises. Half of the 120 professionals surveyed by Deloitte expect the corporate tax rate to be cut to 25 percent this week, the company said in a statement on Monday. Rakesh Nangia, head of tax advisory firm Nangia & Co., warned of a “flight of capital” if tax rates aren’t reduced. 
Can India Afford It?
Modi is in a fiscal bind. Revenue collection remains under pressure following the chaotic roll-out of a national sales tax, and with an eye on next year’s election, his spending priorities may turn to the distressed rural sector, putting pressure on the budget deficit. 
The government signaled on Monday it may slow the pace of fiscal consolidation after pledging to narrow the budget gap to 3 percent of gross domestic product in the year beginning April 1 from an estimated 3.2 percent this year. Chief Economic Adviser Arvind Subramanian told lawmakers that setting “overly ambitious targets” may undermine the credibility of fiscal policy. 
Abhishek Gupta, a Mumbai-based analyst with Bloomberg Economics, expects the budget deficit to come in at 3.4 percent of GDP this year. The median estimate in a Bloomberg survey of 18 economists is for 3.5 percent this year and 3.2 percent next year. 
Political considerations may also prevent Modi from reducing corporate taxes now, said Shailesh Kumar, a senior analyst at Eurasia Group in Washington. 
“In addition to concerns that a reduction will further widen the deficit, a move by Modi to cut corporate rates ahead of next year’s election would expose him to opposition criticism that he is a crony capitalist who only wants to help friends in the business sector,” he said. 
China will offer a tax exemption to foreign investors if they re-invest their dividends in projects encouraged by the government. 
Aside from the corporate tax cut, the U.S. government is also discouraging offshore payment for services in a move that may hurt India’s pharmaceutical, research and development and software companies. 
“U.S. multinationals operating in India would want to look at the profits they are leaving here,” said Rajesh H. Gandhi, a partner at Deloitte India. “Similarly, Indian multinationals operating in the U.S. could be encouraged to increase the depth of their U.S. operations and allocate more profits at the U.S. level.” 
Source : Economic Times

GST returns filing: After SMEs complain of complexity, Centre set to ease process : 29-01-2018


To encourage compliance in the face of most taxpayers, especially SMEs, complaining that filing GST returns is very complicated, GST Network has decided to provide free accounting/billing software to firms that also has the facility to auto-generate the necessary GST reports. The idea is to help SMEs not just file their GST returns but also manage their businesses better in terms of cash management, generating mismatch reports, process their payroll, do inventory management, etc. To do this, GSTN has invited developers to create this software, the best five of which will be uploaded on the GSTN portal, and users will be free to choose which one they wish to use. Developers will not be paid for the software but will bid for each GST return processed using their software—the concept was floated before Infosys Chairman Nandan Nilekani floated the idea of junking the detailed returns in favour of just uploading invoices, so the payment terms will probably need to be tweaked. These costs will be paid by GSTN for the initial two years for which the contract is valid for. In addition to the software, developers will have to provide tech support for users through call centres and email.

So far, nearly 40 companies have submitted proposal to GSTN, an industry source said. The software is required to digitise sales and purchase invoice, automate matching of inward and outward supplies and generate tax liability along with available input tax credit automatically. At the end of the cycle, the software would be able to generate and upload tax returns onto the GSTN portal thus minimizing manual intervention. “It is a step towards automating and digitising return filing processes for those who rely on manual book-keeping,” Prakash Kumar, ceo of GSTN said. He added that the selected developers, which will be the top five lowest bidders, will put their products on GSTN portal for taxpayers to choose among them. To maintain consistency, qualified developers will be asked to match the lowest bid so that all the service providers have the same price.

The government will pay the developers on every successful return filed. The basic software will be free of cost but a taxpayer can avail add-ons for a fee paid directly to the developer. “Once the final modalities of return process is decided, we will make changes in the software requirement but it is too early in the process as the selected developers would be required to put the software on trial for 90 days before its made available for assessees at large,” Kumar said.

Companies like Marg ERP and Tally Solutions already have very similar products which are being used by their clients. An executive at a software firm said that they would need to make only minor tweaks in their products to qualify for GSTN requirements. This could provide an opportunity to acquire new customers, he added. “The government seems to have taken an initiative to bear the cost of using software services on behalf of small taxpayers, which is a practice in many countries” Prakash Maheshwari, national sales manager at Marg ERP said. Several countries including Singapore use this model of providing assessees with free software tools.

GSTN’s effort to create an ecosystem of GST suvidha providers, who would use the application programming interface (API) to provide the link between taxpayers and the portal, hasn’t quite worked due to GSTN’s inability to provide APIs on time, a source said on condition of anonymity. He added that providing free software solutions to small taxpayers was an attempt to fill the void.

Source : Financial Express

Budget 2018: Can Jaitley walk the path of fiscal prudence? : 29-01-2018


Finance minister Arun Jaitley’s fifth budget speech will be closely watched. Can he walk the path of fiscal prudence and accommodate political compulsions ahead of next year’s elections? ET looks at the numbers that could inform his thinking.

Can Jaitley walk the path of fiscal prudence and accommodate political compulsions ahead of next year’s elections?

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Source : PTI

 

Arun Jaitley’s last full Budget to be different due to GST : 29-01-2018


The last full Union Budget to be presented by Finance Minister Arun Jaitley in the forthcoming session of Parliament beginning on Monday will be unlike his previous four such exercises because of the complete overhaul of the indirect tax regime effected by implementing the Goods and Services Tax (GST) last year.

The Budget, to be the last for the BJP in view of the general elections due in the first half of 2019, usually has two main components.

The first part deals with new schemes and outlays for various existing schemes and sectors for the coming fiscal, while the second contains announcements on direct and indirect taxes.

With GST realising the dreams of the pre-Independence nationalist bourgeoisie of a unified market through a single tax regime, replacing the earlier system of multiple central and state taxes, this year’s budget will need take into account only those items like petroleum products that still remain outside the purview of GST.

The 2018-19 budget could thus contain changes in customs and excise duties on these remaining products, which for most others have been subsumed under GST.

In the area of direct taxes like income tax and corporate tax, Jaitley hinted at some relief for taxpayers as he made a case for rationalisation of the direct tax structure considering the fact that “the tax base has expanded”.

Addressing an event here on Saturday to mark International Customs Day, Jaitley said: “In income tax, the base has become larger; it’s bound to enlarge. And, therefore, charging higher rates from few selected groups — which has traditionally been done — is an area which has been changing.”

The country’s net direct tax collections witnessed an increase of 18.7 per cent till January 15 this fiscal, compared with the corresponding period last year.

With the general elections due in 2019, the government will present next year, instead of a full Budget, a vote-on-account, which only deals with the expenditure. Besides, new schemes and changes to taxation are not presented in a vote-on-account.

Moreover, with major states bound for polls this year, observers expect the budget to be weighed in favour of the farm sector at a time when data shows a dip in agriculture growth and the sector under stress.

Source : Economic Times

Why GST looks better in so many ways : 27-01-2018


Given all those filing GST returns have to use up their unexpired tax credits by December, and the jump in collections for that month—these fell from Rs 92,283 crore in July to Rs 80,808 crore in November and then rose to Rs 86,703 crore in December—it is likely the worst of GST is behind us since the number of returns filed is up 46% since the process began, even though it will take a while for the benefits in terms of a sharp rise in compliance to kick in. For January to March, if past trends in indirect taxes are anything to go by, GST collections should average over Rs 110,000 crore per month at the least. What is more encouraging is the GST Council’s willingness to be flexible, though the anti-profiteering law sticks out like a sore thumb, and the jury is still out on the implementation of the e-way bill—it is being brought in to improve compliance and the government claims it will ensure harassment is kept to a minimum. Certainly, the GST is not the 2-3-rates structure many hoped for, but the GST Council reducing rates on many items in November suggests we are headed in the direction of lesser rates; and there is discussion on including items that have been, so far, left out of GST.

And while the blame game continues over who designed the complicated GST returns, there has been progress here too. While the GST Council regularly postponed the filing of detailed returns when industry said it was not ready, the biggest simplification is the suggestion made by Infosys chairman Nandan Nilekani—Infosys handles the GST Network (GSTN)—that, instead of filing detailed returns, businesses should just upload their invoices and handle the matching themselves. Every business, he says, prints an invoice while dispatching a good or a service and this is checked by the receiving party before making a payment—since this matching is being done anyway, why not tweak the system to allow the relevant details of these invoices to be uploaded directly on to the GST Network where the matching can be done by the businesses? While companies will no longer file detailed returns, the GST’s data analytics team will have to keep mining the data to ascertain useful trends —for instance, are firms underpaying GST or, once the information is shared with other departments, are people/firms understating their personal/corporate tax liabilities? Even more heartening is the effort made to simplify the process of filing these returns, especially for the lakhs of SMEs who are finding the process very cumbersome and taking up much of top management time. The GST Network has asked firms across the country to develop simple accounting/filing software to help these SMEs. The software will help them maintain simple accounts by keying in details of invoices made/received and then help generate a P&L statement, balance sheets, create various MIS reports including those on mismatches, generate alerts on payments due or taxes paid and so on.

Around 40 companies have already evinced interest in this and the plan is to take the best five accounting software and make them available for free to everyone. Developers will bid a sum of money for every return filed using their system and the GST Network will pay them accordingly—the system will keep track of how many returns have been prepared using each accounting software. With such an opportunity, there are other interesting developments as well. An app from Iris Business Services, for instance, allows you to take a picture of a bill and, using OCR, the app displays the relevant features of the bill immediately—the supplier’s GST code, the invoice number and amount, whether the supplier is even registered or not. Since the app is still in its beta stage, if needed, it can build in alerts on whether the supplier has, in fact, paid the tax; invoices can be aggregated by supplier names, etc. In other words, it is not necessary that all invoice details have to be keyed in manually by buyers or that invoice matching be done manually. Another company, WeP Digital, for instance, offers billing systems—both with touch-screens as well as physical keyboards—that generate all GST reports in the requisite format and, at the press of a button, these can be automatically uploaded to the GST Network.

While the machines cost in the Rs 30,000-40,000 range, there are also per-return options available and, for those who prefer working on traditional laptops/PCs, there are also cloud-based solutions—this is what the GST Network is trying to develop more versions of to ensure GST filing is no longer seen as a chore. The GST system is also in the process of developing various phone-based solutions to make the generation/acceptance of GSTN data even more convenient—once a vendor uploads data on goods supplied, the buyer has to accept this for the information to be considered authentic; the plan is also to allow users to generate e-way bills on the mobile and now, presumably, to upload the relevant invoice level details to the GST Network. None of this is to suggest GST filing is as simple as 1-2-3, but it has to be recognised that with the GST Council regularly monitoring/reducing rates and the GST Network trying to come up with software solutions—on computers and on mobile phones—what Rahul Gandhi called the Gabbar Singh Tax may just metamorphosise into a Good and Simple Tax sooner than you think.

Source : Financial Express

GST filing made easier with ‘GSTmadeeasy’ : 27-01-2018


With an aim to support the government’s GST initiative and to make every Indian SMEs/MSMEs GST compliant, a revolutionary easy to use, need of the hour GST solution “GSTmadeeasy” is soon to be launched, with end-to-end business solution for MSMEs/small traders to deal with digitizing requirements mandatory under the new GST regime.

CAIT has said that GST is a technology driven taxation system which requires mandatory compliance through digital technology only. And, nearly 60 percent of small businesses in the country have yet to adopt computerisation in their existing business format.

CAIT further states that half of the nearly six crore small businesses fall under the threshold limit of Rs.20 lakh and do not require registration under GST. Another about one crore traders may opt for ‘Composite Scheme’ but will have to get registered under the new tax regime. Remaining about two crore small businesses do not fall under any indirect tax law and will have to comply with the new rule mandatorily.

Ravi Shankar Rao, Co-Founder and CEO of GSTmadeeasy said “It is saddening to see the present scenario of the small businesses who are running from pillar to post, mainly because of lack of technology awareness and preparedness on GST, its daunting cost and moreover the clarity on GST rules and regulations to generate and file regular monthly/quarterly returns.”

“It is shocking and disheartening to see that all the so called GST solutions floating in the market are just cloud based software package / ERP solutions, which mandatorily requires a hardware which could mean a substantive captive investment for a small business, and furthermore, computer software knowledge/awareness to operate upon such ERP Solutions. The next technological challenge could be of getting online to run any such cloud based solution. On the contrary, the practicing GST  professionals with their given limitations are helpless but to charge based on the number of sales / purchase invoices to be uploaded per month to generate and file GST returns.” Rao said.

On the best of the scenario’s and that too, for a developed nation, such solutions might be the right solution. But, for a still developing and a growing nation like that of India, we are still far from that reality, especially when we talk of tier 2 and tier 3 cities and moreover the challenges and limitations of mobile data connectivity in those densely and thickly populated markets deep inside the walled city of Delhi’s Chandani Chowk, Khari Baoli, Sadar Bazar and many more over pan India  are a matter of grave concern, if, one has to run a cloud based solution.

GSTmadeeasy is a complete end to end business solution which will take care of all GST related issues, be it digitization of sales / purchase invoices and that too unlimited invoices, invoice validation with tax rates/HSN codes, professional services at the backend for pre and post filing reconciliation, dispute resolution/mismatch, tax ledger reconciliation, GST return preparation & filing and online tax payment assistance. To top it all a Help Desk from dawn to dusk that too  on a toll free number with GST professionals available just a call away to assist on any GST related issues, claimed the firm.

As for the technological challenges, GSTmadeeasy will provide a very user friendly POS solution which is diametrically opposite to the other complex cloud based solutions and which is designed to work offline as well; which can be easily operated by anybody who has the knowledge of using a smart phone and that’s it; rest of all will be seamlessly taken care by a team of professionally trained executives at the backend on a very nominal monthly service charge with no limitations or cap, whatsoeve .

Also there is a huge gap as per the Institute of Chartered Accountants of India; the number of Practicing Chartered Accounts in India including that of Fellows and Associates in Full Time Practice are 112369 and in Part Time Practice are 8282 only. Moreover, it is further noted that approximately 65 percent of the practicing Chartered Accountants in India does not practice in Indirect Taxes and, on the contrary, the number of GSTINs are expected to rise to over 30 million in the next couple of years.

The success of this GST regime, further lies in, promoting more and more small businesses to get themselves registered under the new GST Act to avoid the impact of cascading effect of previous indirect taxes that have been subsumed as one tax into GST, ultimately, to make available the goods and services to end consumer at a very reasonable price. The increase innumber of GST registered businesses will ultimately help the cause of Govt of India in terms of multifold increase in indirect tax collection; to further the development of our incredible India.

Source : PTI

GSTN to let companies report delays in e-way bill checking : 27-01-2018


Companies will be able to report delays of more than 30 minutes in the checking of electronic way bills carried by transport vehicles as the Goods and Services Tax Network (GSTN) will provide an online form where such information can be filed, a top official told ET.

This check has been introduced to ensure that goods in transit are not delayed by inspectors. In another simplification measure, companies have been given the option of uploading their invoices when they get their e-way bills.

“We have provided a form on the portal,” said GSTN chief executive officer Prakash Kumar. “Consignor can report through this form if the vehicle is stopped for more than half an hour.”

The form can be filed by the driver of the vehicle or the owner of the goods or the transporter by giving the invoice number. The forms will go directly to senior officials who will then seek reasons for delays during e-way bill checking.

Businesses have expressed two key concerns over e-way bills — glitches in the portal and a return of the inspector raj leading to stoppage of vehicles.

To ensure ease of doing business, GSTN has linked e-way bill with filing.

“We have given the option to send invoice to GSTR1 from here directly. There will be no need to upload the invoice again for those who do it from here,” Kumar said

SYSTEM WORKING FINE

E-way bill trials began in the middle of January and will be rolled out nationwide for inter-state movement of goods on February 1. Fifteen states have agreed to implement it for intra-state sales as well. All states will have to do so by June 1.

An e-way bill is required for movement of goods worth more than Rs 50,000. For intra-state items, it’s required for transport beyond 10 km. The e-way bill mechanism has been introduced in the GST regime to plug tax evasion loopholes. Tax evasion was one of the reasons cited by the government for the fall in revenue in the last few months. GST revenue picked up to Rs 86,703 crore in December from Rs 80,808 crore in the month before.

The e-way bill is a key element of GST, which is aimed at creating a common market by unifying a wide swathe of state levies.

Kumar sought to assuage industry worries, citing the ease in issuing e-way bills.

“System is working quite fine,” he said. “About 2.16 lakh people have taken it from the portal since it was opened on January 10 and the number is only going up.” Those who have enrolled include 300,000 taxpayers and 4,000 transporters not registered under GST, he said.

The highest e-way bill registrations are from Karnataka, which had a similar system earlier. Rajasthan and Maharashtra, which did not have such a system, run it a close second. There have even been registrations in Arunachal Pradesh in the northeast.

Kumar said companies were already used to such a system prior to GST. Besides, the current one is much easier multiple e-way bills have been replaced by just one even if several state borders are crossed. “Almost every company is aware of it as all goods in most states moved on transit permits,” he said, adding, “One e-way bill is valid for end-to-end movement.”
The system’s developers have closely studied previous models and implemented it carefully. “We have drawn from the Karnataka experience,” he said. “We have made tools for large companies to make it convenient for them… For large companies, we have provided application programme interface.”
Source : Economic Times

Notification NO. GSR 51(E) [F.No.01/16/2013 CL-V (PT-I)], Dated 26-1-2018


COMPANIES (APPOINTMENT AND QUALIFICATION OF DIRECTORS) AMENDMENT RULES, 2018 – AMENDMENT IN RULE 9 AND SUBSTITUTION OF FORM NO.DIR-3 & FORM NO.DIR-12

NOTIFICATION NO. GSR 51(E) [F.NO.01/16/2013 CL-V (PT-I)]DATED 26-1-2018

In exercise of the powers conferred by sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Appointment and Qualification of Directors) Rules, 2014, namely:—

1. (1) These rules may be called the Companies (Appointment and Qualification of Directors) Amendment Rules, 2018.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Companies (Appointment and Qualification of Directors) Rules, 2014 (hereinafter referred to as the principal rules), in rule 9,

(A) for the marginal heading, the following marginal heading shall be substituted, namely:—
“Application for allotment of Director Identification Number before appointment in an existing company”;
(B) for sub-rule (1), the following shall be substituted, namely:—
“(1) Every applicant, who intends to be appointed as director of an existing company shall make an application electronically in Form DIR-3, to the Central Government for allotment of a Director Identification Number (DIN) along with such fees as provided under the Companies (Registration Offices and Fees) Rules, 2014.
Provided that in case of proposed directors not having approved DIN, the particulars of maximum three directors shall be mentioned in Form No. INC-32 (SPICe) and DIN may be allotted to maximum three proposed directors through Form INC-32 (SPICe)”;
(C) in sub-rule (3),
(I) In sub-clause (a), after sub-clause (iii), the following sub-clause shall be inserted, namely:—
“(iiia) board resolution proposing his appointment as director in an existing company”;
(II) for clause (b), the following clause shall be substituted, namely:—
“(b) Form DIR-3 shall be signed and submitted electronically by the applicant using his or her own Digital Signature Certificate and shall be verified digitally by a company secretary in full time employment of the company or by the managing director or director or CEO or CFO of the company in which the applicant is intended to be appointed as director in an existing company,”.

3. In annexure to the principal rules,

(A) for form No. DIR-3 the following form shall be substituted, namely:—

Form NO. DIR-3

[Pursuant to section 153 of The Companies Act, 2013 & Rule 9(1) of The Companies (Appointment and Qualification of Directors) Rules, 2014 & Rule 10 of Limited Liability Partnership Rules, 2009]

Application for allotment of Director Identification Number before appointment in an existing company

(B) for Form No. DIR-12, the following form shall be substituted, namely:—

FORM NO. DIR.12

[Pursuant to sections 7(1) (c), 168 & 170 (2) of the Companies Act, 2013 and rule 17 of the Companies (Incorporation) Rules 2014 and 8, 15 & 18 of the Companies (Appointment and Qualification of Directors) Rules, 2014]

Particulars of appointment of directors and the key managerial personnel and the changes among them

17 – 25-01-2018


EXIM BANK’S GOVERNMENT OF INDIA SUPPORTED LINE OF CREDIT OF USD 71.40 MILLION TO GOVERNMENT OF COTE D’IVOIRE

A.P. (DIR SERIES 2017-18) CIRCULAR NO.17DATED 25-1-2018

Export-Import Bank of India (Exim Bank) has entered into an Agreement on May 22, 2017 with the Government of Côte d’Ivoire for making available to the latter, a Government of India supported Line of Credit (LoC) of USD 71.4 million (USD Seventy one million four hundred thousand only) for the purpose of financing the Upgradation of four Military Hospitals in Abidjan Korhogo, Bouake and Daloa regions’ in Côte d’Ivoire. Under the arrangement, financing export of eligible goods and services from India would be allowed which are eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by the Exim Bank under this agreement. The goods include plant, machinery and equipment and services include consultancy services. Out of the total credit by Exim Bank under this agreement, goods and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 per cent of goods and services may be procured by the seller for the purpose of the eligible contract from outside India.

2. The Agreement under the LoC is effective from December 15, 2017. Under the LoC, the terminal utilization period is 60 months after the scheduled completion date of the project.

3. Shipments under the LoC will have to be declared on Export Declaration Form as per instructions issued by Reserve Bank from time to time.

4. No agency commission is payable for export under the above LoC. However, if required, the exporter may use its own resources or utilize balances in its Exchange Earners’ Foreign Currency Account for payment of commission in free foreign exchange. Authorised Dealer Category- I (AD Category- I) banks may allow such remittance after realization of full eligible value of export subject to compliance with the extant instructions for payment of agency commission.

5. AD Category – I banks may bring the contents of this circular to the notice of their exporter constituents and advise them to obtain full details of the LoC from the Exim Bank’s office at Centre One, Floor 21, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005 or from their website www.eximbankindia.in

6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

16 – 25-01-2018


EXIM BANK’S GOVERNMENT OF INDIA SUPPORTED LINE OF CREDIT OF USD100 MILLION TO GOVERNMENT OF REPUBLIC OF KENYA

A.P. (DIR SERIES 2017-18) CIRCULAR NO.16DATED 25-1-2018

Export-Import Bank of India (Exim Bank) has entered into an agreement dated January 11, 2017 with the Government of the Republic of Kenya for making available to the latter, a Government of India supported Line of Credit (LOC) of USD 100 million (USD One Hundred million only) for agricultural mechanization project in Kenya. Under the arrangement, financing export of eligible goods and services from India would be allowed which are eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by the Exim Bank under this agreement. The goods include plant, machinery and equipment and services include consultancy services. Out of the total credit by Exim Bank under this agreement, goods and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 per cent of goods and services may be procured by the seller for the purpose of the eligible contract from outside India.

2. The Agreement under the LoC is effective from January 01, 2018. Under the LoC, the terminal utilization period is 60 months after the scheduled completion date of the project.

3. Shipments under the LoC will have to be declared on Export Declaration Form as per instructions issued by Reserve Bank from time to time.

4. No agency commission is payable for export under the above LoC. However, if required, the exporter may use its own resources or utilize balances in its Exchange Earners’ Foreign Currency Account for payment of commission in free foreign exchange. Authorised Dealer Category- I (AD Category- I) banks may allow such remittance after realization of full eligible value of export subject to compliance with the extant instructions for payment of agency commission.

5. AD Category – I banks may bring the contents of this circular to the notice of their exporter constituents and advise them to obtain full details of the LoC from the Exim Bank’s office at Centre One, Floor 21, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005 or from their website www.eximbankindia.in

6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

Union Budget 2018 to be pivotal for Modi government’s ‘Make in India’ and the manufacturing sector : 24-01-2018


Budget 2018: Let’s cast our minds back to the year 2015 when PM Narendra Modi first announced the government’s ‘Make in India’ initiative. The intention was to project India as an attractive destination for manufacturers, indigenous and foreign, to invest and build in India. With the world’s second-largest population at 1.3 billion and rising, India represents a profitable destination for any manufacturer looking to expand a business.

Since then, progress on this front has been above average and several policies and regulations have made it simpler for manufacturers to flourish in the nation. Last year’s Union Budget also put forth several great policies that aided the sector, and the expectation is that Budget 2018-19 will be similarly progressive to add further impetus to this movement. Recent reports stated that in November 2017 the Index of Industrial Production (IIP) hit a 17-month high of 8.4% and the objective should be to continue this growth rate.

Highlights from last year’s Budget that helped the manufacturing sector

All eyes are on Budget 2018. Here is a quick recap of some of the key highlights from last year’s budget which helped the manufacturing sector:

  • Reduction in the income tax rates for MSME companies with turnover up to Rs. 50 crores
  • Disbanding the Foreign Investment Promotion Board (FIPB) by 2018
  • Extending MAT credit to 15 years from the previously restrictive 10 years
  • Launching a Phased Manufacturing Programme (PMP) to encourage domestic manufacturing of electronic components and smartphones
  • Raising the FDI limit within the defense sector to 51% to encourage greater stakes than the previous 49% and build ‘strategic partnerships’ to manufacture submarines, fighter jets, helicopters and armored vehicles
  • Setting up 4 Centers of Excellence (CoE) for textile machinery, machine tools, welding technology and smart pumps

While all these announcements were encouraging for the sector and have had a positive transformational impact, industry watchers expect that the government needs to take it up further in Budget 2018 and get deeper into policymaking so that it benefits the manufacturing domain in the country. The importance of the Union Budget 2018-19 for the manufacturing sector thus has a lot riding on it.

Budget 2018 can boost manufacturing, Smart Cities and Industrial Corridors

So, what does the new Budget 2018 hold in store and what can we look forward to? India’s value as a destination for high-quality manufacturing is on the rise and the government should be looking to implement policies that would boost the building of mobile phones, luxury brands, automobiles and more. Positive policies can aid India to climb the list of growth-oriented economies and manufacturing destinations in the world.

Source: Financial Express

Make it big, Mr Jaitley. India really needs a boost : 24-01-2018


The forthcoming Budget is the last full Budget before the Lok Sabha elections of 2019. Finance minister Arun Jaitley must make it big, not only because of that but because the economy needs it.

Thanks to the IMF, rating agencies and incessant commentary by economic and other experts, public focus today is on the fiscal deficit, when it comes to the Budget. This is a welcome shift from cooking gas prices, which television had made people believe to be the touchstone for deciding the quality of a Budget. But that is not good enough. The size of the Budget matters.

Fret Not Over Fiscal Deficit 

Before economic reforms began, the Union Budget used to be as large as 17% of GDP. Over time, it has shrunk to less than 13% of GDP. Only Pranab Mukherjee presented Budgets that were 14-15% of GDP, and that was because he ran up large fiscal deficits. The overall size of government spending matters, when it comes to giving a boost to the torpid economy. So, the first goal should be to make it big, say, 14% of GDP.

Wouldn’t that push up the fiscal deficit? Should Arun Jaitley walk the path trodden by Pranab Mukherjee? A larger Budget need not push up the fiscal deficit. A full percentage point of GDP rise in direct tax revenue can easily be expected in the next fiscal year, as a result of the goods and services tax (GST)

Right now, attention is focused on collections from GST, and how these have disappointed. But the tax will stabilise, as the GST Council irons out yet more wrinkles. But what is as significant is the multiplicity of audit trails that GST would generate, which taxmen could follow to hitherto hidden sources of direct tax.

Gross value added is the sum of gross profits and wages and salaries. This identity holds good at the level of the nation and at the level of the firm. What this means is that there are limits to how much a firm that pays GST can fudge its books to hide its profits, on which it has to pay tax. In addition, GST makes a firm yield pointers not just to its own scale of activities, but to the activities of those who buy from it and those who supply inputs to it.

Further, GST makes a slew of small companies that had evaded tax to start paying tax, both direct and indirect. Some would not be able to survive after giving up their erstwhile competitive edge, namely, tax evasion. This slack would be picked up by the organised sector, which does pay tax.

All told, the country is poised to make a big jump in direct tax collections, provided the direct and indirect tax departments talk to each other and deploy good information technology to analyse GST data.

Jaitley can use this realistic expectation to budget larger expenditure. But this apart, this is not the time to worry too much about the fiscal deficit.

Think Out of the Box
The fiscal deficit matters because it is a claim on the savings of the non-government sector. If this claim exceeds the spare savings the non-government sector has after meeting its own investment plans, there would be excess demand, pushing up prices and widening the current account deficit. But right now, the non-government sector is not investing much. Gross fixed capital formation is below 27% of GDP (both in current account deficit. But right now, the non-government sector is not investing much. Gross fixed capital formation is below 27% of GDP (both in current prices), 11 percentage points below the peak of 2007-08.

There is little risk of added government borrowings depriving the private sector of the savings to meet its investment plans. On the contrary, stepped up capital formation out of public outlays could crowd in private sector investment.

In an election year, it would be surprising if the government did not prioritise schemes that put money directly in the hands of the voter. Affordable housing is one area that can directly woo the voter with funds and, at the same time, create new demand for steel, cement and construction, boosting growth. Expect that to get a boost.

The lesson from Saurashtra is that rural distress is hurting the BJP. It is not surprising that the finance minister said recently that economic growth is not justified if it does not improve the lot of the rural poor.

So, the Budget would have lots of things to alleviate rural distress, apart from higher tax thresholds and a higher ceiling for tax-exempt savings, for the middle class.

Making good the difference between the minimum support price for crops and the market price is far superior to state procurement. The Centre could co-finance such a scheme with the states.

Get the Employees’ Provident Fund (EPF) and the National Pension System (NPS) to compete to generate higher returns on the retirement savings. Let them set up special situation funds to take advantage of one-off events. The sale of distressed assets that flow from resolving the banks’ huge burden of bad debt offers scope for windfall gains. Why should only foreign private equity gain from this? Why not the EPF and the NPS?

The tobacco industry has been complaining for long about smuggled cigarettes eating up their market. The government loses an estimated Rs 13,000 crore because people smoke duty-evaded cigarettes. Set aside Rs 1,000 crore as incentives for helping confiscate smuggled cigarettes. The lumpen unemployed would chase down smuggled tobacco and Revenue would get a boost.

Source : PTI

How young earners can claim HRA tax exemption with ease : 24-01-2018


House Rent Allowance (HRA) is a part of most employees’ salary structures. To avail the HRA exemption, you need to submit rent receipts or the rent agreement with the house owner to your employer. Quoting the landlord’s Permanent Account Number (PAN) is mandatory if the rent paid is more than Rs 1 lakh annually, i.e., Rs 8,333 a month, to avail the full benefit of HRA exemption .

However, it might not be that easy for everyone to claim tax exemption on HRA. And this is especially true in the case of those who have relocated during a financial year and younger employees staying away from home.

Here are three scenarios young earners are likely to face while claiming tax exemption on HRA and how they can deal with it:

i. Monthly rent is more than Rs 8,333 but annual rent paid is less than Rs 1 lakh. Do you still need to quote landlord’s PAN?
Let us say you have been staying with your parents and in the middle of the financial year you relocate to a different city and start living on your own. At this rented accommodation, you start paying more than Rs 8,333 a month as rent.

Abhishek Soni, CEO Tax2win.in, a tax-filing website says, “As per a CBDT (Central Board of Direct Taxes) circular, if annual rent paid by the employee exceeds Rs 1 lakh per annum, it is mandatory for the employee to report PAN of the landlord to the employer. Therefore, in this case, PAN of landlord is not required if annual rent does not exceed Rs 1 lakh.”

ii. Living in a shared accommodation with friends

If you’re living with your friends and are splitting the rent, having a clearly defined rent agreement will help. For this, get a rent agreement made which has the names of all the lessees and the amount of rent paid mentioned against individual names. In the absence of an agreement which shows the splitting up of rent clearly, a declaration from the landlord specifying the amount of rent (i.e., your contribution  to the total rent) you’re paying, can also help.

“To claim the HRA tax exemption, one must have the rent receipts and rent agreement. If someone is living in a shared accommodation, then it is advisable to have the rent agreement with the name of all the friends living in the accommodation, the same goes for rent receipts as well. Besides, it is preferable if you pay rent via cheque or Net banking, since it also serves as proof for the payment towards rent,” explains Soni

iii. Job relocation and changing accommodation twice or thrice in one FY

Getting your rent receipts monthly instead of asking for them collectively at the end of an FY, helps in this scenario. Elaborating on this situation, Soni says, “In this case where the employee has paid rent to different house owners, it is advisable to have the PAN of all landlords if annual rent exceeds Rs 1 lakh. To claim the HRA, one must have the rent receipts and rent agreement. As mentioned earlier, paying rent via cheque or online banking is recommended.”

Let us say you lived in Delhi for 6 months of a financial year and paid Rs 10,000 as monthly rent and the other 6 months in Pune at Rs 5,000, the total rent paid in the fiscal is Rs 90,000 (60,000 + 30,000) which is less than a lakh, you do not need landlord’s PAN.

However, if you’ve had paid Rs 15,000 monthly rent in Delhi for 6 months, and Rs 10,000 in Pune for the remaining 6 months of the year, the annual rent paid adds up to Rs 1.5 lakh (90,000 + 60,000). So, if the rent paid exceeds Rs 1 lakh, it would be advisable to get the PAN of both the landlords.

Source : Economic Times

Notification No. SO 351(E) [F.NO.1/1/2018-CL.I], Dated 23-1-2018


SECTION 1 OF THE COMPANIES (AMENDMENT) ACT, 2017 – SHORT TITLE AND COMMENCEMENT – ENFORCEMENT OF PROVISIONS OF SECTION 1 AND SECTION 4 OF SAID ACT

NOTIFICATION NO. SO 351(E) [F.NO.1/1/2018-CL.I], DATED 23-1-2018

In exercise of the powers conferred by sub-section (2) of section 1 of the Companies (Amendment) Act 2017 (1 of 2018), the Central Government hereby appoints the 26th January, 2018 as the date on which the provisions of section 1 and section 4 of the said Act shall come into force.

World Economic Forum 2018: India among most trusted nations; sees dip over last year : 23-01-2018


India is among the most trusted nations globally when it comes to government, business, NGOs and media but has recorded “extreme trust losses” compared to last year, a survey said today. Coming ahead of the World Economic Forum annual summit the 2018 Edelman Trust Barometer said, globally, people’s trust in these four areas remained largely unchanged from last year. Of 28 countries surveyed, 20 lie in ‘distruster territory’, one more than in 2017. China topped the Trust Index among both the informed public and the general population segments, with scores of 83 and 74 respectively. India was at the third place in both the categories with scores of 77 in case of informed public and 68 in general population. Indonesia was at the second place. The findings are based on an online survey of more than 33,000 respondents in 28 countries. The fieldwork for the survey was conducted between October 28 and November 20, 2017. “China’s trust scores are nearly matched by India, the UAE, Indonesia and Singapore, while the Western democracies languish mostly in distruster territory, challenging the traditional geopolitical vision of satisfaction with systems,” the report said. As per the survey, India was among the six countries with extreme trust losses over the past year which was topped by the US.

“The collapse of trust in the US is driven by a staggering lack of faith in government,” the survey said, adding that the remaining institutions of business, media and NGOs also experienced declines. The United States saw a 37-point aggregate drop in trust across all institutions, followed by Italy (down 21), Brazil (-17), South Africa (-17), India (-13) and Columbia (-13). The survey further noted that for the first time media is the least trusted institution globally. In 22 of the 28 countries surveyed it is now distrusted. “The demise of confidence in the Fourth Estate is driven primarily by a significant drop in trust in platforms, notably search engines and social media,” it added.

The survey further noted that companies headquartered in Canada, Switzerland, Sweden and Australia are most trusted. “The least trusted country brands are Mexico (32 per cent), India (32 per cent), Brazil (34 per cent) and China (36 per cent),” the survey said, adding that trust in brand US (50 per cent) dropped five points — the biggest decline of the countries surveyed. This is based on views of respondents about global companies headquartered in specific countries and how much these firms are trusted by them ‘to do what is right’.

Source : Financial Express

Income Tax Returns (ITR) filing: Done with investment limits? Check these top hacks to save more tax : 23-01-2018


Salaried employees often think that they do not have scope for saving taxes. However, this is not true. You can save tax in many ways. One is by restructuring your salary in a way that reduces your tax outgo. When you are, for instance, offered a hike in your package or a new job, you must carefully study the components and understand the tax implication.

“The reason you need to pay attention to the salary structure being offered is the fact that although you have a high package, it does not mean that your take-home salary will increase in the same margin. If your employer lets you decide your compensation structure, you might want to use the tricks given in this article so that you take maximum salary home,” says Chetan Chandak, Head of Tax Research, H&R Block India.

Different components of Salary Structure:

1. Fixed Salary

This component includes basic salary, HRA, DA, special allowances, conveyance allowances, compensatory city allowance, etc.

2. Variable Salary

This component includes sales based incentive, performance-based incentive and profit-based bonus.

3. Reimbursements

Reimbursement of conveyance, telephone bills, medical expenses, etc. are included in this component.

4. Contributions

This component includes the benefits that are offered by the company, such as ESI, Statutory Bonus, Gratuity, PF, etc.

Salary Structure based on the level of employee

1. Junior level employee

Employees at this level of employment need a high take-home salary. “If you are a junior-level employee, you should try to add more fixed allowances to your salary structure like food coupons, telephone bill and conveyance, etc. Since these allowances are fixed, your employer will pay you monthly. You can, however, get tax exemption on these allowances to a certain extent,” informs Chandak.

2. Senior level employee

If you are a senior-level employee, you not only have to maintain a high in-hand salary, but you will also have to look for ways to reduce your tax burden. Therefore, you will need to add more benefits to your salary structure.

However, the real aim of employees, regardless of their employment level, is more allowances, less tax liability and more in-hand salary.

Tax impact of different salary components

1. Fixed salary

It is that part of the salary which is fixed and is based on other components of salary that are included. It includes basic salary, which is around 30% to 50% of Cost to Company (CTC) and it is fully taxable.

(a) Basic salary forms the basis on which bonus, gratuity, PF, HRA and other benefits are calculated. Basic salary is fully taxable.

(b) DA or Dearness allowance is used by a very few private companies and is mostly given to the government employees. DA is also fully taxable.

(c) HRA is paid to the employee to meet expenses of rent of a home. “Companies usually keep it 40% to 50% of basic salary depending on where you live. In case you stay in metro cities, your HRA will be kept at 50% of basic salary and in case you stay in non-metro cities your HRA will be at 40% of basic salary. HRA can be claimed as non-taxable component, and its taxability depends upon the city you live in,” says Chandak.

(d) Conveyance allowance is paid to you against expense to commute between office and home. Conveyance allowance is non-taxable up to Rs 1600 per month.

(e) Special allowance is mainly used to adjust rest of the amount which is to be given to you. It is fully taxable allowance.

2. Variable Salary

Variable salary varies depending upon your performance. Many companies are keeping this as a part of their employee CTC these days. “Earlier, only employees related to sales or profit-making department used to have a variable component in their salary. Companies are not willing to pay more fixed salary, but are open to paying higher variable pay as a variable is related to sales and profitability of the organisation. The company has no problem with paying money to employees if the company is making profits,” says Chandak.

3. Other Allowances / Reimbursement

These allowances/ reimbursements are taxable, but you can get tax exemption upon submitting the actual bills to your employer. This component is available to both level of employees’ salary structures, as it gives tax-free income and helps increase the net salary. Reimbursement is paid to employees against expenses made and bills submitted.

(a) Medical reimbursement is one example of this allowance. It is non-taxable up to 15,000 per annum. The company can pay it monthly, quarterly, half-yearly or annually. To claim this allowance/ reimbursement, you will need to submit medical bills in support of medical expenses. Medical bills for spouse, child and dependent parents are also acceptable.

(b) Leave Travel Allowance or Leave Travel Concession (LTC) is another example which is paid for travel cost incurred by you on leave travel. “Every company has its own rule to decide on the amount of LTA to be given to you. A company may prefer to keep as a percentage of the basic monthly salary of the employee or make it fixed depending on your grade and native place. It is a non-taxable income to the extent that bills of travel are submitted, but there are some rules which should be kept in mind while taking benefit of LTA for tax. Moreover this exemption is available only twice in a block of four calendar years,” says Chandak.

(c) Training reimbursement is provided to you for the expenses incurred on professional training/pursuit related to your job profile. You will need to provide bills for same and it can be excluded from taxable income.

(d) Mobile reimbursement is paid to you for expenses incurred for the use of mobile/telephone for official purpose. You need to submit a bill for same.

(e) Books and periodicals will be paid to you for reimbursing expenses made on the purchase of books and periodicals related to your job profile. It is non-taxable if you submit the bills.

(f) CEA (Children Education Allowance) is exempted from tax up to Rs 100 per month per child for two children.

(g) Uniform allowance is fully exempted from income tax on actuals. To claim this, you will have to produce bills for the same. This allowance is given to meet the expenditure on the purchase and maintenance of office uniform or formal office wear which you wear while performing office duties.

(h) Daily allowance is given to you if your normal place of duty is not fixed and you have to travel to different places. Reimbursement received is fully exempt from income tax on actual bills.

(i) Any allowance granted to meet the cost of travel on tour or being transferred from one place to another is called tour allowance. Reimbursement is fully exempted from income tax against actual expenditure incurred.

(j) Food coupon or meal expenses is given to you for meals during working hours. Rs 50 per meal up to 2 meals per day is tax-free.

4. Contributions

Contribution means a contribution made by the employer for your long-term saving schemes or social benefits scheme as per the statutory compliance.

EPF is the contribution made by the employer (12% of Basic salary) and is tax exempt. It is a statutory obligation on the part of the employer. Also, you get the benefit of PF deduction (12% of basic) on your part under Section 80C of the Income Tax Act.

5. Perquisites

Many times employers provide a flexible package to employees where they get to choose the components of their salary. “Senior-level employees generally may choose to have perquisites like rent-free accommodation, car, cleaner, gardener etc. as a part of their salary package. This will save them taxes as a large portion of these perquisites will be tax-free,” informs Chandak.

You can, thus, save tax by making investments that are tax-deductible, through intelligent tax planning. Depending on your job profile and nature of the job, you can discuss the things with your employer to include the allowances mentioned in this article in their salary structure. Planning your salary structure can help you reduce your tax outflow.

Source : PTI

A simpler GST filing regime: Here are the proposed changes : 23-01-2018


In its last meeting, the GST Council deliberated changes in the filing regime for the new tax. The simplified system is expected to be approved by the Council in its next meeting. ET explains the likely scenario:

CURRENT SCENARIO
1. Seller to upload invoice level details in GSTR 1 within prescribed due dates

2. Buyer to download invoice details uploaded by seller (in Form GSTR 2A)

3. Buyer to reconcile the GSTR 2A details with ERP purchase register

4. Buyer to take action (Accept/reject/modify) on GSTR 2A invoices. Buyer also has option to upload invoices if not uploaded by vendor – this activity is done by buyer through filing of monthly GSTR 2 within prescribed due dates .

5. Seller and buyer to file monthly GSTR 3/3B to disclose liability, credits and pay taxes

6. GSTN to perform reconciliation of data uploaded by buyer and share mismatch report

7. Seller and buyer to take relevant action on the mismatches

PROPOSED SCENARIO (AS UNDERSTOOD NOW)
1. Seller has option to upload invoices on real time basis

2. Buyer can view the invoices uploaded by multiple sellers on the portal

3. Buyer to accept the invoices to claim credits .

4. Seller to disclose output liabilities in GSTR 3B based on invoices uploaded

5. Credit to be restricted for the buyer in GSTR 3B to the extent of invoices accepted

6. Buyer to claim credit/ report transaction w.r.t unregistered suppliers/RCM in GSTR 3B

7. Buyer would not have option to claim credit for any invoice not uploaded by seller

7. Buyer would not have option to claim credit for any invoice not uploaded by seller

8. GSTN would not perform any reconciliation for the data uploaded as credit restricted to invoices accepted

gst-gar

 

Concept of invoice matching continues but at the end of buyers and sellers, without it being part of the return process and work flow based system envisaged earlier. This would effectively mean greater onus on businesses to ensure compliance of vendors. It needs to be ensured the new system does not entail more physical scrutiny at the time of assessment or audit and dilute the concept of ‘faceless’ tax administration that we were all hoping for: Pratik Jain, Leader – Indirect Tax, PwC.

Source : Economic Times

 

GST anti-evasion: Cess likely on pan masala at manufacturing stage : 22-01-2018


The GST Council is likely to consider levying cess on certain commodities like pan masala at the manufacturing stage itself, a move aimed at checking tax evasion and shoring up revenues. The Council will look at levying the cess at the manufacturing stage based on production capacity as against the current practice of imposing it on supplies made by the manufacturer. This proposed amendment to the GST (Compensation to States) Act, 2017, would be deliberated upon by the council in its meeting later this month. As per the amendment, compensation cess would be levied on the presumptive capacity of production declared by a manufacturer to the Goods and Services Tax (GST) authorities, sources told PTI. Commodities like pan masala are prone to tax evasion as they are available in small sachets and are bought mostly in cash and hence tracking their final supplies is difficult for tax authorities. Once the Council, chaired by Finance Minister Arun Jaitley and comprising his state counterparts, approves the proposal, it would be sent to the law ministry for vetting. The amendment is likely to be introduced in the second leg of the Budget session of Parliament in March. Currently, on top of the highest GST rate of 28 per cent, 60 per cent cess is levied on pan masala. However, pan masala containing gutkha attracts 204 per cent cess.

A cess, on top of highest tax rate, is levied on luxury, demerit and sin goods. The proceeds from the cess are utilised to compensate states for any revenue loss on account of implementation of the GST regime from July 1, 2017. According to sources, a new section is likely to be inserted in the GST (Compensation to States) Act as an “enabling provision” giving power under the law to levy and collect cess on “specified goods” based on the capacity of manufacture or production. This provision was necessary to “safeguard revenue interest”, they said, adding once the cess is levied at the manufacturing stage, further supplies would not attract the levy. The rules for arriving at the annual value of supplies based on the capacity of production would be framed by the GST Council and such value for each factory or unit would be determined by an Assistant Commissioner level officer. Besides, the amendment is also likely to provide for situations wherein there has not been any manufacturing in a factory for a continuous period of 15 days or more.

In such cases, cess calculated on a proportionate basis is proposed to be abated for such period. The anti-evasion measure comes on the back of deceleration in GST revenue collections, which slipped to over Rs 83,000 crore in November 2017 from over Rs 95,000 crore in July. Commenting on the proposal, AMRG & Associates Partner Rajat Mohan said the provision would be like the erstwhile Central Excise regime whereby tax collection was based on number of packing machines installed in the factory for items like pan masala, gutkha, unmanufactured tobacco and chewing tobacco which are prone to tax evasion. “Companies producing notified goods might be in state of jinx, as dual valuation provisions are to be made applicable. “Looking ahead, CGST/SGST/IGST would be charged on transaction value method and compensation cess would be charged based on installed capacity of production. This seems to be homecoming of production capacity based taxation,’ Mohan said.

But the move, he said, could lead to rise in litigation as there would be numerous open-ended questions like determination of annual production capacity, temporary closure of factory and lower production due to lean season. Deloitte India Partner M S Mani said it is expected that several anti-evasion measures would be put into effect in order to curb evasion and increase revenue collections. “These could include introduction of reverse charge on certain transactions, introduction of GST on the basis of presumptive capacity for certain products, in addition to e-way bill system that comes into force from February 1,” Mani said

Source : Financial Express

Notification No. 5/2018 22-1-2018


Notification No. 5/2018 22-1-2018

Budget 2018: A look at the key people behind FM Arun Jaitley : 22-01-2018


As FM Arun Jaitley gets ready to present the govt’s last full budget on Feb 1, expectations are high. The task of putting it all together is being undertaken by a relatively new team led by seasoned finance secretary Hasmukh Adhia. The departments of economic affairs, banking and expenditure have new secretaries. Will they help Jaitley meet expectations while continuing to walk the path of fiscal prudence and igniting the economy? Here’s a look at the key people behind Budget FY19.

Hasmukh Adhia

Finance secretary and secretary, department of revenue

The most experienced hand in the finance ministry, Adhia has seen many budgets but this year he will be leading the team. The 1981 Gujarat cadre IAS officer is known to be one of the key driving forces behind the country’s biggest indirect tax reform — GST. Adhia also played a key role in pushing the government’s anti-black money  agenda, especially after demonetisation, and changes to make paying taxes easier, which was reflected in India’s improvement in the World Bank’s ease of doing business rankings. His challenge will be to bring all the pieces together into a cogent budget.

Arvind Subramanian
Chief economic adviser

Arvind Subramanian’s Economic Survey, released on the eve of the budget announcement, usually contains ideas that spark debate. The last one included universal basic income as a poverty alleviation tool. Will this find a place in the budget? On a one-year extension, Subramanian’s possibly last Economic  Survey will be keenly watched for big ideas to get the economy going while also providing some solutions for agrarian stress. He has also batted for greater use of fiscal tools to boost the economy.

Subhashchandra Garg
Secretary, department of economic affairs 

Garg was executive director at the World Bank in Washington prior to his posting as economic affairs secretary. Revival of growth, reigniting private investment, generation of jobs — Garg has his task cut out as all these have to be achieved without compromising on fiscal rectitude.

Ajay Narayan Jha 

Secretary, department of expenditure 

Jha, a 1982 batch Manipur cadre IAS officer, controls the purse strings. He is well versed in the art of saying no as he has already served in the department and has also been secretary to the finance commission. This year, as the government looks to offer something to everyone ahead of elections, the focus will be on spending.

Neeraj Kumar Gupta 

Secretary, department of investment and public asset management 

The diversified strategy helmed by the 1981 batch IAS officer has paid dividends as the government has exceeded the divestment target for the first time. He has also set the pace for the next fiscal with multiple approvals in place for both strategic sales and other public offerings. The government is likely to set an even bigger target to raise resources. With less room to manoeuvre given that the government needs to retain majority stake in big CPSEs, more difficult strategic sales will need to be pushed. Gupta will have to look at other innovative measures as well to raise resources.

Rajiv Kumar 

Secretary, department of financial services 

With the bankruptcy law in place and a Rs 2.11 lakh crore capital infusion plan announced, the government has to embark on its next phase of reforms at state-run banks. Giving growth capital to performers, pushing consolidation and HR overhaul at state-run banks will continue to be the focus areas. The 1984 IAS batch officer will also need to focus on the insurance and pension sectors to lift penetration levels. Public sector banks will need to push credit, especially to medium & small enterprises.

Source : PTI

Budget 2018 may not be populist, indicates PM Modi : 22-01-2018


Prime Minister Narendra Modi today indicated that the upcoming Budget will not be a populist one and it’s a myth that the common ma n expects “freebies and sops” from the government.

In an interview with Times Now television broadcast tonight, he also pledged that his government will stay on the course of the reforms agenda that has pulled out India from being among the ‘fragile five’ economies of the world to being a ‘bright spot’.

Modi stoutly defended his economic policies, saying demonetisation was “a very big success story” and that he was open to changes in the new Goods and Services Tax (GST) to plug loopholes and make it a more efficient ‘one-nation-one- tax’ system.

He rejected criticism of providing a jobless growth, saying “lies” were being spread about employment generation and his government’s policies were oriented towards creating jobs.

Acknowledging farm distress, he said it was the responsibility of the Centre and the state governments to identify and address farmers’ issues.

Times Now provided a transcript of the interview ahead of its broadcast today.

Asked if his government will turn populist in its last full-year Budget before the general elections in 2019, Modi said the issue falls under the ambit of the finance minister and he does not want to interfere in it .

“But those who have seen me as the chief minister (of Gujarat) and also as the prime minister (would know) common man does not want all these things. It is a myth,” he said, according to the transcript.

The common man, he said, expects honest governance. “He doesn’t demand sops and freebies. It is our myth.”

Modi said his government was taking decisions to fulfill the needs and aspirations of the common man.

Asked specifically if he will resist populism in the Budget to be presented on February 1, he said it needs to be decided if the country needs to grow and become strong, should “this political culture, the Congress culture, be followed”

On job-less growth, the prime minister said, “Lies are being spread about employment generation.”

Explaining in detail, he said the formal sector accounts for 10 per cent of the employment and the remaining 90 per cent jobs are in the informal sector.

In last one year, 70 lakh new retirement fund or EPF accounts have been opened for the youth between 18 and 25 years of age, he said. “Doesn’t this show new employment,” he asked.

Stating that there is no statistics for people working the informal sector, he said there are new chartered accountants, lawyers, doctors and consultants who have joined the vocation since 2014 .

Doubling of road construction in last three years could not have happened without employing people and so was doubling rate of rail track laying, he said. Also, programmes like electrification and work on ports gathering pace could not have happened without generating employment, he said.

The prime minister said his government’s policies promote employment particularly in sectors like textile and leather.

Also, providing loans to 10 crore non-corporates and small businesses under the Pradhan Mantri Mudra Yojana (PMMY) has created entrepreneurs and jobs, he said.

On farm distress, Modi said the “criticism is justified” and “we can’t deny this”.

It is the responsibility of the central and state governments that problems faced by farmers are understood and resolved, he said.

Schemes like crop insurance, irrigation projects, soil health cards, increasing urea availability and stopping diversion of subsidised crop nutrient are all aimed at addressing farm distress, he said and added that making available solar pumps, increasing agro-product processing and focus on rural and agro-based industries were high on his mind.

On the task before him in the last one-and-half years of his government, Modi said providing electricity to four crore families who still do not have power and completing the programmes and schemes started for the benefit of the common man would be the priority .

Referring to economic achievements, he said in 2013-14, just before the BJP government came to power, India was considered “among the fragile five economies” in the world.

“Within three years, India has come not just come out of being among fragile file but also its economy is seen as a shining star with optimism and expectation,” the prime minister said.

India has on all economic parameters done well — inflation or the rate of price rise, has averaged 3 per cent in last three years as against 10 per cent previously, FDI inflows have more than doubled to USD 62 million from USD 30 billion; fiscal deficit has been brought down to 3.5 per cent of GDP from over 4.5 per cent, current account deficit has come down to 1-2 per cent from 4 per cent, he said.

“The world looks at these parameters and says India is a bright spot,” he said. “We believe that India’s growth rate will rise in the coming days.”

About being the first prime minister to be addressing plenary at the World Economic Forum in Davos this week, he said this has been made possible because India has progressed.

“India has shown its economic strength to the world and so it is but obvious that the world wants to know India, it wants to know India directly (from the top leader) (and) understand it,” Modi said.

India has become a land of great opportunity now,” he said. “India has become an attractive investment destination.”

The prime minister said institutions like the IMF and World Bank and rating agencies like Moody’s are all complimenting steps taken by India.

Attacking critics of demonetisation, Modi said people attempted to “ignite a fire, incite riots and knocked at doors of the Supreme Court. They tried everything possible just to save those who were hoarding black money, to save the corrupt, to save the dishonest.”

The overnight decision to ban 86 per cent of the currency in circulation was “a very big success story”, he said.

The system, he said, should be proactive towards the needs of the common man.

He went on to cite giving free cooking gas connection to 3.3 crore poor women to save them from domestic pollution and providing electricity connection to four crore households that still do not have power as examples of his efforts for ‘ease of living” for common Indians.

The prime minister said people will realise the good work of his government only when they compare it the previous 10- year rule of the Congress-led UPA.

Source : Economic Times

Notification No. GSR 49(E) [F.NO.1/13/2013 CL-V, PART-1, VOL.II] Dated 20-1-2018


COMPANIES (INCORPORATION) AMENDMENT RULES, 2018 – SUBSTITUTION OF RULES 9, 12, FORM NO.INC-1, FORM NO.INC-3, FORM NO.INC-12, FORM NO.INC-22, FORM NO.INC-24 & FORM NO.INC-32; AMENDMENT IN RULES 10, 38, FORM NO.INC-33 & FORM NO.INC-34 AND OMISSION OF FORM NO.INC-7

NOTIFICATION NO. GSR 49(E) [F.NO.1/13/2013 CL-V, PART-1, VOL.II]DATED 20-1-2018

In exercise of the powers conferred by sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Incorporation) Rules, 2014, namely:—

1. (1) These rules may be called the Companies (Incorporation) Amendment Rules, 2018.

(2) They shall come into force from the 26th day of January, 2018.

2. In the Companies (Incorporation) Rules, 2014 (hereinafter referred to as the principal rules), for rule 9, the following rule shall be substituted, namely:—

“9. Reservation of name. — An application for reservation of name shall be made through the web service available at www.mca.gov.in by using RUN (Reserve Unique Name) along with fee as provided in the Companies (Registration offices and fees) Rules, 2014, which may either be approved or rejected, as the case may be, by the Registrar, Central Registration Centre”.

3. In the Principal rules, in rule 10, the words, letters and figure “Form No.INC-7” shall be omitted.

4. In the principal rules, for rule 12, the following rule shall be substituted, namely:—

“12. Application for incorporation of companies. — An application for registration of a company shall be filed, with the Registrar within whose jurisdiction the registered office of the company is proposed to be situated, in Form No.INC-32 (SPICe) along with the fee as provided under the Companies (Registration offices and fees) Rules, 2014;

Provided that in case pursuing of any of the objects of a company requires registration or approval from sectoral regulators such as the Reserve Bank of India, the Securities and Exchange Board, registration or approval, as the case may be, from such regulator shall be obtained by the proposed company before pursuing such objects and a declaration in this behalf shall be submitted at the stage of incorporation of the company”.

5. In the principal rules, in sub-rule (1) of rule 38, the following proviso shall be inserted:—

(i) in sub-rule (1), after the proviso, the following proviso shall be inserted, namely:—
“provided further that in case of incorporation of a company having more than seven subscribers or where any of the subscriber to the MOA/AOA is signing at a place outside India, MOA/AOA shall be filed with INC-32 (SPICe) in the respective formats as specified in Table A to J in Schedule I without filing form INC-33 and INC-34”;
(ii) In sub-rule (2), after the proviso, the following proviso shall be inserted, namely:—
‘Provided further that in case of companies incorporated, with effect from the 26th day of January, 2018, with a nominal capital of less than or equal to rupees ten lakhs or in respect of companies not having a share capital whose number of members as stated in the articles of association does not exceed twenty, fee on INC-32 (SPICe) shall not be applicable”.

6. In the annexure to the principal rules,—

(i) for Form No. INC-1, the following form shall be substituted, namely:—

image

(ii) for Form No.INC-3, the following form shall be substituted, namely:—

FORM NO. INC-3

[Pursuant to section 3(1) of the Companies Act, 2013 and pursuant to Rule 4(2),(3),(4),(5) & (6) of the Companies (Incorporation) Rules, 2014]

One Person Company – Nominee Consent Form

(iii) for Form No.INC-7 shall be omitted;

(iv) for Form No.INC-12, the following form shall be substituted, namely:—

FORM NO. INC-12

[Pursuant to section 8(1) and 8(5) of the Companies Act, 2013 and Rules 19 & 20 of the Companies (Incorporation) Rules, 2014]

Application for grant of License under section 8

(v) for Form No.INC-22, the following form shall be substituted, namely:—

FORM NO. INC-22

[Pursuant to Section 12(2)&(4) of the Companies Act, 2013 and Rules 25 & 27 of The (Incorporation) Rules, 2014]

Notice of situation or change of situation of registered office

(vi) for Form No.INC-24, the following form shall be substituted, namely:—

Form NO.INC-24

[Pursuant to section 13(2) of The Companies Act, 2013 and Rule 29(2) of The Companies (Incorporation) Rules 2014]

Application for approval of Central Government for change of name

(vii) for Form No.INC-32, the following form shall be substituted, namely:—

FORM NO. INC 32

SPICE

[Pursuant to sections 4, 7, 12, 152 and 153 of the Companies Act, 2013 read with rules made thereunder]—

(Simplified Proforma for Incorporating Company Electronically)

(viii) in form No.INC-33 and in Form No.INC-34, for the words and figures ‘INC-1’ the word ‘RUN’ shall be substituted.

Notification No. GSR 48 (E) [F. NO. 01/16/2013 CL-V (PT-I)] Dated 20-1-2018


COMPANIES (REGISTRATION OFFICES AND FEES) AMENDMENT RULES, 2018 – AMENDMENT IN RULE 10 & ANNEXURE

NOTIFICATION NO. GSR 48 (E) [F. NO. 01/16/2013 CL-V (PT-I)], DATED 20-1-2018

In exercise of the powers conferred by sections 396, 398, 399, 403 and 404 read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Registration Offices and Fees) Rules, 2014, namely:—

1. (1) These rules may be called the Companies (Registration Offices and Fees) Amendment Rules, 2018.

(2) They shall come into force from the 26th January 2018

2. In the Companies (Registration Offices and Fees) Rules, 2014, (herein after refer to as the principal rules), in rule 10, in sub-rule (3), the following proviso shall be inserted, namely:—

“provided that no re-submission of the application is allowed in the case of reservation of a name through web service – RUN”.

3. In the principal Act, in the Annexure, in item I (Fee for filings etc. under section 403 of the Companies Act, 2013), for the Table of Fees to be paid to the Registrar, the following shall be substituted namely:—

(1) A. Table of Fees to be paid to the Registrar

(I) In respect of a company having a share capital : Other than OPCs and Small Companies (in rupees) OPC and Small Companies (in rupees)
1. (a) For registration of OPC and small companies whose nominal share capital is less than or equal to Rs.10,00,000. __
(b) For registration of OPC and small companies whose nominal share capital exceed Rs. 10,00,000, , the fee of Rs. 2000 with the following additional fees regulated according to the amount of nominal capital: For every Rs.10,000 of nominal share capital or part of Rs.10,000 after the first Rs.10,00,000 and up to Rs. 50,00,000. 200
2. (a) For registration of a company (other than OPC and small companies) whose nominal share capital is less than or equal to Rs. 10,00,000 at the time of incorporation. __
(b) For registration of a company (other than OPC and small companies) whose nominal share capital exceed Rs. 10,00,000, the fee of Rs.36,000 with the following additional fees regulated according to the amount of nominal capital :
(i) for every Rs. 10,000 of nominal share capital or part of Rs 10,000 after the first Rs. 10,00,000 upto Rs. 50,00,000. 300 __
(ii) for every Rs. 10,000 of nominal share capital or part of Rs. 10,000 after the first Rs. 50,00,000 upto Rs. one crore. 100 __
(iii) for every Rs. 10,000 of nominal share capital or part of Rs. 10,000 after the first Rs. 1 crore. 75 __
Provided further that where the additional fees, regulated according to the amount of the nominal capital of a company, exceed a sum of rupees two crore and fifty lakh, the total amount of additional fees payable for the registration of such company shall not, in any case, exceed rupees two crore and fifty lakhs.
3. For filing a notice of any increase in the nominal share capital of a company, the difference between the fees payable on the increased share capital on the date of filing the notice for the registration of a company and the fees payable on existing authorized capital, at the rates prevailing on the date of filing the notice:
(a) For OPC and small companies whose nominal share capital does not exceed Rs. 10,00,000. 2000
(b) For OPC and small companies, for every Rs. 10,000 of nominal share capital or part of Rs. 10,000 after the first Rs. 10,00,000 and upto Rs. 50,00,000. 200
Other than OPC and small companies

(c) For increase in nominal capital of a company whose nominal share capital does not exceed Rs. 1,00,000.

5000
(d) For increase in nominal capital of a company whose nominal share capital exceed Rs. 1,00,000, the above fee of Rs. 5,000 with the following additional fees regulated according to the amount of nominal capital :
(i) for every Rs. 10,000 of nominal share capital or part of Rs. 10,000 after the first Rs. 1,00,000 upto Rs. 5,00,000. 400 __
(ii) for every Rs. 10,000 of nominal share capital or part of Rs 10,000 after the first Rs. 5,00,000 upto Rs. 50,00,000. 300 __
(iii) for every Rs. 10,000 of nominal share capital or part of Rs. 10,000 after the first Rs. 50,00,000 upto Rs. one crore. 100 __
(iv) for every Rs. 10,000 of nominal share capital or part of Rs. 10,000 after the first Rs. 1 crore. 75 __
Provided further that where the additional fees, regulated according to the amount of the nominal capital of a company, exceed a sum of rupees two crore and fifty lakh, the total amount of additional fees payable for the registration of such company shall not, in any case, exceed rupees two crore and fifty lakhs.
4. For registration of any existing company, except such companies as are by this Act exempted from payment of fees in respect of registration under this Act, the same fee is charged for registering a new company.
5. For submitting, filing, registering or recording any document by this Act required or authorised to be submitted, filed, registered or recorded:
(a) in respect of a company having a nominal share capital of less than Rs. 1,00,000. 200
(b) in respect of a company having a nominal share capital of Rs. 1,00,000 or more but less than Rs. 5,00,000. 300
(c) in respect of a company having a nominal share capital of Rs. 5,00,000 or more but less than Rs. 25,00,000. 400
(d) in respect of a company having a nominal share capital of Rs.25,00,000 or more but less than Rs. 1 crore or more. 500
(e) in respect of a company having a nominal share capital of Rs. 1 crore or more.

Provided that in case of companies to be incorporated with effect from 26.01.2018 with a nominal capital which does not exceed rupees ten lakhs fee shall not be payable.

600
6. For making a record of or registering any fact by this Act required or authorised to be recorded or registered by the Registrar:
(a) in respect of a company having a nominal share capital of less than Rs. 1,00,000. 200
(b) in respect of a company having a nominal share capital of Rs. 1,00,000 or more but less than Rs. 5,00,000. 300
(c) in respect of a company having a nominal share capital of Rs. 5,00,000 or more but less than Rs. 25,00,000. 400
(d) in respect of a company having a nominal share capital of Rs. 25,00,000 or more but less than Rs. 1 crore or more. 500
(e) in respect of a company having a nominal share capital of Rs. 1 crore or more. 600
(II) In respect of a company not having a share capital :
7. For registration of a company whose number of members as stated in the articles of association, does not exceed 20.
8. For registration of a company whose number of members as stated in the articles of association, exceeds 20 but does not exceed 200. 5000
9. For registration of a company whose number of members as stated in the articles of association, exceeds 200 but is not stated to be unlimited, the above fee of Rs.5,000 with an additional Rs. 10 for every member after first 200.
10. For registration of a company in which the number of members is stated in the articles of association to be unlimited. 10000
11. For registration of any increase in the number of members made after the registration of the company, the same fees as would have been payable in respect of such increase, if such increase had been stated in the articles of association at the time of registration :

Provided that no company shall be liable to pay on the whole a greater fee than Rs. 10,000 in respect of its number of members, taking into account the fee paid on the first registration of the company.

12. For registration of any existing company except such companies as are by this Act exempted from payment of fees in respect of registration under this Act, the same fee as is charged for registering a new company.
13. For filing or registering any document by this Act required or authorized to be filed or registered with the Registrar.

Provided that in case of companies to be incorporated with effect from 26.01.2018 whose number of members as stated in the articles of association, does not exceed 20, fee shall not be payable.

200
14. For making a record of or registering any fact by this Act required or authorised to be recorded or registered by the Registrar.] 200
(1) The above table prescribed for small companies (as defined under section 2(85) of the Act) and one person companies defined under Rule related to Chapter II read with section 2(62) of the Act shall be applicable provided the said company shall remain as said class of company for a period not less than one year from its incorporation.
(2) The above table of fee shall be applicable for any such intimation to be furnished to the Registrar or any other officer or authority under section 159 of the Act, filing of notice of appointment of auditors or Secretarial Auditor or Cost Auditor.
(3) The above table of fee and calculation of fee as applicable for increase in authorised capital shall be applicable for revised capital in accordance with sub-section (11) of 233 of the Act, (after setting off fee paid by the transferor company on its authorised capital prior to its merger or amalgamation with the transferee company).
(4) The above table of fee shall be applicable for filing revised financial statement or board report under sections 130 and 131 of the Act.

How GST rate cut on housekeeping services will benefit start-ups : 20-01-2018


India has sent tax notices to tens of thousands of people dealing in cryptocurrency after a nationwide survey showed more than $3.5 billion worth of transactions have been conducted over a 17-month period, the income tax department said. Tech-savvy young investors, real estate players and jewellers are among those invested in bitcoin and other virtual currencies, tax officials told Reuters after gathering data from nine exchanges in Mumbai, Delhi, Bengaluru and Pune. Governments around the world are grappling with how to regulate cryptocurrency trading, and policymakers are expected to discuss the matter at a G-20 summit in Argentina in March. The Indian government has issued repeated warnings against digital currency investments, saying these were like ‘Ponzi schemes’ that offer unusually high returns to early investors. But it has not so far imposed curbs on an industry estimated to be adding 200,000 users in Indiaevery month. B R Balakrishnan, a director general of investigations at the income tax department in the southern state of Karnataka, said notices were sent following the survey to assess the penetration and patterns of virtual currency trade.

“We cannot turn a blind eye. It would have been disastrous to wait until the final verdict was out on its legality,” he told Reuters. The tax department has asked people dealing in bitcoin and other virtual currencies such as ethereum and ripple to pay tax on capital gains. They have also asked for details about their total holdings and the source of funds in the tax notice seen by Reuters. “We found that investors were not reflecting it on their tax returns and in many cases, the investment was not accounted for,” Balakrishnan said. Bitcoin, the world’s biggest cryptocurrency, soared more than 1,700% last year, hitting a record high just shy of $20,000 as institutional and retail investors around the world snapped up the virtual currency.
Its huge gains have attracted the attention of global regulators tasked with protecting investors from fraud. In recent weeks, Japan and China have made noises about a regulatory crackdown, while South Korean policymakers said they were considering shutting down domestic virtual currency exchanges.

An Indian finance ministry official said a federal committee was looking into the possibility of imposing restrictions on virtual currencies and that eventually parliament would have to legislate a regulatory regime. Officials at Zebpay, India’s leading bitcoin exchange, said the industry was adding near 200,000 users every month with an estimated trade volume of about Rs 20 billion ($315 million). “Many of our customers are treating digital currency like gold,” said Zebpay co-founder Saurabh Agarwal. Aman Kalra, marketing head of Coinsecure, a bitcoin exchange in New Delhi, said more than 150 bitcoins were changing hands every week through its platform. The company has 100,000 registered users and is now launching a platform to sell ethereum and other digital currencies. “I don’t think anyone in the government should label our business as a ‘Ponzi scheme’, we are not doing anything illegal,” said Kalra.

Get latest news and updates on Auto Expo 2018, check breaking news on Budget 2018, like us on Facebook and follow us on Twitter.

Source : Financial Express

Tax-saving for young earners simplified : 20-01-2018


With the current financial year coming to an end in just a couple of months, your company’s accounts department must have started asking you to submit your tax-saving proofs. While the more older employees promptly swing into action and take the right steps to avoid paying excess tax deducted at source (TDS), many of the younger ones are left confused as to what this whole exercise means and what exactly they are supposed to do.

So, if you are a young earner who wants to save on tax without locking away your money in a long-term investment and don’t want to put a dent in your wallet, here are a few tax-saving investments and tax breaks you can use:

1. House Rent Allowance (HRA)
To avail the HRA tax exemption, you need to submit rent receipts or the rent agreement. Quoting the landlord’s PAN is mandatory if the rent paid is more than Rs 1,00,000 annually, i.e., Rs 8,333 a month, to avail the full benefit of HRA exemption. In the absence of a rent agreement, a duly signed declaration from the landlord may help.

2. Education loan
If you had taken an education loan for your higher studies, and are working now, don’t forget to claim this deduction. Section 80E of the Income-tax Act, 1961 allows for deduction on the interest paid on the loan. You can deduct the entire interest amount paid from your taxable income and the deduction is allowed for a maximum of 8 years. The principal amount does not qualify for any tax deduction. But keep in mind that only an individual paying  interest on the loan for himself/herself or spouse can claim this deduction.

To claim this deduction, you need to get the certificate of interest paid from the lending institution and submit it as documentary proof to your employer.

3. Health insurance

The premium paid towards health insurance qualifies for tax deduction under Section 80D of the Act. The benefit is available to individuals on health insurance premiums paid for self, spouse, children, and parents. Therefore, the premiums paid on your health insurance can help lower your tax outgo.

Now, if you are already covered by a corporate group insurance policy, you may feel that you do not need additional health insurance. In that case you should consider buying it for your dependent parents if they do not have health cover of their own.

You can claim a maximum deduction of Rs 25,000 on the premiums paid. If the premiums paid by you is towards the health policy of your parent, who is a senior citizen of aged 60 years or more, the maximum amount is capped at Rs 30,000. Hence, you can maximise your tax benefit under section 80D to a total of Rs 55,000.

When you buy a health insurance policy, normally the insurer will issue you a certificate for the premiums paid which you should keep as proof to claim the tax break. If you do not get the certificate, then ask the insurer for it. Else, the insurance policy or any receipt issued showing that you have paid the premium by cheque is sufficient. You will need to submit a photocopy of this document to your office to ensure that they take it into account while calculating the tax that is to be deducted from your salary.

4. Fully use the tax breaks offered in section 80C 
Investment up to Rs 1.5 lakh in avenues specified under Section 80C of the Income Tax Act is deductible from your gross total income and thereby reduces your tax payable. In case you contribute to the Employees’ Provident Fund (EPF) from your salary, the contribution would automatically become eligible for deduction from your gross total income (mainly your salary) before tax payable on it is calculated. Further, there are various expenditures which qualify for deduction from gross total income under section 80C. So, total your investments and expenditures which already qualify for tax benefit under this section. If the total falls short of the limit of Rs 1.5 lakh allowed per fiscal, then you should look at investing the balance (shortfall from Rs 1.5 lakh) amount in any of the other investment avenues specified under section 80C. Of these, young earners should consider investing in equity-linked saving  schemes (ELSS). ELSSs come with a mandatory lock-in period of three years, which is one of the shortest among popular tax-saving instruments.

Equity investments have proven good for long-term investors, and since youngsters have a higher risk appetite and a longer time horizon, ELSS funds are a suitable investment option. When you are a young earner the temptation to take higher take home pay is more, but this is the time when you can make the most of equities and the magic of compounding. Your age is your biggest advantage, so make full use of it while investing.

The Public Provident Fund (PPF) is another popular tax-saving instrument but it has a lock-in period of 15 years. Studies show that over such a long time period equity has often yielded better returns compared with pure debt-oriented investments such as PPF.

What if the investment declared in the beginning of the financial year (FY) and actual investments differ?
If your actual tax-saving investments are lesser than what was declared in the beginning of the FY, your employer will compute your tax liability again as till now he would have been deducting tax on the basis of a lower estimated taxable income. And because of this, your tax payout will be higher in the last few months of the fiscal as your employer is likely to likely to increase the TDS from your salary during this time to adjust for the lower tax deducted earlier. So you end up with a lesser take home pay in these few months.

If actual investments made in the FY are more than what you had declared in the beginning of the year, you have been paying a higher tax. Sample this: If you had declared tax-saving investments worth Rs 1 lakh and actually invested Rs 1.5 lakh during the FY, you are eligible for a refund since your employer would have been deducting tax on a higher estimated taxable income since the beginning of the FY. You could request your employer to deduct a proportionately lower tax in the last few months  of the fiscal to compensate. Else, you can claim a tax refund while filing your tax return.

What is TDS and why you need to submit tax-saving proofs
Tax deducted at source, as the name implies, aims at collection of revenue at the very source of income. It is essentially a method of “collecting tax which combines the concepts of pay as you earn” and “collect as it is being earned.”

Salaries are normally subject to TDS as per the Income Tax Act. This means that the payer (i.e., the employer) of the salary is bound by law to deduct tax on the salary at the time of payment and pay the tax so deducted directly to the government. Consequently, since the beginning of a financial year, the accounts department of your company starts calculating taxes on your salary based on your estimated taxable income. Your estimated taxable income would equal your gross total income minus tax-saving deductions proposed to be made during the financial year. TDS on full salary is deducted if no proposed tax-saving investment is declared.

So if, during the financial year, you have made any tax-saving investments or have any expenditures which qualify for deduction from gross total income as per the Income Tax Act, then you need to furnish the documentary evidence of such investments/expenditures to your employer. Once the actual proof is submitted, the accounts department will compute the taxes based on the proofs of the actual investments made by you, which helps excess tax from being deducted from your salary.

There may be just a little more than two months left till the end of the financial year but that does not mean that there is no way out for you from paying higher taxes. Even if you have not made any investments yet, it is not too late. And if you do not have enough money left to make those tax-saving investments, use the above mentioned tax-breaks available on expenses to reduce your tax outgo. And remember to submit all the right documents on time to your employer.

Source : PTI

 

Small factories bill shelved on rights concerns : 20-01-2018


The labour ministry won’t be pressing forward with the draft small factories legislation as it wants to make sure that workers’ rights are protected, said officials. Stalling the policy could affect the government’s efforts to enhance ease of doing business for small and medium enterprises.

Under the draft Small Factories (Regulation of Employment and Conditions of Services) Bill, 2014, all factories employing less than 40 workers were to be brought under a common regulatory regime to exempt them from 14 central labour laws. The relaxation of strict labour laws is seen as a key structural reform that will help boost economic activity and job creation.

The bill was floated by the labour ministry in October 2014 on the recommendation of the Second National Commission on Labour in 2000.

More than three years later, the ministry has decided that no special concessions should be given to micro, small and medium enterprises or MSMEs at the cost of workers’ rights, officials said.

“We don’t need a dedicated bill for small factories. Why do you want small factories to be exempted from all key central labour laws?” said a senior government official. “It would have led to unnecessary harassment for our workers who could have been exploited either through longer work hours or lesser than minimum wages, besides being devoid of other social sector benefits.”

Small and medium enterprises account for 30% of India’s total industrial production.

Trade Union Response 

A dedicated legislation could have given a push to the government’s massive drive to improve the country’s performance in the World Bank’s ease of doing business ranking.

Although the ministry had made provisions to ensure the basic rights of workers, it wasn’t sure if employers would abide by these in the absence of some kind of monitoring, the official said.

Trade unions were resisting the bill’s proposal to shift workers from the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, to provident fund schemes approved by the Insurance Regulatory and Development Authority, but were not totally opposed to the legislation.

“The Small Factories Bill was an outcome of an agreement between all stakeholders at the Indian Labour Conference,” said Virjesh Upadhyay, general secretary of RSS-affiliated trade union Bharatiya Mazdoor Sangh. “We had some reservations about the bill but the ministry cannot unilaterally decide to abandon the legislation.” He said the ministry should revive the legislation and pursue it aggressively to take it to its rightful conclusion.

Source : Times of India

Arun Jaitley says planning these steps to simplify GST return filing process : 19-01-2018


The GST Council, which met for the 25th time on Thursday, was expected to come up with a decision to simplify the GST returns filing, did not come to a final conclusion. Finance Minister Arun Jaitley told reporters that there were several alternative presentations on how to go about it and the GST Council will try to get it approved in the next council meet, which will be held via video conferencing. The date for the next GST Council meeting is not known yet.

 Finance Minister Arun Jaitley said that the Council will choose the best possible options from those presented in the meeting today. He said, initially, the 3B filing would continue along with supply invoices, which will automatically reflect the supplies. The Finance Minister said that in case of any problem arising due to the simplified process, sellers or suppliers can provide an explanation.

Arun Jaitley said, “It was culminating in a direction… The Council felt that the group of ministers, Icommitteeee, Nandan Nilekani need to discuss and formalise it. After some time we will we will circulate (the process) in writing, and in next meet, we will try and get it approved.”

There are four kinds of GST Returns forms — GSTR-1, GSTR-2, GSTR-3 and GSTR-3B. While GSTR-1 contains details of all outward supplies, GSTR-2 contains all details of inward supplies or purchases, GSTR-3 contains all furnished details of all inward and outward supplies and GSTR-3B is a month self-declaration filed a dealer. In the 23rd Council meeting, it was decided that filing of GSTR-2, GSTR-3 would stop and only the filing of GSTR-1 and GSTR-3B would continue.

What the GST Council is mulling over the GST Returns filing, if the decision is taken, a businessman or dealer will only have to file the GST-3B form and will be required to upload supply invoices. The GST Council on Thursday also discussed a number of issues, of which, tax rate cut on 49 items were finalised, while many issues are being carried forward to the next meeting.

Get latest news and updates on Auto Expo 2018, check breaking news on Budget 2018, like us on Facebook and follow us on Twitter.

 

Source : Financial Express

 

Will Budget 2018 bring tax relief on rent for self employed on par with HRA exemption? : 19-01-2018


Self-employed individuals or salaried ones who do not get house rent allowance (HRA) as part of their salary but pay rent are at substantial disadvantage in terms of tax benefits as compared to salaried people who are able to use the HRA component of their salary to lower their tax outgo. It is hoped that budget 2018 would take some steps to redress this imbalance.

Section 80GG of the income tax act allows self-employed individuals paying rent for accommodation to lower their tax outgo. However, in comparison to the HRA exemption tax benefit the section 80GG benefit is miniscule.

An individual paying rent for a house can claim this deduction from his gross total income while filing income tax returns. A declaration has to be filed by him/her using Form 10BA to claim the deduction. The minimum of the following is taken as deduction:

a) Rent paid in excess of 10 per cent of the Total Income or;
b) Twenty five per cent of his total Income or;
c) Rs 5,000 per month

Here total income is income adjusted by reducing the following amount from the gross total income:

(i) Long- Term Capital Gains if any, which have been included in the Gross Total Income.
(ii) Short Term Capital Gains of the nature referred to in section 111A
(iii) All deductions permissible u/s 80C to 80U except deduction under this section i.e. Section 80GG.

(iv) Income referred to in section 115A. 15AB, 115AC or 115 AD. These sections relate to income of NRI and foreign companies etc.

However, the deduction under section 80GG is not available to an assesse if:

a) Any residential accommodation owned by the assessee or by his/her spouse or minor child or as member of HUF at a place where he/she resides or performs duties of his/her office or employment; or
b) Residential accommodation owned by the assessee at any other place whose value is determined by the section 23(2)(a) /23(4)(a) of the Income Tax Act.

Abhishek Soni, CEO of tax-filing website, tax2win.in explains, in layman terms, why the conditions of section 80GG make it difficult for an individual to avail the tax benefit.

The first condition states that an individual should not own any accommodation either in his name, spouse or in the name of his minor child in a city where he works. If, in order to avoid long commute hours, an individual rents a house even if he owns a house in same city then, he cannot avail of the Section 80GG tax benefit.

In comparison, there is no such restriction for claiming HRA tax relief. According to section 10(13A), a person is eligible to claim HRA tax-exemption as long as rent is paid for the accommodation.

The second condition states that if an assessee owns a residential accommodation in any other city then income from that property should be taxable as Income from house property. This means that tax should be payable on that property either on the basis of actual rent received from the property or on deemed rent basis. However, there is no such requirement for claiming HRA.

In addition to that, the maximum deduction one can available under section 80GG is Rs 60,000 per annum which is quite little when compared with actual rents prevailing in the market. Budget 2016 increased this limit from Rs 2,000 per month to Rs 5000 per month. In case of tax exempted amount under HRA, there is no monetary ceiling. The maximum amount exempted from tax is taken as the least of the following:

a) Actual HRA received; or
b) 50 percent of the salary if accommodation is in the metro cities or 40 percent for non-metro cities; or
c) Excess of rent paid annually over 10 percent of annual salary.

Section 80GG deduction is available on the basis of the total Income of an assessee where HRA tax exemption is available on the basic salary adds Soni. This should be raised at least to Rs 10,000 per month given the rise in rentals.

Source : PTI

GST benefits probably won’t show up next year : 19-01-2018


India’s economy won’t significantly benefit from a goods and services tax until after next fiscal year, according to a slim majority of economists polled by Reuters, but almost half said rewards might come sooner.

Economic growth is probably at its weakest pace this fiscal year since before a new calculation methodology was introduced in 2014-15, the Jan. 10-18 poll of about 30 economists found.

Disruptions from the goods and services tax and a ban on high currency notes in November 2016 curtailed growth and manufacturing, services and consumer spending. Consequently, 15 of 28 economists said benefits from the tax wouldn’t be felt until at least the fiscal year starting April 2019.

But signs of a recovery in activity are appearing, and 13 of the 28 said benefits may show up next year.

The poll also forecast the economy would grow 6.6 percent this fiscal year and 7.3 percent next year.

“Disruptions from the GST and demonetization are expected to start receding from Q218 (April-June quarter) and a pick-up in consumption, investment and growth shall commence,” said KK Mital, investment advisor at Venus India.

The latest consensus was lower than the forecast three months ago.

An early realisation of the benefits would bring some relief to the Reserve Bank of India, which will need to deal with higher inflation over the coming years, the poll showed.

After averaging 3.7 percent this fiscal year, consumer price inflation is now expected to exceed the RBI’s medium-term target of 4 percent each quarter through mid-2019, the end of the forecast horizon. It is expected to average 4.6 percent next year.

“Upside risks (to inflation) stem from higher oil and food prices, currency depreciation, an accelerating economy and fiscal slippage,” said Arjen van Dijkhuizen, senior economist at ABN AMRO.

Even so, the RBI is forecast to leave interest rates unchanged until at least the middle of next year. At its last meeting in December, the central bank said inflation risks were “evenly balanced”.

However, high growth and inflation numbers might prompt a change in the RBI’s neutral policy stance. The consensus forecast among 24 economists was that an inflation level of 5.5 percent would prompt the central bank to consider raising rates.

“As long as various gauges of underlying inflation track sub-5 percent, the RBI should stay pat,” said Abhishek Upadhyay, economist at ICICI Securities PD. “A worsening of other macro stability indicators on account of higher crude prices can make the RBI cautious.”

Source : Economic Times

 

Notification No. 4/2018 18-1-2018


MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 19th January 2018

 

G.S.R. 44(E).—In exercise of the powers conferred by sub-section (1) of Section 139B of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following further amendments in the Tax Return Preparer Scheme, 2006, namely:—

Short title, commencement and application.

1. (1) This Scheme may be called the Tax Return Preparer (Amendment) Scheme, 2018. (2) It shall come into force from the date of its publication in the Official Gazette.

2. In the Tax Return Preparer Scheme, 2006 (hereinafter referred to as the said Scheme), for paragraph 3, the following paragraph shall be substituted, namely:-

“3. An individual, who holds a bachelor degree from a recognised Indian University or institution, or has passed the intermediate level examination conducted by the Institute of Chartered Accountants of India or the Institute of Company Secretaries of India or the Institute of Certified Management Accountants of India, shall be eligible to act as Tax Return Preparer.”.

3. In the said Scheme, in paragraph 4,-

(1) for clause (i), the following clauses shall be substituted, namely:- “(i) It shall invite application from persons,-

(a) having requisite educational qualifications specified in paragraph 3 or having appeared in the final year examination of the qualifying examination; and

(b) who is not below the age of twenty one years or more than forty-five years as on the 1st day of October of the year immediately preceding the date on which applications are invited.

(ia) It shall require that the application under clause (i) shall be accompanied by a fee of two hundred and fifty rupees, and failing which the application shall be invalid.”.

(2) for clause (v), the following clauses shall be substituted, namely“

(v) It shall enrol the persons who qualify the test for enrolment for each training centre separately.

(va) It shall not enrol any person under clause (v), unless –

(a)    he makes a deposit of an amount of seven hundred and fifty rupees, which shall be nonrefundable; and

(b)    (b) he produces a proof of having passed the qualifying examination as specified in paragraph 3.”

(3) clause (ix) shall be omitted.”.

4. In the said Scheme, in paragraph 9, for sub-paragraph (1), the following sub-paragraphs shall be substituted, namely:-

“(1) The Board may authorise the Resource Centre or the Partner Organisation to disburse to a Tax Return preparer, the following amount, namely:-

(a)    five per cent. of the tax paid on the income declared in the return of income for First Eligible Assessment Year which has been prepared and furnished by him;

(b)    three per cent. of the tax paid on the income declared in the return of income for the Second Eligible Assessment Year which has been prepared and furnished by him;

(c)     two per cent. of the tax paid on the income declared in the return of income for the Third Eligible Assessment Year which has been prepared and furnished by him.

(1A) The amount of disbursement for any eligible person in relation to an eligible year shall not exceed,-

(a) five thousand rupees in case of First Eligible Assessment Year;

(b) three thousand rupees in case of Second Eligible Assessment Year; and

(c) two thousand rupees in case of Third Eligible Assessment Year.”.

[Notification No. 04/2018/F.No. 142/16/2010 (SO)-TPL(Part)]

Dr T. S. MAPWAL, Under Secy.

Notification No. 3/2018 18-1-2018


SECTION 10 (46) OF THE INCOME-TAX ACT, 1961 – EXEMPTIONS – STATUTORY BODY/AUTHORITY/BOARD/COMMISSION – NOTIFIED BODY OR AUTHORITY

NOTIFICATION NO. SO 283(E) [NO.3/2018 (F.NO.196/29/2013-ITA-I)]DATED 18-1-2018

In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, the Central Registry for Securitization Asset Reconstruction and Security Interest of India, a body set up under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, in respect of the following specified income arising to that body, namely:—

1. fee income from Security Interest transactions;
2. fee income from transactions on Central KYC (CKYC) Records Registry;
3. interest income on fixed deposits and on saving bank account; and
4. RTI application fee.

2. This notification shall be effective subject to the conditions that Central Registry for Securitization Asset Reconstruction and Security Interest of India,—

(a) shall not engage in any commercial activity;
(b) activities and the nature of the specified income shall remain unchanged throughout the financial years; and
(c) shall file return of income in accordance with the provision of clause (g) of sub-section (4C) of section 139 of the Income-tax Act, 1961.

3. This notification shall be deemed to have been applied for the financial Years 2013-2014, 2014-2015, 2015-2016, 2016-2017* and shall apply with respect to the financial year 2017-2018.

Notification No. 2/2018 18-1-2018


SECTION 10 (46) OF THE INCOME-TAX ACT, 1961 – EXEMPTIONS – STATUTORY BODY/AUTHORITY/BOARD/COMMISSION – NOTIFIED BODY OR AUTHORITY – AMENDMENT IN NOTIFICATION NO. SO 3129(E), DATED 26-9-2017

NOTIFICATION NO. SO 282(E) [NO.2/2018 (F.NO.200/63/2017-ITA-I)], DATED 18-1-2018

In exercise of the powers conferred by clause (39) of the section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following amendments in the notification of the Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, number S.O. 3129(E), dated the 26th September, 2017, published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (ii), dated the 26th September, 2017, namely:—

2. In the said notification, in clause (c),—

(A) for clause (i), the following clause shall be substituted, namely:—
“(i) Income arising from the receipt from National supporters namely Hero Motocorp Ltd., Bank of Baroda, Coal India Ltd., Think and Learn Private Limited, Dalmia Cement Bharat Limited and NTPC Limited.–rupees thirty-nine crore, thirty-nine lakhs, fifty two thousand and two hundred fifty (Rs. 39,39,52,250).”.
(B) sub-clause (ii) shall be omitted with effect from 26th September, 2017.

Why FM Arun Jaitley needs to clarify the cash transactions law in Budget 2018 : 18-01-2018


As we ring in the year 2018, lot of hopes are pinned on the Union Budget 2018 that will be presented on February 1. The Budget being the second last for the BJP-led government in its existing term is expected to give some freebies/ investment-linked benefits to taxpayers to lower the tax burden of the common man/ salaried class.

While everyone is expecting a taxpayer-friendly budget next month, it is worthwhile to reflect the changes that have been brought in the previous budget and what further clarity/ steps are required to achieve the desired results of the implemented changes. The BJP-led government has been upfront and vocal about its war against black money and has taken several stern steps to curb the circulation of unaccounted money in the economy.

One such small step towards a transparent economy was introduction of Section 269ST in the Income-tax Act, 1961. As per this section, receipt by any person of cash payments of Rs 2 lakh or more (a) in aggregate from a person in a day; or (b) in respect of a single transaction; or (c) in respect of transactions relating to one event or occasion from a person is prohibited and would attract a penalty. To ensure compliance with the provisions, a new penal Section 271DA was also introduced which imposes a penalty on the recipient, a sum equal to the amount of money so received, unless good and sufficient reasons are provided by the recipient for the sum so received.

While the intent of the government is clear – to promote a digital economy and curb the circulation of black money — there are a few grey areas on the applicability of Section 269ST which certainly requires more clarity. One such concern is receipt of rent in cash by the landlord. This is the most common transaction for a common man who has let-out his house property to tenants. Where the landlord is receiving monthly rent of Rs 25,000 in cash, the aggregate amount of rent for the whole year would exceed Rs 2 lakh and may attract clause (c) of Section 269ST as stated above. Receipt of rent may also be construed as a ‘single transaction’ to attract clause (b) as a whole and may trigger the provisions of Section 269ST.

The Central Board of Direct Taxes (CBDT) issued a circular on July 3, 2017 clarifying that receipt of monthly instalment by non-banking finance companies (NBFCs) and housing finance companies (HFCs) towards repayment of loan provided by them will not attract Section 269ST. It reasoned that since monthly instalments qualify as a ‘single transaction’ and the instalments as a whole should not be aggregated to check the applicability of Section 269ST. Same inference may be drawn for monthly rent  received by the landlord but a clarification from the government would be more than welcome to settle the doubts.

On the other hand, Section 269ST would be applicable in the following cases – (a) monthly rent received in cash for Rs 2 lakh or more from a single person; (b) rent received in cash under such an arrangement (quarterly/ half-yearly/ annually) where the total amount of each payment is INR 200,000 or more from a single person.

We hope that the government will address the above issue and provide more clarity on applicability of Section 269ST in the hands of the landlord who receives monthly rent in cash whose aggregate annual value is Rs 2 lakh or more. Till that time, let’s live with the hope that the upcoming Budget will bring more “achhe din” and gives more purchasing power to the honest “aam aadmi” who pays his taxes religiously.

Source : Financial Express

GST Council meeting today: Here’s what to expect : 18-01-2018


The Goods and Services Tax Council has a big agenda lined up today as it considers more changes to further improve the country’s most comprehensive indirect tax reform since Independence.

ET takes a look at what is on the agenda of the 25th meeting of the council:

Rejig in Rates

The GST Council may take up revision in tax rates on number of items. Rates are likely to be lowered for:

Bio diesel : 18%

Agri Equipment : 12%

Electric Vehicle : 12%

Online services : 18%

Jobwork service for handicraft : 12 %

Some other services : 18%

Revamp of law, rules and procedure
The law review committee has suggested slew of changes. The council will consider as many as 70 changes and amendments to schedule.
1. Change to definition of supply.
2. A more liberal input tax credit regime.
3. Reverse charge mechanism simplification.
4.Single registration for services providers

Defining Handicrafts:
GST Council may approve a new defi nition for handicrafts to give a leg up to the sector.
Handicraft items:
Handmade paper, handmade envelopes, letter cards, postcards, handmade boxes, pouches, wallets, handmade agarbattis, handmade fabric to be designated as handicrafts .

Return Simplication
The GST Council is expected to simplify and ease compliance.
1. Single return for service providers
2. Merger of regular forms GSTR 1, 2 and 3
3. Limited invoice matching

Presentation on real estate
The GST Council will take up a presentation on what can be possible regime for the sector if it is included within the tax regime

Source : Economic Times

 

Budget 2018: Modi government may tweak tax laws for job creation : 18-01-2018


Providing a stimulus to job creation is likely to be a focus areas of Budget 2018. In the run-up to the Budget, this has been a focus of discussions between finance ministry officials and external stakeholders as well as in internal brainstorming sessions.

Various countries provide tax benefits for creation of additional jobs (see table). Even India has such provisions, but owing to certain conditions that have been stipulated, many companies — especially in the service sector — have been unable to reap its benefits. It’s likely that section 80JJJAA of the Income Tax (I-T) Act may be tweaked to provide a greater impetus for job creation or some other new provision introduced. Under section 80JJJAA, 30% of additional employee cost is available as a deduction for three years, including the year in which the new employment is generated.

If an individual is employed for less than 240 days in the first year, such an individual is not treated as an additional (or new) employee. For the textile sector, a lower threshold of 150 days has been set. Further, if the monthly salary of any additional employees exceeds Rs 25,000, then the salary of such employees are excluded for the purpose of computing the additional employee cost against which the benefit is available.

I-T incentives

In its pre-Budget memorandum, Ficci points out that in a scenario where an employee has worked for less than 240 days in the first year, but for the entire year in year two and year three, even if all the other conditions are met with, the company will still not be able get the corresponding benefit under this section in any of the three years.

EY India partner & national tax leader Sudhir Kapadia explains, “Significant uncertainty arises in respect of those hired from August onwards as they are not able to complete 240 days in the first year. Employers are not incentivised to hire post-July, in any given year.” “The condition of completion of 240 days by an employee should be tested in two consecutive years instead of only the first year. Thus, if the employee fulfils the condition cumulatively in the first two years of employment  the company should be allowed to claim the additional deduction from years two to four,” he adds.

P V Srinivasan, an industry veteran and now a practising chartered accountant, says, “Further, if an employee’s salary exceeds Rs 25,000 per month, such an employee is not treated as an ‘additional employee’ for the purpose of computing the benefits under this section. This largely disqualifies the service sector, including the IT sector.” Ficci recommends that this limit be increased to at least Rs 50,000 per month.

Source : Times of India

 

Notification No. 1/2018 18-1-2018


MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 18th January, 2018

 

S.O. 284(E).—In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, ‘West Bengal Electricity Regulatory Commission’, Kolkata,a commission constituted by the Government of West Bengal, in respect of the following specified income arising to that commission, namely:—

(a) income from the fund maintained in accordance with the provisions of the West Bengal Electricity Regulatory Commission (Manner of application of Fund) Rules, 2006; and

(b) income from the fees collected in accordance with the provisions of the West Bengal Electricity (fees for application for grant of license) Rules, 2005, notified by the Government of West Bengal.

This notification shall be effective subject to the conditions that West Bengal Electricity Regulatory Commission, Kolkata,—

(a) shall not engage in any commercial activity;

(b) activities and the nature of the specified income shall remain unchanged throughout the financial years; and

(c) shall file return of income in accordance with the provision of clause (g) of sub-section (4C) of section 139 of the Income-tax Act, 1961.

3. This notification shall be deemed to have been applied for the financial Years 2016-2017 and shall apply with respect to the Financial Years 2017-2018, 2018-2019, 2019-2020 and 2020-2021.

 

[Notification No. 1/2018/F. No. 300196/9/2016-ITA-I]

VINAY SHEEL GAUTAM, Under Secy.

 

 

Explanatory Memorandum : It is certified that no person is being adversely affected by giving retrospective effect to this notification.

View: High time to prioritise non-tax revenue in the Budget : 17-01-2018


Budget-making is difficult at the best of times. So many demands, so few sources of income. For GoI, the need to raise revenues with a tightening fiscal policy — increasing taxes — is counterproductive, while cutting expenditure will slow down growth and investments.

Essentially, GoI has three sources of revenues: direct taxes, indirect taxes and non-tax revenues. For this year, the indirect taxes will play a much smaller role since it will be the GST Council that will be deciding indirect taxes, with the finance minister working with direct taxes and nontax revenues.

Rising oil prices and non-existent private sector investments make this year especially challenging. GoI has to proactively push the envelope in terms of capex and other expenditures. Non-defence capital expenditure over the last 10 years has grown by a compound annual growth rate (CAGR) of less than 10%.

Last year saw a healthy growth in capex and GoI must continue the momentum this year. Not only will this help boost the economy, but it will also drive a crowding-in effect for private sector investment. However, any increase in expenditure has to be countervailed by a proportionate increase in government revenues. Failure to do so could offset the fiscal deficit balance.

On the tax side, GoI introduced GST. Once its teething problems smoothen out, tax collections will rise further. Raising direct taxes to generate higher revenues, however, can be counterproductive. A rise will further slow private expenditure down, forcing GoI to spend more. This could lead to a vicious cycle of higher taxes and overdependence on government spending. Instead, why not aggressively push for a rise in nontax revenues?

Non-tax revenues as a percentage of total revenues have been budgeted at around 23% this year, lower than the 26% and 25% in 2017 and 2016 respectively. There is also a high chance that the actual number may be even lower. In fact, we have achieved less than 90% of our budgeted target for non-tax revenues in three of the last six years. This lack of predictability creates problems for GoI as it necessitates cost-cutting or increasing taxes to maintain the fiscal deficit target.

It’s high time we accord non-tax revenues the priority they deserve. A structured, long-term plan will not only outline the course of action but also help provide predictability to the earnings from non-tax revenues. The huge response to the Bharat 22 exchange-traded fund (ETF) this year proved that non-tax revenues can yield wonderful results if implemented in a thoughtful manner.

The most important vector in this will be the monetisation of government assets: real estate, telecom spectrum and equity stake in different PSUs. This selling of assets is an investment for the future, which needs to be done through a structure that maximises value for GoI. A possible fund, on the lines of sovereign wealth funds, can be considered. It could then monetise these assets, while simultaneously investing in areas to generate investment returns.

Such a fund could also enter into public-private partnerships (PPPs) for large public sector investments, including bank recapitalisation, infrastructure projects and social investing. Such ventures could help direct investment into capital-intensive projects without requiring explicit GoI funding. GoI can mandate a minimum target inflow from the fund towards the government every year to ensure its revenue requirements are met.

Various ministries, like transportation and railways, have recently announced that they will monetise their assets and will not have to rely solely on budgetary support for their investments. Similarly, GoI should plan to auction property assets to raise money. It also has access to sources such as unclaimed dividends and deposits. A list of options and modes of raising non-tax revenues could be made, along with a well-thought-out long-term plan for raising resources from these sources.

GoI has done well to implement taxside reforms in the form of GST that will enhance the tax revenues in the long term. A similar reforms-oriented approach towards non-tax revenues can help it do a better job at balancing the fiscal deficit and public expenditure, ensuring that the growth momentum is not lost.

Source : Financial Express

Budget 2018: What do the people want? : 17-01-2018


HERE’S A WISH LIST: An increase in income tax slabs, higher spending on agriculture and infrastructure, greater efforts toward skilling and more public investment to drive growth. That’s what the aam aadmi expects from finance minister Arun Jaitley’s fi fth budget on February 1, also the last full-fledged one before the next elections. ET presents the findings of LocalCircles Citizens’ Budget 2018 that got more than 125,000 responses from 50,000 unique participants in 200 cities over three weeks Safety was the biggest concern with respect to the railways. People also want improved oversight of government hospitals for better healthcare. Interestingly, while experts might favour a single rate GST, respondents didn’t think that was a good idea.

Budget1

 

Budget2
Budget3
Budget4
budget5
Budget6

 Budget7

budget8

budget9

Budget10
 budget11
budget13
Budget14
Source : PTI

GST Council meet tomorrow: Inclusion of real estate, cut in tax rates may bring cheer before Budget : 17-01-2018


Just two weeks before the Budget, GST Council is expected to consider a reduction in tax rates for some items and the inclusion of real estate in its 24th meeting tomorrow.

The meeting comes amid continuous dip in GST revenue collection in the last two months. The collection registered a sharp dip to Rs 80,808 crore in November, from Rs 94,063 crore in the launch month in July last year.

Change in tax rates
As Budget can no more tinker with indirect taxes due to implementation of GST, the Council is expected to announce tax concessions and reduction of tax rates on common man items and services, including household goods, agriculture products, housing sector inputs such as cement and steel.

Real estate in GST:

The Council is likely to discuss inclusion of real estate under GST and announce the rollout date for the same. According to some reports, Council may set a 12 per cent rate for the real estate sector and may also decide to subsume stamp duty and registration charges in GST. The likely date for inclusion of real estate under GST could be the start of new financial year, April 1.

“Discussion of real estate inclusion in GST is the key agenda of the GST Council which is scheduled to meet on January 18th,” a senior government official told ANI.

Single GST return form

It may also announce simplification of return filing process. The three return forms — GSTR1, GSTR2 and GSTR3 — may be clubbed into a single form for easier return filing .

This would drastically reduce the compliance burden on the tax payers as they will have to file 12 returns a year instead of 37 returns currently.

Since GST rollout in July, government has extended return filing dates many times.

Rollout of e-way bills 

At the last GST council meeting in December, roll out of e-way bill was decided for February 1. So the council may iron out issues in e-way bill mechanism for smooth implementation of e-way bills from next month.

Source : Economic Times

Notification No. SO 336(E) [F.NO.A-35013/01/2017-AD.III-MCA], Dated 16-1-2018


SECTION 211 OF THE COMPANIES ACT, 2013 – SERIOUS FRAUD INVESTIGATION OFFICE – ESTABLISHMENT OF – APPOINTMENT OF DIRECTOR ON LATERAL SHIFT BASIS W.E.F. 8-1-2018 TO 25-3-2020

NOTIFICATION NO. SO 336(E) [F.NO.A-35013/01/2017-AD.III-MCA]DATED 16-1-2018

In exercise of the powers conferred by sub-section (3) of Section 211 of the Companies Act, 2013 (18 of 2013), the Central Government hereby appoints Shri Amardeep Singh Bhatia, IAS (NL : 93) as Director in the Serious Fraud Investigation Office, on lateral shift basis, with effect from the 08th January, 2018 (A/N) to 25th March, 2020, or until further orders, whichever is earlier.

Budget 2018: Why FM Arun Jaitley should introduce standard deduction in India again : 16-01-2018


The Budget 2018 is just a couple of weeks away and all eyes are on Finance Minister Arun Jaitley as he is expected to provide some sops to the salaried class in his final budget before the 2019 polls. One of these much-expected sops is standard deduction. However, will standard deduction be reintroduced by FM Arun Jaitley through the Budget 2018? This is difficult to say. A majority of people, including tax experts, however, believe that to bring in parity between individuals carrying on business and those in employment, there is need for reintroduction of erstwhile standard deduction in India, which will result in more money inflow to the common man. And this should be done in the Union Budget 2018.

It may be noted that standard deduction for the salaried class under Section 16 of the Income Tax Act was introduced in India in the year 1974-75, but was withdrawn in 2006 by P. Chidambaram on the grounds that there was an equivalent increase in the basic exemption limit and 80C deductions. The withdrawal of standard deduction was made as part of the restructuring of the tax rates apparently on the assumption that standard deduction is an allowancerather than a deduction on account of the expenditure incurred by an employee in the performance of his duties for which he gets paid by way of salary.

It is pertinent to note that that up to the assessment year 1974-75, the Income-Tax Act had a provision for allowing to the salaried persons deductions for purchase of books, car maintenance etc. incurred wholly, exclusively and necessarily for the purpose of employment. From 1975-76, a composite deduction at certain percentage of salary (changed from time to time) was introduced. Thus, the standard deduction permissible under Section 16 of the I-T Act till Finance Act 2005 was intended to cover the expenditure incurred for the purpose of employment and didn’t constitute a personal allowance.

Before the removal in 2006, the rates of standard deduction were as follows:

Income Level

Quantum of Standard Deduction

Up to Rs 5 lakh

40% or Rs 30,000 (whichever is less)

Income above Rs 5 lakh

Rs 20,000

According to tax experts, reintroduction of standard deduction has been a long-pending demand of salaried individuals in India. It is also desirable to bring in parity between individuals carrying on business and those in employment.

That is because “an individual carrying on business or profession is eligible to claim deduction for expenses incurred towards his business. These include fuel and conveyance expenses, depreciation on car and motor bike, expenses incurred towards subscription of books & periodicals, attending seminars etc. In contrast, an individual pursuing an employment is not eligible to claim any expenses except for some relief towards conveyance allowance by his employer. The fact is that individuals in employment do need to incur expense to keep them updated with the latest developments and meet the requirements of their employment. Therefore, to bring in parity, a standard deduction should be allowed to individuals carrying on employment,” says Vikas Vasal, National Leader-Tax, Grant Thornton in India.

Karan Batra, Founder & CEO of CharteredClub.com, says that currently, there are several allowances allowed to salaried employees. However, these allowances are not comprehensive in nature and don’t cover all types of expenses incurred by the salaried employee.

“There are certain expenses which if incurred by a business/ professional can be claimed as an expense, but if incurred by a salaried employee cannot be claimed as a deduction. For example, salary paid to driver, expense incurred for upgrading a skill etc. Standard deduction is also allowed to the employees in several other countries such as Malaysia, Indonesia, Germany, the UK, France, Japan, Thailand, Singapore etc. and, thus, should be reintroduced in India as well through the upcoming Union Budget,” Batra says.

However, will FM Arun Jaitley do this in the Budget 2018? That is yet to be seen!

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Source : Financial Express

 

 

 

Single GST form likely for service providers : 16-01-2018


Service providers such as telcos, banks, insurers and airlines may need to file just one centralised form in respect of the goods and services tax (GST), which will substantially ease the compliance burden on service providers with a multi-state footprint.

The GST Council is expected to consider on January 18 significant relaxation in the law and procedures, including a centralised registration facility to make compliance easier. It will also consider changes to input tax credit regime to allow credit for tax paid on rent a cab services, benefiting IT and ITES companies such as Infosys, Wipro and Genpact.

“Council has a heavy duty agenda lined up…. A number of issues dealing with compliances are likely to be taken up,” said a government official privy to the deliberations. A panel set up by the GST Council has suggested modifications in the provisions of the law and relaxations in some procedures to ensure ease in compliance.

It has recommended centralised registration and centralised form for service providers who have registration in 10 states or more with an annual turnover of Rs 500 crore. At present, service providers have to register in each state and file separate returns, a major grouse of the industry that only had to deal with Centre earlier.

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“Centralised registration is needed to reduce the compliance requirement of industry, given that mechanisms can be worked out to safeguard the revenue of individual states using the IGST mechanism,” said Bipin Sapra, partner, EY

Sapra said in case there is no agreement on centralised registration, then a Large Taxpayer Unit type structure could be considered for centralised processing of returns for assessment and audit.

India had rolled out GST, replacing multiple state and central taxes, from July 1. Subsequently, a number of changes were made in the framework including cut in tax rates on key household items and restaurants and simpler compliances for small businesses especially under the composition scheme.

The GST Council had also set up a panel – the law review committee – to look at the feedback from industry following complaints of burdensome compliance.

A separate panel comprising industry representatives was also set up to relook at procedures and rules and suggest a way forward. Recommendations of this group were taken up by the law review committee.

The law review committee has also suggested changes to the input tax credit framework to ensure that some of the inputs are allowed as a credit. Some of these include expenses incurred on employees such as rent a cab service used extensively by the IT and IT services sector.

“In an ideal GST system, input credit should be available with respect to all business expense. Therefore, liberalising the credit regime is step in the right direction.

This will particularly provide relief to IT/ITES sector who typically have large work force working in multiple shifts,” said Pratik Jain, indirect tax leader, PwC.

 

Source : PTI

 

Arun Jaitley’s Budget could get a helping hand from Pakistan and China : 16-01-2018


Just when the Narendra Modi government is struggling to meet the fiscal deficit target, it is set to reap a bonanza — the sale of enemy properties that belong to those who migrated Pakistan and China.

More than 9,000 enemy properties are worth more than Rs 1 lakh crore. The home ministry has started the process of identifying all such properties. At a recent meeting, Union Home Minister Rajnath Singh was informed that the survey of 6,289 enemy properties had been completed. Singh directed that those properties which were free from encumbrance should be disposed of quickly for monetisation.

Fiscal deficit for FY18 is likely to exceed the budgeted estimate of 3.2 per cent by about 0.3 per cent. Slow GDP growth, low GST collections, smaller dividend from the RBI and less proceeds from telecom spectrum have upset the fiscal math. Higher oil prices and proposed additional borrowing of Rs 50,000 crore for the current fiscal will further put pressure on government finances.

That’s why the windfall gain of more than Rs 1 lakh crore is just in time.

enemy1

The passing of the Enemy Property (Amendment and Validation) Bill 2016 paved the way for the government to monetise enemy properties.The amendment empowers the Custodian of Enemy Property to sell such assets which was not permitted under the old Enemy Property Act, 1968.

According to data provided in the report of the parliament select committee on the bill, there are 9,280 immovable properties belonging to Pakistani nationals encompassing 11,882 acres. The total value of immovable properties that are vested with the custodian stood at Rs 1.04 lakh crore. Movable vested properties consist of shares in 266 listed companies valued at Rs 2,610 crore; shares in 318 unlisted companies valued at Rs 24 crore; gold and jewellery worth Rs 0.4 crore; bank balances of Rs 177 crore; investment in government securities of Rs 150 crore and investment in fixed deposits of Rs 160 crore.

Besides this, there are 149 immovable enemy properties of Chinese nationals with the custodian in West Bengal, Assam, Meghalaya, Tamil Nadu, Madhya Pradesh, Rajasthan, Karnataka and Delhi.

enemy2

An ET Intelligence Group investigation in 2008 had revealed that the shares vested with the custodian were in listed entities such as Wipro, Cipla ACC, Tata and DCM group companies, Bombay Burmah Trading Co., Ballarpur Industries, DLF, Hindustan Unilever, ITC, Bajaj Electricals, India Cement and Aditya Birla Nuvo.

Even if the government is bale to auction a part of the enemy properties, it will provide considerable fiscal cushion

Source : Economic Times

GST panel moots merger of forms, cutting reverse charge mechanism (RCM) ambit : 12-01-2018


A week ahead of a crucial GST Council meeting that is expected to take steps to ease taxpayers’ compliance burden and, at the same time, plug revenue leakage, senior tax officials met in New Delhi on Thursday to finalise the relevant proposals. A merger of triplicate comprehensive tax return forms (GSTR-1, 2 and 3) into one consolidated form, allowing smaller service providers also to register as composition dealers and restricting the prospective application of the reverse charge mechanism (RCM) to only a handful of goods and services where the potential tax evasion is high, are learnt to be among the key proposals.

Although the Centre and tax officials would like a section of service providers who have a large component of inter-state sales like telecom and financial services to have the facility of single, rather than state-wise, registration, there is no certainty about its adoption by the council as state governments continue to oppose the idea.

Another major suggestion of the committee is simplifying the return process for nil-tax filers, to ensure that they can file their returns with just one click on the GSTN portal. Nearly 40% of the existing tax filers have claimed nil-tax liability since July.

Source : Financial Express

Notification No. SO 337(E) 12-01-2018


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – TRUE DEVELOPERS PVT. LTD.

NOTIFICATION NO. SO 337(E) [F.NO.F.1/75/2007-SEZ], DATED 12-1-2018

WHEREAS, M/s. True Developers Pvt. Ltd. had proposed under section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act) to set up a sector specific Special Economic Zone for Electronics Hardware including Information Technology and Information Technology Enabled Services at Arasur Village, Palladam Taluk, Coimbatore District, in the State of Tamil Nadu;

AND, WHEREAS, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the said Act read with rule 8 of the Special Economic Zone Rules 2006, had notified an area of 11.50.4 hectares vide Ministry of Commerce and Industry Notification Number S.O. 1966 (E) dated 20-11-2007;

AND, WHEREAS, M/s. True Developers Pvt. Ltd. has now proposed to de-notify entire area of 11.50.4 hectares of the above Special Economic Zone;

AND, WHEREAS, the State Government of Tamil Nadu has given its “No Objection” to the proposal vide Letter No.5133/MIE-2/2017-3, dated 27-10-2017.

AND, WHEREAS, the Development Commissioner, MEPZ Special Economic Zone has recommended the proposal for de-notification of entire area of 11.50.4 Hectares of the Special Economic Zone;

NOW, THEREFORE, in exercise of the powers conferred by first proviso to rule 8 of the Special Economic Zones Rules 2006, the Central Government hereby rescinds the above notification except as respects things done or omitted to be done before such rescission.

Pressure on FM Arun Jaitley to fulfil promise of cutting corporate tax rate : 12-01-2018


Finance Minister Arun Jaitley will be under pressure to moderate tax rate for the industry which was promised a lower levy of 25 per cent by the government three years ago, experts said.

With the US substantially cutting corporate tax, the minister will also need to keep India’s tax rate globally competitive, they added.

The industry is doubtful whether Jaitley would fulfil his promise of reducing corporate tax rate from 30 per cent to 25 per cent over four years. However, it wants the minister to consider moderating it to at least 28 per cent in the forthcoming Budget.

To be unveiled on February 1, it would be the last full Budget of the present NDA government.

In his Budget speech of 2015-16, Jaitley had said “a regime of exemptions has led to pressure groups, litigation and loss of revenue. It also gives room for avoidable discretion. I therefore propose to reduce the rate of corporate tax from 30 per cent to 25 per cent over the next four years. This will lead to higher level of investment, higher growth and more jobs.”

Not expecting Jaitley to cut corporate tax rate to 25 per cent in view of fiscal constraints, Ficci president Rashesh Shah said the minister should endeavour to bring it down to 28 per cent.

The subdued indirect tax collection following rollout of the Goods and Services Tax (GST) from July 1 last year has put pressure on the fiscal deficit, which has been pegged at 3.2 per cent of the GDP for 2017-18.

The government recently raised borrowing target by additional Rs 50,000 crore for the current fiscal to meet the shortfall.

“I am hoping that in this Budget, they will bring down the tax rate to 28 per cent at least to give a confidence that they are on that path,” Shah told PTI.

He was also of the view that the cut in tax rates would also help the Indian industry in meeting the challenges emanating from tax cuts by the Trump administration in the US and its aftermath in other developing countries.

In December last year, Senate Republicans passed a sweeping overhaul of the US tax code in more than 30 years.

The Senate approved the USD 1.5 trillion tax bill, which includes permanent tax breaks for corporations and temporary tax cuts for individuals, by a final vote of 51-48.

CII suggested that the corporate tax rate should be brought down to 18 per cent all inclusive.

“Reduction in tax rates should even be extended to other forms of unincorporated bodies/business entities like partnerships, LLPs, AOPs and co-operative societies to ensure horizontal equity between different legal forms in which business is carried on,” it recommended.

Although the corporate tax rate of India is competitive in comparison with the global rates, Shardul Amarchand Mangaldas Partner Amit Singhania said considering the recent slashing of corporate tax rate in US, there is a need to revisit the tax rate in Budget 2018 as it will have an impact on overall returns for US investors.

Further, in order to encourage flow of funds (in form of dividend) from overseas subsidiaries, the reduction of MAT on such dividends is warranted, Singhania said.

“In order to facilitate the insolvency bids, the government may provide clarification on the waiver of loan by lenders in the hands of the company under normal provisions of the Income Tax Act, 1961,” he said.

According to Deloitte India Partner Gokul Chaudhri, direct tax measures could contribute towards ‘Make in India’ and push growth.

“This would involve reduction in the corporate tax rate to 25 per cent in line with the Finance Minister’s four year old announcement; US has substantially reduced its corporate tax rate to 21 per cent from January 2018,” Chaudhri said.

Source : PTI

Budget 2018: Dividends may become taxable in your hands but LTCG tax on equity unlikely, says EY : 12-01-2018


Dividends may be made taxable in the hands of the receivers instead of being taxed at source via Dividend Distribution Tax (DDT), says Sonu Iyer, Tax partner and people advisory services leader, EY. On the other hand, she did not feel that long term capital gains tax would be reintroduced for equity because “markets are doing well and the government would not want to stop the market momentum”. While there is a lot of talk that LTCG tax would yield huge tax revenue, however the government already  gets tax in the form of STT which is much easier to collect, she reasoned.

During pre-budget discussion with ET online, she said that a dividend tax on those receiving dividend of over Rs 10 lakh per annum has already been introduced earlier. Therefore, it is likely that this line of thinking may be extended to all dividend receipts to make the tax on dividends more equitable and also to reduce the total load of tax on companies. Currently, if corporate tax and DDT are counted together then the effective tax on companies is around 46% which is much higher than in  other countries, she said. This would also help improve the ease of doing business in India which is a stated objective of the government, she said.

Such a move would also be pro-small investor, she added. Dividend was taxable in the hands of the recipient prior to 1997 when it was abolished and DDT was introduced. If this regime is brought back then, investors would pay tax on the dividend on the basis of their income level instead of everyone having to pay a flat DDT at the same rate which is levied at source i.e. before distribution.

Currently, companies pay dividend distribution tax (DDT) when they pay dividend and such dividend is exempt in the hands of the recipient shareholders. In the Union Budget 2016, the government introduced a new section 115BBDA to tax the dividends in the hands of the shareholders, in excess of Rs 10 lakh, at a flat rate of 10%. It is anticipated the government may change the current method of dividend taxation and make dividend taxable only in the hands of the shareholders, she said.

There has been talk that the government may either raise the holding period for long term capital gain tax exemption (on listed equity shares) to 2 years from the current holding period of one year or levy tax on the long-term capital gains from listed equity shares. Introduction of an LTCG tax would hit market sentiment, Iyer said.

Source : Economic Times

PM Narendra Modi, economists brainstorm on ways to revive growth – What all they discussed? : 11-01-2018


Prime Minister Narendra Modi today brainstormed with economists and experts on the state of the economy as the government looks to revive growth which is set to hit a 4-year low. The meeting with over 40 economists and sectoral experts came weeks before the NDA-government presents its fifth and final full budget that would look to address pain points in the economy and boosting growth to 7-8 per cent. The interactive session, organised by NITI Aayog, was on the theme, ‘Economic Policy – The Road Ahead’.

It had participants express their views on macro-economy, agriculture, rural development, employment, health, education, manufacturing, exports, urban development, infrastructure and connectivity. “In his intervention, the Prime Minister thanked various participants for their suggestions and observations, on various aspects of the economy. In particular, he appreciated the quality of suggestions that had come from various subject experts,” the Prime Minister’s Office said in a statement.

It however did not provide details about the deliberations. The meeting was attended by several Union Ministers, including Finance Minister Arun Jaitley. Vice Chairman NITI Aayog Rajiv Kumar, and senior officers from the Centre and NITI Aayog were also present. The Central Statistics Office (CSO) has projected India’s growth to slow to 4-year low of 6.5 per cent in the current fiscal in the backdrop of introduction of Goods and Services Tax (GST) regime.

Source : Financial Express

How to save income tax under section 80C : 11-01-2018


Every year most of us struggle to save taxes. While most of us have an idea about commonly known options but tax saving can be challenging for a young newly recruited employee.

The most widely used option to save income tax is section 80C of the Income Tax Act. As per this section, if an individual or Hindu Undivided Families (HUFs) invests in or spends on specified avenues then up to Rs 1.5 lakh, as per the current laws, of this investment/expenditure can be claimed as a deduction from gross total income before calculating tax payable on it in a financial year. The deduction can be claimed only from income in the financial year in which the specified investment/expenditure is made.

By claiming this deduction, a person can reduce his/her gross taxable income and thereby the total tax payable by him/her. For example, if your gross total earnings say, for a financial year is Rs 6.5 lakh and if you invest Rs 1.5 lakh in notified schemes which allows you to claim this tax benefit, then your net taxable income will come down to Rs 5 lakh and you would have to pay tax on this amount.

Apart from investment in specified avenues, certain specified expenditures also qualify as deductions from gross total income under section 80C.

There is a long list of investments, expenditures that qualify for deduction from gross total income under Section 80C. Some of them are as follows:

a) Premium paid for life insurance, ULIP, annuity plan
b) Contribution to provident fund such as EPF, VPF or PPF or superannuation funds
c) Investment in NSC, KVP, Senior Citizen Savings Scheme (SCSS) 2004, 5-year Post Office Term deposits, 5-year bank fixed deposits.
d) Investment in a notified Equity Linked Saving Scheme (ELSS) of a mutual fund.

e) Repayment of principal of loan taken for the purchase or construction of house as per rules specified .

For a complete list of all the specified investment/expenditure avenues available under Section 80C click here .

Points to remember about claiming deduction under section 80C are as follows.

Investments/expenditures under section 80C cannot be claimed as a deduction from the capital gains portion, if any, of your income. This means that if your income comprises only of capital gains then you cannot use Section 80C to save tax on that income.

Amount of tax saved by using section 80C depends on the tax slab in which the income was falling. For example, if the income deducted from gross total income before tax calculation was in the 30% plus 3% cess bracket then that would the amount of tax saved

Let us say, if your gross total income for the year is say, Rs 10.5 lakh, then by taking a deduction of Rs 1.5 lakh under section 80C, you reduce your net taxable income to Rs 9 lakh. This would bring down your tax liability by Rs 46,350.

If a person’s income is already below the minimum exemption limit, currently at Rs 2.5 lakh for individuals below 60 years of age, then he/she would not be saving any tax via investments/expenditures under section 80C as his income is not liable for any tax.

Apart from section 80C, there are two more sections i.e. Section 80CCC and Section 80CCD.

According to the section 80CCE, the maximum aggregate deduction that can be claimed under section 80C, section 80CCC and section 80CCD (1) cannot exceed more than Rs 1.5 lakhs

As per section 80CCD (1), the deduction will be allowed for contributions made to notified pension scheme if the same does not exceed

a) ten per cent of the salary in case of an employee, or;
b) twenty per cent of the gross total income in case of self-employed .

Apart from the above 2 constraints, the total amount claimed as a deduction from gross total income under both Section 80C and section 80CCD cannot exceed the notified limit of Rs 1.5 lakh.

As per section 80CCD (1B), an additional deduction of a maximum of Rs 50,000 from gross total income will be allowed to assessee, if he invests this in notified pension scheme(s).

Currently, these notified schemes are National Pension System and Atal Pension Yojana.

In addition to that, you can also ask your employer to make contribution to your NPS account as per section 80CCD (2). The employer’s contribution cannot exceed ten per cent of the employee’s salary. However, there is no upper limit in monetary terms on the amount of employer’s contribution that would be exempt from tax, as per the Income Tax Act. Salary for the purpose of calculating this 10% is defined as “Salary includes dearness allowance, if the terms of employment so provide, but excludes  all other allowances and perquisites” as per the Act.

Source : PTI

How GST has taken the suspense out of Budget : 11-01-2018


The Goods and Services Tax (GST), which was imposed on July 1 last year, radically changed many things in Indian economy. One change that has gone unnoticed is its impact on the Budget. The GST has shorn the Budget of its suspense and mystery by taking away half of its work, the indirect taxes. Now GST Council decides tax rates for goods and services. In fact, Finance Minister Arun Jaitley had dropped indirect tax proposals in his previous Budget in anticipation of GST coming in force after  a few months.

The Budget now is mostly about allocations, direct taxes and customs duties and levies.

Indirect taxes gave the Budget its mass connect, though income tax is still a big item of curiosity for the masses. Earlier, the Budget got the attention of every Indian, right from the man who sold bidis by the roadside to the middle-class housewife looking to buy jewellery.

People avidly waited for the Budget to know what got costlier and what got cheaper.

Days before it was presented in the Parliament, Budget occupied the mindspace of common Indians. Small shopkeeper would start hoarding items that were rumoured to be taxed more. Or rates of such items would already go up.

Due to indirect taxes, the Budget had everything for everyone. Rich or poor, young or old, student or professional, businessman or roadside vendor, every Indian instantly felt the impact of the Budget.

The Budget was the time the aam aadmi hogged the news. Much before it was presented, the media made a beeline for the aam aadmi, asking him about his expectations. It was also the time when aam aadmi could hold forth on a complex subject with authority.

After the Budget, the aam aadmi would rate the Budget. Everyone had something or the other to say about it. Right after the Budget was out, one could feel the pulse of the nation as everyone had an opinion on the government.The Budget was a great festival of democracy that galvanised the whole of India.

Now, except income tax, there is little in the Budget that would make an instant connect with the masses. Of course, various schemes, from agriculture to housing, do impact lives of all Indians. But indirect taxes were about the items of daily use.

The government was deciding important parts of your daily life. Fiscal deficit or a Krishi Sinchai Yojna does not evoke the reaction that cheaper refrigerators or costlier branded clothes do.

Before last year, the finance minister’s budget briefcase was seen as a riddle wrapped in a mystery inside an enigma. As he entered the Parliament brandishing his briefcase, people looked at it with apprehensions as well as expectations. The Goods and Services Tax (GST) has changed all that.

In a way, the finance minister has lost a big part of his power. It was a standard ritual for various industry bodies and other pressure groups to line up at his office to plead their cases for concessions, rebates and other benefits. Now, it’s the GST Council that gets their attention.

Source : Economic Times

01/2018 – 10-1-2018


SECTION 143, READ WITH SECTION 119, OF THE INCOME-TAX ACT, 1961 – ASSESSMENT – GENERAL – ORDER UNDER SECTION 119 – PROCESSING OF INCOME-TAX RETURNS WHICH WERE FILED IN FORMS ITR-1 TO 6 AND APPLICABILITY OF SECTION 143(1)(a)(vi)

CIRCULAR NO.1/2018 [F.NO.225/333/2017-ITA.II]DATED 10-1-2018

Sub-clause (vi) of clause (a) of sub-section (1) of section 143 of the Income-tax Act, 1961 (‘Act’) as introduced vide Finance Act, 2016, w.e.f. 1-4-2017, while processing the return of income, prescribes that the total income or loss shall be computed after making adjustment for addition of income appearing in Form 26AS or Form 16A or Form 16 (the three Forms) which has not been included in computing the total income in the return. In this regard, CBDT has issued Instruction No.(s) 9/2017 dated 11-10-2017 & 10/2017 dated 15-11-2017 for identification of instances in which section 143(i)(a)(vi) of the Act may be invoked by CPC-ITR, Bengaluru on the basis of information contained in the ITR Forms 1 to 6.

2. As intimations proposing adjustments in identified returns under section 143(1)(a)(vi) of the Act would be shortly issued by the CPC-ITR, Bengaluru, the process to be followed by the taxpayers for filing the response is as under:

2.1 Since section 143(l)(a)(vi) of the Act is being applied for the first time while processing the returns, it has been decided that before issuing an intimation of the proposed adjustment, initially an awareness campaign would be carried out to draw the attention of the taxpayer to such differences. This would be in form of an e-mail and SMS communication to the concerned taxpayer informing him about the variation in the tax-return vis-a-vis the information available in the three Forms and requesting him to submit response to the variation within one month of receiving the communication electronically. In case the taxpayer does not respond within the available time-frame or the response is not satisfactory, a formal intimation u/s 143(l)(a)(vi) proposing adjustment to the returned income would be issued to him. As per the second proviso to section 143(1)(a)(vi) of the Act, in a case where no response is received from the taxpayer within thirty days of issue of such an intimation, the proposed adjustment shall be made to the returned income. Therefore, it is of utmost necessity that the concerned taxpayer files a prompt, timely and satisfactory response to the awareness campaign or subsequent intimation proposing adjustment u/s 143(1)(a)(vi) of the Act.

2.2 The manner for furnishing response by the taxpayer is as under:

For furnishing the response electronically, taxpayer is required to login in his account in the e-filing site and choose the option (View-Returns/Forms). In a case where communication/intimation has been issued to the taxpayer u/s 143(1)(a)(vi) of the Act, the status will be displayed in the dashboard as ‘Response to Communication/Intimation u/s 143(1)(a) is pending’. The taxpayer can click on the same and submit his response.

2.3 The scenario(s) for furnishing response are as under:

I. Where upon receiving the awareness message or formal intimation u/s 143(1)(a)(vi) of the Act, if the taxpayer fully agrees with the proposed adjustment, he is required to file a revised return in response.
II. Where upon receiving the awareness message or formal intimation u/s 143(1)(a)(vi) of the Act, if the taxpayer partially agrees with the proposed adjustment, he is required to (i) file a revised return for the part of the proposed adjustment with which he is in agreement & (ii) file a reconciliation statement (in the format to be provided by CPC-ITR on the e-filing site) for the part of the proposed adjustment with which he is not in agreement.
III. Where upon receiving the awareness message or formal intimation u/s 143(1)(a)(vi) of the Act, the taxpayer disagrees with the proposed adjustment, he is required to file a reconciliation statement (in the format to be provided by CPC-ITR on the e-filing site) in support of his contention.

3. Based upon response of the taxpayer as indicated in para 2.3 above and the information so available with the CPC-ITR, thereafter, such returns shall be taken up for processing by CPC-ITR as per provisions of section(s) 143(1), 143(1)(a)(vi) read with Instruction Nos. 9 & 10/2017 of CBDT.

Arun Jaitley meets corporate honchos to set agenda for WEF Davos : 10-01-2018


Finance minister Arun Finance minister Arun Jaitley held a meeting with top industrialists on Tuesday along with commerce and industry minister Suresh Prabhu to shape the agenda for participation at the forthcoming annual meeting of World Economic Forum at Davos. The industrialists include Bharti Enterprises chairman Sunil Mittal and ICICI Bank managing director Chanda Kochhar. Prime Minister Narendra Modi would lead the biggest Indian contingent of over 100 delegates to Switzerland during the four-day World Economic Forum 2018 at Davos starting January 23, the external affairs ministry had said on Monday. Modi would be the first Prime Minister to attend the event in Davos in two decades. He would deliver a keynote address at the eventand also hold a bilateral meeting with Swiss Confederation president Alain Berset. India has been tasked with hosting the welcome reception at the world leaders’ event in Davos, with Indian foods and yoga expected to make their presence felt there.

According to the WEF, over 3,000 leaders representing over 100 countries would gather to discuss global, regional and industry agendas. Even senior executives of key global corporations, government officials, artistes, and civil society members from across 120 nations are expected to attend. The Indian delegation will also include Jaitley, Prabhu, railways minister Piyush Goyal, petroleum minister Dharmendra Pradhan and minister of state for external affairs MJ Akbar.

National logistics plan mooted

The commerce ministry is working on a national logistics plan to facilitate unrestricted movement of goods across the country to add to our trade competitiveness, said a senior official. The recently-established logistics division in the commerce ministry is discussing the matter with various other ministries, including railways, roadways, shipping and civil aviation, for this purpose.

Already, in a move to develop an integrated logistics framework, including industrial parks, cold chains and warehousing facilities, the government has accorded infrastructure status to the logistics sector. This will enable the industry to access cheaper finances.

Source : Financial Express

7th Pay Commission latest news: Great news! This is when salaries will be adjusted : 10-01-2018


The 7th Pay Commission recommendations have been giving government employees a hard time and that is because of a big reason – they have been due for a long time now. Many debates over the same have been sparked as the 50 lakh Central Government staff has been waiting for its complete implementation along with changes. As frustrating as it may sound, the fact that there has been no progress in the matter, was also confirmed in the Lok Sabha. There have been reports suggesting that a high-level committee is being constituted in this regard but no official confirmation has come on the same.

Recently, on the floor of the House, the Finance Ministry was asked if there was any proposal to form a pay panel for increasing salaries and allowances of Central Government employees and pensioners in future. The question asked was: “Is there a proposal to adjust the salaries of employees when Dearness Allowance crossed 50 per cent? Is the Department of Expenditure planning to regularly monitor salaries and allowances of CG employees and recommend changes.”

To this, the Minister of State for Finance, P Radhakrishnan said that the DoPT had formed the National Anomaly Committee in August. In response to the other three questions, the minister said that no such proposals were under consideration for now.

Earlier, the National Anomaly Committee was supposed to meet and decide on a variety of issues, a move that never took place. Then, it was reported that minimum pay hike and fitment factor was not an anomaly and hence would not come under the purview of the NAC.

For the last few months, some reports have been suggesting that a high-level committee would be constituted which would comprise officials and ministers from all departments and the matter would be decided further. However this proposal is still in the offering and no file to this effect has moved as yet.

Source : Times of India

Budget 2018: Tax exemption limit may be raised from Rs 2.5 lakh to Rs 3 lakh : 10-01-2018


Middle class can hope for a big relief in 2018-19 Budget, which will also be the last regular Budget of the NDA government, as the finance ministry is contemplating to hike personal tax exemption limit and tweak the tax slabs, according to sources.

The proposals before the ministry is to hike the tax exemption limit from the existing Rs 2.5 lakh per annum to at least Rs 3 lakh if not 5 lakh, they said.

Besides, the tinkering of tax slab is also being actively considered by the ministry to give substantial relief to middle-income group, especially the salaried class, to help them tide over the impact of retail inflation, which has started inching up.

In the last Budget, Finance Minister Arun Jaitley left the slabs unchanged but gave marginal relief to small tax payer by reducing the rate from 10 per cent to 5 per cent for individuals having annual income between Rs 2.5-5 lakh.

In the next Budget to be unveiled on February 1, the government could lower tax rate by 10 per cent on income between 5-10 lakh, levy 20 per cent rate for income between Rs 10-20 lakh and 30 per cent for income beyond Rs 20 lakh.

At present, there is no tax slab for income between 10-20 lakh.

“Considering the steep rise in cost of living due to inflation, it is suggested that basic limit for exemption and other income slabs should be enhanced to give benefit to low income group. The income trigger for peak rate in other countries is significantly higher,” industry chamber CII said in its pre-Budget memorandum to the finance ministry.

Although the industry chambers want the government to reduce peak tax slab to 25 per cent, it is unlikely that the ministry will agree to that due to pressure on fiscal deficit.

The subdued indirect tax collection following roll out of Goods and Services Tax from July 1 last year has put pressure on the fiscal deficit, which has been pegged at 3.2 per cent of the GDP for 2017-18.

The government recently raised borrowing target by additional Rs 50,000 crore for the current fiscal to meet the shortfall.

According to industry body Ficci, there is a likelihood that demonetisation effects may linger on for some more months and hence there is a need to further boost demand and therefore, the government should consider revision of income tax slabs, by raising the income level on which peak tax rate would trigger.

“This would improve purchasing power and create additional demand. For individual taxpayers, 30 per cent tax rate should be applicable only if the income is above Rs 20 lakh. Additionally, interest rates should be lowered to enable affordable finance for conducting business operation and expansion,” it said.

Among other things, chambers have suggested re- introduction of the standard deduction for salaried employees to at least Rs 1 lakh to ease the tax burden of them and keeping in mind the rate of inflation and purchasing power of the salaried individual, which is dependent on salary available for disbursement.

Standard deduction, which was available to the salaried individuals on their taxable income, was abolished with effect from assessment year 2006-07.

Source : Economic Times

PM Narendra Modi to meet economists, sectoral experts on January 10 : 09-01-2018


With about three weeks left for Union Budget 2018-19, Prime Minister Narendra Modi will meet leading economists and sectoral experts at Niti Aayog on January 10 to deliberate on steps which could be taken to boost growth and generate employment. The meeting, according to a senior government official, will be attended by vice chairman and members of Niti Aayog, members of Economic Advisory Council to the Prime Minister (EAC-PM), economists and sectoral experts. The meeting comes in the backdrop of latest estimates of national income by Central Statistics Office (CSO) which showed that India’s growth is expected to slow down to four-year low of 6.5 per cent this fiscal, the lowest under the Modi-led government.

The Gross Domestic Product (GDP) was 7.1 per cent in 2016-17 and 8 per cent in the preceding year. It was 7.5 per cent in 2014-15. Finance Minister Arun Jaitleywill present Union Budget on February 1, the last budget of the NDA government before the 2019 Lok Sabha election.

Source : Financial Express

Decoding the rationale behind finance ministers’ obsession with tobacco during budget making : 09-01-2018


NEW DELHI: Smokers have been a favourite target of budget makers in India. Tobacco is the only product—along with other so-called ‘sin goods’—which they can keep taxing higher and higher without any guilt. Though many finance ministers do speak of hazards of smoking, their main objective remains the revenues .

Early finance ministers did not even raise the health concerns over tobacco consumption. They considered smoking an indulgence or a luxury. That was how smoking was widely perceived 70 years ago. Sometimes the ministers were even mindful of burdening the smokers too much. Talking of a beedi smoker, CD Deshmukh said in his 1951 Budget speech, “Compared to what the smoker of even the cheapest variety of cigarettes has to pay, I do not think that this places an undue burden on him.” No finance minister today will spare such a thought for smokers. Deshmukh was merely reflecting the sentiment of his times when smoking was not seen as a big health hazard. In his 1955 speech, Deshmukh even cited the recommendation of the Taxation Enquiry Commission for low tax on cheaper cigarettes and high tax on expensive ones.

For two decades, no finance minister spoke of the health concern while taxing the smokers.

Moraraji Desai—known for his novel health practices—was the first finance minister to flag the health risk of smoking. In his 1967 Budget speech, talking of increase in taxes on cigars and cheroots, he said, “I realise that the increase proposed is high. But Honourable Members and others can at least escape its incidence by reducing consumption and thus perhaps prolonging their lives in the bargain.” However, Desai was no anti-smoking warrior. While raising duty on cigarettes, he had another benefit in sight: “It is necessary also to restrain the increasing consumption of cigarettes which cuts into the exportable surplus available of cigarette tobacco, an important foreign exchange earner. ” Next year, proposing to raise duty on unmanufactured tobacco, he said, “I have decided to be impartial between the different devotees of nicotine, be they addicted to the humble bidi, hookah and chewing tobacco or to cigarettes, cigars and the pipe.”

Even Desai’s mild hint at the hazard of smoking was perhaps a new idea in those times. Because, four years later, Indira Gandhi, the prime minister who also held the finance portfolio, regretted raising duties on cigarettes in her 1970 speech. “I am sorry that the smoker’s pocket has to be touched once again. The duty on cigarettes is being enhanced with the increase ranging from 3 per cent to 22 per cent ad valorem depending on the value slabs,” she said. She even wished smokers would consume more cigarettes: “Assuming that the smoking community remains steadfast in its devotion, the additional revenue from this measure will be Rs.13. 50 crores.”

Though Y.B. Chavan did raise the health concern wittily in his 1971 speech, he presented it as a personal problem: “There comes perhaps a time in the life of every smoker when the concern for his own health begins to outweigh the loyalty to an old and faithful companion. For those who cannot shake off their consuming passion, there is at least the consolation that the more taxes they pay, the more they serve the common cause. I am, therefore, fortified in my decision to increase once again the  taxation on cigarettes by the thought that whichever way my smoking friends react, there would be a net gain to national welfare.”

In his 1973 speech, Chavan clearly steered clear of semonising the smokers: “Tobacco has been a much maligned commodity almost from the days of its discovery. While I would certainly refrain from adopting any attitude of castigation towards the numerous devotes of the tobacco leaf, I shall be content if those who take pleasure from the use of this weed will contribute in some higher measure to the national Exchequer.” He seemed to be satisfied with the view that he won’t feel guilty taxing the smokers: “I would hope those fortunate enough to afford the more costly brands will feel more virtuous in the knowledge that they will now be contributing in larger measure to the exchequer.”

The politician who made so much of his moral and ethical stands was happy promoting hookah and cigars. This is what VP Singh said in his 1986 speech: “We have a potential for development of exports of cigar, cheroots and cigarilloes. This would require development of production of branded products which will sell both in the domestic and in the export is proposed to do away with the excise duty presently levied on branded cigars, cheroots and cigarillos. Excise duty on branded Hukka tobacco is also being abolished. I may confess that total excise collections on these items were insignificant. Those who cannot afford to smoke cigarettes can now turn to cigars and cheroots.”

Madhu Dandvate wanted to discourage smokers with higher taxes, though he interpreted this not as a role of the government but as a familial concern: “The family members of my smoker friends would, I am sure, be expecting an increase in the rates of excise duty on cigarettes in the interest of the health of the smokers. I will not disappoint them.” However, he did differ from many of his predecessors who wished higher consumption of smoking to get more revenues. “I shall be more than happy if my actual collections are much less due to fall in cigarette consumption,” Dandvate said. He was probably the first finance minister to declare that he would be happy to lose the revenue from tobacco products.

Manmohan Singh was the first finance minister to state in no uncertain terms that smoking was injurious and it was the duty of the state to restrict this practice. In his 1991 speech, he said, “Every Finance Minister has to do his bit to curb smoking, which is injurious to health. I must also fall in line and add to the tax on cigarettes.” In his next speech in 1992, he sought to make a cause out of discouraging the smokers: “In my budget speech last year, I mentioned that every Finance Minister has to do his bit to curb smoking which is injurious to health. This injury to health is continuing and I would be failing in my duty if I did not make one more attempt to use the fiscal instrument in this worthy cause.” It was the first time a finance minister had clearly stated that it’s government’s duty to curb smoking. Manmohan did not have to lean on the excuse of generating more revenue. He was clear—cigarettes are being taxed more because the government wants you to consider quitting.

In the early nineties, social campaigns and medical research had created awareness about hazards of smoking. That reflects in P Chidambaram’s 1997 speech. “Mr. Speaker, Sir, smoking in public places is banned in Delhi. The fight against cancer and respiratory diseases continues. My contribution will be to increase the excise duty…,” he said.

Chidambaram struck a similar note in his 2005 speech: “The levy of an education cess has been widely applauded. The health sector demands similar treatment. What better way is there to fund health care 27 than tax those goods which are health hazards? I, therefore, propose to raise some additional resources and allocate the proceeds to finance the National Rural Health Mission. Accordingly, I propose to increase the specific rate on cigarettes by about 10 per cent and impose a surcharge of 10 per cent on ad valorem duties on other tobacco products including gutka, chewing tobacco, snuff and pan masala.” In his 2007 speech, Chidambaram again highlighted his anti-tobacco stance: “I strongly support the campaign “say no to tobacco”. Hence, I propose to increase the specific rates of excise duty on cigarettes by about 5 per cent.”

Pranab Mukherjee, once a smoker, chose to strike a personal note in his 2010 speech: “Since I quit smoking many years ago, I would urge others to also follow suit, as smoking is injurious to health. To this end, I am making some structural changes in the excise duty on cigarettes, cigars and cigarillos coupled with some increase in rates.”

When Arun Jaitley proposed raising taxes on smoking in his 2014 speech, he did not have just health concerns on his mind. Like early finance minister who found tobacco as a favourite for raising taxes, he said, “These are healthy measures and I hope everyone would welcome them from the point of view of human and fiscal health.”

There is a bit of hypocrisy when Budget makers talk of smoking being injurious to health and the need to discourage it. If right from the beginning, tobacco and related products have remained favourite of finance ministers looking to tax items, it conveys one fact clearly: higher taxes do not curb smoking. Otherwise, a finance minister’s obsession with tobacco would have died down long ago.

Source : PTI

Budget 2018: Arun Jaitley faces unenviable task of balancing economics with politics : 09-01-2018


Finance minister Arun Jaitley will present his fifth budget on February 1. He faces multiple challenges, to put the economy on track even as he keeps an eye on elections next year.

ET explains the tightrope the FM has to walk.

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Source : Economic Times

Arun Jaitley says will target political funding wrongdoing even though most parties comfortable with status quo : 08-01-2018


Finance minister Arun Jaitley on Sunday said the government is willing to consider fresh suggestions to better clean up the political funding process. But he asserted that the electoral bonds, announced in Parliament last week, are a substantial improvement on the current opaque funding system that has only abetted corruption and yet the Opposition seems satisfied with it. In a Facebook post, Jaitley also countered the Opposition’s criticism that keeping the bond holder’s name anonymous won’t bring in transparency, suggesting that instruments that require the donors to be named, have only pushed people towards cash donations. “I do believe that donations made online or through cheques remain an ideal method of donating to political parties. However, these have not become very popular in India since they involve disclosure of the donor’s identity.” According to a report by the Association of Democratic Reforms (ADR), “unknown sources” accounted for over 77% of the income of the country’s top two political parties — the BJP and the Congress — in 2015-16, when parties were not required to disclose sources for cash donations up to Rs 20,000.

The concept of electoral bonds was first announced by Jaitley in the Budget for 2017-18. He had also announced limiting cash donation by a single donor to Rs 2,000 from Rs 20,000 earlier. The finance minister further said the conventional practice of funding the political system was to take donations in cash. The sources of such donations are anonymous or pseudonymous. The quantum of money was never disclosed and such a system ensures unclean money coming from unidentifiable sources. “It is a wholly non-transparent system. Most political groups seem fairly satisfied with the present arrangement and would not mind this status-quo to continue. The effort, therefore, is to run down any alternative system which is devised to cleanse up the political funding mechanism,” Jaitley said. Maintaining that the government is open to fresh suggestions for a better system, the finance minister, however, added: “It has to be borne in mind that impractical suggestions will not improve the cash-denominated system. They would only consolidate it.”

Last week, Jaitley announced broad contours of electoral bonds, with a validity of 15 days, that donors can buy from State Bank of India (SBI) and a receiving political party can encash only through a designated bank account. The bonds won’t name the donor or the political party she is donating to, but these can be bought only through bank accounts after meeting all the KYC norms. These bonds will be bearer instruments in the nature of a promissory note, carrying no interest, and can be bought for any value, in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh or Rs 1 crore. The validity period of the bonds is restricted to just 15 days to ensure they do not become a parallel currency.

Jaitley had pitched the bonds as an alternative to shoddy and anonymous cash donations. These would reflect in the balance sheet of the donors as well, he had said.

On Sunday, Jaitley said the choice has now to be “consciously” made between the existing system of substantial cash donations involving unclean money and other transparent options like cheque, online transactions or electoral bonds.

A transparent system of political funding assumes importance in the wake of a surge in corporate donations in recent years. The corporate donations received by political parties in just four years through 2015-16 surged two-and-a-half times the funds collected in the seven years between 2004-05 and 2011-12.

According to ADR, which analysed details of all donations above Rs 20,000 to five national parties (BJP, Congress, NCP, CPI and CPM), corporate donations accounted for 89% of all known donations in four years through 2015-16. Together, corporate houses had collectively donated Rs 957 crore from 2011-12 to 2015-16, against Rs 378.89 crore (87% of all donations) over four years from 2004-05 to 2011-12.

Source : Financial Express

India’s economy faces an ominous New Year in 2018 : 08-01-2018


You’d think the Indian economy had returned to rosy health. It seems to have recovered from two enormous disruptions — Prime Minister Narendra Modi’s decision just over a year ago to withdraw 86 percent of the currency in circulation, and the poorly-planned rollout in the middle of 2017 of a new goods-and-services tax. Exports are no longer declining, as they had for several quarters; indeed, for the last month that data is available, they rose 30 percent. The Purchasing Managers’ Index expanded the fastest it has in five years. At least one international ratings agency has upgraded India’s credit rating. Most importantly, growth sped up last quarter for the first time since early 2016. There’s every reason to think it’ll bounce back towards the 7-7.5 percent range shortly. Nothing is ever straightforward in India, however. Just as growth appears to be no longer a pressing problem, another familiar threat has reappeared: India’s macroeconomic numbers don’t look quite as stable as they should. The last few years have been something of an aberration for India. This is a country that tends toward pretty high inflation — which makes sense, if you look at it from a political economy perspective. Given India’s inefficient state, pumping up agricultural prices is pretty much the only reliable way to transfer resources to millions of subsistence farmers. Over the last few years, those price increases have slowed. Together with low demand and the fall in oil prices between 2014 and 2017, that helped drive inflation below the Reserve Bank of India’s target level of 4 percent. Things now seem to be returning to normal. Crude oil prices started inching back up last year, along with Indian inflation, which was, in the last month for which data is available, 4.9 percent. The RBI seems convinced it’s going higher still.

Meanwhile, even Narendra Modi can’t defy India’s political economy forever. He’s under unaccustomed pressure following elections in his stronghold, the western state of Gujarat, which went down to the wire — a photo finish blamed on growing economic distress in rural areas. Most Indian politicians would respond with a giveaway or three; Modi’s predecessor, Manmohan Singh, forgave a chunk of agricultural debt when he was up for reelection in 2009. At the very least, the increases in administrated agricultural prices are likely to get considerably less stingy. And this comes at a time when India is snowed under with sovereign and quasi-sovereign paper; it seems like practically every state government and public-sector company wants a piece of India’s bond market. In response to this flood of debt, the yield curve has steepened by a whole percentage point since July. And the government made things even worse by announcing at the end of December that it would borrow more money from the markets this financial year than planned — a fallout, perhaps, of uncertainty about revenues in the first year of the new indirect tax system. In other words, it’s not exactly the best time for Modi to be planning new spending.

We’re only a few weeks away from knowing which way Modi will go. Finance Minister Arun Jaitley is due to present the federal budget on Feb. 1. If Modi does indeed decide to ramp up spending sharply — and remember, he’s now barely months away from beginning his own reelection campaign — then Jaitley is going to have to deal with some tight fiscal numbers. The federal government is supposed to bring its fiscal deficit down to 3 percent of GDP this year; that’ll be a near-impossible task if transfers to farmers are also to be increased. So far, the sense in New Delhi is that the prime minister wants to hold the fiscal line. Perhaps he thinks he has the political capital to win reelection without a spending bonanza. Certainly, his government’s economic missteps don’t appear to have dented Modi’s personal popularity.

If he succumbs to profligacy, though, India will find itself in a sadly familiar situation, with growth stalling, costs increasing, the deficit ballooning and inflation pushing upward and embedding itself in people’s expectations. The central bank will be tempted to cut rates just as monetary policy in the rest of the world might be tightened. Capital would then be tempted to flow out of India — and suddenly even its external account will begin to look shaky. This is the scenario that policymakers in Delhi are worried about. For them, 2018 is not a very happy new year.

Source : Economic Times

Eye on 2019 polls, government may woo middle class with tax sops : 08-01-2018


Ahead of what may be its final full Budget before next year’s general elections, the NDA government is looking to offer fresh benefits to middle class taxpayers, which are seen as a key constituency of BJP.

While discussions on a possible package have begun, a section in the government wants to ensure the vocal segment is rewarded although the fiscal costs will be weighed.

Among options being talked about are an increase in the tax exemption limit, a return of standard deduction in some form as well as additional benefits for health insurance and even bank fixed deposits, which have become less attractive following the recent surge in stock markets coupled with sops for investment in mutual funds.

In the past, finance minister Arun Jaitley said the government believes in leaving more funds for people to spend and invest. But given the tight fiscal situation due to weaker-than-expected corporate tax collections as well as the impact of GST, where the revenue gains may accrue only in the next fiscal, the Centre has to find resources to make up for the outgo.

Sources said that a section within the government is backing the re-introduction of long term capital gains tax on stock market transactions with riders that it will apply to new transactions above a certain value of, say Rs 5 lakh. In addition, the levy can be lower at around 10%. The proposal is in line with the NDA government’s stance of being seen to be pro-poor and middle class with the demonetisation being part of that strategy, along with recent decisions to pare GST on over 200 items that were in the top bracket of 28%.

“It will impact 5,000 investors but will benefit five crore families,” said a source, who did not wish to be identified. In November, during a meeting with the finance ministry brass, Bombay Stock Exchange (BSE) had suggested the introduction of long term capital gains tax, arguing it will end friction in the market and also tackle the problem of manipulation in penny stocks.

Sources, however, said that BSE had made this suggestion in the past too. Some market players believe that Securities Transaction Tax (STT) has also lost its utility and long -term capital gains tax makes sense now.

“The debate on whether the capital gains exemption on listed shares should be removed comes up before every budget as it’s one of the options available with the government to mobilise revenues.

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To some extent, with the amendments to the tax treaties (such as Mauritius and Singapore) in 2017, it is now only the long-term capital gains that are exempt and more so with the changes and limitations introduced in the Budget 2017, much of the misuse of this exemption has been plugged. 
Looked at from a perspective of incentivising investment and creation of capital, both private and listed shares should be treated alike. There is a large amount of domestic savings as well as private and international capital going into the creation of capital through private companies and it will augur well if a calibrated approach of providing some relief to such shares is also considered,” said Abhishek Goenka, direct tax partner at consulting firm PricewaterhouseCoopers. 
Sources said that the “tax package” will be a political call that will be taken by PM Modi after detailed deliberations with Jaitley. If the government finally moves ahead, an increase in the exemption limit will be calibrated in a way that it does not leave the government short of resources for flagship programmes or to bolster public investment. 
Currently, there is no tax up to Rs 2.5 lakh with investments of up to Rs 1.5 lakh in public provident funds or bank deposits of five years or more enjoying benefits under section 80C of the Income Tax Act. While health insurance premium is outside the ambit, a Rs 25,000 benefit is seen to be too low given the surge in costs over the last two-three years. 
Source : Times of India

 

Fears of imminent economic slowdown have come true: P Chidambaram : 06-01-2018


Senior Congress leader P Chidambaram today hit out at the government over lower growth estimates for the current fiscal, saying the worst fears of an imminent economic slowdown have come true.

There is a decline in new projects and fresh investment, Chidambaram claimed in a statement.

The informal sector is reeling under the ill effects of demonetisation. Job creation is abysmal, exports are plunging, and manufacturing sector growth has slowed down. The agriculture sector has been hit hard and rural despair is abundant, he claimed.

Job creation remained the “single biggest failure” of the BJP government. The bank credit growth was extremely sluggish and it did not bode well for the economy, he said.

“The worst fears of an imminent economic slowdown have come true. The Modi government’s tall claims of India growing at a ‘robust’ growth rate have evaporated in thin air.

“No amount of sugar coating, false bravado and rhetoric along with headlines management can conceal the stark reality. Our fears and warnings have proved true,” the Congress leader said.

He said the recent social discontent could be a “direct manifestation of this economic slowdown, which the government was conveniently hiding”.

It was time the government stopped making tall claims and did some solid work, he said.

Citing government data, the former finance minister said the GDP growth rate was 8 per cent in 2015-16, 7.1 per cent in 2016-17. It is estimated at 6.5 per cent in 2017-18, “which proves there is a slowdown”.

A decline in economic activity and growth meant loss of millions of jobs, he said .

While the GDP growth is estimated at 6.5 per cent during 2017-18 as compared to 7.1 per cent in 2016-17, the anticipated growth of real GVA at basic prices in 2017-18 is 6.1 per cent as against 6.6 per cent in 2016-17, he said.

Retail inflation soared to a 15-month high of 4.88 per cent in November and industrial output hit a three-month low of 2.2 per cent in October, he pointed out.

The investment picture remains bleak… The manufacturing sector has seen the sharpest fall and fiscal deficit is likely to overshoot the budget estimates of 3.2 per cent of GDP,” the Congress leader said.

Source : Times of India

Firms looking for a way to change their GST officials : 06-01-2018


A senior finance executive in a private equity firm was visibly worried after he got a call from goods and services tax (GST) officer. The officer on the other end wanted to know more about the construction business that the company was involved in. It took some time for the executive to explain that the word “stone” in the brand name had nothing to do with the business the firm was into.

Few kilometres away from the PE firm’s office in Mumbai, the CFO of a finance company — that’s part of a major conglomerate — was nervous too. The CFO was just back from a meeting with the company’s GST assessing officer, and it left him in knots.

“How does one explain credit swap ratio, private placement, and other debt instruments in Hindi?” he asked his chartered accountant who had accompanied him. The GST officer too had some queries about some transactions that were carried out in the past few months.

As the government assigned GST assessing officers from a combined pool of erstwhile Sales Tax, Excise and Value Added Tax (VAT) officers, many companies are running scared. Earlier, state officers –mainly VAT — only dealt with manufacturing companies and service tax, and excise officials dealt with service companies including banks, PE firms, NBFCs and insurance companies.

Many of these firms are rushing to their tax consultants and desperately asking them if they can in anyway change their assessing officers.

“There’s no mechanism prescribed by the legislation that enables taxpayers to voice their views on whether they would prefer being assessed by the existing authorities.

Several service providers, whose business models are well known to the central authorities and have now been assigned to the state authorities, are apprehensive that the state authorities will take time to develop expertise on taxation of services,” said MS Mani, Partner, Deloitte India.

Industry trackers say that for indirect taxes, the importance of assessment officers become crucial and dealing with them is not just an annual affair like in the case of income tax. “One has to deal with officials for refunds, credits, monthly taxes, etc. The worry is many VAT officials will take some time before they could understand nitty-gritty of our business,” the senior finance executive in the PE firm said.

Take the instance of an Indian shoe manufacturer that has a turnover of about Rs 1,000 crore: the manufacturer has got a clean chit from the VAT officials for the past five years, but is now worried about the heightened scrutiny.

Another diamond exporter based in Crawford Market in Mumbai has also sent out an SOS to his tax advisors. The exporter, like the shoe manufacturer, wants former state officers to assess his accounts, and not central officers.

The manufacturer has asked his tax advisors to figure out a way to change his assessing officer back to what they were. Many say that these worries are somewhat unfounded. “Many companies have been approaching and making pleas of changing their assessing officers, which is not possible. Every officer has undergone training and there is no need to worry,” a government official in the know clarified.

“Most former VAT officials had until now dealt with indirect taxes on goods and they would now be dealing with services. Although many of these officials were given training, there would be a learning curve and this has worried several services companies that have been assigned to state authorities,” said Sachin Menon, national head, indirect tax, KPMG India.

The worries may not be unfounded. Tax experts point out that indirect tax is a complex subject. “One of my clients, an IT firm, had received a notice because the tax officer wanted a copy of an airfare receipt,” he laughs. “However, I would say many officers would go easy on companies whose business models they don’t understand, and it may just be a good thing.”

But not everyone is convinced as some officers are already asking questions which are making some companies jittery. Take the example of a law firm. The tax officer wanted to know about each transaction leading to revenue of the firm (although law firms are exempted from GST). The officer wanted to know how come the head of the law firm was charging a fee of Rs 2 lakh for “merely talking for half an hour” from a client, but not charging anything from another client with whom she had spoken for two hours.

“It’s not the law alone, the procedure of indirect taxes, especially GST, is complex. It would have been great if officers who have no experience were allotted smaller companies or firms for initial few years,” a senior tax advisor said.

Source : PTI

Modi’s worst growth year puts pressure on Budget to spur economy : 06-01-2018


India forecast its economy will expand at the slowest pace since Prime Minister Narendra Modi came to power in 2014, piling pressure on his government to jump start activity before a national vote early next year.

Gross domestic product will grow 6.5 percent in the year through March, the Statistics Ministry said Friday, compared with the Bloomberg consensus of 6.6 percent as the chaotic roll out of a new sales tax hurt demand. However, with inflation zooming past the central bank’s target, there’s little room to cut interest rates. So investors may have to brace for higher government spending that could draw the ire of rating companies, some of which have been betting on Modi’s fiscal discipline.

“Budget 2018 is likely to have a populist tilt, with renewed focus on agriculture and rural spending,” said Teresa John, a Mumbai-based economist at Nirmal Bang Equities Pvt. “We expect the country’s fiscal deficit to come in at 3.5 percent of GDP in financial year to 2018 against the budgeted 3.2 percent.”

‘Not Conducive’

Public spending is crucial because private investments have been weak. New investment proposals fell to a record Rs 79,000 crore ($12.5 billion) in the quarter ended December 2017, according to data from the think tank Centre for Monitoring Indian Economy.

Uncertainty about policy before elections will probably keep businesses wary.

“The biggest problem is that the economic scenario is simply not conducive to invest into new productive capacities,” Mahesh Vyas, chief executive officer at CMIE, wrote in a note. “In many cases it makes sense to stall projects till the economic conditions turn around.”

Gross value added, a key input of GDP, is forecast to grow 6.1 percent, slower than the central bank’s 6.7 percent projection and 6.6 percent the previous year. The deceleration is led by manufacturing, which is estimated to grow 4.6 percent versus 7.9 percent and agriculture 2.1 percent versus 4.9 percent. Government spending is seen rising 9.4 percent versus 11.3 percent the previous year.

“A further slowdown in growth this year suggests the need for active policy support,” said Bloomberg economist Abhishek Gupta. He is among a small minority of economists who predict the central bank will cut interest rates in the year starting April 1.

Eye on Elections
Most predict Modi’s administration will boost spending when it unveils its Budget on February 1, the last full financial presentation before as many as eight state elections this year and the national vote in 2019.

The government will probably aim for a deficit target of 3.2 percent for the year starting April 1, wider than the previous goal of 3 percent, according to a Bloomberg Survey published last month.

Most economists in a Bloomberg survey also predict the Reserve Bank of India, which is due to review rates over Feb. 6-7, will keep the benchmark at 6 percent all through this year. Consumer prices rose 4.9 percent in November, the most in 15 months and faster than the central bank’s 4 percent medium-term target.

“The RBI will not react because it has got in a state of quandary that the growth rate is actually lower than their GVA projection,” said Saugata Bhattacharya, chief economist at Axis Bank Ltd. “On the other hand, inflationary pressures are creeping up.”

Source : Economic Times

‘Provisional ID to be final GSTIN number’: Revenue secretary busts 8 GST myths : 05-01-2017


The Goods and Services Tax (GST), which is the country’s biggest tax reform since independence, came into force on July 1 and promises a stronger economy and less corruption. Under the GST regime, a four slab tax rate structure of 5 per cent, 12 per cent, 18 per cent and 28 per cent has been adopted. While this landmark tax paves the way for the vision of ‘One Nation, One Tax’, it has also generated apprehension among the populace on how it will affect their finances, businesses and day-to-day life.

On Sunday, revenue secretary Hasmukh Adhia, the driving force behind the framing of GST, took to Twitter to shoot down some common misonceptions about the landmark tax.

Read this story in Gujarati

Higher tax rate

Myth: The new GST rate is higher compared to earlier VAT.

Reality: It appears higher because excise duty and other taxes which were invisible earlier are now subsumed in GST and so visible now.

Paying bills by card

Myth: If a person makes payment of utility bills by credit cards, they will be paying GST twice.

Reality: Inaccurate. GST is only levied once, irrespective of the payment being made by cash or cards.

Electronic transactions

Myth: All invoices must be generated on computer/internet only.

Reality: Invoices can be generated manually also

Internet connectivity

Myth: A retailer needs internet all the time to do business under GST

Reality: Internet would be needed only while filing monthly return of GST.

Business permits

Myth: A retail business I have provisional ID but waiting for final ID to do business

Reality: Provisional ID will be your final GSTIN number.

Ease of doing business

Myth: An item of trade was earlier exempt, so the retailer will need new registration before starting business now.

Reality: You can continue doing business and get registered within 30 days.

Filing returns

Myth: There are three return per month to be filed

Reality: There is only one return with three parts, out of which first part filed by dealer and two other parts auto populated by computer.

Small-scale businesses

Myth: Even small dealers will have to file invoice wise details in the return.

Reality: Those in retail business (B2C) need to file only summary of total sales.

 Source : Financial Express

Unpaid subsidy dues: True FY17 fiscal deficit at 4.2%? : 05-01-2018


The Centre’s fiscal deficit for FY17 would have been 4.2% of the gross domestic product against the 3.5% reported had it paid the subsidy claims for the first three quarters of the year in full. “Examination brought out that an amount of Rs 1,03,331 crore of subsidy claims (Rs 92,254 crore to FCI, Rs 7,174 crore to Petroleum and Rs 3,903 crore to undertakings in the fertiliser sectors) have not been paid by the government during 2016-17,” the Comptroller and Auditor General of India said in a report. Though it is acceptable practice to defer payment of the fourth-quarter subsidy bill to the next year, the first nine months’ claims are supposed to be met. Of course, this norm has not been unfailingly followed by governments, but the unpaid amount for FY17 is far higher than in the previous two years. The lapse by the Modi government is despite it having had the benefit of the overall subsidy bill declining thanks to benign global crude and other commodity prices, decontrol of oil products and the widening of the DBT scheme.

Had the claims of the first three quarters been paid during the financial year, the expenditure on subsidies would have been 2.21% of GDP in 2016-17, against 1.53% shown. Further, if outstanding subsidy claims are considered in totality including the past unpaid claims, but excluding the fourth quarter claims amounting to Rs 1,87,863 crore, then the total subsidy expenditure would have been Rs 4,20,665 crore in 2016-17, which works out to 2.77% of GDP.

Total subsidy was almost at the same level in 2014-15 and 2015-16 but declined to Rs 2,32,802 crore in 2016-17 from Rs 2,58,471 crore in 2015- 16 and declined 9.93% in 2016-17. The level of subsidy reported in 2016-17 was the lowest in the last five years. Out of the subsidy expenditure of Rs 2,32,802 crore in 2016-17, 47.32% was on food, 28.48% on fertilisers, 11.83% on petroleum and 12.36% on other subsidies.

Source : PTI

Budget Mantra: Time for Forward March : 05-01-2018


Ahead of the budget, PwC and ET gauged the mood of the C-Suite on issues ranging from GST to tax administration and reforms to ease of doing business. The survey of more than 200 CFOs and tax heads shows widespread appreciation for reforms and a positive outlook, but many feel bureaucracy and tax administration need to improve.

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3 areas where immediate changes are needed to make GST a success?

  • IT infrastructure
  • Reducing multiplicity of rates
  • Simplifi ed compliance and return filings

What are the top three negatives?

  • Tax litigation
  • Lack of labour reforms
  • Multitude of changes and compliance obligations

What are the top 3 changes you’d like to see in coming years?

  • Faster resolution of tax disputes, including at the judicial level
  • Better implementation of new reforms
  • Infrastructure development

The tax environment in India has been a sore point with many business, including the multinationals. When this government came to power, its stated policy objective was to enable a stable tax environment with focus on resolution of disputes. It is clear the introduction of GST has been one of the government’s biggest achievements. Furthermore, the reforms on ease of doing business have also been well received .

Source : Economic Times

15 – 04-01-2018


REFINANCING OF EXTERNAL COMMERCIAL BORROWINGS (ECBs)

A.P. (DIR SERIES 2017-18) CIRCULAR NO.15, DATED 4-1-2018

Attention of Authorized Dealer Category – I (AD Category – I) banks is invited to paragraph 2 of the Statement on Developmental and Regulatory Policies issued along with the Fifth Bi-monthly Monetary Policy Statement for 2017-18. In terms of the extant provisions in paragraphs 2.15 and 2.16 (xiii) of Master Direction No.5 dated January 1, 2016 on “External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers”, as amended from time to time, Indian corporates are permitted to refinance their existing External Commercial Borrowings (ECBs) at a lower all-in-cost. The overseas branches/subsidiaries of Indian banks are however, not permitted to extend such refinance.

2. In order to provide a level playing field, it has been decided, in consultation with the Government of India, to permit the overseas branches/subsidiaries of Indian banks to refinance ECBs of highly rated (AAA) corporates as well as Navratna and Maharatna PSUs, provided the outstanding maturity of the original borrowing is not reduced and all-in-cost of fresh ECB is lower than the existing ECB. Partial refinance of existing ECBs will also be permitted subject to same conditions.

3. All other aspects of the ECB policy remain unchanged. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers.

4. The aforesaid Master Direction No. 5 dated January 01, 2016 is being updated to reflect the changes.

5. The directions contained in this circular have been issued under sections 10(4) and 11(2) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

Savings (Taxable) Bonds scheme launched by Modi government at 7.75 pct; want to invest? Top 10 things to know : 04-01-2018


Replacing the 8% Savings Bonds Scheme, the government finally launched 7.75% Savings (Taxable) Bonds, 2018, today, to enable resident citizens and HUFs to invest in a taxable bond, without any monetary ceiling. The new scheme will commence from 10th January 2018.

Here are the salient features of the 7.75% Savings (Taxable) Bonds:

1. Who can invest

The Bonds are open to investment by individuals (including joint holdings) and Hindu Undivided Families (HUFs). NRIs are not eligible for making investments in these Bonds.

2. Subscription

Applications for the Bonds in the form of Bond Ledger Account will be received in the designated branches of agency banks and SHCIL in all numbering about 1600.

3. Issue Price

The Bonds will be issued at par, i.e. at Rs 100

The Bonds will be issued for a minimum amount of Rs 1,000 (face value) and in multiples thereof. Accordingly, the issue price, will be Rs 1,000 for every Rs 1,000 (Nominal).

The Bonds will be issued in demat form (Bond Ledger Account) only.

4. Period

The Bonds will be on tap till further notice and issued in cumulative and non-cumulative forms.

5. Limit of investment

There will be no maximum limit for investment in the Bonds.

6. Tax treatment

# Income-tax: Interest on the Bonds will be taxable under the Income-Tax Act, 1961 as applicable according to the relevant tax status of the bond holder.

# Wealth tax: The Bonds will be exempt from wealth tax under the Wealth Tax Act, 1957.

7. Rate of interest

The rate of interest will be 7.75% per annum.

8. Maturity

The Bonds will have a maturity of 7 years carrying interest at 7.75% per annum payable half-yearly. The cumulative value of Rs 1,000 at the end of seven years will be Rs 1,703.

9. Transferability

The Bonds are not transferable. The Bonds are not tradeable in the secondary market and are not eligible as collateral for loans from banking institutions, non-banking financial companies or financial institutions.

10. Nomination

A sole holder or a sole surviving holder of a Bond, being an individual, can make a nomination.

Source : Financial Express

Economy to grow less than 7% in FY18: Forecasters : 04-01-2018


India’s economy is likely to grow 6.4-6.7% in the current fiscal, down from 7.1% in 2016-17, independent experts said ahead of the release of first official estimate on Friday. The national economy expanded 6% in the first half of the year, with growth improving to 6.3% in July-September from a three-year low of 5.7% in the previous quarter. GDP grew 7.1% in 2016-17 while gross value added or GVA was 6.6%.

Some of the recent indicators have pointed to a recovery – core sector growth hit a 13-month high of 6.8% in November while manufacturing Purchasing Managers’ Index scaled a five-year high.

The Reserve Bank of India has retained its economic growth projection for 2017-18 at 6.7% saying that the risks are evenly balanced.

Most independent economists, however, said that they expect GVA to grow 6.5% in 2017-18. “All indicators do not show a structural recovery. Credit growth is yet to pick up and output gap has not closed till now,” said Indranil Pan, chief economist at IDFC Bank.

GVA is the total value of goods and services produced in the economy after deducting the cost of inputs and raw materials used for them.

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Net taxes on products are added to GVA to arrive at GDP where net taxes are taxes on products less subsidies on products. Most analysts now prefer to focus on GVA given the uncertainty in indirect taxes. GVA and GDP had grown 5.6% and 5.7% respectively in the first quarter.

The decline in first quarter growth was largely due to disruption caused by roll-out of GST and the impact of demonetisation. The second quarter of 2017-18 saw GDP growth of 6.3% and GVA of 6.1%. Although the expected revival in economic activity is attributed to a turnaround in industrial growth, the Index of Industrial Production or IIP grew 2.5% in April-October compared with 5.5% a year ago.

The statistics office will release advance growth estimates for FY18 on Friday. Axis Bank chief economist Saugata Bhattacharya said that overall agriculture is looking robust and manufacturing is looking up which will help boost growth especially in the ongoing last quarter of the fiscal.

India Ratings and Research has forecast GDP to grow 6.7% but Devendra Kumar Pant, chief economist at India Ratings, said this growth is difficult to achieve given the growth performance in the first half of the year. In the six months ended September 2017, GDP grew 6% compared with the 7.7% growth registered in the first half of 2016-17.

Ratings firm ICRA has forecast 6.7% GDP growth this fiscal, factoring in a revival in growth in the fourth quarter

Source : PTI

Notification No. S.O. 93(E) [F.NO.500/101/2006-FT&TR-V] 4-1-2018


SECTION 90 OF THE INCOME-TAX ACT, 1961 – DOUBLE TAXATION AGREEMENT – AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION AND PREVENTION OF FISCAL EVASION WITH FOREIGN COUNTRIES – BRAZIL – AMENDMENT IN NOTIFICATION NO. GSR 381(E), DATED 31-3-1992

NOTIFICATION NO. SO 93(E) [F.NO.500/101/2006-FT&TR-V], DATED 4-1-2018

Whereas, the Protocol, amending the Convention and the Protocol between the Government of the Republic of India and the Government of the Federative Republic of Brazil for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income signed at New Delhi on the 26th April, 1988, was signed at Brasilia on the 15th day of October, 2013, as set out in the Annexure appended to this notification and hereinafter referred to as the said amending Protocol;

And whereas the said amending Protocol entered into force on the 6th day of August, 2017, being thirty days after the date of receipt of later of the notifications of the completion of the procedures required by laws of the Contracting States for bringing into force of the said amending Protocol;

Now, therefore, in exercise of the powers conferred by section 90 of the Income –tax Act, 1961 (43 of 1961), the Central Government hereby notifies that all the provisions of said amending protocol shall have effect in the Union of India with effect from the 6th day of August, 2017.

ANNEXURE

PROTOCOL AMENDING THE CONVENTION BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE FEDERATIVE REPUBLIC OF BRAZIL FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME, SIGNED AT NEW DELHI ON 26 APRIL, 1988 PREAMBLE

The Government of the Republic of India and the Government of the Federative Republic of Brazil;

Desiring to amend the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, signed at New Delhi on 26 April, 1988 (hereinafter referred to as “the Convention”);

Have agreed as follows:

ARTICLE I

Article 26 of the Agreement shall be deleted and replaced by the following:

“ARTICLE 26

EXCHANGE OF INFORMATION

1. The competent authorities of the contracting States shall exchange such information as is foreseeable relevant for carrying out the provisions of this Agreement or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation there under is not contrary to the Convention. The exchange of information is not restricted by Articles 1 and 2, but applies only to federal taxes in the case of Brazil.
2. Any information received under paragraph 1 by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, the determination of appeals in relation to the taxes referred to in paragraph 1, or the oversight of the above. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. Notwithstanding the foregoing, information received by a Contracting State may be used for other purposes when such information may be used for such purposes under the laws of both States and the competent authority of the supplying State expressly authorizes such use in writing.
3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose on a Contracting State the obligation:
A. to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;
B. to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contra cting State;
C. to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information the disclosure of which would be contrary to public policy (ordre public).
4. If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use its information gathering measures to obtain the requested information, even though that other State may not need such information for its own tax purposes. The obligation contained in the preceding sentence is subject to the limitations of paragraph 3 but in no case shall such limitations be construed to permit a Contracting State to decline to supply information solely because it has no domestic interest in such information.
5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.”

ARTICLE II

Each Contracting State shall notify the other in writing, through the diplomatic channel, of the completion of the procedures required by its laws for the bringing into force of this Protocol. The Protocol shall enter into force 30 days after the date of receipt of the later of these notifications and its provisions shall have effect on that date.

ARTICLE III

This Protocol, which shall form an integral part of the Convention, shall remain in force as long as the Convention remains in force and shall apply as long as the Convention itself is applicable.

IN WITNESS WHEREOF the undersigned, duly authorized, have signed this Protocol.

DONE in duplicate at Brasilia, this 15 day of October, 2013, in the Hindi, Portuguese and English languages, all three texts being equally authentic. In case of divergence of interpretation, the English text shall prevail.

Insolvency professionals to get cover : 04-01-2017


Within few months of banks initiating insolvency proceedings against a dozen large corporates, insurers have put together a customised cover to protect the professionals appointed to run these defaulting firms.

The cover is aimed at ensuring that the insolvency professional (IP), who takes on the role of the firm’s CEO at the behest of lenders, can take big decisions without fear of legal action.

JLT Independent Insurance Brokers has put together a cover for three of the 12 companies and is in talks with the remaining nine. “The cover is a combination of a Directors & Officers (D&O) policy and a professional indemnity cover with lot of improvisation and client requirement included in the policy wording,” said Amit Agarwal, director, JLT Independent Insurance Brokers.

The D&O cover protects top management of a company against unproven claims from employees, shareholders and regulators, while professional indemnity covers are usually taken by professionals against legal action by their clients.

Once lenders are successful in getting an insolvency petition admitted, the board of directors of the company is dissolved and the committee of creditors become the owners and they appoint an insolvency professional to run the company.

IPs are licensed professionals. Most often they are attached to accountancy firm. In the recent cases, the IPs are attached to one of the big four accountancy firms.

“The IP functions as a quasi-director and also as a professional. The risk is higher as this is an outsider who has come in for six months,” said Agarwal. While it is the lenders who appoint the IP to run the company and give him blanket permission to take day-to-day decision they do not provide him indemnity for his actions. This has compelled the IP to look for insurance.

The size of the insurance cover depends on the size of the company’s debt and the fees of the insolvency professional. Covers usually range from $2 million (Rs 13 crore) to $25 million (Rs 1,625 crore). Despite the modest size (compared to the net worth of the Indian insurance companies) these covers are almost entirely issued on the back of global reinsurance support.

“One of the reasons why these covers have to be backed by special reinsurance agreements is that the they are not covered by the open-ended treaties that insurers have with global reinsurers. This is because the IPs are usually partners in the Big Five accounting firms and these firms are often targets for litigation because they are seen to have deep pockets.

According to Agarwal, class-action suits also cannot be ruled out because most of the companies are listed. “The specific worry is the defence costs. While most of the claims would be in the nature of allegations and would need to be proved, there would be legal expenses involved,” said Agarwal.

Source : Times of India

Stressed assets: Right to keep defaulters out : 03-01-2018


Countering the Opposition’s view that the Insolvency and Bankruptcy Code(Amendment) Bill approved by the Upper House on Tuesday would undermine potential competition for the stressed assets going under the hammer by stipulating unduly broad exclusion criteria, finance minister Arun Jaitley on Tuesday stressed that the aim was to exclude wilful defaulters from taking over the management of companies after banks had taken losses on loans. Replying to the debate in the Rajya Sabha, Jaitley reiterated that the proposed changes in rules were expected to help streamline the process of selecting buyers for stressed assets. Jaitley also made it clear that the government has not written off any bank loan and the liability of the borrowers for repayment of the bad loans remained. “Qua the borrower, the liability remains. But the banks change the identity of the loan to ensure that income tax relief is sought by the bank. One should clear this misconception from the mind that the government or the banks have waived of Rs 55,000 crore,” he said.

The Lok Sabha had passed the Bill on Friday. An ordinance had already kept out “such persons who have wilfully defaulted, are associated with non-performing assets, or are habitually non-compliant and, therefore, are likely to be a risk to successful resolution of insolvency of a company.” The Bill, which the President may sign into law anytime now, makes it clear that defaulters, including promoters, whose accounts have been classified as non-performing assets for at least a year, can submit a resolution plan only after clearing the overdue amounts with interests and other charges. The Bill allows asset reconstruction companies, banks and alternative investment funds registered with Sebi to bid for insolvent companies, as they will not be covered under definitions of holding or subsidiary companies, associate companies or related persons.

Initiating a debate on the Bill in the Rajya Sabha, former finance minister P Chidambaram said the exclusion clauses in the Bill were so broad that “practically everybody in the financial world is excluded.” He added: “It is quite possible that asset reconstruction companies and alternative investment bodies will turn out to be the bidders. Most of the Indian companies which go through the resolution process will pass from an Indian to a foreign management.” He said he had no objection to foreign companies coming to India but a level-playing field should be created for adequate participation of Indian companies. The exclusion clauses in the Bill include leaving out anybody who has been convicted for two years from the bidding process or one prohibited by SEBI. Jairam Ramesh, also a former Cabinet minister, raised concern about lenders taking “big haircuts” or discounts on claim value of NPAs. “In the first case of insolvency taken under the code, the haircut was 76%, in second case, it was 74% and in the third case, it was 80%. Is this an acceptable situation?,” Ramesh asked.

According to the Bill, defaulting promoters, who had already submitted resolution plans for insolvent companies before an Ordinance in November made them ineligible to do so without clearing dues first, will get up to a month to come clean to be eligible to bid for the stressed firms. The relaxation will, however, be applicable only to defaulters in those cases where the resolution period has not exceeded the stipulated time frame. The IBC allows six months (or nine months, if the adjudicating authority has granted a 90-day extension) to approve a resolution plan. Reiterating the government’s position that large non-performing assets (NPAs) of banks and the concomitant, over-leveraged corporate balance sheets are a legacy it inherited from the UPA regime rather than its own creation, Jaitley said: “the bulk of NPAs of banks have arisen out of loans given before April 1, 2014, due to aggressive lending and without proper risk assessment and even without being backed by securities.”

Source : Financial Express

Could US tax reform set precedent for Arun Jaitley in 2018 budget? : 03-01-2017


The latest US tax reforms are being touted as the most significant in the last 30 years. The highlight is the deep cut in corporate tax rate from 35% to 21%. This comes with the streamlining and elimination of some incentives and deductions, as well as measures like making payments to non-US related parties subject to tax disallowances.

Like Britain and Japan, the US also proposes to move to a ‘territorial’ basis of taxation whereby a US corporation will not be subject to any tax on its capital gains and dividend income from investments in foreign subsidiaries.

These measures seem to rely heavily on the assumption of a significant increase in investments in the economy resulting in higher GDP growth to compensate for the cuts in tax rates

Economists have traditionally remained divided on whether tax rate cuts necessarily result in increase in investments.

Broadly speaking, though, there is consensus on the strong correlation between a rise in investments and a stable and predictable social, fiscal and economic policy regime. Additionally, the presence of a large market with an increasing trajectory of disposable incomes is an abiding attraction for investments.

So, with the above backdrop, what are the options for India’s tax policymakers that may be reflected as early as February 1 in Budget 2018?

Corporate tax rate : India has already announced a roadmap towards a 25% corporate tax rate and phasing out of various incentives and deductions. The phase-out plan envisages grandfathering of the deductions in respect of investments already made.

So, the concerned corporations may continue to enjoy lower effective tax rates for a longer period of time. Finance minister Arun Jaitley made astart in last year’s Budget when he announced a simpler tax rate of 25% for new manufacturing companies if they choose to give up claiming the prescribed list of incentives and deductions.

If GoI finds it fiscally challenging to move to a blanket rate of 25% immediately from 2018 onwards, an option for all corporations (rather than to only new manufacturing companies) to adopt the 25% rate in lieu of giving up the prescribed incentives should be considered.

Dividend distribution tax (DDT): India’s current DDT system has resulted in a creeping increase in the effective corporate tax burden to the tune of up to 46% (considering all surcharges and aprofitable company declaring its distributable profits as dividends). With arising shift towards exemption of dividends from overseas investments, India must consider moving towards a classical system of dividend taxation. This means a withholding tax on dividends distributed to sharehold  receiving dividends.

Simplified scheme for small corporations: To ease the compliance burden for small corporations, a simple scheme of corporate taxation should be considered. Such a corporation has an option to adopt the audited profits as its taxable income without any further adjustments under tax laws and applying a flat rate of, say, 20% on such deemed taxable income as represented by the audited profit and loss statements.

Alternate Minimum Tax (AMT) to substitute Minimum Alternate Tax (MAT): The current provisions of MAT have resulted in increased conflicts between treatment for various items under accounting principles and tax purposes. A simplified version of the minimum tax has already been introduced by way of AMT on non-corporate taxpayers. It should be extended to corporations as well, with MAT removed altogether.

Safe harbour rules for captive research centres: The current safe harbour rules to provide certainty of transfer pricing and taxation of captive centres in India are restricted to small centres — and without extending it to high value research-oriented activities. India could attract additional foreign investments in R&D by extending safe harbour rules to all types and sizes of such centres in India.

So, India faces unique challenges, with an increasingly competitive and nationalistic system of taxation being adopted by major countries. But these also provide it with a unique opportunity to drastically simplify our tax regime, and inject moderation in tax rates to propel both domestic and foreign investments.

Source : PTI

5 things one must consider before making fresh Section 80C investment for FY 2017-18 : 03-01-2017


he fag end of the financial year is when we scurry around and grapple with bewildering alphanumeric combinations like Section 80C and 80DD. If your tax-saving efforts are last minute the chances of locking funds in an unsuitable investment are quite high.

Tax-saving investment should never be made on an ad-hoc basis or for an ill-conceived goal. But with the accounts department of your organisation knocking on your door to submit proofs of actual investments, many people try  to make tax saving investments at the last minute.

Here is how you can do last-minute tax planning to not only reduce your tax liability, but also save towards the goals you have set at different life stages.

While choosing the right tax-saver, base your decision on these five important things, among others:
*How much deduction from gross total income can you avail
*The amount of fresh tax-saving investments you need to make
*Kind of tax-saving instrument you should invest in
*Tenure of the investment
*Taxability of income from the investment

Once you have got a fix on these, equally important is to choose a tax-saving instrument which can be linked to a specific goal.

How much deduction can you avail
Section 80C allows deduction from gross total income (before arriving at taxable income) of up to Rs 1.5 lakh per annum on one or more eligible investments and specified expenses. The eligible investments include life insurance, Equity Linked Savings Schemes (ELSS) mutual funds, Public Provident Fund (PPF), National Savings Certificate (NSC), etc., while expenses and outflows can include tuition fees, principal repayment of home loan,among others.

If you have exhausted your annual limit Sec 80C limit of Rs 1.5 lakh, you can also look at National Pension System (NPS) to save towards retirement and, in the process, save additional tax.

From 2015-16 onwards, an additional (additional to Section 80C) deduction of up to Rs 50,000 under Section 80CCD (1b) for investment in NPS is also possible. For someone in the highest 30 per cent income tax bracket, it’s an additional annual saving of about Rs 15,000.

Further, the premium paid towards a health insurance plan for self and family members qualifies for tax benefit under Section 80D for Rs 25,000 and Rs 30,000 for those above 60. If one has a home loan, interest payments made towards its repayment can also be claimed under Section 24 of the Income Tax Act. The other deductions include donations under Section 80G, interest payments under Section 80E for education loan, etc.

Fresh investments you need to make
Before you start looking for the right tax saver, run this simple exercise to evaluate whether you actually need to make any fresh investments for this financial year (2017-18).

Non-Section 80C deductions: First, look at all non-Section 80C deductions like the interest paid on home loan, health plans, educational loan.
Section 80C outflows: Then consider Section 80C-related expenses like children’s tuition fees, principal repayment on home loan, pure term life insurance plans premiums.
Existing Section 80C commitments: Consider all the existing Section 80C commitments to invest/to pay premium such as in Employees’ Provident Fund (EPF) and endowment life insurance, respectively

The exercise above gives you a total of existing commitments under Section 80C, 80D and other deductions. Now, from your gross total income, reduce the amount to arrive at the taxable income.

If your net income after doing the above calculation is still above the tax exemption limit of Rs 2.5 lakh then you need to look at further tax saving. To reduce taxable income further and provided the limit of section 80C isn’t yet exhausted, look for the right Section 80C investments.

Kind of tax-saving instrument
Within the basket of Section 80C investments, there are two options to choose from: Investments offering “Fixed and assured returns” and those offering “market-linked returns”.

The former primarily includes debt assets, including notified bank deposits with a minimum period of five years, endowment life insurance plans, PPF, NSC, Senior Citizens Savings Scheme (SCSC), etc. The returns are fixed for the entire duration and generally in line with the rates prevalent in the economy and very close to inflation figure. They suit conservative investors whose aim is to preserve capital rather than create wealth.

The ‘market-linked returns’ category is primarily the equity-asset class. Here, one can choose from ELSS of mutual funds and Unit-Linked Insurance Plan (ULIP), pension plans and the NPS. The returns are not assured but linked to the performance of the underlying assets such as equity or debt. They have the potential to generate higher inflation adjusted return in the long run to the extent they are based on the equity asset class.

Tenure
All the above tax-saving instruments, by nature, are medium to long term products: From a three-year lock-in that comes with ELSS to a 15-year lock-in of PPF. Some like life insurance require annual payments to be made for a longer duration.

Taxability of income
Another important factor to consider is the post-tax return of the tax-saving investment. For instance, most fixed and assured returns products such as NSC provide you with Section 80C benefits, but the returns, currently 7.8 per cent (five-year) annually, are taxable. This makes the effective post-tax return equal to 5.39 per cent for the highest taxpayers. Considering the annual inflation of six per cent, the real return is almost zero!

Of all the tax-saving tools, only PPF, EPF, ELSS and insurance plans enjoy the EEE status, i.e., the growth is tax-exempt during the three stages of investing, growth and withdrawal.

Making the right choice
First, identify your medium and long term goals. A market-linked equity-backed tax-saving instrument is good for long term goals as equities need time to perform. And, before considering a taxable investment, see the tax rate that applies to you and consider the post-tax return. A low post-tax return after adjusting for inflation will not help you in achieving your goals in the long run. Inflation erodes the purchasing power of money, especially   over long term.

Conclusion
Tax planning should ideally begin at the start of every financial year. Remember, the risks of planning tax-saving in a hurry later are manifold. There is, for instance, a high probability of picking up an unsuitable product. Also, there isn’t any one instrument that can help you save tax and at the same time also provide safe, assured and highest return. Your final choice should ideally be based on a gamut of factors rather than solely being driven by return  from the financial product.

Source : Times of India

GSTR-3B: Government relaxes norms for rectification of returns : 02-01-2018


The Finance Ministry has permitted businesses to rectify mistakes in their monthly returns – GSTR-3B – and adjust tax liability, a move that will help them file correct returns without fear of penalty. This relaxation will give an opportunity to businesses to claim tax credit correctly by rectifying the mistakes made initially while computing GST liability. Businesses have been finding it difficult to assess tax liability correctly after India moved to Goods and Services Tax (GST) regime with effect from July 1. Industry bodies have been demanding relaxation of norms and easier compliance provisions to help businesses adapt to the new system of filing tax returns online. The CBEC in a recent communication to field officer has said “as return in Form GSTR-3B does not contain provisions for reporting of differential figures for past month(s), the said figures may be reported on net basis along with the values for current month itself in appropriate tables…”. It said while making adjustments in the output tax liability or input tax credit, there can be no negative entries in GSTR-3B. The amount remaining for adjustment, if any, may be adjusted in the returns in Form GSTR-3B of subsequent months and, in cases where such adjustment is not feasible, refund may be claimed, CBEC said.

GSTR-3B, initial summarised return, has to be filed by businesses by 20th day of every month for the previous month showing details of taxes paid. “Where adjustments have been made in Form GSTR-3B of multiple months, corresponding adjustments in Form GSTR-1 should also preferably be made in the corresponding months,” it added. EY India Tax Partner Abhishek Jain said the circular will bring relief to businesses who were struggling to make changes in their GST return form.

Rajat Mohan, partner in AMRG and Associates said the CBEC had in September 2017 allowed businesses to rectify errors in GSTR–3B returns while filing GSTR-1 and GSTR-2 of the same month. Now in order to improve the procedure, the CBEC has said since GSTR-3B does not contain provisions for reporting of differential figures for past months, the said figures may be reported on net basis along with the values for current month itself. As per the new circular, Mohan said “all rectifications can be made in the same month’s GSTR–3B and GSTR -1”.

 

Source : Financial Express

 

 

Anti-profiteering: At least 5 entities issued notices : 02-01-2018


Anti-profiteering notices were served to at least five companies, including a Honda dealer, Hardcastle Restaurants, McDonald’s franchisees for West and South India and retailer Lifestyle, for not passing on GST benefits to consumers.

The DG Safeguards also issued a notice to Jaipur-based Sharma Trading for allegedly charging 28% GST on Vaseline when the tax rate had been slashed to 18%.

However, what can really shake the industry is the notice against Hardcastle Restaurants, where the probe is based on a complaint that the price of a cup of coffee allegedly remained unchanged despite the government reducing GST from 18% to 5%.

The companies have been asked to provide copies of balance sheets, profit and loss account statements for 2016-17, GST returns for July-December, details of invoice-wise outward taxable supplies, two sample invoices for sale and purchase of goods each and price list before and after November 15.

The new nationwide tax regime has an anti-profiteering clause that allows consumers to complain against companies not passing on the benefits of reduced rates or input tax credit.

The notice issued to Pyramid Infratech has said that 36 buyers have accused the builder of not passing on the benefit of input tax credit to them, which would have lowered the total consideration for flats booked under the Haryana Affordable Housing Scheme.

A Bareilly-based dealer of Honda Cars India – Vrandavaneshwaree Automotive Ltd. has been accused of allegedly charging higher taxes when a Honda car booked in April but was delivered in July, after GST had been implemented.

In all cases, the complaints have been vetted by the standing committee on antiprofiteering, for which a penalty has been prescribed in the law to ensure that sellers pass on the benefits of lower taxes to consumers or do not overcharge tax. All the entities have been asked to submit documents and replies.

Source : PTI

Govt may offer tax boost for angel investors : 02-01-2018


In what may come as a boost for startups, the government may remove tax hurdles for angel investors grappling with notices, which have forced them to slow down fresh investments in recent months.

Angel tax, or tax on capital raised by unlisted companies by issuing shares in excess of their fair market value, is seen as a contentious issue for startups even 18 months after the government exempted innovative firms from this tax. In June 2016, the Central Board of Direct Taxes (CBDT) said capital raised by startups from domestic angel investors will not be taxed as income even if the investment was more than the fair market value of the shares. Earlier, such investments faced a 30% levy in the form of income from other sources.

It, however, came with the rider that the exemption will be available only to startups that meet conditions laid down by the Department of Industrial Policy and Promotion (DIPP), which now makes it mandatory for them to be certified as “startups” to claim an exemption. So far, seven companies have been recommended by the department for tax benefits under the startup policy, while there are at least 150 that are claiming the benefits of the policy.

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Nasscom has argued that the confusion over the tax regime, including notices to companies that have seen their valuations plummet when they went for subsequent round of funding, has resulted in a fall in investment by angel investors in recent months.

The repeated complaints have prompted DIPP to take up the issue with Sebi, which is reviewing some of the rules, sources told TOI. In addition, the issue of tax rules has also been taken up with the finance ministry, amid indications that the concerns may be addressed in the Budget at a time when the government is keen to revive investments in the economy and spur job creation.

The industry has argued that valuing startups based on their assets alone, given intangibles such as goodwill, is not easy. Nor is it easy to arrive at a fair value for them, based on discounted cash flows. “Imposing angel tax on startups has a direct impact on them as it taxes investment they have received from domestic investors. Startups have no revenues or profits and their valuation is based on the potential and promise of the idea and is usually a matter of negotiation between the founders  and the angel investors,” said an industry source.

Source : Times of India

GST: E-way bill system to be implemented from February 1 : 01-01-2018


The GST provision requiring transporters to carry an electronic waybill or e-way bill when moving goods between states will be implemented from February 1 to check rampant tax evasion and boost revenues by up to 20 per cent. After implementation of the Goods and Services Tax (GST) from July 1, the requirement of carrying e-way bill was postponed pending IT network readiness. This was done even in the 17 states which in the pre-GST era had a well established electronic challan or e-way bill system, a top government official said. Earlier, tax evasion was rampant as some preferred not to pay tax by resorting to cash dealing. Once the e-way bill system is implemented, tax avoidance will become extremely difficult as the government will have details of all goods above the value of Rs 50,000 moved and can spot the mismatch if either the supplier or the purchaser does not file tax returns, he said. The all-powerful GST Council had on December 16 decided to implement the e-way bill mechanism throughout the country by June 1. The official said e-way bill for inter-state movements will be implemented from February 1 and for intra-state movement from June 1.

The official said states have been given the option of choosing when they want to implement the intra-state e-way bill between February 1 and June 1.

They have also been given the option to exempt movement of goods within 10-km radius, he said, adding all essential goods have been exempted from the requirement of carrying e- way bill. Besides plugging tax evasion, the e-way bill will boost revenues by 15-20 per cent, he said. “The experience of states which hade-way bill system in pre-GST era showed a 15-20 per cent rise in revenue,” he said. The official said a pilot of e-way bill has been successfully run in Karnataka and the IT system is fully geared to meet any requirement. E-way bill is an electronic way bill for movement of goods which can be generated on the GSTN (common portal). Movement of goods of more than Rs 50,000 in value cannot be made by a registered person without an e-way bill.

The e-way bill can also be generated or cancelled through SMS, he said. When an e-way bill is generated, a unique e-way bill number (EBN) is allocated and is available to the supplier, recipient, and the transporter, he added. Trade and transporters can start using this system on a voluntary basis from January 16. The rules for implementation of nationwide e-way bill system for inter-state movement of goods on a compulsory basis will be notified with effect from February 1, 2018. This will bring uniformity across the states for seamless inter-state movement of goods.

Source : Financial Express

Abolish Commodities Transaction Tax on on agricultural produce: CII : 01-01-2017


Industry body CII on Monday said that Commodities Transaction Tax (CTT) on agricultural produce should be abolished to protect farmers’ income.

The industry body said that after witnessing an exponential growth since its inception till FY 2011-12, the commodities Futures market in the country has seen a contraction due to “various reasons such as suspension in trading of few commodities, enforcement of stock limits in certain commodities from time to time, introduction of CTT, etc.

According to Chandrajit Banerjee, Director General, CII: “The country remains one of the largest producers in the world for most of the agricultural commodities and there is an urgent need to safeguard the interests of the various stakeholders including farmers by providing them adequate hedging facilities through development of commodity derivatives market.”

He added: “The move to bring the regulatory control under Securities and Exchange Board of India (SEBI) has paved the way for next level of reforms in Indian commodity markets that aim not only at deepening and widening of the market but also make it safer for every stakeholder including farmers to transact efficiently”.

The SEBI has allowed options contracts and has also allowed hedge funds to invest in commodities market to deepen the Indian commodity derivatives market by allowing the entry of financial institutions.

To support the initiative of SEBI, CII further recommended various measures which it feels, if implemented, would go a long way in helping the commodities market grow and become more vibrant and allow them to further benefit the entire commodities value chain and its participants starting from the farmer.

As per CII other recommendations, SEBI should allow the agri-commodity derivative markets to stay open till 8 p.m. on weekdays and Daily Price Limits (DPL) on commodity futures contract to be relaxed.

Source : PTI

Falling GST numbers: Govt suspects massive under-reporting by companies : 01-01-2018


The government suspects that its composition scheme meant to ease life for small businesses is being misused with the average quarterly turnover estimated at Rs 2 lakh. For July-September, around 10 lakh entities had opted for the composition scheme for GST — where only the turnover details have to be disclosed and tax is paid at a flat rate. Of these, around 6 lakh filed returns till December 25.

But the total amount mopped up from these entities for the three-month period added up to Rs 251crore, translating into an annual turnover of Rs 8 lakh.

The number has taken the government machinery by surprise as the threshold for registering for GST is an annual turnover of Rs 20 lakh. With registrations on the rise, now around 15 lakh entities are registered for the composition scheme. But officials fear that because of multiple relaxations, there has been leakage of tax revenue from the system.

“We were planning to increase the ceiling above the currently prescribed Rs 1 crore. Now we are wondering if there is a need to do so if the average declaration shows turnover of Rs 8 lakh a year,” said an official, who did not wish to be identified. In November, the GST Council had proposed to raise the cap to Rs 1.5 crore.

SME scheme

The startling numbers have also prompted the finance ministry brass to check the scheme for payment of presumptive tax under income tax, where the limit was doubled to an annual income of Rs 2 crore. The numbers estimate the average annual income at Rs 18 lakh, which again officials believe is a result of under-reporting by those who are eligible to opt for it.

The immediate worry, however, is GST, where aspects like invoice matching, reverse charge and e-way bills were put on the back burner as there was an uproar of sorts against the new regime that sought to plug leakage of government revenue. While the government will roll out eway bills next month and make it mandatory from February to track consignments moving in trucks, the GST Council will decide on the reintroduction of the two other tools when it meets on January 18.

 

Source : Times of India

 

Creditors need to take haircut in resolving bankruptcy, says Finance Minister Arun Jaitley : 30-12-2017


Banks and creditors would need to take a “haircut” on their bad loans, even as defaulting promoters could make their businesses operational again by paying the outstanding interest on the loan, Finance Minister Arun Jaitley said on Friday. He was replying to the debate in the Lok Sabha on Friday after it passed the amendments to the Insolvency and Bankruptcy Code (IBC) which seek to plug potential loopholes in the Code and prohibit “certain persons”, such as wilful defaulters, from submitting resolution plans to let them take charge of the company. “Workmen, creditors, banks, unsecured creditors..all need to take a haircut so there is an equitable distribution of the resolution process,” Jaitley said, noting that the government featured later in the “waterfall list” of creditors involved in the resolution of the non-performing assets (NPA), or bad loans, in the Indian banking system that have crossed the staggering level of Rs 8.5 lakh crore. A haircut signifies accepting a lower than market value for the asset for a resolution of the NPA. “However, you cannot have a situation where the promoters responsible for the NPAs in the first place come in through the back door to take over the company again…so it was necessary to have an ineligibility criteria,” he said. Jaitley, who also holds the corporate affairs portfolio, further clarified that management is not barred from making a unit operational if it pays the outstanding interest on the stressed loan. “No one is being debarred for life and neither are we asking that you pay the whole amount. Just pay the interest and make the account operational,” he said.

The Insolvency and Bankruptcy Code (Amendment) Bill, 2017 will replace an ordinance promulgated earlier. The IBC, being implemented by the Corporate Affairs Ministry, became operational in December 2016 and provides for a time-bound insolvency resolution process. The changes proposed are expected to help streamline the process of selecting buyers for stressed assets. For instance, currently the Code does not specify the type of buyers who can bid for stressed assets of companies that are undergoing bankruptcy proceedings. Certain people prohibited from submitting the resolution plan include wilful defaulters, disqualified directors, promoters or management of the defaulting company or any person who has indulged in these activities abroad.

According to the American rating agency S&P-owned Crisil, Indian banks will need to take a “haircut” of up to 60 per cent on their bad loans to resolve the issue of NPAS, which is holding up higher economic growth. The government has embarked on a two-pronged strategy in this regard. On the one hand, it has brought in the Insolvency and Bankruptcy Code which provides for a time-bound insolvency resolution process. On the other hand, it has approved a Rs 2.11 lakh crore recapitalisation plan for state-run banks.

Source : Financial Express

Government to implement e-way bill from February as tax mopup slips : 30-12-2017


Nearly six lakh taxpayers availing the simple composition scheme under the GST have paid a tax of only about Rs 250 crore for July-August, leading the government to suspect large scale evasion.

The government fears lack of monitoring of cargo movement could have allowed cash dealing across the entire value chain to evade taxes, which could have been reason for the sharp decline in GST collections in past two months

Nationwide launch of the eway bill from February 1 is expected to check evasion by ensuring goods are tagged and tax paid, a government official said. It could not be rolled out earlier as software and nationwide system was not ready.

COMPOSITION FILERS

Businesses with turnover up to Rs 1 crore — limit is raised to Rs 1.5 crore now —are allowed to file tax based on turnover and not maintain detailed records. Rate of tax is 1% on manufacturers, 2% for traders and 5% for restaurants.

Assuming an average tax of 2%, calculation yields average turnover of about Rs 2 lakh for six lakh composition scheme filers for first three months considering the Rs 250 crore tax payment. Since that would be below the Rs 20 lakh threshold for filing returns, most of these assesses should not have filed tax. “There seems to be massive under reporting in the composition scheme,” the official said.

This also means that GST revenues will not get a boost from composition filers who are required to file returns every quarter.

EWAY BILL

The GST Council has decided to start eway bill for inter-state movement of goods from February 1 while states have up to June 1. Eway bill is an electronic document that is required if goods worth more than Rs 50,000 is transported and carries the details of supplier, buyers and goods being transported. There have been fears the bill will lead to harassment as any cargo would be stopped for checking.

“Asking traders and transporters to generate E-way Bill on-line and carry it, is not ‘Inspector Raj’; it is just ”efficient use of Information Technology.” Let us all prepare for Feb 1 deadline for e-way bill for inter-State transportation of goods,” finance secretary Hasmukh Adhia tweeted.

Source : Times of India

 

HRA Exemption Rules: How to save tax on House Rent Allowance : 30-12-2017


For most employees, House Rent Allowance (HRA) is a common component of their salary structure. Although it is a part of the salary, HRA, unlike basic salary, is not fully taxable. Subject to certain conditions, a part of HRA gets exempted under Section 10 (13A) of the Income-tax Act, 1961.

The amount of HRA exemption is deductible from the total income before arriving at a taxable income. This helps the employee save tax. Remember, the HRA received is fully taxable if an employee is living in his own house or if he does not pay any rent.

Who can avail HRA?

The tax benefit is available only to a salaried individual who has the HRA component as part of his salary structure and is staying in a rented accommodation. Self-employed professionals cannot avail the deduction.

How much is exempted?

The exemption for HRA benefit is the minimum of:
i) Actual HRA received
ii) 50% of salary if living in metro cities, or 40% for non-metro cities; and

iii) Excess of rent paid annually over 10% of annual salary

For calculation purpose, the salary considered is ‘basic salary’. In case ‘Dearness Allowance (DA)’ (if it forms a part of retirement benefits) and ‘commission received on the basis of sales turnover’ is applicable, they too are added to compute the minimum HRA exemption available.

The tax benefit is available to the person only for the period in which the rented house is occupied.

Example of HRA calculation

Let’s say an individual, with a monthly basic salary of Rs 15,000, receives HRA of Rs 7,000 and pays Rs 8,400 rent for an accommodation in a metro city. The tax rate applicable to the individual is 20 percent of his income.

To avail HRA benefit, the least of the following amount (yearly) is exempted, rest is taxable:

i) Actual HRA received = Rs 84,000
ii) 50% of salary (metro city) = Rs 90,000 (50% of Rs 1,80,000)
iii) Excess of rent paid annually over 10% of annual salary = Rs 82,800 (Rs 1,00,800 – (10% of Rs 1,80,000))

It shows that of Rs 84,000 actually received as HRA, Rs 82,800 gets tax exemption and only the balance of Rs 1,200 gets added to the employee’s income, on which a tax of Rs 240 ( 20 per cent slab ) gets payable

Documents

HRA exemptions can be availed only on submission of rent receipts or the rent agreement with the house owner.
It is mandatory for the employee to report the Pan Card of the ‘landlord’ to the employer if the rent paid is more than Rs 1,00,000 annually, or if it exceeds Rs 15,000 per month.

Special cases
There could be special scenarios in claiming HRA tax benefit, such as:

1. Paying rent to family members

The rented premises must not be owned by the person claiming the tax exemption. So if you stay with your parents and pay rent to them then you can claim that for tax deductions as HRA. However, you cannot pay rent to your spouse. As, in the view of the relationship, you are supposed to take the accommodation together. Thus, these transactions can invite the scrutiny from the Income -tax Department.

Even if you are renting the house from your parents, make sure you have documentary evidence as proof that financial transactions regarding your tenancy takes place between you and your parent. So keep a record of banking transactions and rent receipts because your claim can get rejected by the tax department if they are not convinced by the authenticity of the transactions. Recently, there has been an instance in which the HRA claim of a salaried taxpayer was rejected by the Mumbai  income tax appellate tribunal because the claim for HRA did not appear genuine to the tax officials.

2. Own a house, but staying in a different city

One can avail the simultaneous benefit of deduction available for the home loan against ‘interest paid’ and ‘principal repayment’ and HRA in case your own home is rented out or you work in another city.

Individuals who don’t get HRA but pay rent

There may be some employees who might not have HRA component in their salary structure. Also, a non-salaried individual might be paying rent. For them, Section 80 (GG) of the Income-tax Act offers help.

An individual paying rent for a furnished/unfurnished accommodation can claim the deduction for the rent paid under Section 80 (GG) of the I-T Act, provided he is not paid HRA as a part of his salary by furnishing Form 10B.

How much

The least of the following is available for exemption from tax under Section 80GG:
(i) Rent paid in excess of 10% of total income
(ii) 25% of the total of the total income*
(iii) Rs 5,000 per month

*Under this section, the total income is calculated as gross total income minus long-term capital gains, the short-term capital where Securities Transaction Tax (STT) has been paid and deductions available under Sections 80C to 80U, except Section 80GG.

Conditions

While claiming a tax deduction, one must remember that the individual himself or his/her spouse, or minor child, or as a member of the Hindu Undivided Family (HUF) must not own any accommodation. Also, if the individual owns any residential property at any place and earns rent from it then no deduction is allowed.

One can avail the simultaneous benefit of deduction available for the home loan against ‘interest paid’ and ‘principal repayment’ and HRA in case your own home is rented out or you work in another city. However, the same is not available in case of Section 80GG.

Source : Economic times

Insolvency Bill in Lok Sabha: Some defaulters get a month to clear dues : 29-12-2017


Defaulting promoters who had already submitted resolution plans for insolvent companies before an ordinance in November made them ineligible to do so without clearing dues first will get up to a month to come clean to be eligible to bid for the stressed firms. A Bill introduced in the Lok Sabha on Thursday to replace the ordinance on the Insolvency and Bankruptcy Code (IBC), 2016, however, suggests this relaxation will be applicable only to defaulters in those cases where the resolution period has not exceeded the stipulated time frame. The IBC allows six months (or nine months, if the adjudicating authority has granted a 90-day extension) to approve a resolution plan.

Also, as pointed out by Manoj Kumar, partner and head (M&A and insolvency resolution services) at consultancy firm Corporate Professionals Capital, the Bill has made certain relaxations: “Earlier any person who has given a guarantee in relation to any company which is admitted under IBC would have been debarred from bidding for any of the companies under the insolvency resolution process. But now the disqualification would be limited to the company in which he has given the guarantee, that too only if it was given in favour of the applicant who took the company for the insolvency admission.” The Bill allows asset reconstruction companies, banks and alternative investment funds registered with the Securities and Exchange Board of India to bid for insolvent companies, as they will not be covered under definitions of holding or subsidiary companies, associate companies or related persons. Most of the other provisions of the Bill are in sync with the earlier ordinance. In line with provisions of the ordinance, the Bill also makes it clear that defaulters, including promoters, whose accounts have been classified as non-performing assets for at least a year, will be allowed to submit a resolution plan only after clearing the overdue amounts with interests and other charges. Finance and corporate affairs minister Arun Jaitley introduced the Bill in Lok Sabha.

Making the ground of disqualification clearer and perhaps more stringent, the Bill says a person won’t be eligible to submit a resolution plan if he “has an account, or an account of a corporate debtor under the management or control of such persons or of whom such person is a promoter, classified as non-performing asset in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulation Act, 1949, and at least a period of one year has lapsed from the date of such classification till the date of commencement of the corporate insolvency resolution process of the corporate debtor”. There are other provisions for disqualification as well. In November, the government came up with the ordinance to prevent unscrupulous elements, including such promoters and wilful defaulters, from misusing the provisions of the IBC. “The Bill dashes hopes of all bona fide promoters who were expecting to be ring-fenced and brands all acts of default as malfeasance. It is a severe blow to the very spirit of entrepreneurship,” said Sumant Batra, noted insolvency lawyer. “The official policy of our country now is that only success is legitimate, failure is not.”

Source : Financial Express

Finance Minister Arun Jaitley introduces bill to amend IBC in Lok Sabha : 29-12-2017


The government on Thursday introduced a bill in the Lok Sabha to bar those with non-performing accounts from bidding to acquire insolvent companies or their assets.

The Insolvency and Bankruptcy Code (Amendment) Bill, 2017 will replace an ordinance promulgated last month, which barred those with RBI recognised non-performing loan of at least a year from participating in the resolution process of an insolvent entity

The bill clarifies some of the provisions of the ordinance, to make the resolution process effective and provide more time to promoters and insolvent companies to take part in finalising a resolution plan. A penalty of minimum `1 lakh, which can go up to `2 crore, has been proposed for contravening any of the provisions of the Insolvency and Bankruptcy Code (IBC).

“Concerns have been raised that persons who, with their misconduct contributed to defaults of companies or are otherwise undesirable, may misuse this situation due to lack of prohibition or restrictions to participate in the resolution or liquidation process, and gain or regain control of the corporate debtor,” the government said in the statements of object and reason.

The bill allows the promoter to submit a resolution plan after clearing dues.

It was introduced by finance minister Arun Jaitley. Persons acting jointly or in concert with people disqualified by the bill will also be not allowed to participate in the resolution process.

The bill clearly explains related parties, keeping banks, asset reconstruction companies and alternate investment funds out of the definition of related parties.

The bill also relaxes the provisions on corporate guarantors.

“Earlier any person who has given a guarantee in relation to any company which is admitted under IBC, would have been debarred from bidding for any of the companies under insolvency,” said Manoj Kumar, head of M&A and insolvency resolution services at advisory firm Corporate Professionals. “But now the disqualification would be limited to the company in which he has given the guarantee, that too only if it was given in favour of the applicant who took the company for the Insolvency admission .

The bill said “the liquidator shall not sell the immovable and movable property or actionable claims of the corporate debtor in liquidation to any person not eligible to be a resolution applicant”.

Source : Times of India

Is long-term capital gains tax on equity coming? : 29-12-2017


A Union Budget is approaching, and once again the issue of imposing long-term capital gains tax on equity has come up. A newspaper report earlier this week claimed that such a tax – abolished in 2005 – was actively being considered by the finance ministry. Predictably, there was a chorus of protests.

Exactly a year ago, the same thing had happened, except that at the time, the story began with a public statement from the Prime Minister himself. On 24th December, 2016, in a speech the PM said that, “those who profit from financial markets must make a fair contribution to nation-building through taxes. For various reasons, the contribution of tax from those who make money on the markets has been low.” He also said that, “to some extent, the low contribution of taxes may also be because of the structure of our tax laws. Low or zero tax rate is given to certain types of financial income. I call upon you to think about the contribution of market participants to the exchequer. We should consider methods for increasing it in a fair, efficient and transparent way.” Since there is literally no kind of financial income that has zero tax except for long-term capital gains, this sounded like a clear and unambiguous warning that such a tax was coming. However, within a day, Finance Minister  Arun Jaitley explicitly denied that such a tax was being considered and claimed that the PM’s statement had been misinterpreted. Maybe that was the case, but it was pretty clear that at some level, Modi sees this zero tax regime for long term capital gains as unfair. The beneficiaries of this zero tax regime are overwhelmingly likely to be richer people, something that strikes many people as unfair.

Originally, when this tax was abolished in 2005, the genesis of the move was in the report of the Kelkar committee. The idea was that the ultimate source of longterm capital gains is ultimately corporate profits and dividends, which are already taxed. So, in a sense, capital gains was derived from tax-paid income and therefore taxing them would amount to double taxation. While there is some logic here, it’s not a view that cannot be argued against. As it happens, zero capital gains tax is pretty rare around the world. The US, Canada, Australia, and all major European countries, among others, tax all capital gains and many of them tax it heavily.

Jurisdictions that have zero tax tend to be those that set out to use it tactically, for example, Singapore, as well as other tax havens. Back in 2005, India’s zero-rating of such tax could also be seen as a tactical move to attract FII investments. However, it is arguable that this is no longer needed.

Of course, no one likes to pay more tax and it’s likely that the equity markets will react negatively to such a tax. It should be noted that over a long period, an investor would lose more money to taxation than the tax rate. It is entirely possible – even likely – that a tax rate of, say, 15 per cent would lead to a reduction of 50 per cent in your actual returns over a decade or so.  The thing about such a tax is that no investor is going to be in the exact same investment for five or ten years. At some point, they would need to move from one investment to another. Given the structure of tax laws, capital gains would be taxed on such a switch, leading to less capital being available for compounding subsequently. The impact would be quite large.

It’s often speculated that a likely change in the tax laws would be to increase the holding time limit for qualification as longterm capital gains from one to three years. This may deliver higher tax revenue, as well as a desirable change in investor behaviour. Of course, it is actually likeliest that there will be no change at all, but if there is, then it shouldn’t come as a surprise.

Source : Economic Times

India to ‘leapfrog’ Britain, France to become 5th largest economy in 2018 : 28-12-2017


India will “leapfrog” Britain and France to become the world’s fifth largest economy in 2018, ahead of an oncoming major global economic shift towards Asia, according to a British research organisation. The World Economic League Table (WELT) 2018 released on Monday by Centre for Economics and Business Research (CEBR) said that in dollar terms India will rise from its seventh rank to overtake those European economies next year despite the stumble of demonetisation and the introduction of Goods and Services Tax (GST). “The World Economic League Table shows that despite temporary setbacks from demonetisation and the introduction of the new GST tax, India’s economy has still catch up with that of France and the UK and in 2018 will have overtaken them both to become the world’s fifth largest economy in dollar terms,” said CEBR Deputy Chairman Douglas McWilliams. The CEBR projections give India the fifth spot a year ahead of the International Monetary Fund estimates, which move it up in 2019.

According to the IMF, the size of India’s economy is currently $2.439 trillion. With an annual growth rate of 6.7 per cent in 2017 and 7.4 in 2018, it expects the size of India’s economy to be $2.926 trillion in 2019, when it will pull ahead of France and Britain according to its projections. The world’s largest economies now are the US ($19.362 trillion), China ($11.937 trillion), Japan ($4.884 trillion), Germany ($3.652 trillion), France ($2.575 trillion), Britain ($2.565 trillion) and India, according to the IMF. CEBR charts a trend of global economic shift to Asia.

“The interesting trend emerging is that by 2032, five of the 10 largest economies will be in Asia, while European economies will be falling down the ranking and the US will lose its top spot,” CEBR Senior Economist Oliver Kolodseike said.

According to WELT estimate, by 2032 three out of the world’s four largest economies will be Asian – China, India and Japan. Korea and Indonesia are expected to join list of the world’s top 10 economies, with Taiwan, Thailand, Philippines and Pakistan making the top 25 list.

Construction activities are expected to get a tremendous boost, mainly because of India and China, according to CEBR. “Construction’s share of world GDP is to reach its highest level ever, driven by ultra large global transformational projects,” Graham Robinson, director of Global Construction Perspectives, said.

 “The Chinese Belt and Road Initiative and the Indian infrastructural project will boost construction’s share of world GDP to 15 per cent by 2032, probably the highest share of world GDP construction has seen since the pyramids or Great Wall of China were built.”
Source : Financial Express

Away from the headlines, Modi is fighting a crucial war against inefficient bureaucracy : 28-12-2017


Prime Minister Narendra Modi may have gone to town about his boldest reforms, justifying them and recounting how he overcame obstacles to launch them, there is one reform that he has been working on silently but resolutely — the bureaucratic reform.

Modi has taken several steps to discipline the bureaucracy even though it’s a daunting task given that it’s the very bureaucracy that has to implement these reforms.

Recently, the Department of Personnel and Training (DoPT) has written to all Central government departments, states and union territories asking them to ensure submission of Immovable Property Returns (IPRs) by IAS officers working with them by January 31, 2018.

All IAS officers have been asked to submit details of their assets by next month and warned that the failure to do so would lead to a denial of vigilance clearances needed for promotions and foreign postings.

An online module has been designed for the purpose of filing of the IPR. Officers have the option of uploading the hard copy of the IPR by January 31 in the online module.

This step is one of the series of such steps taken by the Modi government. The corrupt and lazy bureaucracy that works with little oversight or checks is in the sights of Modi. He is waging his war on several fronts, from tracking performance to punishing the rogues and the under-achievers.

Early this year, cracking the whip on non-performing officials, the government for the first time prematurely retired 33 tax officers which included seven Group ‘A’ officers. The government said 72 officers had been dismissed in other departmental/disciplinary actions in the last two years.

In the last three years, the Department of Personnel and Training has taken actions like premature retirement and salary cut against 381 officers, 24 of whom were from IAS officers, for non-performance and corruption.

The government has also compulsorily retired a few IPS officers for non-performance.

While these actions come in limelight, PM Modi’s is fighting bigger battles against babudom which do not come into spotlight. The government has started an online performance assessment system for bureaucrats, which can be a very effective tool to track performance.

Online Probity Management System will help various ministries assess the integrity and performance levels of officers.

The government has been assessing the performance of all officers who have turned 50 or 55 or have completed 30 years of service to decide whether they be allowed to continue in service or compulsorily retired. The new ‘Probity’ portal makes the process completely online by which ministries can now submit their reports online and the government gets a birds eye-view of the status on one portal.

The government is using a unique system—Sparrow (Smart performance appraisal report recording online window)—to make the entire appraisal system online and accessible for review by the ministries concerned. The DoPT has recently extended ‘Sparrow’ from just the IAS cadre to 13 cadres, including the central secretariat services.

The government’s another online system to track babudom is a DoPT portal, ‘Solve’, a system for online vigilance enquiry for board-level appointees.

The government has introduced another online software two months ago to cut delays and introduce transparency in departmental proceedings against bureaucrats for alleged corruption. It will record all processes online and use cloud-based technology to provide an interface among all stakeholders.

The new system will expedite the departmental proceedings, thus ensuring that corrupt officers are brought to justice without delay even as the honest ones are spared undue harassment and intimidation.

The portal will initially be adopted in respect of IAS officers posted at the Centre but subsequently be extended to all All India Services officers as well as Group A employees serving in the Central government.

The online system envisages use of cloud-based technology and provides interface to different stakeholders like the administrative ministry initiating the departmental inquiry, the cadre controlling authority, charged officer, inquiry officer, etc through separate modules. All documents required for the conduct of the inquiry will be stored online and authenticated through digital signature/e-signature. Further, all communication between the different stakeholders will be through  the system with provision for email and SMS alerts.

Turning the corrupt, lazy and autocratic bureucrats into responsive officers is not an easy task. Modi’s war on corrupt and inefficient babus will be a long-drawn affair. Only if he comes to power for another term can he make a significant impact.

Source : PTI

 

Tax payers can see status of returns filed on GSTN portal : 28-12-2017


Tax payers can now view the status of the returns filed by them on the GST Network portal, the company handling the technology backbone of the new indirect tax system said today.

“All users logging on the GST portal can now see the status of their returns filed for all the returns like GSTR-1 or GSTR-3B at one place,” GSTN CEO Prakash Kumar said.

While GSTR-3B is in the initial sales returns filed by the 20th day of the succeeding month, GSTR-1 is the final sales return.

Businesses with turnover of up to Rs 1.5 crore have been allowed quarterly filing of GSTR-3B and the same for July- September period will have to be filed by December 31.

Those with turnover exceeding Rs 1.5 crore will have to file GSTR-1 for July-October by December 31.

GSTN has already provided to tax payers the functionality to claim refund of exports of services with payment of tax, ITCBSE 0.10 % accumulated due to inverted tax structure and on account of supplies made to SEZ unit/SEZ Developer

Source : Economic Times

 

Indian economy witnessed many ups-downs in 2017; here is a round-up : 27-12-2017


It has been almost a decade since the world underwent a litany of economic crises beginning with the financial meltdown of 2008-09 immediately followed by the European debt crisis of 2010-12 and then by the global commodity price adjustments between 2014-16. The year just ending was when the global economy showed the first promising signs of recovery. In contrast to a global economic growth of 2.4 per cent in 2016, it is expected to grow at 3 per cent in 2017, the highest since 2011. It might have still been a challenging year for some commodity-exporting nations, but a taste of recovery has reached most economies, and in that sense, this year could be termed as a hopeful one. India, on the other hand, has had a forgetful year in terms of growth. It was recovering from the twin shocks of demonetisation and GST along with the twin balance sheet problem of banks and corporates. Due to these issues, GDP growth fell consistently until it reached a 3-year low of 5.7 per cent in the April-July quarter before recovering to 6.3 percent in July-September. By all means, growth in the current financial year will not exceed 7 percent.

The country’s economic performance has been of concern throughout the year at all levels. First, consumption, which is the largest component of the Indian economy, now accounts for only 54 per cent of the GDP as compared to 59 per cent in December 2016. Consumption growth fell for three consecutive quarters in the calendar year from a high of 11.1 percent to 6.5 percent. Demand for consumer durables seems to have been the most affected.

The IIP (Index of Industrial Production) growth for consumer durables fell to a low of a negative 1.8 percent by September 2017 as compared to 5.9 percent a year ago. Both demonetisation and GST have contributed to these subdued consumption trends. Considering that consumption is the primary driver of economy’s growth, reviving it should be the foremost matter of concern stepping into 2018.

Second, investments have also taken a hit this year owing to the twin balance sheet problem. Banks have become wary of lending due to a rising proportion of bad loans on their balance sheets while corporates with overleveraged balance sheets are postponing any borrowing for later. Investment activity has been affected at both ends.

Gross fixed capital formation, which measures the level of investment in the economy, has been plunging. It had reached heights of 38 per cent a decade ago in 2007 and remained above 35 per cent till 2011, which is the level it needs to maintain a minimum growth rate of 7 per cent. However, it has fallen to an average of 29 per cent in 2017.

The credit growth to industry has fallen to negative levels, underlining the gravity of the situation. The recent bank re-capitalisation plan of Rs 2.11 trillion will help, but the process will be completed only by 2019. Therefore, additional measures need to be taken to revive investment activity in the short-term.

The final major aspect of GDP is the government expenditure, which had been largely driving investments in 2017. The government spending averaged 18 per cent in the first three quarters of the calendar year 2017 as compared to 12 per cent during the same period last year. However, even this has fallen to a lowly 4.1 percent in the July-September quarter. The drastic reduction was imminent due to the tight fiscal situation that the government finds itself in after having incurred 98 per cent of the budgeted expenditure for the financial year in October itself.

Moreover, to make matters worse, tax revenue collection has witnessed a slowdown. The receipts were 48 per cent of the budget estimates during April-October 2017 as compared to 51 percent a year ago. The recent reduction in GST rates will only widen the shortfall and make the fiscal situation even more challenging.

The inflation readings are not promising either. Despite RBI’s best efforts to control inflation within its medium-term target of 4 per cent, it hit a 15-month high of 4.33 per cent in November. If the Central government exceeds the fiscal deficit targets for the year, it will spark higher inflationary trends.

Thus, 2018 is going to be a challenging year considering these aspects. Subdued consumption levels, low investment activity and constrained government spending leave no scope for complacency. Boosting exports aided by a favourable global environment can help, but only to an extent. Also, the external sector will be largely dependent on how oil prices move during the year. A slight indication of unrest in the Middle East can push prices upwards and escalate India’s import bill.

 Therefore, since investments are tied up with the problem of bad loans and government spending is constrained by fiscal limitations, a lot will depend on whether the government can revive the consumption pattern of Indians. Hopefully, now that the effects of demonetisation and GST have worn off and GST rates have been slashed, household spending will see an uptick.

Source : Financial Express

Diesel, petrol prices soar across states as crude oil surges on good demand : 27-12-2017


Diesel prices have soared in the country, peaking in Delhi and touching three-year highs in Kolkata and Chennai as crude oil surges on good demand and production cuts led by OPEC and Russia.

On Tuesday, state oil companies sold diesel for a record Rs 59.31per litre in Delhi. Prices in Kolkata and Chennai were Rs 61.97 and Rs 62.48 per litre, respectively, highest since September 2014, according to price information available on the website of Indian Oil Corp. The price in Mumbai was Rs 62.75 a litre, highest since October 3.

Petrol and diesel are not within the ambit of goods and services tax, so their prices vary from state to state according to local levies. After diesel and petrol prices had risen sharply due to hurricanes-induced shutdown of refineries in the United States, the Central government cut excise duties by Rs 2 per litre for petrol and diesel each from October 4.

The current rise in crude oil prices seems to have erased that gain for consumers in several places in the country. Some states such as Maharashtra and Gujarat, responding to Centre’s request to cut local duties, also reduced VAT on petrol and diesel. In these states, price rise has been slower.

Diesel, petrol prices soar across states as crude oil surges on good demand

On Tuesday, petrol prices in Delhi, Kolkata and Chennai were the highest since November 16. Mumbai prices were the highest since October 10. Petrol was sold for Rs 69.63 a litre in Delhi.

Higher diesel prices mean increased cost for transporters, farmers and all those dependent on diesel-generated power.

State companies daily revise fuel prices which are the average of the trailing 15 days’ international rates. Central and state taxes comprise about half of the retail prices of petrol and diesel.

The surge in fuel prices have followed a rapid rise in international crude oil rates which have gained 42% in six months to $65 a barrel at present. Key oil producers, led by oil cartel OPEC and Russia, have recently agreed to extend oil output cuts until the end of 2018 in order to clear a supply glut that caused oil crash in mid-2014 and has since kept the prices lower. The producers have agreed to cut supply by about 1.8 million barrels per day to boost prices.

If the oil continues to boom, it would expand India’s import bill, boost inflation and leave little room for the Reserve Bank to cut interest rates. India imports about 82% of its oil requirement. Sustained higher fuel prices may also reignite consumer demand for tax cuts that could upset public finance.

Source : PTI

Worry not over FRDI bill, it’s just undue fear fanning mass hysteria : 27-12-2017


Social media is hysterically worried about the Financial Resolution and Deposit Insurance (FRDI) Bill under Parliament’s consideration: bank deposits are at risk, depositors’ money would be used to recapitalise banks in difficulty. The Bill does not quite propose this, and it can be ensured that depositors’ money is not used for the purpose, using the provisions of the Bill themselves.

The Bill seeks to prevent a fire in a tiny part of the integrated financial system from flaring into a conflagration that burns up the entire system. Orderly resolution of the bits that get into trouble is what the Resolution Corporation proposed under the Bill would do.

Additional Capital Buffers
Social media did not cook up the story of bank deposits being used to salvage a bank in trouble. In the 2012-13 banking crisis in Cyprus, bail-in of a proportion of bank deposits over a threshold did take place: deposits over a threshold saw a portion being converted into equity that went to absorb bank losses. But this is not what the FRDI Bill proposes

This is what the Bill says: Clause 52

(4) “(t)he Corporation shall, by regulations, specify the liabilities or classes of liabilities of a specified service provider, which may be subject to bail-in;

(5) The appropriate regulator may, in consultation with the Corporation, require specified service providers or classes of specified service providers to maintain liabilities that may be subject to bail-in and the terms and conditions for such liabilities to contain a provision to the effect that such liabilities are subject to bail-in.”

Unless the Corporation specifies bank deposits as a class of liability that could be bailed in, deposits are safe. Section (5) makes it clear that the essential aim is to make financial firms hold designated liabilities — deposits, bonds, preferential shares — that are explicitly subject to bail-in, in case of trouble.

However, the Bill does not specifically exclude bank deposits. Section 7 of the same Clause 52 excludes deposits covered by deposit insurance from bail-in, suggesting the possibility that deposits in excess of the insured amount could be bailed in.

Section 7 says, “(t)he bail-in instrument or scheme under this section shall not affect… (h) such other liabilities as may be specified by regulations made by the appropriate regulator in consultation with the Corporation and the Central Government.” Parliament could make the present section (h) section (i), and introduce a new section (h) that specifically excludes bank deposits.

Cyprus resorted to bail-in during a financial crisis. India is enacting a law to prevent crises and can ask banks to build up loss-absorbing capacity apart from the capital that is now counted towards capital adequacy in relation to risk-weighted assets. Special bonds could be issued that make it clear that they are liable to be bailed in, in extreme circumstances, and a capital buffer built up, on the lines of the capital buffer that systemically important banks are required to, as per the recommendations of the Financial Stability Board, a key component of the global financial architecture.

Of course, there is a cost to creating and maintaining large capital buffers. But safety has a price.
Bad Banking Untouched
Let us understand that what the FRDI Bill proposes is to enhance the degree of security ordinary people’s savings have at present, not take away from it. Deposit insurance covers only Rs 1 lakh. Deposits in public sector banks enjoy the implicit guarantee that the sovereign would not let the people down.

With what assurance do people put their money in private banks? There is the trust that sound regulation by the RBI would keep deposits safe. Yet, this trust is not absolute. In 2008, the government had to come out with a clarification to prevent a run on ICICI Bank, following a rumour. The stake the sovereign has in maintaining the stability of large banks is not diluted by the FRDI Bill. It just gives the sovereign a tidy way to tackle problems in financial firms, if they do arise.

The problem is not with the FRDI Bill. The problem is that we do not have reform of banking procedures to minimise the risk of their taking bad decisions that might land them in crisis and in the arms of the Resolution Corporation.

Banking decisions should not be based on whispered advice from ministers and babus, or commissions for managers, but on creditworthiness of the projects seeking loans. Project viability should be scrutinised not just by a clutch of bankers at the time of sanction but continuously over the life of the project, by multiple agencies, as would happen if the bond market were to fund long-term projects.

Bankers’ remuneration must be so structured as to align their personal and banking interests. It must be liberal, but tiered: a decent fixed component, a larger chunk linked to medium-term performance of the bank and the largest chunk linked to long-term performance, the variable portions also being subject to clawback.

These reforms are not part of the resolution procedure but are vital, to avert the need for resolution.

 

Source : Economic Times

 

Notification No. SO 4121(E) 26-12-2017


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – DEVBHUMI REALTORS PRIVATE LTD.

NOTIFICATION NO. SO 4121(E) [F.NO.F.1/15/2017-SEZ], DATED 26-12-2017

WHEREAS, M/s. Devbhumi Realtors Private Limited has proposed under section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act), to set up a Sector Specific Special Economic Zone for Information Technology and Information Technology Enabled Services (IT/ITES) at Raidurg Panmaktha village, Serilingampally Mandal, Ranga Reddy District, in the State of Telangana;

AND, WHEREAS, the Central Government is satisfied that requirements under sub-section (8) of section 3 of the said Act, and other related requirements are fulfilled and it has granted letter of approval under sub-section (10) of section 3 of the said Act for development, operation and maintenance of the above sector specific Special Economic Zone on 31st March, 2017;

NOW, THEREFORE, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the Special Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, hereby notifies the 2.02 hectares area at above location with survey numbers given in the table below as a Special Economic Zone, namely:

TABLE

S. No. Name of Village Survey No. Area (in hectares)
1. Raidurg Panmaktha 83/1 2.02
Total 2.02

AND, THEREFORE, the Central Government, in exercise of the powers conferred by sub-section (1) of section 13 of the Special Economic Zones Act, 2005 (28 of 2005), hereby constitutes a Committee to be called the Approval Committee for the above Special Economic Zone for the purposes of section 14 of the said Act consisting of the following Chairperson and Members, namely:—

1. Development Commissioner of the Special Economic Zone Chairperson ex officio;
2. Director or Deputy Secretary to the Government of India, Ministry of Commerce and Industry, Department of Commerce or his nominee not below the rank of Under Secretary to the Government of India Member ex officio;
3. Zonal Joint Director General of Foreign Trade having territorial jurisdiction over the Special Economic Zone Member ex officio;
4. Commissioner of Customs or Central Excise having territorial jurisdiction over the Special Economic Zone or his nominee not below the rank of Joint Commissioner Member ex officio;
5. Commissioner of Income Tax having territorial jurisdiction over the Special Economic Zone or his nominee not below the rank of Joint Commissioner Member ex officio;
6. Director (Banking) in the Ministry of Finance, Banking Division, Government of India Member ex officio;
7. Two officers, not below the rank of Joint Secretary, to be nominated by the State Government Member ex officio;
8. Representative of the Developer of the zone Special invitee

AND, THEREFORE, the Central Government, in exercise of the powers conferred by sub-section (2) of section 53 of the Special Economic Zones Act, 2005 (28 of 2005), hereby appoints the 26th day of December, 2017 as the date from which the above Special Economic Zone shall be deemed to be Inland Container Depot under section 7 of the Customs Act, 1962 (52 of 1962).

Reduce pending litigations in service matters, Revenue officers’ body tells Finance Ministry : 26-12-2017


Indian Revenue Service Officers’ Association today urged the Finance Ministry to reduce litigations in service matters pending in various courts. It said the officers’ body had requested Finance Minister Arun Jaitley thrice this year alone, the latest being on December 15, to take steps to reduce such litigations. “The association is distressed over non-implementation of a litigation policy in the Central Board of Excise and Customs (CBEC),” said Anup Srivastava, president of the association. “The review of unwarranted appeals in service matters is yet to take place in the CBEC and several officers are suffering because of apathy of the administration,” he said. The CBEC is entrusted with the administration of Goods and Services Tax (GST) and customs related matters. Srivastava said lakhs of cases are pending in appellate courts because of indiscriminate filing of appeals by the government. “Thereby government is wasting a lot of money and energy in frivolous litigation and courts are also getting piled up with unwarranted tendencies,” he said. Srivastava said the draft of the new litigation policy prescribes that no appeal will be filed in service matters which pertains to an individual grievance. “It is regretted that the CBEC has not reviewed the cases relating to service matters and filing appeals discriminatory against the orders of Central Administrative Tribunal (CAT) which favour an individual officer contrary to the policy and an officer is made to suffer endlessly,” he said. Therefore, the association has requested the finance minister to issue necessary instructions to the CBEC to examine all the appeals filed by the government in service matters in the High Courts and Supreme Court, Srivastava said.

“This will save the officers from unnecessary harassment and litigation. It will also save the litigation cost incurred by the government as well,” he said. The Indian Revenue Service (Customs and Central Excise) claims to have support of about 80,000 officers of the CBEC. The finance ministry is party to 15,646 cases pending in various courts, including five contempt cases, according to a law ministry data as on June 13, 2017.

Source : PTI

GST made 2017 most significant year for economy since Independence : 26-12-2017


The 70th year since Independence will go down in Indian history since the country switched over to the Goods and Services Tax (GST) regime, realising, thereby, the vision of a unified market in a federal system that guided the nationalist bourgeoisie in joining Mahatma Gandhis struggle to liberate India from the British. Of course, the structural reform came accompanied with pain for trade and industry caught off-guard by the rigours of new compliance procedures. Queried by corporate leaders at industry chamber Ficci’s 90th AGM here earlier this month on how GST was impacting through lower tax collections, Finance Minister Arun Jaitley put the onus on them. “It is you from industry, who have been calling for so long to bring GST… and no sooner do these initial problems in implementing a reform of such scale appear, then you want to go back to the system we’ve had for 70 years,” he said. The earlier system was a myriad of central and state taxes where the movement of goods was slowed down by products being taxed multiple times and at different rates. State level taxes replaced by the pan-India GST include state cesses and surcharges, luxury tax, state VAT, purchase tax, central sales tax, taxes on advertisements, entertainment tax, various forms of entry tax, and taxes on lotteries and betting. Central taxes replaced by GST are service tax, special additional customs duties (SAD), additional excise duties on goods of special importance, central excise, additional customs duties, excise on medicinal and toilet preparations, additional excise duties on textiles and textile products, and cesses and surcharges. The new indirect tax regime unifying the Indian market has four tax slabs of 5, 12, 18 and 28 per cent. It has a novel feature whereby goods and services providers get the benefit of input tax credit for the goods used, effectively making the real incidence of taxation lower than the headline taxation rate. The second half of the year saw a radical reworking of the items within the four-slab tax structure by the supremely federal institution of the GST Council, whereby all but 50 of over 1,200 items remained in the highest 28 per cent bracket. Those retained included luxury and sin items, the cess on which goes to fund the compensation to states for the loss of revenue arising from implementing GST.

With the Council’s decisions last month, GST has been cut on a host of consumer items such as chocolates, chewing gum, shampoos, deodorants, shoe polish, detergents, nutrition drinks, marble and cosmetics. Luxury goods such as washing machines and air conditioners have been retained at 28 per cent. Eating out has become cheaper as all restaurants outside high-end hotels charging over Rs 7,500 per room will uniformly levy GST of five per cent. The facility of input tax credit for restaurants has, however, been withdrawn as they had not passed on this benefit to consumers. Petroleum, including oil and gas, is a strategic sector that is still not under GST, while the industry has been pushing for its inclusion so as not to be deprived of the benefits of input credit. Including real estate is another matter pending before the GST Council. On the functioning of the Council, Jaitley who is its head, had this remarkable insight about the way in which it had effected such large-scale rationalisation of the item rates in a short span of “3-4 months”. “Everything has been achieved by consensus in the best spirit of cooperative federalism. There has been no politics, even from states which are controlled by opposition parties,” he told a gathering of industry leaders here.

The other side of GST was revealed through what the International Monetary Fund described as “short-term disruptions”. With businesses going into a “de-stocking” mode on inventories in anticipation of the GST rollout from July and sluggish manufacturing growth, among other factors, pulled down growth in the Indian economy during the first quarter of this fiscal to 5.7 per cent, clocking the lowest under the Narendra Modi dispensation. Breaking a five-quarter slump, a rise in manufacturing sector output, however, pushed the growth rate higher to 6.3 per cent during the second quarter (July-September) of 2017-18. Besides, technical glitches appearing on the GST Network portal, often unable to take the load of last-minute rush to file returns, marred the filing of returns by traders, forcing the government to postpone filing deadlines several times. The glitches also led to export refunds piling up, resulting in a grave situation of cash crunch for exporters, whose working capital was getting blocked.

 In the final analysis, the GST balance sheet is provided by Gita Gopinath, Professor of International Studies and Economies at Harvard University, who is also the economic adviser to the Kerala Chief Minister. “GST is a real reform. It is a way of formalising the economy. It is a very effective way of ensuring tax compliance, making it harder to earn black money. I mean, nothing ever goes away completely, but it just makes it harder to make it happen,” Gopinath said in Mumbai earlier this month. The icing on the cake came with the World Bank announcing earlier this year that India had jumped 30 places in its Ease of Doing Business rankings to get among the top 100 countries on the list. Though reforms in India’s direct tax regime figured among the parameters considered in evaluation, GST had not been taken into account by the multilateral agency since their cut-off date was June 30.

Source : Financial Express

Government spending, deficit in focus ahead of budget : 26-12-2017


As the government gets down to the business of drawing up the budget, there is a growing view among some influential sections that there should not be any spending cut on key programmes to meet the fiscal deficit target.

The reasoning is that fiscal slippage, if any, is likely to be from the revenue side because of the disruption caused by the imposition of the goods and services tax (GST) and not reckless spending. The budget is likely to be presented early February.

Cutting spending on investment to meet the deficit target, in such a situation, would stall economic recovery, an official privy to discussions told ET. Ahigher deficit would also allow the government to recalibrate the fiscal consolidation road map to create room to step up allocations in FY19 for the farm sector to address agrarian stress.

“In a year of twin shocks (GST and demonetisation), should we not be more accommodating to allow the economy some support?” said a senior official, making a case against expenditure cuts in flagship programmes of the government as well as key social welfare schemes.

Fiscal Slippage Concerns 

The NK Singh committee has allowed the government fiscal leverage in a year of “far-reaching structural reforms in the economy with unanticipated fiscal implications.” GST would qualify as such a reform. ET had earlier reported that North Block was keen on sticking to the fiscal deficit target of 3.2% of GDP for the year.

Finance minister Arun Jaitley has so far indicated that his ministry will meet the target. “The idea is that the glide path of the fiscal deficit should always be maintained so that our borrowings keep coming down,” he said in the Lok Sabha last week

The government has clarified that higher-than-trend fiscal deficit in the April-November period is because the early budget announcement— in the beginning of February rather than at its end — allowed a quick start to spending and that higher revenues toward the end of the year will correct the situation.

The fiscal deficit touched 96.1% of the budget estimate at the end of October, much higher than 79.3% in the year earlier. The government budgeted spending of Rs 21.5 lakh crore in FY18. It had spent Rs 12.9 lakh crore by October with a fiscal deficit of Rs 5.25 lakh crore against a full-year fiscal deficit budget of Rs 5.47 lakh crore.

Fiscal slippage concerns have persisted, giving rise to a debate over the course of action.

Bond yields have already hardened in anticipation of a higher fiscal deficit. The benchmark 10-year bond yield rose to 7.21% in December 2017 from a low of 6.41% in July 2017 even after a 25 basis point reduction in the repo rate in this period. A basis point is 0.01 percentage point.

“Fiscal slippage concerns linger on,” Reserve Bank of India Governor Urjit Patel said last week, warning it would have implications for inflation.

While the Prime Minster’s economic advisory council has also favoured fiscal consolidation, not everyone is concerned about slippage, if any. The Federation of Indian Chambers of Commerce and Industry (Ficci) has called for a relaxation in the fiscal deficit, suggesting a 3.5% target for FY18. Niti Aayog vice-chairman Rajiv Kumar also favours a higher fiscal deficit if the room is used for capital investment.

1

“Public spending or fiscal deficit has to be a countercyclical tool and if you agree to that, if you accept that borrowing for productivity enhancement is not the same thing as borrowing for booze, then why should you get hung up on it? Didn’t the Europeans do this after 2008? So why are we so self-flagellating?” he told ET in an interview last week.

The finance ministry has said it will review the fiscal situation in December.

A higher fiscal deficit this year would give the government room to reset the fiscal consolidation roadmap. This would become the starting point for the new glide path towards more sustainable debt levels suggested by the NK Singh committee. This will give the government room to step up spending for the rural and farm sector to address the agrarian stress in its last full budget before the next general election in 2019, seen as crucial following the BJP’s showing in the Gujarat election in  these areas.

Growth impact

Almost nine months into FY18 there is worry that government revenue could fall short of target and the finance ministry would need to rein in spending to stay within the target.

The key concern is on account of a shortfall in indirect taxes because of lower GST collections in the initial months as businesses get used to the new regime and a shortfall in non-tax revenues as about Rs 50,000 crore budgeted from telecom spectrum may not materialise.

In addition, the government has budgeted additional cash spending of Rs 44,500 through two supplementary demand for grants in the current fiscal.

Not cutting spending to meet the fiscal deficit target will allow government spending to provide support to the economy while it recovers from GST and demonetisation. GDP growth recovered to 6.3% in the July-September quarter from a three-year low of 5.7% in the preceding quarter.

Lower GDP growth would magnify the cuts needed to stay within the budget if revenues fall short of target. In the first half of the fiscal, nominal GDP growth, which is used to calculate the fiscal deficit, was 9.3% against 11.75% growth assumed in the budget. “In case the target of 3.2% of GDP is maintained, expenditure will need to be compressed further in 2H (second half) FY18… raising downside risks to growth,” DBS said in a report earlier this month.

The downside

The government has built up fiscal credibility since it came to power and macroeconomic stabilisation has yielded rich dividends. Inflation and the current account deficit are within comfort zones and foreign investors have endorsed the policies. A fiscal slippage would be seen negatively by foreign investors.

Moody’s recently raised India’s sovereign rating one notch after a gap of nearly 14 years. But one of the officials cited above said assessments by foreign agencies also take into account the country’s potential to grow besides the fiscal situation.

Source : Business Standard

Government introduces bill on GST compensation cess in Lok Sabha : 23-12-2017


The government today introduced a bill in the Lok Sabha that would replace an ordinance wherein tax rates on various motor vehicles were hiked to a maximum of 25 per cent under the Goods and Services Tax (GST).

Finance Minister Arun Jaitley introduced the GST (Compensation to States) Amendment Bill, 2017.

An ordinance to hike the GST cess on a range of cars from mid-size to hybrid variants to luxury ones to 25 per cent was issued in September. The bill would replace the ordinance.

Explaining the details, Jaitley in the bill’s Statement of Objects and Reasons said the GST Council meeting on August 5 had recommended a 10 per cent increase in the maximum rate at which compensation cess can be collected on certain motor vehicles.

The tax rate was to increase to 25 per cent from 15 per cent.

In this regard, the maximum rates were to be increased immediately by amending the GST (Compensation to States) Act, 2017 before the next meeting of the GST Council that was scheduled for September 9. This was to ensure that the “cushion in maximum rate for compensation cess for such motor vehicles was available at the said meeting,” the statement said.

As Parliament was not in session at that time and considering the extraordinary urgency of the situation, the ordinance was promulgated on September 2, it added

According to the statement, the Act was enacted with a view to provide for compensation to the states for loss of revenue arising on account of implementation of the GST.

Last week, the Cabinet had cleared the bill to replace the ordinance.

Source : Financial Express

Consensus will never emerge on petrol under GST: ASSOCHAM : 23-12-2017


Consensus with states on inclusion of petroleum products in the ambit of GST would never emerge as they and the Centre are over-dependent on the sector for revenue collection, says industry body ASSOCHAM.

Finance Minister Arun Jaitley told Rajya Sabha on December 19 that the Centre favoured bringing them under GST but it would want a consensus with the states before taking such a step.

ASSOCHAM (The Associated Chambers of Commerce and Industry of India) today said it is always desirable for petroleum to be brought under the GST for effecting overall efficiency in the fuel value chain and reducing tax burden on consumers.

“However, realistically speaking both the Centre and States have been over-depending on petroleum sector for their revenue collection. Collectively, they impose over 100-130 per cent taxes on petrol and diesel”, it said.

“So, while it is desirable, the resistance is expected from both Centre and States, whatever they may say; after all, are they willing to sacrifice revenue? and if yes, what alternative sources do they have for the revenue?

“The maximum GST slab is 28 per cent and even if some cess is allowed over and above, it can go up to 50 per cent; still consumers would gain. Big point is: governments would not agree easily!”, ASSOCHAM Secretary General D S Rawat said.

It is because of the revenue collection that consensus would never emerge. In fact, not even one state would be willing to forego revenue; same is true about the Centre, he argued.

“Is the Centre willing to forego revenue?, why then blame states alone?. It appears that at this point of time, the consensus, among the states, would be to postpone it. But, the consumer pressure must continue so that going forward, over-dependence of exchequer on petroleum is reduced”, Rawat added.

 

Source : Business Standard

 

Demonetisation, GST will bring long-term benefits: IMF : 23-12-2017


The disruptive impact of demonetisation announced last year is a temporary phenomenon and the scrapping of the high-value currency would bring “permanent and substantial benefits”, according to the International Monetary Fund (IMF).

In an interview to CNBC TV18, IMF Economic Counsellor and Director of Research Maurice Obstfeld said that although demonetisation, as well as implementation of the Goods and Services tax (GST) caused short-term disruptions, both measures would bring long-term benefits.

“The costs of demonetisation are largely temporary and we see permanent and substantial benefits accruing from the move,” Obstfeld said.

“Both demonetisation and the GST introduction will bring long-term benefits, though these caused short-term disruption,” he said.

The IMF Chief Economist described GST as a “work in progress” to which the Indian economy is “gradually adjusting”.

With businesses going into a “destocking” mode on inventories in anticipation of the GST rollout from July 1, sluggish manufacturing growth, among other factors, pulled down growth in the Indian economy during the first quarter of this fiscal to 5.7 per cent, clocking the lowest GDP growth rate under the Narendra Modi dispensation.

Breaking a five-quarter slump, however, a rise in manufacturing sector output pushed the growth rate higher to 6.3 per cent during the second quarter (July-September) of 2017-18.

Obstfeld also listed some of the reforms being undertaken by the Indian government that have impressed the multilateral agencies.

“The government has taken important first steps like bringing in the Insolvency and Bankruptcy Code, which helped India improve its position substantially in the World Bank’s ‘Ease of Doing Business’ rankings,” he said.

He also mentioned the recent recapitalisation plan for state-run banks announced by the government and the Asset Quality Review of commercial banks earlier ordered by the Reserve Bank of India (RBI).

Both measures are designed to address the issue of massive non-performing assets (NPAs), or bad loans, accumulated in the Indian banking system that have crossed a staggering Rs 8.5 lakh crore.

In a report released in Washington on Thursday, the IMF cautioned that the high volume of NPAs and the slow pace of mending corporate balance sheets are holding back investment and growth in India even though structural reforms have helped the nation record stronger growth.

The IMF’s Financial System Stability Assessment (FSSA) for India said that overall “India’s key banks appear resilient, but the system is subject to considerable vulnerabilities”.

“The financial sector is facing considerable challenges, and economic growth has recently slowed down,” the report said.

“High non-performing assets and slow deleveraging and repair of corporate balance sheets are testing the resilience of the banking system, and holding back investment and growth.”

“Stress tests show that… a group of public sector banks are highly vulnerable to further declines in asset quality and higher provisioning needs,” it added.

Source : Economic Times

Notification No.100/2017 22-12-2017


MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 22nd December 2017

S.O. 4011(E).—In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, the ‘Himachal Pradesh Computerization of Police Society’, a body established by the Government of Himachal Pradesh, in respect of the following specified income arising to that body, namely:-

(a) amount received in the form of Grant-in-aid; and

(b) interest accrued on CCTNS fund.

2. This notification shall be effective subject to the conditions that Himachal Pradesh Computerization of Police Society,-

(a) shall not engage in any commercial activity;

(b) activities and the nature of the specified income shall remain unchanged throughout the financial years; and

(c) shall file return of income in accordance with the provision of clause (g) of sub-section (4C) of section 139 of the Income-tax Act, 1961.

3. This notification shall be deemed to have been applied for the financial Years 2013-2014, 2014- 2015, 2015-2016, 2016-2017 and shall apply with respect to the financial year 2017-2018.

                                                                                        [Notification No. 100 /2017, F.No.196/7/2015-ITA-I]                                                               VINAY SHEEL GAUTAM, Under Secy.

Explanatory Memorandum:- It is certified that no person is being adversely affected by giving retrospective effect to this notification.

Notification No.99/2017 22-12-2017


MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 22nd December 2017

 

S.O. 4010(E).—In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, the SEEPZ Special Economic Zone Authority, an authority constituted under the Special Economic Zone Act, 2005 by the Government of India, in respect of the following specified income arising to that authority, namely:—

(a) lease rentals/Service charges from various units operating in the SEZ at rates prescribed by the SEZ Authority;

(b) income by way of Gate Pass Entry Fees, Fine & Penalties from various units and other misc. income (Sale of garbage); and

(c) interest on Bank Deposits and Investments.

2. This notification shall be effective subject to the conditions that SEEPZ Special Economic Zone Authority:—

(a) shall not engage in any commercial activity;

(b) its activities and the nature of the specified income shall remain unchanged throughout the financial years; and

(c) it files return of income in accordance with the provision of clause (g) of sub-section (4C) of section 139 of the Income-tax Act, 1961.

3. This notification shall be deemed to have been applied for the financial Years 2015-2016, 2016-2017 and shall apply with respect to the financial Years 2017-2018, 2018-2019 & 2019-2020.

[Notification No. 99/2017/F. No. 300196/5/2016-ITA-I]

VINAY SHEEL GAUTAM, Under Secy.

Explanatory Memorandum : It is certified that no person is being adversely affected by giving retrospective effect to this notification.

 

7th Pay Commission blamed for this big negative impact by Arun Jaitley : 22-12-2017


Finance Minister Arun Jaitley has said that higher inflation last month was due to the 7th Pay Commission pay-out and the higher oil prices, CNBC-TV18 reported on Thursday. He also said that the Foreign Exchange Reserve was high and the current account deficit (CAD) was within limits.

 Similar views were shared by Reserve Bank of India governor Urjit Patel. He recently said that India’s market is stable despite geopolitical uncertainties and the current account deficits are also within the sustainable limit. However, at the last meeting of the monetary policy committee (MPC), he added that the recent upturn in crude oil prices has emerged as a cause of concern.

The Retail Inflation for November surged to a 15-month high at 4.88%, breaching the 4% target set by the RBI. On December 6, given the concern over rising inflation, the central bank kept the repo rate unchanged at 6%, and stance neutral, saying that its decision will depend on data.

The rural inflation also rose to 4.79% from 3.36% in October, while the urban inflation at 4.9% rose to 4.9% from 3.81% in October. According to economists, rising commodity prices globally and a new pay revision for government employees may have led to the rise in inflation. November’s heavy rains “created lots of damage” for perishable fruit and vegetable crops, said Rupa Rege Nitsure, group chief economist at Larsen & Toubro. “We have seen that translated into price rises for onions, tomatoes and other perishable commodities”.

Source : Financial Express

No study on effects of demonetisation on realty prices: Government : 22-12-2017


The Housing and Urban Affairs Ministry has not carried out any study to ascertain whether demonetisation brought down realty prices, the Rajya Sabha was informed today.

In a written reply, Union minister Hardeep Singh said that there was also no study to find out whether launch of new projects dipped after the announcement of demonetisation.

To a query whether it is a fact that high currency note ban had helped in reducing real estate prices by 5-10 per cent, Puri said, “No such study has been carried out by the Ministry of Housing and Urban Affairs.”

The comments assume significance in the backdrop of media reports stating that the real estate sector witnessed a drop in prices by 5-10 per cent post-demonetisation.

It was also reported that launch of new projects since January has been less across top 10 cities including Noida, Pune, Mumbai, Chennai, Hyderabad, Bengaluru and Ahmedabad.

To another query, Puri said there was a dip in Delhi metro ridership in October which could not be solely attributed to increase in fares but depends on multiple factors like vacation, season and festivals.

Source : Business Standard

Shrinking tax kitty wakes Modi govt up with a jolt, crackdown on GST evaders coming : 22-12-2017


A slowdown in tax collections is pushing Prime Minister Narendra Modi’s administration to be more vigilant on compliance.

Collections under the new goods and services tax dipped to Rs 83,300 crore ($13 billion) in October from about Rs 92,000 crore the previous month, and the central bank is wary of a further dip after the government lowered rates on several items to win public support before state elections. The weakness in GST collections following a July 1 roll out has pushed  down overall revenue growth.

In response, India’s tax office this month asked officials to compare payments made by the top 100 assesses in each of their zones to understand variations in pre- and post-GST payments, according to an internal letter seen by Bloomberg News. “For the purposes of collecting this data, the officers may contact the assesses personally and/or visit their premises,” the note said. Finance Ministry spokesman DS Malik declined to comment.

Reports of evasion are already coming in with the GST being decried as technologically tedious and expensive. Lower revenue risks worsening Asia’s widest budget deficit and extending the region’s steepest jump in bond yields this quarter. Constant tinkering with the GST also makes it harder for the government to prepare its budget for the year starting April 1.

graph1
“It would be challenging to estimate the projected collections for the next year based on the actual collections for the past four months as these months have seen a lot of changes in rates and processes,” MS Mani, partner at Deloitte India, said in an interview this week. “Any deficiency in the collections could add to the pressure on tax authorities to achieve the targets.” 
India’s budget deficit for the year through March 31 will probably be 3.4 per cent of gross domestic product, wider than the government’s 3.2 per cent target, according to the median estimate in a Bloomberg survey. 
The permission for tax officials to visit individuals personally goes against a recent attempt by the government to boost the use of technology in tax assessments and make the process less invasive. 
India has seven taxpayers for every 100 voters, ranking 13th among 18 of its democratic Group of 20 peers, according to the Economic Survey compiled by Modi’s top economic adviser. The report called for greater compliance through non-punitive means and urged that the effort to collect taxes doesn’t lead to harassment by officials. 
“In the past, revenue pressures on tax officials have led to increased scrutiny and investigations of tax payers,” Deloitte’s Mani said. “As the GST legislation is in its infancy and needs to be understood by all taxpayers, it is hoped that such actions would be kept in abeyance till the law settles down.” 
Source : Economic Times

Companies Amendment Bill passed: Creditors of insolvent cos can get shares at discount : 21-12-2017


The Companies Amendment Bill passed by Parliament has brought relief for creditors involved in insolvency proceedings allowing them to acquire shares of insolvent company at a discounted price.

The Section 53 of the amended Companies Bill states, “a company may issue shares at a discount to its creditors when its debt is converted into shares in pursuance of any statutory resolution plan or debt restructuring scheme.” Earlier provision under Section 53 of Companies Act 2013 said, “Any share issued by a company at a discounted price shall be void.”

The amendments to Section 53 are expected to bring down the turnaround time for the entire restructuring process. “The amendment would provide a flexibility to creditors to convert their debt into shares issued at a discount which was earlier prohibited. This amendment would address the concern that when a company goes into insolvency its equity value is eroded and it is not a viable proposition to convert loan into shares at face value,” said Anshul Jain, partner, Luthra & Luthra Law Offices.

A Big Relief
Once the company issues the shares at a discount, the creditors would become the owners and take control of its affairs. “While this is a fairly significant change, we will have to see its acceptance and implementation by the stakeholders, and most importantly, assess whether it will give adequate returns to the creditors in the long run,” said Mukul Shrivastava, partner, EY India. The Companies Amendment Bill 2017 was passed by Parliament on Tuesday bringing about stronger corporate governance  standards with simpler provisions and stringent penalties for non-filing annual returns. The Bill was passed in the Lok Sabha during the monsoon session in July 2017. 
“The new provision will help the creditors who were not inclined to buy at a higher price… It could not be done legally earlier,” Ankit Singhi, partner, Corporate Professionals said. Major changes in the bill also include simplification of the private placement process and rationalisation of provisions related to loans to directors. The bill has replaced the requirement of government approval for managerial remuneration above prescribed limits by approval through special resolution of shareholders.
Source : Financial Express

Cabinet approves Consumer Protection Bill : 21-12-2017


Focused on faster redressal of consumer grievances and to ensure stringent action against unfair trade practices, the Cabinet approved the introduction of the Consumer Protection Bill, 2017, to amend the Consumer Protection Act, 1986, sources said .

The Bill seeks to enlarge the scope of the existing Act and proposes stricter actions against misleading advertisements and food adulteration.

The amended Act will provide for the setting up of a Central Consumer Protection Authority, which will make way for faster redressal of consumer complaints. It will also take up class-action cases, raised by a group of consumers with the same set of complaints .

“Consumer empowerment is one of the main components of the new Act. Misleading ads will be tackled even more strictly,” minister of food, consumer affairs and public distribution Ram Vilas Paswan had said in October. The new law will also provide for proper definition and scope for ecommerce, and the rules regulating the sector.

Source : Times of India

Financial disruptions of 2017 and takeaways for 2018 : 21-12-2017


From introduction of penalty for late filing of income tax returns (ITR), increasing use of Aadhaar, to the decline in interest rates, there were many events that disrupted the working of our personal finances in 2017. Here’s a flashback and pointers to help you incorporate these changes in your financial plans for 2018.

1. Income tax changes

In the Budget 2017, the government slashed the tax rate for individuals in the lowest income tax slab – Rs 2.5 lakh to Rs 5 lakh -to 5% from 10%. Further, the rebate under Section 87A of the Income-tax Act, 1961 was reduced to Rs 2,500 from the Rs 5,000 for those earning between Rs 2.5 lakh and Rs 3.5 lakh. Earlier, those earning up to Rs 5 lakh were eligible for this rebate.

It was also announced that those earning between Rs 50 lakh and Rs 1 crore will have to pay a surcharge of 10 percent on the total income tax payable by them.

Takeaway for 2018: Remember to calculate your taxes using the new tax structure and rebate changes when filing your return for FY2017-18 in 2018.

2. Penalty for filing ITR after the due date

In the budget, the government had also introduced a maximum penalty of Rs. 10,000 for delayed filing of ITR by individuals. This fee is applicable with effect from April 1, 2018. As per the new rules, the fee to be levied is based on the time period of delay which is as follows:

i) A fee of Rs 5,000 in case returns are filed after the due date, but before the December 31 of the relevant assessment year or

(ii) Rs. 10,000 in case it is filed after December 31 of the relevant assessment year.

Takeaway for 2018: Earlier there was no specific penalty for delayed filing of income tax return (the penalty was for late payment of taxes). So, now that there is a penalty for returns filed beyond the due date, file your ITR for FY2017-18 on time and save yourself the penalty payment.

3. New classification of mutual fund schemes

The Securities and Exchange Board of India (Sebi) asked fund houses to classify their schemes into clearly defined categories. For long, there were no clear guidelines to categorise mutual funds. Since fund houses launched multiple schemes under each category, the comparison and selection was a taxing task for many investors.

“It is desirable that different schemes launched by a Mutual Fund are clearly distinct in terms of asset allocation, investment strategy etc. Further, there is a need to bring in uniformity in the characteristics of similar type of schemes launched by different Mutual Funds. This would ensure that an investor of Mutual Funds is able to evaluate the different options available, before taking an informed decision to invest in a scheme,” the Sebi circular said.

As per the Sebi directive, the schemes would be broadly classified in the following groups:

a. Equity schemes
b. Debt schemes
c. Hybrid schemes
d. Solution-oriented schemes
e. Other schemes

With the new classification norms and distinct categorisation, investors will have a better understanding of the scheme and make an informed decision.

Takeaway for 2018: You will know what exactly you are investing in and it will make selecting a fund easier. If a scheme says it is a large-cap fund, it will have to invest in only large-cap stocks and not a selection of large-, mid-, and small-cap stocks (in other words, a multi-cap scheme). Asset management companies will have to align their schemes to comply with the directive and make sure that they are true to their mandates. We could see mergers of schemes if the fund house has similar schemes.

4. Cut in small savings schemes interest rate

The interest rate on small savings schemes like National Savings Certificate, Sukanya Samriddhi Yojana, Kisan Vikas Patra (KVP), and Public Provident Fund (PPF) went down over the last one year, albeit marginally. The interest rate on the post office savings account was retained at 4 per cent. Despite the decline in rate of interest, these small savings schemes haven’t waned in popularity mainly because the interest offered  on them is still higher than what is being offered by bank fixed deposits.
Not only do these schemes offer competitive rates of interest in comparison to other fixed income instruments such as bank fixed deposits, some even come with tax benefits under Section 80C of the income tax Act.

SSS
Takeaway for 2018: Despite reduction in interest rates, small saving schemes still offer interest rates higher than most comparably safe bank fixed deposits. So keep these on your radar when looking for safe fixed income investment options. 
5. GST on financial services
The implementation of the new indirect tax regime has undoubtedly impacted your pocket, especially when it comes to financial services. From the previous 15 percent rate, banking and insurance services will attract 18 percent GST. The 3 percent hike in the tax rate has made these financial services dearer. 
Although service tax on mutual fund returns has increased 3 percent, the impact on returns will be marginal. This is because GST is levied on a scheme’s total expense ratio (TER). Expense ratio is the measure of the cost incurred by an investment company to operate its mutual fund. 
Now, real estate is still not a part of GST, but construction activities including residential structures will attract GST of 12 percent. This makes under-construction projects costlier than ready-to-move-in properties. As per the Central Board of Excise and Customs, “Sale of building is an activity or consideration which is neither a supply of goods nor a supply of services.” This makes the ready-to-move properties lucrative compared with under-construction properties. 
Takeaway for 2018: Formal sector services are getting expensive due to higher GST and it looks like this scenario is here to stay. So make sure you try to get the maximum discount on the service and avoid penal charges for late payment etc., as this will reduce the tax payable on the service charge correspondingly. 
6. Cut in interest rates on savings account
As a result of demonetisation, banks witnessed a surge in deposits. Reportedly 85 per cent of the currency in circulation was deposited back in banks. Going by simple demand-supply economics, this shouldn’t be surprising as surplus liquidity in the banking system was at peak post demonetisation. 
In the recent past, a number of public and private sector banks reduced their interest rate on savings accounts from 4 per cent to 3.5 per cent. State Bank of India reduced the interest rate on its savings bank accounts, it cited decline in inflation and high real interest rates as the main reasons. Besides, the revision in rates of savings accounts has enabled banks to maintain the MCLR for loans at existing rates. 
Although some banks might be offering higher interest rates, they do come with caveats. 
Takeaway for 2018 : Don’t let money idle in savings accounts – you are getting even less interest than before. Invest it instead. 
7. Pension scheme with 8 percent guaranteed returns launched:
Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a pension scheme announced by the government in May 2017 exclusively for senior citizens aged 60 years and above. The scheme is available till May 3, 2018 and can be purchased offline as well as online through Life Insurance Corporation (LIC) of India. It provides an assured return of 8 percent per annum. payable monthly for 10 years. Pension is payable  at the end of each period, during the policy term of 10 years, as per the frequency of monthly/ quarterly/ half-yearly/ yearly as chosen by the pensioner at the time of purchase. Besides, the scheme is exempted from GST. 
Minimum / Maximum Purchase Price and Pension Amount:

PMVVY-1
Takeaway for 2018 : As most bank FDs are currently offering lower returns, this scheme, a new entrant in the arena of government schemes in 2017, would appear of interest. However, it offers little liquidity. 
8. Affordable housing push
In a bid to push affordable housing, the government extended the window to avail the credit linked subsidy scheme (CLSS) on home loans under the Pradhan Mantri Awas Yojana (PMAY) by 15 months till March 2019. Besides, increase in the carpet area of houses eligible for interest subsidy under the scheme for the Middle Income Group (MIG) under PMAY (Urban) was also approved this year. The move is expected to enable the middle-income category of individuals to have a wider choice in developers’ projects. 
Takeaway for 2018: The downslide in prices in some real estate areas and stagnancy of the same in others in 2017 has sharply reduced the attractiveness of property as an investment for people looking to make quick gains. The focus has shifted to affordable housing because of the above mentioned scheme and also because affordable housing is likely to be more saleable in the current scenario. So this is the area to watch out for in real estate in the new year. 
9. Linking Aadhaar with PAN, bank accounts and various financial services made mandatory
In a recent interim order, the Supreme Court said that it has accepted the government’s suggestion to extend the deadline to link it with various documents and accounts by 3 months to March 31, 2018. Besides, the deadline for linking mobile phones with Aadhaar was also extended to this date from February 6. 
Takeaway for 2018: While the court case over whether Aadhaar infringes the right to privacy still goes on, for all practical purposes it looks like it’s here to stay. So if you want a smooth financial life, link your Aadhaar to all that is required by the government if you have not already done so. 
Source : Economic Times

Notification No.GSR 1526(E) [F.No.1/40/2013-CL-V] Dated 20-12-2017


COMPANIES (COST RECORDS AND AUDIT) SECOND AMENDMENT RULES, 2017 – AMENDMENT IN RULES 2, 3 AND FORM CRA-2, FORM CRA-3 AND FORM CRA-4

NOTIFICATION NO.GSR 1526(E) [F.NO.1/40/2013-CL-V]DATED 20-12-2017

In exercise of the powers conferred by sub-sections (1) and (2) of section 469 and section 148 of the Companies Act, 2013 (18 of 2013) (hereinafter referred as the Act), the Central Government hereby makes the following rules further to amend the Companies (cost records and audit) Rules, 2014, namely:—

1. These rules may be called the Companies (cost records and audit) Second Amendment Rules, 2017.

2. In the Companies (cost records and audit) Rules, 2014 (hereinafter referred to as the principal rules), in rule 2, for clause (aa) the following clause shall be substituted and shall be deemed to have been substituted with effect from the 1st day of July, 2017*, namely:—

(aa) “Customs Tariff Act Heading” means the heading as referred to in the Additional Notes in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975).

3. In the principal rules, in rule 3, for the words “Central Excise Tariff Act Heading”, occurring at both the places, the words “Customs Tariff Act Heading” shall be substituted and shall be deemed to have been substituted with effect from the 1st day of July, 2017.

4. In the principal rules, in the Annexure, in Form CRA-2, Form CRA-3 and Form CRA-4, for the words “CETA Heading”, wherever it occurs, the words “CTA Heading” shall be substituted and shall be deemed to have been substituted with effect from the 1st day of July, 2017.

Why CAG has pulled up Narendra Modi government : 20-12-2017


The Comptroller and Auditor General (CAG) has pulled up the government for not even identifying the beneficiary schemes even as it collected Rs 83,497 crore by way of secondary and higher education cess between FY07 and FY17. The cess on taxes was introduced in the Finance Act, 2007 to fulfil the commitment of secondary and higher education. Accruals from the cess were supposed to be utilised in the ongoing schemes for secondary and higher education. “Consequently, the commitment of furthering secondary and higher education cess as envisaged in the Finance Act was not transparently ascertainable,” CAG told Parliament on Tuesday.

The matter of non-creation of a reserve fund in public account and non-identification of schemes was raised in the previous years’ report but the trend is persistent, it added. The top government auditor also expressed concern that even though Rs 7,885 crore was collected through the research and development cess during FY97 to FY17, only Rs 609 crore (7.73%) was utilised towards the objectives of levying the said cess.

It also pointed out in its report that 14 regulatory bodies and autonomous bodies including the Securities and Exchange Board of India have retained funds generated through fee charges, unspent grants, interests, receipt of license fees, corpus fund, etc aggregating to Rs 6,064 crore at the end of March 2017, outside the government account. It sought corrective action in this regard. In its report titled Union Government Accounts for 2016-17, the statutory regulator said the Centre’s fiscal deficit and revenue deficit stood at 3.54% and 2.09% of GDP in FY17, against the Controller General of Accounts’ estimate of 3.51% and 2.02%, respectively.

Source : Financial Express

Full I-T e-assessment from next year; CBDT forms committee : 20-12-2017


The government is set to roll out a pan-India “faceless and nameless” e-assessment procedure for income tax payers from 2018 with the CBDT today constituting a high-level committee to prepare a quick roadmap for the implementation of this ambitious proposal.

The Central Board of Direct Taxes (CBDT), the policy- making body for the Income Tax Department, notified a nine- member committee–headed by a Principal Chief Commissioner rank officer — and has set for it a deadline of February 28, 2018, for submitting its report.

“The deadline of February end to the committee is an indication that the government and the CBDT want to usher in this new regime from the first half of the new year,” a senior tax officer privy to the development said .

The committee is being constituted as the “department is embarking upon the concept of a faceless and nameless e- assessment procedure”, the CBDT order, issued late evening, said.

The CBDT has been running a pilot project in a few major cities and has been testing the feasibility of implementing this new regime of tax assessment for the last few years.

The initiative was launched to reduce visits by taxpayers to I-T offices and their interface with the taxman, thereby curbing corruption.

“As such, there is an imperative need to re-deploy the available manpower in the light of the proposed e-assessment,” the CBDT order said.

The terms of reference of the committee are to propose the new deployment of manpower in view of the implementation of e-assessment; to propose modalities and stages of re- deployment of manpower from existing stations and to recommend the requirements of additional manpower and infrastructure, if any, in the light of this new initiative.

The committee will also “recommend distribution of manpower between assessment units, investigation wing and DG Systems (the technical wing of the CBDT) in view of the new areas assigned to the investigation wings in matters related to Operation Clean Money”, launched by the government to check black money post demonetisation.

A blueprint prepared by the CBDT earlier this year had said the number of income tax payers opting for paperless assessment, under the pilot project, rose by 78 per cent over the last three years.

An official CBDT statement issued at the conclusion of the two-day ‘Rajaswa Gyan Sangam’ conference (national meeting of top tax officers of the country), held here this year, had said the government wanted I-T assessing officers to “be encouraged to maximise e-assessment in a phased manner and to ensure that work be completed online so that there is complete transparency.”

Prime Minister Narendra Modi, who had inaugurated the conference, had also asked I-T employees to create an environment that instills confidence among honest taxpayers and uproots corruption .

PTI had first reported in April this year that all I-T department related proceedings would henceforth be conducted online.

A new link–e-proceeding– was recently hosted by the department on the personal login of the taxpayer on the e- filing website incometaxindiaefiling.gov.in.

The new regime of e-communication will, however, be voluntary and taxpayers can take a call on whether to conduct their dealing over the e-system or through the existing procedure of manual submissions of documents by visiting the tax office.

Once taxpayers register on the web portal, they will get a confirmation as a text message and an email on their registered mobile number and email ID, indicating success.

The functionality to conduct e-proceeding will be available for all types of notices, questionnaires and letters issued under various sections of the I-T Act, the CBDT had earlier said. PTI

Source : PTI

Notification No.98/2017 20-12-2017


MINISTRY OF FINANCE (Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 20th December, 2017

G.S.R. 1527(E).—In exercise of the powers conferred by section 282 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:—

1. (1) These rules may be called the Income –tax (25th Amendment) Rules, 2017.

(2) They shall come into force from the date of their publication in the Official Gazette.

2. In the Income-tax Rules, 1962, in rule 127, in sub-rule (2), after the proviso, the following proviso shall be inserted:-

“Provided further that where the communication cannot be delivered or transmitted to the address mentioned in item (i) to (iv) or any other address furnished by the addressee as referred to in first proviso, the communication shall be delivered or transmitted to the following address:—

(i) the address of the assessee as available with a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of the said Act); or

(ii) the address of the assessee as available with the Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898); or

(iii) the address of the assessee as available with the insurer as defined in clause (9) of section 2 of the Insurance Act, 1938 (4 of 1938); or

(iv) the address of the assessee as furnished in Form No.61 to the Director of Income-tax (Intelligence and Criminal Investigation) or to the Joint Director of Income-tax (Intelligence and Criminal Investigation) under sub-rule (1) of rule 114D; or

(v) the address of the assessee as furnished in Form No.61A under sub-rule (1) of rule 114E to the Director of Income-tax (Intelligence and Criminal Investigation) or to the Joint Director of Incometax (Intelligence and Criminal Investigation); or

(vi) the address of the assessee as available in the records of the Government; or

(vii) the address of the assessee as available in the records of a local authority as referred to in the Explanation below clause (20) of section 10 of the Act.”

                                                             [Notification No. 98/2017/F. No. 370142/36/2017-TPL]

                                                                                                        Dr T. S. MAPWAL, Under Secy.

Note : The principal rules were published vide notification number S.O. 969(E), dated the 26th March, 1962 and last amended by Income-tax (24th Amendment) Rules, 2017 vide notification number S.O. No. 3497(E), dated the 31st October, 2017.

Government directs banks & NPCI to change process of mapping Aadhaar-linked accounts for subsidies 2 Hours ago : 20-12-2017


The government has issued a notification directing banks and the national payment corporation of India (NPCI) to change the process of mapping Aadhaar-linked bank accounts for government subsidies. ET had reported on Monday that apart from overhauling its process for mapping Aadhaar-linked bank accounts to subsidy payments, government is also temporarily halted the existing provision of overwriting existing subsidy linked bank accounts with freshly mapped Aadhaar accounts.

The change comes after allegations that top telecom service provider Bharti AirtelBSE -0.23 % used the electronic know-your-customer (e-KYC) verification process mandated by the Aadhaar Act to open payments bank accounts without users being aware of this. These were then alleged to have been mapped as the accounts to which subsidy payments would be directed without their informed consent.

In a notification, the Unique Identification Authority of India (UIDAI) said, “NPCI shall allow override request pertaining to an Aadhaar holder only if it is accompanied by the name of his current bank on the APB (Aadhaar Payment Bridge) mapper and confirmation from the requesting bank that it has obtained the requisite consent of the Aadhaar holder for switching to the requesting bank on the mapper.”

It added that the NPCI shall disable the override feature on the APB mapper immediately till the new process is implemented. “Banks shall send request for mapping of a new account or overriding an existing bank account to NPCI only after taking explicit informed consent of their customers,” the notification said.

Any violation of these directions shall amount to violation of Sections 37, 40, 41, 42, and 43 of the Aadhaar Act, 2016 and Regulations framed, it added.

The cooking gas subsidy of 4.7 million customers totalling around ₹167 crore was sent to Airtel payments bank accounts in the past two months. The allegations against Bharti Airtel have led UIDAI to temporarily bar Airtel and its payments bank from using Aadhaar linking for mobile verification or opening new accounts. Meanwhile PTI reported that Airtel has deposited an interim penalty of ₹2.5 crore with the UIDAI. The company is also learnt to have given the assurance that it will return ₹190  crore that had flown into the ‘unsolicited’ payments bank accounts of over the next 24 hours and will also inform the customers that their subsidy-linked account is being switched back to the originally-chosen account.

Source : Economic Times

GST, rating upgrade major achievements of 2017, says Finance Ministry : 19-12-2017


The GST rollout, improvement in World Bank’s ease of doing business ranking and sovereign rating upgrade by Moody’s marked 2017, the finance ministry today said highlighting major accomplishments during the year. “Enhancing the quality of life remained primary goal for government when it put into implementation the recommendations of the 7th Central Pay Commission to benefit more than 48 lakh central government employees,” the ministry, headed by Arun Jaitley, said in a statement. Observing that it was a historic year for the finance ministry, it said that Moody’s Investors Service upgraded India’s local and foreign currency issuer ratings after a gap of 13 years and India moved higher by 30 notches in the World Bank’s ease of doing business ranking report. Also, there were “visible signs of financial system cleansing by the demonetisation exercise”, the ministry said. It also termed the Goods and Services Tax (GST) rollout from July 1 as a “transformational” reform which overhauled the indirect tax system by replacing multiple central and state levies. A new direct tax code has also been initiated to re-write the Income Tax Act.

Jaitley had recently said the government will exceed disinvestment target of Rs 72,500 crore for the current financial year. The government raised Rs 52,389.56 crore through disinvestment till December 15. On economic growth front, the ministry said the second quarter GDP numbers show a “reversal of the deceleration trend”. The GDP growth for July-September of 2017-18 was recorded at 6.3 per cent, a substantial increase from 5.7 percent in the first quarter.

Other significant initiatives listed out by the ministry, include institutionalisation of the Monetary Policy Committee (MPC) of the RBI, approval for the phasing out of Foreign Investment Promotion Board (FIPB) and the country’s first International Financial Services Centre (IFSC) becoming operational at the Gujarat International Finance Tec-City (GIFT), Gandhi Nagar in April 2017. The ministry also highlighted various steps taken to promote digital transactions in the country post demonetisation.

Source : Financial Express

Bill to increase maternity leave period & gratuity limit tabled in Lok Sabha : 19-12-2017


The government on Monday introduced a bill in the Lok Sabha that will allow it to notify a higher period of maternity leave and raise gratuity limit for employees.

The gratuity limit for private sector is expected to be raised to Rs 20 lakh in line with that in the government sector .

The Payment of Gratuity Act 1972 was enacted to provide for gratuity payment to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments. It is applicable to employees who have completed at least five years of continuous service in an establishment that has 10 or more persons.

gratuity620

According to the Statement of Objects and Reasons of the bill, the amendment would allow the central government to notify the maternity leave period for “female employees as deemed to be in continuous service in place of existing twelve weeks”.

The proposal comes against the backdrop of the Maternity Benefit (Amendment) Act, 2017 enhancing the maximum maternity leave period to 26 weeks.

“It is therefore proposed to empower the central government to enhance the period of existing twelve weeks to such period as may be notified by it,” the statement said.

With respect to gratuity, the amount is calculated on the basis of a formula which is 15 days of wages for each year of completed services, subject to the ceiling of `10 lakh. This limit was fixed in 2010.

After implementation of the 7th Central Pay Commission, the ceiling of gratuity amount for central government employees has been increased from Rs 10 lakh to Rs 20 lakh and is applicable since January 1. Generally, the ceiling under the Act follows that of the Pay Commission recommendations.

“Therefore, considering the inflation and wage increase even in case of employees engaged in private and public sector, the entitlement of gratuity is also required to be revised for employees who are covered under the Act,” the statement said.

Source : PTI

Gujarat scare may sow seeds of farm-focused policy in Union Budget : 19-12-2017


The BJP’s victory in the Gujarat elections, hard-fought as it was, points clearly to the possible direction of the Budget that finance minister Arun Jaitley will present in February. Given its setbacks in non-urban areas, the big focus of the ruling party will be on agriculture and the rural economy, apart from a likely boost in minimum support prices (MSP).

FM Arun Jaitley told ET the results in a handful of Gujarat districts highlighted farmers’ issues that the government will “analyse” and “address”. He said higher spending on rural India and agriculture isn’t populism. “Spending more is a necessity as far as rural India is concerned.”

The FM said the victories in Gujarat and Himachal reflected public approval of GST. “Post-GST I think this was very important because there was no place better than Gujaratto test it, because it’s a trade centre,” he said. “And, I think most of the important trading centres of Gujarat we have won. Traders and business people have been very kind to us… they voted for us.”

With Prime Minister Narendra Modi calling the result a win for reforms and development over the “poison of caste-ism”, those themes will also be sustained through upcoming state polls to 2019’s general elections.

Agriculture minister Radha Mohan Singh said the government will intensify farmer welfare schemes and ensure their effective implementation as well as the payment of MSP. “Our initiatives to double farmer income and increase production will gain more speed,” he told ET. “Some states are not doing enough for procurement and giving support prices. The Centre will keep putting pressure that farmers should get MSP.”

The February Budget will be the last full-fledged one that will be presented by FM Jaitley before the next election and is likely to be influenced by that fact. This could also mean a reset of the fiscal consolidation road map to give the government more spending room in the next fiscal.

The government is forging ahead with measures to increase farmer income such as major initiatives in dairy development, bee keeping, cold chains and food processing, agriculture minister Singh said. He agreed that rural India was distressed but said policies of the past seven decades were to blame. He insisted that farmers had backed the BJP in Gujarat.

“Farmers support us, otherwise we wouldn’t have won. There is an 8 percentage point difference in the vote share (between BJP and Congress),” he said. A senior government official said disaffection in rural areas was the only key worry for the BJP that retained power with a lower number of seats in Gujarat. Initiatives such as increasing the spread of irrigation, doubling farmers’ incomes by 2022 and higher MSP for farm produce would be intensified, he said.

Farm modernisation is critical to improving agricultural incomes, said Niti Aayog vicechairman Rajiv Kumar. “It implies that going forward we need radical and urgent steps in agriculture to double farmers’ income,” he said.

“This can happen only if they become part of entire value chain and don’t remain confined as producers of commodities. We at the Niti Aayog are focusing on it and working extensively towards replicating and scaling successful practices in this regard. With the modernisation of agriculture and its transformation to high-value products, MSPs could well become inconsequential over time. That is a surer means to addressing farmers’ distress.”

Mohini Mohan Mishra, secretary of the Bhartiya Kisan Sangh, which is affiliated with the Sangh Parivar, said the vote reflected the ire of Gujarat’s farmers. “There was anger among Gujarat farmers as they didn’t get good prices in the kharif crop or even compensation during the adverse monsoon,” he told ET.

“In 2018, the government will have to give profitable price to farmers in terms of MSP. It will also have to improve the procurement system with government to ensure it buys farmers’ crops.” BJP workers shared that concern.

“It was not PAAS (Patidar Anamat Andolan Samiti), but kapaas (cotton),” said one senior party leader, seemingly debunking the notion that caste equations played a role and pointing out that it was largely the state’s cotton growers who had voted against the party.

Patel leader Hardik Patel’s PAAS was allied with the Congress. Another top government official said rural incomes had suffered.

“Rural farmers have not got money for their produce since commodity prices have gone down,” he said. “Globally, agriculture prices are down… government could do something for the farmer community now as they have suffered… We will have to see what they can do for this sector.”

HDFC Bank chief economist Abheek Barua said, “Increase in MSP, higher allocations for MGNREGS (Mahatma Gandhi National Rural Employment Scheme), PMGSY (Pradhan Mantri Gram Sadak Yojana), loan waivers in states could dominate the economic policy landscape going forward if the rural Gujarat election results are taken as representative.” GST and demonetisation didn’t have any impact on the vote, he added.

Source : Economic Times

Three reasons why UN believes India can grow at 8% for next 20 years : 18-12-2017


After a report by United Nations predicted that India’s economy is likely to expand by 7.2 per cent in 2018 and go up further to 7.4 per cent in the following year, a senior UN official said that India can grow at 8% for the next 20 years. Last week, a UN report said, “The outlook for India remains largely positive, underpinned by robust private consumption and public investment as well as ongoing structural reforms.” Describing India’s economic condition as largely positive and “favourable to growth”, Sebastian Vergara, an Economic Affairs Officer at the United Nations, told PTI that the country needs to unleash the next set of reforms to achieve its potential. “It needs to think as to how to maintain and consolidate its growth for a very long period of time. India in our assessment has the potential to grow at eight per cent, not for a few years, but 20 years,” PTI reported Sebastian Vergara as saying. We take a look at why UN is upbeat on India’s growth prospects.

Structural Reforms

International rating agencies and economic experts in the country see a slew of positives flowing to the country from the structural reforms such as GST and demonetisation. Sebastian Vergara said that India will have to aggressively pursue its structural reforms agenda in order to maintain its growth consistently. All the three global rating agencies have lauded the Narendra Modi-led government for the ongoing reforms agenda.  “India needs to come out with the next series of reforms, for example, promote investment and improve the living condition of its population,” Sebastian Vergara said. “Moody’s believes that those (reforms) implemented to date will advance the government’s objective of improving the business climate, enhancing productivity, stimulating foreign and domestic investment, and ultimately fostering strong and sustainable growth,” Moody’s had said. Andrew Tilton, chief Asia-Pacific economist for Goldman Sachs Group Inc says that India’s economy could prove to be stronger than expected as the shock from structural reforms such as demonetisation and introduction of GST begins to fade. S&P believes that introduction of GST should spur up the economic activity in the country. “The removal of barriers to domestic trade tied to the imposition of GST should also support GDP growth,” S&P had said.

Public Investment

Economic Affairs Officer at the United Nations, Sebastian Vergara praised the Indian government’s emphasis on public investment and infrastructure projects. The government has already pumped in a lot of public investment in the ongoing financial year. After the Narendra Modi-led government announced a mega plan of Rs 2.11 lakh crore to recapitalise the stressed public sector banks last month, Moody’s, S&P and Fitch lauded the initiative will certainly the reform will help to spur up lending activity of the banks. All the three credit rating agencies have also taken note of the government’s infrastructure boost through the Bharatmala project to develop and expand approximately 40,000 km of roads at an investment of Rs 6.9 lakh crore by 2022. S&P noted in its report, “Public-sector-led infrastructure investment, notably in the road sector, will also stimulate economic activity, while private consumption will remain robust.” United nations said in its report, “In this environment, vigorous public investment in infrastructure has been critical in propping up overall investment growth.”

Strong Private Consumption

India has seen a steady rise in demand, and private consumption accounted for 57.3 % of its Nominal GDP in Sep 2017.  In an interview to CNBC TV18, Chetan Ahya, Co-Head of Global Economics & Chief Asia Economist, Morgan Stanley said recently, “The private capex joining in will bring the strength in India growth numbers that we are forecasting for it to go to 7.5 percent in March FY19.” Sebastian Vergara noted that this is one of the important factors for India’s positive economic condition. “One of this is the growth of private consumption and sound macroeconomic policies. The monetary policy, which has been able to control inflation, also has a role to play. Also fiscal policy in India, in our assessment has been prudent. At the same time, it has provided another quite support for the economic activity, PTI reported Sebastian Vergara as saying.

Source : Financial Express

What is e-way bill and who will generate it? Here is all you need to know : 18-12-2017


In a GST Council meeting held on Saturday, the decision to implement the e-way bill mechanism throughout the country by June 1 was taken, in a bid to plug gaps. Under the e-way bill system, goods worth more than ₹ 50,000 have to be pre-registered online before they can be moved from one state to another. An e-way bill is an electric-way bill for the movement of goods which can be generated on the GSTN (common portal). After the implementation of this bill, any movement of goods of more than Rs 50,000 in value cannot be made by a registered person without an e-way bill. It will be allowed to be generated or cancelled through SMS.

When an e-way is generated, a unique e-way bill number (EBN) is allocated and is available to the supplier, recipient, and the transporter. As per the schedule of implementation, the nationwide e-way bill system will be ready to be rolled out on a trial basis latest by January 16, 2018, the Finance Ministry statement said. Trade and transporters will be able to use it on a voluntary basis from January 16. Now, the bigger question is that when is an e-way bill generated?

The e-way bill is generated when there is a movement of goods:

1. In relation to the supply.
2. For reasons other than a supply (say a return).
3. Due to inward supply from an unregistered person.

In this case, a supply can either be:

1. Sale – sale of goods and payment made

2. Transfer – branch transfers for instance

3. Barter/Exchange – where the payment is by goods instead of in money

This brings us to the other part which is who generates an e-way bill? It has to be generated to or from a registered person if the movement of goods is more than Rs 50,000 in value. A registered person or transporter can choose to generate and carry e-way bill even of the value of goods is less than Rs 50,000.

 Unregistered persons or their transporters may also choose to generate an e-way bill. This means that an e-way bill can be generated by both registered and unregistered persons. However, where a supply is made by an unregistered person to a registered person, the receiver will have to ensure all the compliances are met as if they were the supplier.

Source : PTI

GST Council approves early roll-out of e-Way Bill; who will it help and how : 18-12-2017


The GST Council on Saturday approved an early roll-out of the e-Way bill for the inter-state movement of goods from February 1, 2018. The GST Council, headed by Finance Minister Arun Jaitley, held an urgent meeting via video conferencing to advance the roll-out of the bill from February 1 instead of April 1.

The need to review the rollout timeline stems from the revenue shortfall registered last month as for October it stood at Rs 83,346 crore, the lowest compared to the first three months since the implementation of GST from July 1. It was significantly down from the September figure of Rs 95,131 crore.

Here’s all you need to know about the e-Way Bill:

1. An e-way bill is required for movement of goods worth more than Rs 50,000. When goods are transported for less than 10 km within a state, the supplier or the transporter need not furnish details on the GST portal.

2. The e-way bill mechanism has been introduced in the GST regime to plug tax evasion loopholes. Tax evasion was one of the reasons cited by the government for the fall in revenue collection in October.

3. The GST Council has fixed February 1 as the compliance date for inter-state movement of goods. The e-way bill facility bill will be available for the trial run from January 15.

4. The GST Council has approved mandatory compliance of e-way bill for intra-state movement of goods from June 1. However, some states might roll out both inter-state and intra-state e-Way Bill from February 1 on a voluntary basis.

5. According to Arun Jaitley revenue collection from the GST could pick up after the e-Way bill kicks in.

6. The GST Council also reviewed the progress of readiness of hardware and software required for the introduction of nationwide e-way Bill System.

7. The e-Way bill is understood to be easing traders’ concerns by simplifying the process and easing the compliance burden.

8. Since the e-Way Bill can be generated through a smartphone and can be sent via SMS, it would make the day-to-day inter-state trading easier.

Source : Economic Times

Government to replace GST ordinance with bill : 16-12-2017


The Cabinet today approved replacing the Goods and Service Tax (Compensation to States) Ordinance by a bill, sources said. The GST (Compensation to States) Act 2017 aims to provide for compensation to the states for the loss of revenue arising on account of implementation of Goods and Service Tax Act, they said. It provides for imposition of compensation cess on intra-state/ inter-state supplies of goods and services. The GST Council in its 20th meeting held in August had recommended an increase of 10 per cent to 25 per cent in the maximum rate on certain type of motor vehicles. The Ordinance was promulgated on September 2, thus raising the maximum rates. Article 123 of the Constitution mandates that the ordinance be approved by the Parliament within six weeks of reconvening.

Accordingly, the sources added the finance ministry had sought Cabinet nod for the replacement of the ordinance by the Goods and Service Tax (Compensation to States) Bill, 2017. The government has listed the bill for introduction in its Parliament business agenda for the next week.

Source : Financial Express

Cheque bounce cases: Cabinet clears amendment to law for payment of interim compensation : 16-12-2017


The Cabinet today approved an amendment to a current law to allow for payment of an interim compensation in cheque dishonour cases with a view not to allow unscrupulous elements holding payments, pending long trial, sources said. An amendment to the Negotiable Instrument Act will allow a court to order for payment of an interim compensation to those whose cheques have bounced due to dishonouring parties, a move aimed at promoting a less cash economy. The amendment is likely to be introduced in the ongoing Winter Session of Parliament. Law Minister Ravi Shankar Prasad, while briefing the media about the Cabinet’s decisions, said amendment to Negotiable Instruments Act, 1881 has been approved. The minister, however, did not provide details about the proposed amendment. However, sources said the amendment would enable the court to order interim compensation to the payee of a cheque, a part of the cheque amount at the trial stage.

 If the drawer is acquitted, the court may direct the payee to repay the amount paid as interim compensation with interest, they said. Similarly, appellate courts would be enabled to order the appellant to deposit a part of the compensation awarded by the trial court at the time of filing appeal. The amendment has been proposed to help trade and commerce, particularly the MSME sector, and in order to increase the credibility of the cheque as a financial instrument, sources added. Dishonour of cheques due to inadequate funds in the account of the drawer of the cheque or for other reasons causes lot of distress in the trade, business and MSME sectors. Dishonouring of cheque causes incalculable loss and inconvenience to payees and “erodes the credibility” of cheques to a large extent.

The Cabinet, sources said, considered the proposal to amend the Negotiable Instruments Act to “address various representations” from the public as well as the trading community regarding the “injustice caused to payees” as a result of pendency of cheque dishonour cases. “The common themes in such representations are delay tactics by unscrupulous drawers of dishonoured cheques, relatively easy filing of appeals and obtaining stay on proceedings,” they said. A payee of a dishonoured cheque has to spend considerable time and resources in court proceedings to realise money due to him. The amendment is in line with the government’s push to make India a less cash economy.It is to be mentioned here that cheques are an integral part of the payments landscape, and form the backbone of trade and commerce, by being negotiable instruments.

Source : PTI

SC extends deadline for linking of Aadhaar to all services to March 31 : 16-12-2017


The Supreme Court said Aadhaar linking is mandatory by March 31for anyone opening a new bank account in an interim order on Friday, accepting the government’s argument in this regard. The deadline for linking mobile phones with Aadhaar was also extended to this date from February 6 earlier. Those who don’t have Aadhaar cards yet will have to produce enrolment slips.

This arrangement will prevail while the top court examines the constitutional validity of the Aadhaar Act in January. The date for linking Aadhaar with existing accounts and other services, benefits, subsidies, insurance policies, post office accounts —about 140 items in all — has been extended to March 31.

The top court had mandated electronic know-your-customer (e-KYC) validation in an earlier judgement to check the misuse of mobile phone SIM cards by terrorists and anti-social elements.

While the court had not insisted on linking mobiles with Aadhaar, only saying connections should be issued after proper verification, the government had said that Aadhaar linking was the best way of doing this.

A five-judge bench led by chief justice of India Dipak Misra said, in a short order delivered earlier on Friday, that the court will examine the validity of the Aadhaar Act in January in view of the importance of the issues involved.

“A resolution at the earliest would lead to greater clarity for citizens,” the order read out by Justice DY Chandrachud said

In another judgement delivered earlier, the court had upheld the linking of Aadhaar with the income tax permanent account number (PAN), also with a deadline of March 31. Some lawyers said the court’s interim orders would pave the way for the enrolment of more than 90% of the population by the Unique Identification Authority of India, making Aadhaar a fait accompli.

A quicker hearing would have helped, a lawyer said. “Instead, the court has allowed the state to roughshod over people’s constitutional right to privacy and the right to be left alone.” The government has said that Aadhaar is essential for ensuring that state benefits reach the deserving without being siphoned off, besides championing it as a tool for verifying identity.

Rights activists say Aadhaar has denied some of the poorest their due as the online system doesn’t work in remote areas. Privacy advocates say the system makes closely held personal information details vulnerable to hacking.

The Unique Identification Authority of India said the court order was in line with the central government’s notifications to extend the deadline to March 31for Aadhaar linkage with all schemes and services of its ministries and departments. It said the Supreme Court had accepted the statement made by Attorney General KK Venugopal in this regard.

Source : Economic Times

Government raises basic customs duty on mobile phones to encourage Make In India : 15-12-2017


India has raised basic customs duty on mobile phones to 15 per cent from 10 per cent, imposed in July as it looks to encourage Make In India.

Duty has also been raised on coloured television sets and microwave ovens to 20 per cent.

“This to encourage industry to make in India….Those already manufacturing should also remain competitive,” an official told ET.

The government had imposed customs duty on mobile phones for the first time from July One, coinciding with the roll out of goods and services tax.

A notification to this effect was issued late Thursday night.

Source : Times of India

Need to demystify black money, tax havens to masses: Experts : 15-12-2017


A social movement is needed to combat the menace of black money, experts today opined, while asserting that the concept of tax havens should be demystified to the masses so that they can exert pressure on politicians to take action.

Former professor of economics at the JNU, Arun Kumar said there have been movements to root out corruption in the past, but they could not prove sustainable.

“When it comes to dealing with black money in the country, there is this triad that needs to be broken. That triad is of corrupt politicians, corrupt businessmen and a corrupt administration. That needs to be broken.

“And, that can only be broken through social movements, like the Gujarat Nav Nirman Movement or the JP Total Revolution or the Anna Hazare anti-graft crusade in the past attempted. And, once people start rising, the political system would have to take action,” said Kumar, also the author of ‘The Black Economy in India’.

He was speaking at a panel discussion after launch of a book — ‘Thin Dividing Line: India, Mauritius and Global Illicit Financial Flows’ authored by journalist and independent researcher Paranjoy Guha Thakurta and Shinzani Jain.

Former additional solicitor general of India, Biswajit Bhattacharya, another panelist, concurred with Kumar’s views, while alleging that governments of different periods, cutting across party lines, have been “remarkably silent” over the issue of tax havens and black money stashed abroad.

“Political willpower is needed but unfortunately we haven’t seen that across different dispensations. But a social movement would exert pressure on the government to act against it,” he said.

Ranu Kayastha Bhogal, Director, Policy Research and Campaigns at Oxfam India, said, it was important that the concept of black money and tax havens be made more understandable to the common man, so that masses can actually get involved.

Thakurta also said that as an author the greatest challenge for him was to demystify the concept of black money and tax havens to ordinary people.

“Most of them hear these words on TV channels and come across in newspapers but the book also attempts to make these concepts more familiar to a layperson so that they become part of the crusade against black money rather than the fight being confined to a mere esoteric group,” he said.

The book has been published by Penguin Random House India.

Source : PTI

Modi may give India its first employment policy in the coming budget : 15-12-2017


India will soon have its first national employment policy that will outline a comprehensive road map for creation of quality jobs across sectors through economic, social and labour policy interventions. The move is aimed at addressing the crucial issue of job creation in the country.

The policy is likely to be announced in the upcoming Budget, the last full one that will be presented by this government before general elections in 2019.

The multi-pronged employment policy will include incentives for employers to create more jobs, reforms to attract enterprises and help for medium and small scale industries, which are major job providers, a senior government official told ET.

The idea is to address the twin issues of providing quality jobs to over 10 million youth being added to the country’s workforce every year and ensuring that more of these are created in the formal sector. As of now, barely 10% of the country’s 400 million workforce is in the organised sector.

“The policy will moot fiscal incentives for employers across labourintensive sectors to create more jobs as well as employees to get engaged in the organised sector as this would fetch them minimum wages and enough social security,” the official said.

Untitled-7
The plan comes amid rising pressure to speed up job creation in sync with economic growth so that incomes rise and millions of people are lifted out of poverty. 
“Economic growth would need capacity building in infrastructure, commodities, manufacturing, consumer goods and services and each of these sectors will create new jobs and upgraded jobs,” said MS Unnikrishnan, chairman of the national committee on industrial relations at the Confederation of Indian Industry. “In light of this, we need to have a flexible employment policy that protects the interest of both employer and employee. This means it has to be viable and attractive for investors and provide for a social security system for our workers.” 
The pace of job creation fell to a six-year low in 2015 with 135,000 new jobs being created compared with 421,000 in 2014 and 419,000 in 2013, according to a quarterly survey of industries by the Labour Bureau of the labour ministry. 
Another survey of households conducted by the Labour Bureau showed unemployment rate rising to a five-year high of 5% in FY16 compared with 4.9% in FY14 and 4.7% in FY13. 
About 90% of workers are engaged in informal employment, not covered by any social security law and most likely not getting the minimum wage. The policy will seek to reverse the trend. 
The government is assessing the current employment situation in the country, including the macroeconomic environment, demographic context and sectoral employment generation challenges and constraints, following which it will set targets and monitor them. 
Source : Economic Times

 

Federal Reserve chief Janet Yellen: Flat US yield curve not signaling recession risk : 14-12-2017


For all those market mavens out there fretting about the relentless flattening of the U.S. Treasury yield curve, Federal Reserve Chair Janet Yellen has a message for you: Get over it. In response to her final question at her final press conference on Wednesday, after nearly four years at the helm of the U.S. central bank, Yellen effectively dismissed the current shape of the U.S. yield curve as little more than a technical anomaly.

“I think there are good reasons to think that the relationship between the slope of the yield curve and the business cycle may have changed,” Yellen said. The yield curve – the plot of all of the yields on Treasury securities of maturities from 4 weeks to 30 years – has long been studied by economists and investors as a signal of the health of the economy.

A steep curve, when long-dated yields are substantially higher than shorter-dated ones, is emblematic of a growing economy that is likely to produce inflation, the biggest driver for yields further out the time-to-maturity curve. A flat curve, when the gap between the two ends of the curve is narrow, is typically associated with periods when central bankers are working to combat inflation by lifting shorter-term interest rates, something the Fed has done five times now even though signs of inflation are scant.

And an inverted curve, when short-term yields are higher than long-term ones, has served as a classic precursor of economic recession. In the last year, the spread between 2-year and 10-year Treasury note yields, a benchmark measure of yield-curve slope, has collapsed from around 135 basis points to 57 basis points.
Between 30-year bonds and 5-year notes , another widely tracked measure, the spread has narrowed from 127 basis points to 62.

This has given rise to a lot of chatter in financial markets that the flattening curve signals the waning days of an economic expansion that dates from mid-2009, following the Great Recession. “Now there is a strong correlation historically between yield curve inversions and recessions,” Yellen said. “But let me emphasize the correlation is not causation.” Moreover, this time it’s different, Yellen argued.

The current flatness of the yield curve is likely attributable to a lack of something called “term premium”, or essentially a premium in yield that investors of long-date bonds demand in compensation for inflation risk. With little inflation risk, today’s term premium has effectively vanished. “Right now the term premium is estimated to be quite low, close to zero, and that means that structurally, and this can be true going forward, that the yield curve is likely to be flatter than it’s been in the past,” Yellen said.

And, she said, “if the Fed were to even move to a slightly restrictive policy stance, you could see an inversion with a zero-term premium.” Yellen’s comments may lift concerns about the yield curve for now, and allow the Fed under incoming chair Jerome Powell to continue with a gradual path of rate increases. But if spreads continue to narrow it is likely to cause tensions with investors and within the Fed.

Already St. Louis Fed chair James Bullard and others have flagged the risks of a Fed-induced yield curve inversion as a reason for policymakers to move more cautiously. Bullard argued recently that the curve could invert within a year if the Fed continues to hike.”

Source : Financial Express

Service tax notices to IT firms: Concerns will remain till rules are amended, say Experts : 14-12-2017


Even though the tax department has set aside a clutch of orders sent to IT companies reversing their tax exemptions in respect of IT/IT-enabled services (IT/ITes) provided to clients abroad and also slapping service tax and penalty on them, tax experts said the “technical issue” could linger. Under the Place of Supply Rules — which were applicable to service tax earlier and hold good for the GST now — in case goods are provided to a service provider, the place of supply of the service is where the goods are located and the tax needs to be paid there. In practical terms, the problem arises for Indian IT companies providing IT/ITes to firms abroad because they often use the base software made available by the client abroad to do the repair/upgrade and subsequently export the version. Such transactions remain export of service and hence exempt from service tax/GST if the Indian firm has online access to the foreign buyer’s server. If, on the other hand, the Indian company download the base software for repair/upgrade, then it is akin to it being supplied a good by the foreign client and so the place of supply of (the services) becomes India attracting tax liability in the country.

In TCS versus State of Andhra Pradesh (2005), the Supreme Court had held that software is a “good” and hence transactions relating thereto could only be construed as sale of good.

Following reports that the indirect tax department had sent notices to dozens of IT companies, seeking return of export benefits (tax refunds) claimed by them between 2012-2016 on software provided to clients outside the country and demanding 15% service tax along with fines, the government clarified on Tuesday, “in a subsequent development, the commissioner (Appeals) set aside the orders of the lower adjudicating authority where refund was disallowed and has also upheld the orders where refund had been granted. Thus, the apprehensions expressed in those sections of the press about the negative effects on the software industry was without basis.”

The clarification was actually an outcome of the IT companies under the banner of Nasscom raising the issue of tax demand with finance minister Arun Jaitley in the pre-Budget consultations on Monday.

According to industry experts, while branded software is treated as “good” (merchandise), customised software include the service element of customisation. But the determination of customisation in this context will hinge on the contract terms. “The tax issue with regard to IT companies providing services to clients outside India is a technical, rather than a policy-related one. The solution should be fact-based, depending on the specifics of each case,” a tax expert said, requesting anonymity. Anyway, since GST also goes by the Place of Supply Rules, the issue will remain unless it is settled with legal amendments/tribunal rulings. The breather given by the finance ministry therefore doesn’t give a lasting relief to the IT firms, which had said the tax notices would make their businesses, already on wafer thin margins, non-viable.

“There are quite a few tech service providers across locations who have been struggling to get refunds and any direction to the refund authorities to consider the matter in proper technical grounds and then decide, would be greatly appreciated by business. There is a need to support exporters of services, who have in any case been grappling with increased compliance requirements, by making the refund process painless,” said MS Mani, partner GST, Deloitte India.

Source : PTI

GST Network simplifies returns filing process : 14-12-2017


The GST Network said it has introduced a functionality which simplifies the returns filing process for taxpayers.

“A new functionality has been introduced on the GST portal for ease of the taxpayers under which questions will be posed as soon as the taxpayer enters the Returns dashboard and only relevant tiles will be displayed to the taxpayers based on the answers to the questions posed,” the GST Network said in a statement.

This has been started first with GSTR-3B returns (initial sales return ), it added.

For ‘nil’ GSTR 3B returns , one-click filing has been introduced as no tile will be shown to such taxpayers. Also, a help section has been provided on each page for the convenience of the taxpayer.

“Until now, taxpayers were shown all tiles with payments when they enter the Returns dashboard but now they will be shown only those tiles which are relevant for them.

“They will be asked questions and basis their response, they will be shown only relevant tiles,” said Prakash Kumar, CEO of the Goods and Services Tax Network (GSTN).

The new facility will result in time savings for the taxpayers, said GSTN, which provides the IT backbone for the new indirect tax regime.

Source : Economic Times

With rate hike in the bag, Fed may hint at Donald Trump effect on economy : 13-12-2017


The Federal Reserve is widely expected to raise interest rates on Wednesday, but, more significantly, it may give its strongest hint yet on how the Trump administration’s tax overhaul could affect the U.S. economy. Investors will pay close attention to how the central bank aims to balance a stimulus-fueled economic boost with the ongoing weak inflation and tepid wage growth that has curbed some policymakers’ appetite for higher rates. The Fed’s policy statement and its latest economic projections are due to be released at 2 p.m. EST (1900 GMT) following the end of a two-day meeting. Fed Chair Janet Yellen is scheduled to hold a press conference half an hour later. It will be her last before her four-year term ends early next year. Her successor, Fed Governor Jerome Powell, said at his recent confirmation hearing before a Senate panel that he had “no sense of an overheating economy,” an early signal he may not want to quicken the pace of rate increases until there is evidence of an acceleration in wage growth and inflation.

The Fed has increased rates twice in 2017 and is currently expected to push through three more hikes next year.Much of Yellen’s tenure as Fed chief has been defined by a desire to leave loose monetary policy in place as long as possible in the hope that unemployment continued to decline, workers rejoined the labor force, and wages rose. Powell, who has worked closely with Yellen, said he feels that process still has room to run. Recent bullish data, highlighted by continued solid job gains and a jump in economic growth, has prompted some analysts to speculate that the central bank’s new projections will reflect an expectation of four rate increases next year. There are also signs inflation may be firming after a lengthy bout of weakness. Fed policymakers have been stymied at how price rises have remained persistently below the central bank’s 2 percent target despite labor market strength and a growing economy.

 President Donald Trump’s proposed tax plan, including a sharp reduction in the corporate income tax, could further boost the U.S. economy if it passes the Republican-controlled Congress, as appears likely. In a recent note projecting four Fed rate increases next year, Paul Ashworth, U.S. economist for Capital Economics, said “the stimulus could provide cover for the Fed to normalize interest rates at a faster pace than it otherwise would have been able to.” What Ashworth called a “badly timed” tax cut “would be expected to raise inflation as much as it boosted real GDP growth,” he said.

Source : Financial Express

Govt may allow pre-GST stocks to have revised MRP stickers till March : 13-12-2017


The government is expected to allow use of stickers to display revised maximum retail price (MRP) on unsold pre-GST stocks for three months until March 31, a senior official said.

“The department of consumer affairs will most likely extend it, and will issue a directive next week,” the government official told ET. The department had earlier extended the deadline from September 30 to December 31. Recent changes in GST rates again created a problem of goods carrying old prices printed on them.

When the goods and service tax (GST) was implemented on July 1, the government had allowed marketers to display details of the revised MRP on pre-GST stocks b way of stamping, putting sticker, or online printing. Also, from April 1 onward, manufacturers will not have to display details of GST on packaged commodities. They will need to display only the revised MRP, the official said.

Manufacturers will still need to advertise the change in MRP after implementation of GST, the official said. Trade and industry had sought more time to liquidate pre-GST stocks .

“To bring equity between pre and post GST period it is necessary that remaining period of current fiscal year should be granted to liquidate the stocks,” said Praveen Khandelwal, secretary general of Confederation of All India Traders (CAIT). CAIT had last month written to consumer affairs, food and public distribution minister Ram Vilas Paswan, seeking that the last date be extended till March 31, 2018.

A spokesperson for Dabur said, “Extension of deadline for putting stickers with new prices will help liquidate unsold inventory and ensure that end consumers benefit from the GST reduction.”

In July, Paswan had warned manufacturers that not displaying revised MRP on products whose prices have increased after the implementation of GST could lead to a fine, and even a jail term.

“Strict action will be taken against those who do not comply and publicise their revised MRP in case of an increase,” he had said. “It is similar to the process of labelling undertaken during sale. You just have to stick a revised MRP, so that consumers know changes in rates after GST,” he had said.

Source : Economic Times

FRDI bill: One man’s trauma shows how Modi govt is playing with fire : 13-12-2017


The world of Rajaram Shinde is changing. The retired central government official is moving his money from State Bank of India to Kotak. Mr Shinde is not exactly enamoured by the advertisements of the private sector lender or its promises. He is not a demanding customer, has no fancy needs. But, like everyone with a bank account, there’s one thing he believes is non-negotiable: the safety of his money. Not that he ever felt there was a concern. Until now.

It all began with strange WhatsApp messages. He ignored them. What he couldn’t disregard were unbelievable stories in large, mainline English and Marathi newspapers. The reports talked about a new Bill, which once enacted, could freeze — at least temporarily — or even knock off a slice of deposits of a troubled bank. The objective is to save the bank by making depositors pay.

Tough choice

Having stayed away from co-operative banks, which are often the preferred choice of many in western India despite a few failures, it never crossed his mind that high-street, government-owned banks could do the same.

But then, here’s a Bill that would apply to all financial institutions, including public sector as well as private banks; so it made perfect sense for Mr Shinde, who after checking the stock and financial performance of Kotak — the bank with a branch that’s nearest to his home — to think of gradually shifting his savings to a healthy private bank. After all, if the government chooses not back a bank where it’s the majority owner, why not move to a strong private bank?

To many, Mr Shinde’s decision could appear like an extreme step taken by a libertarian who abandons fiat currency — out of distrust towards inept central banks and stodgy governments — to convert his savings into bitcoin or gold. But that would be unfairly judging a pensioner who is shaken and puzzled by a Bill.

In all likelihood such a law, at least in its present form, may never see the light of the day. But what’s bewildering is Mr Shinde’s suspicion that it could. (Will the dull-sounding Financial Resolution & Deposit Insurance or FRDI Bill turn out to be DeMo 2.0?)

After going unnoticed for months, the Bill suddenly began making news around November 8, an ominous date. For a week it was confined to social media chatter and the world of instant messages. There was very little assurance from the government.

Soon, mainstream media caught on. Despite the excitement around eminently newsy stuff like the Bankruptcy Code and Gujarat elections, newspapers and television headlines ran headlines and tickers like, “Is your deposit safe?” Still, New Delhi didn’t quite get it. Last week, the finance ministry released a statement saying, “The FRDI Bill 2017 is far more depositor-friendly than many other jurisdictions, which provide for statutory bail-in, where consent of creditors/depositors is not required for bail-in.”

What jurisdictions are we talking about? Cyprus? Greece? Advanced economies, which had passed such a law, have rarely, if ever, used it. The ministry’s statement probably means that the Bill is better than the law in Cyprus which was invoked a few years ago to keep banks afloat. Does it really mean much? It’s certainly not enough to comfort Mr Shinde and savers like him with their nest egg lying in some bank. Finally, on Monday, the finance minister assured that the government will fully protect the public’s deposits in financial institutions. He couldn’t have done anything else, and going by his words the Bill is in for drastic changes.

Trust matters

It’s a bizarre turn of events. Never before did the finance minister of a country — with a stable government, booming stock market, and one of the fastest GDP growth rates — had to assure the public about the safety of their bank deposits. Why did it happen?

Probably the government felt that a debate on ‘how to bail-in (instead of bail-out) banks’ has become an imperative. Just like the resolution plan for bankrupt borrower manufacturers, there should be a law backing resolution for lender banks. But it’s a debate which, if gathers heat, can take us into an absolutely uncharted territory.

Trust in banks has been the strongest trait of the modern Indian financial system. No PSU bank — even the ones with eroded capital, unpaid loans, and damaging scandals — ever suffered a run simply because of the state’s backing. Successive governments and the RBI have been calm and quick in dealing with private banks that failed or faced panicky depositors. Such bail outs were probably unfair to tax payers. But handling the consequences of letting banks fail or saving them with depositors’ Such bail outs were probably unfair to tax payers. But handling the consequences of letting banks fail or saving them with depositors’ money can be far more challenging.

The FRDI Bill is not the need of the hour. Luckily, not too many people have taken it seriously. But that can change. If New Delhi thinks it’s testing the waters, it is mistaken. It’s playing with fire.

Source : Business Standard

Notification No. SO 3912(E) 12-12-2017


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – CCCL INFRASTRUCTURE LTD.

NOTIFICATION NO. SO 3912(E) [F.NO.F.2/589/20006-SEZ]DATED 12-12-2017

WHEREAS, M/s. CCCL Infrastructure Limited, had proposed under Section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act), to set up a sector specific Special Economic Zone for Food Processing sector at Vadakkukaracheri and Thimmarajapuram villages, Tuticorin District in the State of Tamil Nadu;

AND, WHEREAS, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the said Act read with rule 8 of the Special Economic Zones Rules 2006, had notified an area of 119.145 hectares as Special Economic Zone vide Ministry of Commerce and Industry Notification Number S.O. 1006(E), dated 23rd April, 2009;

AND, WHEREAS, the name of the developer changed from M/s. CCCL Infrastructure Limited to M/s. CCCL Pearl City Food Port SEZ Limited vide Ministry of Commerce and Industry Notification Number S.O. 1010(E), dated 04th May, 2010;

AND WHEREAS, M/s. CCCL Pearl City Food Port SEZ Limited has now proposed to include an area of 10.64 hectares as a part of above Special Economic Zone;

NOW, THEREFORE, in exercise of the powers conferred by second proviso to sub-section (1) of section 4 of the Special Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, the Central Government hereby notifies an additional area of 10.64 hectares, as a part of above Special Economic Zone, thereby making total area of the Special Economic Zone as 129.785 hectares, comprising the survey numbers and the area given below in the table namely:—

TABLE

S. No. Village Survey No. Area in hectares
1. Vadakkukaracheri 2/1B 0.38.5
2. 12/2A 0.06
3. 12/2B 0.73
4. 16/1A1 0.36.0
5. 16/1A2 0.36.0
6. 16/1A3 0.36.0
7. 16/1A4 0.36.0
8. 16/1A5 0.20.5
9. 16/1B 0.12.5
10. 50/2A 1.75
11. 50/2B 0.00.5
12. 53 1.59.5
13. 54/1 0.03.0
14. 54/2 1.30.5
15. 54/3 0.04.0
16. 55/1A 0.36.0
17. 55/1B 0.06.0
18. 55/1C 0.01.5
19. 55/2A 0.07.5
20. 55/2B 0.43.5
21. 55/3A 0.03.0
22. 55/3B 1.07.5
23. 56/1 0.44.0
24. 56/2 0.06.5
25. 62/2 0.41
Total 10.64
Grant total area of SEZ after above addition 129.785 

14 – 12-12-2017


REVIEW OF INVESTMENT BY FOREIGN PORTFOLIO INVESTORS (FPI) IN GOVERNMENT SECURITIES MEDIUM TERM FRAMEWORK

A.P. (DIR SERIES 2017-18) CIRCULAR NO.14DATED 12-12-2017

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to Schedule 5 to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified vide Notification No. FEMA.20/2000-RB dated May 3, 2000, as amended from time to time.

Revision of Limits for the next quarter Jan. – Mar. 2018

2. The limits for investment by FPIs for the quarter January – March 2018 is increased by INR 64 billion in Central Government Securities (Central G-Secs) and INR 58 billion in State Development Loans (SDLs). The revised limits are allocated as per the modified framework prescribed in the RBI/2017-18/12 A.P.(Dir Series) Circular No.1 dated July 3, 2017, and given as under.

Limits for FPI investment in Government Securities (Rs. Billion)
Central Government Securities State Development Loans Aggregate
General Long Term Total General Long Term Total
Existing limits 1,897 603 2,500 300 93 393 2,893
Revised limits 1,913 651 2,564 315 136 451 3,015

3. The revised limits will be effective from January 01, 2018.

4. The operational guidelines relating to allocation and monitoring of limits will be issued by the Securities and Exchange Board of India (SEBI).

5. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approval, if any, required under any other law.

Notification No.97/2017 12-12-2017


SECTION 10(46) OF THE INCOME-TAX ACT, 1961 – EXEMPTIONS – STATUTORY BODY/AUTHORITY/BOARD/COMMISSION – NOTIFIED BODY OR AUTHORITY

NOTIFICATION NO. SO 3868(E) [NO.97/2017 (F.NO.300196/8/2016-ITA-I)], DATED 12-12-2017

In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, ‘Manipur State Rural Road Development Agency’, a body established by Government of Manipur, in respect of the following specified income arising to the body, namely:—

(a) fund received for PMGSY from Ministry of Rural Development, Government of India; and
(b) interest received from Bank on above fund.

2. This notification shall be effective subject to the conditions that Manipur State Rural Road Development Agency,—

(a) shall not engage in any commercial activity;
(b) activities and the nature of the specified income shall remain unchanged throughout the financial years; and
(c) shall file return of income in accordance with the provision of clause (g) of sub-section (4C) of section 139 of the Income-tax Act, 1961.

3. This notification shall be deemed to have been applied for the financial years 2015-2016, 2016-2017* and shall apply with respect to the financial years 2017-2018, 2018-2019 and 2019-2020.

Budget 2018: Economists want Centre to reform tax laws, raise pensions and more : 12-12-2017


In a pre-budget meeting with finance minister Arun Jaitley and his team, economists on Monday impressed upon the government to stick to fiscal consolidation path, announce a road map for further tax reforms and give more incentives on infrastructure investment and better remunerative prices to farmers. They also suggested cut in corporate tax rate, taxing of long-term capital gains, reduce minimum alternate tax (MAT) rate and announce a road map for goods and service tax (GST), including convergence of rates. Arvind Virmani, former chief economic adviser, said customs tariff system, that hasn’t seen any major change, for several years after the peak rate of customs duty was brought down to 10%, needed a relook. Rathin Roy, member, Prime Minister’s Economic Advisory Council, said the government should have a fresh medium-term fiscal framework. Earlier this year, the NK Singh-headed Fiscal Responsibility and Budget Management (FRBM) Committee had recommended that the Centre should aim for a fiscal deficit of 3% of GDP for three straight years starting the current fiscal itself and gradually reduce it to 2.5% by 2022-23 and partner states in adhering to fiscal discipline. Singh was recently appointed as chairman of the 15th Finance Commission, whose one of the mandate is to look at framing a suitable FRBM framework.

Among other issues, the economists suggested that the Centre should give more thrust to disinvestment of PSUs to generate more revenues to meet the expenditure needs without hurting fiscal goals. “We understand that there is a genuine commitment to maintain the fiscal deficit and revenue deficit targets. Operational constraints may vary but political commitment is there,” Roy said.

The economists also suggested to raise old age pension from the existing Rs 200 to Rs 500/month and widow pension from Rs 300 to minimum Rs 500/month. It was also suggested that maternity entitlement benefits be fully implemented and be extended up to two children. Besides, they said payment system for these social security schemes also needs to be streamlined.

On taxes, the economists said the corporate tax rate should be brought down to around 20% from over 30% now, removing all exemptions in order to make it globally-competitive. The Centre’s plan to bring down the corporate tax to 25% is yet to materialise for firms with above `50-crore turnover.

It was also suggested to tax long-term capital gains to bring equity and raise revenue, reduce MAT rate, and announce the road map for GST, including convergence of rates, extending time for transactions’ matching, etc. It was also suggested to give incentives to labour-intensive industries, including SMEs, and informal and unorganised sectors. The economists also suggested a re-look at the crop insurance scheme to make it more effective, by extending the insurance cover from crop failure to price failure.

 Jaitley said the Centre is following the road map of fiscal consolidation path under which it has to come down to 3.2% of GDP in FY18. He said fiscal deficit has been consistently being brought down in the past few years. The economists suggested that more and more subsidies should be brought under DBT to avoid pilferage, implement labour reforms and government funding to the promotion of digital payments.
Source : Financial Express

Finance Minister Arun Jaitley says India on road to fiscal consolidation : 12-12-2017


Finance minister Arun Jaitley said India is following the roadmap of fiscal consolidation and the country’s economic growth in the second quarter marks the reversal of a declining trend.

The minister also sought to allay apprehensions over provisions of Financial Resolution and Deposit Insurance Bill and said the government will fully protect the public’s deposits in financial institutions

“We are following the roadmap of fiscal consolidation under which the fiscal deficit as a ratio of GDP stood at 3.9% in 2015-16 and 3.5% in 2016-17 and is budgeted to be 3.2% for the current financial year,” a finance ministry statement quoted Jaitley as saying in a pre-budget interaction with economists on Monday.

There has been apprehension in some quarters that the government may not achieve the fiscal deficit target for FY18. India’s fiscal deficit during April-August touched 96.1% of the budget estimate for the full fiscal year that ends in March.

gfx
But, according to Rathin Roy, a member of the Economic Advisory Council to the Prime Minister, the government is expected to stick to the fiscal deficit target. 
“I think there is a political commitment (to do this). I reinforced that. I am sure they will. I said that we understand that there is a genuine commitment to maintain the fiscal deficit and revenue deficit targets. Operational constraints may vary, but political commitment is there,” Roy said after the meeting. 
Jaitley said India is on the planned path of fiscal consolidation. 
The economy expanded 6.3% in the second quarter of the financial year compared with 5.7% in the previous quarter. 
“We have been able to achieve these fiscal targets due to focus on expenditure rationalisation, plugging of loopholes in public expenditure through Direct Benefit Transfer Scheme and the Public Financial Management System and by making innovative revenue-raising efforts, among others,” Jaitley was quoted as saying. 
ET had earlier reported that the finance ministry is keen on staying with the target for the year 
“No pause but challenges arising from structural reforms which could change the glide path (of fiscal consolidation),” Jaitley had said earlier this month. 
This had been understood to mean that the government may not target a fiscal deficit of 3% in FY19 and may proposed a more stretched roadmap to reach that limit. 
The NK Singh committee set up to review the fiscal roadmap has given the government some wriggle room to breach the target in years of “far-reaching structural reforms in the economy with unanticipated fiscal implications”. 
RUMOUR MONGERING OVER FRDI BILL
Referring to the FRDI bill, he said rumours are being spread about provisions in the draft law. Jaitley said separately the government’s Rs 2.11 lakh crore capital infusion plan in state-owned banks was to strengthen them and there was no question of any lender failing 
If any such situation arises, the government will “fully protect” the deposits of customers, the minister said in a statement, adding that “the government is very clear about it” 
The Financial Resolution and Deposit Insurance Bill, 2017, was introduced in the Lok Sabha in August and referred to a joint committee of Parliament. 
“Whatever are the recommendations of the committee, the government will consider,” Jaitley said. 
The bill is aimed at creating a framework to oversee financial institutions such as banks, insurance companies, non-banking financial companies and stock exchanges in case of insolvency. A bail-in clause in the draft legislation has been criticised in some quarters. 
The bill proposes to set up a Resolution Corporation that will look after the process and prevent banks from going bankrupt by “writing down of the liabilities”, a phrase that some have interpreted as a bail-in. 
The Resolution Corporation will be empowered to cancel the liability of a failing bank or convert the nature of the liability. It does not specify the deposit insurance amount. 
All deposits up to Rs 1 lakh are currently protected under the Deposit Insurance and Credit Guarantee Corporation Act, which the bill seeks to repeal. 
Source : PTI

This tax cut could be India’s chance to plug many gaps in one stroke : 12-12-2017


Corporate tax reform is nice in theory but tough in practice. It usually requires lowering of tax rates and closing of loopholes. And whatever new, lower tax rate is determined, there will probably be another country willing to lower its rate further, creating what author of Too Big To Fail, Andrew Ross Sorkin, described as “a sad race to zero”.

The US is in the process of putting theory into practice by lowering the corporate tax rate to 20% from 35%. Republicans claim this will boost growth and create more jobs. Indian industry, too, believes that a steep cut in our corporate tax rate will make a world of difference.

Lowering the rate to 18% from 30%, with the withdrawal of tax incentives and exemptions, surcharges and cesses, is the centrepiece of the Confederation of Indian Industry’s Budget wishlist. This will send a powerful message to India Inc and global investors that India is an attractive investment destination.

Traditionally, corporate tax rates were not seen as defining the competitive advantage of nations. But the success of low-tax countries like Singapore and Hong Kong proved otherwise. Many others chipped away at their tax rates to attract inward investments. The US is keen to ensure that its own companies ship back their profits piled up overseas, making the goal somewhat different. What should be India’s response? Policymakers do not favour a kneejerk reaction. India’s strength is its huge  market. GoI has already committed to lowering corporate tax rate to 25%, to attract foreign investors and give more liquidity to Indian companies to expand overseas. It would be wary of a steep cut in the absence of clear revenue collection trends from GST.

Many contradictions also need to be resolved. There are demands, for example, to create more special enclaves, with tax and legal regimes that are different from those for the rest of the country. Let us not forget that companies made a beeline to milk tax breaks in enclaves called special economic zones (SEZs), meant to promote export-oriented production. But resources were misallocated and revenues forgone.

Big Boys, Small Duty
The thicket of concessions must be cleared to raise the tax-to-GDP ratio. The current ratio – of the Centre and the states combined – is about 17%, of which about 5.7% comes from direct taxes, 7% from indirect taxes that have been subsumed in GST, and the rest from petroleum, customs and stamp duties. The target should be doubling the tax-to-GDP ratio to achieve the OECD average of about 34%.

Indian companies pay surcharge and cess, on top of the base rate of 30%, taking the total burden closer to 34.5%. These companies also pay dividend distribution tax, and the total burden does look steep for many. The effective tax rate has moved up to over 28% in 2015-16 from 24.6% in 2014-15, thanks to the phasing out of profit-linked incentives in some sectors such as telecom. This must be done in other sectors as well.

But the effective tax liability of the largest companies is lower than the smaller ones. That is because the larger ones can hire expensive tax planners. Some of them have also been able to house profit centres across the globe, including in tax havens, so as to move revenues around to minimise tax outgo. Companies with no global exposure are hamstrung, but these loopholes have been plugged now.

India has adopted the general antiavoidance rules to curb sharp tax practices. It has endorsed the OECD’s rulesto prevent companies from shifting profits to shell companies in tax havens. Automatic sharing of information should be followed by the creation of a unique legal identifier to trace the beneficial owner. In these days of globalisation, countries including the US must cooperate to end base erosion and profit shifting. It will help lower the corporate tax rate.

There is also a difference now in the corporate tax liability between the services and manufacturing sectors. Services contribute to a lion’s share of the GDP but bear a higher burden of tax due to fewer exemptions, whereas manufacturing bears a lower tax burden as it enjoys more exemptions, such as accelerated depreciation benefits on fixed assets. Yet, its share in GDP is still low.

In 2015-16, the effective tax liability of companies in the services sector stood at 30.3%, compared to 25.9% in manufacturing. Their tax liability must come down to foster a knowledge economy

Eventually, a large slice of the total tax collections should come from direct taxes, not indirect taxes that impact the rich and poor in a similar way. If the GST is implemented well, indirect taxes should swell, and generate abroader base for direct taxes. Equally, collections will go up when tax rates become lower.

Duck Tax, Get Drenched

Reducing tax-planning opportunities and increasing the likelihood of tax evasion being detected will raise the cost of non-compliance. India is moving in this direction

There is a need to hasten corporate tax reform to have a lower flat rate. An 18-20% rate without exemptions can put all businesses, whatever their size, on the same level. Direct tax collections would offer up a bounty. That would be nice not just in theory but in practice too.

Source : Economic Times

Notification No. SO 3864(E) [F.No.A-45011/20/2013-AD.IV], Dated 11-12-2017


SECTION 410 OF THE COMPANIES ACT, 2013, READ WITH TRIBUNAL, APPELLATE TRIBUNAL AND OTHER AUTHORITIES (QUALIFICATIONS, EXPERIENCE AND OTHER CONDITIONS OF SERVICE OF MEMBERS) RULES, 2017 – NATIONAL COMPANY LAW TRIBUNAL AND APPELLATE TRIBUNAL – CONSTITUTION OF – NOTIFIED JUDICIAL MEMBER IN NCLAT

NOTIFICATION NO. SO 3864(E) [F.NO.A-45011/20/2013-AD.IV]DATED 11-12-2017

In exercise of the powers conferred by section 410 of the Companies Act, 2013 read with Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017, the Central Government hereby appoints Justice (Retd.) Shri A. I. S. Cheema as Judicial Member in the National Company Law Appellate Tribunal in level 17 in the Pay Matrix (Rs. 2,25,000/- fixed) with effect from the 11th September, 2017, for a period of three years or till he attains the age of sixty-seven years, whichever is earlier.

 

Notification No. SO 3863(E) [F.No.A-45011/20/2013-AD.IV] Dated 11-12-2017


SECTION 410 OF THE COMPANIES ACT, 2013, READ WITH TRIBUNAL, APPELLATE TRIBUNAL AND OTHER AUTHORITIES (QUALIFICATIONS, EXPERIENCE AND OTHER CONDITIONS OF SERVICE OF MEMBERS) RULES, 2017 – NATIONAL COMPANY LAW TRIBUNAL AND APPELLATE TRIBUNAL – CONSTITUTION OF – NOTIFIED JUDICIAL MEMBER IN NCLAT

NOTIFICATION NO. SO 3863(E) [F.NO.A-45011/20/2013-AD.IV]DATED 11-12-2017

In exercise of the powers conferred by section 410 of the Companies Act, 2013 read with Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017, the Central Government hereby appoints Justice (Retd.) Shri Bansi Lal Bhat as Judicial Member in the National Company Law Appellate Tribunal in level 17 in the Pay Matrix (Rs. 2,25,000/- fixed) with effect from the 17th, October, 2017, for a period of three years or till he attains the age of sixty-seven years, whichever is earlier.

 

Insolvency law: Norms notified, set to be applicable to creditors, debtors and service providers : 11-12-2017


The regulations for grievance handling procedure under the Insolvency and Bankruptcy Code have been notified, wherein the filing fee will be refunded to the stakeholder in case the complaint is found to be not “frivolous or malicious”. The Insolvency and Bankruptcy Board of India (IBBI), which is implementing the Code, has notified the regulations and they will be applicable for all stakeholders, including creditors, debtors and service providers. Depending on the complaint, the IBBI can order an investigation or issue a show cause notice to the entities concerned. “The regulations provide for an objective and transparent procedure for disposal of grievances and complaints by the IBBI, that does not spare a mischievous service provider, but does not harass an innocent service provider,” the corporate affairs ministry said in a release on Sunday. The IBBI comes under the ministry.

A large number of cases have been filed under the Code, which came into force last year, and there have been certain instances of alleged complaints against entities involved in the insolvency process. Under the regulatory framework, a complaint can be filed against insolvency professional agency, insolvency professional, insolvency professional entity and information utility.

A stakeholder can file a complaint with details of “suffering, whether pecuniary or otherwise, the aggrieved has undergone; how the conduct of the service provider has caused the suffering of the aggrieved; details of his efforts to get the grievance redressed from the service provider; and how the grievance may be redressed”, the release said.

The complaint can be filed in the specified form along with a fee of Rs 2,500. “If the complaint is not frivolous or malicious, the fee will be refunded,” the release said. In case the IBBI finds that there is a prima facie case of violation in the matter, inspection or investigation could be ordered or a show cause notice could be issued.

Source : Financial Express

To boost Make in India, framework for SEZs set for a complete makeover : 11-12-2017


India is eyeing a revamp of its framework for special economic zones (SEZs) to boost manufacturing, including the exemption of factories located in them from minimum alternate tax (MAT), seen as a key factor that has stunted the zones.

Other ideas include slashing the category of deemed exports besides reducing minimum area requirement for smaller and special category states. The proposals are likely to be considered during budget talks, but a final call will be taken keeping in view revenue considerations and government’s intent to cut corporate exemptions.

The revamp has been necessitated by the switchover to the goods and services tax (GST), but the government is keen to go beyond this to spur private investments, particularly in manufacturing. GST was implemented across the country on July 1.

“Imposition of MAT had a huge negative impact on exports from SEZ,” said a person aware of the recommendations of a panel set up to draft a plan for the revamp of the zones, conceived as areas of enterprise that would drive jobs and growth as in China.

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The SEZ Act of 2005 exempted the zones and units located within them from MAT without any sunset clause. But the government changed the law again to impose MAT on SEZs and their units at the rate of 18.5% from 2012.

 Experts welcomed the proposals. “Focus seems to be on making the entry, exit as well as operations within SEZ easier and incentivising exports by simplifying the procedures and removing operational restrictions such as manufacturing for domestic units,” said Pratik Jain, indirect tax leader, PwC.
The ministry of commerce and industry had set up a panel comprising Noida SEZ development commissioner LB Singhal and his counterparts at Kandla SEZ, Santacruz Electronics Export Processing Zone (Seepz) and Madras Export Processing Zone (MEPZ) to suggest changes in the framework to align it with the GST regime.
The panel has also identified access to cheap finance as an issue and sought incentives for setting up overseas banking units in these zones.
It has mooted a reduction in the minimum area needed to 4 hectares from 25 hectares for establishment of sector-specific SEZs such as biotechnology, non-conventional energy equipment, agro-based food processing and services in the North-Eastern states, Goa, Jammu and Kashmir, Uttarakhand and the Union Territories. “Land requirement has to be tailored in line with the size of the state,” an official said.
The move on deemed exports will make it necessary for units to sell goods overseas to get benefits available to them. A long and more flexible list for activities qualifying as deemed exports made it easy for the units as even without actually exporting they could get the benefits.
The panel has also suggested that units of a company within the same SEZ should be allowed to merge subject to conditions. In line with this, net foreign exchange earning computation and income tax exemption of the merged units should be with effect from the date when the first unit commenced operation, according to the report.
The panel has suggested that duty and tax benefits on goods needed for setting up a unit be extended to sub-contractors as well.
This is currently limited to contractors. It has suggested that subcontracting for Domestic Tariff Areas (DTAs) be allowed subject to conditions as well as a change in computation for net foreign exchange earnings. It will be computed on the basis of exports and supply of goods manufactured or services provided in the SEZ but will exclude traded goods.
Source : PTI

Taxman pressing ahead with prosecution notices : 11-12-2017


As tax officials chase to meet stiff revenue targets amid sluggish growth, there is a sudden surge in prosecution notices slapped by the income tax (I-T) department. Till now prosecution provision was invoked sparingly and primarily on wilful tax evaders. Now, prosecution proceedings are being initiated for not filing tax returns or for short or even delayed remittance of tax deducted at source (TDS) by business entities.

A list of 8,000-odd non-filers (of tax return) with a past record of earnings has been compiled (by the tax department).

Many in that list have been issued prosecution notices. While this may come across as somewhat harsh, notices have also gone to companies which even after deducting TDS (from salaries, rent, or other heads) have failed to submit it to the government,” a senior tax official in Mumbai, which accounts for the highest income tax collection, told ET.

According to tax practitioners, some of the small and mid-sized companies which had earlier admitted their inability to pay on time and subsequently cleared the tax in phases along with interest, have also received prosecution notices.

A prosecution notice can be unnerving to most tax payers, particularly ones with limited resources and legal assistance. The assessee will have to either move the high court seeking to quash the notice or accept the compounding process.

“Prosecution provisions should be triggered in serious tax matters and after confirming a civil liability and not as precursor to civil liability. In most developing countries, prosecution for tax matters is applied only in cases of serious tax frauds and not in general compliance matters… Though the taxman may be driven by compulsions to ensure proper tax compliance, care must be taken that such action does not hurt growth,” said Bijal Ajinkya, partner at law firm Khaitan & Co.

On receipt of such a notice, an assessee has to explain reasons for delay in paying taxes or non filing of returns or non payment of taxes. If the tax assessing officer is not satisfied, the assessee has to present himself before the magistrate’s court in the jurisdiction.

“There are cases that are two to three years old. Some of them should not in any way attract prosecution. There can be many reasons for not filing tax return.

It does not necessarily mean wilful concealment of income. In respect of admitted tax where the assessee was permitted to pay tax in instalments, the question of wilful defaults cannot rise.

Now the assessee who gets the notice has to go through the trouble to prove the position otherwise. The compounding fees prescribed in the circular are exorbitant,” said senior chartered accountant Dilip Lakhani.

So far, prosecution notices — with reference to sections 276C/276CC and 276CCC of the Income tax Act and dealing with wilful attempt to evade taxes — have been served following confiscation of incriminating evidence in tax raid, spotting bogus claims or falsification of accounts to conceal income, or corroboration of undisclosed offshore bank accounts and assets (such as the HSBC Swiss accounts).

“Such moves may purify tax compliance system, but one cannot ignore the reality that this does result in unnecessary hardship to assessees. The rationale is that establishing wilful default does involve subjective and judgemental considerations and hence, everyone would want to play safe and let courts decide,” said Mitil Chokshi, senior partner at Chokshi and Chokshi.

ET’s email query to the spokesperson for CBDT, the apex direct tax body, about the sharp increase in issuance of prosecution notices and a seemingly harsher interpretation of the law by the tax department, went unanswered till the time of going to press.

Source : Economic Times

Economy has shrugged off demonetisation, GST effects; see how : 08-12-2017


A little over a year ago, banks, companies, government departments and ordinary people were frenetically trying to adjust to the extraordinary step taken, of overnight “withdrawal of legal tender status of specified bank notes” amounting to 85% of outstanding currency. The release of the GDP growth data for Q2FY18 marks something of an end for the progressive slowing down of growth, a trend that has accompanied the demonetisationexercise. This article looks more at the journey of India’s economic, financial and payments structure since November 2016, rather than the growth trajectory for the coming quarters. First, though, a brief look at the growth recovery in Q2FY18, which was fairly broad-based across segments (compared to a couple of previous quarters) and, importantly, led to by non-government manufacturing (and, to an extent, services). The manufacturing segment, in particular, seems to have recovered sustainably; the persistence of better numbers suggests that this is not a dead-cat-bounce after GST. There seem to be the first signs of investor interest in some capex projects. We forecast that H2FY18 growth is likely to be 7% plus, and the twin balance-sheet problems will get gradually mitigated.

 Multiple structural changes have happened, or been catalysed and accelerated, including formalisation and financialisation of household savings, a jump-up in retail digital payments, higher tax compliance, among others, and these are changes which will impact transaction, savings and economic behaviour in future. This article attempts a limited analysis of near-term economic effects of the changes, primarily on the real economy, including consumption, production and jobs.

It is difficult to attribute elements of the current economic environment to the extraction of high-value currency notes. There have been multiple changes in policies, institutions and structures both in the run up to and the period after demonetisation. But there are some indications of changes in trends and behaviour, though each depcition of the these changes has layers of complexity built in that are difficult to detail in this brief article. On the real economy, the trends and impact have been mixed. Business seems to have largely shrugged off even the expected disruption due to GST, based on both RBI surveys as well as output indicators.

PMIs show that demonetisation had an impact, though transient, but output systems have been hit by the ongoing process changes in the run up to GST. The same narrative is evident even in the Index of Industrial Production (IIP)—for a sharp dip recorded for a couple of months—before other pre-GST commercial considerations became important. The striking impact seems to have been on consumer durables. The other segment which has decelerated is intermediate goods—the inputs into future production.

But this seems to have been a prelude to GST rather than a DeMo effect. Corporate results on sales and operating margins show that services segment growth slowed sharply (due to disruption in construction, trade and other cash-intensive segments) and operating margins took a hit across the board. However, RBI’s House Price Index does not show any particular distress in housing.

Job growth, on the contrary, seems to have jumped in the October-December 2017 period—with the manufacturing sector contributing the most. It is not clear if this addition was prior to November, but the pattern of job growth in the other seven segments reported (particularly, construction and trade) suggests that this did not capture the reported effects of demonetisation on selected work-segments.

This leads to another puzzle. Compared to business confidence, consumer confidence has been more adversely affected. This has implications for future growth; it implies weaker consumption demand, which might make closing the capacity utilisation gap an extended exercise, further delaying the private investment cycle. The consumer-confidence drop emanates from worsening perceptions of “economic conditions”—given the current outlook, this will likely improve.

Overall, domestic and global conditions have changed for the better, but their cumulative impact on India still bears watching closely. The Monetary Policy Committee, in its policy review , kept the policy repo rate unchanged, and will, may be, continue to do so even in the near future. However, three significant developments—the sharp rise in India’s Ease of Doing Business ranking, the bank recapitalisation programme, and the improvement in sovereign credit rating—all indicate a perception of improvement in India’s structural fundamentals, and consequent of potential growth.

Source : Financial Express

Finace Ministry seeks industry view on US tax reform impact on business : 08-12-2017


Ahead of the Budget, Finance Secretary Hasmukh Adhia is seeking industry inputs on ways to deal with the impact of sweeping tax reforms as proposed by the US and other suggestions to rev up economic growth.

The Donald Trump administration has proposed corporate tax rate cut to as low as 20 per cent from 35 per cent with a view to boosting corporate earnings, a move that could hit India’s trade and economy.

Adhia, in his meeting with representatives of industry chamber Ficci, also sought its views on steps that could be taken to strengthen the domestic economy in light of the developments in the world’s largest economy.

The secretary is likely to hold a similar detailed discussion with other chambers and industry bodies.

“We discussed long-term impact of the proposed tax reforms by the Trump administration. If approved, it is going to have an impact on Indian economy. It will hurt exports of goods and services and discourage foreign direct investment to India,” Ficci Secretary General Sanjaya Baru said after the meeting here.

Since American companies will have better opportunity in their home country, they would refrain from making investment in other countries, including India, he reasoned.

He also felt that it will have an impact on overall competitiveness.

The interaction was part of the pre-Budget consultation and Ficci had a detailed discussion with the finance secretary

“We see this as a major challenge to Indian economy and the government should accordingly shape domestic tax policy both in terms of direct and indirect taxes so as meet this challenge,” he said.

Ficci also requested the government to implement the Budget proposal to reduce tax for all companies to 25 per cent.

The Union Budget 2015-16 had proposed lowering the basic rate of corporate tax to 25 per cent, from the current 30 per cent over the next four years, accompanied by fewer exemptions.

Source : PTI

Budget 2018: Cost-benefit analyses that reveal the most deserving priorities for India : 08-12-2017


Early in the new year, the annual Union Budget process will get underway. All eyes will be on the government as it pilots legislation through both Houses and sets priorities for the year ahead. Businesses, civil society and, indeed, every citizen of India has a stake in this important process, which will see roughly Rs 21.47 lakh crore allocated among important causes.

Finance minister Arun Jaitley, Prime Minister Narendra Modi and the government face a myriad of difficult choices, including exactly how much will be spent on infrastructure, hospitals, programmes to help the rural poor, policies to improve education, or those to clean up the environment.

The budget process is complex, and much care will be taken to ensure that choices work coherently to create a stronger, more prosperous nation. We can have confidence that there will be many well-deserving beneficiaries among the new and existing programmes that receive funding.

But budget setting can always be improved in every nation, and we submit that one of the most effective ways for India to do so would be to engage in cutting-edge economic analysis and to adopt the principle that every rupee should be spent achieving the greatest social benefit that it possibly can.

This is the approach that underpins a new process being applied in Andhra Pradesh and Rajasthan, in a project which we have each contributed to.

The project, a partnership between Tata Trusts and Copenhagen Consensus Center called India Consensus, will produce new economic research that will inform state level policy discussion and budget decisions for years to come.

In the past half year, India Consensus has worked with hundreds of leaders from each state – from government, academia, civil society and businesses to examine a plethora of topics from education and health to gender and infrastructure. Their objective has been to identify the best new policies within each state.

From many hundreds of engaging proposals, they have honed a list of about 60 highly promising policies for each state. Now, teams of top economists from India and abroad are working diligently to calculate the costs and benefits for each of these proposals.

These research papers, which will be released publicly online, will help identify different ways that scarce budget funds could best be spent across all areas.

While the research process is still underway, the early findings are very promising. For instance, one proposal suggests more spending on tuberculosis screening and treatment. TB is a massive cause of mortality – just in Andhra Pradesh it causes every ninth death, and across India more than half a million people die each year.

The preliminary research paper on TB suggests that investment could be hugely beneficial, creating social benefits worth as much as Rs 50 for every rupee spent.

The researchers look not just at health, but at a wide range of different topics. Skill development is recognised as a priority for India. But different approaches are not equal, and what works in one state may not always translate elsewhere. Interestingly, the research suggests that there is a considerably higher return on investment for investing in skills development in AP than in Rajasthan.

This approach, of capturing all the environmental, social and economic benefits of a specific policy and putting it into monetary terms, is cost-benefit analysis. It can help improve public decision making, but because it requires large numbers of academics, well organised inputs and can sometimes lead to politically inconvenient results, it is rarely used in a broad, cross-cutting, transparent fashion, by any government.

However, Copenhagen Consensus has successfully applied it to some of the world’s biggest challenges for more than a decade. As well as publishing new research on the most effective responses to problems, it enlists teams of Nobel laureates and other senior, distinguished economists to study the research and identify the most powerful choices.

Former United Kingdom Prime Minister David Cameron cited its findings in 2013 when G8 leaders announced £2.8 billion (Rs 23,300 crore) would be spent to end undernutrition. The Colombian president found evidence on the benefits of marine reserves so compelling that he and neighbouring leaders quadrupled the size of a marine reserve in 2016.

The approach has been applied at a national level in Haiti and Bangladesh. The Haitian president undertook to require wheat to be fortified with vital micronutrients. In Bangladesh, the government is ensuring that every line ministry receives the economic findings, which included endorsing the importance of e-government solutions.

By summer, eminent panels of economists will study the research produced for AP and Rajasthan, and highlight the most effective priorities. It is our hope that this broad knowledge will generate a renewed debate, and help to ensure that both states achieve faster gains in prosperity and well-being.

It is an approach that we would like to see expanded to every state. And, as the national government starts its budget setting process, it is also worth asking: What role could such analysis play in helping India to solve her national challenges and increase the well being of all?

Faizan Mustafa is VC, National Law University Hyderabad. VS Vyas is professor at Institute of Development Studies, Jaipur

Source : Economic Times

Notification [F.No.1/40/2013-CL-V] Dated 7-12-2017


COMPANIES (COST RECORDS AND AUDIT) AMENDMENT RULES, 2017 – AMENDMENT IN RULE 2 AND SUBSTITUTION OF FORM CRA-1 AND CRA-3

NOTIFICATION [F.NO.1/40/2013-CL-V]DATED 7-12-2017

In exercise of the powers conferred by sub-sections (1) and (2) of section 469 and section 148 of the Companies Act, 2013 (18 of 2013) (hereinafter referred as the Act), the Central Government hereby makes the following rules further to amend the Companies (cost records and audit) Rules, 2014, namely:—

1. These rules may be called the Companies (cost records and audit) Amendment Rules, 2017.

2. In the Companies (cost records and audit) Rules, 2014 (hereinafter referred to as the principal rules), in rule 2, after clause (f), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2016*, namely:—

(fa) “Indian Accounting Standards” means Indian Accounting Standards as referred to in Companies (Indian Accounting Standards) Rules, 2015.

3. In the principal rules, in the Annexure, for Form CRA-1 and Form CRA-3, the following Forms shall respectively be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 2016*, namely:—

FORM CRA-1

(See rule 5(1) of the Companies (cost records and audit) Rules, 2014)

 

FORM CRA-3

[See rule 6(4) of the Companies (Cost Records and Audit) Rules, 2014]

FORM OF THE COST AUDIT REPORT

Power must come under GST; Here is why, how and when : 07-12-2017


As the Goods and Services Tax (GST) overcomes the transitional implementation challenges, it is time to look ahead to further improving it. The impact of the highest rates has been reduced by substantially paring down commodities in the 28% bracket. Simplification of procedures for small enterprises, especially those that sell to large enterprises, is underway. Bringing land and real estate into the GST is on the agenda for discussion. High priority must now also be accorded to the inclusion of electricity in the GST. Why, how, and when? Currently, there is a bewildering multiplicity of electricity taxes that vary by states and across user categories, low for consumers and high for industrial users. Taxes levied by the states thus vary from 0% to 25%. It is an important source of revenue for them, amounting to about `31,000 crores for all the states combined. On average, electricity taxes account for about 3% of own tax revenues of the states, going up to close to 9% in other states. States are therefore reluctant to give up the right to levy these taxes. But the status quo imposes large costs that seriously undermine the government’s Make in India initiative.

The most serious and obvious one is that costs to industrial users of electricity are higher because they include the taxes on inputs that have gone into the supply of electricity. These include taxes on raw materials (coal, renewables) and other equipment (solar panels and batteries). Not being part of the GST means that no input-tax credit can be claimed which results in the embedding of the tax in the final price. For the textile industry, for example, these embedded taxes amount to about 2% of the price. This embedding of taxes hurts manufacturers selling to the domestic market. But they hurt in particular exporters of electricity-intensive products because they are not liable to any duty drawback—relief for taxes embedded in exports. But there is a subtler way in which these embedded taxes hurt industrial buyers of electricity, creating a double whammy for them. Electricity is finally purchased by consumers and industrial users. Politics, especially populist politics, has ensured that consumers (and other users in agriculture) pay either nothing for electricity or very little. As a result, and in order to make up for the resulting losses, discoms cross-subsidise, that is, they charge higher prices to industrial users to make up for under-charging others. But the embedding of taxes adds an extra layer of cross-subsidisation. Industrial users must also be charged higher rates to make up for the embedded taxes that cannot be recouped from consumers. Totalling up all of these effects could lead to increased costs and lower margins of between 1-3% for several industries. These margins are significant especially for exporters who face ferocious international competition and where a 1% extra cost could be fatal.

Another argument calls for its inclusion in the GST. Currently, there is a large bias in favour of renewables in GST policy. Inputs to renewables generation attract a GST rate of 5% while inputs to thermal generation attract higher rates of 18%. Supporting renewables might be conscious policy (and also good policy), but we are in a situation where subsidisation is proliferating across policy instruments, making it difficult to quantify the overall support. As we have discovered, complexity in the GST rate structure arises because it is burdened with having to meet multiple objectives. Support for renewables should be direct, conscious, and transparent. GST should not become the instrument for adding (non-transparently) to that support. If electricity were to be included in GST, then there would be no discrimination between renewables and thermal energy because all inputs going into both forms of electricity generation would receive tax credits. GST would then become neutral between different forms of electricity generation as good tax policy should be. Thus, the case for including electricity in the GST is compelling. The question is how? Recall that including electricity in the GST would reduce or eliminate embedded taxes in electricity-using products. That means that both the central and state governments would lose revenues that would now accrue as input tax credits to the private sector. In addition, state governments would lose taxes from electricity use itself. So, there would be two sources of losses. What should be the response? Several options are available. One would be for the Centre and the states to bear the losses of the embedded taxes since the benefits would also be shared. The Centre would then compensate the states only for the direct loss of revenues. Another would be a half-way solution. This would be to impose a 5% tax on electricity in the GST—allowing inputs tax credits to flow through the GST pipeline—but then allow state governments to impose a small non-GST able cess on top of the GST rate. In this case, however, the greater the cess, the more it would resemble the status quo with all its problems as described above. So, this half-way solution must come with some limits on state governments’ freedom to levy further taxes on electricity. But in both proposals the central government would lose revenues both from the loss in embedded taxes and from having to compensate the states.

The final question relates to timing. The likelihood of fiscal losses suggests that implementation should perhaps wait till GST revenues have stabilised, say, by the end of this fiscal year. Next fiscal year would then seem the right time for action, requiring the start of discussions in the GST Council soon. In sum, there are four clear benefits from bringing electricity into the GST: reducing the costs for manufacturing; improving the competitiveness of exporters; reducing the cross-subsidisation of electricity tariffs that further undermines the competitiveness of manufacturers and exporters; and eliminating the large biases—and hence restoring neutrality of incentives—in electricity generation. There would be costs in terms of foregone revenues but the benefits would be large and states could be partially or fully compensated. Indian manufacturing is saddled with costs. Efficient GST policy should aim to reduce them.

Source : Financial Express

Importers of food, cosmetics to get refund on excess GST : 07-12-2017


Unsold inventory of imported chocolates, confectionery and cosmetics, which attracted 28% Integrated Goods & Services Tax (GST) during inbound shipments but are now retailing with an 18% levy, can claim refunds on the excess tax paid.

“We have told importers that if they have imported goods at 28% and are selling them at 18%, they can claim a refund,” a senior official at the Central Board of Excise and Customs (CBEC) said. “They will, however, have to submit proof. We understand they have issues related to stickers.”

All imports face customs duty and IGST (CGST+SGST), unless specifically exempted. Last month, the GST Council had slashed tax slabs on 178 products, including chocolates, confectionery, deodorants and shampoo, from 28% to 18%. Almost all Indian firms have dropped prices in relevant categories after the cut.

“The reduction in GST rates for products imported at a higher rate may have some shortterm working capital impact on the importer. However, this can be adjusted against future sales,” said Lalit Malik, chief financial officer at Dabur, which operates retail chain NewU and sells both Indian and imported cosmetics and personal-care products. Some of the imported products retailed at DaburBSE 1.04 % chains include Beauty Formula from UK and Spice Island from Sri Lanka.

A leading importer of chocolates said: “We are continuing to sell at 28% as of now, and awaiting fresh stocks with revised MRPs. Unlike local manufacturers, our import cycles are dependent on international producers.”

While Indian vendors are in the process of manufacturing stocks with revised prices on packaging, importers say they are saddled with inventories because their import cycles extend anywhere between three and six months.

The government has allowed companies to put stickers on unsold stock, printing the new maximum retail prices (MRP) as long as the earlier MRPs are also visible. This facility, available until December 31, applies to both locally manufactured and imported products.

Many importers are putting stickers with revised MRPs. Some others, however, are facing issues with international clearances on revised stickers from the importing countries, said an official representing a large cosmetics importer.

Source : PTI

Anti-profiteering: Filing complaints against firms not an easy task : 07-12-2017


Are you upset over your favourite restaurant raising prices after reduction in goods and services tax (GST) or some retailer continuing to charge pre-GST rates or your supplier refusing to pass on the benefits of the new tax regime? Now you can file a formal anti-profiteering complaint.

The government has notified a format for filing such complaints. But, according to experts, the common man may find the format difficult to navigate.

The format requires details on input tax credit, Harmonised System of Nomenclature code and GSTIN of a company along with self-attested copies of every documentary evidence such as proof of identity, invoice and price, and a declaration by the complainant that all information furnished is true and that due diligence has been exercised in submitting such information. This comes close on the heels of the government setting up the National Anti-Profiteering Authority, with former additional secretary BN Sharma at the helm.

The anti-profiteering structure has a three-tiered framework, with state-level screening committees and a standing committee at the national level forming the first level of examination of complaints.

If these committees find a prima facie case after preliminary examination, the matter will be referred to the Director General of Safeguards for a detailed investigation.

The director general will investigate the company’s balance sheet and the allegations levelled. The investigation report will then go to the National Anti-Profiteering Authority for the final decision.

As per the rules, an application can be filed by any interested person including GST authorities. The government had repeatedly said that the anti-profiteering provisions are meant to act as a deterrence.

“The timing of coming out with the format is important given the recent GST rate cuts and consequent controversies… Given the granularity of information needed, it may be very difficult for the end consumers to file it,” said Pratik Jain, indirect tax leader, PwC. “Perhaps a simpler form is needed for a common man to have an effective mechanism.”

MS Mani, senior director, indirect taxes at Deloitte Haskins & Sells LLP said: “The format could work well if it is to be completed by tax officials. Others will find it difficult to fill up the mandatory fields marked in the form. Some details in the form would be available only with the progress of the investigation.”

Experts also said that this would discourage frivolous complaints. “The application form for filing the anti-profiteering request by a customer is elaborate. While this may deter a lot of consumers given the lack of information they may have, it will also discourage frivolous complains against suppliers of goods and services,” said Bipin Sapra, partner, EY.

Source : Economic Times

Jaitley kicks off pre-budget talks with unions and farmer groups ; 06-12-2017


Finance minister Arun Jaitley met trade unions and farmers groups on Tuesday, starting the process of pre-Budget consultations with key stakeholders.

Jaitley said to achieve the goal of doubling farmers’ income by 2022 there was need to improve storage and marketing facilities for agri produce so that farmers get better price, a statement issued by the finance ministry said.

He said there was need for water conservation, incentivising agro processing and balanced use of fertilisers in order to ensure higher agriculture productivity.

Farmers groups suggested that India has constantly pursued ‘Food Policy’ and Budget 2018-19 is an opportunity to shift to ‘Farmers’ Policy’. There is need to reduce pressure on the land by creating off-farm jobs, they suggested according to the finance ministry statement.

A ‘Price Deficiency Payment Mechanism’ was suggested for those crops where procurement cannot be ensured to provide more remunerative prices to farmers .

Other suggestions included an ‘Agriculture Debt Relief Package for the entire country, deeper focus on dairy, fruit and vegetable items, starting ‘Operation Veggies’. The focus should be on TOP —Tomato, Onion and Potato — as there is maximum volatility in their prices.

Thrust to warehouses, cold storages at the local level and give boost to agro processing, food and fertilisers subsidy through DBT, higher prices for urea and lower for other fertilisers. More focus to piggery, bee keeping, honey production, mushroom production and fisheries, and tax reliefs to the plantation companies were some of the other suggestions.

Twelve points

In a separate meeting, the trade unions presented a common memorandum of 12 point charter of demands.

The demands included allocations for social sector including health and education that can be funded by taxing the rich who have capacity to pay, effective measures against deliberate tax and loan repayment faults, minimum wages for all workers, stop disinvestment and strategic sale of PSUs and same wages for contract workers as permanent workers doing same work.

No FDI in crucial sectors like defence production, railways, retail trade and financial sector among others, higher exemption ceiling of.`5 lakh for income tax and EPF benefit for unorganised sector workers were some of the other suggestions.

Source : Financial Express

Panel moots wide-ranging revamp to make GST less taxing : 06-12-2017


A key committee set up by the government to simplify the goods and services tax (GST) has proposed a wide-ranging revamp of the reform that was put in place on July 1 to make compliance easier.

A composition scheme for services, deferment of the e-way bill till 2019 and abolition of the reverse-charge mechanism are some of the key measures proposed by the committee in its report submitted to finance secretary Hasmukh Adhia on Tuesday.

The group has also proposed simplification of return forms and exclusion of exempted goods from aggregate turnover, a person aware of the development told ET. Other suggestions include no interest charges on late payments and input tax credit for building and office infrastructure. The panel also suggested allowing those availing of the composition scheme to engage in inter-state sales.

Addressing Grievances
Under the composition scheme, those with turnover up to Rs 1 crore can opt for a flat tax without the need to maintain elaborate documentation and file returns. A higher Rs 1.5 crore limit has been approved by the GST Council, but that can be implemented only after a change in the law.
The government is eyeing further rationalisation of the GST framework, especially rules and procedures, as it looks to make the new tax more easy for businesses to comply with. The e-way bill refers to a document that’s required for the movement of goods worth above a certain threshold. The reverse-charge mechanism relates to the recipient of goods and services paying GST rather than the producer.
Traders and small businesses across the country have complained about provisions under the new tax as well as the compliance burden it imposes on them. GST replaced multiple state and central taxes and cesses and is aimed at turning India into a common market by removing barriers, thus improving efficiency, reducing costs and boosting growth.
The business community in Gujarat, which goes to the polls this month, has been at the forefront of protests against the new tax regime, especially with regard to compliance. The proposed procedural overhaul is expected to address these issues.
The GST Council, the apex decision-making body, had set up the advisory group comprising industry representatives to look at issues and suggest steps to make compliance under the new tax regime less onerous.
The group was specifically set up to look at central, state and integrated GST laws and problems faced by stakeholders. It had been asked to submit its report by November 30. The proposals will be taken up by the review committee set up to examine the GST law and will give its recommendations by December end. These will then be considered by the GST Council when it meets next in January.
Source : PTI

 

Union Budget 2018-19: Government may cut corporate tax for larger firms : 06-12-2017


In a move that will benefit larger companies, the government may cut corporate tax in the upcoming Union Budget.

ET Now reported quoting sources that the government is in discussion to slash corporate tax for larger companies in the Budget. Also, it is likely to give the glide path for reducing corporate tax for all companies to 25 per cent from the current 30 per cent.

For extending the tax cut, the government could consider companies with annual turnover of Rs 100 crore to Rs 500 crore.

A cut in corporate tax will also depend on revenue outlook for GST in the next fiscal.

Source : Economic Times

15th Finance Commission: To realise the goals under new India 2022, here is what Centre must remember : 05-12-2017


The appointment of the Fifteenth Finance Commission (15th FC) has not come a day sooner. The Commission will require two years to make recommendations on tax devolution and grants for the period 2020-25 and many other issues referred to it in the terms of reference (TOR). Besides the chairman, it has two full-time members and two part-time members, and given their competence, experience and specialised knowledge, it is well-equipped to deal with the challenging TOR within the specified period. Most governments tend to be a little uneasy around the Finance Commission as the latter act independently, and the Union government has no control over what they recommend. The problem gets complicated as there is a tradition of accepting the core recommendations of the Commissions, making them awards. Although it is the Union government which issues the TOR through the president and tries to nudge the Commissions to make recommendation in its favour through various directives, most Commissions have taken the view that India is a Union of States and resources raised by the Union government belong to the nation to be deployed between the Union and states to meet their needs arising from Constitutional assignments. Indeed, the Constitutional provision under Article 270 for sharing of Union taxes is the recognition of the fact that for reasons of comparative advantage, centralised collection of the tax is necessary but the proceeds do not entirely belong to the Union and must be shared with the states to enable them to fulfil their Constitutional mandate. The transfers recommended by the Commissions through tax devolution under Article 270 and grant under Article 275 are not charities; they are meant to enable the states to provide comparable levels of services at comparable tax rates while ensuring a budget balance in the revenue account. Over the years, the presidential TORs have mandated the Commissions to deal with a number of matters other than the core tasks listed under Article 280 namely, devolution of taxes, grants in aid to be given to states and measures to supplement the consolidated funds of the states to supplement the resources of rural and urban local bodes. Under 280 (d) – “Any Other Matter in the Interests of Sound Finance”, they have been asked to make recommendations on a number of issues. The provision has also been used to give directives to the Commissions—and some of these have been controversial.

There are some important differences in the presidential TOR to the 15th FC. Unlike the past Commissions which were specifically asked to take into account the 1971 population when used in the devolution formula, the 15th FC has been asked to use the 2011 population. This is important for, public services have to be provided to the current population and not the population of any earlier date. The stipulation to use 1971 population for allocating resources arose from a parliamentary resolution. The Fourteenth Finance Commission (14th FC) was asked to take account of 1971 population and also subsequent demographic changes. Since the 12th Finance Commission, an important mandate given to the commission is to prescribe fiscal targets and recommend a roadmap for consolidation. While the states, by and large, have complied with the targets, the Union government has been flouting them on one pretext or another. In fact, after the 14th FC submitted a roadmap, the Fiscal Review Committee with NK Singh as the Chairman was asked to revisit the road map for the period until 2023, and the committee recommended more stringent targets. It will be interesting to see whether there will be any departure from this. While the TOR nudges the commission to adopt a more incentivised approach to making transfers to states, there is no such attempt to influence the behaviour of the Union government. Tax effort is an issue relevant to both the Union and the state governments and now that the power to levy GST rests with the GST Council, states have limited manoeuvrability. Populism is a bane arising from electoral politics, and both the Union and State governments are equally guilty. At least as far as the states are concerned, their resource assessment is done by taking taxable capacity rather than actual tax revenues in the assessments whereas Central taxes are simply projected for the period of the award. The two most important differences in the TOR of the 15th FC relate to (i) the issue of whether the revenue deficit grants to be provided at all and (ii) impact of substantially enhanced tax devolution to states following the recommendations of the 14th FC on the fiscal situation of the Union government, and to take into account the imperative of the national development programme, including New India 2022. Both raise issues of Constitutional propriety and will be questioned by the state governments.

The Constitution makes specific provision for giving “grants in aid of revenues” to the states under Article 275 (1), and to suggest that revenue deficit grants may not be provided is tantamount to asking the Commission to ignore Articles 275 and 280 3 (b). In fact, constitutional experts have questioned the legitimacy of giving grants under 282 for central schemes and consider Article 275 as the only legitimate channel. As a matter of fact, tax devolution is made on the basis of criteria representing revenue and cost disabilities and these still leave some states with uncovered expenditure needs over their revenue capacity and the commissions have used the grants under 275 (1) to target the transfers to bridge them. Is it the intention of the TOR to nudge the commission to act in violation of the Constitutional provisions? Similarly, to suggest that the 15th FC should review the impact of the “overly generous” devolution by the 14th FC and take into account the impending commitments arising from New India 2022 is to nudge the 15th FC to reduce the devolution to the states to meet the requirements of the central schemes. There are two issues with this. First, the 14th FC’s recommendation on increasing devolution from 32% to 42% is not as generous as it looks. It must be noted that unlike the previous Commissions, the 14th FC was asked to cover the requirements under both Plan and Non-Plan accounts which required it to subsume Gadgil formula grants, amounting to 5.5% of the divisible pool in their recommendation. In addition, the 14th FC avoided giving discretionary sectoral grants including environmental grants amounting to 1.5% of the divisible pool. Thus, the legitimate comparison should be between 39% and 42%. Furthermore, the 14th FC’s analysis showed that Union government’s spending on the State List increased from 14% during 2002-05 to 20% during 2005-11, and the increase in spending on Concurrent List was from 13% to 17%. The increase of three percentage points was only to give the states greater flexibility. The 15th FC has an important role at this juncture in strengthening the fabric of fiscal federalism and intergovernmental finance. Offsetting the fiscal disabilities of the states is critical to achieving and realising the goals under “New India 2022”

Source : Financial Express

CBEC calls for reality check to boost GST mop-up : 05-12-2017


Amid concerns over slowing goods and services tax (GST) collections, the Central Board of Excise and Customs (CBEC) has sought detailed field reports with a special focus on the top taxpayers.

Finance secretary Hasmukh Adhia will review the revenue position with senior officials in the department on December 9.

Field officers have been asked to submit a detailed analysis comparing tax payments, before and after GST was imposed, of the top 100 taxpayers in their jurisdictions as the government seeks to understand the reasons for collections slowing. The officials have been authorised to contact the assessees personally or even visit their premises.

India’s GST collections in October fell to Rs 83,346 crore from a high of over Rs 92,000 crore in September. Moreover, the Centre’s share has been low after payment of compensation cess to states. The total central GST collection in the first four months of the new tax — July, August, September and October — has been Rs 58,556 crore.

The government is looking to avoid any revenue shortfall as it’s keen to stick to the fiscal deficit roadmap while nurturing an economic revival. The fiscal deficit was at 96% of its full-year target by the end of October.

ET has seen the letter sent by CBEC directing field officials to analyse GST collections in detail.

Monthly Turnover Details

The department is providing data to field officials based on GSTR 3B filings by the big assessees to help them make comparisons with the pre-GST regime. Each commissionerate has to review the top 100 assessees as per central excise and service tax revenues according to FY17 data and match that with their tax payments in the GST regime. Where possible, the officials have to also consider valueadded tax and central sales tax revenues under the  previous regime.

Source : PTI

GST slows service activity in November, PMI at 3 month low : 05-12-2017


Sluggish demand and lower customer turnout due to the Goods and Services Tax (GST) rollout made India’s service activity contract for the first time in three months in November, a private survey showed on Tuesday.

The Nikkei India Services PMI Business Activity Index plunged from 51.7 in October to 48.5 in November.

A reading above 50 indicates economic expansion, while a reading below 50 points toward contraction.

“Following modest growth in the previous two months, hopes of a sustained recovery in November waned as marked growth in the manufacturing sector was broadly offset by a downturn in the service sector,” said Aashna Dodhia, Economist at IHS Markit, and author of the report.

As per the survey, underlying data highlighted that service activity fell in response to a drop in new business during November. According to anecdotal evidence, July’s GST continued to affect businesses as it led to sluggish demand and lower customer turnout. As with the case with activity, the rate of contraction in new work was modest.

A similar survey last week showed manufacturing activity in November expanding at its fastest pace in 13 months

Put together, the Nikkei India Composite PMI Output Index fell from 51.3 in October to a three-month low of 50.3 in November.

On employment front, despite unfavourable demand conditions, service providers continued to add to their workforce numbers. That said, employment growth eased to a modest pace and further away from September’s recent high.

Source : Economic Times

Notification No. SO 3804(E) [F.No.01/12/2009-CL-I (VOL.IV)], Dated 4-12-2017


SECTION 435 OF THE COMPANIES ACT, 2013 – SPECIAL COURTS – ESTABLISHMENT OF – NOTIFIED SPECIAL COURTS

NOTIFICATION NO. SO 3804(E) [F.NO.01/12/2009-CL-I (VOL.IV)]DATED 4-12-2017

In exercise of the powers conferred by sub-section (1) of Section 435 of the Companies Act, 2013 (18 of 2013), the Central Government, with the concurrence of the Chief Justice of the High Court of Karnataka, hereby designates the following Court mentioned in column (1) of the Table below as Special Court for the purposes of providing speedy trial of offences punishable with imprisonment of two years or more under the said sub-section, namely:—

TABLE

Court Jurisdiction as Special Court
(1) (2)
LIX Additional City Civil and Sessions Judge, Bengaluru City State of Karnataka

 

Notification No. GSR 1480(E) [F.NO.1/19/2013-CL-V], Dated 4-12-2017


COMPANIES (FILING OF DOCUMENTS AND FORMS IN EXTENSIBLE BUSINESS REPORTING LANGUAGE) SECOND AMENDMENT RULES, 2017 – SUBSTITUTION OF ANNEXURE III

NOTIFICATION NO. GSR 1480(E) [F.NO.1/19/2013-CL-V]DATED 4-12-2017

In exercise of the powers conferred by sub-sections (1) and (2) of section 469 read with section 398 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015, namely:—

Short title and commencement

1. (1) These rules may be called the Companies (Filing of Documents and Forms in Extensible Business Reporting Language), Second Amendment, Rules, 2017.

(2) They shall come into force from the date of their publication in the Official Gazette.

2. In the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015, for Annexure-III, the following Annexure shall be substituted.

If this strategy of Modi works, then it could cement BJP’s position and set up his re-election in 2019 : 04-12-2017


Narendra Modi’s steady conquest of India’s state governments and his drive to unify taxes across the country are fueling a new competition between provincial chief ministers for investment in factories, businesses and jobs that is redrawing the country’s industrial map. The ruling Bharatiya Janata Party has extended control to a record 18 states, representing roughly 60 percent of India’s gross domestic product. That’s allowing Modi to erode decades of fighting between the central government and provincial leaders, who are responsible for everything from providing industrial land to law and order. While Modi’s lack of a majority in the upper house of parliament hinders his ability to implement change at the federal level, the state-level victories give him the chance to speed up reforms like land acquisition and labor laws across a large part of the country. And by forcing even non-BJP chief ministers to compete for investment by providing infrastructure and cutting bureaucracy, rather than through tax breaks and corruption, businesses are being encouraged to invest in states that previously had little to offer. “Over the past few years, we have seen a concerted effort by the central government to drive competitive federalism among states,” said Abhishek Gupta, Mumbai-based India analyst with Bloomberg Economics. “Irrespective of political affiliation, we should see state governments competing against each other for business investment.” Modi is fueling the new competition by sending state governments a higher share of federal tax revenue. If his strategy works, and more of the country sees an economic boost, it could cement the BJP’s position in power and set up Modi for re-election in 2019.

Rajasthan Reforms

Since the BJP took power in poor, landlocked Rajasthan in 2013, the state government has tried to promote industrial growth by reforming labor laws, land purchasing rules and power distribution. “Rajasthan is almost always among the leaders in terms of the highest number of positive regulatory changes,” said Richard Rossow at the Center for Strategic and International Studies in Washington, D.C. “We have seen several BJP states in addition to Rajasthan tend to be among the leaders in enacting reforms.” The BJP administration has purchased land for factories directly from farmers to set up dedicated industrial areas, removing one of the traditional bugbears of trying to build a factory in the country. Land negotiations have frequently become bogged down in talks with conflicting groups, such as farmers and local officials, giving rise to corruption and legal disputes that could hold a project up for years. One zone in Rajasthan, near the city of Neemrana was set up just for Japanese manufacturers, and now hosts Toyota Motor Corp. and Daikin Industries Ltd. “They are friendly to industry,” said Ram Narain Singh at his auto parts factory in Bhiwadi, Rajasthan. The BJP-ruled state of Madhya Pradesh is now emulating Rajasthan’s labor law reforms, Capital Economics analyst Shilan Shah said in a Sept. 13 note.

Political Consolidation

The BJP has spread across India at a remarkable rate. In March, it came to power in Uttar Pradesh, India’s most populous state with 200 million people, as well as in the smaller states of Goa and Manipur. In July, the BJP helped form the government in Bihar, a state of 100 million, after a governing coalition collapsed. Polls suggest the BJP will retain power in Gujarat in elections in December and could wrest control of mountainous Himachal Pradesh from the opposition Congress party. Rajasthan industry minister Rajpal Singh Shekhawat said economic growth gets a boost when both the central and state governments are the same party, because policy cooperation is more likely. “We believe that poverty cannot be alleviated by state investment alone,” Shekhawat said in his Jaipur office. “Poverty can only be eliminated by an accelerated pace of growth.” Despite a slump in India’s economic growth rate, partly thanks to the roll out of the goods and services tax and a shock move last November to demonetize much of the country’s currency, Modi remains popular among voters. A survey in May found he was the preferred prime minister for 44 percent of respondents and the BJP retained the level of support that gave it a sweeping victory in 2014. Still, the easier political gains at a provincial level may be coming to an end for the BJP.

‘Difficult States’

“What are left are the more difficult states — West Bengal, Kerala, Tamil Nadu — where our presence has been negligible at best,” said Yashwant Sinha, a senior party leader who was finance minister in a previous BJP government. BJP or not, with states still wielding so much power, investors suggest the quality of the local chief minister is a big factor in a state’s performance. In Uttar Pradesh, the ruling party appointed Hindu monk Yogi Adityanath as chief minister. He immediately channeled Hindu cow worship into a campaign against “illegal” slaughterhouses. Soon after, executives at legitimate meat export businesses complained of official harassment and a steep drop in business. Adityanath also came in for criticism after dozens of children reportedly died at a government-run hospital that wasn’t paying suppliers. Siddharth Nath Singh, Uttar Pradesh’s health minister, defended the chief minister’s actions and said the government acted firmly on the health crisis. In Haryana, another BJP-ruled state, the party appointed newly-elected legislator Manohar Lal Khattar to the top job in 2014. He has come under fire for the state’s handling of a series of violent riots in August related to the arrest of a religious leader, including one that killed more than 30 people The violence mirrored a week of angry protests in 2016 that prompted Maruti Suzuki India Ltd. to temporarily halt production at two factories. Khattar has defended the police response during the unrest, while Congress party members called for Khattar’s resignation.

Neeraj Daftuar, who works in Khattar’s office, said the protests have roots predating Khattar’s appointment and that “it would be unfair if we were to judge him just on the law and order situation.” “The recent law and order crisis in Haryana and the health tragedy in UP have complex causes, but the inability of the state to marshal an effective response cuts against Modi’s pledge to bring a dose of good governance to India’s states,” said Milan Vaishnav, a senior fellow at the Carnegie Endowment for International Peace. “This raises concerns not only for wary investors, but also for residents of the state.”

The BJP has also advocated populist policies such as waiving farmer loans that could widen state fiscal deficits. “Whether it’s a BJP state or a Congress state or a whatever state, it’s leadership that delivers results,” said Salil Singhal, an Indian businessman who works in both Rajasthan and Gujarat. “There is now a competition among the states to say, ‘Things are better here than elsewhere, so come and invest in my state.’”

First post-GST budget likely on February 1 : 04-12-2017


Finance Minister Arun Jaitley is likely to present India’s first post-GST and the current government’s last full Budget on February 1 next year.

The Budget session of Parliament may begin on January 30 with President Ram Nath Kovind addressing the Joint Session of both the Houses of Parliament, a senior government official said.

The Economic Survey, detailing the state of the economy, is likely to be tabled on January 31 and the Union Budget may be presented the following day, he said.

Scrapping the colonial-era tradition of presenting the Budget at the end of February, Jaitley had for the first time presented the annual accounts on February 1 this year.

The Budget presentation was advanced by a month to ensure that proposals take effect from April 1, the beginning of the new financial year.

Also, the nearly century old tradition of having a separate budget for the railways was scrapped and merged with the general budget.

The tentative schedule being drawn up for the Budget Session means that there would be less than a month’s gap between two sessions of Parliament. The Winter Session, which begins on December 15, will end on January 5.

The official said that at least on one occasion in the past — in 1976, when Indira Gandhi was the Prime Minister, had the winter session spilled into January. But in those days, the Budget was presented on the last day of February and so there was one-month gap between the two sessions.

The Union Budget 2018-19 would be the last full Budget of the BJP-led NDA government before the 2019 General Elections. As per the practice, a vote-on-account or approval for essential government spending for a limited period is taken in the election year and a full-fledged budget presented by the new government.

While P Chidambaram had presented the previous UPA government’s vote-on-account in February 2014, Jaitley had presented a full budget in July that year.

The official said this will be the first budget post implementation of the Goods and Services Tax (GST) regime.

Even though independent India’s biggest tax reform of GST was implemented from July 1, the Budget for 2017-18 (April- March), had followed the practice of tax revenue projections under the heads of customs duty, central excise and service tax alongside direct tax numbers.

With excise duty and service tax being subsumed in the Goods and Services Tax (GST), the classifications in the forthcoming budget may undergo change, he said.

While a new classification for revenues to be accrued from GST will be included in the Budget for next fiscal, for the current year two sets of accounting may be presented one for actual accruals during April-June for excise, customs and service tax, and the other for July-March period for GST and customs duty.

The official said that since the GST rates are decided by a GST Council, headed by Union Finance Minister and comprising of representatives of all states, the Budget for 2018-19 may not have any tax proposals concerning excise and service tax levies.

Only proposals for changes in direct taxes, both personal income tax and corporate tax, besides customs duty, are likely to be presented in the Budget along with new schemes and programmes of the government.

This will be Jaitley s 5th Budget in a row.

With the preponement of Budget, ministries are now allocated their budgeted funds from the start of the financial year beginning April. This gives government departments more leeway to spend as well as allow companies time to adapt to business and taxation plans.

Previously, when the Budget was presented at the end of February, the three-stage Parliament approval process used to get completed some time in mid-May, weeks ahead of onset of monsoon rains. This meant government departments would start spending on projects only from August-end or September, after the monsoon season ended.

Besides advancing the presentation date, the Budget scrapped the Plan and non-Plan distinction as well.

Source : PTI

Monetary panel set to hold rates citing inflation, growth revival : 04-12-2017


The Monetary Policy Committee (MPC) will likely vote to keep interest rates unchanged later this week citing inflationary pressure and a recovery in economic growth, according to an ET Poll conducted among 20 market participants.

In RBI’s bi-monthly policy announcement due on December 6, the MPC may also warn of rising prices and adopt a more hawkish tone, which could well be a prelude to a change in stance to tightening from neutral, said a majority of respondents. The MPC will meet on Tuesday and Wednesday.

“Growth concerns are likely to somewhat recede in the coming quarters as the positive impact of reform measures like GST (goods and services tax) will creep in,” said Shubhada Rao, chief economist at Yes Bank. With inflation and fiscal deficit remaining as risks, these factors collectively make a case for status quo while the markets look for the central bank’s assessment in the policy statement. “Room for rate cut is getting squeezed,” she said.

Retail Inflation may go up

India’s gross domestic product expanded 6.3% in the July-September quarter from a year earlier, reversing five quarters of slowing growth and up from a three-year low of 5.7% in the preceding quarter. That comes after disruptions caused by demonetisation in November last year and GST’s rollout on July 1

“India’s growth is below trend, temporarily disrupted by big-ticket reforms and a weak capex cycle,” said DBS Bank economist Radhika Rao. “The resultant negative output gap has helped contain price pressures, but this is likely to reverse if growth sets into motion next year, as businesses adjust to the new tax regime, (and) the deleveraging process hastens due to bank recap plans. Also, demand recovers, pulling up manufacturing activity alongside.”

Manufacturing activity expanded at its fastest pace in 13 months in November. The Nikkei Indian Manufacturing Purchasing Managers’ Index rose to 52.6 in November compared with 50.3 a month earlier.

“The domestic and global factors which may trigger a rise in inflation might prompt a hawkish response from the MPC, thereby signalling a change in the interest rate cycle,” said Saugata Bhattacharya, chief economist at Axis BankBSE 0.86 %. “MPC’s communication will be critical in this transition. More than rates, this review will be more about liquidity and transmission. Government’s reform measures are raising India’s potential output.”

The Consumer Price Index (CPI), the retail gauge for inflation, hit a seven-month high, led largely by higher vegetable and fuel prices.

It rose 3.58% in October over the same month last year. It may increase as much as 4.5% by March this fiscal year.

The MPC has maintained a neutral monetary policy stance with the objective of achieving the medium-term CPI target of 4% within a band of 2 percentage points on either side. State Bank of IndiaBSE 0.67 %, the country’s biggest lender, last week raised interest rates by about 100 basis points on bulk deposits.

Since the beginning of October, the benchmark bond yield has risen by about 42 basis points to 7.06%. A basis point is one-hundredth of a percentage point.

Earlier in August, the MPC cut its key policy rate by 25 basis points to 6%, the lowest since November 2010. “RBI’s current neutral stance has an option for rate increase, but nothing would happen immediately, be it change of stance or something else,” said Abheek Barua, chief economist at HDFC Bank. “An extended pause is expected in RBI’s policy action with the central bank anchoring the inflation cautiously.”

Source : Economic Times

CBDT PRESS RELEASE, DATED 1-12-2017


SECTION 92CC OF THE INCOME-TAX ACT, 1961 – TRANSFER PRICING – ADVANCE PRICING AGREEMENT – INDIAN ADVANCE PRICING AGREEMENT REGIME MOVES FORWARD WITH SIGNING OF TWO MORE APAs BY CBDT IN NOV. 2017

CBDT PRESS RELEASEDATED 1-12-2017

The Central Board of Direct Taxes (CBDT) has entered into 2 Bilateral Advance Pricing Agreements (APAs) during the month of November, 2017. These Agreements are the first ever Bilateral APAs with The Netherlands. With the signing of these Agreements, the total number of APAs entered into by the CBDT has gone up to 186. This includes 171 Unilateral APAs and 15 Bilateral APAs.

These two APAs pertain to the Electronics and Technology sectors of the economy. The international transactions covered in these agreements include Distribution, Provision of Marketing Support Services, Provision of Business Support Services, etc.

The APA provisions were introduced in the Income-tax Act in 2012 and the “Rollback” provisions were introduced in 2014. The APA Scheme endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance. Since its inception, the APA Scheme has been well-accepted by taxpayers.

The progress of the APA Scheme strengthens the Government’s resolve of fostering a non-adversarial tax regime. The Indian APA programme has been appreciated nationally and internationally for being able to address complex transfer pricing issues in a fair and transparent manner.

From GST to income tax to infra boost: India’s near term economic future in 6 points by Arun Jalitley : 01-12-2017


India’s economic growth made an impressive comeback in the second quarter of the fiscal year 2017-2018 at 6.3% after hitting a three-year low of 5.7% in the previous quarter, majorly due to structural reforms such as demonetisation and the massive destocking ahead of the implementation of the Goods and Services Tax. “The economic activities that registered a growth of over 6% in the Q2 of 2017-18 against the Q2 of 2016-17 are manufacturing, electricity, gas, water supply & other utility services, and trade, hotels, transport & communication and services related to broadcasting,” Ministry of Statistics & Programme Implementation said in a statement. Taking stock the second quarter performance, Finance Minister Arun Jaitley said, “It indicates that perhaps the impact of two very significant structural reforms – demonetisation and GST – is behind us and hopefully in coming quarters we can look for an upwards trajectory.” The Union Finance Minister yesterday, also gave a glimpse of India’s near term economic future. We take a look at six key takeaways.

 Reduction in GST slabs

Finance Minister Arun Jaitley on Thursday indicated that the number of slabs of Goods and Services Tax (GST) could be pruned to just three from four currently. The Goods and Services Tax (GST), rolled out on July 1, currently has four tax slabs of 5, 12 18 and 28 per cent. “We started the rationalization (of GST rates) ahead of schedule. Future rationalization will depend on how the revenue moves. We have thinned down the 28% slab. Moving ahead, we will rationalize it further to probably keep only luxury items in the highest bracket,” Arun Jaitley said. This will be achieved by merging the 12% and 18% slab. “We need to consider if we have the scope of merging the 12% and 18% slabs and have an interim rate. We have the lowest rate at 5%, then this new merged rate and the very thin slab of 28%. Eventually, that will be the direction,” Arun Jaitley said yesterday.

Focus on SMEs

The government is looking to prop up growth in the small scale enterprises sector. The Union minister said that the government is looking to focus on the informal as well as small-scale enterprises in the future. “Banks will fund SMEs and the informal sector from the leftover cash it received during demonetisation,” Arun Jaitley said. Further, Arun Jaitley pointed out that bulk of the job creation comes from this segment.

Fiscal Deficit Reduction

The government is looking to trim fiscal deficit to 3.2 percent of gross domestic product in 2017/18 compared with 3.5 percent in the previous year. “The last three years we have an exemplary record as far as maintaining that glide path is concerned. We intend to move on that track,” Arun Jaitley said on Thursday during the sidelines of an event.

Infrastructure Spending

In the last ten years, India has spent Rs 60 lakh crore in infrastructure. Finance Minister Arun Jaitley pointed out that the government has increased its allocation to infrastructure in the next budget. “In recent time, the government has increased infrastructure spending”, he said, adding the Budget 2017-18 made allocation of Rs 3.96 lakh crore for infrastructure sector.

Improving Tax Compliance

Arun Jaitley noted that one of the major hindrances to increase infrastructure spending in India has been the low tax compliance. “One of the great challenges which remained in India and that directly impinges on the creation of the world class infrastructure is that India was largely a tax non-complaint society,” he said. According to the Minister, “extraordinarily high taxation rates in the past” had encouraged people to evade taxes. Arun Jaitley also pointed out that  Indians need to be nudged to comply to economic norms and that the 5% income tax rate is a ploy to get people to start paying taxes.

Increased dependence on global economy

Arun Jaitley pointed out that India alone cannot generate a double digit growth, but would need the help of the global economy achieve it. “A 10 percent growth is a very challenging figure. It will not merely depend on domestic factors. It will also depend on how the world is moving,” Arun Jaitley said yesterday. According to Minister, exports contribute a lot to GDP, and if they fall due to a slomp in world economy, it could hamper India’s growth. “Exports contribute a sizeable portion to GDP (gross domestic product) itself. That is an area we certainly need to keep our fingers crossed, if the world were to slow down,” Arun Jaitley said.

Source : Financial Express

Manufacturing back in business, shrugs off GST, demonetisation blues : 01-12-2017


Stunning. That was the only word to describe the number flashing on television screens on the evening of August 31 this year. The first-quarter GDP numbers had just been released and growth had slipped to 5.7%, a three-year low.

While that in itself was shocking, what was even more stupefying was the collapse of manufacturing. Quarterly gross value added (GVA) growth for the sector slipped to 1.2% compared with 10.7% in the previous year. 1.2%!, that’s it.

Private sector growth, deduced from the data available from listed companies on the stock exchanges was even more stunning.

A negative 0.9% compared with a 10.2% growth in year-ago period! It took some time for the numbers to sink in. But when it did, the full extent of the problems in manufacturing induced by GST rollout became apparent. Businesses had stopped or sharply cut back production of goods in May-June ahead of the GST rollout on July 1. Small businesses still facing demonetisation after-effects suffered even more and that was fully reflected in the data captured by government’s statisticians.

Cut to November and the picture has changed. On Thursday, the second quarter GDP estimates were released showing a smart bounce in GDP and manufacturing. GVA for manufacturing rose 7% in the quarter compared with 1.2% in April-June, while private sector corporate growth was a healthy 11.4%. Of course, the numbers were still lower than 7.7% manufacturing growth in second-quarter of 2016/17 when the economy was humming along before the demonetisation shock in November last year. So there is  a lot of room to do more. This is obviously not the best performance and one should refrain from celebrating too much or calling this a spectacular turnaround. But there is no doubt that the woes caused by GST and demonetisation, at least for big and medium manufacturers, have ebbed and that they are on the cusp of faster growth.

Consider the following: GVA for mining and quarrying grew 5.5%, the highest growth rate the sector has posted in the first-half of the fiscal year since 2015/16. Electricity, gas water supply and utilities recorded a growth of 7.6% in GVA compared with 5.1% in the year-ago quarter.

The star performer here was electricity which grew by 6.1% in July-September compared with 3.1% last year.

Commercial vehicle sales jumped 21% in the second-quarter, while cargo handled by civil aviation grew by 18.9%; railway freight growth measured by net tonne kilometres was up 5.0%. Construction has been having a bad time but second-quarter numbers show that it has actually held up quite well. Now, construction here covers cement production, consumption of finished steel. These haven’t grown as much as the previous year but the category has grown 2.6%, which is up from 2.0% growth in the first-quarter.

An interesting anomaly needs to be mentioned here and that is the discrepancy between the cement production data and the actual volume growth reported by major cement companies in the three-months ended September 30.

Almost all the big cement firms reported double-digit volume growth in the second-quarter with ACC and UltraTech volumes rising 18% followed by Gujarat Ambuja’s 12% growth. Smaller JK Lakshmi Cement too reported 10% volume growth. New capacities through mergers helped support this growth but still this is surprising as the second-quarter is generally weak for cement companies due to monsoon and dull construction activity across the country. So one shouldn’t read too much into the dip  in cement production and I think a fuller analysis is needed to understand the demand conditions for cement companies.

On Thursday, we had another interesting data release and that was the performance of core industries. The eight core industries, that is cement, steel, fertiliser, natural gas, crude oil, refinery products, coal and electricity grew by 4.7%, compared with 7.1% last year. The figure was the same as previous month and the joint highest growth for this fiscal year. Once again, it shows a revival in manufacturing led by steel, refinery products, coal and electricity.

Source : PTI

GST: Anti-profiteering becomes a board issue : 01-12-2017


Anti-profiteering under the goods and services tax (GST) has gone from being a plain costing issue to one that’s worrying board members. Several directors have written to company CFOs and finance teams seeking an update on price reductions under GST, said people aware of the matter.

The government has been actively pushing companies to pass on the benefits of GST, especially after rate reductions earlier this month, and directors don’t want their companies to get caught up in complaints on this score with the anti-profiteering authority about to be established, experts said. On the other hand, they are also concerned about maintaining profitability

Central Board of Excise and Customs (CBEC) chairperson Vanaja Sarna recently wrote to about 100 consumer goods companies regarding GST benefits being passed on to consumers. Directors in most of these companies are asking for updates on anti-profiteering, said the people cited above. Some of the queries are also being directed at tax advisors, they said.

“Anti-profiteering has become a board issue, subsequent to the letter from CBEC,” said Sachin Menon, national head, indirect tax, KPMG India. “The basic question is what will be the benchmark price that companies must take, on the basis of which reduction has to be applied.”

Tax experts said companies are also concerned about profitability. While some companies have already announced by how much prices would be slashed, it’s just beginning of a complex pricing exercise, they said.

“While passing on rate reductions to end customers is a complex task in itself, considering the specific supply chain and pricing aspects that are relevant to a business, determining input tax credits that are required to be passed on is a very intricate exercise requiring significant cost accounting expertise,” said MS Mani, partner, Deloitte India.

India’s biggest fast-moving consumer goods (FMCG) including Hindustan Unilever, Proctor and Gamble, Marico, Dabur and Mondelez told ET they have already passed on the benefits of GST by either slashing the maximum retail price (MRP) or by increasing grammage.

Insiders said many boards are planning to discuss anti-profiteering at upcoming meetings, with CFOs and tax advisors asked to make presentations along with the latest updates.

“Many companies require external assistance in order to prepare a report card documenting the steps taken and outcomes achieved in order to comply with the anti-profiteering regulations,” said MS Mani, partner, Deloitte India.

FMCG companies, especially listed ones, need to balance the expectations of investors and consumers, experts said. While being penalised for profiteering is a risk, not able to show healthy margins could backfire on the company’s stock.

“The problem for several companies is maintaining a balance between price reductions and profitability,” said an independent director with one of the companies. “It’s a reputation risk if tomorrow the government pulls up the company but if margins dip, it could reflect on investor sentiment.”

Most companies are conducting extensive product-wise analysis, having cut prices to avoid being on the wrong side of the law, said tax experts. This is mainly because there is no mechanism to estimate anti-profiteering and whether companies can deduct compliance costs from the benefits they derive from GST rate cuts.

Tax experts also said there is no guides on cutting prices.

“Most products will have fluctuating price lines depending on the season/discounts during a year,” said Menon of KPMG India. “Though boards want to adhere to anti-profiteering norms, the costing is turning out to be a nightmare for most companies as there are no parameters as to how such a complex calculation–for example, product level or entity level–could be carried out.”

As it stands today, anti-profiteering mostly mandates companies to pass on benefits derived from input tax credits or output tax due to GST to consumers. The focus of the exercise is currently on companies that directly impact consumers and not passing on benefits of GST, which could trigger inflation going ahead.

Source : Economic Times

F.NO. DGIT(Vig.)/HQ/SI/2017-18 – 30-11-2017


SECTION 143 OF THE INCOME-TAX ACT, 1961 – ASSESSMENT – GENERAL – INSTRUCTIONS FOR UNAUTHORIZED EXPANSION OF SCOPE OF LIMITED SCRUTINY

LETTER [F.NO.DGIT(VIG.)/HQ/SI/2017-18]DATED 30-11-2017

CBDT has issued detailed guidelines/directions for completion of cases of limited scrutiny selected through CASS module. These guidelines postulate that an Assessing Officer, in limited scrutiny cases, cannot travel beyond the issues for which the case was selected. The idea behind such stipulations was to enforce checks and balances upon powers of an AO to do fishing and roving inquiries in cases selected for limited scrutiny.

2. Further, the guidelines for proper maintenance of order sheets have been given in the Manual of Office Procedure issued by the Directorate of Organisation and Management Services. The Manual clearly lays down:—

A. The minutes of the hearing must be entered with date, in the order-sheet.
B. Make proper order-sheet entries for each posting, hearing and seeking and granting of adjournments.
C. If nobody attends a hearing or the request for adjournment comes after the hearing date, enter the facts in the order-sheet.

Maintenance of a cursory and cryptic order sheet shows irresponsible, ad hoc and undisciplined working of any officer.

3. Instances have come to notice of CBDT where some Assessing Officers are travelling beyond their jurisdiction while making assessments in Limited Scrutiny cases by initiating inquiries on new issues without complying with mandatory requirements of the relevant CBDT Instructions dated 26-9-2014, 29-12-2015 and 14-7-2016. These instances have been viewed very seriously by the CBDT and in one case the Central Inspection Team of the CBDT was tasked with examination of assessment records on receipt of allegations of several irregularities. Amongst other irregularities, it was found that no reasons had been recorded for expanding the scope of limited scrutiny, no approval was taken from the PCIT for conversion of the limited scrutiny case to a complete scrutiny case and the order sheet was maintained very perfunctorily. This gave rise to a very strong suspicion of mala fide intentions. The Officer concerned has been placed under suspension.

4. In view of discussion in the preceding paragraphs it is once again reiterated that the Assessing Officers should abide by the instructions of CBDT while completing limited scrutiny assessments and should be scrupulous about maintenance of note sheets in assessment folders.

India seen posting stronger growth as businesses adjust to new tax : 30-11-2017


India’s economic growth pace likely picked up in the three months ending in September, halting a five-quarter slide as businesses started to overcome teething troubles after the bumpy launch of a national sales tax. The economy also has moved past the disruptions encountered after India’s shock ban on high-value banknotes in November 2016, economists say. For July-September, the median in a Reuters poll of economists was for annual growth of 6.4 percent. Forecasts ranged from 5.9 percent to 6.8 percent. If there was 6.4 percent growth, that would mark a sound acceleration from 5.7 percent in April-June, but still lag China’s 6.8 percent and Philippines’ 6.9 percent for the three months through September.

The data could help Prime Minister Narendra Modi, who is facing criticism over the hasty July launch of Goods and Services Tax (GST) – aimed at transforming India’s 29 states into a single customs union – but hitting millions of small businesses due to complex rules and technical glitches. Big companies have largely adjusted to the changes while benefiting from reduced logistics costs. Prominent Indian firms had their best profit growth in last six quarters in July-September, according to Thomson Reuters data.

The results are an indication that firms are starting to recover after being hit earlier this year by uncertainty tied to the rollout of a new tax and a shock ban on cash in late 2016. In July-September, auto sales, manufacturing, electricity generation grew more quickly than in the previous quarter. “We expect a gradual recovery led by the industrial sector as businesses adjust to the GST regime,” said Aditi Nayar, an economist at ICRA, the Indian arm of Moody’s Investors Service.

RATINGS UPGRADE

On Nov. 17, Moody’s upgraded India’s sovereign credit rating for the first time in nearly 14 years, saying continued progress on economic and institutional reforms would boost its growth potential. It expects the economy to grow 6.7 percent in the fiscal year ending March 31, and 7.5 percent the following year. Many private-sector economists expect faster growth in the current quarter and January-March as consumers and businesses step up spending and global recovery gains traction.

 Urjit Patel, governor of the Reserve Bank of India (RBI), said last month that signs of an upturn were visible and growth was likely to top 7 percent in those quarters. Modi’s administration hopes the ratings upgrade can attract more foreign investors, who pumped $15 billion into Indian equities in July-September, up 44 percent from the previous quarter. The main NSE share index is up 27 percent in 2017.

Still, the world’s seventh largest economy, which grew at more than 9 percent a year from 2005 through 2008 is far from firing on all cylinders. Domestic demand and private investments remain weak. After front-loading state spending in the fiscal year’s first half, Finance Minister Arun Jaitley has limited room to spend amid slowing revenue growth.

Finance Ministry officials hope the central bank will cut interest rates soon, but analysts say that rising global oil prices, which could pinch consumers through higher inflation, may instead force the RBI to hike in the second half of 2018, denting growth momentum.

GST cuts: Get more for same price : 30-11-2017


The next time you visit the market to shop for your daily essentials, you may see bigger pack sizes at the same price as some consumer goods companies are planning to increase the weight of their products to pass on gains from revised GST rates.

Authorities had written to companies to pass on the benefits of cuts in GST to consumers. And companies are now devising ways to comply with these requests. Mondelez India, the maker of Bournvita, Cadbury and Oreo cookies, said, “To pass on the benefits to our consumers, we are either reducing prices where the coinage is not an issue or increasing grammage, which means giving more product to the consumer at the same price. This is important for a large number of our products at price points like Re 1, Rs 2, Rs 5 and Rs 10 — which are critical for consumer convenience and value.”

Similarly, Hindustan UnileverBSE -1.30 % (HUL), the maker of daily household products including Rin, Domex and Dove, has increased the grammage on Rin Powder Rs-10 pack from 125gm to 140gm. “This has also been advertised to ensure consumers are aware of the change,” said an HUL spokesperson.

In addition, around 600 of HUL’s stock keeping units (SKUs) are being impacted by the reduction in maximum retail price (MRP), or increase in weight. “As we pass on GST rate reductions, the benefits to consumers across categories will be between the range of 7% and 10%,” the spokesperson said. “We are confident that the transition of a sizeable part of our portfolio to reduced MRPs/increased grammage will be completed in the next few weeks.”

Other companies that TOI reached out to were Marico, ITC and GSK, which did not respond to queries on weight-increase of products. Pratik Jain, partner and leader indirect tax at consulting firm PwC, said, “From a consumer standpoint, increase in weight also results in effective reduction of price, hence it should be viewed as sufficient compliance of anti-profiteering laws.”

Source : PTI

Finance ministry, exporters spar over GST refunds, claims : 30-11-2017


The revenue department and the exporters are sparring over unpaid refunds and tax credits that have accrued to businesses since Goods and Services Tax (GST) was implemented in July. The finance ministry put out a release saying that exporters have claimed integrated GST refunds of Rs 6,500 crore during the first four months of the rollout, while input credit claims added up to Rs 30 crore.

But exporters contested the numbers. Citing discussions during an official meeting, exporters claimed that the finance ministry had said that Rs 6,500 crore was around 15% of the overall dues to exporters.

“On this basis, the total outstanding refund would be to the tune of Rs 43,000 crore. Central Board of Excise and Customs (CBEC) has no figure of GST refund due to services exports as the same is not routed through customs or where shipping bill is filed. The quarterly exports of services is to the tune of $50 billion,” said a source.

While the tax department advised exporters to file claims in proper form with matching shipping bills to facilitate early settlements, businesses said that problems with the system were making it tough to comply.

Many exporters using inland container depots have told the commerce department that their IGST refund claims were not traceable. Since they have received duty drawback, the shipping bills have moved into ‘history basket’ of the system. As a result, export manifest at the gateway port, which is now being filed, is not getting linked with the shipping bill to facilitate the claim. “This was not told in July. Now, they want us to do all this but even that is not showing. CBEC is in denial mode and that makes it difficult to find an effective solution,” said an exporter.

On its part, the finance ministry said, exporters can upload the final sales return for August in GSTR-1 on GST Network (GSTN) portal from December 4.

The CBEC had last month started refunds for exporters of goods who have paid IGST and have claimed refund based on shipping bills. Earlier this month, it allowed businesses making zero-rated supplies or those who have paid IGST on exports or those wanting to claim input credit to fill up a specified form.

Source : Times of India

Arun Jaitley cracks whip, says no loan waivers for capitalists : 29-11-2017


The government on Tuesday asserted that it hasn’t waived any loans of big defaulters, scotching rumours that debts of capitalists are being written off by banks. In a blog, finance minister Arun Jaitley said the time has come to be apprised of facts in this regard and one must ask at whose directive the loans, which have now turned non-performing assets (NPAs), were offered between 2008 and 2014 by public-sector banks (PSBs). “Government has not waived any loans of big NPA defaulters …,” Jaitley said. Under the new Insolvency and Bankruptcy Code, cases have been initiated in the National Company Law Tribunal for a timebound recovery from 12 largest defaulters, as recommended by the Reserve Bank of India. These defaulters alone account for non-performing assets (NPAs) worth around Rs 1.75 lakh crore. “The public needs to ask the rumour mongers at whose behest or under whose pressure were such loans disbursed.

They should also be asked that when these debtors delayed in repayment of their loans and interest thereon to public sector banks, what decision was taken by the then government,” the finance minister said. The finance minister said instead of taking firm and bold decision against debtors and defaulters, the then government eased loan classification norms to keep defaulters as non-NPA account holders. He added that the asset quality review (AQR) carried out for clean and fully provisioned balance-sheets in 2015 revealed high NPA. Consequently, loans of about Rs 4,54,466 crore, which were actually fit to be NPAs but were under the carpet, were recognised after intensive scrutiny under the AQR, said Jaitley.

Separately, the finance minister, after launching the Paytm Payments Bank, held that technology has changed the way the banking is done in the country. Digital transaction is fast replacing the need for more cash, thanks to a series of government initiatives to formalise the economy. “We are all realising that convenience, security and even proprietary lies in switchover itself,” he said. With the aim of boosting credit offtake as well as job creation, the government has taken the critical decision of infusing huge capital into state-owned banks, the finance minister said in his blog. Last month, the government announced a massive Rs 2.11 lakh crore capital infusion plan for the PSBs through 2018-19.

“Through capital infusion, banks weakened by NPAs would become strong and become capable of raising adequate capital from the market,” Jaitley said in the blog. However, even this infusion will be tied to strict conditions. The PSBs will have to carry out several reforms so that such situations do not recur, he added. The finance minister asserted that through strong steps taken over the last three years, “not only have the problems received as legacy” been addressed but reforms for rebuilding the strength of PSBs have been boosted. The consolidation in the public-sector banking space to create few strong banks started with the integration of State Bank of India and its associates, and the latest recapitalisation move will strengthen this process.

Source : Financial Express

Badri Narain Sharma named GST anti-profiteering body Chairman : 29-11-2017


Badri Narain Sharma, a Rajasthan cadre IAS officer of 1985 batch, has been appointed the first chairman of the National Anti-profiteering Authority (NAA), the body set up under the goods and services tax (GST) to ensure that the benefits of lower taxes under the new regime are shared with consumers.

Sharma, 58, at present an additional secretary in the department of revenue in the finance ministry, will have rank and pay of secretary at the Centre.

The Union cabinet last week cleared the setting up of the NAA, which will have a two-year tenure that can be extended by the GST Council.

The tenure of the authority will begin the day Sharma assumes charge. Prior to the revenue department, Sharma was additional secretary in the power ministry and before that in the Commercial Taxes Department in Rajasthan.

Sharma has been closely associated with the formulation of GST and its implementation, the finance ministry said in a statement. “As its first chairman, Shri BN Sharma is expected to give a direction to the Authority in boosting the confidence of consumers that GST is a ‘Good and Simple Tax’ in the overall national interest,” the statement said.

Sharma will be assisted by four senior officials of the rank of joint secretary and above who have been appointed as technical members in the authority – JC Chauhan, chairman, tax tribunal, Himachal Pradesh; Bijay Kumar, principal commissioner, GST, Kolkata; CL Mahar, principal commissioner GST, Meerut and R Bhagyadevi, ADG, Systems, Chennai .

A high-level committee headed by cabinet secretary PK Sinha selected the chairman and members. “The Authority is mandated to ensure that the benefits of input credit and the reduction in GST rates on specified goods or services are passed on to the consumers by way of a commensurate reduction in prices,” the statement said.

The authority has powers to order a business found not to have passed on benefits of GST to reduce its prices or return the undue benefit along with 18% interest to the consumers of goods or services. If the undue benefit cannot be passed on to the consumers, it can be ordered to be deposited in the Consumer Welfare Fund.

In grave cases of violation, the authority also has the power to impose penalty on the defaulting business.

Source : PTI

India’s government is getting one big reform right : 29-11-2017


According to one of India’s most respected bankers, it’s a once-in-a-lifetime opportunity — a mammoth sale of distressed assets, some $40 billion in the first round. Much could go wrong, of course, especially given that so many powerful interests have so much money at stake in the process. Fortunately, Prime Minister Narendra Modi’s government, which has stumbled in some of its biggest policy moves recently, appears to be handling this particular challenge with both agility and a sense  of urgency. That mindset should now be carried over into other parts of the reform agenda.

The fire sale of assets has been made possible by one of Modi’s true achievements: the passage of a modern law to replace the creaking, ineffectual bankruptcy mechanism India had used earlier. The law gives courts the power to appoint resolution professionals to sell off and revive investments and companies financed by loans that have turned bad. The hope is that India’s state-controlled banks will recover some of their money and that the economy-wide problem of stalled investment and stranded  assets might finally begin to shrink.

As has been made clear by the botched rollout of a nationwide goods-and-services tax, however, even a landmark reform can do great damage if not handled well. One problem with the new law has been apparent since the beginning: It didn’t say anything about who could or couldn’t bid for these distressed assets, leaving open the possibility that the same company owners who had bankrupted their firms — many of them powerful and politically connected families — could buy them back at pennies on  the dollar.

This might seem counterintuitive. Someone who’s deep in debt wouldn’t seem likely to be the winning bidder at a blind auction. In India, however, company owners (or “promoters,” in the local terminology) are adept at squirrelling away money — whether company revenues or funds borrowed with the firm’s assets as collateral — using complicated group holdings and privately held corporations. At least some owners undoubtedly saw the new bankruptcy act as a way to retain control of the firms they had mismanaged, while avoiding the need to repay the loans that state-controlled banks had unthinkingly handed them.

At first, state banks seemed happy to oblige. Some senior bankers argued that the existing owners at least understood the sectors they were in and, if they offered high bids, banks should accept them in order to preserve the value of the assets as far as possible. In one much-publicized example, one of the banking system’s largest debtors reportedly tied up with a Russian bank to bid for a steel company it had previously controlled.

This loophole threatened to discredit the whole process. Most observers have an understandably hard time understanding why owners who have demonstrated their inability to judge market conditions, or to abide by their promises, should be treated like any other bidder. Even if some of them had defaulted because of a shift in the economic climate rather than malfeasance or mismanagement, the damage done to the credibility of the process by including them in auctions outweighed any possible benefit.

So, it’s welcome that the government last week issued an ordinance modifying the bankruptcy law so that anyone who runs a company into the ground is forbidden to bid for a distressed asset. (Parliament still needs to ratify the change within six months.) The government says that its “amendments aim to keep out such persons who have willfully defaulted, are associated with non-performing assets, or are habitually non-compliant and, therefore, are likely to be a risk to successful resolution of insolvency of a company.”

If nothing else, this means that, in the future, owners will be quicker to try and push their companies into resolution; the law allows them one year to raise funds that would allow them to retain control. That should help clear the credit pipes a bit faster.

But there was always meant to be a larger purpose to bankruptcy reform as well: to revive a certain degree of faith in India’s corporate sector, which had sullied its reputation over the past decade as high-profile promoters took out loans they knew they couldn’t repay, defrauded investors and outright mismanaged their businesses. A bankruptcy process that ended with the same bunch of capitalists in control of the same sectors might have saved some banks — and taxpayers — money in the short run. But it wouldn’t have achieved the aim of restoring credibility, whether in state-controlled banks or in troubled infrastructure companies.

The new ordinance gives the investment-starved Indian economy a chance to regain some dynamism and for investors to begin to trust the private sector again. India Inc. needs new blood and new faces. The government’s trying to ensure it finds them.

Source : Economic Times

Notification No. SO 3756(E) [F.No.05/27/2013-IEPF], Dated 28-11-2017


SECTION 125 OF THE COMPANIES ACT, 2013 – INVESTOR EDUCATION AND PROTECTION FUND – AMENDMENT IN NOTIFICATION NO. SO 1647(E), DATED 2-5-2016

NOTIFICATION NO. SO 3756(E) [F.NO.05/27/2013-IEPF]DATED 28-11-2017

In exercise of the powers conferred by sub-sections (5) and (6) of section 125 of the Companies Act, 2013 (18 of 2013) read with rules 5 and 7 of the Investor Education and Protection Fund Authority (Appointment of Chairperson and Members, holding of meetings and provision for offices and officers) Rules, 2016, the Central Government hereby appoints the person at serial number 1 as Chairperson and the persons at serial numbers 2 to 4 and 7 as Members to the Investor Education and Protection Fund Authority with effect from the date of publication of this notification and for that purpose, the Central Government hereby makes the following amendments in the notification of the Government of India in the Ministry of Corporate Affairs number S.O 1647, dated the 2nd May, 2016 namely:—

In the said notification,—

(i) for serial numbers 1 to 4 and the entries relating thereto, the following serial numbers and entries shall respectively be substituted, namely:—
Sl. No. Particulars Designation
“1. Shri Injeti Srinivas,

Secretary,

Ministry of Corporate Affairs,

Shastri Bhawan,

New Delhi- 110001.

Chairperson- ex – officio

(till he hold the post of Secretary in the Ministry of Corporate Affairs)

2. Smt. Surekha Marandi,

Executive Director,

Reserve Bank of India.

Member, ex – officio

(till she hold the post of Executive Director in the Reserve Bank of India.)

3. Shri Nagendra Parakh,

Executive Director,

Securities and Exchange Board of India.

Member, ex – officio

(till he hold the post of Executive Director in the Securities and Exchange Board of India.)

4. Shri Rajib Sekhar Sahoo,

Chartered Accountant,

B – 220, C R-Park,

New Delhi – 110019

Member.”;
(ii) after Serial number 6 and the entries relating thereto, the following serial number and entries shall be inserted, namely:—
“7. Shri R. Sridharan IAS (Retd.),

A – 7, Tower-7,

New Moti Bagh,

New Delhi – 110023

Member.”;
(iii) for paragraph 2, the following paragraph shall be substituted, namely:—
“2. The term of office of members at serial numbers 4 to 7 shall be governed by rule 8 of the Investor Education and Protection Fund Authority (Appointment of Chairperson and Members, holding of meetings and provision for offices and officers) Rules, 2016 and they shall be entitled for reimbursement of actual expenditure incurred for attending the meetings as per the provisions of sub-rule (10) of rule 11 of the said rules.”

Central GST revenue less than states; government explains why : 28-11-2017


The Finance Ministry has explained the reason behind the revenue shortfall under the Central Goods and Service Tax, saying that the liabilities were “discharged using transition credit rather than by way of cash.” According to government data, states have collected Rs 87,238 crore by way of SGST between August and November 26, while the total CGST collected for the same period has been Rs 58,556 crore.

“Thus, taxpayers are using the balance credit available with them in the previous tax regime, which is the reason why there is an additional revenue gap in the Centre’s revenue,” the Finance Ministry tweeted. The government said that the total collection of the GST for the month of November so far has been Rs 83,346 crore and over 95.9 lakh taxpayers have been registered under the new regime. The Finance Ministry, in a series of tweets, said, “50.1 lakh returns have been filed for the month of October until 26th November.”

The government also said that states are being compensated for their revenue shortfall. “By way of settlement an amount of Rs. 31,821 crores have been released to the States for the months of August, September & October 2017. Rs. 13,882 crores are being released by way of settlement to all the States for the month of November 2017,” the government said.

As per the Goods and Services (Compensation to States) Act 2017, states’ revenues are fully protected against any shortfall in GST collections. A compensation amount of Rs. 10,806 crores have been released to all the States for July and August 2017.

A compensation of Rs 13,695 crores is also being released for the month of October and September, the Finance Ministry said, adding that states’ revenues have been fully protected taking 2015-16 as the base year. In addition to this, an amount of Rs 16,233 crore has been transferred from IGST account to CGST account by way of settlement of funds on account of Inter-State supply of goods and services in the month of August, September and October.

The total number of GSTR 3B returns filed for the return period July, August, September and October till November 26 has been Rs 58.7 lakh, Rs 58.9 lakh, Rs 57.3 lakh and Rs 50.1 lakh respectively.

Source : Financial Express

Tax advisers may come under Income Tax department’s scanner : 28-11-2017


Less than a month after International Consortium of Investigative Journalists (ICIJ) leaked financial data known as Paradise Papers, tax advisers of Indians named in the list of those with money stashed in tax havens could find themselves in the income tax net, said two people in the know. However, finance secretary Hasmukh Adhia was non-committal regarding the issue.

“In the investigation matter, we cannot disclose the processes which are initiated or which are going on. We therefore, cannot give point-wise reply to your questions. As and when the investigations are completed, we can let you know about the actions taken out of it,” said finance secretary Hasmukh Adhia in response to a detailed list of queries from ET.

The government is set to invoke an income tax provision introduced last year which provides power to the revenue authorities to penalise anyone aiding or advising in tax evasion. Names of about 700 Indians including several politicians, businessmen and film personalities figure in the leak.

According to one of the persons in the know, the government is looking to test a recently passed section under the income tax law where tax advisers can be pulled up under the new section—277A— which refers to “falsification of books of account or document” that breaks or circumvents domestic laws.

Most tax advisers ET spoke to say such an action would create panic among the tax community. “Often clients don’t even share all the details. How is the tax adviser supposed to know the exact details, and it’s quite harsh if the government is looking to bring action against tax advisers,” said a tax adviser based in New Delhi.

“It will be unfortunate if this happens. Revenue authorities must differentiate between tax avoidance and tax evasion, the latter is not a crime,” a tax adviser of an HNI whose name has figured in the earlier set of tax dodgers known as the Panama Leaks, told ET. The government has already announced a multi-agency probe in Paradise Papers.

As far as tax advisers go, there is one more weapon up the taxman’s sleeves. “Action can be taken against a tax adviser if it’s proven that an advice is being imparted with a sole intent to escape tax. Such penal provisions are embedded under Income-tax Act, the newly amended Benami Act. However, this distinction between tax planning and tax evasion is required to be understood. In case of any tax planning advice, penal consequences may not be attracted,” said Paras Savla, partner, KPB  & Associates.

Income tax experts say it’s not illegal to hold a foreign bank account and any Indian individual can open and hold a foreign currency account with any bank outside India for making remittances under LRS (Liberalised Remittance Scheme). However, this could be a grey area as there is a limit on remittances.

The Enforcement Directorate (ED) can still investigate for FEMA (Foreign Exchange Management Act) or PMLA (Prevention of Money Laundering Act) if they suspect money laundering or if the depositor has transferred more money than prescribed under the law.

According to another person in the know, the multi-agency body probing the Paradise Papers could also issue multiple summonses simultaneously to some of the Indians whose names have appeared in the leaks within next one month.

Source : PTI

Banks can now use provisional ratings for rejigging loans : 28-11-2017


The Reserve Bank of India has allowed lenders to rely on ‘provisional ratings’ — which will not be disclosed to the market — for rejigging loans to distressed companies before resorting to the insolvency mechanism. Over the next one month, large banks will attempt to spot distressed companies whose loans can be restructured based on provisional ratings .

Till now, all upgrades, downgrades and outlook on debts by credit rating agencies were put out in the public domain. Faced with a mountain of bad loans and few resolutions, financial regulators are making an exception.

NPA loans have a ‘D’ or ‘default grade’ rating. The provisional rating will capture whether the execution of the restructuring proposal would upgrade the rating to ‘investment grade’.

However, the information of a provisional ‘upgrade’ of the debt (from ‘D’ to ‘investment grade’) would be primarily meant for banks and RBI. In such cases, the Securities and Exchange Board of India has exempted rating agencies from the rule that requires any rating action to be immediately communicated to financial markets.

Such ratings have to be of minimum investment grade and obtained from two rating agencies. This will enable banks to evaluate the viability of a corporate borrower and its ability to service loans left after haircut.

“If there is provisional upgrade, banks and RBI would have comfort in approving the restructuring instead of referring the borrower to NCLT (National Company Law Tribunal). RBI has recently informed the decision to banks and agencies,” a banker told ET.

Provisional ratings will depend entirely on the loan restructuring terms — which typically entail easier repayment terms, lower interest and haircut against commitment of fund infusion, sale of idle or loss-making assets and furnishing of guarantee and additional security. Lenders will give rating agencies the mandate to evaluate whether a loan account qualifies for provisional upgrade based on a specific restructuring proposal.

“These will be largely out of pre-NCLT accounts and companies where bankers feel there is a possibility of turnaround,” said a banker. Soon after a default, any financial creditor (among others) can file a petition before NCLT to initiate proceedings under the Insolvency and Bankruptcy Code.

“Many earlier loan restructuring plans did not work out or result in any rating upgrades. So, we believe RBI wants rating agencies and banks to check the viability and see whether a company deserves a lifeline. Rating agencies have probably been brought in for external validation,” said a person dealing with stressed assets.

The regulator has clarified that rating agencies will not carry out advisory services in estimating a company’s ‘sustainable debt’ — the quantum of debt that a distressed company would be able to service. Say, of the Rs 1,000 crore debt on the books of a borrower, the unsustainable portion of Rs 400 crore is converted into equity while the balance Rs 600 left as debt as the sustainable part.

Rating agencies will evaluate whether this sustainable debt is worthy of investment grade rating while lenders will carry out due diligence to estimate the quantum of such debt. The exercise will test the ability of banks as well as rating agencies in finding a way out for debt-laden companies. The possibility of additional endorsement on loan restructuring by an external agency (like a rating agency) was flagged off by a regulatory official earlier this year. RBI has now formalised the mechanism through recent communications.

Source : Economic Times

Some promoters escape tight insolvency norms : 27-11-2017


Promoters of at least four small companies managed to pass their resolution plans before New Delhi tweaked the bankruptcy code, limiting the ability of erstwhile defaulting owners from buying back their assets at the conclusion of time-bound recovery proceedings.

Synergies-Dooray, Chhaparia Industries, Sree Metaliks, and the West Bengal Essential Commodities Supply Corporation have all presented successful resolution plans approved by respective chapters of the National Company Law Tribunal (NCLT).
“The ordinance is not retrospective,” said Sandeep Parekh, founder of Finsec Law Advisors. “Those companies were fortunate enough to go through successful resolution plans under the code, but without the new amendments. The outcome could have been different under the latest ordinance subject to promoters’ eligibility.”
In absence of adequate bidders, promoters have mostly regained control in all those companies where they were resolution applicants bidding for their own assets.
The first was Synergies Dooray, approved by Hyderabad NCLT. Creditors settled dues for just ?54 crore out of a total of about ?900 crore unpaid loans in the age-old case, which was once pending before the Board for Industrial & Financial Reconstruction (BIFR).
Kolkata-based resolution professional Mamta Binani had received plans from three entities, including Synergies Castings. The group company’s plan was finally submitted to the Hyderabad NCLT, which accepted it.
“There could be chances that those successful resolution cases may be challenged where the promoters are disqualified under the new ordinance,” said Babu Sivaprakasam, partner at Economic Laws Practice (ELP). “Whether those promoters were fortunate enough to regain control over their companies is to be seen.”
“The amended law suggests that even if a resolution plan is submitted for approval by promoter(s), it won’t go ahead unless all the tests are passed as prescribed in the Ordinance,” said Anil Goel, founder, AAA Insolvency Professionals. “Genuine promoters should always have an edge.” – www.economictimes.indiatimes.com [27-11-2017]
Source : Times of India

Government is keen to meet FY18 deficit target : 27-11-2017


The government is keen on sticking to the fiscal deficit target for the year and will look for ways to make up for any revenue shortfall that could hinder this plan. The thinking at the highest level of the government is that the fiscal deficit target of 3.2% of GDP for FY18 should be met, though there can be some relaxation in the consolidation roadmap beyond that.

“There seems to be some discomfort about letting go fiscal goals… The thinking as of now is that the target should be met,” said a senior government official aware of the matter.

There have been preliminary discussions on the issue but a final call will only be taken after the revenue position becomes clearer post December. The government has met budget targets in the last three years, which has helped establish budget credibility, something that it does not want to compromise.

Following a slump in growth in the third quarter to a three-year low, there had been speculation about a fiscal stimulus package aimed at boosting the economy but that’s abated amid signs of revival. Recent assessments by Moody’s, which upgraded its India rating, and Standard and Poor’s, which kept it unchanged, have cited the fiscal deficit as a key risk.

The NK Singh committee set up to review the fiscal roadmap has given the government some wriggle room to breach the target in years of “far-reaching structural reforms in the economy with unanticipated fiscal implications” but the government is not inclined to take advantage of this. Besides, fiscal slippage at this time won’t sit well with inflation set to accelerate and the current account deficit, though manageable, beginning to deteriorate.

A rising fiscal deficit at this stage could exacerbate both. Finance minister Arun Jaitley said last week that the government had an impeccable record on fiscal deficit.

“We intend to move forward on this,” he had said. “No pause but challenges arising from structural reforms which could change the glide path (of fiscal consolidation),” Jaitley had said earlier this month.

There had been concerns over the fiscal deficit running ahead of the trend halfway through the year. While that has eased somewhat, the government will find it difficult to stay within target with uncertainty over some revenue items. The dividend from the Reserve Bank of India at Rs 31,659 crore is well below what was budgeted. There is uncertainty over spectrum realisation with the telecom sector struggling and tax revenues uncertain with the rollout of the goods and services tax (GST) on July  1.

The government expects Rs 44,300 crore from spectrum auctions and Rs 74,901 crore in dividends from banks and RBI. There may be some additional spending as well, for instance, on the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which may need more funds. At the end of September, the fiscal deficit was 91.3% of that budgeted for FY18, well ahead of 83.9% at the same time last year. The government expects the current year to be a challenging one.
“This is a year of transition, lots of reforms are being done, (structural) reforms, fundamental in nature, which have made their impact on growth, on revenues and others. But the commitment of the government to stay on course on fiscal consolidation, in the medium term, is completely there,” economic affairs secretary Subhash C Garg had said last week.

“Transition is challenging, definitely. But how much, whether it is substantial, whether it’s anything meaningful, for that, still the assessment is to be made,” Garg said. Independent experts believe slippage is unavoidable. “Notwithstanding the encouraging budget numbers in September, there is a risk of a modest miss to the FY18 deficit target, which is currently at 3.2% of GDP,” DBS economist Radhika Rao said in a recent note.

Consolidation Road Map
The NK Singh committee had suggested a new fiscal consolidation focus on government debt rather than the fiscal deficit. It suggested a total government debt of 60% of GDP by FY23 and provided fiscal goalposts to attain this target. It suggested a fiscal deficit of 3.0% for FY18 through FY20. It has allowed a deviation of 0.5 percentage point of GDP in a year under three conditions, one of them being the structural reforms cited above.

GST disruption would qualify as one such reform. If the government uses this relaxation next fiscal, it will mean a fiscal deficit target of 3.5% of GDP, instead of 3.0%. The government is expected to take a view on the report soon.

Source : PTI

 

Govt begins review of tax, other norms for startups : 27-11-2017


The government is reviewing the regime for startups in a bid to make it more attractive for entrepreneurs, especially on the tax front.

Sources told TOI that discussions have been initiated across ministries over the last few days, ahead of Prime Minister Narendra Modi’s meeting with several startups and their CEOs during the Global Entrepreneurship Summit in Hyderabad this week. While PM had announced a policy almost two years ago, several elements of the package need to be recalibrated due to feedback received from industry. Startups are a major thrust area for the Modi administration as they are not just seen to create jobs  but also encourage entrepreneurship.

Sources said that a large part of the agenda for the government includes tweaks in the taxation policy. For instance, the government had announced a tax benefit on profits earned in three years during a company’s first five years of operations. But based on industry feedback, the government allowed the tax benefit to be taken during the first seven years, as most startups do not make profits in the initial years of their operations.

There are concerns related to the taxation policy for a large number of angel investors, which face a levy on the capital gains. Nasscom recently attributed the 53% decline in angel funding during the first half of 2017 to the complicated tax rules. “For the last two years, the government has agreed that it needs to be done… There have been some concerns about misuse (of the provisions). But the fear of misuse is there for any law,” Nasscom president R Chandrashekhar told TOI during a recent  interaction.

Sources said there are concerns over the rules for taxation of employee stock options, which have been flagged and the government is looking into it. “The idea is to make the regime as attractive as possible and the concerns are sought to be addressed at the earliest,” said an official, adding that the PMO is monitoring the issue closely .

“The issue of startups being taxed on the investments received is far from over. While an exemption is provided to investors registered with Sebi and to foreign investors, domestic investors in general have to still defend the valuation. In fact, it continues to be common for companies to receive notices asking for a justification of the premium received,” said Abhishek Goenka, India leader — corporate and international tax at consulting firm PwC .

While the tax changes are unlikely before the budget, scheduled for February 1, some of the procedural issues can be fixed earlier if they only require change in rules through notifications.

Source : Economic Times

Income Tax Act, 1961 review: 4 remarkable ways Narendra Modi government’s new Direct Tax Law will benefit taxpayers : 25-11-2017


The Modi government has constituted a six-member task force to review the Income Tax Act, 1961, and draft a new Direct Tax Law in consonance with economic needs of the country. The Terms of Reference of the task force is to draft an appropriate Direct Tax Legislation keeping in view (i) the direct tax system prevalent in various countries, (ii) international best practices, (iii) economic needs of the country, and (iv) any other matter connected thereto. The task force will set its own procedures for regulating its work and is required to submit its report to the government within six months.

It may be recalled that during the Rajaswa Gyan Sangam held on 1st and 2nd September, 2017, Prime Minister Narendra Modi had said that the Income Tax Act, 1961 was drafted more than 50 years ago and needs to be re-drafted.

Commenting on the government move to draft a new direct tax legislation, Vikas Vasal, Partner & Tax Leader, Grant Thornton India LLP, says that it’s a move in the right direction, and in line with government’s stated intent to boost investor and business confidence in the country.

“It’s a long journey, and constitution of the task force is the first step. A simple, easier-to-interpret direct tax code with minimal conflicts will go a long way in providing certainty and clarity to the tax payers. Unnecessary litigation on otherwise settled issues only results in waste of productive time and effort. Hopefully, the new code will address these issues, incorporating the learnings from the current tax law, as well as the decade-long discussions on the earlier Direct Tax Code that was shelved some time back,” he says.

Here’s how the new Direct Tax Law is expected to simplify tax-related issues and boost investor and business confidence:

1. Simplify Law and Declutter Redundant Provisions: The current Income Tax Act is more than 5 decades old and has suffered thousands of amendments over these years. Formation of a committee for drafting a new Direct Tax Code is a progressive step to do away with the past baggage and make the law relevant to the current business environment. A new code would simplify the law and declutter redundant provisions.

2. Pro-Business Development: This is a pro-business development as concerns of the industry can be addressed in the new law. “The government has in recent past taken several initiatives such as the issuance of clarification on debated issues, issuing detailed guidelines on new regulations, acceptance of judicial decisions etc. for the benefit of the taxpayers. One would expect that several of such measures would find a place in the new law,” says Vasal.

3. Reduce Litigation: The provisions of the Income Tax Act have been a subject matter of extensive litigation, which has led to complexity in the interpretation. A new law, without a baggage of past jurisprudence, would be simpler to interpret and is expected to reduce litigation.

4. Plug Loopholes in a Single Shot: The Direct Tax Code would provide an opportunity to the authorities to plug the loopholes in a single shot rather than making it an annual exercise. It is an excellent opportunity to make the law simpler, taxpayer-friendly, less prone to litigation and free from interpretational loopholes.

There is a word of caution though. “We need to learn from our past experience of the previous version of the direct tax code and make sure that a new law is developed on the threshold of simplicity rather than rehashing of the existing Income Tax Act in a new format,” says Vasal.

Source : Financial Express

Fewer GST slabs possible in future, says CEA Subramanian : 25-11-2017


Chief Economic Adviser (CEA) Arvind Subramanian today said going forward the Goods and Services Tax (GST) may “probably” have fewer rates by “collapsing” 12 per cent and 18 per cent tax slabs into one.

He said the new tax regime, rolled out from July 1, will stabilise in the next six to nine months and become a “model” for other countries.

“I am confident that over the next six to nine months the system will stabilise. It will also be a model for other countries to emulate.”Then over time, the 12 per cent and 18 per cent rate can probably be collapsed into one rate. So over time we will see fewer rates. We would not ever have one rate because that is too difficult to achieve,” he said.

The CEA was delivering a lecture at the ICFAI Institute of Higher Learning here.

Admitting there were some technical glitches in the filing systems under the regime, he said the new system is a bit “complicated” as states have different IT systems and these issues are being addressed by the GST Council.

Subramanian described the GST implementation as a “transformational fiscal reform” that the country had not seen in the past.

“The Centre and every state has its own tax officials and own IT system. I can’t tell you how complicated the system is. So the fact is the transitional glitches, I think, is not surprising. Perhaps I think we could have done better.

“But the most important thing for the GST Council is to decide all these things and take corrective action,” he said when asked about technical glitches the taxpayers were facing.

Source : PTI

All revised I-T returns post demonetisation under lens : 25-11-2017


In the days after demonetisation, thousands handled their hidden cash by dumping the currency in banks, filing a revised income-tax return, and forking out a little over 30% tax for the extra cash that was deposited.

This, they believed, was a neat way to take care of the cash and keep tax officers at bay. But things may turn out differently. On Friday, the government told all tax offices to accept only those revised tax returns where there is a “bona fide inadvertent error” or “a mistake” on part of the assessee. If inquiries indicate any dubious manipulation to legitimise undisclosed cash deposit, then an assessee should be taxed at a much higher rate under the anti-abuse provisions of the law.

The law, however, gives taxpayers a greater latitude than the government’s internal communique suggests. According to the Income-Tax Act, a revised return is permitted when a taxpayer “discovers any omission or any wrong statement”. Probably because the law does not specify conditions for filing revised returns, the communique mentions that the “guidelines are only suggestive”.

“An assessee can file revised returns under Section 139(5) of I-T Act. It could be due to various reasons, including intention to conceal income. The suggestion that a revised return can be filed only when there is a bona fide inadvertent error or a mistake is an interpretation contrary to the provision of the law,” said senior chartered accountant Dilip Lakhani. “Most of the high-denomination notes were deposited with banks. The success of demonetisation thus rests on the ability of the I-T  department in identifying the untaxed cash,” said senior CA Dilip Lakhani.

All revised I-T returns post demonetisation under lens

The email from Rohit Garg,director at the apex tax body Central Board of Direct Taxes (CBDT), to all principal chief I-T commissioners, points out the key factors that tax officers should keep an eye on while verifying the revised tax returns.

 These are:
Unsubstantiated reduction in closing stock in the revised return vis-à-vis the figures in original returns (a person regularising his black money held in cash may show higher sales and lower closing stock);
Higher sales in revised return;

Increase in cash-in-hand as on March 31, 2016, or March 31, 2015, (showing higher cash in revised returns for last two financial years could help in regularising undisclosed cash deposited in banks);

Additional cash inflow claimed to be out of earlier-year savings, receipts of loans or advances or gifts or sale of capital assets;

Use of cash to lower liabilities;

Lower closing stock as on March 31, 2015, or March 31, 2016, as compared to earlier years in belated returns (filed after due date).
When assessing officers come across such seemingly suspicious entries in the books of accounts, they are expected to examine the veracity in different ways. For instance, they may compare the higher sales (shown by a businessman in his revised return to justify large cash deposits) with central excise/VAT returns; cross-check the identity, credit-worthiness and source of cash of buyers who had paid in cash; analyse past profile of assessees whose books raise suspicion; and monitor expenditure to match it against any change in cash-in-hand.
In September, CBDT told its officials to target and tax the .`3 lakh crore of unexplained deposits that are estimated to have been made after demonetisation was announced.
Source : Economic Times

F.No. 225/391/2017/ITA.II – 24-11-2017


SECTION 143 OF THE INCOME-TAX ACT, 1961 – ASSESSMENT – GENERAL – SOME OF IMPORTANT ISSUES TO BE CONSIDERED WHILE FRAMING SCRUTINY ASSESSMENT PERTAINING TO FILING OF REVISED/BELATED RETURN BY ASSESSEES, POST DEMONETIZATION

LETTER [F.NO.225/391/2017/ITA.II]DATED 24-11-2017

Post-demonetisation, it was found that some of the assessees tried to build an explanation for cash deposits in their bank account(s) by manipulating their books of account and filing revised/belated income-tax returns. In this regard, Finance Ministry issued a Press Release dated 14th December, 2016 in which it had cautioned that post-demonetisation exercise, provisions of Income-tax Act, 1961 (‘Act’) which permitted filing of a revised or a belated return in certain situations should not be misused. The Release further stated that any instance of a revised/belated return of income coming to the notice of Income-tax Department which reflected any manipulation of book of account, cash-in-hand, profits etc. to justify the cash deposit being made in bank account(s) might lead to taking necessary action under the relevant provisions of the Act by Income-tax Department. Based upon risk-assessment, several of such cases were selected for scrutiny in Computer Aided Scrutiny Selection (CASS) during this financial year.

2. Under the Act, revision of income-tax return is allowed only if any omission or wrong statement is discovered therein by the concerned assessee. Such omission or wrong statement should have occurred due to a bona fide inadvertent error or a mistake on the part of the assessee. Therefore, in situations where enquiries/verification in course of assessment proceedings suggest manipulations made fictitiously merely to build an explanation for cash deposits in bank account(s), the revised return itself becomes questionable and therefore, the transactions disclosed in it which are over and above the original return are liable to be taxed under anti-abuse provisions of the Act. Similarly, in case of a belated return, it would be crucial to examine the trend and business practices of a particular assessee while ascertaining the legitimacy of the transactions disclosed in a belated return, filed post-demonetisation. In such cases already under scrutiny, some instances which might indicate that assessee had filed revised or belated return merely as a cover up to explain the cash deposits in bank accounts are:

i. Unsubstantiated reduction in closing stock in the revised return vis-a-vis the figures in original return;
ii. Reporting of higher sales in the revised return;
iii. Cash-in-hand as on 31-3-2016 or 31-3-2015 was enhanced in the revised return;
iv. Additional cash inflow claimed to be out of earlier year savings, receipt of loans/advances /gifts/repayments/sale of capital assets;
v. In some cases, cash outflow might have been reduced by paying some of the liabilities in cash;
vi. Significantly lower closing stock as on 31-3-2015 or 31-3-2016 as compared to the earlier years in a belated return;
vii. Significantly higher cash-in-hand as on 31-3-2016 or 31-3-2015 compared to the preceding year in a belated return.

3. In such scenarios, following issues may be kept in consideration during verification and framing of assessments—

I. The claim of enhanced sales may be compared with the Central Excise/VAT returns;
II. Whether the parties to whom additional sales were disclosed have identity, creditworthiness and transaction was genuine or not;
III. Where the accounts are subjected to tax-audit, whether omission or wrong statement in the original return was pointed out by the audit or not;
IV. The source of cash-in-hands of the person who had made payments to the assessee has to be verified carefully;
V. The past profile of the concerned assessee should be thoroughly analysed;
VI. Where as a result of enquiries/investigations it emerges that figures in the revised/belated return are fudged, the figure of manipulated receipts/sales/stock etc. is liable to be taxed as a cash credit under section 68 and not merely on net profit basis;
VII. Any undisclosed expenditure detected after reduction of cash-in-hand by the assessee may be verified carefully;
VIII. Unaccounted income so assessed in scrutiny assessment is liable to be taxed at a higher rate without any set off of losses, expenses etc. under section 115BBE of the Act;
IX. In the scenario pertaining to Wealth tax returns of earlier years, it should be examined whether there is an attempt to build cash-in-hand or any other asset so as to justify deposit of cash, post-demonetisation.

4. The above guidance note may be brought to the notice of field authorities in your charge. The above guidelines are only suggestive. Therefore, depending upon specific facts and circumstances of a particular case, Assessing Officer should also look into other relevant issues as well.

Taxmen are now grilling leading eateries about menu prices before & after GST cut : 24-11-2017


Leading fast-food chains such as McDonald’s have got queries from tax officials seeking details about menu prices before and after GST rate cuts on November 15. The move follows reports of some food chains raising prices. The government is keen to ensure the benefit of GST reduction is passed on to consumers.

The National Restaurant Association of India (NRAI) has said it will soon be advertising price cuts. State GST authorities have made phone calls and sent questionnaires to restaurants. ET has seen a copy of the format in which restaurants have been asked to submit details. A government official said the exercise was aimed at collecting data. “Many restaurant associations and owners in the organised space have received communication from relevant authorities to outline the GST implementation  process,” a McDonald’s spokesperson said.

“We are in the process of furnishing the details appropriately.” This is besides a letter from Central Board of Excise and Customs (CBEC) chairman Vanaja Sarna to companies and restaurants individually asking them to pass on tax cuts and communicate price revisions to consumers. At the GST Council meeting on November 15, GST was cut to 5% from 18% for all standalone restaurants, irrespective of whether they were airconditioned or otherwise, without input tax credit.

Also, a flat 5% slab was imposed on takeaways and deliveries. Soon after GST reduction, many restaurants raised menu prices, citing withdrawal of credit for taxes paid on raw material and rent as the reason for ‘price adjustments.’ Brands such as Starbucks and McDonald’s had hiked base price of some products. GST on 178 goods was lowered to 18% from 28% as part of rationalisation approved by the GST Council.

“Like many businesses operating in India, Tata Starbucks adjusted prices following the recent revision of the goods and services tax (GST) structure,” a Tata Starbucks spokesperson said. “The GST revision included the elimination of the input tax credit, increasing costs for the industry.

As a result, we raised our base prices, while still providing savings for our customers after tax. Pricing is continually evaluated on a product-by-product basis in our stores to balance business needs while continuing to provide value to our customers.” Incidentally, a number of complaints before state screening committees on anti-profiteering were either against restaurants or real estate companies. The union cabinet last week cleared the setting up of an antiprofiteering authority to examine   such allegations under GST regime.

“The government has legitimate expectations that restaurant prices should go down, although for bigger ones the reduction may be relatively lower because of input credit loss,” said Pratik Jain, indirect tax leader, PwC. “One hopes that industry will support and follow the letter as well as spirit of the law. However, since there is already a process outlined for anti-profiteering-related proceedings, government should ensure that authorities do not make random enquiries and visits to restaurant . There is a need for issuance of a clear instruction to the field officers so that panic on the ground can be avoided.”

CUTS IN MENU PRICE

NRAI, which has some popular food chains as members, said restaurants are proposing cuts in menu price. “The move by the government has made the consumer bill come down, which will encourage demand and investment for our sector and we will soon be providing wide publicity of all the benefits,” said NRAI vice-president Rahul Singh. All major brands will engage in this exercise, he said.

“Changes came into effect from November 15 and all restaurants updated systems overnight in order to pass on the tax benefit to the consumers,” NRAI’s Singh said. “Depending on the category of the restaurant, price adjustment exercise to the base menu price had to be done to rationalise the removal of ITC (input tax credit).”

A Jubilant FoodWorks spokesperson said the GST cuts had been reflected in its prices. “Jubilant FoodWorks has passed on benefits of GST reduction to all our customers of both Domino’s Pizza and Dunkin’ Donuts,” the person said. “Since denial of input tax credit has led to increase in the input cost, we have adjusted prices of a few items to only partially cover this increased cost. However, our customers will now witness a significant reduction in effective prices immediately.”

Source : Financial Express

GST rollout: Anti-profiteering authority in place, but consumers not filing complaints : 24-11-2017


The recent Cabinet decision to set up a National Anti-profiteering Authority (NAA) and the message given to industry by policymakers that the benefits of the goods and services tax (GST) in the form of lower tax rates and higher input tax credits must reach the final consumers may have created the impression that consumers have inundated the respective authorities with pleas to crack down on non-compliant businesses. Far from it. FE spoke to eight state tax departments on how busy their anti-profiteering machinery has been, and it is clear that except in some states like Kerala, the number of serious actionable complaints have been few and far between.

Several states like Tamil Nadu and Gujarat are yet to receive any complaint against profiteering, even though the GST Council had in its latest meeting held at Guwahati cut the tax rates on over 200 items, including a large number of fast-moving consumer goods, and reduced the tax liability of restaurants, especially the relatively smaller ones. While the GST rate for restaurants except those at five-star hotels was cut to 5% (sans input tax credit or ITC) from 12% (non-AC) and 18% (AC) earlier, the industry is divided on whether this will reduce its tax liability. While the larger eateries that pay high rentals say the removal of ITC would pinch them, smaller outlets see scope for some price cuts.

Even Maharashtra, the most industrialised state in the country, has received only a few complaints against eateries while none of the petitions filed with the state’s tax department had a prima facie pan-India import and needed to be transferred to the standing committee at the central level. “We have received two to three complaints against restaurants in the last 10 days, after which we have deployed inspectors to verify these claims,” an official at Maharashtra’s anti-profiteering screening committee said on condition of anonymity.

The official added that the complaints were against small eateries and not against those with multiple outlets in various cities. The relatively lukewarm response of the consumers to the new mechanism that is still evolving is despite the recent missives sent by the Central Board of Excise and Customs to all major FMCG companies, asking them to immediately revise the maximum retail prices of products for which the tax cuts had been effected.  “Although we haven’t received any complaints, we are working on a pre-emptive mechanism to deal with profiteering,” a Gujarat tax official told FE. He declined to disclose the mechanism, saying he wasn’t authorised to discuss it.

Andhra Pradesh has received just one complaint which would soon be taken up by the screening committee, an official said, but didn’t disclose the details of the petition. The screening committees in eastern states of Bihar and Jharkhand too haven’t received any petition of substantial nature. A Jharkhand official said that while many GST-related complaints have been received by the tax department, none of these are related to profiteering. “We have received complaints against some businesses which are supposedly required to register under GST but haven’t done so yet,” the official said. Although Bihar has received petitions against profiteering, they are either one-line complaints, drafted poorly with little evidence, or do not stand prima facie scrutiny. “One of the complaints we have received says that milk prices haven’t gone down but this did not stand scrutiny as milk was not taxed before or after GST roll-out,” said a Bihar tax official.

 The NAA will have the authority to order the supplier/business concerned to reduce its prices or return the undue benefit availed by it along with interest to the recipient of the goods or services. If the undue benefit cannot be passed on to the recipient, it can be ordered to be deposited in the Consumer Welfare Fund. The NAA can impose a penalty on the defaulting business entity and even order the cancellation of its registration under GST.

Source : PTI

India’s new insolvency ordinance: Blunt, unforgiving and political : 24-11-2017


For New Delhi, promoters of failed companies are as untrustworthy as those who bankrolled them. This is the message from the Ordinance that was moved on Thursday to amend the Insolvency & Bankruptcy Code.

Neither will the exiled promoter of a defaulting company be allowed to regain control nor will banks have the liberty to toss him a sweetheart deal or a lifeline. Even if the bankruptcy of a business is brought about by industrial upheavals or turbulent markets — and not by the loot and profligacy of its promoters — it’s goodbye to men who once called the shots.

The old order must change. Men who presided over the decline (and did not pay bankers for a year or more) do not deserve a second chance. This is the new rule of the game for insolvent companies looking for buyers who could turn them around .

It’s a politically powerful signal. It’s a blunt and unforgiving message. And it makes sharp headlines even if it doesn’t necessarily make great business sense for banks who have to salvage sunk loans by selling an insolvent company — preferably to a buyer who is willing to pay the most.

Banks, which are often — and sometimes unfairly — blamed for years of loose lending and their nexus with business houses, were probably not even consulted in deciding the terms of the Ordinance. Having lost the credibility that financial institutions once enjoyed, they are now left with little discretion. All they can do is obey inflexible rules that the government sets for them.

There are companies and assets which would only attract the promoters or founders due to the nature of the business, complications, and legacy; these promoters may even be willing to fork out premium to get back on the board of directors.

Before the Ordinance, most bankers would have been willing to cut a deal and accept a haircut on loans as long as such promoters were not perceived as corrupt or categorised as `wilful defaulters’; in other words, as long as there was no evidence or forensic audit show they had diverted funds to other group companies or personal accounts, or the company they ran had failed to service loan despite posting operating profits.

Today, they can’t – thanks to the Ordinance that makes it virtually impossible for banks to deal with most of the original promoters

Even though Indian banks have not exactly displayed great lending acumen, they should have been given the discretion (in choosing promoters who are not swindlers), simply to pave the way for quicker resolutions and help the Bankruptcy Code take off. The Ordinance should have simultaneously given bankers the freedom and protection to reject a top dollar bid from a promoter who may not figure in the list of `wilful defaulters’ but is nonetheless dodgy and do not enjoy a great reputation.

But banks, it seems, have lost the trust that could have let them retain that choice. (However, the flip side to the Ordinance is that it spares some bankers the ethical and financial dilemma while evaluating a bid from old, familiar clients.)

By shutting the doors to promoters of all hues, and by somewhat doing away with the difference between wilful and ordinary defaulter, banks would for first time treat an individual and corporate on a par.

How?

If a person loses her job – irrespective of whether the employer is hit by Chinese dumping, or she is found incompetent – lenders are quick to react. The borrower has to beg, borrow and starve to cough up EMIs to avert a foreclosure and save her family the trauma of homelessness. Such a fear of losing a prized and possibly only asset did not haunt a promoter group as long as it could escape the tag of a `wilful defaulter’.

Not anymore. The tycoon, like the EMI man, knows the price of dropping the ball.

The Ordinance can be misinterpreted as an exercise of political grandstanding. In reality, it’s a righteous, simplistic solution to an old complex problem.

Source : Economic Times

GST tax returns filed increase as compliance rises, tax mop-up jumps : 22-11-2017


Thanks to the proactive steps taken by the Goods and Services Tax (GST) Council to remove the sundry glitches that used to trouble taxpayers in the initial months after the GST launch and also the progressive lowering of tax rates by the council over its last few meetings, compliance and tax collections have picked up of late. This has not only reduced the states’ revenue shortfall considerably over the period but boosted the government’s confidence that GST would eventually expand the tax base and yield revenue higher than the taxes that collapsed into it did in the previous regime. Filings of the summary returns GSTR-3B — with which the tax needs to be paid or nil liability claimed — have increased over the months since July. Till the August 20 deadline for filing GSTR-3B for the month of July without fine, 34 lakh returns were filed; the returns filed before the respective deadline for September was higher at 39.4 lakh and the number for October grew further to 43.7 lakh.

On November 20, the last date for filing the summary returns for October without interest, as many as 14.76 lakh assessees rushed in, in what indicated that the tendency to defer compliance to the last hour hasn’t gone away. GST collectionstoo have shown commensurate increases over the period (see chart). Also, the overall GST registrations too have crossed 11crore from a level of 60 lakh in late August. Of course, a very large number of GSTR-3B filers (around 40%) continue to claim nil tax liability, a trend which vexes the government. “There is a steady rise in the number of taxpayers filing their GSTR-3B returns every month, which is encouraging to see. The trend of taxpayers postponing compliance to the last day continues, though. Taxpayers are urged to file their returns early enough to avoid last-minute rush and consequent hassles,” said Prakash Kumar, CEO, GST Network (GSTN). “There is an increase in filings month after month since July. This could be down to two reasons: One, taxpayers are becoming familiar with GSTR-3B, and two, the IT system as far as 3B is concerned has also stabilised. But the gap between eligible taxpayers and those filing returns by the deadline has continued to hover around 30 lakh, which would be a concern for the government,” said Abhishek Jain, tax partner, EY.

Meanwhile, the council is in the process of further simplifying the GST compliance process by relaxing the rules and procedures and addressing technical glitches at GSTN. A group of state finance ministers headed by Bihar deputy chief minister Sushil Kumar Modi is working with Infosys, the technology vendor, to resolve GSTN-related issues. On Tuesday, the government constituted a 10-member committee under GSTN chairman Ajay Bhushan Pandey to look into the requirements of filing returns in current financial year. “The committee, which has tax commissioners from the state of Gujarat, Karnataka, Punjab and Andhra Pradesh, will also suggest if modifications, including changes in rules, laws and format, are required in returns. It will submit its report by December 15,” PTI reported.

“The whole idea is that people who are nil filers, who have no sale/purchase transactions, have taken a registration for some future use, they should be able to file GSTR-1 and GSTR-3B by pressing just a few buttons. That is our ultimate aim,” Pandey was quoted by the agency as saying. The council had decided to allow filing of summary returns till March 31, 2018. Further, filing of GSTR-2 (inward supplies) and GSTR-3 — both required for smooth invoices-matching — was suspended till March 31. Taxpayers need to file GSTR-3B and GSTR-1 for the remaining part of the year.

Why Modi must stop pinning his hopes on those sectors whose time has gone : 22-11-2017


The government’s ‘Make in India’ drive is in trouble. It aims to increase the share of manufacturing from 16% of GDP to 25% by 2022, creating 100 million jobs. Alas, industrial growth has been weak in Modi’s three years in office, the investment rate has fallen, formal employment growth has been miserable, and exports have stagnated.

What’s gone wrong? I have long held that government attempts to boost this or that sector is a mistake. Far better is simply to improve the ease of doing business, remove constraints in all sectors, and then leave entrepreneurs to decide which area should soar, which should plod along, and which should close. In this approach, services will probably do better than manufacturing, and brain-intensive sectors better than labour-intensive ones. GoI needs to build on these strengths rather than hanker for labour-intensive areas whose time has gone.

Encroachment on Policy
The big picture is that India has lost competitiveness thanks to new policies that no party is keen to reverse. The recent land acquisition law has made land much more costly than in Asean competitors. Wages have shot up since 2008, thanks in part to MGNREGA.

Creating an independent Monetary Policy Committee entrusted with a single-minded focus on inflation control is not going to bring down interest rates to Asean levels. Electricity for industry costs twice as much as in Asean, because high industrial tariffs are used to subsidise farm and domestic consumption.

In sum, many politically popular initiatives of recent years have raised the cost of all industrial inputs: land, labour, capital and electricity. No wonder industrial output and exports are struggling. Yet, no political party has an explicit plan to slash these costs. Now, Indian entrepreneurship and jugaad can overcome many cost hurdles.

But in low-tech industries, value addition is so low that it’s difficult to overcome cost hurdles. These can more easily be overcome where value addition is high, in hi-tech areas. They can also be more easily overcome in service industries, which require less land, electricity, water, capital investment or working capital than manufacturing.

This surely explains why India’s service exports have risen so much faster than manufacturing exports, and why hi-tech exports like auto and pharma have done much better than textiles and leather. Hi-tech areas do not require political tricky steps to cut land and labour costs.

Yet, many experts keep arguing that India is labour-abundant and capital-scarce, and so, must focus on labour-intensive sectors that have created millions of jobs and billions in exports for neighbouring Asian countries. One example is the chapter by C Veeramani and Garima Dhir, ‘Make What in India?’ in the latest India Development Report 2017

They show that hi-tech auto exports grew by an amazing 34% a year during 2000-15, while labour-intensive apparel export growth was only 9%. They find India is locked out of global value chains (GVCs), in which products are assembled from components produced in a wide variety of locations. Many Asian countries are part of GVCs, which culminate in the assembly in China.

India is just not in the picture. How can it get in? By reducing its high input costs like land, labour capital and electricity. But will politics allow that?

Sci-Tech No Longer Sci-Fi

In another chapter in the report, ‘Services for Indian Manufacturing’, Rupa Chanda argues the case for emphasising more services embedded in manufacturing to improve competitiveness. This will include steps to slash India’s speed and costs of logistics: transport, warehousing, rail-road links, paperwork.

In another chapter, ‘One Size Does Not Fit All’, Sunil Mani argues the case for industrial policy, citing some successes and ignoring many failures. But his chapter is useful for emphasising the dynamism of hi-tech exports, which now include aircraft components and satellite launches.

Neither the report nor government experts are facing up to the threat of automation. Machines are being developed that can handle soft materials like cloth and leather. Once these machines are standardised, they will eliminate millions of jobs in apparel and leather goods. Should India make a huge, expensive effort to get into areas that had huge potential in the past but now face the risk of extinction?

Robots will take over brain-intensive areas too. But not to the same extent as labour-intensive ones. Broadly, the future of the world — and of India — lies more in services than in manufacturing, and more in brain-intensive than labour-intensive areas.

India is now a land of relatively expensive inputs like land, labour, capital and electricity. These cannot be offset by cheap manual labour, but can be by low-cost skills. This explains the runaway success of computer software and BPO, and of medical tourism. It explains the export success of autos and pharma.

The challenge of robotisation cannot be met through labour-intensive techniques. It means raising productivity fast enough to overcome cost disadvantages in land, labour and capital. It means improving efficiency of every sort; slashing corruption and waste; vastly improving government services; hugely enhancing skills. It means developing a workforce that is agile and can shift from one task to another depending on how the winds of technical change blow. That’s a big agenda.

Source : PTI

Next on Modi’s list? Mandatory Aadhaar linkage with property : 22-11-2017


When Prime Minister Narendra Modi announced demonetisation to fight black money, a valid criticism was that the black money is hoarded more in immovable property than cash. The government, however, has been saying that demonetisation was one step in fight against black money and more such steps would come.

Now the next big step against black money is round the corner, and this time it’s immovable property that’s on target. For the first time, a Union Cabinet minister has indicated that Aadhaar linkage with property transactions would be made mandatory.

Union Housing Minister Hardeep Puri has said that he has no doubt the linkage would happen. Speaking to Nayantara Rai of ET NOW, Puri said such a move would go a long way in sucking out black money from real estate and also help in crackdown on benami properties. “Seeding Aadhaar to property transaction is a great idea but I’m not going to make an announcement on that. We are already linking Aadhaar to bank accounts, etc, and we can take some additional steps for property market also,” he said.

Prime Minister Narendra Modi has indicated several times that the government would crack down on benami property. Aadhaar linkage could be one part of that drive.

When asked if seeding Aadhaar with property is a logical conclusion of the government’s drive to push Aadhaar to bring transparency in economy, Puri said, “Absolutely, that’s the way it’s heading anyways. I have no doubt that it will happen.”

However, according to Puri, while no one can absolutely enforce that a transaction between two individuals is completely transparent, large-value transactions such as property and air tickets could definitely be monitored.

“There is no economy in the world that is entirely cashless. However, people do not feel the need of carrying large wads of cash around in economies that have stable system. That’s the way we are heading,” he said.

Mandatory Aadhaar linkage to innumerable government schemes and for identification has generated a lot of debate. Several petitions against the Aadhaar linkage are being heard in the court.

Source : Economic Times

Moody’s India upgrade could help Modi consolidate his popularity : 21-11-2017


India’s longer-term financial health received a vote of confidence at a time when the government’s economic policies are facing criticism and growth has slipped to levels last seen in 2014. In a development that could help Prime Minister Narendra Modi consolidate his popularity, Moody’s Investors Service raised India’s sovereign rating for the first time in 14 years on Friday, offering a political victory to Modi and his at-times-controversial reform agenda. The praise for India’s new goods and services tax and efforts to reduce the size of the informal economy gives the prime minister’s Bharatiya Janata Party a boost ahead of a crucial election in his home state of Gujarat next month and their re-election bid in 2019.

 At the same time, the upgrade — to Moody’s second-lowest investment grade rating from its lowest — contrasts starkly with brewing problems on the domestic front. Dented by Modi’s cash ban last year, growth dropped to 5.7 percent in the April-June quarter from 7.9 percent a year ago. The chaotic rollout of the tax has further dampened sentiment, prompting government to tweak tax rates several times amid growing criticism about the lack of employment creation and fears that India may miss its fiscal deficit target.

“In the short-run, difficulties in adjusting to the new GST and the expanded digital economy have led to some downturn in economic activity, but the prospects for the next couple of years leading up to the 2019 general elections definitely look optimistic,” said Raghbendra Jha, Rajiv Gandhi professor of economics at Australian National University.

Reform Praise

Moody’s praised Modi’s efforts to broaden the tax base and tackle non-performing loans in India’s $2.3 trillion economy, Asia’s third-largest. Moody’s said these reforms provide stability and “enhance India’s high growth potential.” The agency also praised Modi’s disruptive demonetization policy, which sucked 86 percent of India’s currency out of circulation last November for helping reduce corruption, increase the size of the formal economy and improve tax collection. The upgrade’s timing is “opportune,” and corrects “undue bearish sentiment over the last few months,” according to Abhishek Gupta, a Mumbai-based analyst with Bloomberg Economics.

ANU’s Jha said the upgrade could provide political stability, lead to more foreign direct investment inflows and boost jobs as the ruling BJP faces crucial elections. “This will increase jobs and have positive spin off effects on Modi’s political prospects,” he said.

Domestic Situation

Still, India’s vast challenges meant the upgrade was greeted with skepticism. Some reforms praised by Moody’s “are of questionable value both in the near-and medium-term,” said Prasanna Ananthasubramanian, chief economist at ICICI Securities Primary Dealership, adding that the “loss of growth momentum in the last 12 months” outweighs benefits from additional savings.

The Moody’s upgrade also comes amid expectations of fiscal slippage because of falling revenue collections, higher oil prices and government expenditures as it tries up to make up for weak private investment. “We believe the central government will likely breach the FY18 fiscal deficit target of 3.2 percent of GDP by about 0.5 percent of GDP on lower revenues collections,” said Tanvee Gupta Jain, economist at UBS Group AG. That’s because of excise duty cuts on gasoline and diesel, lower telecom collections, a drop in the central bank dividend and higher government expenditures. State governments are also under pressure to fund additional spending to pay for billions of rupees in waived farmer loans and higher salaries for government employees.

The upgrade might be a “reflection of the improvements” in India, said Hugh Young, head of Asia for Standard Life Aberdeen Plc. “I don’t think in itself it will change much,” Young said. “India needs to keep on making business life easier and more transparent and the money will flow.”

Source : Financial Express

CBEC chief’s missive to FMCGs: Pass on benefits post GST tweak : 21-11-2017


Keeping up the pressure on the consumer goods sector, the Central Board of Excise and Customs (CBEC) chairman has written to the biggest companies to ensure that cuts in the goods and services tax (GST) are passed on to customers. The GST Council has cut rates on 178 products including chocolates, detergent, toothpaste, shampoo, air freshener and shaving cream to 18% from 28% and the government is keen that this translate into lower prices for buyers.

“We have reached out to over 100 companies,” CBEC chairman Vanaja Sarna told ET. “This is essentially an appeal asking them to pass on the tax cuts to consumers.” India’s biggest fast-moving consumer goods companies include Hindustan UnileverBSE 0.30 %, ITCBSE -0.50 %, NestleBSE -0.02 %, DaburBSE 0.87 %, Godrej Consumer ProductsBSE -0.02 %, Amul, Perfetti Van Melle, L’Oréal and Mondelez.

A top executive at a large diversified consumer products maker confirmed it had got the letter. “We received a letter from CBEC, asking that benefits of the tax reductions announced by the GST Council be passed on to buyers,” he said. “We received the letter on Friday.”

Finance secretary Hasmukh Adhia had told ET that it was up to companies to ensure the benefits of tax cuts were passed on. “It is the company’s responsibility to ensure that its entire retail chain follows its directives on pricing,” Adhia said in the November 20 interview. “If a trader is not selling a good at revised MRP (maximum retail price), then it is the responsibility of the company.”

Boost to Consumption “It (the company) will have to respond to the National Anti-profiteering Authority on this. Action can only be taken against organised players as they are the ones who decide MRP. We don’t want that industry should suffer, but at the same time consumers should also not suffer,” Adhia had told ET.

The cabinet last week approved the establishment of the National Anti-profiteering Authority (NAA) in this regard.

The GST Council had on November 10 moved 178 items, including washing powder, toothpaste, tooth powder, shaving cream, deodorants and chocolates, to the 18% GST slab from 28%. A day after the notification of reduced rates by the Centre and states, companies had begun instructing trade partners, including distributors, stockists and retailers, to sell products on which taxes were reduced at lower prices to consumers, irrespective of the printed MRP. Companies have until December to apply  new price stickers according to an order issued by the consumer affairs ministry.

But the government is keen that even before this happens, a process that may take time, companies direct the trade and also communicate to consumers directly on price reductions.

“Yes, we are in receipt of the letter over the weekend,” said a cosmetics company executive. “We are fast-tracking on packaging products with revised prices. There is no question of not passing on the benefits to consumers immediately.

The reduced pricing is expected to spur consumption in a category that has otherwise been subdued. The existing inventory is expected to be replaced with fresh stock bearing new price tags in about two-four weeks.

A government statement issued late Monday evening said CBEC chairman Sarna has written to all major fast-moving consumer goods companies, pointing out the need to immediately revise MRP for products on which tax rate has been reduced.

Source : PTI