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

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

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Here’s why an entry tax may not solve states’ past problems : 21-11-2016


The Supreme Court last week upheld the levy of entry tax by states. A nine-judge Constitution Bench headed by Chief Justice TS Thakur in a majority verdict of 7:2 ruled that the freedom of trade under Article 301 of the Constitution was not free from tax, and a non-discriminatory levy of tax is not violative of Article 304(a). It held that states have the right to levy taxes as long as these are not discriminatory. States fighting these cases in the apex court included Haryana, Bihar, Tamil Nadu, Kerala, Rajasthan, Odisha, Uttar Pradesh, Jharkhand, Chattisgarh, Assam and Madhya Pradesh.

Laying down a 10-point framework for the regular benches to decide the legality of such state laws, CJI Thakur, who penned down the judgment for judges AK Sikri and AM Khanwilkar, said “the compensatory tax theory evolved in Automobile Transport case and subsequently modified in Jindal’s case has no juristic basis and is therefore rejected”.

As the SC endorsed entry tax, companies will have to pay arrears of over R30,000 crore plus interest and future taxes till it is abolished under the GST regime. Over 2,000 cross-appeal cases were filed by several companies and states on levying entry tax.

While judges SA Bobde, Shiva Kirti Singh, NV Ramana and R Bhanumathi also concurred with the findings of CJI, 2 out of 9 judges—Justice DY Chandrachud and Justice Ashok Bhushan—disagreed with the majority view. Justice Bhanumathi preferred to write a separate judgment, saying she had difference of opinion on one or two points only. She was of the view that the term ‘local area’ implied the entire territory of the state.

Justice Chandrachud noted that a tax can impose restriction where its direct and “inevitable effect is to restrict the freedom of trade, commerce and intercourse.” He also held that a local area is not the entire state.

The other dissenting judge on the bench Justice Ashok Bhushan dismissed states’ arguments of holding entry tax as compensatory in nature by saying that the concept is not compatible with the Constitution.

While attorney general Mukul Rohatgi had told the court that all future entry tax issues will be resolved with the passage of the GST, legal experts say that will not solve the states’ past problems.

Senior advocate KK Venugopal pointed out that if the GST Bill is passed it will impact only future transactions. If the GST is not passed, then states will be entitled to collect such tax arrears based on accounts maintained by them.

Welcoming the SC’s judgement, the Odisha government said that it would earn balance R1,500 crore from different companies as some dealers have paid 50% of entry tax pursuant to the apex court’s interim orders.

The provisions of Article 301 of the constitution were first examined in the case, Atiabari Tea Company Ltd vs State of Assam, in 1960 by a five-judge bench that emphaised on the need for economic unity and ruled against entry tax. After doubts arose over the Atiabari ruling, the issue was referred to a larger bench of seven judges in the Automobile Transport (Rajasthan) Company Ltd vs State of Rajasthan (1962). The bench then ruled in favour of tax.

Jindal Steels Ltd then challenge the levy by Haryana in 2002. Later, other manufacturing companies including Vedanta, Reliance, SAIL and Hindalco followed. The case was eventually referred to a larger bench of five judges for more clarity. In 2006, the five-judge bench directed hearing of all related cases following which, in 2008, a two-judge bench framed 10 questions for consideration by the larger bench.

Later in 2010, the issue was referred to a 9-judge Bench by a Constitution Bench led by Justice SH Kapadia. After a six-year hiatus, CJI Thakur then finally heard the matter overruling previous apex court decisions in Atiabari and The Automobile Transport. The assessees had relied upon these cases for assailing entry taxes while the states have sought for overruling the two decisions.

Senior Advocate Harish Salve batted for the companies, arguing it was beyond the power of the states to impose such tax on goods entering their territory. However, states refuted these arguments by saying their sovereign powers should not be diluted as the right to levy and entry tax is essential to the division of tax powers between the Centre and states.

Source : PTI

GST will help India Inc go digital : 21-11-2016


The newly introduced goods and services tax (GST) is India’s most significant tax reform in decades. It is expected to usher in a harmonised national market for goods and services and lead to a simplified, assessee-friendly tax administration system. But getting GST compliant for businesses may mean significant re-thinking of business processes and systems. What does this mean for IT teams? Two key executives from German enterprise software maker, SAP—Neeraj Athalye, head of SAP S/4HANA, Indian subcontinent and Arun Subramanian, vice president, globalisation services, SAP India—speak to Sudhir Chowdhary on the transition challenges and road map for implementation during this digital transformation. Excerpts:

What are some of the major challenges for the industry while adopting GST?

Neeraj Athalye: There are two basic challenges. The first is getting clarity on GST, which is an ongoing challenge and is expected to be addressed as we progress towards a successful transition. The second challenge is making the businesses GST compliant. As a technology organisation, it is important to know where businesses stand. Businesses need help on the road map to move to GST compliant systems. As SAP’s solutions cut across 26 industries, we understand that each company has different needs depending on the industry it belongs to.

How can IT companies such as SAP support India Inc, especially SMEs, to be prepared to move onto the new GST regime?

Athalye: SMEs have always been a very strategic customer base for SAP. We have launched various solutions to meet their requirements and have multiple solutions depending on their size and scale. For GST, it is critical for us to help them through this journey towards achieving compliance. We have recently announced a knowledge platform available at sap.com/India/SimpleGST, with Assocham as industry partner, where all the GST related information is available to businesses, irrespective of their size. Large enterprises have access to a whole bunch of consultants, advisors and others for getting requisite information on GST. Since SMEs may not have the same kind of access, we have taken a three-pronged approach—connect, engage and transform to enable them for this.

Engage: For engaging or reaching out to enterprises across the country, we have a large set of partners that we work with across diverse industries. We enable the partners to take the message and process forward to businesses. Additionally, we are available on a 24×7 SAP support line.

Transform: We have various tools today that help businesses with their transformation journey. Be it the S/4HANA digital core road map or how companies go about adopting it, all such information is available through blogs/white papers/e-learning sessions. We conduct wide web learning/ training sessions and seminars as well.

Arun Subramanian: We started this journey of reaching out to businesses and the ecosystem sometime back in December 2014, when the white paper for GST was ready. In addition to webinars and regular sessions, industry work groups, we are also going to put our solution proposal on the knowledge platform along with sound bytes from senior executives, consulting notes and other prerequisites. Additionally, SAP is reaching out not just to businesses, but partners as well. We want to give as much information as possible to ensure that everyone is crossing the line on April 1, 2017, because if even one company misses the deadline, the chain will break.

Do you see GST to be a catalyst of growth for the Indian enterprise application industry?

Athalye: Absolutely. If a retail company has to be GST compliant, all its suppliers need to be GST compliant as well. A big ripple effect of digitisation is to be expected out of this implementation. This will be followed by optimisation. As I said, GST will have an implication on the number of warehouses every company has.

GST is not just a taxation exercise. Isn’t there a huge amount of IT technology infusion that is going into the whole business landscape?

Subramanian: Absolutely. First, the tax follows the goods because it is a tax on supply. Second, look at how the government has announced the law. It says upload all your supply invoices electronically onto the GSTN system. So, if everyone with a tax base of R20 lakh is going to upload their supplies, this will include any business that makes R6,500 earning per day, which could be a pav bhaji vendor or panwalla as well. That is how wide the tax base is going to be. They are saying every supply invoice has to be in the system.

The GSTN is not just going to hoard data, it is going to act as a clearing house mechanism. Interstate supply will do the transfer of SGST (state GST) from state A to state B where the goods are moving. That’s how the tax is moved with them electronically. If you look at it, everything is getting tagged into the system. So IT enablement is going to be pivotal as everyone is going live. Everyone is going to have to learn and then take it forward from there. We will be going paperless. IT is going to be a key driver.

GST may translate into processing of 300 to 500 crore (3-5 billion) invoices every month. How can the SAP system help to deal with the volumes?

Subramanian: According to our understanding, about 4-5 billion invoices will be uploaded onto the GSTN system on a monthly basis. I can safely say 30-40% of this number would come from an SAP system. The question is on the line of connectivity to GSTN. We are looking at building solutions with SAP HANA as the database to help even those businesses who probably are not on SAP S/4HANA or the digital core to process large volumes of data.

Each organisation is estimated to process 50,000 to seven lakh invoices a month. With HANA as the database, our solutions will specifically be able to cater to each and every size and segment of the businesses that we support today. For those who cannot afford S/4HANA or those who are looking at S/4HANA a little later down the line, we have an interim solution as well. So from a compliance point of view, businesses will not be affected.

We have handled several legal changes in the past—those that were part of Yashwant Sinha’s budget, VAT, service tax, the NFE going automatic in Brazil, and the digital agenda of the European Union. In Brazil, for example, you cannot issue an invoice to your customer. It goes to the government system, the tax is verified, and then you send your invoice to your customer. The electronic invoicing in Russia also follows a similar process where it doesn’t go directly to the government, but it goes to a registered tax authority and through the registered tax authority the invoice is directed to the customer.

What have been the key learnings from other markets where GST was implemented?

Subramanian: Let me take the example of Canada. There are three levels of taxes, exactly as in India— federal, provincial and inter-state. It has an integrated GST with one rate, hence, it was simpler. Prior to GST it had VAT, which had two rates, so it was an easier transition. However, in terms of industry and practices it was a mature market. So the enterprises that transitioned were able to do it probably in a much efficient manner.

A recent example is Malaysia, where the industry and the enterprises are not as mature as that in Canada. There were teething problems, coupled with strikes by traders against the increase of the tax net, even though it went with one single tax across the country. So we have had varied experiences. For India, I think it is very important that from a policy perspective, while we have a draft model in place today, the business of business should be business, it should not be compliance.

Source : Financial Express

GST faces deadlock over administrative control on assessees : 21-11-2016


Most issues related to the proposed Goods and Services Tax (GST) taken up by the GST Council have been resolved. But administrative control over assessees has become a prickly matter, dividing the Centre and states.

Even an informal meeting between Finance Minister Arun Jaitley and state finance ministers failed to resolve the matter on Sunday, five days ahead of when the GSTCouncil is slated to take up the issue.

While the states and central finance officials are set to meet on Monday, the lack of consensus has the potential to cast a shadow on the planned GST rollout by April 1, 2017.

States, including West Bengal, Uttar Pradesh and Tamil Nadu, also took the opportunity to raise the issue of demonetisation and its impact on their treasuries with the finance minister.

After Sunday’s three-hour meeting, Jaitley said: “The meeting has remained incomplete. Discussions will continue on November 25.”

Trinamool Congress-ruled West Bengal remained a hurdle in building a consensus on the issue. The Trinamool had made implementation of GST a part of its manifesto for the Assembly polls, which it won earlier this year. However, the Assembly has not ratified the constitutional amendment Bill.

But there are practical difficulties as well. Entry-level taxes imposed by the Centre and the state have not been resolved. Who will collect these taxes? If the state ceases to collect these, how will the compensation mechanism work? West Bengal asked these questions. The state also objected to the Centre’s close monitoring of fund usage in social development schemes, calling it a “serious infringement” of the federal structure.

Kerala and Tamil Nadu are also citing jurisdictional issues and two sets of tax collection agencies as their objections. The objections of these three states suggests that the rollout of GST will miss its deadline.

In initial meetings of the GST Council in October, the issue was stated to be resolved amicably between the Centre and states. According to that agreement, the states were to have sole control in matters of sending notices, scrutinising and auditing accounts of assessees if their annual turnover was up to Rs 1.5 crore in case of goods. Over this threshold, both the Centre and states were to have control, but they were to avoid dual control over the same assessee.

In case of services, it was agreed the Centre would have sole control over assessees in case of service tax till the time state officials get enough skills to monitor this levy. Under the current tax system, only Centre can impose service tax, at least most of them.

However, this agreement, technically called horizontal model, broke down later even before the minutes of the agreement could be written. States argued that they also levy some service taxes such as entertainment tax. As such, they should be given power to monitor these.

The Centre then proposed a vertical model under which both the Centre and states will have control over assessees in goods and services, but would avoid dual control. The Centre was willing to give more number of assesses — two-thirds — to states. This was not agreed to by many states.

As the GST Council meeting could not break the deadlock, an informal meeting was convened by Jaitley. Most bureaucrats were not part of the meeting. However, this meeting could not resolve the issue.

Any disagreement at the next meet could derail the rollout of the GST from the targeted April 1, 2017. Jaitley had earlier this month stated that the GST has to be rolled out by September 16, 2017, before the validity of the constitutional amendment brought in by Centre and ratified by states expired.

On Sunday, West Bengal, Kerala, Uttarakhand, Uttar Pradesh and Tamil Nadu insisted on exclusive control over taxpayers earning less than Rs 1.5 crore in annual revenue, for both goods and services.

Uttarakhand Finance Minister Indira Hridayesh said: “The Centre is agreeable on goods, but is not yielding on services. States are looking at their interest to safeguard their revenue. The Centre will have to yield to states to get the CGST and IGST Bills passed. A middle ground on the issue has to be worked out politically.”

Kerala Finance Minister Thomas Issac said his state was unwilling to compromise as it had virtually given up its taxation rights.

At present, the estimated indirect taxpayer base, including value-added tax, service tax and excise, is around 10 million, of which around 0.4 million are common to the centre and the states. This leaves around 9.6 million tax payers of which around 6.6 million are value-added tax assessees, 2.6 million are active service tax assessees and around 0.4 million assesses are registered under excise.

The next GST Council meeting, on November 25, will also work to finalise four supplementary Bills dealing with CGST, SGST, IGST and the compensation law.

Source : Economic Times

Revised Double Taxation Avoidance and Prevention of Fiscal Evasion Agreement : 19-11-2016


India and Cyprus signed a revised agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion (DTAA) with respect to taxes on income, along with its Protocol, in Nicosia today.
The agreement will replace the existing DTAA that was signed by the two countries on 13th June 1994.
The protocol was signed by Mr. Ravi Bangar, High Commissioner of India to Cyprus on behalf of India and Mr. Harris Georgiades, the Minister of Finance on behalf of Cyprus.
An official press release said the new DTAA provides for source based taxation of capital gains arising from alienation of shares, instead of residence based taxation provided under the existing DTAA.
However, a grandfathering clause has been provided for investments made prior to 1st April, 2017, in respect of which capital gains would continue to be taxed in the country of which taxpayer is a resident.
The new agreement provides for assistance between the two countries for collection of taxes. The new agreement also updates the provisions related to Exchange of Information to accepted international standards, which will enable exchange of banking information and allow the use of such information for purposes other than taxation with the prior approval of the Competent Authorities of the country providing the information.
The new agreement expands the scope of ‘permanent establishment’ and reduces the tax rate on royalty in the country from which payments are made to 10% from the existing rate of 15%, in line with the tax rate under Indian tax laws. It also updates the text of other provisions in accordance with the international standards and consistent policy of India in respect of tax treaties.
Provisions of the new DTAA will enter into force after the completion of necessary internal procedures in both countries and is expected to come into effect in India in respect of income derived in fiscal years beginning on or after 1st April, 2017, the release added.
Source : Financial Express

Realty Awaits Clarity on GST : 19-11-2016


While the goods and services tax (GST) tax structure has been announced, the real estate sector is waiting with bated breath to see which tax rate gets applied to the real estate and construction sector.

Anuj Puri, Chairman & Country Head, JLL India — a leading real estate consultancy firm in India — said, “Given the Finance Minister Arun Jaitley’s clarification that the highest tax slab will be applicable to ‘sin’ items and other categories that are currently taxed at around 30 percent, it can be assumed that this rate will not apply to the real estate and construction industry. Similarly, the lowest tax rate of 5 percent will apply on common use items and is highly unlikely to be applied to housing. That leaves us with two probable scenarios: the tax rate either being set at 12 percent or 18 percent,” adding, “Clarification would also be needed on whether credit for input tax would be allowed by the Government if the composition scheme has been availed by developers. Only after these clarifications have been issued in coming days will the real estate industry understand the implications of the upcoming GST regime.”

Elaborating upon 18 percent tax bracket may put the input cost on the higher bottle neck Manoj Gaur, President CREDAI-NCR said, “There are few chances of the input costs going up as the cumulative taxes which are charged as of now might end up being on the higher side than the rate which is decided for the sector. In such cases, say there are 7 industries which are prime contributors to the sector and few of them have the GST rate on the higher side than for the sector and others have lower rates.” The Managing Director of the Gaursons India further added, “This will mean net increase in the input costs fractionally by a percent or two but eventually the costs are bound to go down for the end user as the final delivery charges will have much lower taxes than the ones already persistent resulting in the final costs going down.”

Standing in sync with Anuj Puri of the JLL Deepak Kapoor, President CREDAI-Western UP chapter said, “There have been various issues which the government still needs to address like deciding on the overall rate which would be applicable for the real estate sector. Speculations are still high as to what rate would be assigned to the sector but a final assessment can be made only when the final rates are announced. The Director, Gulshan Homz further added, Till that time, everyone needs to work around the structure of GST and better understand it’s applicability which will ensure smooth operations post that.”

Demanding different brackets for tier-2 and tier-3 cities Kushagr Ansal, Director, Ansal Housing said, “Rather than deciding some exceptional tax brackets for markets like Mumbai and Delhi NCR, there should considerations towards incorporating these brackets for tier – 2 and tier – 3 cities as there are massive infrastructure plans for them which are in the pipeline and various initiatives like the Smart India Mission and Housing for All 2022 which will ensure more benefit for the buyers which are being targeted through these schemes.”

Batting in favour of the 12 percent tax regime for the real estate sector Anuj Puri of the JLL India said, “A higher rate of 18 percent, however, could end up increasing the cost of homes, especially in projects which are under construction, unless the Government offers more clarity on the composition scheme (i.e. abatements for cost of land) as well as on service tax and value added tax (VAT) already paid by developers on under-construction properties.” Puri said that under the service tax regime, developers and home buyers can obtain benefits under the abatement scheme. In the case of buying an under-construction flat, an abatement of 75 percent was allowed, subject to the flat being less than 2,000 sft and sold for less than Rs 1 crore, taking the effective tax rate from 15 percent to 3.75 percent. If these two conditions are not met, the abatement was reduced to 70 percent and the effective tax rate to be borne by the home buyer increased to 4.5 percent.

As most houses in Mumbai are priced above INR 1 crore, an end-user buying an under-construction apartment would currently pay both service tax (4.5 percent) and VAT (1 percent in Maharashtra, varies from state to state). Besides, there are other taxes applicable such as excise duty, customs duty, central sales tax, octroi, etc., which are paid by the developer during procurement and passed on to the home buyer. Stamp duty, which is payable on property transfers, will not be subsumed into the GST.

“Now, assuming that the same rules of abatement apply under the GST regime, properties under construction will attract a tax rate of 4.5 percent (after 75 percent abatement on a tax rate of 18 percent), which is the same as today. However, if the abatement rules do not apply, the applicable tax rate would shoot up drastically. Moreover, developers would have already paid service tax and VAT for procurement of goods and services for their properties currently under construction. Will they be allowed to claim credits for input tax paid,” asked Puri of the JLL India?

However, either 12 percent or 18 percent there are builders who believe would be enough to scale down the realty prices in India. Speculating prices of the house properties going down post GST implementation, Vikash Bhagat, Director, Airwil Infra said, “Either of the two remaining brackets would be both beneficial for the sector as in the current scenario there are multiple taxes and this cumulates to a much higher tax than the speculated 12  percent or 18  percent.” Bhagat said that there have been high bids on the prices of properties going up post GST is implemented but this might not be the scenario in real time. It might end up reducing the major tax burdens on the real estate developers hence resulting in the final prices going down.

Source : Business Standard

Demonetisation: Analysts warn of speed bumps before GDP growth rebound : 19-11-2016


The scrapping of Rs 500 and Rs 1,000 notes, which comprised about 86% of all cash in circulation, will put a dent in India’s growth. How big is a matter of speculation — some analysts pegged the setback at a few tenths of a percentage point, others slashed estimates by half. The most pessimistic view would possibly see India slipping back behind China and losing its title of fastest growing major economy in the world.

Brace for a slowdown in the remaining five months of FY17 as demand dries up in response to the lack of liquidity, but expect an equally strong rebound in a few quarters when the expected benefits of the move kick in, was the predominant view among analysts.

“The economy has had a heart attack this quarter,” said Indranil Sen Gupta, chief India economist at Bank of America-Merrill Lynch. “We expect the impact of this to resonate for at least two quarters, impacting GDP by 50 basis points for the fiscal year.”

Most put the revised number at around 7% against earlier estimates of near 8%, an optimism that had been bolstered by good monsoons and a pay commission-led consumption boost. The Indian economy expanded 7.6% in FY16. The International Monetary Fund had put FY17 growth at the same level. China is likely to grow at 6.6% in 2016 and is expected to slow to 6.2% in 2017.

HDFC Bank expects India’s GDP to grow at 7.3% versus the earlier estimate of 7.8%. CARE Ratings slashed its projection for gross value added (GVA) to 7.1-7.3% from 7.6%. Services will get hit the most in the December quarter on account of losses in trade, hotels and transport due to the volume of cash transactions involved in these activities.

“Agriculture is expected to be least impacted with the major shock being absorbed in the first two-three weeks itself as there have been issues in sales at mandis due to the cash crunch presently,” CARE Ratings said in a report.

ICRA cut its growth forecast by 40 basis points. It had earlier forecast GDP and GVA to grow 7.9% and 7.7%, respectively. One basis point is one hundredth of a percentage point.

“Consumption-oriented sectors, particularly those which witness a sizable magnitude of cash transactions, such as real estate, construction, jewellery, retail, travel and tourism and trade are likely to be most affected. Cash-based transactions in the unorganised sector would also get disrupted, particularly in rural areas,” said Aditi Nayar, senior economist at ICRA.

Investment bank Ambit Capital took a far bleaker view. It cut GDP growth estimates for FY17 to 3.5% from 6.8% earlier and for FY18 to 5.8% from 7.3%, even penciling in the possibility of a contraction in the ongoing third quarter.

Ambit said the cash crunch will paralyse economic activity in the short term. “Hence, we expect GDP growth to decelerate from 6.4% in the first half of FY17 (as per Ambit estimates) to 0.5% year on year in the second half of FY17 with a distinct possibility of GDP growth contracting in the third quarter FY17.”

An economist at one of the large private Indian banks said GVA growth could be as low as 7.1% with discretionary consumption to suffer a major blow due to the cash crunch. “It will be a drag especially in this quarter but we expect things to normalise in the fourth quarter,” the economist said.

Credit ratings firm Crisil earlier projected GDP to grow 7.5% but now expects a downside risk emanating from demonetisation.

“Though we are still waiting and watching, it is almost certain that demonetisation will shave off some percentage points from the GDP,” said Sunil Kumar Sinha, principal economist at India Ratings & Research, a Fitch Group company. HSBC expects an impact of up to one percentage point on growth. “Using the cash elasticity of GDP, we estimate that over a year, economic growth can fall by 0.7-1.0 ppt (percentage point), with the maximum impact in the immediate two quarters, which will see  a large contraction in ‘effective’ money supply,” it said in a note.

Economic Affairs Secretary Shaktikanta Das said it was too early to assess the impact of demonetisation. “It is too early to assume GDP will go down just because of this. The situation will ease out in next 10 to 15 days,” he said at an ET Now function, while pointing out that things were improving. The deceleration will push the government’s ambitions of achieving 8% growth further out of reach.

“Consumption has been hit hard. Agriculture has done better this year but it will not be able to make up for this impact,” said DK Joshi, chief economist at Crisil. Consumption has about a 56% weightage in GDP.

Sen Gupta said the economy can at best grow at the same pace as last year, though it is more likely it will grow somewhere around 7.4%, slower than the 7.6% registered in the fiscal year ended March 2016. The biggest blow will be borne by services sector as people conserve cash rather than spend on travel, consumption or leisure activities. Since the sector dominates the economy, this will lead to some job losses and pull GDP lower.

While the short-term view is negative, most experts have a bullish view a year down the line from the boost to taxes and potentially lower interest rates and inflation. Ambit expects a 25-50 basis point reduction in interest rates in the second half of the current fiscal.

“Since government’s fiscal situation is likely to improve (with higher tax collection), GDP growth is likely to improve over time – we expect FY18 GDP growth of around 8.2% (revised up) from 8%,” said Tushar Arora, senior economist at HDFC Bank.

Small and medium enterprises (SMEs), which are also big contributors to GDP, will be hit because both payments and receipts are in cash, said Madan Sabnavis, chief economist at Care Ratings.

“Overall GDP would be affected by 0.3% to 0.5%,” Sabnavis said. Care had expected India’s GDP to grow at 7.8% before the monetisation was announced.

Expectations are that the sowing for the winter rabi crop will also be affected, though it is unclear on what impact the demonetisation will have on prices of foodstuff.

Source : Economic Times

Don’t mislead Parliament: Oppn punches hole in govt’s claims on bad loans, black money : 18-11-2016


The Congress and Communist Party of India (Marxist) questioned the Narendra Modi government’s claims on a crackdown on ‘black money’ and also highlighted its poor record on recovering bad loans, or non-performing assets (NPAs), of the banking sector.

Arun Shourie, a former Bharatiya Janata Party (BJP) member, told news channel NDTV thee government failed to anticipate the distress its decision would cause in remote areas. Asked if demonetisation was a bold move, Shourie said jumping into a well or committing suicide is also radical. A minister in the Atal Bihari Vajpayee-led government, Shourie said a beginning could have been made by reforming the tax administration.

Opposition punches hole in govt's claims on bad loans, black money

CPI (M) chief Sitaram Yechury said Finance Minister Arun Jaitley’s clarification in the Rajya Sabha on Wednesday about NPAs was incorrect and accused him of having “misled” Parliament. On reports that the State Bank of India had written off bad loans worth Rs 7,000 crore, including Rs 1,200 crore of industrialist Vijay Mallya, the minister had said it was incorrect to term it a “loan waiver”.

Jaitley had said the bad loans continued to be on the books of the bank, which would continue to make efforts to recover it. But Yechury, quoting former Reserve Bank deputy governor K C Chakrabarty, said there was no incentive for banks to pursue recovery of a bad loan if it was no longer on the balance sheet. The CPI (M) chief advised Jaitley to read RBI guidelines on the issue.

Yechury said the Modi government’s efforts to recover bad loans were poor. The conviction rate for loan defaulters was a mere 1.45% in 2014-15, which further declined to 1.14% in 2015-16.

Congress Rajya Sabha member Jairam Ramesh said the government move would impact the rural economy for the next 12 months. He said the Modi government, according to a reply to a question in Parliament, had recovered Rs 1.25 lakh crore of black money in the past two years. Ramesh said the Congress-led UPA government’s record was better; it unearthed Rs 1.31 lakh crore in its last two years.

Ramesh also questioned the government claim that demonetisation is largely aimed at checking fake currency.

He said fake currency was not more than Rs 500 crore or 0.02 per cent of total black money. The two parties also said the government had mismanaged the situation. Its confusion was apparent in the way it had repeatedly changed the exchange limit of currency notes and its failure to recalibrate ATMs.

Shourie said the PM was carried away by a big idea and got into a self-image that he needed some or the other ‘surgical strike’. “They have got into this cycle of surgical strike business,” he said. Earlier also a Modi government critic, he said demonetisation was akin to wielding an axe to remove a mosquito on your nose. “You have to do a lot more on black money…I am all for it but this is not the way to go about it,” he said.

Source : Financial Express

Solving tax woes: India, US strike deal on advance pricing agreement : 18-11-2016


India and the US have reached a deal for the first bilateral advance pricing agreement, opening the doors for US multinationals here to ascertain their tax liabilities beforehand. The two countries have also resolved 108 tax disputes involving a tax of about `5,000 crore through the Mutual Agreement Procedure (MAP).

“The two competent authorities reached an agreement on the terms and conditions of the firstever Bilateral APA involving India and the USA,” a finance ministry statemen  said on Thursday. At a meeting held in the last week of October, the two countries resolved 66 transfer pricing disputes and 42 cases related to treaty interpretation.

MAP, under the Double Taxation Avoidance Agreement (DTAA), is an alternative dispute settlement mechanism available to authorities and foreign investors. “The total amount that was locked up in dispute in these cases is approximately `5,000 crore and these cases were related to Assessment Years ranging from AY 1999-2000 to AY 2011-12,” it added.

The resolved cases pertain to various issues like transfer pricing adjustments made to the international transactions in the nature of payment of royalty, management fees, cost contribution arrangements, engineering design services, contract R&D services, investment advisory services, Marketing Support Services and Software Development Services.

The treaty interpretative issues were in the nature of presence of permanent establishment in India and profit attribution to such PEs, disputes pertaining to royalty income v/s business income of foreign companies.

Advance pricing provides certainty to taxpayers in respect of cross-border sales among related entities by specifying the methods of transfer pricing and determining the arm’s length price of international transactions in advance for usually a maximum of five years ahead

Though India started its Bilateral APA process with the US by accepting applications from the Indian taxpayers from FY 2012-13, the US started its bilateral process with India only in February 2016 by way of accepting applications from US taxpayers. Within a short span of eight months, the agreement has been reached upon in the first ever bilateral APA involving India and the US.

“The speedy resolution of cases and agreement on Bilateral APA due to effective mechanism of development of mutual trust and cooperation between the Competent Authorities of two countries would really be a positive factor in creating a conducive atmosphere for investments and business by US Companies in India,” the finance ministry statement said.

Source : PTI

Ban on old notes just a beginning, more such curbs for Aam Aadmi & cos in offing : 18-11-2016


n the government’s determined push against the parallel economy, the next step after the disruptive overnight ban on high value notes could be a cap on cash withdrawal, transactions and amounts that can be held by individuals and companies, people in the know said.

Recently some senior tax officials and experts were asked their opinion about such a step. The senior government officials seeking feedback or opinion on the issue is one of the main reasons why industry trackers say  that such a step could be in the offing, said two people who spoke to ET.

“What was asked was whether SIT proposal on reducing cash transactions was feasible. They wanted to know what could be the pushback or problems of implementing such a step,” a person who refused to be identified said. The Supreme Court-constituted Special Investigation Team (SIT) in July this year that had recommended a cap of Rs 3 lakh on cash transactions and Rs 15 lakh on cash holdings.

The government may not implement the SIT’s proposal as it is and could change the threshold on the cash transactions and cash holdings, industry trackers said.

“The demonetisation and a cap on cash withdrawal is a very positive step as this can just end the parallel economy as almost no black money would be generated. I see this step as a logical extension of government strategy to attack the black money, and it could have huge positive implications on Indian economy,” said Rakesh Nangia, Managing Partner, Nangia and Co.

Experts say that such a step could mean that the war on black money will open up another flank and combined with GST, such a proposal could go a long way.

“As it is, black money would be highly hit due to GST and if the government goes ahead with the SIT recommendation it would be very good. Also, I think the government may allow some exceptions for holding more cash than prescribed and charge tax in some situations,” said Uday Ved, a senior tax expert.

Industry trackers said the government could be looking to introduce such a step in the budget next year. The government can also announce such a change through a CBDT or an RBI circular. A questionnaire mailed to CBDT and the finance secretary on Wednesday did not elicit any response. “There could a probability that such a step could just come in by budget because the government is leaving no stones unturned to attack the black money economy. This would mean that the income tax officers can scrutinise those who hold cash above the limit,” said Amit Maheshwari, Partner, Ashok Maheshwary & Associates LLP.

While seeking opinions of people outside Narendra Modi’s core team means that the government has factored in the risk that the information could leak out, it could also be a strategy to avoid a blowback that demonetisation unleashed, experts said.

The government may be looking at preparing and gauging the impact of such a step in detail by roping some consultants and senior tax officials.

Source : Economic times

Notification No: SO 3464(E) [F.NO.01/12/2009 CL-I Dated: 17-11-2016


SECTION 435 OF THE COMPANIES ACT, 2013 – SPECIAL COURTS – NOTIFIED SPECIAL COURT

NOTIFICATION NO. SO 3464(E) [F.NO.01/12/2009-CL-I (VOL.IV)]DATED 17-11-2016

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 Meghalaya, hereby designates the following Court as Special Court for the purposes of providing speedy trial of offences punishable with imprisonment of two years or more under the Companies Act, 2013, namely:—

TABLE

Sl. No. Existing Court Jurisdiction as Special Court
(1) (2) (3)
1 Court of District and Sessions Judge, Shillong. State of Meghalaya

2. The aforesaid Court mentioned in column number (2) shall exercise the jurisdiction as Special Court in respect of jurisdiction mentioned in column number (3).

Notification No: G.S.R 1075(E) [F.NO.17/60/2012 CL-V Dated: 17-11-2016


COMPANIES ACT, 2013 – AMENDMENT IN SCHEDULE II OF SAID ACT

NOTIFICATION NO. GSR 1075(E) [F.NO.17/60/2012-CL-V]DATED 17-11-2016
(AS CORRECTED BY NOTIFICATION NO. GSR 1127(E) [F.NO.17/60/2012-CL-V], DATED 9-12-2016)

In exercise of the powers conferred by sub-section (1) of section 467 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following further amendments to amend Schedule II to the said Act, namely:—

1. In the Companies Act, 2013, in Schedule II, under Part ‘A’, in para 3, in sub-paragraph (ii), for the brackets, letters and words starting with “(ii) For intangible” and ending with the words “force shall apply”, the following brackets, letters and words shall be substituted, namely:—

“(ii) For intangible assets, the relevant Indian Accounting Standards (Ind AS) shall apply. Where a company is not required to comply with the Indian Accounting Standards (Ind AS), it shall comply with relevant Accounting Standards under Companies (Accounting Standards) Rules, 2006″

2. This notification shall be applicable for accounting period commencing on or after 1st April, 2016.

18 – 17-11-2016


FOREIGN EXCHANGE MANAGEMENT (INSURANCE) REGULATIONS, 2015 – SUITABLE MODIFICATION IN MEMORANDUM OF FOREIGN EXCHANGE MANAGEMENT REGULATIONS RELATING TO GENERAL/HEALTH INSURANCE (GIM) AND LIFE INSURANCE CORPORATION (LIM)

A.P. (DIR SERIES 2016-17) CIRCULAR NO.18[(1)/12(R)]DATED 17-11-2016

Attention of Authorised Dealers (ADs) is invited to A.D (M.A. Series) Circular No. 11 dated May 16, 2000 in terms of which ADs were advised of various Rules, Regulations, Notifications/Directions issued under the Foreign Exchange Management Act, 1999 (hereinafter referred to as the Act). On a review, it is felt necessary to revise the regulations issued under the Foreign Exchange Management (Insurance) Regulations, 2000 notified videNotification No. FEMA. 12/2000 – RB dated May 03, 2000 c.f. G.S.R. No. 395(E) dated May 03, 2000. Accordingly, the said Regulations have been repealed in consultation with the Government of India and superseded by the Foreign Exchange Management (Insurance) Regulations, 2015 notified videNotification No. FEMA. 12(R)/2015-RB dated December 29, 2015 c.f. G.S.R. No. 1007(E) dated December 29, 2015. The revised notification has come into force with effect from December 29, 2015.

2. The Memorandum of Foreign Exchange Management Regulations relating to General/Health Insurance (GIM) and Life Insurance (LIM) in India have also been suitably modified and are annexed at Annex I and Annex II, respectively.

3. AD Category I banks may bring the contents of the circular to the notice of their constituents and customers concerned.

4. The Master Direction No. 9 dated January 01, 2016 on Insurance, is being updated to reflect the changes.

5. 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/approvals, if any, required under any other law.

ANNEX I

Major changes effected in the revised General/Health Insurance Manual (GIM)

Sl. No Subject matter Changes
1. Policies allowed to be placed in foreign exchange. All general/health insurance policies permitted by IRDAI are allowed to be placed in foreign exchange. No RBI permission is required for issuance/renewal of any insurance policy.
2. Payment of insurance premium by Indian Resident Payment of insurance premium in foreign currency by Indian Resident is no longer required irrespective of currency for settlement of claim.
3. Payment of insurance premium by Resident outside India Resident outside India may obtain general/health insurance policy on payment of insurance premium in foreign currency irrespective of currency for settlement of claim. However, if the premium is paid in INR, settlement of claim will be in INR.
4. Health insurance policy by resident going abroad.
(i) Resident going abroad for employment purpose may also take health insurance policy on payment of premium in INR.
(ii) Claims settlement under cashless international health insurance policies to hospitals providing treatment or through Third Party Administrator arrangements allowed.
5. Investments abroad Overseas investment by Insurance companies enabled.
6. Quarterly report by insurance companies on settlement of claims of policies issued with permission of RBI. Quarterly Report discontinued.

GIM Memorandum of Foreign Exchange Management Regulations Relating to General /Health Insurance in India

Definitions

1. (i) “Person resident in India” and “Foreign Currency” will have the same meaning as defined under Foreign Exchange Management Act, 1999.

(ii) “Insurers” means the Indian Insurance Companies as defined in section 3(9) of The Insurance Laws (Amendment) Act, 2015 and registered with Insurance Regulatory and Development Authority of India (IRDAI) to carry out general/health insurance/reinsurance business in India.

Payment of insurance premium in foreign exchange.

2. Payment of premium in foreign exchange means and includes payment of premium in foreign exchange and/or payment of premium in INR derived by sale of foreign exchange to an authorised dealer or an authorised money changer. Appropriate documentary evidence may be insisted upon at the time of accepting payment.

General/Health Insurance policies from Insurers outside India.

3. (i) A person resident in India may take or continue to hold a health insurance policy issued by an insurer outside India provided aggregate remittance including amount of premium does not exceed the limits prescribed by RBI under the Liberalised Remittance Scheme (LRS) from time to time.

(ii) Units located in SEZs may take or continue to hold general/health insurance policies from insurers outside India subject to IRDAI Guidelines and Central Government rules provided the premium is paid by the units out of their foreign exchange balances.

(iii) No person shall take out or renew any policy of insurance in respect of any property in India or any ship or other vessel or aircraft registered in India with an insurer whose principal place of business is outside India without permission of Insurance Regulatory and Development Authority of India (IRDAI).

(iv) A person resident in India may take or continue to hold a general /health insurance policy other than the ones referred in (i) to (iii) above, issued by an insurer outside India, provided that, the policy is held, under a specific or general permission of the Central Government.

(v) A person resident in India may continue to hold any general/health insurance policy issued by an insurer outside India when such person was resident outside India. In case the premium due on a general/health insurance policy has been paid by making remittance from India, the policy holder shall repatriate to India through normal banking channels, the maturity proceeds or amount of any claim due on the policy, if any, within a period of seven days from the receipt thereof.

All risk insurance policies

4. Insurance on Indian marine hulls covering All Risks against war and other allied risks (arising out of civil commotion, political or labour disturbances etc.) is required to be obtained only from the Insurers in India.

General/Health Insurance policies by Indian Residents

5. Resident of India may take general/health insurance policy permitted by IRDAI from Indian insurer on payment of premium in INR, where claims arising under the policies outside India are to be settled in foreign currency.

General/Health Insurance policies by Residents outside India.

6. Resident outside India may take general/health insurance policy as permitted by IRDAI from Indian Insurers. Claims arising under the policies are to be settled in INR if payment of premium is in INR and in any currency if payment of premium is in foreign currency. However, Insurance cover on risks inside India (including All Risks Insurance) on assets in India owned by Indian branches/offices of foreign companies, banks, etc., may be issued only in INR.

Transaction in Nepal and Bhutan

7. Indians, Nepalese and Bhutanese resident in Nepal and Bhutan as well as offices and branches of Indian, Nepalese and Bhutanese firms, companies or other organizations in these two countries are treated as resident in India for purpose of transactions in INR. Payment of claims to such persons against general/health insurance policies may be freely made in INR. Payments in foreign currency towards claims under general/health insurance policies will require prior approval of Reserve Bank, except where premium thereon was also collected in foreign currency.

Settlement of claims in foreign currency

8. A.D. Banks may allow foreign currency remittance for claims under IRDAI permitted general/health insurance policies issued by Indian insurers where settlement of claims is assured in foreign currency subject to following conditions.

(i) The claim has been admitted by the competent authority of the insurer;
(ii) The claim has been settled as per the surveyor’s report wherever applicable, and other substantiating documents;
(iii) Claims on account of reinsurance are being lodged with the reinsurers and will be received as per reinsurance agreement;
(iv) The remittance is being made under the policy to the beneficiary who is resident outside India. For resident beneficiaries the claim may be settled in INR equivalent of foreign currency due. Under no circumstances payment in foreign currency be made to a resident beneficiary;
(v) In case of settlement of claims of import into India, Insurance company is satisfied that:—
(a) Remittance in foreign exchange is not already made by Importer and
(b) If Import is made against Import Licence, the amount of insurance policy premium is endorsed on the import licence;
(vi) In case of settlement of insurance claims of export from India, Insurance company is satisfied that the payment is received in foreign exchange by the Indian exporter;
(vii) In case of settlement of insurance claims in respect of assets located outside India owned by residents of India, permission of Reserve Bank of India for holding the property had been obtained, (wherever necessary);
(viii) Claims arising outside India against policies issued under Employers’ Liability Act and Merchant Shipping Act may be paid in appropriate foreign currency. Remittances will be allowed for meeting specific claims on application by the Insurers furnishing full details of the claims;
(ix) In case of cashless international health insurance products remittances may be allowed to the hospital which has provided the treatment/Third Party Administrator with which the insurer or the hospital has entered into a contractual arrangement in accordance with applicable IRDAI regulations or to the insured person resident outside India.

Note:

(a) Where original documents are not available for any reason, photo copies may be accepted with reasons for non-availability of the original documents. This provision does not apply to remittances for replenishment of foreign currency balances which will require specific approval of Reserve Bank of India.
(b) Claims may be settled in INR in favour of Indian exporters even in cases where title to the goods has passed to foreign buyer, if a request to that effect has been made by the claimant resident outside India. A certificate indicating full particulars of the transaction including number of relative EDF form (wherever applicable) and amount paid in settlement of claim should be issued to the exporter to enable the latter to obtain necessary approval from Reserve Bank for making replacement shipments;
(c) Authorised dealers have been permitted to open revolving letters of credit in favour of established claims-settling agents abroad and reimburse claims under the credit on verification of the necessary documentary evidence viz. statement of claim, survey report or other documentary evidence of loss/damage, original policy or certificate of insurance etc.

Re-Insurance

9. Reinsurance arrangements of the insurers registered with IRDAI are to be decided by the companies themselves on an annual basis, which is to be approved by the respective insurer’s Board in compliance with IRDAI Regulations. Authorised dealer, designated by these insurers may allow remittances falling due under such approved reinsurance arrangements by the insurers in accordance with the terms and conditions laid down by their Boards.

Remittance of Reinsurance Premium by IRDAI licensed brokers

10. Wherever IRDAI licensed brokers arrange the reinsurance on behalf of insurers, brokers may remit the premium through the branch of the authorised dealer designated by the insurer in terms of para 9 above subject to the production of undernoted documents:

(i) Relative debit notes from overseas insurance company and/or Broker.
(ii) Detailed statement of premium settled by the individual insurer, along with a certificate to the effect that the amount of reinsurance business is within the overall limit approved by the insurer’s Board and that the risks covered under the reinsurance arrangements are within the scope of the Reinsurance Programme, approved by the insurer’s Board in compliance with IRDAI Regulations.
(iii) A certificate from the Chartered Accountant of the broker, prepared on the basis of certificates and statements obtained from the insurers, to the effect that the proposed remittance of reinsurance premium sought, is in agreement with the various statements/certificates obtained from the insurer/s.
(iv) Copy of approval letter from IRDAI for placing business outside India by direct insurance brokers.

Foreign Currency Accounts Abroad

11. Insurers may open, hold and maintain with a bank outside India foreign currency accounts for facilitating transactions and expenses relating/incidental to general/health insurance /reinsurance business undertaken in foreign countries in accordance with regulations laid down. Insurers should endeavour to keep in their foreign currency accounts only the minimum balances required for normal business and transfer to India regularly all surplus funds held at foreign centres.

Investments Abroad

12. General/health insurers may invest freely, out of their funds abroad, without prior approval of Reserve Bank of India subject to the following conditions:

(i) Statutory requirement of host country concerned; and,
(ii) IRDAI guidelines, if any, and in accordance with applicable FEMA regulations relating to investment abroad.

ANNEX II

LIM

Memorandum of Foreign Exchange Management Regulations Relating to Life Insurance in India

A. Definitions

(i) “Person resident in India”, “Person resident outside India” and “foreign currency” will have the same meaning as defined under Foreign Exchange Management Act, 1999 (42 of 1999).
(ii) “Person of Indian Origin” will have the same meaning as defined in Notification FEMA 5(R)/2016-RB dated April 1, 2016.
(iii) ‘Not permanently resident’ means a person resident in India for employment of a specified duration (irrespective of length thereof) or for a specific job or assignment, the duration of which does not exceed three years.
(iv) “Insurer in India” means Life insurers registered with Insurance Regulatory and Development Authority of India (IRDAI) to carry out Life insurance business in India.

B. Life insurance policy from insurer outside India by Residents

(i) A person resident in India may take or continue to hold a life insurance policy issued by an insurer outside India, provided that the policy is held under a specific or general permission of the Reserve Bank of India.
(ii) A person resident in India may continue to hold any life insurance policy issued by an insurer outside India when such person was resident outside India. If the premium due on a life insurance policy has been paid by making remittance from India, the policy holder shall repatriate to India through normal banking channels, the maturity proceeds or amount of any claim due on the policy, within a period of seven days from the receipt thereof.

C. Life insurance policies by insurer in India.

1. Issuance of policies and collection of premium.

(a) Residents

(i) Policies may be issued in foreign currency to resident persons of Indian nationality or origin who have returned to India after being resident outside India, provided the premium are paid out of remittances from foreign currency funds held by them abroad or from their Resident Foreign Currency (RFC) account with authorised dealers in India.
(ii) Policies denominated in foreign currency or rupees may be issued to foreign nationals not permanently resident in India provided the premium is paid out of foreign currency funds or from their income earned in India or repatriable superannuation/pension fund in India.
(iii) Conversion of Rupee policies on the lives of persons resident in India into foreign currency or transfer of records of such policies to a country outside India is not permitted without prior approval of Reserve Bank.

(b) Residents outside India

(i) Insurer in India may issue policies denominated in foreign currency through their offices in India or abroad to residents outside India provided the premium are collected in foreign currency from abroad or out of NRE/FCNR accounts of the insured or his family members held in India.
(ii) For policies denominated in rupees issued to residents outside India, funds held in NRO accounts can be accepted towards payment of premium.
(iii) Policies issued to Indian nationals and persons of Indian origin resident abroad by overseas offices of Insurer in India may be transferred to Indian register, together with the actuarial reserves held against the policies, on the policy holders’ return to India. Foreign currency policies in such circumstances shall be converted into rupee policies except in cases where the policy has been in force for at least 3 years prior to policy holder’s return to India and the policy holder wishes to retain and continue the foreign currency policy. Requests received for payment in foreign currency towards premium on such policies may be permitted by authorised dealers provided the policy holder undertakes to repatriate to India the maturity proceeds or any claim amounts due on the policy through normal banking channels with in a period of seven days from the receipt thereof.

Settlement of claims

2. (i) The basic rule for settlement of claims on rupee life insurance policies in favour of claimants resident outside India is that payments in foreign currency will be permitted only in proportion in which the amount of premium has been paid in foreign currency in relation to the total premium payable.

(ii) Residents outside India who are beneficiaries of insurance claims/maturity/surrender value settled in foreign currency may be permitted to credit the same to NRE/FCNR account, if they so desire.

(iii) (a) Resident beneficiaries of the insurance claims/maturity/surrender value settled in foreign currency may be permitted to open and credit the proceeds thereof to their RFC (Domestic) Account.

(b)The Policy holder Indian residents who were outside India, and are the beneficiaries of insurance claims/maturity or surrender value settled in foreign currency in respect of policies issued by Insurer in India may be permitted to credit the proceeds to the RFC Account opened by them on their becoming residents.

(iv) Claims/maturity proceeds/surrender value in respect of rupee life insurance policies issued to Indians resident outside India for which premium have been collected in non-repatriable rupees may be paid only in rupees by credit to NRO account of the beneficiary. This would also apply in cases of death claims being settled in favour of resident outside India assignees/nominees.

(v) Claims/maturity proceeds/surrender value in respect of rupee policies issued to foreign nationals not permanently resident in India may be paid in rupees or may be allowed to be remitted abroad, if the claimant so desires.

Commission to overseas Agents

3. Insurer in India may pay commission to their agents who are permanently resident outside India regardless of the fact that part of the business booked by them may be on the lives of persons resident in India and relative premium are paid in rupees in India. Remittances of commission from India to such agents abroad will be governed by instructions contained in Government Notification No.G.S.R. 381(E) dated May 3, 2000 relating to Current Account transactions as amended from time to time.

Reinsurance

4. In terms of the existing instructions, reinsurance arrangements for the insurance companies registered with IRDAI are to be decided by the companies themselves on an annual basis which is to be approved by the respective insurance company’s Board in compliance with IRDAI Regulations. Authorised dealers, designated by these insurance companies may allow remittances falling due under such approved reinsurance arrangements by the insurer in accordance with the terms and conditions laid down by their Boards.

Foreign Currency accounts

5. Insurer in India may open, hold and maintain with a bank outside India foreign currency accounts for facilitating transactions and expenses relating /incidental to life insurance business undertaken in foreign countries in accordance with the above guidelines. Insurer in India should transfer to India regularly all surplus funds held at foreign centres and endeavour to keep in their foreign currency accounts only minimum balances required for normal business.

Investments abroad

6. Insurer in India invest freely, out of their funds abroad without prior approval of Reserve Bank subject to

(i) Statutory requirement of host country concerned and
(ii) IRDAI guidelines if any and in accordance with applicable FEMA regulations relating to investment abroad.

Utilisation of Foreign Currency Funds

7. (i) Insurer in India may freely use its foreign currency balances for meeting all the normal expenses of its overseas offices inclusive of taxes and other dues in connection with maintenance and upkeep of buildings and properties held by insurers in foreign countries as well as purchase of cars for official use.

(ii) Insurer in India may also freely use their overseas funds for settlement of provident fund, gratuity and other retirement benefits to retiring employees of overseas offices.

(iii) Insurer in India may grant loans, without prior permission of Reserve Bank, to employees of their overseas offices (other than Indian nationals who had been deputed or posted from India) against provident fund balances held in the country concerned provided loan recoveries will be made in foreign currency

Stormy winter session begins today: All the Bills you should know about : 17-11-2016


Expecting firework during the winter session of Parliamentscheduled to take place between November and December 16, the Opposition is planning to put the government in dock over several issues, including thedemonetisation policy.

The Bharatiya Janata Party-led Centre likely to push its legislative agenda that includes passage of pending legislations for rollout of the Goods and Services Tax (GST) and the surrogacy regulation bill.

The Centre is likely to see a united Opposition confronting the problems faced by people following the move to demonetise Rs 500 and Rs 1,000 currency notes, with issues concerning farmers and one rank one pension (OROP) also likely to be taken up.
Opposition parties including Congress, Bahujan Samaj Party, Trinamool Congress, Aam Aadmi Party and Samajwadi Party have been vociferous in attacking the government over the war against black money and the strategy it is following its demonetisation move.
The agenda for legislation includes ten Bills for consideration and passing. Nine Bills are listed for introduction, consideration and passing and two are listed for withdrawal. Here is the complete list:

Nine Bills to be introduced, consideration and passing are:

 

Title Objectives
The Central Goods and Services Tax (CGST)  Bill, 2016    Facilitates levy of tax on intra-state supply of  goods or services.
     The Integrated GST Bill, 2016 Facilitates levy of tax on inter-state supply of  goods or services.
     The GST (Compensation for loss of revenue)   Bill, 2016 Facilitates payment of compensation to states for loss of revenue arising on account of  implementation of GST.
The Indian Institute of Management Bill, 2016 Declares the Indian Institutes of Management (IIMs) to be Institutions of National Importance
and enables them to award degrees.
The Surrogacy (Regulation) Bill, 2016 Constitutes the National Surrogacy Board, State Surrogacy Boards and regulates the practice and process of surrogacy.
The Divorce (Amendment) Bill, 2016 Amends the Divorce Act, 1869 with regard to dissolution of marriage and mandatory period of separate residence.
The Collection of Statistics (Amendment) Bill, 2016 Extends the jurisdiction of the 2008 Act to Jammu and Kashmir in respect of statistical matters falling in the Union List and Concurrent List applicable to the state.
The Constitution Scheduled Tribes (Order) Amendment Bill, 2016 Revises the list of Scheduled Tribes in the states of Assam, Chhattisgarh, Jharkhand, Tamil Nadu and Tripura.
The Admiralty (Jurisdiction and Settlement of Maritime Claims), 2016 Consolidates laws related to jurisdiction, claims, arrest of vessels and related issues for maritime issues and claims.

Two Bills for withdrawal are:

Title                          Objectives
In Lok Sabha: The High Court (Alteration of Names) Bill, 2016 Changes the names of Bombay, Calcutta and Madras High Courts to Mumbai, Kolkata and Chennai High Courts, respectively.
In Rajya Sabha: The Participation of Workers in Management Bill, 1990 Provides for participation of workers in management at shop floor, establishment and board of management levels.

Four Bills for passing that are already introduced in Lok Sabha are:

Title                                        Objectives
 
The Mental Healthcare Bill, 2016

 

Replaces the Mental Health Act, 1987 to protect the rights of persons with mental illness and promote their access to mental health care.
The Maternity Benefit (Amendment) Bill, 2016 Increases the maternity leave to 26 weeks, grants leave to adopting and commissioning mothers and requires establishments with 50 employees to provide nursery facilities.
The Consumer Protection Bill, 2015 Replaces the 1986 Act. Provides for redressal of consumer complaints, recall of goods, action against misleading advertisements, and product liability claims.
The Citizenship (Amendment) Bill, 2016 Proposes that illegal migrants from Afghanistan, Bangladesh and Pakistan from specified religious groups (Hindu, Sikh, Buddhist, Jain, Parsi and Christian) will be eligible to apply for Indian citizenship.

Six Bills for passing that are already introduced in Rajya Sabha:

Title Objectives
The HIV and AIDS (Prevention and Control) Bill, 2014 Seeks to prevent the spread of HIV and AIDS, prohibit discrimination against persons with HIVand AIDS.
The Employees Compensation (Amendment) Bill, 2016 Requires an employer to inform the employee of his right to compensation under the 1923 Act and imposes a penalty for failure to inform.
The Factories (Amendment) Bill, 2016 Enhances the limit of overtime work hours and empowers central government to make exempting rules related to overtime hours.
The Whistleblowers Protection (Amendment) Bill, 2015 Specifies grounds under which disclosures related to corruption may not be made.
The Prevention of Corruption (Amendment) Bill, 2013 Makes giving a bribe an offence and modifies the definition of taking a bribe. Requires prior sanction to prosecute former officials.
The Enemy Property (Amendment and Validation) Bill, 2016 Vests all rights, titles and interests over enemy property in an office of the central government.

Source: Ministry of Parliamentary Affairs

Reduce Corporate Tax To 25%, ASSOCHAM To Government : 17-11-2016


In its pre-Budget presentation with the Finance Ministry, the ASSOCHAM has sought immediate reduction in the corporate tax to 25% to attract more investment in the country while for driving the consumption led demand, income tax for individuals should also be reduced along with upward revision in the exemption limit upto Rs 5 Lakhs.

The Associated Chamber of Commerce and Industry of India (ASSOCHAM) in its Pre-budget meeting with the Revenue Secretary Dr. Hasmukh Adhia made some important suggestions. The proposed multiple Good Service Tax (GST) rate structure could increase classification disputes. Therefore, the categorisation of products under each duty slab should be carefully done.

Corporate tax needs to be reduced to 25% to attract more investment in the country. The income tax rate for individuals to be reduced and threshold limit should be increased in view of the current situation prevailing in the country at the pre-budget meeting with the Revenue Secretary.

The Associated Chamber of Commerce and Industry of India (ASSOCHAM) in its Pre-budget meeting with the Revenue Secretary today made some important suggestions. The proposed multiple Good Service Tax (GST) rate structure could increase classification disputes. Therefore, the categorisation of products under each duty slab should be carefully done.

It said the committed investment link tax incentive for specifies period should be grant fathered under GST for the un-expired period of committed incentives.

During the initial period of two year after implementation of the GST penal provision should not be made applicable unless there are frauds cases, the chamber. The tax administrative provision under the draft GST law are quite harsh and may leave to Inspector Raj and this need to modify in the final GST law.

Inverted Duty structure under excise on pharmaceutical products needs to be corrected. The basic custom duty rate on some of the products like aluminium, copper, steel and polymer need to be reduced in the current scenario. ASSOCHAM further suggested that corporate tax needs to be reduced to 25% to attract more investment in the country. The income tax rate for individuals to be reduced and threshold limit should be increased in view of the current situation prevailing in the country.

Demonetisation of currency notes of Rs. 500/1000 will have a short term adverse impact on demand on items for mass consumption hence duty rates for such products should be reduced in the next budget to revive the demand.

Source : Economic Times

Notification No.105/2016 16-11-2016


Income tax (31st Amendment) Rules, 2016 – Prescribes Income Tax Authority to issue notice u/s 143(2) for scrutiny / regular assessment. Assessment officer (AO) is already authorized to issue notice u/s 143(2) – 105/2016

MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION No. 105/2016

New Delhi, the 16th November, 2016

G.S.R. 1073(E).-In exercise of the powers conferred by section 295 read with sub-section (2) of section 143 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 (31st Amendment) Rules, 2016.

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

2. In the Income-tax Rules, 1962, after rule 12D, the following rule shall be inserted, namely:-

12E. Prescribed authority under sub-section (2) of section 143.-The prescribed authority under sub-section (2) of section 143 shall be an income-tax authority not below the rank of an Income-tax Officer who has been authorised by the Central Board of Direct Taxes to act as income-tax authority for the purposes of sub-section (2) of section 143.”.

[F. No. 142/8/2014-TPL]

Dr. T. S. MAPWAL, Under Secy.

Note : The principal rules were published vide Notification S.O. 969(E), dated 26th March, 1962 and last amended vide Notification G.S.R. 1068(E), dated 15th November, 2016.

India’s tryst with Demonetisation: PM Narendra Modi goes back to the future; here’s how : 16-11-2016


Prime Minister Narendra Modi’s ‘historic’ decision to demonetise Rs 500 and Rs 1000 currency notes has raised many eyebrows. But this was not the first time that the country witnessed such economic reform. A few months after the NDA government led by the then Prime Minister Atal Bihari Vajpayee came to power in May 1998, Finance Minister Yashwant Sinha had to address concerns relating to the growing demand for fresh currency notes. High value notes of Rs 1,000, 5,000 and 10,000 had been demonetised in 1978 by the Morarji Desai government, and given the growth of the economy since then, there was a feeling in the government that high denomination notes would have to be re-introduced. The Reserve Bank of India was sounded out, and the plan received backing from some of the big industry chiefs on the bank’s board. That’s when the government decided to go ahead with a law to bring back the Rs 1,000 note. Sinha told Lok Sabha on December 9, 1998, that he was certain that lawmakers would share his view that the root cause of illegal transactions lay not in notes of high denomination, but elsewhere — he didn’t specify where. But the interesting part was the Finance Minister’s argument that the purchasing power of the rupee had gone down considerably since 1978, when high value notes were junked.

The value of Rs 1,000 in 1998, compared to the movement of the Consumer Price Index taking 1982 as the base year, was only Rs 160. This meant the average consumer now needed notes of a higher face value for normal cash transactions. This — and taking into account the fact that other methods of payment were yet to take root — was why the government was, in the public interest, re-introducing the Rs 1,000 note, according to a report by the Indian Express.

As many Opposition members attacked the move, the government provided some interesting data. According to Sinha, by 1998, the demand for fresh currency notes was growing at 15% to 20% annually, making it incumbent on the government to increase their production. The government modernised the currency printing presses at Nashik and Dewas and got the RBI to do the same at the two new presses under its control at Mysore and Salboni. To ease pressure on Rs 100 notes, it stepped up production of Rs 500 notes, and imported 3,600 million pieces of printed notes (2,000 million piece of Rs 100 notes and 1,600 million of Rs 500 denomination) of a total face value of Rs 100,000 crore. And yet, Sinha said, the demand-supply gap in fresh notes was expected to go up to 12,680 million pieces by 2004-05, which made it imperative to print Rs 1,000 notes to improve supply. Soon after the government got the law approved, work began in consultation with RBI on policy measures to move towards electronic forms of payments such as Real Time Gross Settlement (RTGS), and National Electronic Funds Transfer (NEFT), the report said.

The problem of ensuring an adequate supply of notes was an issue in the 70s and also in the run-up to the demonetisation of January 1978. For, two months before the decision to do away with Rs 1000, 5000 and 10,000 notes, the central bank had told the government to consider replacing old machines at the currency press in Nashik. When H M Patel, Finance Minister in the Janata government and a former Principal Secretary, Finance, himself, informed RBI Governor I G Patel of the decision to demonetise high denomination notes, the Governor was not in favour. He told the Finance Minister that such exercises hardly produced any striking results, I G Patel has written in his autobiography.

The government went ahead and issued an ordinance on January 16, 1978, giving effect to its decision. And, just like it happened last week, it directed all banks and treasuries to be shut the following day — January 17 — for all transactions. The RBI History volumes detail how long, winding queues started to form in front of banks, confusion reigned, and working hours were extended. The volumes also record pessimistic views of the potential impact of the move, expressed by economists such as P R Brahmananda and C N Vakil. But a month later, in his Budget speech of 1978-79, Finance Minister H M Patel said the demonetisation of high value currency notes was aimed primarily at controlling illegal transactions, and was part of a series of measures that the government had taken — and was determined to take — against anti-social elements. Patel, also an economist who had been instrumental in the nationalisation of life insurance companies, then referred to the smuggling of gold, which he said helped sustain black moneyoperations. The Finance Minister announced the sale of gold from stocks held by the government as one of the measures aimed at preventing smuggling of the precious metal.

Source : Financial Express

State tax officers demand fair share in GST : 16-11-2016


In a unique way of protest, about 2.36 lakh officers and employees working with commercial and sales tax departments of various states will work on Sunday to press for their demand of having a fair share in the administration of taxes under the proposed Goods and Services Tax (GST).

The All India Confederation of Commercial Taxes Association (AICCTA) said its members will also go on day-long pen down strike on November 23 if their demands are not accepted by the government.

The confederation has decided that all its members will work on November 20, which is Sunday, to protest the way the administration of GST has been planned by the Centre.

“It is a positive form of protest by working on a general holiday,” the employees’ body said.

Union Finance Minister Arun Jaitley has called an informal meeting of state finance ministers to discuss the matters of dual control and cross empowerment on Sunday.

Earlier this week, different delegations of the confederation met finance ministers of various states to seek their support.

The confederation claims to represent over 36,000 Gazetted officers and about two lakh employees of Class-III and -IV categories.

The confederation has sought complete authority relating to monitoring, audit, assessment and enforcement activities provided either under the GST Act or under the Integrated Goods and Services Tax — to be levied on all inter-state supplies of goods and services.

“It is also demanded that the state authorities should also be empowered under IGST Act to administer matters relating to interstate transactions,” as per a memorandum submitted to the Finance Ministry.

The officers’ body has sought representation of officers from the states in GST council secretariat.

“It is demanded that the GST council provide sufficient funds to the states to establish a uniform infrastructural and networking system,” it said.

The confederation has said that they would not work on November 23 to protest against non-implementation of its demands and for a just and fair tax administration under the GST regime.

The proposed GST is a single tax on supply of goods and services, right from the manufacturer to the consumer.

Source : PTI

House business: 3 GST bills on government’s ‘to do’ list : 16-11-2016


Amid indications of a stormy winter session in Parliament, the government has listed its legislative agenda which includes bills for rollout of goods and services tax (GST), maternity benefit (amendment) and the surrogacy regulation.

The government is keen to push the passage of the three legislations related to the main GST bill early on in the session. Parliamentary nod for these bills will facilitate GST roll-out from the target date of April 1, 2017.

The government has listed nine bills for introduction, consideration and passage, while it has also listed 10 pending bills in both houses.

The key bills include the Central Goods and Services Tax Bill, the Integrated Goods and Services Tax Bill, the Goods and Services Tax (Compensation for Loss of Revenue) Bill and the Surrogacy (Regulation) Bill.

The ruling dispensation also wants early passage of im portant pending bills which include the Mental Health Care Bill, the Maternity Benefit (Amendment) Bill and the Consumer Protection Bill.

Bills pending in Rajya Sabha include the HIV and AIDS (Prevention and Control) Bill, the Employees Compensation (Amendment) Bill, the Factories (Amendment) Bill and legislations aimed at checking corruption such as the Whistle Blowers Protection (Amendment) Bill and the Prevention  of Corruption (Amendment) Bill, 2013.

The Enemy Property (Amendment and Validation) Bill has also been included in the government’s agenda.

Source : Economic Times

Notification No.104/2016 15-11-2016


Income tax (30th Amendment) Rules, 2016 – Specifies the limit for deposit of Cash without PAN and Issues Direction to banks for Submission of information for deposit of cash in excess of specified limit for the period from 9.11.2016 to 30.12.2016 – 104/2016

MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION No. 104/2016

New Delhi, the 15th November, 2016

INCOME-TAX

G.S.R 1068(E). - In exercise of the powers conferred by section 285BA, 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 (30th Amendment) Rules, 2016.

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

2. In the Income-tax Rules, 1962 (hereinafter referred to as the said rules), in rule 114B, in the Table, for serial number 10 and entries relating thereto the following serial number and entries shall be substituted, namely:-

Sl. No.

Nature of transaction

Value of transaction

(1)

(2)

(3)

“10. Deposit with,-

(i) a banking company or a cooperative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act);

(ii) Post Office.

Cash deposits,-

(i) exceeding fifty thousand rupees during any one day; or

(ii) aggregating to more than two lakh fifty thousand rupees during the period 09th November, 2016 to 30th December, 2016.”.

3. In the said rules, in rule 114E, -

(i) in sub-rule (2), in the Table, after serial number 11 and entries relating thereto the following serial number and entries shall be inserted, namely:-

Sl. No.

Nature and value of transaction

Class of person (reporting person)

(1)

(2)

(3)

“12. Cash deposits during the period 09th November, 2016 to 30th December, 2016 aggregating to -

(i) twelve lakh fifty thousand rupees or more, in one or more current account of a person; or

(ii) two lakh fifty thousand rupees or more, in one or more accounts (other than a current account) of a person.

(i) 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 that Act);

(ii) Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).”;

(ii) in sub-rule (5), the following proviso shall be inserted, namely:-

“Provided the statement of financial transaction in respect of the transactions listed at serial number (12) in the Table under sub-rule (2), shall be furnished on or before the 31st day of January, 2017.”.

[F.No.370142/32/2016-TPL]

(Dr T S Mapwal)
Under Secretary to the Government of India

Note:- The principal rules were published vide notification S.O. 969 (E), dated the 26th March, 1962 and last amended vide notification S.O.3399(E), dated 07th November, 2016.

Income Tax officials unsure how to slap 200% penalty on income mismatch : 15-11-2016


As India struggles with demonetization, individuals and businesses are using old currency notes to settle debts while income tax officials are at a loss how to go about imposing 200% penalty — as announced by a senior finance ministry official — on such funds flowing into banks.

Firms are clearing dues to suppliers, depositing cash in bank accounts to repay old loans, and buying memberships of clubs, SPAs and gyms; in all these cases their books would show that cash changed hands  before Tuesday evening when demonetization of 500 and 1000 rupee bills was announced. On the other hand, taxmen in several cities have told their superiors that there is no provision in the law to automatically slap penalty on such cash being deposited in banks, according to I-T officials, tax practitioners and bankers ET spoke to.

“There can be penalty on escaped income. But what do you do if someone deposits a crore with bank, pays 33% tax, and discloses the amount as income in his tax return filed for the assessment year ’17-18? Even if it’s driven by demonetization, this is technically voluntary declaration and shown as `income from other source’. This has been discussed in our meetings over the past few days… To impose penalty on this money, there has to be retrospective amendment of the income tax law,” said a senior tax official.

A 200% penalty would mean the entire declared amount going into the state coffer.

The questions troubling those with large, unexplained cash deposits are: Will the I-T office come after them if they are unable to spell out the fund source? Even if i-T spares them, will the service tax and other indirect departments chase them? And finally, will the I-T office share the information with Enforcement Directorate who in turn can invoke the harsh anti-money laundering law?

“If the source of the fund relates to an admitted activity which is subject to levy of indirect tax, then even if the IT department accepts the source there is always the possibility that other agencies may step in,” said senior chartered accountant Dilip Lakhani.

Indeed, the swelling bank deposits could pose challenge for the I-T department. Several small and mid-sized businesses, traders and individual borrowers in the farm sector have deposited cash to resolve their non-performing loans and initiate one-time settlements. “These are typically small borrowers with loan liability ranging from Rs 5-10 lakhs to Rs 5-10 crores. We have also had an instance of an individual borrower depositing cash of Rs 20 crore to clear his dues,” said the CEO of a southern bank. “As part of our compliance, we are filing suspicious transaction report on such deposit beyond permissible limits,” said the compliance head of a Mumbai-based private sector bank.

It is not just banks which are witnessing inflows. “Many companies have undertaken prepaid sales for a year; health centres, SPAs, and hotels have offered prepaid packages — all have been sold without discounts but using earlier currency notes. NGOs and trusts are receiving calls for anonymous donations. Some are in a dilemma whether to accept,” said Mitil Chokshi, senior partner at audit firm Chokshi & Chokshi.

On Friday, income tax officials surveyed large bullion dealers to assess their respective cash in hand and make a note of the last bill number. This was done to stop the transfer of cash to bullion dealers and jewelers that began since Tuesday evening. But it’s impossible to keep a track of all establishments which are accepting cash. Such cash  transfers are easier in case of retail outlets and jewelers where the names of buyers are not mentioned, but more difficult in transactions where the identity of the cash giver is revealed – such as club and holiday membership deals. While government authorities may not be able to prove that the cash transfer took place post Nov 7, they can always question the fund source.

Source : PTI

Will the law change to tax unexplained cash? : 15-11-2016


The Prime Minister’s grim message that the state will check “records since independence and spare no one” has sparked fears that the law could be changed to tax `unexplained’ cash.

Today, the law lacks the teeth to penalise those who fork out tax after parking a mountain of such cash as deposits with a bank.

Here, the rules of the game are simple: as long as such persons pay the maximum rate of income tax – of about 36% (including surcharge and cess) – they can keep the taxman at bay; even if they are unable to convince tax officials about the sudden loan or gift that is credited in their books of accounts, there is very little the tax office can do other than treating the amount as ‘income’ that would be taxed at the highest rate. It cannot slap a penalty.

All an assesse has to do to escape penalty is state that the amount has been received in the current financial year and tax has been paid on it. This business of taxing the unexplained  is spelt out in section 115BBE of the Income Tax Act.

However, the burden of penalty falls on those whose income as stated in the tax return is less than the income assessed by the tax officer. This is described as misreporting or underreporting of income under Section 270A of the Act. But depositors of cash – particularly in the present environment where many are believed to have dumped their undeclared funds in bank accounts and many more planning to do – would be untouched  by the penal provision of Section 270A. That’s because they would declare the amount as `income’ in this year’s IT return to make sure that income stated in the return does not exceed the number arrived by the assessing officer.

Thus, there is no way the IT department can invoke Section 270A to impose 200% penalty – as stated by a senior bureaucrat – on deposits of cash whose source the account holder is unable to explain. A government, seemingly obsessed to clamp down on black  money and go ahead with a penalty, can do so only if Section115BBE of the Act is amended. Such an amendment could incorporate the provision that anyone taxed under this Section — where the person cannot offer any satisfactory explanation of the cash source – would be asked to cough up penalty (and thus end up losing almost the entire pile of cash).

Will the government push through a change in the law? Will it antagonise a section of its vote bank? If so, how soon? And will it open the pandora’s box of a retrospective change to catch those who deposited cash since last Wednesday?

It has certainly struck the revenue authorities that there is a multitude of cash hoarders who did not come clean in earlier quasi-amnesty schemes (where the tax charged was 45%) and may now wriggle out by paying a lesser tax of 36%. But the timing of any such change in the statute would perhaps depend on the fallout of what till now has been the government’s biggest policy gamble.

Source : The Hindu

State tax officers demand fair share in GST : 15-11-2016


In a unique way of protest, about 2.36 lakh officers and employees working with commercial and sales tax departments of various states will work on Sunday to press for their demand of having a fair share in the administration of taxes under the proposed Goods and Services Tax (GST).

The All India Confederation of Commercial Taxes Association (AICCTA) said its members will also go on day-long pen down strike on November 23 if their demands are not accepted by the government.

The confederation has decided that all its members will work on November 20, which is Sunday, to protest the way the administration of GST has been planned by the Centre.

“It is a positive form of protest by working on a general holiday,” the employees’ body said.

Union Finance Minister Arun Jaitley has called an informal meeting of state finance ministers to discuss the matters of dual control and cross empowerment on Sunday.

Earlier this week, different delegations of the confederation met finance ministers of various states to seek their support

The confederation claims to represent over 36,000 Gazetted officers and about two lakh employees of Class-III and -IV categories.

The confederation has sought complete authority relating to monitoring, audit, assessment and enforcement activities provided either under the GST Act or under the Integrated Goods and Services Tax — to be levied on all inter-state supplies of goods and services.

“It is also demanded that the state authorities should also be empowered under IGST Act to administer matters relating to interstate transactions,” as per a memorandum submitted to the Finance Ministry.

The officers’ body has sought representation of officers from the states in GST council secretariat.

“It is demanded that the GST council provide sufficient funds to the states to establish a uniform infrastructural and networking system,” it said.

The confederation has said that they would not work on November 23 to protest against non-implementation of its demands and for a just and fair tax administration under the GST regime.

The proposed GST is a single tax on supply of goods and services, right from the manufacturer to the consumer.

Source : Economic Times

Denial of ITC on construction of ‘immovable property’ under GST – a wholly unjustified move – 14-11-2016


Taxindiaonlinelogo-jpg                        

   By S Sivakumar, LL.B., FCA, FCS, MBA, ACSI, Advocate & R Vaidyanathan, M.Com., M.Phil, Consultant

 

RULE 2(l) of the Cenvat Credit Rules, 2004, reads:

2(l) “input service” means any service,-

(i) used by a provider of output service for providing an output service; or

(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal

and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;

but excludes

(A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for -

(a) construction or execution of works contract of a building or a civil structure or a part thereof; or

(b) laying of foundation or making of structures for support of capital goods,

except for the provision of one or more of the specified services…

In effect, due to the above referred ‘exclusion clause, cenvat credit of the service tax paid is not available except when the input construction or input works contract service is used to provide an output construction/works contract service. Thus, cenvat credit is not available when the input works contract/construction service is used in the construction of an immovable property that is not sold off as works contract/(s). Thus, credit is denied in respect of construction buildings, corporate offices, commercial buildings like malls which are let out, etc. As we know, the Board had issued Circular No.98/1/2008-ST dated January 4, 2008 seeking to deny credit on input construction/works contract services on construction of immovable property which is rented out.

The relevant portions of the issue and the clarification issued by the Board, in this Circular, are reproduced below

Issue:

Commercial or industrial construction service [section 65(105)(zzq)] or works contract service [section 65(105)(zzzza)] is used for construction of an immovable property. Renting of an immovable property is leviable to service tax [section 65(105)(zzzz)].

Whether or not, commercial or industrial construction service or works contract service used for construction of an immovable property, could be treated as input service for the output service namely renting of immovable property service under the CENVAT Credit Rules, 2004?

Clarification:

Right to use immovable property is leviable to service tax under renting of immovable property service.

Commercial or industrial construction service or works contract service is an input service for the output namely immovable property. Immovable property is neither subjected to central excise duty nor to service tax.

Input credit of service tax can be taken only if the output is a ‘service’ liable to service tax or a ‘goods’ liable to excise duty. Since immovable property is neither ‘service’ or ‘goods’ as referred to above, input credit cannot be taken

Luckily, the Hon’ble High Court of AP had in CCE v Sai Samhita Storages Pvt Ltd, reported in2011-TIOL-863-HC-AP-CX, read down this Circular, a decision that was followed by many CESTAT Benches. In order to get over the challenge to its 2008 Circular, the Government amended Rule 2(l) and 2(k) of the Cenvat Credit Rules, 2004, with effect from 1-4-2011, to specifically deny cenvat credit in respect of input works contract/construction services used for creating an immovable property, which is let out or used internally. Of course, capital goods used in the creation of immovable property would be entitled to credit, even under the existing law.

Be that at is may…….from the Realty Sector’s perspective, the denial of credit in respect of creating of immovable property that is let out as contrasted to the availability of credit in respect of immovable property that is sold off as works contract, seems bizarre and illogical, as the very decision whether to let out the property or to sell the property or a part thereof, is driven purely by commercial considerations. It is a common practice for Developers who develop commercial malls, to look for buyers at the construction stage itself and when, this does not happen due to reasons beyond the control of the Developer, the Developer completes the construction and lets out the property, which is purely, a business decision. To say that credit would be allowed when the property is sold off and credit would not be allowed when the property is retained and let out reflects the complete lack of understanding on the part of the Babus, as to how the Realty Sector works. Talking specifically of a commercial mall with many commercial outlets/shops, it is common for the Developer to retain some shops and to sell off other shops in the course of construction and under the current law, credit is denied in respect of the inputs/input services used for construction of shops that are let out, as compared to those that are sold before completion, by the Developer.

Unfortunately, this major lacuna may continue under the GST regime, to the detriment of the Realty Sector.

Look at the exclusion clause contained in Section 16 of the model GST law, dealing with input tax credit, viz…

( 9) Notwithstanding anything contained in sub-section (1), (2), (2A) or (3) input tax credit shall not be available in respect of the following:….

(c) goods and/or services acquired by the principal in the execution of works contract when such contract results in construction of immovable property, other than plant and machinery;

(d) goods acquired by a principal, the property in which is not transferred (whether as goods or in some other form) to any other person, which are used in the construction of immovable property, other than plant and machinery;

A reading of the above indicates that, under the GST law, input tax credit would be denied when the goods and/or services are used for construction of an immovable property (other than plant and machinery) that is let out or that is used for internal purposes as a factory building or corporate office, etc. In other words, under the GST law, input tax credit would be allowed only when the immovable property is sold off as works contract, before completion of construction. The wording used in Section 16 of the model GST law, is extremely mischievous and misleading, in as much as, it can lead one to possibly conclude that input tax credit would be totally disallowed in respect of construction of all immovable properties, notwithstanding the fact that, when a residential or commercial building that is sold out in the course of construction is not treated as ‘immovable property’ in the books of the Developer/Builder.

To deny input tax credit in respect of construction of factory buildings comes as a big dampener, especially, in the context of the Government’s moves to encourage domestic manufacture which, obviously would entail construction of new factories and office buildings involving significant expenditure.

Before concluding…

Under the current service tax law, cenvat credit of the service tax paid on input services such as Architects, etc. is allowed, in respect of construction of a commercial building that is let out, as, credit is denied only on input construction/works contract services. However, it seems doubtful if credit would be available in respect of non-construction input services such Architects’ services, Consulting Engineers, Interior Designers, Legal fees, etc, under the GST regime, given the manner in which the exclusion clauses in Section 16 of the model GST are worded.

The Realty Sector had hoped that this unfair treatment involving denial of credit on construction of commercial buildings that are let out would disappear under the GST law. Unfortunately, this does not seem to be the case.

In our view, denial of credit in respect of the construction of an immovable property that is let out, in contrast to one that is sold off as works contract, is clearly violative of Article 14 of the Constitution.

Slash stamp duty to clean up real estate sector: Assocham Slash stamp duty to clean up real estate sector: Assocham : 14-11-2016


To further intensify the crackdown on black money, Assocham has suggested the Centre to impress upon states to “drastically” lower stamp duty on residential and commercial property deals to dissuade people from undervaluing purchases. The industry body said that the biggest beneficiary of the move would be buyers of residential or commercial properties.

“One of the biggest reasons for the cash forming 30-40 per cent of the real estate transactions is the high level of stamp duty. With 6-7 per cent stamp duty, purchaser of a flat worth Rs 1-1.50 crore will have to shell out different government levies and other charges like registration and lawyers’ fee to the extent of Rs 10 lakh or so.

“Likewise, the registration value also determines the capital gains tax for the sellers. With both these levies accounting for significant account, there is a big incentive for the buyers and sellers to show the registration amount as much lower than the real transaction value,” the chamber said.

It said there are instances where ironically, people filing their income tax returns and living a clean life, are forced to withdraw cash from their legitimate bank accounts cash for such transactions.

“Thus, the system forces you to convert white into black. Nobody likes it, but the state governments must come forward and slash it by at least 50 per cent and the move would result in increase in their revenue rather than reducing it,” Assocham Secretary General D S Rawat said.

He also said that the lower stamp duty would revive the demand in the highly suppressed sector which would further be jolted with cash totally drying out from the transactions.

“The cleanup will take place with lower duties, ease of doing business in terms of clear land titles by the state regulatory agencies and other clearances being made transparent.

It cannot be a one–way street where the builders are expected to grease the palm of the corrupt officials and others while they are then expected to do every other transactions by cheques. Hopefully, with the new model law in place, things should improve,” the chamber said.

A recent joint paper by Assocham and Thought Arbitrage found prevalence of rampant black money or ‘untaxed money’ in the real estate business posing a great challenge for the construction industry.

For speedy approvals and sanctions from authorities, builders or contractors are often compelled to pay large sums of money as bribe to government officials, surveyors, engineers etc. A part of the burden is passed on to the buyer who in turn has to pay in cash to the contractor, the paper noted.

Source : PTI

FM Arun Jaitley questions global agencies : 14-11-2016


Finance minister Arun Jaitley on Thursday said the government will continue tax reforms, even as he criticisedglobal agencies for not fully appreciating the efforts made by the government.

He also said that the government will meet its target of reining in fiscal deficit at 3.5% of GDP, even though a gap between the Centre’s expenditure  and income in the first half of the current financial year touched almost 84% of the Budget Estimates.

“I must acknowledge and state that the kind of steps we have taken, we still have not got from international agencies the full recognition of the effort we have put in,” he said at Economic Editors’Conference.

The comment assumes significance as India continues to be ranked low, at 130th position, in terms of ease of doing business index released recently by the World Bank. Besides, global rating agency S&Pruled out an upgrade for India from the lowest investment grade in the next two years. Moody’s Investors Service too   expressed its inability to upgrade India stating in the next two years because of muted private investment and rising NPAs.

Both the statements have drawn the government’s ire which has gone on to question these institutions’ credibility.

Speaking on the Goods and Service Tax, Jaitley said the Centre was making all efforts to build consensus on sticky issues, especially on jurisdiction of assessees, to ensure GST roll out from the scheduled date ofApril 1 next year.

“We are making all efforts to introduce GST from April1, 2017. GST has to be implemented latest by September 16, 2017, and if it is not implemented by then, then states will not be able to collect their share of taxes, and hence there is not enough scope to further delay the decision,”he said.

“We have already sorted out ten issues. The issue of dual control still remains, there is no reason why we will not be able to workout a reasonable solution on this,” he said.

Besides this, he said parallel reforms are also in the pipe line in direct tax structure. He said tax collection this year is reasonably good, there is spurt in public expenditure and local demand is increasing. Hence there will be positive impact of recent decision of demonetising of higher value currency notes.

The all powerful GST Council, which is chaired by the Union Finance Minister and has representations from state, has already decided on a four-tier rate structure — 5, 12, 18 and 28%  — with a cess over anda bove the peak rate for luxury and demerit goods.

“One of the objectives has been that since the GST Council is a federal decision-making process and the manner in which it functions in the initial years will lay down the precedent for the future rather than resorting to voting and division in every small issue. We have been trying to discuss, re-discuss and then reach a consensus and so far most of the major issues we have been able to resolve through consensus,” Jaitley said.

The issue of dual control, which deals with who will control which set of assessees under GST, has been holding back the negotiations.Jaitley and his state counterparts will meet on November 20 to work out a”political solution” to the issue and the GST Council will formally take up the issue on November 24-25.

“Only the last stages (of decision making) remain and I do hope we (GST Council) are able to resolve that through a larger consensus as well. And this form of functioning of the Council where discussion and consensus is a preferred option is a precedent we are trying in a federal decision-making body to establish,” Jaitley said.

Also at the conference were senior government bureaucrats. Economic Affairs Secretary Shaktikanta Das said that allowing foreign institutional investors (FIIs) in commodity trading was under consideration,but no decision has been taken. “Many suggestions have come with regard to permitting FIIs into commodity trading, but no decision has been taken. The matter is under consideration. The matter is also under consideration of Sebi,” Das said.

“If the Sebi board after taking a view makes recommendation as a regulator if they permit… if it requires government permission, we will see. But so far, no decision has been taken,” he said.

separately, The finance minister  denied any move to digitise personal lockers in banks. “Completely factually incorrect. There is no such proposal,” he told a news channel. Rumours are going around on social media that the government may next digitise bank lockers which would be opened in presence of revenue officials.

Source : Economic Times

17 – 11-11-2016


ISSUE OF PRE-PAID INSTRUMENTS TO FOREIGN TOURISTS

A.P. (DIR SERIES 2016-17) CIRCULAR NO.17DATED 11-11-2016

Attention of Authorised Persons is invited to the A.P. (DIR Series) Circular No. 16 dated November 9, 2016 on Withdrawal of the legal tender character of the existing and any older series banknotes in the denominations of Rs. 500 and Rs. 1000.

2. The circular inter alia instructs Authorized Persons to facilitate exchange transactions for foreign tourists.

3. In order to avoid any inconvenience to foreign tourists, Authorized Persons may issue Pre-paid instruments to them in terms of the instructions issued by Department of Payments and Settlement System, Reserve Bank of India, in exchange of foreign exchange tendered. Passport may be treated as a valid document for issuance of the said documents.

4. Authorised Persons may follow the above instructions and bring the contents of this circular to the notice of their constituents.

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

Want to make India the most open economy in the world, says PM Narendra Modi : 11-11-2016


Prime Minister Narendra Modi on Friday said that Asia has emerged as s the new centre of global growth, which is because of its competitive manufacturing, and expanding markets. Speaking at the CII-KEIDANREN business luncheon in Tokyo the PM expressed hope that India and Japan will have to continue to play an important role in Asia’s emergence. He also added that Japan has emerged as the fourth largest source of the FDI in various fields. Here are highlights of his speech:

* Asia has emerged as the new centre of global growth. This is because of its competitive manufacturing, and expanding markets: PM Modi

* India and Japan will have to continue to play an important role in Asia’s emergence.

* In 2015, the Indian economy grew faster than other major economies.

* Strong India strong Japan will also be a stabilising factor in Asia and the world.

* Japan has emerged as the 4th largest source of FDI and that too in various fields.

* ‘Made in India’ and ‘Made by Japan’ combination has started working wonderfully.

* Lower labour costs, large domestic market and macro-economic stability combine to make India a very attractive investment destination.* Want to make India the most open economy in the world.* Japan has important role as India needs scale, speed & skill; Involvement in our mega projects signifies scale & speed.* FDI equity inflows have gone up by 52% in last 2 yrs; We have done substantial improvement on ease of doing business.

* In 2 yrs, India is up by 32 places in global competitiveness index of world economic forum.

*Combo of your hardware & our software is fantastic; Let’s march forward & explore bigger potentials and brighter prospects.

 Source : Business Standard

ARUN JAITLEY: TAX DEPARTMENT NOT TO HOUND SMALL DEPOSITORS : 11-11-2016


 Assuring people that taxman will not hound those making small deposits in scrapped Rs 500/ Rs 1,000 currency, Finance Minister Arun Jaitley today advised them not to throng banks as there is enough time to exchange the junked notes.

He said however that those depositing large amounts of unaccounted money will have to face the consequences under tax laws, which provide for tax and a 200 per cent penalty.

“With regard to people making small deposits, nobody will face any question or harassment of any kind. People who have small amount of cash at home for exigencies and emergencies, they can deposit that in their account. And the revenue department is not going to take notice of small depositors,” Jaitley said.

He added that deposits within the tax exempted limit can always be made within the banking system without any questions being asked.

“It’s only people with large amounts of undisclosed monies who will have to face the consequences under the tax laws,” Jaitley said at the Economic Editors’ conference.

Revenue Secretary Hasmukh Adhia said yesterday that only cash deposits of over Rs 2.5 lakh in bank accounts will be scrutinised by the tax department and in case of mismatch with I-T returns, tax plus 200 per cent penalty would be levied.

The government has allowed citizens to deposit in their bank accounts old currency of Rs 500 and Rs 1,000, which has been declared invalid in the country’s biggest crackdown on black money, corruption and counterfeit notes, between November 10 and December 30.

On whether the demonetisation of Rs 500/1000 notes will help weed out black money, Jaitley said this is not an isolated initiative and the decision has to be seen in the backdrop of various steps being taken including GST roll out.

“You will have the currency squeeze that will take place because a lot of static currency is not going to come back into the market. You have the GST which will be implemented, which is a far more effective system where tax evasion will be much lower and compliance will be much higher. You have parallel movement to rationalise your direct tax rate,” he said.

Source : PTI

Govt readies proposal to relax service sector regulations : 11-11-2016


Making a case for permitting foreign universities to open campuses in India, Commerce Secretary Rita Teaotia on Thursday said the ministry had worked out a proposal to relax norms in the services sector, including higher education.

“We have worked on a draft note for consideration of the government which looks at the domestic reforms necessary in the services sector and this includes higher education,” Teaotia said here at the Ficci Higher EducationSummit.

She said the services sector contributes significantly to the country’s growth, trade and in terms of attracting foreign direct investments.

There is a need to focus on improving infrastructure in higher education as its demand is huge in the country, she said, adding that India has a huge potential to attract global students.

The largest exporters of education services are the US, UK and Europe and China and India are the largest net importers.

About 230,000 Indian students go abroad for study and almost one lakh go annually to the US, she said, adding that “the actual value of this in economic terms of Indians studying abroad is about $17 billion and it is a huge amount that we need to to see”.

This is the unmet demand in the country, the secretary said.

Teaotia said the department of commerce has recognised the export potential for the sector and at its services conclave, export of education services remains a focus area.

Based on the deliberations, an inter-ministerial group was set up and this group is instrumental in preparing reforms agenda for the higher education sector.

She further said factors that make India a preferred destination for higher education include India’s capacity to provide low cost of higher education as against many other developed countries, English-speaking population and world-reputed technical and professionals institutions.

“We should be looking at areas like setting up of campuses of foreign universities in special economic zones, where foreign students can study and such centres can offer global curriculum,” she added.

India offers “quality education and opportunities for foreign universities to set up campuses in India”, the secretary said, adding that it can lead to savings of billions of dollars that Indian studentsspend when they go abroad to study.

“I believe that this should be an area of focus for policymakers,” she added.

According to Teaotia, as policymakers, they need to be sensitive to the needs of students who come to study in India in terms of both policy framework, creating a conducive and welcoming environment and making visa regime friendlier.
Source : Economic Times

Centre resolved to get rid of black money: Arun Jaitley says after high-value currency note ban : 10-11-2016


A day after the ‘big announcement’ by Prime Minister Narendra Modi to ban currency notes of Rs 500 and Rs 1,000 denomination effective from Tuesday midnight, Finance Minister Arun Jaitley spoke on the merits of the move. Hailing the decision, Jaitley said that the centre is resolved to get rid of black moneycompletely. He further called the decision helpful in the long term and said that only those people should be worried who have not earned money honestly.

In an interaction with Doordarshan, Jaitley opened up about the currency ban. He explained the benefits of demonetising high-value currency notes and asked people to be patient as the move will help them in future.

Emphasising the sole motive of eradicating black money and corruption, he said, “We have resolved to get rid of black money” and added that the centre wants “our economy to be cashless”.

Asked about the suffering of common men after the decision, the union minister said only those people should worry “who have not earned honestly”, while on the quick implementation of the ban, he sought support of the people of India and assured that the decision will prove highly beneficial to everyone in the long term.

Source : Financial Express

Govt may curb on use of cash for high-value deals: Revenue secretary : 10-11-2016


The Centre is likely to unveil more steps to control the black money menace , including restrictions on the use of cash for high-value transactions, a top official has said.

Taking measures to control the menace is a continuous process and the government is taking different measures at different times, Revenue Secretary Hashmukh Adhia was quoted as saying by ‘The Times of India’.

He said that more such measures are expected to come, when asked by the paper whether the government will come out with restrictions on cash deposits of over Rs 3 lakh. The special investigation team ,which was appointed by the Supreme Court had suggested that curbs be imposed on cash deposits of over Rs 3 lakh. The main aim of the limit is to ensure that transactions are made using credit or debit cards, cheques or drafts which can be tracked.

The government decided the move at the highest level for a number of reasons, even though other options were also discussed, it was the best the prime minister felt. It was also because of the travel plan since he is travelling to Japan from Thursday, Hashmukh Adhia added.

The revenue secretary further said that the government had taken several steps including setting up an SIT, accepting some of its suggestions, Income Declaration Scheme, among others.

He also added that a number of people pay taxes is low and even those who pay, prefer to pay less than the actual.

Tax authorities will not immediately as questions on cash deposits that people make now, he said.

Source : PTI

Watch out for the 200% penalty: Deposit only what you can account for : 10-11-2016


If you have hoards of cash and wish to deposit it into the bank, do so if you can only account for that income as the government has said there will be a massive penalty incase of mismatch between the two.

If tax men find out that money deposited is not matching with the income declared,it would be treated as a case of tax evasion and the tax amount plus a penalty of 200% of the tax payable would be levied as per the section 270(A) of the income tax act. Hence,  authorities might take away 90% of your money if there is an income mismatch.

Imprisonment?
The tax defaulter could also attract prosecution under Section 276C of the Act, with imprisonment from three months to seven years with fine, said experts.

“One should be in a position to match the cash in hand with income from business operations,” said Pallav Pradyumn Narang, partner, Arkay & Arkay, a Delhi-based chartered accountancy firm. Businesses would have barely four months in the current financial year to justify the cash hoard as business income. Alternatively, they should be in a position to establish that the cash was withdrawn for business purpose.
If the amount is unaccounted for, various provisions of Income-Tax Act, 1961, will come into effect. “If the sources of income are unaccounted for, these would be deemed to be current year’s income under Section 69A of the Income-Tax Act, 1961, and will attract income tax at the rate of 30% along with applicable surcharge and education cess, under Section 115BBE of the Act,” said Neeru Ahuja, partner, Deloitte Haskins & Sells.

But what about housewives, small artisans and businessmen?

A lot of small businessmen, housewives, artisans, workers may have some cash lying around as their savings at home.

They need not worry about such small amount of deposits up to Rs 1.5-2 lakh, since it would be below the taxable income. There will be no harassment by income tax department for such  deposits made.
Source : Business Standard

Notification No : 49/2016 Dated: 09-11-2016


Seeks to amend notification No. 30/2012- ST, dated the 20th June, 2016 so as to put compliance liability of service tax payment and procedure on to the service provider located in the non-taxable territory with respect to online information and database access or retrieval services provided in the taxable territory to non-assesse online recipient – 49/2016

MINISTRY OF FINANCE (DEPARTMENT OF REVENUE)

NOTIFICATION No. 49/2016-Service Tax

New Delhi, the 9th November, 2016

G.S.R.____(E).-In exercise of the powers conferred by sub-section (2) of section 68 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 30/2012-Service Tax, dated the 20thJune, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 472 (E), dated the 20thJune, 2012, namely:-

In the said notification,-

(a) in paragraph I, in clause (B), after the words “located in the taxable territory”, the words “other than non-assesse online recipient” shall be inserted;

(b) in paragraph (II), in the TABLE, against Sl. No. 10, in the entry under column (2), after the words “located in the taxable territory”, the words “other than non-assesse online recipient” shall be inserted;

(c) after Explanation II, following shall be inserted, namely:-

Explanation III. For the purposes of this notification, “non-assesse online recipient” has the same meaning as assigned to it in clause (ccba) of sub-rule 1 of rule 2 of Service Tax Rules, 1994.’.

2. This notification shall come into force on the 1st day of December, 2016.

[F. No. 354/149/2016-TRU]

(Anurag Sehgal)

Under Secretary to the Government of India

Note:-The principal notification was published in the Gazette of India, Extraordinary, vide notification No. 30/2012 – Service Tax, dated the 20thJune, 2012, vide number G.S.R. 472(E), dated the 20thJune, 2012 and last amended vide notification No. 34/2016-Service Tax, dated the 6th June, 2016 vide number G.S.R. 577(E), dated the 6th June, 2016.

Notification No : 48/2016 Dated: 09-11-2016


Seeks to amend Service Tax Rules, 1994 so as to prescribe that the person located in non-taxable territory providing online information and database access or retrieval services to non-assesse online recipient , as defined therein, is liable to pay service tax and the procedure for payment of service tax – 48/2016

GOVERNMENT OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE)

NOTIFICATION No. 48/2016-Service Tax,

New Delhi, the 9th November, 2016

G.S.R….. (E). - In exercise of the powers conferred by sub-section (1), read with sub-section (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the Service Tax Rules, 1994,namely:-

1. (1) These rules may be called the Service Tax (Fourth Amendment) Rules, 2016.

(2) They shall come into force on the 1st day of December, 2016.

2. In the Service Tax Rules, 1994,-

(i) in rule 2, in sub-rule (1),-

(a) after clause (ccb), the following clause shall be inserted, namely:-

‘(ccba) “non-assesse online recipient” means Government, a local authority, a governmental authority or an individual receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory;

Explanation.- For the purposes of this clause, “governmental authority” means an authority or a board or any other body :

(i) set up by an Act of Parliament or a State legislature; or

(ii) established by Government,

with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243Wof the Constituion;’;

(b) after clause (ccc), the following clause shall be inserted, namely:-

‘(ccd) “online information and database access or retrieval services” means services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology and includes electronic services such as,-

(i) advertising on the internet;

(ii) providing cloud services;

(iii) provision of e-books, movie, music, software and other intangibles via telecommunication networks or internet;

(iv) providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network;

(v) online supplies of digital content (movies, television shows, music, etc.);

(vi) digital data storage; and

(vii) online gaming;’;

(c) in clause (d),-

(i) in sub-clause (i),-

(a) in item (G), after the words “taxable service”, the words “other than online information and database access or retrieval services,” shall be inserted;

(b) after item (G), following item shall be inserted, namely:-

“(H) in relation to services provided or agreed to be provided by way of online information and database access or retrieval services, by any person located in a non-taxable territory and received by any person in the taxable territory other than non-assesse online recipient, recipient of such service;”;

(ii) in sub-clause (ii), the following provisos shall be inserted, namely:-

“Provided that in case of online information and database access or retrieval services provided or agreed to be provided by any person located in a non-taxable territory and received by non-assesse online recipient, provider of service located in a non-taxable territory shall be the person liable for paying service tax:

Provided further that in case of online information and database access or retrieval services provided or agreed to be provided by any person located in a non-taxable territory and received by non-assesse online recipient, an intermediary located in the non-taxable territory including an electronic platform, a broker, an agent or any other person, by whatever name called, who arranges or facilitates provision of such service but does not provides the main service on his account shall be deemed to be receiving such services from the service provider in non-taxable territory and providing such services to the non-assesse online recipient except when such intermediary satisfies all the following conditions, namely :-

(a) the invoice or customer’s bill or receipt issued or made available by such intermediary taking part in the supply clearly identifies the service in question, its supplier in non-taxable territory and the service tax registration number of the supplier in taxable territory;

(b) the intermediary involved in the supply does not authorise the charge to the customer or take part in its charge i.e. intermediary neither collects or processes payment in any manner nor is responsible for the payment between the non-assesse online recipient and the supplier of such services;

(c) the intermediary involved in the supply does not authorise delivery;

(d) the general terms and conditions of the supply are not set by the intermediary involved in the supply but by the service provider:

Provided also that in case of online information and database access or retrieval services provided or agreed to be provided by any person located in a non-taxable territory and received by non-assesse online recipient, any person located in taxable territory representing such service provider for any purpose in the taxable territory shall be the person liable for paying service tax:

Provided also that in case of online information and database access or retrieval services provided or agreed to be provided by any person located in a non-taxable territory and received by non-assesse online recipient, if the service provider does not have a physical presence or does not have a representative for any purpose in the taxable territory, the service provider may appoint a person in the taxable territory for the purpose of paying service tax and such person shall be liable for paying service tax:

Provided also that in case of online information and database access or retrieval services provided or agreed to be provided by any person located in a non-taxable territory and received by any person located in the taxable territory, person receiving such services shall be deemed to be located in the taxable territory if any two of the following non-contradictory conditions are satisfied, namely :-

(a) the location of address presented by the service recipient via internet is in taxable territory;

(b) the credit card or debit card or store value card or charge card or smart card or any other card by which the service recipient settles payment has been issued in the taxable territory;

(c) the service recipient‟s billing address is in the taxable territory;

(d) the internet protocol address of the device used by the service recipient is in the taxable territory;

(e) the service recipient‟s bank in which the account used for payment is maintained is in the taxable territory;

(f) the country code of the subscriber identity module (SIM) card used by the service recipient is of taxable territory;

(g) the location of the service recipient‟s fixed land line through which the service is received by the person, is in taxable territory:

Provided also that in case of online information and database access or retrieval services provided or agreed to be provided by any person located in a non-taxable territory and received by non-assesse online recipient, a person receiving such services shall be deemed to be a non-assesse online recipient, if such person does not have service tax registration under these rules.”;

(ii) in rule 4, in sub rule (1), after third proviso, the following proviso shall be inserted, namely:-

“Provided also that a person located in non taxable territory liable for paying the service tax in the case of online information and database access or retrieval services may make an application for registration in form ST-1A for registration within a period of thirty days from the date on which the service tax under section 66B of the Act is levied or the person located in non taxable territory has commenced supply of taxable services in the taxable territory in India and notwithstanding anything contrary in these rules, the registration shall be deemed to be granted in form ST-2A from the date of receipt of the application.”;

(iii) in rule 4A, in sub-rule 1, after the sixth proviso, the following proviso shall be inserted, namely:-

“Provided also that in case of online information and database access or retrieval services provided or agreed to be provided in taxable territory by a person located in the non-taxable territory, an invoice, a bill or, as the case may be, challan shall include any document, by whatever name called, whether or not serially numbered, but containing name and address of the person receiving taxable service to the extent available and other information in such documents as required under this sub-rule.”;

(iv) in rule 7, in sub-rule (1) after the letters and figure “ST-3A”, the word, letters and figure “or ST-3C” shall be inserted;

Notification No : 47/2016 Dated: 09-11-2016


Seeks to amend notification No. 25/2012-ST dated 20th June , 2016 so as to withdraw exemption from service tax for services provided by a person in non-taxable territory to Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory – 47/2016

MINISTRY OF FINANCE (DEPARTMENT OF REVENUE)

NOTIFICATION No. 47/2016-Service Tax

New Delhi, the 9th November, 2016

G.S.R.….(E).-In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.25/2012-Service Tax, dated the 20thJune, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 467 (E), dated the 20thJune, 2012, namely:-

In the said notification,-

(a) in the opening paragraph, in entry 34, after clause (c), the following proviso shall be inserted, namely,-

“Provided that the exemption shall not apply to online information and database access or retrieval services received by persons specified in clause (a) ;”;

(b) in paragraph 2, after clause (xaa), the following clause shall be inserted, namely: -

‘(xab)    “online information and database access or retrieval services” has the same meaning as assigned to it in clause (ccd) of sub-rule 1 of rule 2 of the Service Tax Rules, 1994;’.

2. This notification shall come into force on the 1st day of December, 2016.

[F. No. 354/149/2016-TRU]

(Anurag Sehgal)

Under Secretary to the Government of India

Note:-The principal notification was published in the Gazette of India, Extraordinary, vide notification No. 25/2012 – Service Tax, dated the 20th June, 2012, vide number G.S.R. 467 (E), dated the 20thJune, 2012 and last amended vide notification number 40/2016 – Service Tax, dated the 6th September, 2016 vide number G.S.R. 857 (E), dated the 6th September, 2016.

No. 202/12/2016 Dated: 09-11-2016


F.No. 354/149/2016-TRU

Government of India Ministry of Finance Department of Revenue (Tax Research Unit)

Dated the 9th November, 2016

To,

Principal Chief Commissioners of Customs and Central Excise (All)

Principal Chief Commissioners of Central Excise & Service Tax (All)

Principal Director Generals of Goods and Service Tax/System/CEI

Director General of Audit/Tax Payer Services

Principal Commissioners/ Commissioners of Customs and Central Excise (All)

Principal Commissioners/Commissioners of Central Excise and Service Tax (All)

Principal Commissioners/Commissioners of Service Tax (All)

Principal Commissioners/Commissioners LTU/Central Excise/Service Tax (Audit)

Madam/Sir,

Subject: – Withdrawal of exemption from service tax on cross border B2C OIDAR services provided online/electronically from a non-taxable territory to consumers in taxable territory in India-reg.

At present services received in taxable territory in India from outside the taxable territory by Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession are exempted [cross border B2C (business to consumer) services provided in taxable territory]. On the other hand, services received by other persons in taxable territory from non-taxable territory [cross border B2B (business to business) services] are taxable under reverse charge i.e. service recipient in taxable territory pays tax. Further, in view of Place of Provision of Service Rules, 2012 rule 9(b), with respect to online information and database access or retrieval services [OIDAR], the place of supply is location of service provider and thus such cross border B2B/B2C services provided by a person in non-taxable territory and received by a person in taxable territory are outside the levy of service tax.

2. In this context, kind attention is invited to notification No. 46/2016-ST, 47/2016-ST, 48/2016-ST and 49/2016-ST all dated 9th November, 2016. These notifications shall come into force with effect from 1st December 2016, whereby service tax would be chargeable on online information and database access or retrieval [OIDAR] services provided by any person located in non-taxable territory and received by Government, local authority, governmental authority, or an individual in relation to any purpose other than commerce, industry or any other business or profession [cross border B2C (business to consumer) OIDAR services provided in taxable territory]. Online information and database access or retrieval [OIDAR] services have been re-defined in Service Tax Rules, 1994 to include electronic services. In this regard, there may be many questions in the mind of service providers in the non-taxable territory, recipients in the taxable territory and other stakeholders, in respect of various aspects pertaining to the taxation of such services. Accordingly, the following clarifications are issued:-

Sl. No. Issue Clarification
1. What is taxable territory? Taxable territory has been defined in section 65B of the Finance Act, 1994 as the territory to which the Finance Act, 1994 applies i.e. the whole of territory of India other than the State of Jammu and Kashmir.“India” includes not only the land mass but its territorial waters, continental shelf, exclusive economic zone or any other maritime zone as defined in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976; the sea-bed and the subsoil underlying the territorial waters; the air space above its territory and territorial waters; and the installations structures and vessels located in the continental shelf of India and the exclusive economic zone of India, for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof.
2. What do we mean by cross border B2C services provided in the taxable territory? It means those services where the service provider is in non-taxable territory and the service recipient is Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession (located in the taxable territory in India) and the place of provision of such services as determined by the application of Place of Provision of Service Rules, 2012, is in the taxable territory in India.
3. Are all cross border B2C services provided in the taxable territory made taxable with effect from 1stDecember, 2016? No. Only cross border B2C OIDAR services provided in the taxable territory have been made taxable w.e.f 1st December, 2016. Other cross border B2C services continue to be exempted. Further, cross-border B2B services have been taxable since prior to 1st December, 2016, under reverse charge mechanism.
4. Do OIDAR services have the same meaning as defined in the Place of Provision of Service Rules, 2012? If no, what do we mean by OIDARservices? No. The existing definition of OIDAR services given in PoPSR, 2012 [clause (l) of rule 2] has been redefined to assign the OIDAR services the same meaning as assigned to it in the clause (ccd) of sub-rule 1 of rule 2 of the Service Tax Rules, 1994 [inserted vide notification No. 48/2016-ST].
5. What do we mean by Cross Border B2C OIDAR services provided in taxable territory in India? Cross border B2C OIDAR services means online information and database access or retrieval services provided by a person located in non-taxable territory to a ‘non assesse online recipient’ in taxable territory in India.‘Non assesse online recipient’ has been defined in Service Tax Rules, 1994 [rule 2(1)(ccba)] to mean Government, a local authority, a governmental authority or an individual receiving OIDAR services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory [notification No. 48/2016-ST refers].
6. Is there any change regarding cross border B2B [business to business] services provided in India?Will the cross border B2B OIDAR services provided in taxable territory in India to a business entity be taxed under forward charge or reverse charge? No. The current dispensation of taxing cross border B2B services under reverse charge mechanism i.e. the recipient business entity pays service tax, continues.Cross border OIDAR services provided in taxable territory in India to a business entity will be taxed under reverse charge i.e. the business entity receiving the services will pay tax under reverse charge.
7.
Service recipient in taxable territory receiving cross border B2C services Service Taxable/ Exempted Taxing Mechanism Person liable to pay tax
Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession OIDAR Taxable[w.e.f. 01.12.2016] Forward charge Service provider in non-taxable territory
Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession Other than OIDAR Exempted Exempted Exempted
Other than Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession All including OIDAR Taxable Reverse Charge Service recipient in taxable territory
8. What are the changes made in statutory/legal provisions and when are these coming into effect? Notification Nos. 46/2016-ST, 47/2016-ST, 48/2016-ST and 49/2016-ST have been issued on 9th November, 2016 to effect these changes.These changes will however, come into force with effect from 1st December, 2016.
9. What are the changes made in the Place of Provision of Services Rules, 2012 [PoPSR] and what are its implications? Vide notification No. 46/2016-ST, the Place of Provision of Services Rules, 2012 [PoPSR] are being amended with effect from 1st December, 2016,-to assign the OIDAR services the same meaning as assigned to it in the clause (ccd) of sub-rule 1 of rule 2 of the Service Tax Rules, 1994 [inserted vide notification No. 48/2016-ST].

to amend proviso of rule 3 of PoPSR so as to make the proviso inapplicable to OIDARservices.

to omit the clause (b) of rule 9 of PoPSR.

As a result, default rule 3 of PoPSR will be applicable in such cases from 1st December, 2016, whereby the place of provision of a service is the location of recipient of services i.e. cross border B2B/B2C OIDAR services received by a person located in taxable territory will be leviable to service tax in the taxable territory. In order to avoid any confusion, the existing proviso to rule 3 of PoPSR has been made inapplicable forOIDAR services

10. Even though the cross border OIDAR services are being made leviable to service tax with effect from 1st December, 2016, will these services not get exempted by means of any existing exemption? Vide notification No. 47/2016-ST, the existing exemption [Sl. No. 34(a) of notification No. 25/2012-ST] to services provided by a person located in a non- taxable territory and received by Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession, will not be available for OIDAR services received by such persons w.e.f 1st December, 2016. OIDARservices have been assigned the same meaning as assigned to it in the clause (ccd) of sub-rule 1 of rule 2 of the Service Tax

 

Notification No : 46/2016 Dated: 09-11-2016


Seeks to amend Place of Provision of Services Rules, 2012 so as to amend the place of provision of online information and database access or retrieval services with effect from 01.12.1016 – 46/2016

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

NOTIFICATION No. 46/2016-Service Tax

New Delhi, the 9th Novemeber, 2016

G.S.R.—(E).- In exercise of the powers conferred by sub-section (1) of section 66C and clause (hhh) of sub-section (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules to amend the Place of Provision of Services Rules, 2012, namely :-

1. (1) These rules may be called the Place of Provision of Services (Amendment) Rules, 2016.

(2) They shall come into force on the 1st day of December, 2016.

2. In the Place of Provision of Services Rules, 2012,-

(i) in rule 2, for clause (l), following clause shall be substituted, namely:-

‘(l) “online information and database access or retrieval services” has the same meaning as assigned to it in clause (ccd) of sub-rule 1 of rule 2 of the Service Tax Rules, 1994;’;

(ii) in rule 3, in the proviso, after the words “in case”, the words “of services other than online information and database access or retrieval services, where” shall be inserted;

(iii) in rule 9, clause (b) shall be omitted.

[F. No. 354/149/2016-TRU]

(Anurag Sehgal)

Under Secretary to the Government of India

Note:- The principal rules were published in the Gazette of India, Extraordinary, vide notification No. 28/2012 – Service Tax, dated the 20th June, 2012 vide number G.S.R. 470 (E), dated the 20th June, 2012 and last amended by notification No.14/2014 – Service Tax, dated the 11th July, 2014 vide number G.S.R. 483 (E), dated the 11th July, 2014.

No. Press Release Dated: 09-11-2016


Notification of Protocol amending the Double Taxation Amending Convention (DTAC) between India and Japan – Order-Instruction

 

Government of India Ministry of Finance Department of Revenue

Central Board of Direct Taxes

PRESS RELEASE

New Delhi, 9th November, 2016.

Sub: Notification of Protocol amending the Double Taxation Amending Convention (DTAC) between India and Japan

The existing Double Taxation Avoidance Convention between India and Japan was signed on 7th March, 1989 and was notified on 1st March 1990. The DTAC was subsequently amended on 24th February, 2006. A Protocol amending the DTAC between India and Japan for the Avoidance of Double Taxation and the Prevention of Fiscal evasion with respect to taxes on income which was signed on 11th December, 2015 has entered into force on 29th October, 2016 on completion of procedural requirements by both countries. The Protocol amending the DTAC aims to promote transparency and cooperation between the two countries.

The Protocol provides for internationally accepted standards for effective exchange of information on tax matters including bank information and information without domestic tax interest. It is further provided that the information received from Japan in respect of a resident of India can be shared with other law enforcement agencies with authorization of the Competent Authority of Japan and vice versa.

The Protocol provides for exemption of interest income from taxation in the source country with respect to debt-claims insured by the Government/Government owned financial institutions.

The Protocol inserts a new article on assistance in collection of taxes. India and Japan shall now lend assistance to each other in the collection of revenue claims.

(Meenakshi J Goswami)

Commissioner of Income Tax

(Media and Technical Policy)

Official Spokesperson, CBDT.

GST rate and inflation: Brokerages weigh in on how it will impact you : 09-11-2016


As various aspects of indirect taxes are being brought under one umbrella, the common fear for most people was the possible inflationary impact of the goods and services tax (GST). But, with the finance ministry announcing a four-tier tax structure for GST, most experts prefer to wait for clarity specifically with regard to classification of items under GST to get a true picture on how inflationary the proposed GST could be for consumers.
However, going by information currently available, experts believe that GST’s impact on inflation may not be too severe. This is mainly because a major chunk of goodscomprising the consumer price index (CPI) basket are kept off from the taxation purview.

Domestic brokerage Emkay Global is of the view as this being more or less similar to the current duty structure, there could be no positive impulse for inflation.

Experts at Antique Stock Broking also have a similar view and in fact are of the view that zero-taxes on the final product will help in reducing the incidence of effective tax. The point is explained by taking the example of cereals, which under the current structure does not suffer any tax incidence, but the effective tax rate is higher as there is incomplete passage of credits. This will be eliminated by GST.

However, analysts at Motilal Oswal Securities believe that with 50 per cent goods in the CPIbasket eliminated from the tax bracket, the implementation of this multiple tax rates structure may lead to continued litigation issues over classification.

Even for goods such as food products other than essentials, readymade garments and cars, which currently fall in the 12 ? 38 per cent blended duty structure (excise duty plus state value added tax), GST may not significantly alter the structure as tax incidence under GST is likely to be the same as the currently prevailing structure. These goods would fall in the 12 ? 28 per cent GSTrate.
However, inflationary pressures may become pronounced in case of any service tax levy. Current service tax rate is at 15 per cent and companies had the option of abatement of taxes in case of services such as transport, airline and restaurants. Services forms for nearly 28 per cent of the CPI and hence any substantial alteration in duty structure could trigger inflationary pressures.

“Both 12 per cent and 18 per cent GST rates for services are on the higher side; the silver lining is in the credit set?off that would become available”, say experts at Phillip Capital. Those at Kotak Institutional Research say, “We estimate 15-25 basis points impact on inflation from higher taxrates on 15 ? 20 per cent of the CPI basket, which pertain to services.”

Source : Financial Express

Govt demonetises two currency notes of Rs 500 & Rs 1000; Banks to remain closed today : 09-11-2016


With a view to curb financing of terrorism through the proceeds of Fake Indian Currency Notes (FICN) and use of such funds for subversive activities such as espionage, smuggling of arms, drugs and other contrabands into India, and for eliminating Black Money which casts a long shadow of parallel economy on our real economy, it has been decided to cancel the legal tender character of the High Denomination bank notes of Rs 500 and Rs 1000 denominations issued by RBI till now. This will take effect from the expiry of the 8th November, 2016.

Fake Indian Currency Notes (FICN) in circulation in these denominations are comparatively larger as compared to those in other denominations. For a common person, the fake notes look similar to genuine notes. Use of FICN facilitates financing of terrorism and drug trafficking. Use of high denomination notes for storage of unaccounted wealth has been evident from cash recoveries made by law enforcement agencies from time to time. High denomination notes are known to facilitate generation of black money.In this connection, it may be noted that while the total number of bank notes in circulation rose by 40% between 2011 and 2016, the increase in number of notes of Rs.500/- denomination was 76% and for Rs 1,000/- denomination was 109% during this period. New Series bank notes of Rs.500/- and Rs.2,000/- denominations will be introduced for circulation from 10th November, 2016. Infusion of Rs 2,000/- bank notes will be monitored and regulated by RBI. Introduction of new series of banknotes which will be distinctly different from the current ones in terms of look, design, size and colour has been planned.

The World Bank in July, 2010 estimated the size of the shadow economy for India at 20.7% of the GDP in 1999 and rising to 23.2% in 2007. There are similar estimates made by other Indian and international agencies. A parallel shadow economy corrodes and eats into the vitals of the country’s economy. It generates inflation which adversely affects the poor and the middle classes more than others. It deprives Government of its legitimate revenues which could have been otherwise used for welfare and development activities.

In the last two years, the Government has taken a number of steps to curb the menace of black money in the economy including setting up of a Special Investigation Team (SIT); enacting a law regarding undisclosed foreign income and assets; amending the Double Taxation Avoidance Agreement between India and Mauritius and India and Cyprus; reaching an understanding with Switzerland for getting information on Bank accounts held by Indians with HSBC; encouraging the use of non-cash and digital payments; amending the Benami Transactions Act; and implementing the Income Declaration Scheme 2016.

In order to implement the above decisions of the Government and keeping in view the need to minimise inconvenience to the public, the following operational guidelines have been issued:-

(i) Old High Denomination Bank Notes may be deposited by individuals/persons into their bank accounts and/or exchanged in bank branches or Issue Offices of RBI till the close of business hours on 30th December, 2016.

(ii) Old High Denomination Bank Notes of aggregate value of Rs.4,000/- only or below held by a person can be exchanged by him/her at any bank branch or Issue Office of Reserve Bank of India for any denomination of bank notes having legal tender character, provided a Requisition Slip as per format to be specified by RBI is presented with proof of identity and along with the Old High Denomination Bank Notes. Similar facilities will also be made available in Post Offices.

(iii) The limit of Rs.4,000/- for exchanging Old High Denomination Bank Notes at bank branches or at issue offices of Reserve Bank of India will be reviewed after 15 days and appropriate notification issued, as may be necessary.

(iv) There will not be any limit on the quantity or value of Old High Denomination Bank Notes to be credited to the account of the tenderer maintained with the bank, where the Old High Denomination Bank Notes are tendered. However, in accounts where compliance with extant Know Your Customer (KYC) norms is not complete, a maximum value of Rs.50,000/- of Old High Denomination Bank Notes can be deposited.

(v) The equivalent value of the Old High Denomination Bank Notes tendered can be credited to an account maintained by the tenderer at any bank in accordance with standard banking procedure and on production of valid proof of Identity.

(vi) The equivalent value of the Old High Denomination Bank Notes tendered can be credited to a third party account, provided specific authorisation therefor accorded by the said account holder is presented to the bank, following standard banking procedure and on production of valid proof of Identity of the person actually tendering.

(vii) Cash withdrawal from a bank account, over the counter will be restricted to Rs.10,000/- subject to an overall limit of Rs. 20,000/- in a week for the first fortnight, i.e., until the end of business hours on November 24, 2016.

(viii) There will be no restriction on the use of any non-cash method of operating the account which will include cheques, demand drafts, credit/debit cards, mobile wallets and electronic fund transfer mechanisms.

(ix) Withdrawal from ATMs would be restricted to Rs.2,000 per day per card up to November 18, 2016. The limit will be raised to Rs.4,000 per day per card from November 19, 2016 onwards.

(x) For those who are unable to exchange their Old High Denomination Bank Notes or deposit the same in their bank accounts on or before December 30, 2016, an opportunity will be given to them to do so at specified offices of the RBI on later dates along with necessary documentation as may be specified by the Reserve Bank of India.

(xi) Instruction is also being issued for closure of banks and Government Treasuries, on 9th November, 2016.

(xii) In addition, all ATMs, Cash Deposit Machines, Cash Recyclers and any other machine used for receipt and payment of cash will remain shut on 9th and 10th November, 2016.

(xiii) The bank branches and Government Treasuries will function from 10th November, 2016.

(xiv) To avoid inconvenience to the public for the first 72 Hours, Old High Denomination Bank Notes will continue to be accepted at Government Hospitals and pharmacies in these hospitals/Railway ticketing counters/ticket counters of Government/Public Sector Undertaking buses and airline ticketing counters at airports; for purchases at consumer co-operative societies, at milk booths, at crematoria/burial grounds, at petrol/diesel/gas stations of Public Sector Oil Marketing Companies and for arriving and departing passengers at international airports and for foreign tourists to exchange foreign currency at airports up to a specified amount.

Source : PTI

‘Realty, consumer non-durable markets to be hit by currency notes ban’ : 09-11-2016


Experts are of the view that ecommerce, real estate and consumer non-durable sectors are likely to be hit by government’s move to ban Rs 500 and Rs 1,000 notes, even as they projected the economy to benefit from it in the long run.

In a major fight against black money, fake currency, corruption and terror financing, Prime Minister Narendra Modi last night announced demonetisation of Rs 1,000 and Rs 500 notes with effect from today.

“The impact would be felt by every part of the economy with real estate sector feeling the biggest and a far reaching impact. Consumption would be hit India-wide in the short term,” said Rakesh Nangia Managing Partner Nangia &Co.

E-commerce sector having cash on delivery may feel impact on sales. Every unorganised sector in every trade will feel the impact of this bold move, he said.

Anis Chakravarty, Lead Economist, Deloitte India said the commodities and agricultural sector including the market for consumer non-durables is expected to feel the heat.

“However, the largest impact in the medium to long term is likely to be the real estate sector which possibly will have the largest negative impact,” he said.

Mukesh Butani, Managing Partner, BMR Legal said government’s move was driven by national security concerns and wider agenda to filter out unaccounted income

“Timing was perfect – a month after closure of the income disclosure week and a week after Diwali such that the impact of short term disruption in festive period is minimised,” Butani said.

Experts said high denomination currency in circulation in past 5 years vis-a-vis economic growth pointed towards indicators of unaccounted money in circulation.

“This is a masterstroke move by the Government and in the long run, the move will give the economy a positive fillip leading to an increase in GDP also,” Nangia said.

Chakravarty said on a positive note, there will be a reset of expectations as this represents in the long term a big push to the cashless economy and businesses in the fin tech sector are expected to see gains .

“This move also shows the intent of the government to come up with game changing ideas and will represent a threat to all future operations in the black economy and hoarding of cash,” he added.

Source : Economic Times

Notification No. SO 3463(E) [F.NO.F.1/10/2016-SEZ], 08-11-2016


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – COGNIZANT TECHNOLOGY SERVICES PVT. LTD.

NOTIFICATION NO. SO 3463(E) [F.NO.F.1/10/2016-SEZ]DATED 8-11-2016

WHEREAS, M/s. Cognizant Technology Services 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 IT/ITES at Nanakramguda 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 21st April, 2016;

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 2.56 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. Nanakramguda 115/1 1.599
2. 115/24 0.451
3. 115/25 0.398
4. 115/26 0.107
5. 115/30 0.002
Total 2.56

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 8th day of November, 2016 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).

 

Notification No. SO 3159(E) [F.NO.F.1/4/2016-SEZ], 08-11-2016


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – GAR CORPORATION PVT. LTD.

NOTIFICATION NO. SO 3459(E) [F.NO.F.1/4/2016-SEZ]DATED 8-11-2016

WHEREAS, M/S. GAR Corporation 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 IT/ITES At Kokapet Village, Rajender Nagar 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 05th February, 2016;

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 2.22 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. Kokapet 107/P 2.22
Total 2.22

And, Therefore, the Central Government, i n 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 8th day of November, 2016 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).

 

1050/38/2016-CX – 08-11-2016


SECTION 7 OF THE FINANCE ACT, 1994 – RETURNS – FURNISHING OF – COMBINED ANNUAL RETURN FORM FOR CENTRAL EXCISE AND SERVICE TAX

CIRCULAR NO.1050/38/2016-CXDATED 8-11-2016

Kind attention is invited to Notification No. 8/2016-CE(N.T.) (Sl.No.5) dated 01.03.2016 and Notification No.13/2016-CE(N.T.) (SI.No.9) dated 01.03.2016vide which Rule 12 of Central Excise Rules, 2002 and Rule 9A of CENVAT Credit Rules, 2004, respectively, were amended to replace the existing Central Excise Forms ER-4 to ER-7 with an Annual Return form. On the service tax side, videNotification No. 19/2016-ST dated 01.03.2016, Rule 7 of the Service Tax Rules, 1994 was amended to prescribe an annual return. In terms of Rule 12 of Central Excise Rules, 2002 and Rule 7 of the Service Tax Rules, 1994, the format of the Annual Return, which was required to be filed by 30th day of November, was to be specified by the Board by notification.

2. In view of impending implementation of Goods & Services Tax (GST) it has been decided that, the aforesaid Annual Return shall not be required to be filed for the year 2015-16. which is due to be filed by 30.11.2016. After implementation of GST, Annual Return for non-GST goods only may be required. A final view on the same would be taken after due consultation with the trade.

3. Trade may be suitably informed that the aforesaid Combined Annual Return for 2015-16 is not required to be filed. Difficulties, if any, in the implementation of above Circular may be brought to the notice of the Board.

No exemption! Non-disclosure of cashbacks may earn taxmen’s ire : 08-11-2016


A senior banker in Mumbai unexpectedly received a letter from the Income Tax Department seeking scrutiny of his account. Surprised, he contacted his chartered accountant who rechecked his books and found an unaccounted credit of Rs 1,500.

“I actually had received it as a cashback for some transaction that I had done with my debit card. It was too small for my attention but then I did receive a notice against that,“ said the banker who did not wish to be identified.
While customers nowadays look for cashback deals during purchases, they usually forget that in some cases, it can be considered a source of income and can be taxable.Although these amounts are mostly too small for the tax department’s notice, big cashbacks such as a 100% return against international flight tickets, foreign hotel bookings or even large consumer durable purchases made online can be significant, chartered accountants say .

“Technically speaking, cashbacks  should be included as income from other sources under Section 56 of the Income Tax Act. It should be taxable as there is no exemption available as per the act. However, since the amounts are usually small they slip out of notice in most cases, but it is a good habit for consumers to keep a tab on the total amount received as cashbacks,“ said Harsh Roongta, a chartered accountant and investment advisor.

While cashbacks are often perceived  as discounts on purchases, in many cases it can be a direct credit into the bank account against a specific payment, especially in case of business transactions.

“Cashbacks received in case of personal consumption are mostly used to reduce expenses, but if any of the expenses are being claimed against business accounts, then such cashbacks should be taxable as business or professional receipts,“ said Arvind Rao, a chartered accountant with Arvind Rao & Associates.

Earlier, cashbacks and reward points were typically associated with credit cards and adjusted against dues. Now, bankers are offering reward points on debit card transactions as well in order to take the fight to mobile wallets.

“Sometimes, banks give you reward points which allow you to redeem them only at specific places and for buying something specific.But now we are making an attempt to make customer interaction a better experience by making it as a direct credit into the bank  account, which makes our customers feel more satisfied,“ said Mridul Sharma, head of technology at IndusInd BankBSE -0.16 %.

IndusInd Bank and a few others are trying to lure people into using their cards for payments to build brand loyalty by direct cashback into their savings accounts.However, a direct credit into accounts is bound to bring it to the notice of taxmen, in which case, it needs to be reported.

Source : Financial Times

 

 

Commodity options will help bring offshore business back to India: Samir Shah, NCDEX : 08-11-2016


Options promise to revitalise the domestic commodities market, by bringing back business from offshore markets. But it will require time to educate market participants about this new instrument and ensure that there are enough option writers for market making to keep the contracts liquid, says Samir Shah, Managing Director & CEO, NCDEX , in an email interview. Edited excerpts:

When are you expecting to launch options trading?
Sebi recently paved the way for the launch of options trading in commodities and we will initially start with one agri and one non-agri commodity. The details are being worked out in terms of the kind of commodities being suggested, the product structure, contract specifications, option style, settlement procedure and trading cycle. NCDEX is in discussion with Sebi on these issues. Time would be required to educate market  participants about the new product and ensure that there are enough option writers for market making so that the contracts remain liquid.

Can you explain a bit about options trading in commodities and how it will impact the market?
Options have been a long-pending demand and by allowing them SEBI has sent out a clear signal that it wants to take these markets ahead and make them hedger / user friendly. Options give hedgers a form of insurance determined  by the strike price of the option. Since options carry virtually no downside risk, such risk-management products are much-needed instruments in a diversified emerging economy like India with a preponderance of small stakeholders who are risk averse and who need these products the most. A combination of options and futures – both risk management tools – can give market participants the leverage of futures with the safety of options.

With addition of liquidity through  commodity options, various associated benefits such as lowering of impact cost, improved market stability, lowering of volatility, reduction in risk of market cornering and improved price discovery can be seen. It is expected that its existence would boost overall market participation, especially the hedging community. It will also complement the existing futures contracts and make the commodities market more robust and efficient.

The biggest beneficiary though will be the farmers,  for whom options will be a game changer. It would help them to sell their produce in the derivatives market and thereby get the benefit of price protection in case the price falls below their cost of production and also derive the benefit of any rise in the price.

In which products do you plan to launch options trading?
The exchange is considering some agricultural commodities most suited for options, based on liquidity and participation in the underlying commodity. Soyabean, soya oil, mustard seed and guar seed are some of the commodities being considered. Sebi will take the final decision on it.

What are the advantages of options trading over futures trading?
Both futures and options are derivative instruments that derive their values from an underlying commodity. However, there is a fundamental difference between the two instruments. In futures, while both the buyer and the seller have the obligation to fulfil the contract, in options, the buyer has the right but no obligation to fulfil it. So, for an option buyer, loss is limited (to the premium he pays for the contract) while profits are unlimited. This feature makes it an ideal hedging  tool for small participants.

There are some advantages compared with futures. One, the initial outlay is much lower in options. While the initial and volatility margins that an investor pays could vary, the premiums on options are much lower than the initial margins paid on futures contracts

Two, compared with the M2M daily margin payments in futures, there is no further outgo after the initial payment for option premium.

Three, losses in options are limited to the premium paid whereas a trader who uses futures faces unlimited losses. It is hence less risky than futures.

Will options help increase depth to the commodities market?
Introducing options trading in India will incentivise market participants, who have been forced to hedge offshore because of the lack of options trading opportunities in India, to bring their business back to India’s bourses. While the introduction of options can help increase liquidity, market depth will come with increased participation by allowing banks and other mutual funds to participate in the commodity  market.

Since commodity is cyclical, how safe are options for investors? Are options a safer product for investor in the commodity market compared with futures?
The cyclical nature of commodities is one of the reasons for the price risk being faced by market participants. While a futures contract can enable price risk management, the combination of futures contract with options contract can add to the effectiveness of a combined derivatives position.

There are two parties to an option contract — a buyer and a seller (also called the writer). The buyer of an option is the one who by paying the option premium buys the right to exercise his option on the seller. The seller of a call/put option is the one who receives the option premium and is thereby obliged to sell/buy the asset if the buyer exercises his right.

So, clearly, the risk is higher if you are a seller in an option contract – as your profit is limited to the premium  amount, but the loss is unlimited. But for all hedgers – be it farmers or commodity users who will be buying put option or call option – the risk is limited to the premium. If prices are not favourable to them, they can let the contract expire.

Hence for buyers, options are more flexible than futures and less risky. This makes options akin to insurance, because the cost can be limited to the cost of the option. They are riskier for sellers, but they add income to investment portfolio  provided appropriate risk mitigation measures are undertaken.

What do you make of the effect of global trade winds on the Indian commodity market? Are we insulated from developments like cross-currents in the Chinese economy and Brexit?
The network structure of international trade implies that development in other economies are not just restricted to the immediate trading partners, but have higher round impacts. The commodity markets in India emulate global trends in many ways and India is no longer insulated from developments such as happenings in China or the Brexit. It is a matter of time to see the long term impact. But one thing is certain – the risks have increased for businesses and with it the increased need for risk mitigation measures.

Of late, in agriculture there has seen a paradigm shift from cereals to pulses and cash crops. Even the PM has been exhorting farmers to make the switch. Will that have an impact  on the commodities trade?
The shift in acreage is a function of supply and demand and the prices that farmers have fetched in the preceding season. What is important however, is to ensure that there is a vibrant market structure and supporting ecosystem for farmers to get fair prices and an increased share of the consumer prices. Options can play a very important role here, since farmer can use the tool to lock in a minimum price for his produce and in the event the price .. for his produce and in the event the prices go up can choose not to exercise the option.

For example, a farmer growing maize can buy a put option to sell 10 MT of maize at Rs 1,500 per quintal, five months from now. Two scenarios can play out for him. If the price of maize goes down to Rs 1,300 per quintal, he can exercise his option, making a profit of Rs 200 per quintal. This will offset the notional loss he will incur when he sells the product in the physical market. In the event of the price of maize going up to Rs 1,600, he can choose to not exercise his option.

In the context of monsoon and an expected bumper harvest, will there be an impact on commodities exchange?
NCDEX offers a robust platform for transparent price discovery and hedging. The trading and prices of commodities are a function of fundamental supply demand in the underlying commodities. One cannot predict the impact of monsoon and bumper harvest on trading.

Source : PTI


Levy 1.25% GST rate on jewellery industry: GJF : 08-11-2016


A jewellers body demanded that the GST rate on the jewellery sector should be 1.25 percent if the government wants the industry to be “compliant and organised”.

“We are now gearing up for GST and have proposed that the GST rate for the gems and jewellery sector should be 1.25 percent if the government expects the industry to be compliant and organised,” All India Gems and Jewellery Trade Federation (GJF) Chairman Sreedhar G V said in a release.

A delegation of the jewellers’ body today met Maharashtra Finance Minister Sudhir Mungantiwar at Nagpur and submitted its representation on Goods and Services Tax (GST).

GJF, he said, will send the representation to Union Finance Minister Arun Jaitley on GST, highlighting various concerns of the sector.

“We have been constantly highlighting various contentious issues such as smuggling of gold and increasing PAN card limit for purchases, lack of hallmarking infrastructure and high Customs duties on raw material gold,” he added.

GJF, he said, is closely evaluating the implications of Model GST Law and has already started mapping the business practises of the sector with the Model GST Law and Draft GST Rules.

GJF Director and Member-High Level Committee (HLC) Ashok Minawala said, “The HLC Report, which was unanimously accepted by the government, was prepared after taking the suggestions and recommendations from over 60 associations of India into consideration.”

“Keeping in mind, the unique characteristics of the gems and jewellery sector, the kaarighars and small jewellers were kept out of purview of the Excise Duty. Therefore, while we welcome GST we request the GST Council to recognise the practical issues faced by the sector as highlighted in the HLC report,” Minawala added.

Source : Business Standard

Notification No: G.S.R 1049(E) [F.NO.01/16/2013 CL-V(PT-I) Dated: 07-11-2016


COMPANIES (REGISTRATION OFFICES AND FEES) SECOND AMENDMENT RULES, 2016 – AMENDMENT IN RULE 8 AND ANNEXURE

NOTIFICATION NO. GSR 1049(E) [F.NO.01/16/2013 CL-V (PT-I)], DATED 7-11-2016

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) Second Amendment Rules, 2016.

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

2. In the Companies (Registration Offices and Fees) Rules, 2014, (herein after refer to as the principle rules), in the principle rules, in rule 8, in sub-rule (12), in clause (b) for sub-clause (iv), the following shall be substituted, namely:—

“(iv) AOC-4 certification by the Chartered Accountant or the Company Secretary or as the case may be by the Cost Accountant, in whole- time practice.”

3. In the principal rules, in the Annexure, in item II, for sub-item (vi), the following sub-items shall be substituted, namely;—

For Application made Other than OPCs and Small Companies OPC and Small Companies
“(vi) For allotment of Director Identification Number (DIN) under section 153 of the Act 500 500
(vii) For surrender of Director Identification Number under rule 11(f) of the Companies (Appointment and Qualification of Directors) Rules 2014 1000 1000″

GST: Aerated drink makers fume at being put in demerit list : 07-11-2016


Indian Beverage Association has expressed disappointment at the re-categorisation of aerated drinks under ‘demerit’ category in the GST rate slabs, saying at Rs 10 for 200 ml, such drinks are neither luxury goods nor do they pose health hazards.

“Aerated drinks are not ‘luxury’ goods. Aerated drinks cater to the average hydration needs of Indians in the form of immediately-available hygienic and safe drink source,” Indian Beverage Association (IBA) said in a statement.

The association, which has major cola and other beverages makers such as Coca-Cola India, PepsiCo India and Red Bull India among others as members, said aerated drinks are also not ‘sin’ goods “as the Union Government itself had accepted the position by removing such goods from Schedule VII of the Finance Act, 2005 in the 2015-16 Budget”.

On the health issues linked to such drinks, IBA said: “There are observations by the court on the basis of the report of an expert panel that the ingredients present in aerated drinks do not pose any health hazard.”

Last week, GST Council had announced that luxury items like high-end cars and demerit goods including tobacco, pan masala and aerated drinks, will be taxed at the highest rate of 28 per cent and would also attract a cess in a way that the total incidence of tax remains at almost the current level.

Expressing disappointment at the decision, IBA said: “At Rs 10 for 200 ml, aerated drinks are neither luxury goods nor do they carry the kind of health hazards attributed to them.”

It further said the consumer base of aerated drinks ranges from the low to high income group and they are supplied even to rural villages and semi-urban places.

When the applicable tax rates on aerated drinks with abatement already stands at an effective 30-31 per cent, the IBA does not subscribe to the recommendation of an additional cess on aerated drinks over and above the 28 per cent GST rate, it added.

Stating that food processing and aerated beverages have been one of the largest contributors to the FDI in the country, IBA hoped that it will not be “discriminated against in GST”.

While increase in taxes will lead to an increase in the price of the soft drinks, the viability of the industry could be in grave danger due to a consistent adversarial tax approach, IBA added.

Source : Financial Express

GST to become a reality soon: India rises to 2nd spot on global biz optimism index : 07-11-2016


India improved its ranking by one spot in a global index of business optimism, with policy reforms and Goods and Services tax (GST) expected to become a reality soon, says a survey.

According to the latest Grant Thornton International Business Report, India was ranked second on the optimism index during the third quarter (July-September 2016).
Indonesia took the top spot, with the Philippines coming in third.
India was ranked third during the April-June period after being on top for two consecutive quarters.
“The improvement in the optimism ranking in the recent past clearly reflects that the reform agenda of the government and its efforts on improving the climate for doing business are having an impact,” Grant ThorntonIndia LLP Partner India Leadership Team Harish H V said.
 India regained its top position on this parameter, from second position in the April-June period, while profitability expectations also moved up.
“…all the programs and initiatives of the government as well as its focus on building relationships with all major economic powers has made India a bright spot in the global economy,” Harish said, adding the recent push for GST augurs well and should give a further boost to business optimism.
While India continues to be amongst the top five countries citing regulations and red tape as a constraint on growth, for the first time in the year, the country’s ranking on this parameter has dropped from second to fourth.
As per the survey, 59 percent of the respondents have quoted this as an impediment in the growth prospects compared to 64 percent in the previous quarter.
The report is prepared on the basis of a quarterly conducted global business survey of 2,500 businesses across 36 economies.
Meanwhile, in terms of revenue expectations, India slipped to third position from top in the previous quarter.
In spite of the downturn, India is much ahead of China where only 30 percent respondents expect an increase in revenue, whereas in India, 85 percent respondents have voted in favour of increasing revenue.
The survey further noted that 68 percent of respondents have voted for an upsurge in selling prices. On this parameter too, China lags India with only 10 percent of respondents expecting an upsurge in selling prices. The global average is 19 percent.
Globally, business optimism stands at net 33 percent, rising 1 percentage point from the previous quarter but falling 11 percentage points over the year.
“Political events such as Brexit and the US presidential election understandably rattle the global economy and test the resilience and elasticity of businesses worldwide.
In general, businesses do not like uncertainty, and that is what is happening,” Grant Thornton Global CEO Ed Nusbaum said.

Source : Business Standard

With GST on its way, India rises to second spot on global biz optimism index : 07-11-2016


India improved its ranking by one spot in a global index of business optimism, with policy reforms and Goods and Services tax (GST) expected to become a reality soon, says a survey.

According to the latest Grant Thornton International Business Report, India was ranked second on the optimism index during the third quarter (July-September 2016).

Indonesia took the top spot, with the Philippines coming in third.

India was ranked third during the April-June period after being on top for two consecutive quarters.

“The improvement in the optimism ranking in the recent past clearly reflects that the reform agenda of the government and its efforts on improving the climate for doing business are having an impact,” Grant Thornton India LLP Partner – India Leadership Team Harish H V said.

High business optimism was also complimented by the rise of employment expectations. India regained its top position on this parameter, from second position in the April-June period, while profitability expectations also moved up.

“…all the programs and initiatives of the government as well as its focus on building relationships with all major economic powers has made India a bright spot in the global economy,” Harish said, adding the recent push for GST augurs well and should give a further boost to business optimism.

While India continues to be amongst the top five countries citing regulations and red tape as a constraint on growth, for the first time in the year, the country’s ranking on this parameter has dropped from second to fourth.

As per the survey, 59 per cent of the respondents have quoted this as an impediment in the growth prospects compared to 64 per cent in the previous quarter.

The report is prepared on the basis of a quarterly conducted global business survey of 2,500 businesses across 36 economies.

Meanwhile, in terms of revenue expectations, India slipped to third position from top in the previous quarter.

In spite of the downturn, India is much ahead of China where only 30 per cent respondents expect an increase in revenue, whereas in India, 85 per cent respondents have voted in favour of increasing revenue.

The survey further noted that 68 per cent of respondents have voted for an upsurge in selling prices. On this parameter too, China lags India with only 10 per cent of respondents expecting an upsurge in selling prices. The global average is 19 per cent.

Globally, business optimism stands at net 33 per cent, rising 1 percentage point from the previous quarter but falling 11 percentage points over the year.

“Political events such as Brexit and the US presidential election understandably rattle the global economy and test the resilience and elasticity of businesses worldwide. In general, businesses do not like uncertainty, and that is what is happening,” Grant Thornton Global CEO Ed Nusbaum said.

Source : Economic Times

Control over GST, hope to find political consensus soon, says Arun Jaitley : 05-11-2016


The debate over the authority as to who would conrol the Goods and Services Tax (GST) may finally see a closure soon, indicated by finance minister Arun Jaitley. Addressing the press the finance minister said that all the taxation officer have to administer taxes & there has to be clearly assigned guidelines.

Since GST is the single biggest reform in India’s indirect tax structure since the economy began to be opened up 25 years ago, it is a complex matter which the council do not want to rush through. Every step has to be carefully thought out.

Jaitley announced that there will be an informal meet of the ministers on Nov 20th. After this informal meet, the council will meet on Nov 24th and 25th for further discussion.

Can’t have two competing assessing authorities for same assessee; need clear guidelines on the complex & contentious issue: FM Jaitley

— ANI (@ANI_news) November 4, 2016

“Tax exemption limit under GST will be Rs 20 lakhs, further 4 drafts will be prepared for discussion. Once software based tax assessment will be in place it will be of great help to the taxpayers & the industry.The other suggestion is to divide base of assessees vertically without a threshold,” said the finance minister.

On the raging OROP debate the finance minister said that whhen such huge amounts are disbursed a few calculation mistakes have happened from the bank side, “Govt has allocated all money, there seems to be prob at bank level, this was a procedural problem that could be resolved at bank level,” iterated Arun Jaitley.

Source : Financial Express

Concern over securities transaction under GST : 05-11-2016


The proposed model of goods and services tax (GST), which has included ‘securities’ in the definition of goods, has raised serious concerns on whether transactions in securities would attract GST or would be subject to an additional tax.

According to tax experts, the government needs to improve the proposed definition and exclude securities from the definition of ‘goods’.

Currently, share transaction attracts securities transaction tax (STT) and Krishi Kalyan cess and Swachh Bharat cess, apart from exchange transaction charges, stamp duty, clearing member charges and Securities and Exchange Board of India turnover charges.

While the current model gives no clarity that securities would come under the ambit of the GST, the government’s intent might not be to introduce yet another tax over and above STT of 0.1 per cent on delivery-based trades.

“Technically, the government cannot tax transaction in securities as it falls under direct tax but if it does happen, the whole stock market will crash down. Meanwhile, if you see the range of proposed tax rate which is up to 28 per cent — it’s impossible to implement it on securities,” said Sumit Lunker, executive director (tax and regulatory services) at PwC.

He added that in the indirect tax legislation scenario, securities being considered as activity of sale and purchase and has never been subjected to any service tax and value added tax. So, one cannot treat securities at par with normal goods and services used in the normal course.

Another controversy that might rise is on central and state governments’ revenue. “Let us assume certain securities traded at the stock exchange in Mumbai. But, sellers and buyers are in different states while the servers are at various locations. Under such circumstance, which state will get revenue is an issue that needs to be addressed,” he added.

Other section of experts, though, agree with the current interpretation of law. “From state governments’ perspective, they would want direct access to taxpayers’ data as opposed to waiting for the Centre to perform assessments and verifications and trust the Centre to allocate funds to the state. If securities are taxed as goods, it allows the government to track its trading more efficiently under GST. Else, they would have to build a complex place of supply rules for capturing all the various activities around trade in securities,” said Amit Kumar Sarkar, partner, Grant Thornton India.

Source : PTI

Experts have started demystifying GST regime to tax officials from across India : 05-11-2016


After finalising the goods and services tax (GST) rates with the consensus of all the states, the central government has taken on another equally challenging task: to train nearly two million officers to handle the new tax mechanism.

The Centre has roped in senior tax experts from the industry and from the government mechanism to train about 1.8 million tax officers across the country in four phases in line with their ranks, and training sessions are being carried out in various cities since September, a senior tax official said.

Besides familiarising tax officials — who until now were only familiar with several indirect taxes — with the new framework, the government has to train them on the nitty-gritty of implementing GST. This, industry insiders said, could pose some problems.

“GST is not just a tax, it’s a new framework where everything would change,” said the tax official quoted earlier. “Officers, especially the junior ones, are used to dealing with current system. They have to be not just trained but also handheld for some time initially.”

Industry insiders said it is essential that tax officers, who would be responsible to not just understand but also implement GST, understand how the complex web of GST works.

“The new rules around GST would mean that tax officers have to not only learn the current regulations and taxpayer-friendly approach but also unlearn what they were practicing thus far to effectively implement GST and the adopt the concept of e-enabled tax administration,” said Sachin Menon, head of indirect tax at KPMG.

“Also in some way GST would reorganise the structure of the tax department so that GST is implemented smoothly and the efforts of state and central GST officers are not duplicated in assessment, audit and adjudication proceedings,” said Menon, a former IAS officer with the revenue department.

There are fears that there could be a turf war between the Centre and states over collection of GST although the government has already said they are trying to iron out such problems. “More clarity is also required as to which part of the GST would be handled by the tax officials in the state and what would be looked after by the Centre,”  a tax officer said.

Another area where tax officials will need training is technology. “Not just the data would be collected online, tax officers would have to learn absolutely new concepts,” said an industry expert.

India will start the new tax regime with four GST slabs — 5%, 12%, 18% and 28%. While this multi-layered system drew flak from some tax experts, it was mainly done to overcome the fear of inflation. Experts said that wherever GST  has been implemented, inflation has jumped for the first two to three years along with boost in growth.

Source : Economic Times

Notification No. 379/2016-RB 04-11-2016


FEM (TRANSFER OR ISSUE OF SECURITY BY A PERSON RESIDENT OUTSIDE INDIA) (SIXTEENTH AMENDMENT) REGULATIONS, 2016 – AMENDMENT IN SCHEDULE 1

NOTIFICATION NO.FEMA.379/2016-RB/GSR 1042(E)DATED 4-11-2016

In exercise of the powers conferred by clause (b) of sub-section (3) of section 6 and section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following amendments in the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 (Notification No. FEMA. 20/2000-RB dated 3rd May 2000), (hereinafter referred to as ‘the Principal Regulations’) namely:—

Short Title & Commencement

1. (i) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Sixteenth Amendment) Regulations, 2016.

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

Amendment of the Schedule 1

2. In the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, (Notification No. FEMA 20/2000-RB dated 3rd May 2000), in Schedule 1, in Annex B, for the existing entry F.10, the following shall be substituted, namely:

F.10. Pension 49% Automatic route
F.10.1 Other Conditions
(a) Foreign investment in the Pension Funds is allowed as per the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013.
(b) Foreign investment in Pension Funds will be subject to the condition that entities bringing in foreign investments as equity shares or preference shares or convertible debentures or warrants as per Section 24 of the PFRDA Act, 2013 shall obtain necessary registration from the PFRDA and comply with other requirements as per the PFRDA Act, 2013 and Rules and Regulations framed under it for so participating in Pension Fund Management activities in India.
(c) An Indian pension fund shall ensure that its ownership and control remains at all times in the hands of resident Indian entities as determined by the Government of India/PFRDA as per the rules/regulation issued by them from time to time. The meaning of ownership and control would be as defined in Regulation 14 of the Principal Regulations.

Four-tier GST structure of 5%, 12%, 18% and 28% finalised : 04-11-2016


The GST Council on Thursday decided to have four slabs under the GST regime with some changes from what union finance ministry proposed and a cess over the peak rate of 28% on luxury and sin goods for five years to compensate states for any revenue loss.

A four-tier GST rate structure would be 5%, 12%, 18%, 28%, finance minister Arun Jaitley told reporters after the meeting. The finance ministry had earlier proposed to have 6%, 12%,18% and 26%.

Most of the food items would attract zero% rate. As much as 50% of consumer price index would be zero rated.

5% rate would be on other necessary goods such as soaps and others needed for daily uses.

Earlier proposal of the finance ministry to have 26% would be hiked to 28% but many items that were to attract 26% earlier would be brought down to 18%. These would include some white goods.

Above 28% would be a cess to be imposed on luxury cars, aerated  drinks and tobacco.

Kerala finance minister Thomas Isaac instead had pitched for GST rate of 40% above 28% on these items.

The proposal of cess was made by the union finance ministry.

This cess, coupled with one on clearn energy, would yield the government Rs 50,000 crore, which is expected to be revenue loss for states in a year. However, cess would be reviewed every year on the basis of revenue loss  to  states.

The earlier proposal of levying 2% rate on gold was put on hold. The duty on gold would be decided later after assessing impact of these GST rates.

The council  would now take up the issue of administrative control on assessees on Friday.

Source : Business Standard

Provisional anti-dumping duty imposed on certain steel products : 04-11-2016


he Finance Ministry has imposed provisional anti-dumping duty on import of hot rolled steel products (bars and rods) from China. This anti-dumping duty will be valid for a period of six months.

Based on the recommendation of Designated Authority in Commerce Ministry, the Revenue Department has pegged the anti-dumping duty as difference between “landed value” and $ 499 per tonne in the case of exports by Minmetals Yingkou Medium Plate Co Ltd, China.

For all other producers and exporters of bars and rods (hot rolled) from China, the anti-dumping duty is difference between “landed value” and $538 per tonne.

Steel Authority of India Ltd, Rashtriya Ispat Nigam Ltd, Usha Martin Ltd and JSW Steel had filed a petition seeking anti-dumping levy on alleged dumped imports of “wire rod of alloy or non-alloy steel” originating in or exported from China.

The application was also supported by two other domestic producers — Tata Steel Ltd and Jindal Steel and Power Ltd.

Wire rod of alloy or non-alloy steel are used in many applications and sectors such as automotive components, welding electrodes, fasteners including nuts and bolts, nails, railway sleepers, general engineering and binding wires for construction industry and armoured cables etc.

Source : PTI

Major consumer durables to be taxed at 28% : 04-11-2016


Majority of the items from the consumer durables sector are likely to be taxed at 28 per cent under the final goods and services tax (GST) rates that were announced on Thursday. According to industry experts, some of the items – belonging to the lower price bands – might be taxed at 18 per cent, considering their mass nature.

While Finance Minister Arun Jaitley on Thursday announced the tax slabs for all products and services in the country, he did not specify the items under each of the four tax slabs – five, 12, 18 and 28 per cent. Currently, majority of the while goods are taxed at 26-31 per cent rate, depending on their nature and usage. Products such as laptops and personal computers will fall under similar tax slab, which might increase their prices marginally, if manufacturers decide to pass on the additional tax burden.

Mobile handsets assembled in India, especially smartphones, are taxed much lower at present. Majority of the large vendors have opened facilities here to avail various tax sops provided by the central government through the modified special incentive package scheme and by local authorities. The tax rates for such devices could be kept below 18 per cent.

“This is definitely a good sign and a positive development for the consumer durables sector. Lower tax will also add to the growth of the overall industry and the will be passed on to the consumers. These are early phases, but GST was long awaited and the industry would keenly observe the future developments,” said Kanwal Jeet Jawa, CEO and managing director of Daikin India.

Sachin Menon, partner and head of indirect tax at KPMG in India, said: “The rate slabs look reasonable. But, the proposal to levy cess over and above GST will distort the very purpose of introducing GST. It’ll lead to tax cascading in the absence of set-off mechanism unless the cess is levied only at last point of sale.”

According to experts, the biggest benefit that the GST will bring in is reduction in complications related to taxation. The consumer durables sector is considered inventory-heavy and inter-state transportation of goods lead to complications in taxation.

The Rs 1 lakh crore consumer durables sector in India is growing at 15 per cent and is expected to cross Rs 2 lakh crore in revenue by 2020. Items such as smaller television sets that do not fall under the premium category are effectively taxed at 21-22 per cent at present; these are expected to be incorporated in the 18 per cent tax slab.

“It is good that the Centre and states have agreed on the tax structure for the GST regime. It is expected that the consumer goods and consumer electronics should get favourably impacted under the GST regime. However, it will depend on the exact classification of goods under different tax rates. So, the next critical and the most crucial step is the grouping of goods under the GSTrate structure, which will determine the impact on consumer goods and electronics,” said Anita Rastogi, partner (indirect tax) at PwC.

Source : Economic times

15 – 03-11-2016


EXTERNAL COMMERCIAL BORROWINGS (ECB) – CLARIFICATIONS ON HEDGING

A.P. (DIR SERIES 2016-17) CIRCULAR NO.15DATED 7-11-2016

Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to paragraphs 2.i and 3 of A.P. (DIR Series) Circular No.56 dated March 30, 2016 and paragraph no. 2.5 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, on the provisions of hedging in the ECB framework.

2. With a view to provide clarity on the aforesaid directions and bring uniformity in hedging practices in the market so as to effectively address currency risk at a systemic level, the following clarifications are issued:

i. Coverage: Wherever hedging has been mandated by the RBI, the ECB borrower will be required to cover principal as well as coupon through financial hedges. The financial hedge for all exposures on account of ECB should start from the time of each such exposure (i.e. the day liability is created in the books of the borrower).
ii. Tenor and rollover: A minimum tenor of one year of financial hedge would be required with periodic rollover duly ensuring that the exposure on account of ECB is not unhedged at any point during the currency of ECB.
iii. Natural Hedge: Natural hedge, in lieu of financial hedge, will be considered only to the extent of offsetting projected cash flows/revenues in matching currency, net of all other projected outflows. For this purpose, an ECB may be considered naturally hedged if the offsetting exposure has the maturity/cash flow within the same accounting year. Any other arrangements/structures, where revenues are indexed to foreign currency will not be considered as natural hedge.

3. The designated AD Category-I bank will have the responsibility of verifying that 100 per cent hedging requirement is complied with. All other aspects of the ECB policy shall remain unchanged.

4. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers.

5. Relevant paragraph of the Master Direction No. 5 dated January 01, 2016 is being updated to reflect the changes.

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/approvals, if any, required under any other law.

14 – 03-11-2016


ISSUANCE OF RUPEE DENOMINATED BONDS OVERSEAS BY INDIAN BANKS

A.P. (DIR SERIES 2016-17) CIRCULAR NO.14DATED 3-11-2016

Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to the measures announced by the Reserve Bank on August 25, 2016 for development of Fixed Income and Currency Markets in India which, inter alia, proposed to permit banks to issue Rupee Denominated Bonds overseas for their capital requirements and for financing infrastructure and affordable housing and Circular DBR.BP.BC.No.28/21.06.001/2016-17 dated November 3, 2016.

2. In line with the announcement made, with a view to developing the market of Rupee Denominated Bonds overseas, as also providing an additional avenue for Indian banks to raise capital/ long term funds, it has been decided, after consultation with the Government, to allow Indian banks, within the limit set for foreign investment in corporate bonds (INR 244323 crore at present), to issue:

i. Perpetual Debt Instruments (PDI) qualifying for inclusion as Additional Tier 1 capital and debt capital instruments qualifying for inclusion as Tier 2 capital, by way of Rupee Denominated Bonds overseas; and
ii. Long term Rupee Denominated Bonds overseas for financing infrastructure and affordable housing.

3. Provisions contained in A.P. (DIR Series) circular No. 17 dated September 29, 2015 and A.P. (DIR Series) circular No.60 dated April 13, 2016 on Issuance of Rupee Denominated Bonds Overseas read with paragraph No. 3.3.2 and 3.3.3 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, which allow Indian banks to participate in the space of Rupee Denominated Bonds Overseas only as arrangers and underwriters but not as issuers, accordingly, stand modified for the limited purpose of treating Indian banks as eligible borrowers under this route. The instruments (PDI and debt capital instruments) and long terms bonds, as mentioned in paragraph 2 above, issued by Indian banks by way of Rupee Denominated Bonds overseas should, however, conform to the provisions contained in the Master Circular DBR.No.BP.BC.1/21.06.201/2015-16 dated July 01, 2015 on ‘Basel III Capital Regulations’ and Circular DBOD.BP.BC.No. 25/08.12.014/2014-15 dated July 15, 2014 on ‘Guidelines on Issue of Long Term Bonds by Banks – Financing of Infrastructure and Affordable Housing’ issued by the Reserve Bank and as amended from time to time. Further, underwriting by overseas branches/subsidiaries of Indian banks for such issuances will not be allowed.

4. All other provisions of aforesaid circulars dated September 29, 2015 and April 13, 2016 remain unchanged.

5. The changes/ revised instructions in respect of issuance of Rupee denominated bonds will be applicable from the date of issuance of this circular.

6. Relevant paragraphs of the Master Direction No.5 dated January 1, 2016 are being updated to reflect the changes.

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

 

How to get GST right: Not factoring in low rates will lock India into high rates : 03-11-2016


Finance minister Arun Jaitley makes a strong point when he says those opposing the cess he is proposing to compensate states in the GST structure haven’t understood this is actually better than a tax. For every R100 levied as a GST tax, the Centre will get only R50, and 42% of this has to go to the states, leaving the Centre with only R29—so, to compensate the states by R50,000 crore, it will need to levy a tax of R172,000 crore! Put that way, there can be no doubt the cess is better than the tax. Of course if, as is expected, half the cess is going to come from the one on energy, this adds a considerable cost to the system since energy is an input and the cess cannot be adjusted as a credit.

Jaitley also defends the multiple GST rates by arguing that if there were a lesser number of rates, many items that are currently taxed at around 5-6%—most of them are exempt in the central list but face a state VAT right now—will see a big jump in prices if the tax is fixed at, say, 12%. Former finance secretary Vijay Kelkar has, along with Satya Poddar and V Bhaskar in a column (GST: Make haste slowly, October 19, Mint) argued the GST rate can be higher on certain items—that is, the exemptions can be reduced—and certain sections of the population can be compensated for the higher GST payout on their consumption basket through a direct benefit transfer (DBT), but targeting is not that easy.

Also, while it may be desirable to have a single-rate GST from the point of it being simpler, it is important to keep in mind that the political economy is such that the best solution doesn’t usually win. In such a case, then, the reformers’ job is to try and push for the least-bad solution. And this is where, it appears, the finance minister is not being ambitious enough and not taking into account the benefits of the GST.

What we need to focus on is the fact that, based on the proposal given to the states by the finance ministry, the revenue-neutral-rate of GST is working out to be around 17-18%, which is considerably higher than the 15-15.5% that the chief economic advisor (CEA) recommended as being non-inflationary.

While the revenue department of the finance ministry argues that this is also because the CEA’s calculations were based on taxes collected in an earlier year—the new tax proposals are based on the actual taxes of R8.8 lakh crore collected by the Centre and the states in FY16—this is neither here nor there; by this logic, tax rates will keep going up each year in order to catch up with the amount of tax needed/collected.

What makes tax collections go up even when the rate is fixed is the increase in nominal GDP itself and compliance—the amount of the potential tax base that actually pays taxes. While India’s compliance rates across the GST chain are estimated to be around 35-40%, with the biggest evasion taking place in service taxation, it is obvious that a higher compliance will come with the complete goods/service value chain being captured and lakhs of tax invoices being matched in real time by powerful and smart computer systems—based on the taxpayer number, for instance, the computer will track any good, and the tax paid on it, from the first producer to the last, so if the chain breaks at any point, the taxman will know whom the good has been sold to and will be in a position to identify where the tax evasion is taking place.

But any system, no matter how good, can be compromised, particularly if the entire chain operates in cash and that is why a lower rate is a good idea—as in other areas of taxation, this too will encourage compliance—since getting the system to stabilise will take time as every trader/producer will have to input item codes for thousands of items.

Moreover, in the current list circulated, more than a fourth of items are to be taxed at 26% and these include many items of everyday use. While the best would be to abolish the 26% slab and move all these goods to an 18 or 20% slab, if the rate has to be retained for revenue reasons, the best bet would be to drastically prune the list in the 26% slab to just a few items.

The critical issue here, again, is one of compliance. The CEA’s analysis had concluded that increased compliance could fetch additional revenues of R4.3 lakh crore or around half the amount collected in FY16. It is not clear what level of compliance needs to be achieved to get to this figure, and how long it will take to get to the required levels of compliance, but it is obvious the results of compliance can be a game-changer.

There is a related problem here which finance minister Jaitley needs to keep in mind. If not in the first year, certainly everyone expects compliance to go up after 3-4 years. If so, what that means is the Centre and the states will see a huge jump in their tax collections—since the chances of the political class saying it will cut tax rates as it needs far less taxes are remote, keeping a high rate now means India will get locked into a perpetually high tax regime; if the VAT experience is anything to go by, once the political class found the system was working well, it hiked VAT rates instead of reducing them. And while it is possible for the finance minister to say the GST Council can lower rates once there is increased compliance, doing so will be difficult since the structure needs a real champion to push for lower rates and, unlike today where states are looking at a step-up in revenues, there will be no carrot to dangle at them later.

But, an argument will be made, the efficiency gains will be in the long run while the tax compensation will have to be made every quarter—how is the mismatch to be handled? This is where the new FRBM committee under NK Singh comes in. If a path-breaking taxation is to be introduced and can be compromised by putting in place a high rate-structure just to meet temporary shortfalls, surely the committee can be persuaded to relax the FRBM by a certain amount for 3-4 years, to allow for this—if this is done, Jaitley’s point about needing to compare the R50,000 crore cess with a potential R172,000 crore tax becomes moot since the FRBM will allow the compensation to be paid for through a higher deficit. Just as the promise of a 100% compensation was meant to assuage the fear of states and get them to agree on GST, relaxing the FRBM should allow the Centre to take a bolder approach to GST. If the sole purpose behind the proposed GST is to levy tax rates roughly similar to those in place today—and that is what it looks like right now—you have to ask yourself whether it is even worth it.

Source : Financial Express

Tax tribunal issues order against a law firm for forum shopping : 03-11-2016


In an unprecedented order, a tax tribunal has barred cases and appeals filed by a law firm from being heard by any bench headed by one of its judicial members.

The order comes in the backdrop of a recent controversy over the law firm getting a favourable order from the bench after an adverse ruling from the Supreme Court.

No cases or appeals represented by Lakshmikumaran & Sridharan should be posted before any bench presided over by Archana Wadhwa, the registrar of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) said in a circular dated October 21on behalf of tribunal president Justice (Dr) Satish Chandra.

A bench headed by Wadhwa had granted relief to Dewsoft Overseas Pvt Ltd., represented by Lakshmikumaran & Sridharan, in August after an adverse ruling by the Supreme Court, which asked the company to deposit about Rs 14 crore towards payment of a tax demand.

The tribunal had ruled that the tax demand and penalty were not justifiable – in conflict with the Supreme Court’s order. ETfirst reported on September 27 that Dewsoft obtained the favourable ruling from CESTAT in what the Department of Revenue alleged was an “abuse of the process of law.”

Although advocates from the same firm appeared before both the apex court and the tribunal, the CESTAT wasn’t informed that the Supreme Court was seized of the matter and neither did the lawyers withdraw the application filed with the tribunal.

Once the civil appeal was admitted by the Supreme Court, the tribunal had no jurisdiction to entertain an application from the company, the revenue department said.

The tribunal’s registry, which was sent a certified copy of the apex court’s order on July 19, failed to place it before the bench, the revenue department contended.

The service tax department had slapped a Rs 10.59 crore demand on New Delhi-based Dewsoft, a software design and development company, back in 2009. A CESTAT bench confirmed the demand in October 2015, with an equivalent amount as penalty.

In April 2016, the company filed an application against this order for Rectification of Mistake before CESTAT. The following month, Dewsoft also filed a civil appeal before the Supreme Court, contesting the CESTAT order of October 2015.

Lakshmikumaran & Sridharan denied allegations of forum shopping, a practice used to get cases heard in a court that may grant a favourable judgement.

However, one of the law firm’s advocates, BL Narasimhan, apologised to CESTAT.

Source : PTI

Sebi grants in-principle approval to BSE for global exchange : 03-11-2016


Leading bourse BSE has received in-principle approval from market regulator Sebi to set up international exchange and clearing corporations at GIFT city. BSE plans to operationalise the international exchange by early next year, the bourse said in a statement today. Mock trading for the same commenced from October 3.

The BSE board at its meeting held on May 5, 2016, had approved creation of two wholly-owned subsidiary companies for the purpose of setting up the first international exchange and clearing corporations. BSE had applied to Sebi for in-principle approval, which it received today, the exchange said.

In January 2015, it had signed an MoU with GIFT SEZ Ltd to set up the two entities at the GIFT city, India’s first International Financial Services Centre (IFSC). BSE in August had said its international stock exchange would provide a platform to trade on equity, commodity and currency and interest rate derivatives for Indian and foreign investors.

Source : Economic Times

No.37/2016 Dated: 2-11-2016


Chapter VI-A deduction on enhanced profits – Circular

 

CIRCULAR NO. 37/2016

F.No.279/Misc./140/2015/ITJ

GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES

New Delhi, Dated 2nd November 2016

Subject: Chapter VI-A deduction on enhanced profits – Reg.

Chapter VI-A of the Income-tax Act, 1961 (“the Act”), provides for deductions in respect of certain incomes. In computing the profits and gains of a business activity, the Assessing Officer may make certain disallowances, such as disallowances pertaining to sections 32, 40(a)(ia), 40A(3), 43B etc., of the Act. At times disallowance out of specific expenditure claimed may also be made. The effect of such disallowances is an increase in the profits. Doubts have been raised as to whether such higher profits would also result in claim for a higher profit-linked deduction under Chapter VI-A.

2. The issue of the claim of higher deduction on the enhanced profits has been a contentious one. However, the courts have generally held that if the expenditure disallowed is related to the business activity against which theChapter VI-A deduction has been claimed, the deduction needs to be allowed on the enhanced profits. Some illustrative cases upholding this view are as follows:

(i) If an expenditure incurred by assessee for the purpose of developing a housing project was not allowable on account of non-deduction of TDS under law, such disallowance would ultimately increase assessee’s profits from business of developing housing project. The ultimate profits of assessee after adjusting disallowance under section 40(a)(ia) of the Act would qualify for deduction under section 80-IB of the Act. This view was taken by the courts in the following cases:

  • Income-tax Officer – Ward 5(1) vs. Keval Construction, Tax Appeal No. 443 of 2012, December 10, 2012, Gujarat High Court - NJRS-2012-LL-1210-45.
  • Commissioner of Income-tax-IV, Nagpur vs. Sunil Vishwambharnath Tiwari, IT Appeal No. 2 of 2011, September 11, 2015, Bombay High Court - NJRS-2015-LL-0911-22

(ii) If deduction under section 40A(3) of the Act is not allowed, the same would have to be added to the profits of the undertaking on which the assessee would be entitled for deduction under section 80-IB of theAct. This view was taken by the court in the following case:

  • Principal CIT, Kanpur vs. Surya Merchants Ltd., I.T. Appeal No. 248 of 2015, May 03, 2016 Allahabad High Court. – NJRS-2016-LL-0503-77

The above views have attained finality as these judgments of the High Courts of Bombay, Gujarat and Allahabad have been accepted by the Department.

3. In view of the above, the Board has accepted the settled position that the disallowances made under sections 32,40(a)(ia), 40A(3), 43B, etc. of the Act and other specific disallowances, related to the business activity against which the Chapter VI-A deduction has been claimed, result in enhancement of the profits of the eligible business, and that deduction under Chapter VI-A is admissible on the profits so enhanced by the disallowance.

4. Accordingly, henceforth, appeals may not be filed on this ground by officers of the Department and appeals already filed in Courts/ Tribunals may be withdrawn/ not pressed upon. The above may be brought to the notice of all concerned.

(K Vamsi Krishna)

ACIT (OSD)(ITJ),

CBDT New Delhi

Order [F.NO.10/03/2016-NCLT], Dated 02-11-2016


SECTION 408 OF THE COMPANIES ACT, 2013 – NATIONAL COMPANY LAW TRIBUNAL – CONSTITUTION OF – NCLT, SPECIAL PRINCIPAL BENCH AT NEW DELHI ON 3-11-2016

ORDER [F.NO.10/03/2016-NCLT], DATED 2-11-2016

There shall be a Special Principal Bench on 3rd November 2016 to attend the matters listed before Hon’ble President Chief Justice Shri. M.M. Kumar and Shri S.K. Mohapatra, Member (Technical). The Special Principal Bench shall comprise of:

NCLT, Special Principal Bench at New Delhi

1. Shri R. Varadharajan, Member (Judicial)
2. Shri S. K. Mohapatra, Member (Technical)

The Special Bench shall hear all the matters as if, it is a Principal Bench.

After taking up matters listed before the Special Principal Bench Shri R. Varadharajan, Member (Judicial) shall take up the matters listed before their own Bench i.e. New Delhi, Division Bench. This is in partial modification of Order of even number dated 5-7-2016 for 3-11-2016 only.

 

Real Estate Act: Centre notifies rules for five UTs : 02-11-2016


The Ministry of Housing and Urban Poverty Alleviation has notified the Real Estate (Regulation and Development) (General) Rules, 2016, for the five Union Territories without Legislature — Andaman & Nicobar Islands, Dadra & Nagar Haveli, Daman & Diu, Lakshadweep and Chandigarh, an official statement said on Monday.

Registration of projects

For registration of projects with the authorities by builders, the requirement of disclosing Income Tax returns, as proposed earlier, has been withdrawn in the final Rules – keeping in view the confidentiality attached with them and as pointed out by legal experts and promoters, the statement said.

The Centre has incorporated suggestions received from consumer associations and real estate bodies after placing the draft rules in public domain three months back.

Registration fees

The fee for registration of projects and real estate agents with regulatory authorities has been reduced by half, based on suggestions from promoters. For registration of projects, the fee has been reduced to ₹5 per square metre, for up to 1,000 sq m area and ₹10 per sq m beyond this limit – subject to a maximum of ₹5 lakh per project.

For commercial and mixed development projects, it will be ₹10 and ₹15 per sq. m subject to a maximum of ₹7 lakh. For commercial projects, it will be ₹20 and ₹25 subject to a cap of ₹10 lakh per project. For plotted development, it is ₹5 per sq. m with a ceiling of ₹2 lakh.

A cap has been placed on the total amount of registration fee based on the suggestion of real estate bodies, the rules stated.

Fee for renewing registration of projects with the regulatory authorities would be half of the registration fees. For registration of real estate agents, the fee now prescribed is ₹10,000 for individuals and ₹50,000 for other entities, as against ₹25,000 and ₹2,50,000 proposed in the draft rules. Similarly, fee for renewal of registration of projects and agents has also been reduced to ₹5,000 and ₹25,000 respectively.

Developers will be required to refund or pay compensation to allottees with an interest rate of SBI’s highest Marginal Cost of Lending Rate, plus 2 per cent.

Source : The Hindu

Hike GST rate by 1-2%, do not levy cess: Assocham to FM : 02-11-2016


Industry chamber Assocham has made a pitch to Finance Minister Arun Jaitley not to levy cess, but hike GST rate by 1-2 per cent to garner additional resources to compensate states for any revenue loss on rollout of the new regime from April next year.

At the GST Council meeting last month, the Centre had proposed a four-tier GST rate structure of 8 per cent, 12 per cent, 18 per cent and a peak rate of 26 per cent, which will mostly apply to FMCG and consumer durables.  Besides, a cess is also likely to be levied on demerit or sin goods and polluting items.

In a letter to Jaitley, Assocham Secretary General D S Rawat said that even if multiple rates are accepted by the GST Council, additional cess should not be made applicable as this would lead to distortion and cascading of taxes.

“The idea of levying cess in order to make a corpus for compensation to states does not seem to be feasible. The additional revenue required for such compensation can be collected by increasing the tax rates (by 1-2 per cent) instead of levying a cess,” he said.

The suggestion, however, is at variance with Jaitley’s contention, who had favoured levy of cess on tobacco and luxury products to compensate states, saying the cost of funding that through an additional tax would be “exorbitantly high and almost unbearable”.

Assocham has also suggested that essential commodities of mass consumption like fruits, vegetables, grains etc should be taxed at zero rate. Processed food products for mass consumption like dairy products, rice, edible oil, biscuits should attract 6 per cent duty.
It further suggested that mobile phones, computers, fruit juices, pet foods be taxed at 12 per cent and other items at 18 per cent. Luxury cars, tobacco and pan masala should be taxed at 26 per cent, it said.

Under the proposed 4-slab structure, the items which are currently taxed between 3-9 per cent will fall in the 6 per cent bracket; those in 9-15 per cent range will come under 12 per cent rate.

Those products which are currently taxed between 15-21 per cent will attract 18 per cent levy while those above 21 per cent will be taxed at the peak rate of 26 per cent.

The GST Council, which has Union Finance Minister and his state counterparts, will decide on tax rates at its meeting on November 3-4 here.

Source : Economic Times

Order [F.NO.10/03/2016-NCLT], Dated 01-11-2016


SECTION 408 OF THE COMPANIES ACT, 2013 – NATIONAL COMPANY LAW TRIBUNAL – CONSTITUTION OF – NCLT, SPECIAL PRINCIPAL BENCH AT NEW DELHI ON 2-11-2016

ORDER [F.NO.10/03/2016-NCLT], DATED 1-11-2016

There shall be a Special Principal Bench on 2nd November 2016 to attend the matters listed before Hon’ble President Chief Justice Shri M.M. Kumar and Shri Santanu Kumar Mohapatra, Member (Technical). The Special Principal Bench shall comprise of:

NCLT, Special Principal Bench at New Delhi
1. Shri R. Varadharajan, Member (Judicial)
2. Shri Santanu Kumar Mohapatra, Member (Technical)

The Special Bench shall hear all the matters as if, it is a Principal Bench.

After taking up matters listed before the Special Principal Bench Shri R. Vardharajan, Member (Judicial) shall take up the matters listed before their own Bench i.e. New Delhi, Division Bench. This is in partial modification of Order of even number dated 5-7-2016 for 2.11.2016 only.

 

GST implications on IT/ITes/BPO sectors – 01-11-2016


Taxindiaonlinelogo-jpg                     

NOVEMBER 01, 2016 

By S Sivakumar, LL.B., FCA, FCS, ACSI, MBA, Advocate

THE following are the GST related issues that would affect the IT/ITS/ITeS sector, as per my understanding of the model GST law.

1. By and large, this sector is subject only to the levy of service tax, which is currently at 15%, inclusive of all cesses. Also, a significant portion of the companies in this sector are engaged in export of services and consequently pay, no or negligible service tax. Except for software product companies which are engaged in domestic sales through the licensing mode, no VAT is paid by these companies as no VAT is payable on services.

2. The biggest challenge for these companies who are primarily into exports is to obtain refund of the unutilized CENVAT credit of the service tax paid on input services. Currently, these companies file service tax refunds based on the place where their principal office is located, in terms of the centralized registration. However, under the GST regime, these companies would be required to take separate registrations under the Central GST law, in respect of each of the States where they are operating, necessitating filing of separate refund claims in each of these States. This could pose enormous problems for IT exporters.

3. Next… with the GST rate likely to be fixed at around 18%, as per the latest indications, the overall quantum of the refund to be obtained could go up significantly. With the service tax refunds not flowing to the IT exporters currently, it remains to be seen as to how this critical aspect would get handled. Under the model GST law read with the draft refund rules, there is a provision for automatic refund of 80% of the service tax refund claimed on a provisional basis and there is also a time limit of three months for refund to be granted and if refund is not granted within the said period of three months from the date of filing of the refund claim, there is also a provision for payment of interest. It is for the first time that a time frame for processing of refund claims is being brought in as a statutory provision. It remains to be seen as to how these provisions are handled at the ground level.

4. It is not very clear as to whether, only the Central Government would administratively manage both the central and the state GST laws, for companies with annual business turnover of over Rs.1.5crores. Though the Central Government is pushing to exclude the States from exercising dual administrative control, the States are not agreeing. If both the Central Government and the States are allowed to administratively handle the respective laws, viz. CGST law and SGST law, in which case, IT exporters would be required to file refund claims in respect of CGST and SGST laws, with the Central and the State Governments, respectively. This could be a major dampener for IT exporters.

5. One major positive aspect of the GST regime would be the availability of CENVAT credit on inputs. Currently, IT exporters being service providers, are not allowed to avail of input tax credit of the VAT paid on inputs, as IT players who are rendering services are not treated as ‘dealers’ within the meaning of the VAT law. Under the GST regime, this would change, and IT players, as suppliers of services, would be entitled to input tax credit on all eligible goods and services. Given the huge investment that is made by IT players in computers, software packages, furniture, etc., the benefit of input tax credit in respect of central excise duties and VAT paid on these inputs could be significant.

6. Yet another benefit that would accrue to the IT sector is the abolition of levy of multiple taxes. Currently, software product companies pay both the service tax (15%) and VAT (5.5% in Karnataka) on license fees. This would vanish under the GST regime. Moreover, for software maintenance activities, IT companies treat these as works contracts and charge service tax on 70% of the receipts and VAT on 70% of the receipts, resulting in taxation on more than 100% of the transaction value. This situation would cease to exist under the GST regime, to the overall benefit of the Industry.

7. Under the GST regime, the input tax credit scheme would be broad based, as compared to the current CENVAT credit scheme and this would augur well for the IT sector. Credit would be available on most inputs and input services that are used for business purposes, except for a small list of negative services which are found also in the current service tax regime.

8. Currently, refund of the unutilized CENVAT credit is granted to IT exporters, even for the period prior to registration. However, under the GST regime, registration is a mandatory pre-requisite for availment of and claiming of refund of unutilized input credit.

9. As per the latest indications, the small-scale exemption under the GST regime is likely to be fixed at Rs. 20 lakhs, as against the current exemption limit of Rs. 10 lakhs under the service tax law. Small IT companies would benefit from this provision.

10. Under the GST regime, the time limit for filing of refund claims is proposed to be fixed at 2 years from the relevant date, as against the time limit of one year under the existing service tax law in terms of Section 11B of the Central Excise Act. This would augur well for IT exporters. Input tax credit, under the GST regime, has to be availed within 12 months from the date of the invoice of vendors/service providers.

11. At the procedural level, IT and services companies would be required to file all the requisite returns under the three Acts, viz Central GST Act, State GST Act and Integrated Goods and Services Act. From a procedural perspective, these companies would be required to file details of all claims towards input tax credit, etc. entailing some amount of effort and would need to follow the requirements related to availing of input tax credit.

12. The Central Board of Excise and Customs (‘CBEC’) has exhorted the Service Tax Department to expedite the processing of the refund claims. It remains to be seen as to whether this directive would have any practical impact. Unutilized CENVAT credit of service tax paid on input services can be carried forwarded under the GST regime and IT exporters whose refund claims are pending to be adjudicated or whose claims have been rejected, wholly or partially, would need to take expert help to take the benefit of the transitional provisions.

13. The concept of Input Service Distributor would continue to exist under the GST regime and IT companies can take advantage of this provision to distribute credit amongst their development centers, to derive optimal advantage.

14. Under the GST regime, exemptions related to the SEZ scheme are proposed to be converted into refund schemes. Consequently, IT companies that are currently operating as SEZ units would be required to pay service tax to their lessors/SEZ Developers/landlords, as against the exemption from service tax that is currently available in terms of service tax Notification No. 12/2013-ST. Consequently, these SEZ companies would be required to file refund claims in respect of input services such as rent, maintenance services, etc.

15. The quarterly refund scheme is likely to be continued under the GST regime. It, of course, remains to be seen if IT and services exporters would be required to file separate refund claims with the Central and State Governments.

16. As per latest indications, the GST council has decided to have four GST slab rates, viz. 6%, 12%, 18% and 26% and above. Services rendered by IT companies are very likely to come under the 18% slab. Given this, as aforesaid, the overall quantum of refunds under the GST regime is likely to go up significantly, for this sector.

17. From a systems perspective, IT and other companies, like any other company, would need to tweak their internal software systems to ensure that they trace input tax credit separately under the three Acts/streams, viz. central GST, state GST and IGST. Most input invoices would have multiple taxes under the GST regime and tracking these invoices and availing input tax credit would require ample adjustment of the internal systems.

Before concluding…

As is well known, the IT and allied sectors are the largest exporters of services from India and being export centric would be concerned about the manner the refunds are administered under the GST regime. While it is good to see some provisions in the draft GST refund rules relating to provisional refund of 80% of the claim, time limit of 3 months for disposal of the refund claim, etc., it would remain to be seen as to how these provisions are ultimately administered by the Department.

IT and services exporters would be well advised to meticulously plan their procurements, etc. over the next few months and,if need be, delay major purchases of goods to take advantage of the input tax credit that would be available under the GST regime.

Government has strategic control;no threat to tax data: GST Network Chairman : 29-10-2016


Debunking criticism over equity structure of the company building world’s biggest tax system, GST-Network Chairman Navin Kumar today said all measures have been taken to protect sensitive tax information and the government will have strategic control over it.

By keeping Goods and Services Tax Network (GSTN) private, the company has been equipped to take decisions quickly as an agile and nimble organisation not bound by red tape that can retain talent by paying market salaries, he told PTI.

Kumar insisted that enough fire-walls and 8-levels of security is being built to keep the data safe.

BJP leader Subramanian Swamy has questioned the structure of the entity created under the previous UPA regime saying how a private firm can be allowed access to “sensitive” tax information without security clearance.

The Government of India has 24.5 per cent stake in GSTN and the state government an equal share. The remaining 51 per cent is with private financial institutions.

“But measures for strategic control by the government have been built-in,” he said adding the GSTN board has 14 directors, half of them are appointed by the government.

The Centre and State nominate three directors each and the Chairman is jointly named by the two.

“So government has 49 per cent equity and 50 per cent of the directors. The private equity holders who hold 51 per cent, can nominate only three directors. And then there are three are indepedent directors and one is a CEO.

“The rules of business specify that no meeting of the board can take place unless 50 per cent of the directors are from government. Which basically means that no decision can be taken against the wishes of the government. So this is the strategic control that they exercise,” Kumar said.

While GSTN in day-to-day functioning works like a private company, takes quick decisions and is not bound by the PSU rules, there are certain critical decisions which can be taken only through special resolution in the general meeting, where 75 per cent of the votes are to be polled for any decision.

“So in a nutshell, it is a non-government company over which government has a strategic control,” he said.

Asked about concerns over data security, he said this is not the first time that the government is implementing an IT project through a private company.

“There are many large IT projects already in operation. Take the case of Income Tax. Who is doing the Income Tax project– it is Infosys and TCS. What are Infosys and TCS, they are private companies. Go to any VAT projects in the states, most of them are being done by either TCS or Wipro…

“So is the I-T data sensitive or not? That is with these private companies. Now look at GSTN. GSTN is structured as a private company over which government has a strategic control. No decision can be taken without its consent… So what is the concern? If data can rest with TCS or Wipro without any problem, why is a question being raised about GSTN handling such data. Because here government has a presence on our board. So there is no problem,” Kumar said.

Source : Business Standard

Implementation of GST will help trade, industry: Official : 29-10-2016


Implementation of GST will help trade and industry and there is no need to have any room of concern about its implementation, a top official said here today. “GST is indeed a good tax,” Pullela Nageswara Rao, Chief Commissioner of Central Excise, Customs and Service Tax, Kerala, said.

He said state will collect a part of it and the Centre will collect one part.

“Nothing that would harm or hurt you will happen.

This will definitely help the growth of trade and industry,” Rao said.

He made this observation during his inaugural address at the one day awareness workshop on ‘GST and its Implications’ organised by Federation of Indian Chambers of Commerce and Industry (FICCI) along with KPMG in Kochi. “With the implementation of GST, Central Excise and all such organisations will change our role from enforcement agency to facilitation agency. Let’s slowly break the old laws and go for the new ones,” a FICCI release quoting Rao said here. The GST, which has already been approved by the President of India, is scheduled to be implemented across the country from April 1, 2017.

It replaces all indirect taxes levied on goods and services by the Centre and States, making for a single, easier taxation system.

There are 60,000 Central Excise and Customs and state government officers who will be trained for the switch to GST, a tax system practised in 160 countries.

S Sivankutty, Deputy Commissioner (Intelligence), Commercial Taxes, Central Zone, Ernakulam in his introductory address commented that in the globalised situation we have to capture the market.

Described as a system that will create transparency and credibility, the GST is expected to bring in numerous changes.

The GST single taxation system will increase ease of doing business, pointed out Deepak L Aswani, Co-Chair, FICCI Kerala State Council.

“This will be a significant step with the benefits passed on to the consumer,” he said.

Sachin Menon, FICCI Co-Chair- GST, Partner and Head, Indirect Tax, KPMG in India, said, Kerala being one of the highest consuming states, it will be one of the largest beneficiaries of introduction of GST. “This will improve the finances of the state Significantly. Kerala is seen as one of the most vocal states in the GST council today and by taking the lead in spreading awareness of GST, it reiterates its commitment to implement GST,” he said.

Source : Economic Times

India, New Zealand agree to amend tax treaty, boost trade : 28-10-2016


India and New Zealand today decided to amend the bilateral tax treaty and expressed commitment to work towards a comprehensive free trade agreement with a view to boost economic ties.

The two sides also vowed to press for successful negotiations of the Regional Comprehensive Economic Partnership (RCEP), said the joint statement issued after the meeting of Prime Minister Narendra Modi with New Zealand counterpart John Key.

The two-way trade between the countries stood at $1.8 billion, showing an increase of 42 per cent in the past five years.

“The Prime Ministers expressed their wish for greater bilateral trade and investment,” said the joint statement.

The two countries also agreed to amend “the bilateral Double Taxation Agreement to bring its tax cooperation provisions into line with international best-practice”.

India has been revising double taxation avoidance pacts with countries with a view to check tax evasion and bring them in line with OECD norms.

As regards the Free Trade Agreement (FTA), the statement said both sides committed to work towards a “high-quality, comprehensive and balanced bilateral FTA which would deliver meaningful commercial outcomes to both sides.

They vowed to ensure that India and New Zealand contribute to a high-quality, comprehensive outcome to the Regional Comprehensive Economic Partnership (RCEP) negotiations, of which both countries are parties.

The RCEP talks started in Phnom Penh in November 2012. The 16 countries account for over a quarter of the world’s economy, estimated to be more than $75 trillion.

The 16-member bloc RCEP comprises 10 Asean members (Brunei, Cambodia, Indonesia, Malaysia, Myanmar, Singapore, Thailand, the Philippines, Laos and Vietnam) and their six FTA partners — India, China, Japan, South Korea, Australia and New Zealand.

At their meeting today, the two countries also announced conclusion of a Food Safety Cooperation Arrangement to encourage greater coordination between New Zealand and Indian food safety authorities, and supporting more efficient trade in food products, the statement said.

Source : Financial Express

India looks to cut tariff concessions on Chinese goods : 28-10-2016


India is expected to push for a new approach to tariff cuts at the 16-country trade bloc to prevent China from flooding its market with cheap goods. The commerce department is working on ways to give minimum tariff concessions to Chinese goods and delay the concessions by a long number of years even as it allows imports from other member countries at lower duties.

As part of the Regional Comprehensive Economic Partnership (RCEP) trade negotiations, India is looking to treat Chinese products differently due to the burgeoning trade deficit it has with Beijing. In 2015-16, India’s exports to China were $9 billion while the imports were a staggering $61.7 billion leaving a trade deficit of $52.7 billion.

India hopes this longer phasing out of tariff concessions and differential treatment, called “deviations”, will become the basis for RCEP negotiations. The new approach comes ahead of the next ministerial meeting on November 3-4 in the Philippines.

Moreover, since India had to do away with a three-tier structure of differential duty cuts as part of the negotiations, deviations are the last ray of hope to contain the trade deficit with China under a formal trade agreement. In the earlier tiered structure, India had proposed to remove duties on 42.5% of the items traded with China, something that Beijing had termed as low.

“We hope the tiers come back from the backdoor through deviations,” said a commerce department official, adding that the difference in tariff cuts may not be as much as in the earlier structure of three tiers.

“We can look at longer staging periods for China by delaying the concessions by some years or not offer key products for tariff cuts to them at all,” the official said. Despite agreeing to a common concession, India is insisting on a single undertaking for the RCEP which means nothing is agreed until everything is agreed. “With single undertaking, we can be sure other we can be sure other members will not lose interest in India’s demands once we accept their demands for tariff concessions on goods,” the official said.

Source : Economic Times

Notification No.103/2016 28-10-2016


Income-tax (29th Amendment) Rules, 2016 – 103/2016

MINISTRY OF FINANCE (Department of Revenue)(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION No. 103/2016

New Delhi, the 7th November, 2016

INCOME-TAX

S.O. 3399(E).-In exercise of the powers conferred by section 32, section 115BA and 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) These rules may be called the Income-tax (29th Amendment) Rules, 2016.

(2) In the Income-tax Rules, 1962 ( here after referred to as the principal rules),-

(a) in rule 5, after sub-rule (1), the following proviso shall be inserted with effect from 1st day of April, 2016, namely:-

“Provided that in case of a domestic company which has exercised option under sub-section (4) of section 115BA, the allowance under clause (ii) of sub-section (1) of section 32 in respect of depreciation of any block of assets entitled to more than forty per cent. shall be restricted to forty per cent. on the written down value of such block of assets.”

(b) in the New Appendix I, in the Table, in the second column, for the figures “ ‘50’, ‘60’, ‘80’, ‘100’ ”, wherever they occur, the figure “40” shall be substituted with effect from the 1st day of April, 2017.

[F.No.370142/29/2016 -TPL]

PITAMBAR DAS, Director (Tax Policy And Legislation)

Note : The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii) vide notification number S.O. 969 (E), dated the 26th March, 1962 and last amended by the Income-tax (28thAmendment) Rules, 2016, vide notification number G.S.R No.982(E),dated the 17.10.2016.

GSTN inks MoU with DGFT for sharing of forex realisation data : 28-10-2016


The Goods and Services Network (GSTN) today signed a memorandum of understanding with the commerce ministry for sharing of foreign exchange realisation and import-export code data.

The move is expected to strengthen processing of export transactions of taxpayers under GST, increase transparency and reduce human interface, an official said.

GSTN is a not-for-profit, non-government, private limited company promoted by the central and state governments with the specific mandate to build the IT infrastructure and the services required for implementing GST.

The MoU was signed by Director General of Foreign Trade Ajay K Bhalla and GSTN CEO Prakash Kumar.

An electronic bank realisation certificate captures transaction level details of foreign exchange realised in India.

The eBRC project implemented by DGFT created an integrated platform for receipt, processing and subsequent use of all bank realisation related information by exporters, banks, central and state government departments.

Source : Economic Times

Notification No.102/2016 28-10-2016


Agreement between the Government of the Republic of India and the Government of Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes – 102/2016

MINISTRY OF FINANCE (Department of Revenue)

NOTIFICATION No. 102/2016

New Delhi, the 28th October, 2016

INCOME-TAX

S.O. 3346(E).- Whereas the annexed Protocol amending the Convention between the Government of the Republic of India and the Government of Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income [hereinafter referred to as said “Protocol”] shall enter into force on the 29th day of October, 2016 in accordance with paragraph 1 of Article 4 of the said 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 directs that all the provisions of said Protocol amending the Convention between the Government of the Republic of India and the Government of Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income shall be given effect to in the Union of India with effect from the 29th day of October, 2016.

[F. No. 506/69/81-FTD-I]

RAJAT BANSAL, Jt. Secy.

ANNEXURE

PROTOCOL

AMENDING THE CONVENTION

BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA

AND THE GOVERNMENT OF JAPAN

FOR THE AVOIDANCE OF DOUBLE TAXATION

AND THE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME

The Government of the Republic of India and the Government of Japan,

Desiring to amend the Convention between the Government of the Republic of India and the Government of Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, signed at New Delhi on 7th March, 1989, as amended by the Protocol signed at Tokyo on 24th February, 2006 (hereinafter referred to as “the Convention”),

Have agreed as follows:

ARTICLE 1

Paragraphs 3 and 4 of Article 11 of the Convention shall be deleted and replaced by the following:

“3. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be taxable only in the other Contracting State if:

(a) the interest is derived and beneficially owned by the Government of that other Contracting State, a political sub-division or local authority thereof, or the central bank of that other Contracting State or any financial institution wholly owned by that Government; or

(b) the interest is derived and beneficially owned by a resident of that other Contracting State with respect to debt-claims guaranteed, insured or indirectly financed by the Government of that other Contracting State, a political sub-division or local authority thereof, or the central bank of that other Contracting State or any financial institution wholly owned by that Government.

4. For the purposes of paragraph 3, the terms “the central bank” and “financial institution wholly owned by that Government” mean:

(a) in the case of Japan:

(i) the Bank of Japan;

(ii) the Japan Bank for International Cooperation;

(iii) the Japan International Cooperation Agency;

(iv) the Nippon Export and Investment Insurance; and

(v) such other financial institution the capital of which is wholly owned by the Government of Japan as may be agreed upon from time to time between the Governments of the Contracting States;

(b) in the case of India:

(i) Reserve Bank of India;

(ii) Export-Import Bank of India;

(iii) General Insurance Corporation of India;

(iv) New India Assurance Company Limited; and

(v) such other financial institution the capital of which is wholly owned by the Government of India as may be agreed upon from time to time between the Governments of the Contracting States.”

ARTICLE 2

Article 26 of the Convention shall be deleted and replaced by the following:

“Article 26

1. The competent authorities of the Contracting States shall exchange such information (including documents or certified copies of the documents) as is foreseeably relevant for carrying out the provisions of this Convention 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 sub-divisions or local authorities, insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Articles 1 and 2.

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 Contracting 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 other purposes under the laws of both Contracting States and the competent authority of the supplying Contracting State authorises such use.

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 Contracting 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.

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 Contracting 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 3

A new Article shall be added after Article 26 of the Convention as follows:

“Article 26A

1. The Contracting States shall lend assistance to each other in the collection of revenue claims. This assistance is not restricted by Articles 1 and 2. The competent authorities of the Contracting States may by mutual agreement settle the mode of application of this Article.

2. The term “revenue claim” as used in this Article means an amount owed in respect of the taxes covered by Article 2 and the following taxes imposed on behalf of the Contracting States, or of their political sub-divisions or local authorities, insofar as the taxation thereunder is not contrary to this Convention or any other instrument to which the Contracting States are parties, as well as interest, administrative penalties and costs of collection or conservancy related to such amount:

(a) in Japan:

(i) the consumption tax;

(ii) the inheritance tax; and

(iii) the gift tax;

(b) in India:

(i) the wealth tax;

(ii) the excise duty;

(iii) the service tax;

(iv) the sales tax; and

(v) the value added tax;

(c) any other tax agreed upon between the Governments of the Contracting States.

3. When a revenue claim of a Contracting State is enforceable under the laws of that Contracting State and is owed by a person who, at that time, cannot, under the laws of that Contracting State, prevent its collection, that revenue claim shall, at the request of the competent authority of that Contracting State, be accepted for purposes of collection by the competent authority of the other Contracting State. That revenue claim shall be collected by that other Contracting State in accordance with the provisions of its laws applicable to the enforcement and collection of its own taxes as if the revenue claim were a revenue claim of that other Contracting State that met the conditions allowing that other Contracting State to make a request under this paragraph.

4. When a revenue claim of a Contracting State is a claim in respect of which that Contracting State may, under its law, take measures of conservancy with a view to ensure its collection, that revenue claim shall, at the request of the competent authority of that Contracting State, be accepted for purposes of taking measures of conservancy by the competent authority of the other Contracting State. That other Contracting State shall take measures of conservancy in respect of that revenue claim in accordance with the provisions of its laws as if the revenue claim were a revenue claim of that other Contracting State even if, at the time when such measures are applied, the revenue claim is not enforceable in the first-mentioned Contracting State or is owed by a person who has a right to prevent its collection.

5. Notwithstanding the provisions of paragraphs 3 and 4, a revenue claim accepted by a Contracting State for purposes of paragraph 3 or 4 shall not, in that Contracting State, be subject to the time limits or accorded any priority applicable to a revenue claim under the laws of that Contracting State by reason of its nature as such. In addition, a revenue claim accepted by a Contracting State for the purposes of paragraph 3 or 4 shall not, in that Contracting State, have any priority applicable to that revenue claim under the laws of the other Contracting State.

6. Notwithstanding the provisions of paragraph 5, acts carried out by a Contracting State in the collection of a revenue claim accepted by that Contracting State for purposes of paragraph 3 or 4, which, if they were carried out by the other Contracting State, would have the effect of suspending or interrupting the time limits applicable to the revenue claim according to the laws of that other Contracting State, shall have such effect under the laws of that other Contracting State. The first-mentioned Contracting State shall inform the other Contracting State about such acts.

7. Proceedings with respect to the existence, validity or the amount of a revenue claim of a Contracting State shall not be brought before the courts or administrative bodies of the other Contracting State.

8. Where, at any time after a request has been made by a Contracting State under paragraph 3 or 4 and before the other Contracting State has collected and remitted the relevant revenue claim to the first-mentioned Contracting State, the relevant revenue claim ceases to be

(a) in the case of a request under paragraph 3, a revenue claim of the first-mentioned Contracting State that is enforceable under the laws of that Contracting State and is owed by a person who, at that time, cannot, under the laws of that Contracting State, prevent its collection, or

(b) in the case of a request under paragraph 4, a revenue claim of the first-mentioned Contracting State in respect of which that Contracting State may, under its laws, take measures of conservancy with a view to ensure its collection

the competent authority of the first-mentioned Contracting State shall promptly notify the competent authority of the other Contracting State of that fact and, at the option of the other Contracting State, the first-mentioned Contracting State shall either suspend or withdraw its request.

9. In no case shall the provisions of this Article 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 carry out measures which would be contrary to public policy;

(c) to provide assistance if the other Contracting State has not pursued all reasonable measures of collection or conservancy, as the case may be, available under its laws or administrative practice;

(d) to provide assistance in those cases where the administrative burden for that Contracting State is clearly disproportionate to the benefit to be derived by the other Contracting State.”

ARTICLE 4

1. This Protocol shall be approved in accordance with the legal procedures of each of the Contracting States and shall enter into force on the thirtieth day after the date of exchange of diplomatic notes indicating such approval.

2. The provisions of paragraphs 3 and 4 of Article 11 of the Convention, as amended by Article 1 of this Protocol shall have effect:

(a) in Japan:

(i) with respect to taxes levied on the basis of a taxable year, for taxes for any taxable years beginning on or after 1st January of the calendar year next following that in which the Protocol enters into force; and

(ii) with respect to taxes not levied on the basis of a taxable year, for taxes levied on or after 1st January of the calendar year next following that in which the Protocol enters into force; and

(b) in India:

(i) with respect to taxes withheld at source, for amounts paid or credited on or after 1st April of the calendar year next following that in which the Protocol enters into force; and

(ii) with respect to taxes on income for any previous year beginning on or after 1st April of the calendar year next following that in which the Protocol enters into force.

3. The provisions of Article 26 of the Convention, as amended by Article 2 of this Protocol, and Article 26A of the Convention, as added by Article 3 of the Protocol, shall have effect from the date of entry into force of the Protocol, without regard to the date on which the taxes are levied or the taxable year to which the taxes relate.

4. This Protocol shall remain in effect as long as the Convention remains in force.

IN WITNESS WHEREOF the undersigned, duly authorised thereto by their respective Governments, have signed this Protocol.

DONE in duplicate at New Delhi this eleventh day of December, 2015, in the Japanese, Hindi and English languages, all texts being equally authentic. In case of any divergence of interpretations, the English text shall prevail.

FOR THE GOVERNMENT OF THE REPUBLIC OF INDIA

Sd./-

(HASMUKH ADHIA)

REVENUE SECRETARY

FOR THE GOVERNMENT OF

JAPAN

Sd./-

(KENJI HIRAMATSU)

AMBASSADOR OF JAPAN

13 – 27-10-2016


EXTERNAL COMMERCIAL BORROWINGS (ECB) BY STARTUPS

A.P. (DIR SERIES 2016-17) CIRCULAR NO.13DATED 27-10-2016

Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to the announcement made by the Reserve Bank in the Fourth Bi-monthly Monetary Policy Statement for the year 2016-17 released on October 04, 2016, for permitting Startup enterprises to access loans under ECB framework.

2. Parameters for considering an entity as a Startup have since been published in the Official Gazette on February 18, 2016 by the Government of India. It is therefore decided, in consultation with the Government of India to permit AD Category-I banks to allow Startups to raise ECB under the following framework:

a. Eligibility : An entity recognised as a Startup by the Central Government as on date of raising ECB.
b. Maturity : Minimum average maturity period will be 3 years.
c. Recognised lender : Lender/investor shall be a resident of a country who is either a member of Financial Action Task Force (FATF) or a member of a FATF-Style Regional Bodies; and shall not be from a country identified in the public statement of the FATF as:
i. A jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply; or
ii. A jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the Financial Action Task Force to address the deficiencies
Exclusion: Overseas branches/subsidiaries of Indian banks and overseas wholly owned subsidiary/joint venture of an Indian company will, however, not be considered as recognized lenders under this framework.
d. Forms : The borrowing can be in the form of loans or non-convertible, optionally convertible or partially convertible preference shares. The funds should come from a country which fulfils the conditions at 2 (c) above.
e. Currency : The borrowing should be denominated in any freely convertible currency or in Indian Rupees (INR) or a combination thereof. In case of borrowing in INR, the non-resident lender, should mobilise INR through swaps/outright sale undertaken through an AD Category-I bank in India.
f. Amount: The borrowing per Startup will be limited to USD 3 million or equivalent per financial year either in INR or any convertible foreign currency or a combination of both.
g. All-in-cost : Shall be mutually agreed between the borrower and the lender.
h. End-uses : For any expenditure in connection with the business of the borrower.
i. Conversion into equity : Conversion into equity is freely permitted, subject to Regulations applicable for foreign investment in Startups.
j. Security : The choice of security to be provided to the lender is left to the borrowing entity. Security can be in the nature of movable, immovable, intangible assets (including patents, intellectual property rights), financial securities, etc., and shall comply with foreign direct investment/foreign portfolio investment/or any other norms applicable for foreign lenders/entities holding such securities.
k. Corporate and personal guarantee : Issuance of corporate or personal guarantee is allowed. Guarantee issued by non-resident(s) is allowed only if such parties qualify as lender under paragraph 2(c) above.
Exclusion: Issuance of guarantee, standby letter of credit, letter of undertaking or letter of comfort by Indian banks, all India Financial Institutions and NBFCs is not permitted.
l. Hedging: The overseas lender, in case of INR denominated ECB, will be eligible to hedge its INR exposure through permitted derivative products with AD Category – I banks in India. The lender can also access the domestic market through branches/ subsidiaries of Indian banks abroad or branches of foreign bank with Indian presence on a back to back basis.
m. Conversion rate: In case of borrowing in INR, the foreign currency – INR conversion will be at the market rate as on the date of agreement.

3. Other provisions like parking of ECB proceeds, reporting arrangements, powers delegated to AD banks, borrowing by entities under investigation, conversion of ECB into equity will be as included in the ECB framework announced vide A.P. (DIR Series) Circular No. 32 dated November 30, 2015. However, provisions on leverage ratio and ECB liability: Equity ratio will not be applicable.

4. It may be noted that Startups raising ECB in foreign currency, whether having natural hedge or not, are exposed to currency risk due to exchange rate movements and hence are advised to ensure that they have an appropriate risk management policy to manage potential risk arising out of ECBs.

5. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers.

6. Master Direction No.5 dated January 1, 2016 is being updated to reflect changes.

7. The directions contained in this circular has been issued under section 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.

 

12 – 27-10-2016


DEFERRED PAYMENT PROTOCOLS DATED 30-4-1981 AND 23-12-1985 BETWEEN GOVERNMENT OF INDIA AND ERSTWHILE USSR

A.P. (DIR SERIES 2016-17) CIRCULAR NO.12DATED 27-10-2016

Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to A.P. (DIR Series) Circular No. 79 dated June 30, 2016 wherein the Rupee value of the Special Currency Basket was indicated as Rs. 83.5796140 effective from June 23, 2016.

2. AD Category-I banks are advised that a further revision has taken place on October 17, 2016 and accordingly, the Rupee value of the Special Currency Basket has been fixed at Rs. 81.0297640 with effect from October 20, 2016.

3. AD Category-I banks may bring the contents of this circular to the notice of their constituents concerned.

4. 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.

Notification No.101/2016 27-10-2016


Section 10(46) of the Income-tax Act, 1961 Central Government notifies Bihar Electricity Regulatory Commission, a body constituted by the State Government of Bihar, in respect of the specified income arising to that Commission – 101/2016

 

MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION No. 101/2016

New Delhi, the 27th October, 2016

S.O. 3336(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, Bihar Electricity Regulatory Commission, a body constituted by the State Government of Bihar, in respect of the following specified income arising to that Commission, namely:-

(a) amount received in the form of government grants;

(b) amount received as licence fee from licensees in electricity;

(c) amount received as application processing fee; and

(d) interest earned on government grants and fee received.

2. This notification shall be effective subject to the conditions that Bihar Electricity Regulatory Commission,-

(a) shall not engage in any commercial activity;

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

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

3. This notification shall be applicable for the financial years 2016-17 to 2020-21.

[F. No. 300196/12/2016-ITA-I]

DEEPSHIKHA SHARMA, Director

No. Press Release Dated: 26-10-2016


Notification of Revised Double Taxation Avoidance Agreement (DTAA) between India and Republic of Korea – regarding – Order-Instruction

Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes

New Delhi, 26th October, 2016.

PRESS RELEASE

Sub: Notification of Revised Double Taxation Avoidance Agreement (DTAA) between India and Republic of Korea – regarding

The existing Double Taxation Avoidance Convention between India and Korea was signed on 19th July, 1985 and was notified on 26th September 1986. A revised DTAA between India and Korea for the Avoidance of Double Taxation and the Prevention of Fiscal evasion with respect to taxes on income which was signed on 18th May 2015 during the visit of Hon’ble PM to Seoul has entered into force on 12th September 2016, on completion of procedural requirements by both countries. Provisions of new DTAA will have effect in India in respect of income derived in fiscal years beginning on or after 1st April, 2017.

Some of the salient features of new DTAA are:

(i) The existing DTAA provided for residence based taxation of capital gains on shares. In line with India’s policy of taxation of capital gains on shares, the revised DTAA provides for source based taxation of capital gains arising from alienation of shares comprising more than 5% of share capital.

(ii) In order to promote cross border flow of investments and technology, the revised DTAA provides for reduction in withholding tax rates from 15% to 10% on royalties or fees for technical services and from 15% to 10% on interest income.

(iii) The revised DTAA expands the scope of dependent agent Permanent Establishment provisions in line with India’s policy of source based taxation.

(iv) To facilitate movement of goods through shipping between two countries and in accordance with international principle of taxation of shipping income, the revised DTAA provides for exclusive residence based taxation of shipping income from international traffic under Article 8 of revised DTAA.

(v) The revised DTAA, with the introduction of Article 9(2), provides recourse to the taxpayers of both countries to apply for Mutual Agreement Procedure (MAP) in transfer pricing disputes as well as apply for bilateral Advance Pricing Agreements (APA). Further, as per understanding reached between the two sides, MAP requests in transfer pricing cases can be considered if the request is presented by the tax payer to its competent authority after entry into force of revised DTAA and within three years of the date of receipt of notice of action giving rise to taxation not in accordance with the DTAA.

It may be added that a Memorandum of Understanding (MoU) on suspension of collection of taxes during the pendency of Mutual Agreement Procedure (MAP) has already been signed by Competent Authorities of India and Korea on 9th December 2015. The MoU provides for suspension of collection of outstanding taxes during the pendency of MAP proceedings for a period of two years (extendable for a further maximum period of three years) subject to providing on demand security / bank guarantee.

(vi) The Article on Exchange of Information is updated to the latest international standard to provide for exchange of information to the widest possible extent. As per revised Article, the country from which information is requested cannot deny the information on the ground of domestic tax interest. Further, the revised DTAA contains express provisions to facilitate exchange of information held by banks. Information exchanged under the revised DTAA can now be used for other law enforcement purposes with authorization of information supplying country.

(vii) The revised DTAA inserts new Article for assistance in collection of taxes between tax authorities.

(viii) The revised DTAA inserts new Limitation of Benefits Article i.e. anti-abuse provisions to ensure that the benefits of the Agreement are availed only by the genuine residents of both the countries.

The revised DTAA aims to avoid the burden of double taxation for taxpayers of two countries in order to promote and thereby stimulate flow of investment, technology and services between India and Korea. The revised DTAA provides tax certainty to the residents of India and Korea.

(Meenakshi Goswami)

Commissioner of Income Tax

(Media & Technical Policy)

Official Spokesperson, CBDT.

Order [F.NO.10/03/2016-NCLT], Dated 26-10-2016


SECTION 408 OF THE COMPANIES ACT, 2013 – NATIONAL COMPANY LAW TRIBUNAL – CONSTITUTION OF – SPECIAL PRINCIPAL BENCH AT NEW DELHI

ORDER [F.NO.10/03/2016-NCLT], DATED 26-10-2016

There shall be a Special Principal Bench on 27th October, 28th October, 2016 & 1st November, 2016 to attend the matters listed before Hon’ble President Chief Justice Shri. M.M. Kumar and Shri Santanu Kumar Mohapatra, Member (Technical). The Special Principal Bench shall comprise of:

NCLT, Special Principal Bench at New Delhi

1. Shri R. Vardharajan, Member (Judicial)
2. Shri Santanu Kumar Mohapatra, Member (Technical)

The Special Bench shall hear all the matters as if, it is a Principal Bench.

After taking up matters listed before the Special Principal Bench Shri R. Vardharajan, Member (Judicial) shall take up the matters listed before their own Bench i.e. New Delhi, Division Bench. This is in partial modification of Order of even number dated 5-7-2016 for 27-10-2016, 28-10-2016 & 1-11-2016 only.

Govt sources say cess is a better option than high tax rate : 26-10-2016


Just a week before the next Goods and Service Tax (GST) Council meeting on November 3 and 4, the view of states being compensated through a cess rather than a hike in the proposed GST rate has gained strength, with the Centre telling them that an increase in the tax rate has to yield around Rs 1.72 lakh crore. On the other hand, a cess which will yield Rs 50,000 crore a year would be enough to compensate states.

The Centre has proposed a four-slab structure — 6 per cent, 12 per cent, 18 per cent and 26 per cent— under the proposed GST and a cess beyond 26 per cent on luxury and sin goods.  States are expected to lose around Rs 50,000 crore a year, which would be compensated by the Centre in full for the first five years. If the GST rates are raised beyond 26 per cent on luxury and sin goods, it must yield Rs 1.72 lakh crore to the states and  the Centre, government sources said. This is so because half of this would be state GST, and of the remaining half— Rs 86,000 crore — 42 per cent,  or around Rs 36,000 crore would go to states. This would leave Rs 50,000 crore in the Centre’s hands to compensate states.

The other option could have been to raise direct taxes, which did not find favour with the Centre, sources said.

While there has been demand from various quarters to have a maximum rate of 18 per cent, the government sources said it would have meant a Rs 1 lakh crore revenue loss to the Centre’s exchequer. This would have to be offset from increasing tax rates on items consumed by the poor, they said.

On the other hand, a 26 per cent peak tax rate would be mainly on consumer durable goods such as refrigerators which already are taxed at the combined rate of 25 per cent. So, there is not much of the difference between existing rate and the one proposed under the GST regime.

Moreover, there is no cascading and leakages under the GST regime which would save another 2-4 per cent on taxes, which should also be taken into account while comparing the present structure with the proposed peak GST rate.

The proposed GST, including a cess, would lead to a total of Rs 9.32 lakh crore to the Centre’s kitty.

The sources said that one can argue that the proposed GST is not an ideal one, but the government’s hands were tight.

While many experts have crticised the multiple tax rates proposed by the Centre for GST, the sources said even in Europe there are specific rates for products. while Luxembourg has four rates, other countries  in the European Union have three slabs.  Former finance secretary Vijay Kelkar who headed the 13th Finance Commission that gave recommendations on GST, recently said  the proposal was disappointing as it would rob the GST of its efficiency enhancing potential.

He had said the impact of the tax rate proposals  on the economy would be only one fourth of the high potential impact that the 13th Finance Commission had estimated.

The next GST Council meeting’s agenda will be a packed one as it is expected to decide on the much-awaited GST rates. Also, the issue of administrative control over tax assesses or dual control — claimed to have been settled earlier — has been cropped up and it will be decided upon at the meeting slated for November 3-4. In the last meeting on October 19, the Centre and states did manage to reach a broad agreement on the formula for compensation to loss-incurring states and a cess over the peak rate to fund the compensation.

The details of these, however, would be worked out at the next meeting, before tax rates can be fixed.

UNDER REVIEW

  • The Centre has proposed a four-slab structure — 6%, 12%, 18% and 26% — under the proposed GST and a cess beyond 26% on luxury and sin goods
  • The proposed GST, including a cess, would lead to a total of Rs 9.32 lakh crore to the Centre’s kitty
  • States are expected to lose around Rs 50,000 crore a year

Source : PTI

FinMin looks at cut in corporation tax : 26-10-2016


The finance ministry is examining the possibility of cutting the corporation tax rate by one to two percentage points, even as the revenue department is set to kickstart Budgetconsultations with industry and consultants from the first week of November. The ministry’s thinking is part of bringing down the corporation tax rate to 25 per cent by the end of 2018-19, from 30 per cent at present.

An official said the government could look at an across-the-board one to two percentage point reduction incorporation tax rate, from 30 per cent next year, based on the phasing-out of exemptions.
Finance Minister Arun Jaitley had, in 2015-16, promised a reduction in corporation tax rate to 25 per cent by 2019. Towards that, it has laid down the road map to simultaneously phase out exemptions given to the corporate sector to reduce the tax rate, simplify administration, and improve India’s competitive edge globally. Corporation tax is 30 per cent, but it is effectively 23 per cent due to many exemptions and deductions.
In the 2016-17 Budget, the corporation tax rate for companies with a turnover of ~5 crore or less was lowered to 29 per cent plus surcharge and cess from 30 per cent plus surcharge and cess. Besides, a lower corporate tax rate of 25 per cent was also announced for all new manufacturing companies incorporated from March 1, 2016 onwards, given that they do not claim any exemptions.
Another senior government source who is part of the pre-Budget consultations also said that deliberations are ongoing in the finance ministry regarding reducing corporate tax by one to two per cent in the 2017-18 Budget. “Things will be finalised closer to the Budget, but we are discussing on how to bring corporation tax down to 25 per cent by 2019. There will be a cut in the upcomingBudget and in the one after that,” the official said.
The revenue foregone in 2015-16 on account of exemptions stood at over Rs 62,000 crore.
Neeru Ahuja of Deloitte pointed out that the finance minister must reduce the corporate tax rate as promised two years ago. “We expect him to cut rates this time for both corporate tax and some rates for individuals as well.”
The revenue department’s discussions will be crucial amid a slew of taxation reforms expected to come up from the next financial year – goods and services tax, general anti-avoidance agreement (GAAR), revised double-taxation avoidance agreements (DTAA), base erosion and profit shifting (BEPS) measures, among others.
“Budget consultations are beginning from the first week of November. The talks will revolve around making taxation regime easier for industry and individuals. A range of taxation changes are coming up from the next financial year. So, these discussions will be crucial,” said a senior government official.
The government is rolling out GAAR from April 1, 2017, to plug loopholes in tax treaties. Basically,GAAR is a set of rules designed to give Indian authorities the right to scrutinise tax transactions, which they believe are structured solely to avoid taxes.
According to Ahuja, a range of clarifications and follow-ups are expected on issues such as GAARand country-by-country reporting under BEPS.
India also amended the DTAA with Mauritius in April, allowing the former to impose capital gains tax on shares from next year at 50 per cent rate and fully from 2019. It is also negotiating the DTAAwith Cyprus and Singapore.
The government is also awaiting the second report from retired judge R V Easwar-headed panel on direct taxes.

Key taxation changes kicking in from FY18 include:
· General anti-avoidance rules
· Goods and services tax
· Revised double taxation avoidance agreement with Mauritius and Cyprus
· Place of effective management
· Country by country reporting under base erosion and profit sharing
Top expectations include:
· Reduction in corporate tax rate by 1-2%
· Reduction in personal tax rates
· Widening scope of equalisation levy or Google tax
Source : Business Standard

Amid concerns, Niti Aayog supports four-slab GST & cess on sin goods : 26-10-2016


NITI Aayog, government’s premier think tank, has supported a four-slab structure for the goods and services tax (GST) and backed the proposed cess on luxury and sin goods.

“A four slab rate structure for GST is better than going in one go on to a single rate as in the latter price effect on specific products could be substantial,” Aayog vice-chairman Arvind Panagariya said on Monday.

He said this structure would ensure less inflationary implications and lower tax rates for consumers as well as revenue predictability for the exchequer.

Aayog’s backing to the Centre’s proposal comes after several critics have questioned the proposed structure saying that it would dilute the original idea of a single unified rate.

The GST Council, which will finalise the GST rates, had failed to come to an agreement after three rounds of meetings last week with some states opposing the Union finance ministry’s proposal to levy a cess on ultra-luxury goods, tobacco and pan masala and for clean energy and instead favouring a higher tax rate on consumer durables.

According to Panagariya, the revenues loss prospects under four slabs will be much less as opposed to a single rate, it would be predictable and would give a better picture of what the unified rate could be going forward. “GST is a process and we are gradually heading towards it,” he said.

The Centre had proposed a fourslab rate structure for GST, ranging from 6% to 26%.

The structure proposes zero GST on a host of goods and services, including food, health and education services, and slabs of 6%, 12%, 18% and 26% on remaining goods and services with the highest tax on luxury items such as fast-moving consumer goods and consumer durables.

On consumption of ultra-luxury items and demerit goods, such as big cars and tobacco products, it proposes imposition of a cess over and above the GST rate.

Supporting the imposition of the proposed cess, Panagariya said it is temporary in nature and could be withdrawn anytime. “The Centre has to compensate states for revenue loss. Keeping it separate from tax rate will mean that it can be withdrawn anytime,” he said.

The Centre requires over Rs 50,000 crore for compensating the states for any revenue loss under GST for the next five years and had proposed to fund it through the cess.

Commenting on whether GST rollout can meet the April 1deadline, Panagariya said the government is working towards it. “It’s a little bit of race against time but certainly well within the realm of possibility,” he said.

Source : Economic Times

Notification No.99/2016 25-10-2016


Prohibition of Benami Property Transactions Rules, 2016 – 99/2016

MINISTRY OF FINANCE

(Department of Revenue)

Notification No. 99/2016

New Delhi, the 25th October, 2016

G.S.R. 1004(E).-In exercise of the powers conferred by section 68 of the Prohibition of Benami Property Transactions Act, 1988 (45 of 1988), the Central Government hereby makes the following rules, namely:-

1. Short title and commencement.-(1) These rules may be called the Prohibition of Benami Property Transactions Rules, 2016.

(2) They shall come into force on the 1st day of November, 2016.

2. Definitions.-(1) In these rules, unless the context otherwise requires,-

(a) “Act” means the Prohibition of Benami Property Transactions Act, 1988 (45 of 1988);

(b) “Chapter” means a Chapter of the Act;

(c) “Form” means a Form appended to these rules; and

(d) “Section” means a section of the Act.

(2) Words and expressions used and not defined in these rules but defined in the Act, the Indian Trusts Act, 1882 (2 of 1882), the Indian Succession Act, 1925 (39 of 1925), the Indian Partnership Act, 1932 (9 of 1932), theIncome-tax Act, 1961 (43 of 1961), the Depositories Act, 1996 (22 of 1996), the Prevention of Money-Laundering Act, 2002 (15 of 2003), the Limited Liability Partnership Act, 2008 (6 of 2009) and the Companies Act, 2013 (18 of 2013) or the rules made under those Acts, shall have the same meanings respectively assigned to them in those Acts and rules.

3. Determination of price in certain cases.-(1) For the purposes of sub-clause(ii) of clause (16) of the section 2of the Act, the price shall be determined in the following manner, namely:-

(a) the price of unquoted equity shares shall be the higher of,-

(I) its cost of acquisition;

(II) the fair market value of such equity shares determined, on the date of transaction, by a merchant banker or an accountant as per the Discounted Free Cash Flow method; and

(III) the value, on the date of transaction, of such equity shares as determined in the following manner, namely:-

The fair market value of unquoted equity shares = (A+B – L)× (PV)/(PE)

where,

A= book value of all the assets (other than bullion, jewellery, precious stone, artistic work, shares, securities and immovable property) as reduced by,- (i) any amount of income-tax paid, if any, less the amount of income-tax refund claimed, if any, and (ii) any amount shown as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset;

B= the price that the bullion, jewellery, precious stone, artistic work, shares, securities and immovable property would ordinarily fetch on sale in the open market on the date of transaction; L= book value of liabilities, but not including the following amounts, namely:-

(i) the paid-up capital in respect of equity shares;

(ii) the amount set apart for payment of dividends on preference shares and equity shares;

(iii) reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation;

(iv) any amount representing provision for taxation, other than amount of income-tax paid, if any, less the amount of income-tax claimed as refund, if any, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;

(v) any amount representing provisions made for meeting liabilities, other than ascertained liabilities;

(vi) any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares;

PE = total amount of paid up equity share capital as shown in the balance-sheet;

PV= the paid up value of such equity shares;

4. Furnishing of Information.-For the purpose of sub-section (2) of section 21, the income-tax authority referred to in sub-section (1) of the section 285BA of Income-tax Act, 1961 (43 of 1961) or such other authority or agency which is prescribed under sub-section (1) of section 285BA shall electronically transmit a copy of statement received by it under sub-section (1) of section 285BA of that Act to the Initiating Officer or such authority or agency authorised by the Initiating Officer on or before fifteen days from the end of the month in which said statement is received.

5. Provisional attachment.-For the purposes of sub-section (3) of section 24, the Initiating Officer shall provisionally attach any property in the manner provided in the Second Schedule of Income-tax Act, 1961 (43 of 1961).

6. Confiscation of property under second proviso to sub-section (1) of section 27.-(1) Where an order of confiscation of property under sub-section (1) of section 27 has been made, the Adjudicating Authority shall send a copy of the order to the Authorised Officer.

(2) Where an order referred to in sub-rule (1) has been received by the Authorised Officer in respect of any immovable property, he shall,-

(i) forthwith issue notice to the authority of the Central Government or a State Government, as case may be, having jurisdication for the purposes of registration of such immovable property, intimating about the confiscation of the property;

(ii) arrange to place copy of the notice at some conspicuous part of the immovable property for the benefit of general public mentioning clearly therein, in English and in vernacular language, that the property has been confiscated under the Act and vests absolutely in the Central Government;

(iii) arrange to make a proclamation for the confiscation of immovable property at some place on or near such property by beat of drum or other customary mode.

(3) Where an order referred to in sub-rule (1) has been received by the Authorised Officer in respect of any movable property, he shall,-

(i) forthwith issue a notice to the authority or person having the custody of such movable property informing him about the confiscation of such property; or

(ii) sell the property, if the property is liable to speedy and natural decay or the expenses for maintenance is likely to exceed its value, with the leave of the concerned Adjudicating Authority, and deposit the sale proceeds in the nearest Government Treasury or branch of the State Bank of India or its subsidiaries or in any nationalised bank in fixed deposit and retain the receipt thereof:

Provided that where the owner of the property furnishes the fixed deposit receipt of State Bank of India or its subsidiaries or a nationalised bank equivalent to the value of property in the name of Administrator, the authorised officer may accept and retain such fixed deposit receipt as security:

Provided further that where the movable property is a mode of conveyance of any description, the authorised officer, after obtaining its valuation report from the Motor Licensing Authority or any other authority, as the case may be, may accept and retain the fixed deposit receipt of State Bank of India or its subsidiaries or a nationalised bank, equivalent to the value of the movable property as security in the name of Administrator;

(iii) cause to deposit the property consisting of cash, Government or other securities or bullion or jewellery or other valuables in a locker in the name of the Administrator or in the form of fixed deposit, as the case may be, in State Bank of India or its subsidiaries or in any nationalised bank and retain the receipt thereof;

(iv) cause to get the property in the form of shares, debentures, units of Mutual Fund or instruments to be transferred in favour of Administrator;

(v) issue a direction to the bank or financial institution, as the case may be, to transfer and credit the money to the account of the Administrator, where the property is in the form of money lying in a bank or a financial institution.

Explanation.- For the purposes of this rule, an “Authorised Officer” means an Income Tax Officer who is authorised by the Adjudicating Authority in this behalf.

7. Receipt of confiscated property under sub-section (1) of section 28.-The Administrator shall, at the time of receiving the confiscated property, ensure proper identification of such property with reference to its particulars mentioned in the order made under sub-section (1) of section 27.

8. Management of confiscated property under sub-section (1) of section 28.-(1) Where the property confiscated is of such a nature that its removal from the place of attachment is impracticable or its removal involves expenditure out of proportion to the value of the property, the Administrator shall arrange for the proper maintenance and custody of the property at the place of its attachment.

(2) If the property confiscated consists of cash, Government or other securities, bullion, jewellery or other valuables, the Administrator shall cause to deposit them for safe custody in the nearest Government Treasury or a branch of the Reserve Bank of India or the State Bank of India or its subsidiaries or in any authorised bank.

(3) The Administrator shall maintain a register containing the details in Form No. 1 annexed to these rules for recording entries in respect of moveable property, such as cash, Government or other securities, bullion, jewellery or other valuables.

(4) The Administrator shall obtain a receipt from the Treasury or the bank, as the case may be, against the deposit of moveable properties stated in sub-rule (2).

(5) The Administrator shall maintain a register containing the details in Form No. 2 annexed to these rules for recording entries in respect of property other than the properties referred to in sub-rule (2).

9. Disposal of confiscated property under sub-section (3) of section 28.-Where the Central Government directs that the property vested in it under sub-section (3) of section 27 be disposed of, then, the administrator shall arrange to dispose of the property in the manner provided in the Second Schedule to the Income-tax Act, 1961(43 of 1961).

10. Appeals to the Appellate Tribunal.-(1) An appeal to the Appellate Tribunal under sub-section (1) of section 46 of the Act shall be filed in Form No. 3 annexed to these rules.

(2) At the time of filing, every appeal shall be accompanied by a fee of ten thousand rupees.

(3) The appeal shall set forth concisely and under distinct head the grounds of objection to the order appealed against and such grounds shall be numbered consecutively; and shall specify the address of service at which notice or other processes of the Appellate Tribunal may be served on the appellant and the date on which the order appealed against was served on the appellant.

(4) Where the appeal is preferred after the expiry of the period of forty-five days referred to in sub-section (1) of section 46, it shall be accompanied by a petition, in quadruplicate, duly verified and supported by the documents, if any, relied upon by the appellant, showing cause as to how the appellant had been prevented from preferring the appeal within the period of forty-five days.

FORM 1

[See rule 8(3)]

MANAGEMENT OF CONFISCATED PROPERTY REGISTER (MOVEABLE).

Order number:

Date of receipt of properties:

Description of properties (quantity, amount, estimated value):

Name(s) and address(es) of the benamidar and beneficial owner, if his identity is known:

Name and address of the Treasury or bank where the properties are deposited for safe custody:

Date and time of deposit of confiscated properties in the Treasury or bank:

Receipt number with date of the receipt obtained from the Treasury or bank:

Remarks of the Administrator:

(Signature of the Administrator)

Name of the Administrator

Date:

(Seal)

FORM 2

[See rule 8(5)]

MANAGEMENT OF CONFISCATED PROPERTY REGISTER (IMMOVEABLE)

Order Number:

Date of receipt of properties:

Description of properties:

(In case of land:- area, survey number, plot number, location and complete address. In case of building: house number, location and complete address)

Name(s) and address(es) of the benamidar and beneficial owner, if his identity is known:

Remarks of the Administrator:

(Signature of the Administrator)

Name of the Administrator

Date:

(Seal)

FORM 3

[See rule10(1)]

From_____________________________________________________________________

(Mention name and address of the appellant here).

To

The Registrar,

Appellate Tribunal

(Address)

Sir,

The above-named appellant, begs to prefer this appeal under section 46 of the Prohibition of Benami Property Transactions Act, 1988 against order Number ______________ dated _________ passed by the Adjudicating Authority (address of Adjudicating Authority) under the said Act on the following facts and grounds.

FACTS

(Mention briefly the facts of the case here. Enclose copy of the order passed by the or Adjudicating Authority and copies of other relevant documents, if any.)

GROUNDS

(Mention here the grounds on which appeal is preferred).

PRAYER

In the light of what is stated above, the appellant prays for the following relief:-

RELIEF SOUGHT

(Specify the relief sought)

DECLARATION

The fee payable for this appeal as mentioned in sub-rule (2) of rule 10 has been deposited in the form of demand draft with the Registrar, Appellate Tribunal, ___(Address)____ vide receipt number____________ dated __________.

(Signature of the Appellant)

(Name of the Appellant)

VERIFICATION

I……………………… the appellant, do hereby declare that the facts stated above are true to the best of my information and belief.

Verified today the ……………………………… day of ………………………

(Signature of the Appellant)

(Name of the Appellant)

List of documents:

Place:

Date:

[ F. No. 149/144/2015-TPL (Part-II)]

PRAVIN RAWAL, Director (Tax Policy & Legislation)

Notification No.98/2016 25-10-2016


Amendment to Benami Transaction (Prohibition) Act, 1988 shall come into force w.e.f. 1.11.2016 – 98/2016

GOVERNMENT OF INDIA MINISTRY OF FINANCE (Department of Revenue)

Notification No. 98/2016

New Delhi, the 25th October, 2016

S.O. 3289(E).- In exercise of the powers conferred by sub-section (2) of section 1 of the Benami Transaction (Prohibition) Amendment Act, 2016 (43 of 2016), the Central Government hereby appoints the 1st day of November, 2016 as the date on which provisions of the said Act shall come into force.

[F. No. 149/144/2015-TPL (Part-II)]

(Pravin Rawal)

Director (Tax Policy & Legislation

 

Notification No.97/2016 25-10-2016


Central Government notifies the Adjudicating Authority and Appellate Tribunal for the purpose of the Prohibition of Benami Property Transactions Act, 1988 (45 of 1988). – 97/2016

GOVERNMENT OF INDIA MINISTRY OF FINANCE (Department of Revenue)

Notification No. 97/2016

New Delhi, the 25th October, 2016

S.O. 3288(E).- In exercise of powers conferred under section 71 of the Prohibition of Benami Property Transactions Act, 1988 (45 of 1988), the Central Government hereby notifies that, with effect from the 1st day of November, 2016, the Adjudicating Authority appointed under sub-section (1) of section 6 of the Prevention of Money-Laundering Act, 2002 (15 of 2003) and the Appellate Tribunal established under section 25 of that Act shall discharge the functions of the Adjudicating Authority and Appellate Tribunal, respectively, under the Prohibition of Benami Property Transactions Act, 1988 (45 of 1988) until the Adjudicating Authorities are appointed and the Appellate Tribunal is established under the Prohibition of Benami Property Transactions Act, 1988 (45 of 1988).

[F. No. 149/144/2015-TPL (Part-II)]

(Pravin Rawal)

Director (Tax Policy & Legislation)

No. Press Release Dated: 25-10-2016


CBDT issues second round of Certificates of Appreciation to tax payers for their contribution towards Nation building – Order-Instruction

 

Government of India Ministry of Finance Department of Revenue

Central Board of Direct Taxes

25th October, 2016

Press Release

Sub: CBDT issues second round of Certificates of Appreciation to tax payers for their contribution towards Nation building.

The Honourable Finance Minister Shri Arun Jaitley, had personally handed over certificates to a few individuals at North Block to commence the program of taxpayer appreciation on 19th September, 2016. The Central Board of Direct Taxes has sent out such certificates of appreciation to 8.43 Lakh individual tax payers by e-mail in the following categories on the basis of the taxes paid by them for the Assessment Year 2016-17 :

i. Platinum : Tax contributed ₹ 1 Crore and above

ii. Gold : Tax contributed ₹ 50 Lakh to ₹ 1 Crore

iii. Silver : Tax contributed ₹ 10 Lakh to ₹ 50 Lakh

iv. Bronze : Tax contributed ₹ 1 Lakh to ₹ 10 Lakh

Taxpayers have lauded this new initiative and have reacted with pride and satisfaction that their contribution towards spending on various infrastructure development, social sector & welfare schemes out of revenues mobilized through tax payments have been acknowledged.

In continuation of the initiative, CBDT has started issuing the second round of Certificates to another 10.15 Lakh tax payers. While the earlier set of certificates had mostly included individuals who e-verified their returns, the second phase will cover those individuals who have filed their returns within the due date and their ITR-V has been received well before the 120 day period for submission provided under the Income Tax Act.

The CBDT urges taxpayers to e-file their returns in time and verify their return by submitting the Electronic Verification Code online or sending their ITR-V within the 120 day period so that they can also be acknowledged for their contribution. The Department is committed to continuous improvement of taxpayer services and seeks the cooperation of all taxpayers in contributing their  fair share of taxes voluntarily.

(Meenakshi Goswami)

Commissioner of Income Tax

(Media & Technical Policy)

Official Spokesperson, CBDT.

No.F.NO.225/220/2016-ITA.II Dated: 25-10-2016


Issue of Intimation under section 143(1) of Income-tax Act, 1961 beyond the prescribed time in non-scrutiny cases-reg – Order-Instruction

Government of India Ministry of Finance Department of Revenue

Central Board of Direct Taxes

North Block, New Delhi, the 25th of October, 2016

Order under section 119 of Income-tax Act, 1961

Subject: Issue of Intimation under section 143(1) of Income-tax Act, 1961 beyond the prescribed time in non-scrutiny cases-reg.

It has come to notice that some returns-of-income having ‘claim of refund’ pertaining to Assessment Years 2014-2015, 2013-2014 and 2012-2013 were not processed within the time-frame prescribed under sub-section (1) of section 143 of the Income-tax Act, 1961 (‘Act’). Consequently, intimation of ‘amount of refund due’ which is issued to the taxpayer after processing the income-tax return could not be sent. This has led to a situation where the concerned taxpayer is unable to get his legitimate refund in accordance with provisions of the Act, although the delay is not attributable to him.

2.  On consideration of the matter, in instances where a valid return-of-income having ‘claim of refund’ for Assessment Years 2014-2015, 2013-2014 and 2012-2013 was filed either under section 139 or 142(1) of the Actand in which the time for sending intimation under sub-section (1) of section 143 has lapsed, the Central Board of Direct Taxes (‘CBDT’), by virtue of its powers under section 119 of the Act, hereby relaxes the time-frame prescribed in second proviso to sub-section (1) of section 143 and directs that such returns-of-income shall now be processed by 31.03.2017. Further, intimation of processing and consequential refund, if any, shall be issued expeditiously as per the prevailing norms and existing provisions of the Act.

3.  However, the above relaxation shall not be applicable to those cases where the said return-of-income was not processed in view of provisions of sub-section (1D) of section 143 of the Act. Further, this relaxation shall not be applicable to those cases where either demand is shown as payable in the return-of-income or is likely to so arise after processing the return-of-income.

4.  The contents of this order may be brought to the notice of all for necessary compliance.

(Rohit Garg)

Deputy Secretary to the Government of India

(F. NO. 225/220/2016-ITA.II)

No.36/2016 Dated: 25-10-2016


Taxability of the compensation received by the land owners for the land acquired under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (‘RFCTLAAR Act’)

Circular No. 36 of 2016

F.No. 225/S8/2016-ITA.II

Government of India Ministry of Finance Deprtment of Revenue

Central Board of Direct Taxes

Dated: 25th October, 2016

Subject: Taxability of the compensation received by the land owners for the land acquired under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (‘RFCTLAAR Act’)-reg.

Under the existing provisions of the Income-tax Act 1961 (‘the Act’), an agricultural land which is not situated in specified urban area, is not regarded as a capital asset Hence, capital gains arising from the transfer (including compulsory acquisition] of such agricultural land is not taxable. Finance (No, 2] Act, 2004 inserted section 10(37) in the Act from 01.04.2005 to provide specific exemption to the capital gains arising to an Individual or a HUF from compulsory acquisition of an agricultural land situated in specified urban limit, subject to fulfilment of certain conditions. Therefore, compensation received from compulsory acquisition of an agricultural land is not taxable under the Act (subject to fulfilment of certain conditions for specified urban land).

2. The RFCTLARR Act which came into effect from 1st January, 2014, in section 96, inter alia provides that income-tax shall not be levied on any award or agreement made [except those made under section 46) under the RFCTLARR Act Therefore, compensation received for compulsory acquisition of land under the RFCTLARR Act (except those made under section 46 of RFCTLARR Act), is exempted from the levy of income-tax.

3. As no distinction has been made between compensation received for compulsory acquisition of agricultural land and non-agricultural land in the matter of providing exemption from income-tax under the RFCTLARR Act, the exemption provided under section 96 of the RFCTLARR Act is wider in scope than the tax-exemption provided under the existing provisions of Income-tax Act, 1961. This has created uncertainty in the matter of taxability of compensation received on compulsory acquisition of land, especially those relating to acquisition of non-agricultural land. The matter has been examined by the Board and it is hereby clarified that compensation received in respect of award or agreement which has been exempted from levy of income-tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of income-tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income-tax Act, 1961.

4. The above may be brought to the notice of all concerned.

5. Hindi version of the order shall follow.

(Rohit Garg)

Deputy Secretary to the Govt. of India

Notification No. 378/2016-RB 25-10-2016


FEM (FOREIGN EXCHANGE DERIVATIVE CONTRACTS) (AMENDMENT) REGULATIONS, 2016 – SUBSTITUTION OF REGULATION 5B

NOTIFICATION NO. FEMA.378/RB-2016/GSR 1005(E)DATED 25-10-2016

In exercise of the powers conferred by clause (h) of sub-section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following amendments in the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25/RB-2000 dated May 3, 2000), namely:—

Short Title and Commencement

1. (i) These regulations may be called the Foreign Exchange Management (Foreign Exchange Derivative Contracts) (Amendment) Regulations, 2016.

(ii) They shall be deemed to have come into force with effect from the date of their publication in the Official Gazette.

Amendment of Regulation 5B

2. In the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25/RB-2000 dated May 3, 2000), under the principal regulations, for the existing Regulation 5B, the following shall be substituted namely:

“5B Permission to a person resident outside India to enter into exchange traded currency derivatives.— A person resident outside India who is exposed to Rupee currency risk arising out of:

(i) a permitted current account transaction or
(ii) a Rupee denominated asset held by him or a Rupee denominated liability incurred by him, as permitted under FEMA, 1999, may transact currency derivatives contracts on a stock exchange recognised under section 4 of Securities Contracts (Regulations) Act, 1956 to hedge such exposure, subject to such terms and conditions as may be set forth in the directions issued by the Reserve Bank of India from time to time.”

Salaried tax payers will now get SMS alerts on TDS deductions : 25-10-2016


The income-tax department will now send SMSes to salaried taxpayers on their tax deducted at source or TDS.

Finance Minister Arun Jaitley on Monday launched the service. Central Board of Direct Taxes or CBDT will soon offer this facility on a monthly basis.

Jaitley said the salaried class cannot afford to pay taxtwice or indulge in litigation; hence they should be updated on TDS.

“So, they can match the office salary slip and the SMS and at the end of the financial year be clear about any possibletax dues,” Jaitley said.

He asked CBDT to take grievance redressal system forTDS mismatch online. Jaitley said e-Nivaran is working well for taxpayers and CBDT is taking several taxpayer-friendly initiatives.

CBDT will soon extend this SMS facility to another 44 million non-salaried taxpayers. “The frequency of SMS alerts will be increased, once the process for filing TDS returns is streamlined to receive such information in real time,” CBDT said.

CBDT Chairperson Rani Singh Nair said the tax department is encouraging people to register their mobile number on the electronic-filing website.

She said taxpayers will initially receive a welcome message from CBDT informing them about the facility; after that, each assessee would be sent messages informing them about their TDS.

In case of a mismatch, they can contact their deductor for necessary correction.

Besides, SMS alerts will also be sent to deductors who have either failed to deposit taxes deducted or failed to e-file TDS returns by the due date.
Source : Business Standard

Anti-dumping duty likely on some Chinese, EU products : 25-10-2016


The government may impose anti-dumping duty on imports of certain flat steel products from China and European Union to protect the interest of domestic players from cheap in-bound shipments.

In its preliminary findings, the directorate general of antidumping and allied duties (DGAD) has recommended the duty on imports of “colour coated / pre-painted flat products of alloy or non-alloy steel”.

Essar Steel India and JSW Steel Coated Products had jointly filed the application for initiation of anti- dumping investigations. DGAD has suggested the duty be the difference between the landed value of steel products and $849 per tonne.

These steel products offers resistance to corrosion with barrier protection. It is used in many applications and sectors including construction, roofing, walling, paneling, cladding and decking, automotive, white goods, appliances and furniture.

Source : Economic Times

Notification No. F. No. Q-23016/6/2015-Ad.IC(AAR) Dated: 24-10-2016


Authority for Advance Rulings (Procedure for Appointment as Chairman and Vice-Chairman) (Amendment) Rules, 2016 – F. No. Q-23016/6/2015-Ad.IC(AAR)

 

MINISTRY OF FINANCE (Department of Revenue)

NOTIFICATION

New Delhi, the 24th October, 2016

G.S.R. 1001(E).-In exercise of the powers conferred by Section 245-O, read with sub-section (1) and clause (p) of sub-section 2 of Section 295 of the Income-tax Act, 1961 (43 of 1961), the Board hereby makes the following rules to amend the Authority for Advance Rulings (Procedure for Appointment as Chairman and Vice-Chairman) Rules, (2016), namely:-

1. Short title and commencement.-

(1) These rules may be called the Authority for Advance Rulings (Procedure for Appointment as Chairman and Vice-Chairman) (Amendment) Rules, 2016

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

2. In the Authority for Advance Rulings (Procedure for Appointment as Chairman and Vice-Chairman) Rules, 2016, for rules 3 and 4, the following rules shall be substituted namely:-

“3. Selection Committee.- (1) The Chairman and Vice-Chairman of the Authority shall be appointed by the Central Government from a panel of names recommended by a Selection Committee consisting of the following members, namely:-

(a) The Chief Justice of India or a Judge of the Supreme Court as nominated by the Chief Justice of India as Chairman;

(b) The Secretary to the Government of India in the Ministry of Finance, Department of Revenue;

(c) The Secretary to the Government of India in the Ministry of Law and Justice, Department of Legal Affairs;

(d) The Secretary to the Government of India in Ministry of Personnel, Public Grievances and Pensions, Department of Personnel and Training.

(2) Any three members of the Selection Committee including the Chairman shall form a quorum for the meeting of the Committee.

(3) The Selection Committee shall recommend a panel of three names for appointment of Chairman and Vice-Chairman.

(4) The Committee shall make its recommendations to the Central Government, within a period not exceeding one hundred and twenty days from the date of reference made to the Committee.

4. Manner of selection of panels of names for Chairman.- (1) Whenever any vacancy of Chairman exists or as and when such vacancy arises or is likely to arise, the Central Government may make a reference to the Committee in respect of such vacancy for recommendations of a panel of names.

(2) The Committee shall devise its own procedure for selecting the persons for inclusion in the panel of names to be recommended for appointment as the Chairman.

5. Manner of selection of panels of names for Vice-Chairman.- (1) Whenever any vacancy of Vice- Chairman exists or as and when such vacancy arises or is likely to arise, vacancy shall be circulated through open advertisement and applicants shall be asked to forward complete application through Registrar of High Courts.

(2) The Selection Committee may devise its own procedure for selecting the persons from the applicants for inclusion in the panel of names to be recommended for appointment as the Vice-Chairman.

6. Medical fitness.- No retired person shall be appointed as a Chairman or Vice-Chairman unless he is declared medically fit by a Medical Board to be constituted by the Central Government for the purpose.”

[F. No. Q-23016/6/2015-Ad.IC(AAR)]

S. BHOWMICK, Under Secy.

Note: The Principal notification was published in the Gazette of India, Extraordinary vide G.S.R. Number 100(E), dated the 21st January, 2016

Notification No. F.No.370142/21/2016 24-10-2016


Draft Rules for prescribing the method of valuation of fair market value in respect of the trust or the institution-Chapter XII-EB of the Income-tax Act, 1961 – F. No. 370142/21/2016-TPL

 

F. No. 370142/21/2016-TPL

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, dated 24th October, 2016

Subject: Draft Rules for prescribing the method of valuation of fair market value in respect of the trust or the institution-Chapter XII-EB of the Income-tax Act, 1961- reg.

The Finance Act, 2016, inter alia, inserted a new Chapter XII-EB consisting of sections 115TD, 115TE and 115TF in the Income-tax Act, 1961 (the Act). This chapter contains specific provisions relating to levy of additional income-tax where the charitable institution exempt under the Act ceases to exist as charitable organization or converts into a non-charitable organization.

2. Sub-section (2) of newly inserted section 115TD provides that the accreted income for the purposes of sub-section (1) thereof means the amount by which the aggregate fair market value of the total assets of the trust or the institution, as on the specified date, exceeds the total liability of such trust or institution computed in accordance with the method of valuation as may be prescribed. Therefore, the method of valuation of fair market value in respect of the trust or the institution as on the specified date for determination of accreted income needs to be prescribed in the rules.

3. Accordingly, it is proposed to insert rule 17CB in the Income-tax Rules, 1962. The draft rule 17CB, on whichcomments and suggestion of stakeholders and general public may be sent electronically by 31st October, 2016 at the email address, dirtpl1@nic.in in this regard, are as under:

17CB. Method of valuation for the purposes of sub-section (2) of section 115TD. (1) For the purpose ofsub-section (2) of section 115TD of the Act, the aggregate fair market value of the total assets of the trust or institution, shall be the aggregate of the fair market value of all the assets in the balance sheet as reduced by-

(i) any amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Act, and

(ii) any amount shown as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset.

(2) For the purpose of sub-rule (1), the fair market value of an asset shall be determined in the following manner, namely:-

(i) Valuation of shares and securities,-

(a) the fair market value of quoted share and securities shall be the following,-

I. the average of the lowest and highest price of such shares and securities quoted on a recognised stock exchange as on the specified date ; or

II. where on the specified date, there is no trading in such shares and securities on a recognised stock exchange; the average of the lowest and highest price of such shares and securities on a recognised stock exchange on a date immediately preceding the specified date when such shares and securities were traded on a recognised stock exchange,

(b) the fair market value of unquoted equity shares shall be the value, on the specified date of such unquoted equity shares as determined in accordance with the following formula, namely:-

Fair market value = (A+B – L) × (PV), /(PE)

where,

A = book value of all the assets in the balance sheet (other than bullion, jewellery, precious stone, artistic work, shares, securities, and immovable property) as reduced by-

(i) any amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Act; and

(ii) any amount shown in the balance sheet as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset;

B = fair market value of bullion, jewellery, precious stone, artistic work, shares, securities and immovable property as determined in the manner provided in this rule;

L = book value of liabilities shown in the balance sheet, but not including the following amounts, namely:-

I. the paid-up capital in respect of equity shares;

II. the amount set apart for payment of dividends on preference shares and equity shares;

III. reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation;

IV. any amount representing provision for taxation, other than amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Act, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;

V. any amount representing provisions made for meeting liabilities, other than ascertained liabilities;

VI. any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares;

PE = total amount of paid up equity share capital as shown in the balance-sheet;

PV= the paid up value of such equity share;

(c) The fair market value of shares and securities other than equity shares shall be estimated to be price it would fetch if sold in the open market on the specified date on the basis of valuation report from a merchant banker or an accountant in respect of such valuation;

(ii) The fair market value of an immovable property shall be higher of the following:

(a) price that the property shall ordinarily fetch if sold in the open market on the specified date on the basis of the valuation report from a registered valuer, and

(b) stamp duty value as on the specified date,

(iii) The fair market value of a business undertaking, held by trust or institution, shall be its net assets:-

(A + B-L)

Which shall be determined mutatis mutandis applying the manner provided in sub-clause (b) of clause (i) of sub-rule (2).

(iv) The fair market value of any asset, other than those referred to in clauses (i), (ii) and (iii) above, shall be the price that the asset shall ordinarily fetch if sold in the open market on the specified date on the basis of valuation report obtained from a registered valuer:

Provided that in case no valuer is registered for valuation of such assets, the valuation report shall be obtained from a valuer who is a member of any one of the professional valuer bodies viz. Institution of Valuers, institution of Surveyors (Valuation Branch), institution of Govt. Approved Valuers, Practicing Valuers Association of India, The Indian Institution of Valuers, Centre for Valuation Studies, Research and Training, Royal institute of Chartered Surveyors, India Chapter, American Society of Appraisers, USA, Appraisal institute USA or a valuer who is appointed by any public sector banks or public sector undertakings for valuation purposes.

(3) For the purpose of sub-section (2) of section 115 TD of the Act, the total liability of the trust or institution shall be book values of liabilities in the balance sheet on the specified date but not including the following amounts , namely:-

(i) Capital fund or accumulated funds or corpus, by whatever name called, of the trust or institution,

(ii) Reserve or surpluses or excess of income over expenditure, by whatever name called,

(iii) any amount representing contingent liability

(iv) any amount representing provisions made for meeting liabilities, other than ascertained liabilities;

(v) any amount representing provision for taxation, other than amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income- tax Act, to the extent of the excess over the tax payable with reference to the income in accordance with the law applicable thereto.

Explanation- For the purposes of this rule,-

(a) “accountant” shall mean a fellow of the Institute of Chartered Accountants of India within the meaning of the Chartered Accountants Act, 1949 (38 of 1949) who is not appointed by the trust or institution as an auditor;

(b) “balance-sheet” in relation to any trust or institution, shall mean the balance-sheet of such trust or institution (including the notes annexed thereto and forming part of the accounts) as drawn up on the specified date which has been audited by an accountant;

(c) “Merchant banker” means category I merchant banker registered with Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(d) “quoted share or security” in relation to share or security means a share or security quoted on any recognized stock exchange with regularity from time to time, where the quotations of such shares or securities are based on current transaction made in the ordinary course of business;

(e) “recognized stock exchange” shall have the same meaning as assigned to it in clause (f) of section 25 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(f) “registered valuer” shall have the same meaning as assigned to it in section 34AB of the Wealth-tax Act, 1957 (27 of 1957) read with rule 8A of Wealth-tax Rules, 1957;

(g) “securities” shall have the same meaning as assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(h) “specified date” means the date as referred in explanation to section 115TD of the Act;

(i) “stamp duty value” means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property;

(j) “unquoted shares and securities”, in relation to shares or securities, means shares and securities which is not a quoted shares or securities.”

(Rajesh Kumar Kedia)

Director (TPL-I)

Tel No: 011-23095446

Notification No. 373/2016-RB 24-10-2016


FEM (TRANSFER OR ISSUE OF SECURITY BY A PERSON RESIDENT OUTSIDE INDIA) (ELEVENTH AMENDMENT) REGULATIONS, 2016 – AMENDMENT IN SCHEDULE 1

NOTIFICATION NO.FEMA.373/2016-RB/GSR 1002(E)DATED 24-10-2016

In exercise of the powers conferred by clause (b) of sub-section (3) of section 6 and section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following amendments in the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 (Notification No. FEMA. 20/2000-RB dated 3rd May 2000) namely:—

Short Title & Commencement

1. (i) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Eleventh Amendment) Regulations, 2016.

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

Amendment of Schedule 1

2. In the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, (Notification No. FEMA 20/2000-RB dated 3rd May 2000), in Schedule 1, in paragraph 2, after the existing sub-paragraph (4), a new sub-paragraph, by name ‘(5)’ shall be inserted, namely:

“(5) A wholly owned subsidiary set up in India by a non-resident entity, operating in a sector where 100 per cent foreign investment is allowed in the automatic route and there are no FDI linked conditionalities, may issue equity shares or preference shares or convertible debentures or warrants to the said non-resident entity against pre-incorporation/pre-operative expenses incurred by the said non-resident entity up to a limit of five per cent of its capital or USD 500,000 whichever is less, subject to the conditions laid down below.

a. Within thirty days from the date of issue of equity shares or preference shares or convertible debentures or warrants but not later than one year from the date of incorporation or such time as Reserve Bank of India or Government of India permits, the Indian company shall report the transaction in the Form FC-GPR to the Reserve Bank.
b. The valuation of the equity shares or preference shares or convertible debentures or warrants shall be subject to the provisions of Paragraph 5 of Schedule 1 of these Regulations.
c. A certificate issued by the statutory auditor of the Indian company that the amount of pre-incorporation/pre-operative expenses against which equity shares or preference shares or convertible debentures or warrants have been issued has been utilized for the purpose for which it was received should be submitted with the FC-GPR form.

Explanation: Pre-incorporation/pre-operative expenses shall include amounts remitted to Investee Company’s account, to the investor’s account in India if it exists, to any consultant, attorney or to any other material/service provider for expenditure relating to incorporation or necessary for commencement of operations.”

Notification No. 374/2016-RB 24-10-2016


FEM (TRANSFER OR ISSUE OF SECURITY BY A PERSON RESIDENT OUTSIDE INDIA) (TWELFTH AMENDMENT) REGULATIONS, 2016 – AMENDMENT IN SCHEDULE 5

NOTIFICATION NO.FEMA.374/2016-RB/GSR 1003(E)DATED 24-10-2016

In exercise of the powers conferred by clause (b) of sub-section (3) of section 6 and section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following amendments in the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 (Notification No. FEMA 20/2000-RB, dated 3rd May 2000) namely:—

Short Title & Commencement

1. (i) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Twelfth Amendment) Regulations, 2016.

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

Amendment of Schedule 5

2. In the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, (Notification No. FEMA 20/2000-RB, dated 3rd May 2000), in Schedule 5,

A. In paragraph 1,

(a) in the existing clause (b), the words, “listed” shall be deleted
(b) the existing clause ‘(g)’ and clause ‘(j)’ shall be deleted
(c) after existing clause (m), the following shall be added, namely:—
“(n) securitised debt instruments, including (i) any certificate or instrument issued by a special purpose vehicle (SPV) set up for securitisation of asset/s with banks, FIs or NBFCs as originators; and/or (ii) any certificate or instrument issued and listed in terms of the SEBI “Regulations on Public Offer and Listing of Securitised Debt Instruments, 2008.”

B. In paragraph 1C,

(a) in the existing clause (b), the words, ” listed” shall be deleted
(b) the existing clause ‘(g)’ and clause ‘(j)’ shall be deleted
(c) after existing clause (m), the following shall be added, namely:
“(n) securitised debt instruments, including (i) any certificate or instrument issued by a special purpose vehicle (SPV) set up for securitisation of asset/s with banks, FIs or NBFCs as originators; and/or (ii) any certificate or instrument issued and listed in terms of the SEBI “Regulations on Public Offer and Listing of Securitised Debt Instruments, 2008.”

Order [F.NO.10/03/2016-NCLT], Dated 24-10-2016


SECTION 408 OF THE COMPANIES ACT, 2013 – NATIONAL COMPANY LAW TRIBUNAL – CONSTITUTION OF – CONSTITUTION OF SPECIAL BENCH OF NCLT AT NEW DELHI ON 25-10-2016

ORDER [F.NO.10/03/2016-NCLT], DATED 24-10-2016

There shall be a Special Bench on 25th October, 2016 to attend the matters listed before Hon’ble President Chief Justice Shri M.M Kumar and Shri Santanu Kumar Mohapatra, Member (Technical). The Special Bench shall comprise of:

NCLT, Special Principal Bench at New Delhi

1. Shri R. Vardharajan, Member (Judicial)
2. Shri Santanu Kumar Mohapatra, Member (Technical)

After taking up matters listed before the Special Principal Bench Shri R. Vardharajan, Member (Judicial) shall sit in the regular New Delhi Division Bench to take up regular matters of Division Bench. This is in modification of order of even number dated 5-7-2016 for 25th October, 2016 only.

 

Dharmendra Pradhan asks states to help bring petro product under GST : 24-10-2016


Oil Minister Dharmendra Pradhan today nudged the states to agree on bringing all petroleum products under the Goods and Services Tax (GST) regime.

Speaking at the Global Investors Meet here, he said petroleum is currently under ‘state list’ for the the purpose of taxation under GST.

“GST Council will decide on this (taxation of petroleum products). On behalf of the industry, I would request the states to allow petroleum products to be brought under GST taxation,” he said.

As per the GST Constitutional Amendment Bill, petroleum products like LPG, kerosene and naptha would attract GST.

However, other products — crude oil, natural gas, petrol, diesel, high speed diesel and aviation turbine fuel — have been excluded from GST for initial years. Hence, these products will continue to be taxed in the hands of the states as they are being taxed at present.

The GST Council, which consist of Union Finance Minister and state counterparts, will decide on the date of inclusion of these products in the GST basket and rates thereon.

Pradhan also asked Madhya Pradesh Chief Minister Shivraj Singh Chouhan to support bringing all petroleum products under the Goods and Services Tax (GST) regime.

“In the last 3-4 years, there is a healthy growth of petroleum products in Madhya Pradesh. I will request the Chief Minister that he should agree to (petro items coming under) GST. There would be no loss to the state on account of taxation of petroleum products,” he said.

With two different kinds of taxation structure, in the new regime the oil and gas industry would have to comply with both the current tax regime as well as GST.

According to experts, GST would have a negative impact on the oil and gas industry due to compliance with dual taxation regime and non-creditable tax costs.

Pradhan said petrol consumption in rural areas is growing by 10 per cent every year.

On the occasion, there were total seven MOUs signed today for setting up solar power plants and oil marketing and infrastructure facility in the state.

Neyveli Lignite Corp (NLC) and Madhya Pradesh New and Renewable Energy Department (MPNRED) signed an MoU to set up 1,000 MW solar power plant, followed by an agreement between IOC, OIL India and Madhya Pradesh Urja Vikas Nigam Ltd (MPUVN) for 500 MW solar facility, NTPC and MPNRED for 500 MW solar power plant, PTC and MPNRED for 500 MW facility and NHDC Ltd and MPNRED for 140 MW solar project.

Besides five MoUs on solar projects, there were two agreements signed for oil marketing and infrastructure facilities. One MoU was signed between BPCL and MPNRED for setting up an ethanol plant and the other by IOC and MP Trade and Investment Facilitation Corporation (TRIFAC) for developing oil marketing infrastructure in the state.

State-run companies like NTPC, Neyveli Lignite will work towards making the state a solar power hub.

Pradhan said there are 1.65 lakh houses in the state and 56 lakh family had LPG connection till 2014.

“In the last two years, we have added 30 lakh more, and in the coming two years in MP, 50 lakh more LPG connections will come,” he said.

Source : PTI

PM for making India global arbitration hub : 24-10-2016


Prime minister Narendra Modi on Sunday batted for making India a global hub for arbitration, highlighting the need to develop cost-effective and time-bound processes in this regard.

Addressing a conference on the National Initiative Towards Strengthening Arbitration and Enforcement in India, organised by Niti Aayog, Modi said efforts to make India a preferred destination for global arbitration faced challenges in the form of availability of excellent global arbitrators, professional conduct, enforcing neutrality, timely completion of proceedings, and cost effective arbitration process.

He said India has no dearth of brilliant lawyers and judges and also has a large number of retired judges, engineers and scientists who can function as competent arbitrators in various disputes.

However, this in turn would require widening the ambit of legal education in India, he said. “There is need to develop specialised arbiration, bar associations also need to be professionally involved,” he said.

Enabling an alternative dispute resolution eco system is a national priority for India, PM Modi said, adding,”We need to promote India as a global arbitration hub.”

Modi highlighted legal reforms undertaken by his government including scrapping of over 1,000 archaic laws, enacting the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, and the Arbitration and Conciliation Act (Amendment) Act, the Bankruptcy and Insolvency Code.

“This has given us an opportunity to emerge as a leading arbitration jurisdiction,” he said.

Under the amendments to the Arbitration and Conciliation Act, 1996, an arbitrator will have to settle a case within 18 months. After the completion of 12 months, certain restrictions will be put in place to ensure that the arbitration case does not linger on.

Here chief justice T S Thakur raised a relevant question. He said even if a dispute is settled by an arbitration panel within a year, a losing party can always approach courts where the case may linger on.

The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act enables transfer of all pending suits and applications relating to commercial disputes involving a claim of Rs. 1 crore and above in high courts and civil courts to the relevant commercial division of courts.

Commercial Divisions are to be set up in those high courts which are already exercising ordinary original civil jurisdiction such as Delhi, Bombay, Calcutta, Madras and Himachal Pradesh high court.

Source : Business Standard

GST law to boost domestic demand, drive job creation: PM Narendra Modi : 24-10-2016


The Goods and Services Tax law will boost domestic demand, create more opportunities for domestic business and drive job creation, Prime Minister Narendra Modi said today.

He said so far the domestic market has been fragmented and different taxes across different states have made goods and services more expensive.

“This has hampered growth in inter-state commerce. We are enacting a Goods and Services Tax law, to create an integrated national market. This will further boost domestic demand, create more opportunities for Indian business and drive job creation,” he said.

India today, Modi said, is the fastest growing major economy, and one of the most attractive destinations for FDI.

“Indeed, we stand out as a bright spot in the global economy. This is the result of India’s fundamental strengths — democracy, demographic dividend and demand. We need to fully harness these strengths. This can happen only if businesses make long-term investments that create jobs and sustain economic growth,” he said.

Addressing the valedictory function of an international conference on arbitration, the Prime Minister said India is experiencing a digital revolution which is bridging the digital and economic divide in the society in general and rural society in particular.

“A boost to the rural economy through this revolution will make the Indian economy even more robust,” he said.

Innovative business models and app-based start-ups have instilled a spirit of enterprise among Indians, he noted, adding that yesterday’s job seekers are becoming today’s job creators.

“The legal profession is also opening up to the promises of the digital world. From cause-lists to case-laws, the lawyer’s library is now just a click away on your mobile phone,” he said.

Source : Economic Times

Need to revive arbitral centres to win investor confidence: FM : 22-10-2016


Pitching for making India an important commercial arbitral centre, Finance Minister Arun Jaitley today said efforts are being made to revive the arbitration centres in Mumbai and national capital with a view to expedite contractual dispute resolution at lesser cost.

India, he said, is the bright spot in gloomy world economy and has attracted highest foreign direct investment and to retain investor confidence the nation should have robust mechanism for expeditious disposal of disputes.

For India to become an important arbitral centre, “We need the adequate infrastructure for arbitration, that’s an area we have made headway,” he said pointing to progress made in setting up arbitration centres at Mumbai.

“I am conscious of the fact that efforts are being made to actively revive the arbitration centre in Delhi also and hopefully in the other large towns of India,” he said addressing a conference on Strengthening Arbitration and Enforcement in India.

Currently, the most respected arbitration centres are in US, UK, Europe and Singapore.

Jaitley said the objective is to “expedite dispute resolution, bring down the cost and incentivise people on arbitrating in India, rather than otherwise.”

For India to emerge as a major arbitral centre, it needs “independent and credible set of arbitrators,” he said adding besides a pool of independent and credible set of arbitrators, there is a need to nourish talent from fields like academia.

“We need arbitration with a speed, we need arbitration at modest cost. We need to recognise the principle that arbitration being a domestic redressal mode chosen by the contracting parties, contracts should be respected and therefore judicial intervention to be either minimal or virtually non existent,” he said.

For economic activity taking place in India, the seat of arbitration must be within the country as otherwise the cost on contracting parties would become unaffordable, he said.

“The objective is India does become an important arbitral centre as an economy which is attracting investment which is a fast growing economy, disputes in relation to that economy should take place in India.

“A country like India has experienced independent and powerful judiciary, there is no reason why we can’t have a very independent and robust arbitral mechanism in India,” he said.

The Finance Minister said investment is key to any economy and investors today have a choice across the world.

“His anticipated returns, his likelihood of profitability, his security of investment are all key decisions which guide the investment.

“And one key consideration for them is how safe and secure is investment. Will I have the right to exit at the appropriate moment and will I have the right to have expeditious disposal of any issue of dispute in relation to my investment,” Jaitley said.

India, he said, needs investment because it has a large infrastructure gap.

Road, highways, railways, airports, seaports, power sectors as well as manufacturing still have a large distance to cover.

“And history has provided us an opportunity where the world today looks at us. For the last two years and hopefully for the next few years we occupy the place of a bright spot as the fastest growing economy in the world.

“And when there is a global slowdown we have still been able to maintain respectable growth rates. We attracted one of the highest foreign direct investments into our economy,” he said.

Stating that public spending has increased, he said it was extremely important both from the point of view of the ease of doing business as also to retain the confidence of the investor itself, that Indian system is tuned in order to ensure that it has a robust mechanism for expeditious disposal of any disputes which arise.

Speaking on the occasion, Niti Aayog Vice Chairman Arvind Panagariya said with foreign investments increasing in the economy, there is a need to develop India as a global hub for arbitration.

Panagariya said India is a bright spot in challenging global economy and is projected to grow at 7.5 per cent in current year. Also improvement in ranking of the country in the competitiveness index shows inherent dynamism in the economy.

Source : Business Standard

Arun Jaitley to lay foundation for Financial, Administrative City : 22-10-2016


Union Finance Minister Arun Jaitley will lay the foundation stone for the proposed Financial City and Administrative City in Andhra Pradesh’s capital Amaravati on October 28.

Financial City and Administrative City are two of the nine cities the state government intends to develop in the capital region.

“In the last one year, we have achieved satisfactory results in building our capital Amaravati. We have built the (temporary) Secretariat in a record time and the development process will continue,” Chief Minister N Chandrababu Naidu said here today after inaugurating the branches of Andhra Bank and State Bank of India in the Secretariat at Velagapudi.

The Union Finance Minister would lay the foundation for Financial and Administrative cities on October 28, he said.

Source : PTI

CAG gearing up for audit changes in view of GST rollout: Shashi Kant Sharma : 22-10-2016


As the government goes full throttle to roll out Goods and Services Tax (GST) from April 1, the CAG today said it is ready for the new challenges and will take steps to enhance effectiveness of revenue audit.

Comptroller and Auditor General (CAG) Shashi Kant Sharma said the department has been alert to the emerging new challenges in the area of revenue administration, including the GST and various other reform measures taken by the government to improve tax collection and combat tax avoidance.

In the coming days, the CAG will take measures that would enhance the effectiveness of revenue audit such that it contributes more effectively to the fiscal sustainability of the governments, he added.

During the valedictory function of the two-day event of CAG, Sharma said reforms undertaken by the government are likely to improve budgetary process and tax administration in a big way.

“Amalgamation of the Railways and General budgets has brought the 92-year-old practice to an end. The government proposes to advance the budget presentation date from the last week of February. Further, plan and non-plan expenditure are proposed to be merged.

“Many more sectors have been opened up to foreign direct investment. Debt recovery is being made easier by amending the SARFAESI Act. And the most significant reform is introduction of GST,” he said.

Observing that CAG has taken due cognizance of these new challenges, Sharma said the department has taken note of the changing paradigm in revenue administration, including the challenges posed by shadow economy and black money, transfer pricing, accommodation bills etc and the need to manage large volumes of digital information that will emerge from increasing automation of tax filing.

“Notwithstanding the fact that the revenue audit has led to identification and recovery of thousands of crore of tax amounts every year, the audit department has faced challenges in accessing the data and information of taxpayers, which significantly limits the potential and effectiveness of audit,” he said.

He further said the urban local bodies and Panchayati Raj Institutions that constitute the third tier of government have come to occupy a very important place.

These bodies receive significant flows of funds, now close to Rs 14 lakh crore annually, but suffer from poor governance, weak financial management and poor accountability, he said.

Successive Finance Commissions have been recommending a key role for the CAG in the governance and accountability mechanism of the local bodies, he said.

“However, we are not the primary auditors of these institutions in most of the states. Our department has been conducting supplementary audits and providing technical guidance and to the primary auditors of these institutions,” he added.

Source : Economic Times

GSTN receives over 200 applications from IT and fintech companies : 21-10-2016


Goods and Services Tax Network (GSTN), the agency in charge of building the technological infrastructure for the implementation of GST, has received over 200 applications from IT and fintech companies who seek to become GST Suvidha Providers, but there are very few startups among them.

The GST Suvidha Provider (GSP) will offer products and services to help tax payers and businesses in compliance. While leading tech companies such as SAP India, Tally Solutions, Vayam Technologies and Mastek Holdings have sought to become GSPs, ClearTax seems to be among the few startups to have applied. The problem is the stringent criteria related to paid-up capital and turnover.

An IT/ITeS or financial company looking to become a GSP must have paid-up (raised) capital of at least Rs 5 crore and an average turnover of at least Rs 10 crore during the last three financial years.

“We kept the criteria stringent because, at the beginning, we want companies who are tested and whom we can rely on, since we are also building our own infrastructure. Also, we cannot handle a large number of GSPs right in the beginning,” GSTN chairman Navin Kumar told ET. “However, we are not barring startups from applying, and we have given a notification that even companies that don’t fit the criteria can apply and we will consider them in the next phase of selecting GSPs,” he added.

Software think tank iSPIRT said it was pushing to relax the GSP criteria to help startups. “iSPIRT is looking for an open policy that allows any startup or a small company to become a GSP. Instead of turnover, the GSTN could use other instruments like surety bonds or bank guarantees of Rs 5-10 lakh for a period of 12 to 18 months,” said Sudhir Singh, a policy expert at the iSPIRT.

“The real concern of GSTN should be the product that the GSP develops. To ascertain the application security and ICT infrastructure of GSPs, they can use third parties to verify that the technical criteria is met,” Singh said. Becoming a GSP can also open a business opportunity as the selected companies are allowed to turn their services and products into a revenue model.

ClearTax’s B2B business of providing software products to businesses brings 60% of the company’s revenue, and is expected to grow to 65% after integration with the GST ecosystem, said CEO Archit Gupta. “Startups have an important role to play in the GST ecosystem for their speed of innovation and the quality of the products. They should be encouraged to become GSPs,” he said.

Source : PTI

GST: No consensus emerges, Council to meet again on Nov 4-5 : 21-10-2016


On a crucial day in which the GST Council was to decide the future course of action over Goods and Services Tax implementation, it has emerged that the various parties could not come to a consensus. Sources say that the GST Council will meet again on November 4-5 again.

Just a day earlier, Finance Minister Arun Jaitley said the 14% secular rate of growth was agreed on after discussing five different formulas to compute the states’ possible VAT revenue growth in a non-GST scenario (any shortfall from this level is eligible to be compensated).

It was decided on Tuesday, in order to compute the states’ revenues losses from the goods and services tax (GST), a 14% annual growth over the 2015-16 VAT revenue base would be assumed over the initial five years when the Centre will be obliged to fully compensate them for these losses. The broad contours of the compensation formula finalised here by the GST Council added to the revenue base of the 11 geographically disadvantaged states. Also, the CST revenue in the base year with the actual rate of 2% would be added to the revenue base, and not 4% as initially demanded by the states.

Source : Financial Express

Cess on demerit good a departure from GST concept: Experts : 21-10-2016


The proposed structure of levying cess on ultra-luxury and sin goods is a departure from the GST concept as envisaged initially and the Centre would have absolute powers in future to alter the cess rate, which could go up to 2 per cent, experts said.

The GST Council yesterday mooted a four-slab GST tax structure of 6, 12, 18 and 26 per cent with lower rates for essential items and the highest for luxury goods that will also be levied with an additional cess.

“Cesses are being subsumed under GST and hence the levy of a new cess was a complete surprise. Proposal to have 5 rate structure is not aligned to the concept of simplified tax regime. Multiple slabs lead to complications on compliance and issues on classification,” PwC Partner (Indirect Tax) Anita Rastogi said.

Last year, a panel headed by Chief Economic Advisor Arvind Subramanian had suggested 17-18 per cent as the standard rate for bulk of goods and services while recommending 12 per cent for low rate goods and 40 per cent for demerit ones like luxury car, aerated beverages, pan masala and tobacco. For precious metal, it recommended a range of 2-6 per cent.

Experts said that the incidence of cess is likely to be such that luxury goods would attract tax somewhere between 26 to 40 per cent.

“This cess that the Centre is talking about is likely to be non-creditable. Because the Centre wants to create a pool for compensation, the cess rate will likely come to between 1-2 per cent,” Nangia & Co Director Rajat Mohan said.

Deloitte Haskins & Sells LLP Senior Director (Indirect Tax) M S Mani said that as a concept cess does not go well with the original idea of Goods and Services Tax (GST).

“Possibly they want to avoid a fifth tax slab and hence they brought the concept of cess. Cess would be helpful in a way that the rate of cess can be very easily altered whenever the Centre wants without consultation with state,” Mani said.

As per the proposed GST rate structure, the Centre plans to create a Rs 50,000 crore pool to be used to compensate the states for revenue loss arising out of implementation of GST.

The amount would be raised by imposing cess over and above the 26 per cent rate on ultra luxury and demerit goods such as tobacco, cigarettes, aerated drinks and polluting items.

As the cess would vary, experts said, it would be difficult to quantify how much would be the incidence of price increase in these items.

“Most demerit goods are currently taxed between 27-40 per cent. If the tax rate in GST is kept closer to that then the inflationary impact will be limited,” Mani said.

The government plans to roll out GST from April 1, 2017. It will subsume excise, service tax and other local levies.

Source : Economic Times

9 – 20-10-2016


Rupee Drawing Arrangement – Trade related remittance limit

RBI/2016-17/91
A.P. (DIR Series) Circular No. 9

October 20, 2016

To
All Category – I Authorised Dealer Banks

Madam/Sir,

Rupee Drawing Arrangement – Trade related remittance limit

Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to A.P. (DIR Series) Circular No.102 dated May 21, 2015 permitting them to regularize payments exceeding the prescribed limit under RDA provided that they are satisfied with the bonafide of the transaction

2. On a review and in consultation with Government of India, it has been decided that the permitted trade transaction, under the Rupee Drawing Arrangements (RDAs) shall not exceed fifteen lakh rupees per transaction. All other instructions issued vide A.P. (DIR Series) Circular No. 28 [A. P. (FL/RL Series) Circular No. 02] dated February 6, 2008 will remain unchanged.

3. The Reserve Bank has since amended the subject Regulations accordingly through Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 which have been notified through notification no. FEMA 14(R)/2016-RB dated May 02, 2016 vide G.S.R No. 480(E) dated May 3, 2016. Master Direction No.2 dated January 1, 2016 is being updated, to reflect the changes. The other instructions issued vide the above mentioned circulars shall remain unchanged.

4. AD Category – I banks may bring the contents of this circular to the notice of their constituents concerned.

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

Yours faithfully,

(Shekhar Bhatnagar)
Chief General Manager-in-Charge

8 – 20-10-2016


Foreign investment in Other Financial Services

RBI/2016-17/90
A.P. (DIR Series) Circular No. 8

October 20, 2016

To
All Category – I Authorised Dealer Banks

Madam/Sir,

Foreign investment in Other Financial Services

Attention of Authorised Dealers Category – I (AD Category – I) banks is invited to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, notified videNotification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time (Principal Regulations).

2. At present, paragraph F.8 of Annex B to Schedule 1 of the Principal Regulations permits foreign investment up to 100%, under the automatic route, in Non-Banking Finance Companies (NBFCs) engaged in the 18 activities listed therein. Such investment is subject to the conditions, including minimum capitalisation norms.

3. On a review, in consultation with the Government of India, it has been decided to allow foreign investment up to 100% under the automatic route in ‘Other Financial Services’. Other Financial Services will include activities which are regulated by any financial sector regulator viz. Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority, Pension Fund Regulatory and Development Authority, National Housing Bank or any other financial sector regulator as may be notified by the Government of India in this regard. Such foreign investment shall be subject to conditionalities, including minimum capitalisation norms, as specified by the concerned Regulator/ Government Agency.

4. Other salient features of the revised regulatory framework are as under:

a) In financial services activities which are not regulated or partly regulated by any financial sector regulator or where there is lack of clarity regarding regulatory oversight, foreign investment will be allowed up to 100% under the Government approval route.

b) Foreign investment in an activity which is specifically regulated by an Act, will be restricted to foreign investment levels/limits, if any, specified in that Act.

c) Downstream investment by any entity engaged in ‘Other Financial Services” will be subject to extant sectoral regulations and provisions of Principal Regulations.

5. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

6. Reserve Bank has since amended the Principal Regulations accordingly through the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Thirteenth Amendment) Regulations, 2016 which have been notified through Notification No. FEMA 375/2016-RB dated September 9, 2016 vide G.S.R. No.879(E) dated September 9, 2016.

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

Yours faithfully,

(Shekhar Bhatnagar)
Chief General Manager-in-Charge

7 – 20-10-2016


Investment by a Foreign Venture Capital Investor (FVCI) registered under SEBI (FVCI) Regulations, 2000

RBI/2016-17/89
A.P. (DIR Series) Circular No. 7

October 20, 2016

To
All Category – I Authorised Dealer Banks

Madam/Sir,

Investment by a Foreign Venture Capital Investor (FVCI) registered under Si.EBI (FVCI) Regulations, 2000

Attention of Authorised Dealers Category – I (AD Category – I) banks is invited to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, notified videNotification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time (Principal Regulations).

2. Investment in India by Foreign Venture Capital Investors (FVCI), registered with SEBI, is governed by the provisions of Schedule 6 of the Principal Regulations. In order to further liberalise and rationalise the investment regime for FVCIs and to give a fillip to foreign investment in the startups, the extant regulatory provisions have been reviewed, in consultation with the Government of India and accordingly amendments have been carried out inSchedule 6 of Foreign Exchange Management (Transfer or Issue of security by a person resident outside India) Regulations, 2000, through Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Third Amendment) Regulations, 2016.

3. As per the Amendment Notification referred to above, any FVCI which has obtained registration under the Securities and Exchange Board of India (FVCI) Regulations, 2000, will not require any approval from Reserve Bank of India and can invest in:

a) Equity or equity linked instrument or debt instrument issued by an Indian company whose shares are not listed on a recognised stock exchange at the time of issue of the said securities/instruments and engaged in any of the following sectors:

i. Biotechnology

ii. IT related to hardware and software development

iii. Nanotechnology

iv. Seed research and development

v. Research and development of new chemical entities in pharmaceutical sector

vi. Dairy industry

vii. Poultry industry

viii. Production of bio-fuels

ix. Hotel-cum-convention centres with seating capacity of more than three thousand

x. Infrastructure sector (This will include activities included within the scope of the definition of infrastructure under the External Commercial Borrowing guidelines / policies notified under the extant FEMA Regulations as amended from time to time).

b) Equity or equity linked instrument or debt instrument issued by an Indian ‘startup’ irrespective of the sector in which the startup is engaged. A startup will mean an entity (private limited company or a registered partnership firm or a limited liability partnership) incorporated or registered in India not prior to five years, with an annual turnover not exceeding INR 25 Crores in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property and satisfying certain conditions given in the Regulations.

c) Units of a Venture Capital Fund (VCF) or of a Category I Alternative Investment Fund (Cat-I AIF) (registered under the SEBI (AIF) Regulations, 2012) or units of a Scheme or of a fund set up by a VCF or by a Cat-I AIF.

4. It is clarified that downstream investments by a Venture Capital Fund (VCF) or a Cat-I AIF, which has received investment from FVCI, shall have to comply with the provisions for downstream investment as laid down in Schedule 11 of the Principal Regulations.

5. Other salient features of the revised regulatory framework are as under:

a) FVCI may open a foreign currency account and/or a rupee account with a designated branch of an Authorised Dealer for the purpose of making transactions only and exclusively under this Schedule.

b) The consideration for all investment by an FVCI shall be paid out of inward remittance from abroad through normal banking channels or out of sale / maturity proceeds of or income generated from investment already made as per paragraph 3 above.

c) There will be no restriction on transfer of any security/instrument held by the FVCI to any person resident in or outside India.

6. An entity receiving investment directly from a registered Foreign Venture Capital Investor (FVCI) will be required to report the investment, mutatis mutandis, in form FCGPR. The necessary changes in the E-biz portal is being made and separate instructions will be issued in due course. Till such time, reporting requirements, as hitherto, shall continue.

7. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

8. Reserve Bank has since amended the Principal Regulations accordingly through the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Third Amendment) Regulations, 2016 which have been notified vide Notification No. FEMA 363/2016-RB dated April 28, 2016, vide G.S.R. No.465(E) dated April 28, 2016.

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

Yours faithfully,

(Shekhar Bhatnagar)
Chief General Manager-in-Charge

6 – 20-10-2016


RBI/2016-17/88
A.P. (DIR Series) Circular No. 6

October 20, 2016

To
All Category – I Authorised Dealer Banks

Madam/Sir,

Review of sectoral caps and simplification of Foreign Direct Investment (FDI) Policy

Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, notified by the Reserve Bank vide Notification No. FEMA. 20/2000-RB dated 3rd May 2000 (FEMA 20), as amended from time to time.

2. The Central Government had reviewed the extant FDI Policy on various sectors and has made amendments in the Consolidated FDI Policy Circular 2015 vide Press Note No. 6(2015 Series) dated June 3, 2015, Press Note No. 7(2015 Series) dated June 3, 2015, Press Note No. 8(2015 Series) dated July 30, 2015, Press Note No. 11(2015 Series) dated October 1, 2015 and Press Note 12(2015 Series) dated November 24, 2015.

3. While Authorised Dealers and their constituents are advised to refer to the said amendments regarding the changes made, some of the salient features are as under:

a.  In all sectors where there is a limit/cap on foreign investment, such limit/cap shall be reckoned in a composite manner. In other words, “sectoral cap”, i.e., the maximum amount which can be invested by foreign investors in an entity will include all types of foreign investments, direct and indirect, regardless of whether the said investments have been made under Schedules 1, 2, 2(A), 3, 6, 8, 9 and 10 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000. Foreign Currency Convertible Bonds (FCCBs) and Depository Receipts (DRs) having underlying of instruments which can be issued under Schedule 5, being in the nature of debt, shall not be treated as foreign investment under such composite limit/cap. However, any equity holding by a person resident outside India resulting from conversion of any debt instrument under any arrangement shall be reckoned as foreign investment under the composite limit/cap.

b. “Total foreign investment” in an Indian company will be the sum total of direct and indirect foreign investments.

c.  Portfolio investment up to aggregate foreign investment level of 49% or sectoral/statutory cap, whichever is lower, will not be subject to either Government approval or compliance with the sectoral conditions, as the case may be, provided such investment does not result in change in ownership leading to control of Indian entities [within the meaning of Regulation 14 (1) of Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000] by non-resident entities. Other foreign investments will be subject to conditions of Government approval and compliance of sectoral conditions as laid down in the FDI policy and the related Regulations under the Foreign Exchange Management Act 1999.

d.  The onus of compliance with the sectoral/statutory caps on foreign investment and attendant conditions, if any, shall be on the company receiving foreign investment.

e.  A company shall be considered as owned by resident Indian citizens if more than 50% of the capital in it is beneficially owned by resident Indian citizens and/or Indian companies, which are ultimately owned and controlled by resident Indian citizens. A Limited Liability Partnership (LLP) will be considered as owned by resident Indian citizens if more than 50% of the investment in such an LLP is contributed by resident Indian citizens and/ or entities which are ultimately ‘owned and controlled by resident Indian citizens’ and such resident Indian citizens and entities have majority of the profit share.

f. ‘Control’ shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreement or voting agreement. For the purpose of LLP, ‘control’ shall mean right to appoint majority of the designated partners, where such designated partners, with specific exclusions to others, have control over all the policies of the LLP.

g.  Foreign investment in LLP is permitted under the automatic route if the LLP is engaged in sector where 100% FDI is allowed and there are no attendant FDI linked performance conditionalities to the sector.

h.  Foreign investment by way of swap of shares has been permitted provided the resident company in which the investment is made is engaged in an automatic route sector subject to the condition that irrespective of the amount, valuation of the shares involved in the swap arrangement will have to be made by a Merchant Banker registered with the Securities and Exchange Board of India (SEBI) or an Investment Banker outside India registered with the appropriate regulatory authority in the host country.

i.  In terms of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2016 notified vide Notification No. FEMA 361/2016-RB dated February 15, 2016, a Non-resident Indian (NRI) has been permitted to purchase or sell shares, convertible preference shares, convertible debentures and warrants of an Indian company or units of an investment vehicle, on repatriation basis (under Schedule 3 to FEMA 20) and non-repatriation basis (under schedule 4 to FEMA 20) . Investment by an NRI, including a company, a trust and a partnership firm incorporated outside India and owned and controlled by NRI, on non-repatriation basis under Schedule 4 of notification ibid, will be deemed to be domestic investment at par with the investment made by residents.

j.  Foreign investment up to 100 percent under the automatic route has been permitted in the plantation sector which includes tea plantations, coffee plantations, rubber plantations, cardamom plantations, palm oil tree plantations and olive oil tree plantations. There have been changes in the foreign investment cap in other sectors. The updated Annex-B to schedule-1 has been notified vide Notification No. FEMA 362/2016-RB dated February 15, 2016.

k.  ”Real estate business” shall mean dealing in land and immovable property with a view to earning profit therefrom and does not include development of townships, construction of residential / commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships. Further, earning of rent income on lease of the property, not amounting to transfer, will not amount to “real estate business”.

l.  Manufacturing has been given a precise definition and foreign investment up to 100% under the automatic route is permitted in manufacturing subject to the conditions of the FDI policy and the provisions of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000. A manufacturer is permitted to sell its products manufactured in India through wholesale and/or retail, including through e-commerce without Government approval.

m.  An entity engaged in single brand retail trading operating through brick and mortar stores, is permitted to undertake retail trading through e-commerce.

4. To effect these changes the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 have been amended through the Foreign Exchange (Transfer or Issue of Security by a Person Resident outside India) (Tenth Amendment) Regulations, 2015 notified vide Notification No. FEMA.354/2015-RB dated October 30, 2015, (c.f. G.S.R No.823 (E) dated October 30, 2015), the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2016 notified vide Notification No. FEMA 361/2016-RB dated February 15, 2016 (c.f. G.S.R No 165(E) dated February 15, 2016) and Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Second Amendment) Regulations, 2016 notified vide Notification No. FEMA 362/2016-RB dated February 15, 2016, (c.f. G.S.R No. 166 (E) dated February 15, 2016).

5. Authorised Dealer 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 section 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(Shekhar Bhatnagar)
Chief General Manager-in-Charge

No.11 [(1)/14(R) Dated: 20-10-2016


Foreign Exchange Management (Manner of receipt and payment) Regulations, 2016

 

RBI/2016-17/93

A.P. (DIR Series) Circular No. 11 [(1)/14(R)]

October 20, 2016

To

All Category – I Authorised Dealer Banks

Madam/Sir,

Foreign Exchange Management (Manner of receipt and payment) Regulations, 2016

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to A.D.(M.A. Series) Circular No. 11 dated May 16, 2000 in terms of which ADs were advised of various Rules, Regulations, Notifications/ Directions issued under the Foreign Exchange Management Act, 1999 (hereinafter referred to as the Act). In consultation with the Government of India, the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000; Foreign Exchange Management (Receipt from, and payment to, a person resident outside India) Regulations, 2000 and Foreign Exchange Management Notification (Transactions in Indian rupees with residents of Nepal or Bhutan) Regulations 2000, as amended from time to time have been repealed and superseded by theForeign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 notified vide G.S.R. No.480 (E) dated May 03, 2016.

Further, attention of Authorised Dealers is invited to para A.3 of Master Direction No 16/2015-16 on Export of Goods and Services and B.4 of Master Direction No 17/2015-16 on Import of Goods and Services dated January 1, 2016 respectively, as amended from time to time.

The synopsis of the new Regulations notified is as under:

2. Manner of receipt in foreign Exchange :

(1) AD bank may receive foreign exchange by way of remittance or by way of reimbursement from his branch or correspondent outside India against payment for exports from India or against any other payment in following manner :

(A) Members of Asian Clearing Union (ACU)

(i) Bangladesh, Myanmar, Pakistan, Sri Lanka and Republic of Maldives -

a) Receipt for export of eligible goods and services, through ACU mechanism i.e. by debit to the ACU Dollar/Euro account in India of a bank of the member country in which the other party to the transaction is resident or by credit to the ACU Dollar/Euro account of the Authorised Dealer maintained with the correspondent bank in that member country,

b) In any freely convertible currency for cases other than export of eligible goods and services,

c) In respect of exports from India to Myanmar, payment may be received in any freely convertible currency or through the ACU mechanism from Myanmar.

(ii) Nepal and Bhutan-

a) In Rupees

b) In respect of exports from India to Nepal, may be received in any freely convertible currency also, provided the importer resident in Nepal has been permitted by the Nepal Rashtra Bank to make payment in free foreign exchange. However, such receipts shall not be routed through the ACU mechanism.

(iii) Islamic Republic of Iran –

In all cases including receipts for export of eligible goods and services, in any freely convertible currency and/or as prescribed by Reserve Bank of India from time to time.

(B) All countries other than those mentioned in (A) above:-

(i) Receipt in rupees from the account of a bank situated in any country other than an ACU member,

(ii) In any freely convertible currency.

(2) (i) In respect of export from India, receipt shall be made in a currency appropriate to the place of final destination as mentioned in the declaration form irrespective of the country of the residence of the buyer,

(ii) Any other mode of receipt of export proceeds as prescribed by the Reserve Bank of India from time to time.

(3) Payment for export of goods / software may be received from a Third Party (a party other than the buyer) as per specified conditions.

(4) Receipt for exports may also be made in following manner:

(i) In the form of a bank draft, cheque, pay order, foreign currency notes/traveller’s cheque from a buyer during his visit to India

(ii) By debit to FCNR/NRE account in India;

(iii) In rupees from the credit card servicing bank in India against the charge slip signed by the buyer;

(iv) From a rupee account held in the name of an Exchange House with an Authorised Dealer if the amount does not exceed fifteen lakh rupees per export transaction;

(v) In accordance with the directions issued by the Reserve Bank to Authorised Dealers, where the export is covered by the arrangement between the Central Government and the Government of a foreign country or by the credit arrangement entered into by the Exim Bank with a financial institution in a foreign state;

(vi) In the form of precious metals i.e. gold / silver / platinum equivalent to value of jewellery exported by Gem & Jewellery units in Special Economic Zones and Export Oriented Units on the condition that the sale contract provides for the same and the value is declared in the relevant EDF;

(vii) In addition to (i) and (iii) above, any person resident in India may also receive any payment other than for exports by means of postal order/postal money order issued by a post office outside India.

3. Manner of payment in foreign exchange:

(1) AD bank may make payment in foreign exchange by way of remittance from India or by way of reimbursement to his branch or correspondent outside India against payment for import into India, or against any other payment in the following manner:

(A) Members of Asian Clearing Union:

(i) Bangladesh, Myanmar, Pakistan, Sri Lanka and Republic of Maldives -

a) Payment for import of eligible goods and services by credit to the ACU Dollar/Euro account in India of a bank of the member country in which the other party to the transaction is resident or by debit to the ACU Dollar/Euro account of the Authorised Dealer maintained with the correspondent bank in that member country,

b) In any freely convertible currency for cases other than import of eligible goods and services

c) In respect of imports to India from Myanmar, payment may be made in any freely convertible currency or through the ACU mechanism from Myanmar.

(ii) Nepal and Bhutan- Payment may be made in Rupees,

(iii) Islamic Republic of Iran –

In all cases including payments for import of eligible goods and services, in any freely convertible currency and/or as prescribed by Reserve Bank of India to ADs from time to time,

(B) All countries other than those mentioned in (A) above:

(i) Payment in rupees from the account of a bank situated in any country other than an ACU member,

(ii) In any freely convertible currency.

(2) In respect of imports into India;

(i) where the goods are shipped from ACU member, but the supplier is resident of a country other than member of ACU (other than Nepal and Bhutan), payment may be made in rupees to the account of a bank situated in any country other than an ACU member or in any freely convertible currency,

(ii) In all other cases, payment shall be made in a currency appropriate to the country of shipment of goods.

(iii) Any other mode of payment as may be prescribed by the Reserve Bank of India from time to time.

(3) Payments for import of goods / software may be made to a Third Party (a party other than the supplier) as per specified conditions.

(4) Manner of Payment in certain cases:

(A) Payments for import of goods may be made in foreign exchange through an international card held by him / in rupees from international credit card / debit card through the credit / debit card servicing bank in India against the charge slip signed by the importer / as prescribed by Reserve Bank from time to time, provided that the transaction is in conformity with the extant provisions including the Foreign Trade Policy in force.

(B) Any person resident in India may also make payment as under:

(i) in rupees towards meeting expenses on account of boarding, lodging and services related thereto or travel to and from and within India of a person resident outside India who is on a visit to India;

(ii) by means of a crossed cheque or a draft as consideration for purchase of gold or silver in any form imported by such person in accordance with the terms and conditions imposed under any order issued by the Central Government under the Foreign Trade (Development and Regulations) Act, 1992 or under any other law, rules or regulations for the time being in force;

(iii) a company or resident in India may make payment in rupees to its non-whole time director who is resident outside India and is on a visit to India for the company’s work and is entitled to payment of sitting fees or commission or remuneration, and travel expenses to and from and within India, in accordance with the provisions contained in the company’s Memorandum of Association or Articles of Association or in any agreement entered into by it or in any resolution passed by the company in general meeting or by its Board of Directors, provided the requirements of any law, rules, regulations, directions applicable for making such payments are duly complied with.

4. Consequent to provisions of para 3.(4) of this circular, para B.4 (iii) of Master Direction No. 17/2015-16 dated January 1, 2016 on Imports of goods and services has been amended and para B.4(iv) inserted. The amendments have already been suitably incorporated in Master Direction No. 16/2015-16 dated January 1, 2016 on Exports of goods and services.

5. The new regulations have been notified vide Notification No. FEMA 14 (R)/2016-RB dated May 02, 2016 c.f. G.S.R. No.480 (E) dated May 03, 2016 and shall come into force with effect from May 02, 2016.

6. AD Category- I banks may bring the contents of the circular to the notice of their constituents concerned.

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

Yours faithfully,

(Shekhar Bhatnagar)

Chief General Manager-in-Charge

10 – 20-10-2016


External Commercial Borrowings (ECB) – Extension and conversion

 

RBI/2016-17/92
A.P. (DIR Series) Circular No. 10

October 20, 2016

To
All Category – I Authorised Dealer Banks

Madam/Sir,

External Commercial Borrowings (ECB) – Extension and conversion

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to paragraph No. C.14, F.18 and F.19 of Annex to A.P. (DIR Series) Circular No.32 dated November 30, 2015 and paragraph No. 2.10 and 2.16 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. Based on experience gained, it has been decided to simplify the process of dealing with matured but unpaid ECB.

2. Under the extant ECB guidelines, designated AD Category-I banks can approve requests from borrowers for changes in repayment schedule during the tenure of the ECB, i.e., prior to maturity provided average maturity and all-in-cost are in conformity with applicable ceilings/ norms. To simplify the procedure relating to ECB, it has been decided to delegate the powers to designated AD Category-I banks to approve requests from borrowers for extension of matured but unpaid ECB, subject to the following conditions:

i) No additional cost is incurred;

ii) Lender’s consent is available;

iii) Reporting requirements are fulfilled.

3. Further, powers are also delegated to designated AD Category – I bank to approve cases of conversion of matured but unpaid ECB into equity subject to same conditions as set out in paragraph 2 while ensuring that conversion is within the terms mentioned in paragraph C.14 of Annex to Circular dated November 30, 2015 as referred to above.

4. It should also be noted that if the ECB borrower concerned has availed credit facilities from the Indian banking system including overseas branches/subsidiaries, any extension of tenure / conversion of unpaid ECBs into equity (whether matured or not) shall be subject to applicable prudential guidelines issued by the Department of Banking Regulation of RBI, including guidelines on restructuring. Further, such conversion into equity shall also be subject to consent of other lenders, if any, to the same borrower or at least information regarding conversions shall be exchanged with other lenders of the borrower.

5. All other aspects of the ECB policy shall remain unchanged. AD Category – I banks should bring the contents of this circular to the notice of their constituents and customers.

6. The aforesaid Master Direction No. 5 dated January 01, 2016 is being updated to reflect the changes.

7. The directions contained in this circular have been issued under section 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.

Yours faithfully,

(Shekhar Bhatnagar)
Chief General Manager-in-Charge

Order [F.NO.10/03/2016-NCLT], Dated 20-10-2016


SECTION 408 OF THE COMPANIES ACT, 2013 – NATIONAL COMPANY LAW TRIBUNAL – CONSTITUTION OF – NOTIFIED VACATION MEMBER AT NCLT, MUMBAI

ORDER [F.NO.10/03/2016-NCLT]DATED 20-10-2016

There is vacation at NCLT Mumbai Bench from 31-10-2016 to 4-11-2016, Shri B.S.V. Prakash Kumar, Member (Judicial) shall be the Vacation Member at NCLT, Mumbai, during the vacation to attend urgent matters. Hearing on urgent matters shall be granted on the date(s) convenient to the Hon’ble Member.

CBDT issues final rules for taxing share buy back by companies : 20-10-2016


Seeking to minimise litigations over taxation, CBDT has come out with rules for computing distributed income arising out of issue of shares following buy back, demerger, amalgamation or bonus issue by companies.

The Central Board of Direct Taxes (CBDT) has introduced new Rule 44BB for computing amount received by a company in respect of issue of share for computing buy back tax payable.

The rules take effect from June 1, 2016.

The final rules provide for computation mechanism of ‘amount received’ in 12 different scenarios depending upon the manner of issue of shares — regular issue, amalgamation, demerger, bonus issue, conversion of bond or debenture, sweat equity share issue and share-buyback in demat form.

The clarification with respect to the amount received by a company in case of ESOP or Sweat Equity shares is quite logical and would go a long way in rationalising the tax impact arising on buy back of such shares, experts said.

“In absence of clear provisions in this regard, there was a trend to shift the tax cost of buy back of ESOP shares to the employees. This will help in alleviating any open issues in relation to buy backs, thereby reducing litigation,” Nangia & Co Partner Amit Agarwal said.

Industry has been waiting for the final rules in relation to methodology for determining the amount received by the company, under different circumstances in which the shares have been issued.

Overall, the final rules appreciate the business and commercial realities that are associated with issuance of shares in different scenarios, Agarwal said.

The final rules also cover issuance of equity shares, pursuant to conversion of a firm into company or succession of a sole proprietorship by a company.

In case of issue of shares for acquiring an asset or settling a liability, the requirement of obtaining a fair market value report of the merchant banker is an onerous requirement, he said.

“While the intention of the CBDT is to obtain a fair valuation, we believe that the valuation responsibility should have been casted on certified assets valuers or chartered engineers,” he added.

Source : Financial Express

GST talks stumble on cess, administrative control issue : 20-10-2016


The Centre’s efforts to finalise the rates for the Goods and Services Tax have been pushed back to November as the States opposed the Finance Ministry’s proposal to levy a cess for compensation, an issue which had been resolved on Tuesday.

The States also called for a fresh discussion on control of assessees.

“The discussion on these two items is continuing. We have converged towards a consensus, an announcement will be made after the next GST Council meeting,” Finance Minister Arun Jaitley said on Wednesday after the conclusion of the third round of meetings.

The GST Council will now meet on November 3 and 4 to finalise the rate structure and once again on November 9 and 10 to discuss the draft legislation. Despite the delay, the Centre and the States are still hopeful of meeting the rollout date of April 1, 2017.

Some States have opposed the Centre’s proposal to levy a cess on ultra-luxury goods, tobacco and pan masala and for clean energy; instead, they favoured a higher tax rate on consumer durables. The Centre requires ₹50,000 crore to compensate the States for any revenue loss under GST for the next five years and had proposed to fund it through the cess.

“A cess can be levied for clean energy and on sin goods such as tobacco, which will together yield ₹44,000 crore. The remaining ₹7,000 crore can be financed through various ways such as a higher tax than the proposed rate on consumer durables,” said Kerala Finance Minister Thomas Isaac.

He also called for a review of the proposal to have a lower tax slab of 6 per cent under GST as against the current 5 per cent and said this would impact the common man.

The Finance Ministry had on Tuesday proposed that GST should have a four-rate structure with two standard rates of 12 per cent and 18 per cent. Food items and other necessities would be taxed at 6 per cent while white goods and luxury products would be taxed at 26 per cent.

Source : The Hindu

GST: Centre, states put off decision on rate to next month : 20-10-2016


The Goods and Services Tax (GST) Council was unable to finalise two key elements of the proposed levy’s framework — the rate structure and dividing its administration between state and central authorities — pushing the decision to early next month. However, Finance Minister Arun Jaitley said the Centre and states were close to a decision on the matter.

“On this issue we have virtually converged towards consensus,” Jaitley said after the two-day council meeting ended Wednesday.

The next meeting will be held on November 3-4 as the government races to complete work on the landmark reform by April 1.

With regard to rates, the sticking point was the proposed cess on luxury items and so-called sin goods such as tobacco to create a corpus to fund states that would lose revenue from the rollout of GST.

“The rate structure will depend on the source of funds on the basis of which compensation to the losing states will be funded,” said Jaitley, who’s also chairman of the council. After the compensation fund issue is resolved, the rates can be worked out, he said. “Whether the compensation is to be funded out of the rate structure itself or out of some special cess or out of any other sources, once this question is answered, then the rate structure can be determined independently.”

Central and state officials will examine the options before early November meeting that will take a call on rates. The council will then meet on November 9-10 to thrash out GST-related legislation. The winter session of Parliament that begins on November 16 is expected to pass all GST legislation in advance of its rollout.

MULTIPLE RATES

The Centre has proposed a four-slab structure — two standard rates of 12% and 18%, a lower one of 6% and a higher one of 26% — with five alternatives and a cess on luxury and sin goods to fund compensation to states. The lower tariff will apply to essential items and the highest to luxury and sin goods such as tobacco, cigarettes and alcohol. Services will be taxed at 18% and abatements will continue to reduce the levy’s incidence on those deemed to be essential.

The draft tax  proposal envisages that goods should be fitted into the bracket closest to the rates they are currently taxed at to ensure minimal impact on prices. Zero-rated items won’t be taxed while those at 3-9% should fit into the 6% slab and so on.

Some states such as Kerala have said a top rate of 26% isn’t high enough given that this is currently at a cumulative 35-40%. It feels a cess on luxury goods would distort GST and prefers a higher tax instead. Industry and tax experts also oppose  the idea of a cess, saying it will complicate the issue.

“While multiple rate structure seems to be the only realistic way for arriving at a consensus for timely implementation of GST, possible imposition of a central cess comes as a disappointment for industry,” said Pratik Jain, leader, indirect tax, PwC India. “Cesses, if imposed, will lead to cascading of taxes and complicate the overall structure. One hopes that the government will reconsider the decision on cess. Increasing the rate of GST slightly might be a better solution than having a non-creditable cess on several products.”

One proposal that’s been made is to retain the clean energy and tobacco cesses while raising the tax rate on luxury goods.

TAX ADMINISTRATION

On tax administration, there is agreement that duplication has to be avoided.

“The underlying principle, which has been accepted, is that one assessee would be assessed by one authority only,” Jaitley said.

Some states such as West Bengal presented new data to support the argument that states should be given exclusive control of even those service providers with a turnover of more than Rs 1.5 crore per year

The Centre had proposed a cross-empowerment model that will allow taxpayers to restrict their interaction to a single tax authority for central GST, state GST and integrated or iGST. Central and state GST are components of a single GST levied on intrastate sales while iGST will apply to inter-state sales.

At the previous council meeting, it had been decided that 11 lakh service providers registered with the tax department will be assessed by the central authorities and new ones will be shared with state authorities after due training.

Assessees with a turnover of less than Rs 1.5 crore annually will be assessed by state tax authorities and those above that through the new crossempowerment model. Under this model, tax administrators will use a formula to decide which assessees they will audit or register. Some states are not in favour of this.

Source : Economic Times

RBI to hold board meeting in Kanpur on Oct 20 : 19-10-2016


Reserve Bank Governor Urjit Patel will chair the central board meeting in Kanpur on Thursday, October 20.

This is first such instance that RBI will hold the meeting at this industrial city of Uttar Pradesh. It also happens to be the first central board meet under new Governor Patel.

Patel will reach Kanpur tomorrow evening and will have interaction with industrialists and technocrats here, said Deepesh Tewari, Manager (Personnel).

Tewari said there is no prior information about whether the Governor will interact with the media or not.

Source : PTI

Notification No.95/2016 19-10-2016


U/s 138(1) of IT Act 1961 – Central Government specifies Director, Vigilance and Anti-Corruption Bureau, Kerala – 95/2016

 

Government of India Ministry of Finance Department of Revenue (Central Board of Direct Taxes)

NOTIFICATION 95/2016

New Delhi, the 19th October, 2016

In pursuance of sub-clause (ii) of clause (a) of sub-section (1) of Section 138 of the Income-tax Act, 1961, the Central Government hereby specifies Director, Vigilance and Anti-Corruption Bureau, Kerala for the purposes of the said clause.

 (Rohit Garg)

Deputy Secretary to the Government of India

(F.No.225/284/2015-ITA II)

ESIC eyes pan-India expansion with healthcare facilities : 19-10-2016


The Employees’ State Insurance Corporation (ESIC) is likely to expand its services to over 650 districts nationwide as part of its second generation reforms. The corporation has decided to take in its fold all construction workers, ESI Insurance Commissioner Arun Kumar was quoted as saying at a PHDCCI seminar on ESIC.

ESIC is likely to propose charging financial contribution from the employers of construction workers to give them ESI benefits, which would be drawn from the various welfare boards in which the construction companies deposit their construction cess, he added.

He added that the proposal is being discussed at the higher level of bureaucracy within the Labour Ministry.

Elaborating on the issue of second generation reforms in ESIC, Kumar said ESIC now has its healthcare and hospital facilities around 300 districts where workers avail medical and healthcare facilities. These will be extended to all districts of India and the process will begin in March 2017.

Source : The Hindu

Cabinet may consider Budget presentation on February 1 : 19-10-2016


The Cabinet is likely to consider this week fixing February 1 as date of presentation of the Budget after the Election Commission gave its nod in light of upcoming Assembly elections in five states.

Having decided to advance the budget presentation by a month, the government took the line that it should not be presented in the middle of Assembly poll in Uttar Pradesh, Punjab, Uttarakhand, Goa and Manipur.

So, it consulted the Election Commission, which has concurred with the Election Commission, which has concurred with the finance ministry’s view that it is an annual financial statement and can come anytime of the government’s choice, officials said.

The Cabinet headed by Prime Minister Narendra Modi is likely to meet on Wednesday or Thursday to decide on the date for Finance Minister Arun Jaitley to present the budget for 2017-18.

The Cabinet on September 21 had in-principle decided to end the colonial-era tradition of presenting the Union budget on last day of February and advance it by about a month to help complete the legislative approval for annual spending plans and tax proposals before beginning of the new financial year on April 1.

“The reason we wanted to advance the date was that we want the entire budgetary exercise to be over and the Finance Bill to be passed and implemented from April 1 onwards rather than June because then the monsoon sets in and effectively, the expenditures start in October,” Jaitley had stated last week.

Stating that the government wants expenditure to start in April itself, he had said there are five state Assembly elections lined up in 2017.

“So, we are just trying to co-ordinate that you do not have to announce the Budget bang in the middle of an election date. It should be reasonably before that or after that,” he had said.

The finance ministry had been proposing that the Budget presentation be fixed for February 1 and the entire exercise be completed by March 24.

It wanted the Budget Session of Parliament to begin before January 25 and go in for a three-week break between February 10-15 before reconvening between March 10-15 to complete the legislative exercise.

But with Assembly elections in five states likely to be held in phases, there is a probability that this budget schedule may clash with the campaigning and the polling.

While tenure of Punjab, Manipur and Goa Assemblies is due to end on March 18, 2017, that of Uttarakhand is till March 26, 2017. Uttar Pradesh Assembly’s tenure expires on May 27.

The official said the Election Commission has given a go-ahead with presentation of the Budget as per Centre’s wishes.

The Cabinet had last month also decided to scrap the 92-year old practice of having a separate railway budget, merging it with the general budget.

As things stand, the budget approval process happens in two parts spilling over to the second or third week of May, hampering early implementation of schemes and spending programmes.

To facilitate its early presentation, the finance ministry had proposed that the Budget Session be convened some time before January 25, a month ahead of the current practice.

Consequently, preparation for the Budget would start this month and GDP estimates would be made available on January 7 instead of February 7

Source : Economic Times

No. F.No.279/Misc/M-75/2011-ITJ(Part-II) Dated: 18-10-2016


Modifications to the Instruction No. 7/2016 for engagement of Standing Counsels to represent the Income-tax Department before High Courts and other judicial forums- Reg. – Order-Instruction

F.No. 279/Misc/M-75/2011-ITJ (Part-II)

Government of India Ministry of Finance

Department of Revenue Central Board of Direct Taxes

(A&J Division)

New Delhi, the 18th October, 2016

To,

All Principal Chief Commissioners of Income Tax.

Madam/ Sir,

Sub:- Modifications to the Instruction No. 7/2016 for engagement of Standing Counsels to represent the Income-tax Department before High Courts and other judicial forums- Reg.

Ref:- CBDT Instruction no. 7/2016 dated 7th  September 2016.

Kindly refer to the above.

2.  Instruction No. 7/2016 of CBDT (hereinafter “Instruction”) has revised the guidelines for engagement of standing counsels to represent the Income Tax Department before High Courts and other judicial forums in supersession of the earlier Instruction No. 3/ 2012 of the CBDT on the subject. In this regard, representations have been received from various authorities suggesting modifications and seeking certain clarifications with respect to the  matters dealt with in the Instruction.

3.  In this regard, after considering the suggestions, the following modifications are hereby  made to the Instruction.

a.  In ‘Duties of the Standing Counsels’ in para 7.2 of Annexure I, the phrase, “Diary number, ITA number etc.” shall be substituted with the phrase, “Diary number and ITA number of appeals filed, Diary number of other petitions/ applications filed etc.”

b.  In Annexure II, the para 2 heading, para 2.1 and para 2.2, the words, “For Drafting” shall be substituted with the words, “For Drafting and Filing”

c.  In Annexure II, para 12.1.1, the words, “Bills for drafting” shall be substituted with the words, “Bills for drafting and filing.” Also, in the same para 12.1.1, the following sentence shall be added, “Bill for drafting and filing of appeals shall be  submitted only after removal of all defects with ITA No. of appeal filed.”

d.  In proforma-‘X’ of Annexure II, under the head, PRE-RECEIPTED at S. No. 5, the  words, “ITA no. / WTO no. etc.” shall be substituted with the words, “ITA no. / WTO no.”

e.  In the heading at Part A of proforma- ‘X’ of Annexure II, the words, “Bill for drafting”  shall be substituted with the words, “Bill for drafting and filing.”

f.  In the second column of the Pro forma- ‘B-1′ and Pro forma- ‘B-2′ of Annexure I of the Instruction at the marking for Academic record(marks scored in LLB), instead of  the earlier marking scheme, the revised marking scheme for Academic record(marks  scored in LLB) may be read as follows,

“>60%-5 marks”

g.  In Annexure II of the Instruction, the following paragraph, i.e., para 13, shall be  added after para 12.

“13. Dispute Resolution

In the event of any doubt or difference regarding the fees payable to the counsels, the fees determined by the Principal Chief Commissioner of Income Tax of the Region concerned shall be final and binding.”

4.  These modifications may be brought to the notice of all the officers concerned.

5.  Hindi version of this will follow.

(K. Vamsi Krishna)

ACIT (OSD) (ITJ-II)

Tel: 26882637

Govt unlikely to go in for cut in public expenditure : 18-10-2016


Government is unlikely to cut public expenditure in the current fiscal despite shortfall from spectrum auction and slow progress on strategic sale.

There would not be compression this year as well although there is some pressure on revenue front from spectrum auction, sources said.

However, the fiscal deficit target of 3.5 per cent of the GDP for the current fiscal will be met.

There could be increase in public expenditure if the fiscal situation shows improvement, sources said, adding there was no compression last fiscal.

Revenue from Income Disclosure Scheme (IDS) would provide some cushion.

Earlier this month, government received bids worth Rs 65,789 crore for telecom spectrum, selling mere 40 per cent of the total quantum of spectrum that was placed on the block.

Around 60 per cent of mobile airwaves remained unsold in what was billed as the country’s largest spectrum auction where Rs 5.63 lakh crore worth of spectrum was put up for sale from October 1.

With regard to disinvestment, the government aims to collect Rs 56,500 crore this fiscal.

Of the total budgeted proceeds, Rs 36,000 crore is estimated to come from minority stake sale in PSUs and the remaining Rs 20,500 crore from strategic sale in both profit and loss-making companies.

The government is yet to initiate strategic sale of loss making PSU.

As far as IDS is concerned about Rs 65,250 crore of undisclosed assets were declared, yielding Rs 29,362 crore in taxes to the government spread over two fiscals.

For the fiscal ending March 2017, Finance Minister Arun Jaitley has kept fiscal deficit target of 3.5 per cent.

Total government expenditure in next fiscal would be Rs 19.78 lakh crore. Of this, Rs 5.50 lakh crore would go towards Plan expenditure and another Rs 14.28 lakh crore towards non-Plan expenditure.

The revenue deficit for current fiscal has been bettered to 2.5 per cent of GDP, from the budgeted 2.8 per cent.

Source : PTI

GST reaches the crucial rate test hurdle : 18-10-2016


The ideal minimal and moderate rate structure will have to wait and multiple rate slabs appear to be the most likely choice for now as the GST council holds its three-day meeting from tomorrow, to decide on the issue.

With prime minister Narendra Modi pitching for implementation of the integrated goods and services tax (GST) across the country from April 1, 2017, it is natural that the Union finance ministry is trying its level best to put all the pieces together within the available time to achieve this goal.

The three-day GST council meeting beginning tomorrow, therefore, is critical as the idea is to fix two most important issues—formulation of a workable tax rate structure and also the compensation formula in case there is a revenue loss to any state due the GST.

Once this is done, the Union government will be able to introduce the central GST (CGST) and integrated GST (IGST) legislations in the month-long Winter Session of Parliament starting November 16.

Though the panel headed by Chief Economic Advisor Arvind Subramanian had suggested 17-18% as the standard rate for bulk of goods and services, and a 12% rate for low rate goods while 40% for demerit ones like luxury car, soft drinks, pan masala and tobacco—it seems that a consensus might be reached to begin with four or five slabs, of, say, 10%, 12%, 16% and 25% etc.

This may not be an ideal case as multiple rates are against the GST principle, but considering the fact that the choice may be between having a GST with these kind of rates or no GST at all, there may be a decision to start with this framework with the intention of fine-tuning it to the minimal and moderate rates.

Similarly, in case of compensation formula also, though several options are already on the table, the GST council must zero in on a workable structure fast, but should also ensure that the whole exercise doesn’t become a window of controversy—compensation has to be the last resort in the GST scheme of things.

But, both the Union government and also the states must be averse to hurrying through the GST to just meet the April 1, 2017 deadline, if they want to avoid major problems going ahead.

Source : Business Standard

Too many tax slabs will distort GST: CAIT : 18-10-2016


A day ahead of the crucial three-day meeting of the Goods and Services Tax (GST) Council to decide on rates, a key traders’ body has pitched for minimal tax slabs under the proposed tax regime.

“Too many tax slabs will distort GST,” the Confederation of All India Traders (CAIT) said a statement on Monday.

GST Council, a body of Centre and states, will meet on Tuesday to decide on rate of tax. The CAIT said that too many tax rate slabs under the GST regime will not only the single tax fabric but will also lead to complications, making voluntary compliance a difficult task.

The traders’ body urged the GST Council to keep the standard rate tax slab at not more than 18% and hoped that such a tax slab will augment more than sufficient revenue for the Centre and the states. The single GST rate should not be more than 35%, else it will prove to be counterproductive, CAIT cautioned.

The body wants stakeholders to be consulted before finalising items falling under the exempted category and the zero rate category as zero rate tax slab would allow for input credit.

CAIT also asked the GST Council to decide on a definite roadmap to educate and train the traders with compliance formalities of GST to empower them to deal with the new framework.

The CAIT has already launched a nationwide campaign in association with Tally Solutions, a software product company, to train the traders about required technology but support of the government is all the more important to reach out to people within a short time.

The finance minister-headed GST Council will decide on the rates, the remaining issue of oversight of service tax assesses and issue of compensation to states.

DECISION ON RATES The finance ministry has set itself November 22 as the deadline for building consensus on all the issues related to GST regime.

The government is keen to keep the rate low so that it does not stoke inflation.

A panel headed by Chief Economic Advisor Arvind Subramanian had suggested 17-18% as the standard GST rate, one that would apply to most goods. It suggested 2-6% rate for precious metals, 12% rate for select ones and 40% rate for demerit ones  like aerated beverages, pan masala and tobacco.

Once the details are finalised, the government will move a GST law for the consideration of parliament. The government has already put out GST rules for stakeholder feedback.

Source : Economic Times

Refer all high-value NPA resolution cases to OC: Finmin to PSBs : 17-10-2016


The Finance Ministry has asked public sector banks to approach the newly constituted overseeing committee (OC) for resolution of all high-value bad loans and not just accounts considered under S4A.

This was conveyed to the lenders at last month’s meeting between Finance Minister Arun Jaitley and the heads of PSU banks.

According to ministry sources, some banks were under the impression that only cases under the Scheme for Sustainable Structuring of Stressed Assets (S4A) are to be reviewed by the OC.

There were some information gaps which have been addressed in the meeting with the Finance Minister, sources said.

A two-member OC, which includes former State Bank of India chairman Janki Ballabh and former chief vigilance commissioner Pradeep Kumar, has been set up by the Indian Banks’ Association in consultation with both RBI and vigilance and investigating agencies.

The OC has been created to ensure that the entire exercise of NPA resolution is carried out in a transparent and prudent manner.

Gross NPA of public sector banks has surged from 5.43 per cent (Rs 2.67 lakh crore) in 2014-15 to 9.32 per cent (Rs 4.76 lakh crore) in 2015-16.

Meanwhile, the RBI has said it will come out with modified guidelines by this month-end to allow a portion of sustainable bad loans to be treated as standard asset in a bid to effectively deal with high NPA problem.

The Reserve Bank has put in place the ‘Scheme for Sustainable Structuring of Stressed Assets’ (S4A) in order to provide an avenue for reworking the financial structure of entities facing genuine difficulties and requiring coordinated financial restructuring.

The scheme provides flexibility in restructuring, which may involve material write-down of debt and/or making large provisions, RBI had said in the fourth bi-monthly monetary policy review for 2016-17.

Banks that have taken up cases for resolution under the S4A had represented that the asset classification norms under the S4A may be reviewed to make the scheme more effective.

Accordingly, it is proposed to allow that portion of debt determined to be sustainable to be treated as a standard asset in all cases, subject to certain conditions, it had said.

Detailed guidelines in this regard will be issued by end-October 2016, it had said.

Source : Financial Express

Notification No.94/2016 17-10-2016


Income-tax (28th Amendment), Rules, 2016 – Special Provisions Relating to Tax on Distributed income of Domestic Company for Buy-Back of Shares – 94/2016

MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION NO. 94/2016

New Delhi, the 17th October, 2016

INCOME-TAX

G.S.R. 982(E).-In exercise of the powers conferred by section 115QA 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 theIncome-tax Rules, 1962, namely: -

1.  (1) These rules may be called the Income-tax (28th Amendment), Rules, 2016.

(2) They shall come into force from the 1st June, 2016.

2. In the Income-tax Rules, 1962, after PART-VII B, the following part shall be inserted, namely: -

‘PART VII-BA

Special Provisions Relating to Tax on Distributed income of Domestic Company for Buy-Back of Shares

40BB. Amount received by the company in respect of issue of share. (1) For the purposes of clause (ii) of the Explanation to sub-section (1) of section 115QA, the amount received by a company in respect of the share issued by it, being the subject matter of buy-back referred to in the said section, shall be determined in accordance with this rule.

(2) Where the share has been issued by a company to any person by way of subscription, amount actually received by the company in respect of such share including any amount actually received by way of premium shall be the amount received by the company for issue of such share.

(3) Where the company had at any time, prior to the buy-back of the share, returned any sum out of the amount received in respect of such share the amount as reduced by the sum so returned shall be the amount received by the company for issue of said share:

Provided that if the sum or any part of it so returned was chargeable to additional income- tax under section 115-Oand the company has paid such additional income tax then such sum or part thereof, as the case may be, shall not be reduced.

(4) Where the share has been issued by a company under any plan or scheme under which an employees’ stock option has been granted or as part of sweat equity shares, the fair market value of the share as computed in accordance with sub-rule (8) of rule 3, to the extent credited to the share capital and share premium account by the company shall be deemed to be the amount received by the company for issue of said share:

Explanation.- For the purposes of this sub-rule the expression “sweat equity shares” shall have the meaning assigned to it in clause (b) of the Explanation to sub-clause (vi) of clause (2) of section 17.

(5) Where the share has been issued by a company being an amalgamated company, under a scheme of amalgamation, in lieu of the share or shares of an amalgamating company, then, the amount received by the amalgamating company in respect of such share or shares determined in accordance with this rule, shall be deemed to be the amount received by the amalgamated company in respect of the share so issued by it.

(6) The amount received by a company, being a resulting company in respect of shares issued by it under a scheme of demerger, shall be the amount which bears the amount received by the demerged company in respect of the original shares determined in accordance with this rule in the same proportion as the net book value of the assets transferred in a demerger bears to the net worth of the demerged company immediately before such demerger.

(7) The amount received by the demerged company in respect of the original shares in the demerged company shall be deemed to have been reduced by the amount as so arrived under sub-rule (6).

(8) Where the share has been issued or allotted by the company as part of consideration for acquisition of any asset or settlement of any liability then the amount received by the company for issue of such share shall be determined in accordance with the following formula-

Amount received = A/B

Where,

A= an amount being lower of the following amounts-

(a) the amount which bears to the fair market value of the asset or the liability, as determined by a merchant banker, the same proportion as the part of consideration being paid by issue of shares bears the total consideration;

(b) the amount of consideration for acquisition of the asset or settlement of the liability to be paid in the form of shares, to the extent credited to the share capital and share premium account by the company;

B= the number of shares issued by the company as part of consideration:

Explanation.- For the purposes of this sub-rule, the term “merchant banker” shall have the meaning assigned to in sub-clause(b) of clause (iv) of sub-rule (8) of rule 3.

(9) Where the shares have been issued or allotted by a company on succession or conversion, as the case may be, of a firm into the company or succession of sole proprietary concern by the company, then the amount received by the company for issue of shares shall be determined in accordance with the following formula-

Amount received = A-B/C

A= book value of the assets in the balance-sheet as reduced by any amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act and any amount shown in the balance-sheet as asset including the unamortized amount of deferred expenditure which does not represent the value of any asset;

Explanation.-For determining book value of the assets, any change in the value of the assets consequent to their revaluation shall be ignored.

B= book value of liabilities shown in the balance-sheet, but does not include the following amounts, namely:-

(a) capital, by whatever name called, of the proprietor or partners of the firm, as the case may be;

(b) reserves and surpluses, by whatever name called, including balance in profit and loss account;

(c) any amount representing provision for taxation, other than amount of tax paid, as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act, if any, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;

(d) any amount representing provisions made for meeting liabilities, other than ascertained liabilities;

and

(e) any amount representing contingent liabilities,

C= number of shares issued on conversion or succession.

(10) Where the share has been issued or allotted, without any consideration, on the basis of existing shareholding in the company, the  consideration in respect of such share shall be deemed to be “Nil”.

(11) Where the shares have been issued on conversion of preference shares or bond or debenture, debenture-stock or deposit certificate in any form or warrants or any other security issued by the company, the amount received by the company in respect of such instrument as so converted.

(12) Where the share being bought back is held in dematerialised form and the same cannot be distinctly identified, the amount received by the company in respect of such share shall be the amount received for the issue of share determined in accordance with this rule on the basis of the first-in-first-out method.

(13) In any other case, the face value of the share shall be deemed to be the amount received by the company for issue of the share.’.

[[F. No. 370133/30/2016-TPL]

NIRAJ KUMAR, Under Secy. (Tax Policy & Legislation)

Note : The principal rules were published in the Gazette of India Extraordinary, part III, section 3, sub-section (i), vide notification number S.O. 969(E), dated the, 26th March, 1962 and were last amended vide notification number S.O. 3179(E) dated the 7th October, 2016.

Narendra Modi pushes for greater cooperation within BRICS : 17-10-2016


Prime Minister Narendra Modi on Sunday pushed for greater collaboration among BRICS countries, which also include Brazil, Russia, China and South Africa besides India, as well as members of Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) grouping, on the issues of terrorism, economy, trade and connectivity.

“Terrorism, radicalisation, and transnational crimes pose grave threats to each of us,” Modi said addressing the first BRICS-BIMSTEC Outreach Meeting that was also attended by Russian President Vladimir Putin, Chinese President Xi Jinping, South African President Jacob Zuma and Brazilian President Michel Temer.

Among the BIMSTEC leaders present were Bangladesh Prime Minister Sheikh Hasina, Sri Lankan President Maithripala Sirisena and Nepalese Prime Minister Pushpa Kamal Dahal ‘Prachanda’, Myanmarese leader Aung San Suu Kyi and Bhutanese Prime Minister Tsering Tobgay.

“In South Asia and BIMSTEC, all nation states, barring one, are motivated to pursue a path of peace, development and economic prosperity for its people. Unfortunately, this country in India’s neighbourhood embraces and radiates the darkness of terrorism,” he said in a clear reference to Pakistan. “Terrorism has become its favourite child. And, the child in turn has come to define the fundamental character and nature of its parent.” Modi said that with 1.5 billion people and a combined gross domestic product (GDP) of $2. 5 trillion, the countries of BIMSTEC have shared aspirations for growth, development, commerce, and technology.

Their quest for economic prosperity can shape the agenda for building economic partnerships with BRICS, he said.

Similarly, BRICS represents large emerging economies, G- 20 member-states and two permanent members of the UN Security Council. “Its (BRICS) linkages with BIMSTEC economies will enlarge the regional and global sphere of dynamic growth and prosperity,” the Prime Minister said.

India is making all out efforts to revive BIMSTEC as Prime Ministers of Bhutan, Bangladesh, Nepal, Sri Lanka, and Myanmar (State Counsellor) besides Thai Deputy Foreign Minister come together with BRICS leaders to forge a new partnership.

This also assumes significance given the collapse of recent SAARC Summit after four countries apart from India pulled out of the meet to be hosted by Pakistan over the issue of cross-border terrorism, maintaining that environment was not conducive to hold such an event.

Modi said the convergence of purpose and priorities between BRICS and BIMSTEC provides a perfect opportunity to frame economic and development partnership, shape ties in the fields of energy, agriculture, technology, fisheries, and culture besides structured trade, investment and commercial partnerships and pool resources to fight terrorism and transnational crime.

Source : PTI

FinMin to issue rules for norms under BEPS : 17-10-2016


The finance ministry will issue rules and guidance to address some concerns and ambiguity over mandatory reporting norms with respect to transfer pricing for multinational companies whose consolidated annual revenue is over Rs 5,000 crore.

The government is also stepping up administrative systems to plug possible data leakage, said a senior tax officer at a conference on Friday.

CLEARING UP CONFUSION
  • Govt to issue rules to address concerns over mandatory reporting norms with respect to transfer pricing
  • Transfer pricing allows companies to reduce tax liabilities by transferring property to subsidiaries in offshore, lower-tax countries.
  • These rules and guidance will aim at clarity on documentation required under Base Erosion and Profit Shifting (BEPS)

These rules and guidance will aim at clarity on the extensive data reporting and documentation required under the Base Erosion and Profit Shifting (BEPS) measures unveiled by the Paris-based OECD grouping in October last year, to address tax avoidance by MNCs. OECD is Organization for Economic Cooperation and Development.

The concerns are on confidentiality of the data shared by companies with the tax authorities of various jurisdictions, beside the difference in accounting years and rules in different countries. The matter was discussed at the conference on Friday.

Akhilesh Ranjan, a senior income tax officer, said: “The concerns on accounting years, joint ventures and permanent establishment are genuine and a guidance note is under preparation. That and the rules will be issued in a couple of months.”

He was responding to Mohd Haroon Qureshi, head of tax, Asia-Pacific, at Genpact, who raised a slew of concerns. “There are concerns that are yet to be addressed. There will be so much data. There is going to be a mismatch of countries with respect to their accounting rules, currencies and the accounting years being used,” said Qureshi.

He noted that tax officers may even ask for reconciliation documents, though BEPS does not ask for it. Called the new world order in taxation, BEPS will require Indian companies with foreign presence and consolidated annual revenue of over Rs 5,000 crore in the previous year to furnish country-by-country reports (CBCR) to the Indian tax department, a master file and local file directly to the tax authorities of each country of operation.

The Indian department will be required to share the CBCR documents with tax authorities of other jurisdictions.

Qureshi said confidentiality was a big concern. “So much of data will be with the tax authorities. Sensitive data can’t be leaked to competitors. This must be ensured,” he said. Also, some order on how to treat that data.

On confidentiality concerns, Ranjan said the government was upgrading its administrative systems. “There has been a lot of discussion (on confidentiality) at the global forum. We need to protect privacy. We are putting in place administrative systems and are outlining the way of using this information, to prevent avoidable leakages,” he said.

A three-tiered standardised approach is one among the 15 action points listed by BEPS to plug loopholes that allow companies to shift their profits to low tax countries and debt to high tax ones.

In India, close to 200 companies will have to comply with increased data reporting legislation, being mandated to furnish details such as revenue, capital, taxes paid and employees on a country by country basis.

Source : Business Standard

Notification No.93/2016 14-10-2016


Reconstruction or splitting up has been made to transfer any assets of the demerged company to the resulting company Agreement and Share Purchase Agreement – 93/2016

MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION NO. 93/2016

New Delhi, the 14th October, 2016

(INCOME-TAX)

S.O. 3204(E).- In exercise of the powers conferred by Explanation 5 to clause (19AA) of section 2 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby specifies that the reconstruction or splitting up of a company which ceased to be a public sector company as a result of transfer of its shares by the Central Government, into separate companies, shall be deemed to be a demerger if the following conditions are fulfilled, namely:-

(i) that such reconstruction or splitting up has been made to transfer any assets of the demerged company to the resulting company to give effect to the conditions mentioned in the Share Holders’ Agreement and Share Purchase Agreement; and

(ii) that the resulting company is a public sector company.

[No.149/251/2015-TPL]

PRAVIN RAWAL, Director (Tax Policy and Legislation)

No. F.No.225/195/2016/1TA.ll Dated: 14-10-2016


Due date for filing Income-tax return and reports of audit extended for taxpayers in the state of Jammu & Kashmir – Order-Instruction

F.No. 225/195/2016/1TA.ll

Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes

North-Block, ITA.II Division

New Delhi, the 18th of October, 2016

Order under Section 119 of the Income-tax Act 1961

In order to mitigate the difficulties being faced by the taxpayers in the State of Jammu & Kashmir in filing income tax returns and reports of audit for Assessment Year 2016-2017 by the ‘due date’, as prescribed under section 139(1)of Income-tax Act, 1961, the CBDT, hereby extends the ‘due date’ for filing income tax returns and reports of audit under the provisions of Income-tax Act pertaining to Assessment Year 2016-2017 for all categories of taxpayers in the State of Jammu & Kashmir to 31st December, 2016.

(Rohit Garg)

 Deputy- Secretary to the Government of India

No. 35/2016 Dated: 13-10-2016


Applicability of TDS provisions of section 194-I of the Income-tax Act, 1961 on lump sum lease premium paid for acquisition of long term lease-regarding

 

Circular No. 35 of 2016

F No.275/29/2015-IT (B)

Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes

Dated: 13th October, 2016

Subject: Applicability of TDS provisions of section 194-I of the Income-tax Act, 1961 on lump sum lease premium paid for acquisition of long term lease-regarding.

Section 194-I of the Income-tax Act, 1961 (the Act) requires that tax be deducted at source at the prescribed rates from payment of any income by way of rent. For the purposes of this section, “rent” has been defined as any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or machinery or plant or equipment or furniture or fittings.

2. The issue of whether or not TDS under section 194-I of the Act is applicable on ‘lump sum lease premium’ or ‘one-time upfront lease charges” paid by an assessee for acquiring long-term leasehold rights for land or any other property has been examined by CBDT in view of representations received in this regard.

3. The Board has taken note of the fact that in the case of The Indian Newspaper Society (ITA No. 918 & 920/2015), the Hon’ble Delhi High Court has ruled that lease premium paid by the assessee for acquiring a plot of land on an 80 years lease was in the nature of capital expense not falling within the ambit of Section 194-I of the Act. In this case, the court reasoned that since all the rights easements and appurtenances in respect of the said land were in effect transferred to the lessee for 80 years and since there was no provision in lease agreement for adjustment of premium amount paid against annual rent payable, the payment of lease premium was a capital expense not requiring deduction of tax at source under section 194-I of the Act.

4. Further, in the case Foxconn India Developer Limited (Tax Case Appeal No. 801/2013), the Hon’ble Chennai High Court held that the one-time non-refundable upfront charges paid by the assessee for the acquisition of leasehold rights over an immovable property for 99 years could not be taken to constitute rental income in the hands of the lessor, obliging the lessee to deduct tax at source under section 194-I of the Act and that in such a situation the lease assumes the character of “deemed sale”. The Hon’ble Chennai High Court has also in the cases of Tril Infopark Limited (Tax Case Appeal No. 882/2015) ruled that TDS was not deductible on payments of lump sum lease premium by the company for acquiring a long-term lease of 99 years.

5, In all the aforesaid cases, the Department has accepted the decisions of the High Courts and has not filed an SLP. Therefore, the issue of whether or not TDS under section 194-I of the Act is to be made on lump sum lease premium or one-time upfront lease charges paid for allotment of land or any other properly on long-term lease basis is now settled in favour of the assessee.

6. In view of the above, it is clarified that lump sum lease premium or one-time upfront lease charges, which are not adjustable against periodic rent, paid or payable for acquisition of long-term leasehold rights over land or any other property are not payments in the nature of rent within the meaning of section 194-I of the Act. Therefore, such payments are not liable for TDS under section 194-I of the Act.

Hindi version follows.

 (Sandeep Singh)

Under Secretary to the Govt. of India

No. 11/2016 Dated: 13-10-2016


The Income Declaration Scheme, 2016 – reg. – Order-Instruction

Instruction No. 11 of 2016

F.No.142/8/2016-TPL(Part)

Government of India Ministry of Finance Department of Revenue (Central Board of Direct Taxes)

New Delhi, the 13th October, 2016

To,

All Principal Chief Commissioners of Income-tax

Sub.: The Income Declaration Scheme, 2016 – reg.

Representations have been received from field authorities to allow electronic mode of communication as a valid mode of service for issuance of Form-2 under the Income Declaration Scheme, 2016.

1.2 Keeping into consideration the confidential nature of the declarations made under the Scheme, it has been decided that electronic communication of Form-2 on the email address mentioned in Form-1 by mutatis mutandis application of notification No.2 of 2016 dated 03.02.2016 issued by DGIT(Systems) shall be considered as a valid mode of service in respect of the electronically filed declarations under the Scheme.

2.1 Representations have also been received from field formation seeking clarification as to the eligibility of the assessee to file declaration under the Scheme where search and seizure operation has been conducted on or after 01.06.2016.

2.2 In this context, reference is drawn to question No.6 of Circular No.17 dated 20.05.2016 read with question No.12 of Circular No.29 dated 18.08.2016 wherein it has been clarified that a person is not eligible to make a declaration under the Scheme if a search has been initiated and the time for issuance of notice under section 153A has not expired, even if such notice for the relevant assessment year has not been issued. It has also been clarified that in case of survey operation, the person is barred for making a declaration under the Scheme in respect of the previous year in which the survey was conducted.

2.3 In view of the above it is reiterated that in a case where a search and seizure operation has been conducted on or after 01.06.2016 but before making of declaration under the Scheme, the assessee shall not be entitled for filing a declaration under the Scheme in respect of the assessment years for which a notice under section 153A/153C of the Income-tax Act can be issued. The previous year in which search is conducted is already not eligible for declaration under the Scheme as declaration under the Scheme can be filed only upto A.Y.2016-17.

3. This instruction may be brought to the notice of all the officers concerned and other stakeholders.

4. Hindi version of the instruction will follow.

(Dr. T.S. Mapwal)

Under Secretary (TPL-IV)

Copy to:

1. The Chairperson, Members and all other officers in CBDT of the rank of Joint Secretary and above.

2. Web manager for posting on the departmental website.

3. Data base cell for posting on irs officers website.

4. ITCC (3 copies)

5. Official language section for Hindi translation.

Law ministry for ‘procedural reforms’ to improve criminal justice system : 10-10-2016


The law ministry has called for “procedural reforms” to improve the criminal justice system in the country, saying criminal trials are riddled with the problem of frequent adjournments despite provisions in place to prevent delays.

It has asked the Advisory Council of National Mission for Justice Delivery and Legal Reforms to take a call on the need “for certain procedural reforms, either through amendments to the existing law or through proper implementation of the provisions that are already in place” to improve the criminal justice system in the country.

The council, chaired by law minister Ravi Shankar Prasad, will meet here on 18 October to discuss various issues, including the need to overhaul the criminal justice system.

Section 309 of the Code of Criminal Procedure requires that the proceedings in a criminal case should be held as expeditiously as possible and on a day-to-day basis. It also grants the court the power to postpone or adjourn proceedings for reasonable time periods; for reasons to be recorded in writing.

“This provision is, however, accompanied by certain restrictions on the power to grant adjournments, some of which were added through the Code of Criminal Procedure (Amendment) Act, 2008 to address the issue of frequent adjournments being sought by the parties. “… Despite the existence of these provisions, criminal trials are riddled with the problem of delays on account of frequent adjournments. This calls for the urgent need to put in place a system for the proper monitoring of the number of adjournments being granted by judges in each case. In addition, courts should proactively enforce the provisions of Section 309, which allows them to order the payment of costs for adjournment requests,” the law ministry note for the meeting says.

The existing provisions say that no adjournments are to be granted at the request of a party, except for circumstances beyond its control. It is also explicitly stated that the pleader of a party being engaged in another court is not a sufficient ground for seeking adjournments.

Further, in order to minimise the inconvenience caused to witnesses, section 309 discourages the grant of adjournments in situations where witnesses are present in court but the party, though also present, is not prepared to examine the witness.

As per available data as on December 2015, there were a total of 27,019,955 cases pending across various district and subordinate courts out of which 18,614,308 were criminal cases. Data from the National Crime Records Bureau shows that there were 2.1 million serious criminal cases pending under the Indian Penal Code in 2009 and this had risen to 2.8 million in 2014, indicating an increase in the number of serious crimes.

The data further reveal in 58.3% cases tried in 2014, the accused was either discharged or acquitted.

Other members of the council include Law Commission chairman Justice B.S. Chauhan (retd), minister of state for law P.P. Chaudhary, minister of state for home Kiren Rijiju, attorney general Mukul Rohatgi, representatives of the Supreme Court registrar general office and members of the Bar Council of India.

Source : PTI

India, UAE set to kick off political and business talks : 10-10-2016


India and the United Arab Emirates will launch a political and economic dialogue later this month in Dubai as a prelude to Abu Dhabi Crown Prince Sheikh Mohamed bin Zayed Al Nahyan’s presence as the chief guest for next year’s Republic Day celebrations, with the oil-rich Gulf nation looking to invest in the growing real estate sector besides ports and hydro-carbon related fields here.

Led by road transport, highways and shipping minister Nitin Gadkari and minister of state foreign affairs MJ Akbar, the Modi government will hold detailed discussions with UAE’s political leadership as well as local industry captains between October 18 and 20. UAE had announced that it will invest $75 bn in the National Investment and Infrastructure Fund. “Oil-rich and cash-rich UAE is looking east as it plans to diversify its economy.

The government in UAE feels that India is a natural partner with similar cultural traits, food habits and centuries-old trading ties. There is a natural synergy and the UAE leadership enjoys a level comfort with the biggest country in South Asia. India should try to cash in on the opportunity that currently exists there,” explained an official source familiar with the developments in UAE

In what would be first political level meeting between the two sides since the Abu Dhabi Crown Prince accepted India’s invite for the R-Day celebrations, Akbar would seek to expand counter-terror partnership that has evolved in the past few years. The United Arab Emirates had come out strongly in India’s support after the Uri strikes, backing action by the Modi government against the terrorists.

The Gulf nation, in keeping with its core strengths in the real estate sector, development and expansion of ports and oil & associated sector, is eyeing to fund such projects, a person familiar with Indo-UAE economic partnership told ET. Two other areas that UAE investors are keen to explore are hospitality and healthcare in India.

But it is not just Emirati investors who are eyeing the lucrative market, Indian business groups including Lullu which have made it big in UAE and other five Gulf states are also keen to invest in the healthcare space.

The Modi government is hoping to attract funds from UAE for rapid expansion of next generation infrastructure, especially in railways, ports, roads, airports and industrial corridors and parks.

The UAE India Economic Forum, co-supported by Invest India (government’s investment promotion arm) scheduled in Dubai on Oct 19-20 participated by top UAE investors besides investors from other Arab nations would help to identity sectors for investments. There will be special session on startups at this Forum.

ET has learnt that the Dubai Ports Authority is keen to develop and expand ports along India’s huge coastline. Besides UAE is interested in setting up oil storage tanks in the ports here. Investors from UAE are looking to set up oil storage facilities besides small oil fields in this country.

UAE is already setting up India’s maiden strategic oil reserve facility in Karnataka and offering two-third oil for free. It may be noted that India is UAE’s second-largest trading partner, and the UAE is India’s third largest trading partner, after the US and China.

Source : Times of India

Notification No. SO 3162(E) [F.No.A-12023/03/2013 Dated: 07-10-2016


SECTION 408 OF THE COMPANIES ACT, 2013 – NATIONAL COMPANY LAW TRIBUNAL – CONSTITUTION OF – APPOINTMENT OF SPECIFIED PERSON AS MEMBER (JUDICIAL) W.E.F. 22-8-2016

NOTIFICATION NO. SO 3162(E) [F.NO.A-12023/03/2013-AD.IV]DATED 7-10-2016

In exercise of the powers conferred by section 408 of the Companies Act, 2013 (18 of 2013), the Central Government hereby appoints Shri Maharaj Krishan Hanjura as Member (Judicial), in the National Company Law Tribunal in the pay scale of Rs. 67000-79000/- with effect from 22nd August, 2016 for a period of five years or till he attains the age of sixty five years, whichever is earlier.

Notification No.92/2016 07-10-2016


Income-tax (27th Amendment) Rules, 2016 – 92/2016 – Dated 7-10-2016

MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION NO. 92/2016

New Delhi, the 7th October, 2016

(Income-tax)

S.O. 3179(E).-In exercise of the powers conferred by clause (b) of section 13B, 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 (27th Amendment) Rules, 2016.

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

2. In the Income-tax Rules, 1962, in rule 17CA, in sub-rule (4),-

(i) in clause (a), the word “and” occurring at the end shall be omitted;

(ii) after clause (b), the following shall be inserted, namely:-

“(c) from a Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013); and

(d) from a foreign source as defined in clause (j) of section 2 of the Foreign Contribution (Regulation) Act, 2010 (42 of 2010).”.

[F. No. 142/20/2012-TPL]

ABHISHEK GAUTAM, Under Secy. (Tax Policy and Legislation)

Note.-The principal rules were published in the Gazette of India vide notification number S.O. 969(E), dated the 26th March, 1962, and last amended by vide notification number S.O.3160(E) dated 6th October, 2016.

Government looks at relaxing FDI rules further : 07-10-2016


The government is looking at further relaxing the foreign direct investment policy after recent reforms that allowed automatic approval for most sectors and increased the limit in many areas.

India has become one of the most open economies in the world and 92% of its FDI now comes through the automatic route, Department of Industrial Policy & Promotion (DIPP) secretary Ramesh Abhishek said at the ‘India Means Business’ session of the India Economic Summit. “We have allowed 100% FDI even in very sensitive sectors and under automatic route in most cases.

There is a huge potential in India to attract FDI.” Reforms are ongoing and based on industry feedback, the government will take steps to ease processes, Abhishek said, indicating further relaxation in the foreign investment regime

“We have taken a series of transformative steps in the last two years…from bankruptcy code to GST, which the government is ready to launch as per schedule,” Abhishek said. The target date to implement GST is April 1.

The DIPP secretary said the government is looking at “various restrictive policies” brought to its notice by ecommerce companies. A panel set up by Niti Aayog to look into issues faced by the sector will soon submit its recommendations to bring about a policy that encourages competition and transparency.

The government will act on feedback and tackle the issues of corruption and contract enforcement and improve the public-private partnership model, Abhishek said. He was responding to queries about the last tranche of payments due to companies remaining stuck in prolonged government procedures.

Srivatsan Rajan, chairman of Bain & Co, said the difficulty of doing business in India is still very significant, especially in manufacturing. “Local and state-level administration have to do a lot of work to bring about ease of doing business,” he pointed out. The government has started ranking states on the ease of doing business on a 340-point action programme. DIPP, which is spearheading the exercise, will release the final ranking this month.

Source : Financial Express

GST Network operating expenses to be funded by user fee : 07-10-2016


Clearing the ambiguity over the funding of operating costs of the Goods and Services Tax Network (GSTN), the government has decided that an ‘assessee-based user fee’ would make up for the bill.

GSTN, a not-for-profit, non-government firm, would provide IT infrastructure and services to the central and state governments, taxpayers and other stakeholders for implementation of the Goods and Services Tax (GST).

“The Centre and states will pay user fees based on the number of assessees registered with each of them to meet the running expenses of the GSTN. It will work on a no-profit-no-loss basis,” a senior finance ministry official told FE.

Currently, the Centre has over 16 lakh indirect tax assessees, while states such as Gujarat, Karnataka, Maharashtra, Tamil Nadu, Uttar Pradesh and Delhi have more than one lakh assessees. With the implementation of GST, the government expects the number of taxpayers under indirect tax laws to increase from 36 lakh currently to about 65 lakh.

The Narendra Modi government’s plans to roll out GST from April 1, 2017. The GST Council, chaired by Union finance minister Arun Jaitley, is already working towards finalising the structure of the new tax law and two rounds of meetings are already concluded.

GSTN has hired Bengaluru-based Infosys on a project worth Rs 1,380 crore to buy and instal the IT infrastructure required for the network to function and to maintain it for five years. Of this, Rs 550 crore is towards capital cost. GSTN will reportedly subscribe to a loan to fund the expenses, and the repayment liability will be synced with the user charge. GSTN was incorporated on March 28, 2013. At present, the central government holds 24.5% equity in GSTN and all states hold another 24.5%. Balance 51% equity is with non-government financial institutions, including LIC Housing Finance, ICICI Bank, HDFC, HDFC Bank and NSE Strategic Investment Corporation.

GSTN has been initially funded through a one-time non-recurring grant in-aid of Rs 315 crore from the Centre towards expenditure for the initial setting up and functioning of the SPV for a three-year period after incorporation. After rolling out of GST, the revenue model of GSTN shall consist of user charge to be paid by stakeholders who will use the system and thus, it will be a self-sustaining organisation.

Source : PTI

GST moves a step closer to provide ‘suvidha’ to taxpayers : 07-10-2016


Inching closer to provide ease to the Goods and Services taxpayers, GST Network (GSTN), the company entrusted to create the logistical and IT backbone for the new tax regime, has allowed taxpayers the option of third-party interfaces to guide them from registration to filing of returns.

The step, aimed at providing ease to the taxpayers towards payment of the new indirect tax, invites banks, IT companies and financial technology companies to become GST Suvidha Providers (GSPs) to help the taxpayers from registration of entity to uploading of invoice details to filing of returns.

“Tax payers’ convenience will be a key factor in success of GST regime. The tax payer should have a choice to use third party applications which can provide varied interfaces on desktops, laptops and mobiles and can connect with GST System,” GSTN Chairman Navin Kumar said in a statement.

The GST system is going to have a government-to-business portal for taxpayers to access it. However, this would not be the only way for interacting with the GST system as the taxpayer via his choice of third party applications, which will provide all user interfaces and convenience via desktop, mobile, other interfaces, will be able to interact with the GST system.

Thus there will be two sets of interactions, one between the app user and the GSP and the second between the GSP and the second between the GSP and the GST System. It is envisaged that app provider and GSP could be the same entity. Another version could where data in required format directly goes to GSP-GST Server.

The third party applications will connect with GST system via secure GST System application programming interface (APIs). All such applications are expected to be developed by third party service providers who have been given a generic name, GST Suvidha Provider or GSP.

“On signing of the contract, GSPs will get a unique license key for accessing the GST system. GSPs will be authenticated using this license key provided by GSTN,” it said.

The government is targeting April 1, 2017 to bring in the GST regime.

Source : Economic Times

Notification No.91/2016 06-10-2016


Income tax ( 26th Amendment) Rules, 2016 – 91/2016 – Dated 6-10-2016

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION 91/2016

New Delhi, the 6th October 2016

S.O. 3160(E).-In exercise of the powers conferred by section 139A and section 285BA, read with section 295 of theIncome-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 ( 26th Amendment) Rules, 2016.

(2) These rules shall come into force from the date of their publication in the Official Gazette.

2. In the Income-tax Rules, 1962 (hereinafter referred to as the said rules), in rule 114D,-

(i) in sub-rule (1), in clause (I), for the word, brackets and letter “clauses (b)”, the word, brackets and letter “clauses (a)” shall be substituted;

(ii) after sub-rule (3), the following shall be inserted, namely:-

“(4) The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) shall specify the procedures, data structures, and standards for ensuring secure capture and transmission of data, evolving and implementing appropriate security, archival and retrieval policies in relation to the statement referred to in sub-clause (i) of sub-rule (1).”.

3. In the said rules, in rule 114E, in sub-rule (3), for the brackets, words and number “(other than the person at Sl. No. 9)”, the brackets, words and numbers “(other than the persons at Sl.No.10 and Sl. No. 11)” shall be substituted.

[F. No. 370142/27/2016-TPL]

Dr. T. S. MAPWAL, Under Secy.

Note : The principal rules were published vide notification S.O. 969(E), dated the 26th Ma

rch, 1962 and last amended vide notification S.O. 3150(E), dated the 05th October, 2016.

5 – 6-10-2016


IMPORT DATA PROCESSING AND MONITORING SYSTEM (IDPMS)

A.P. (DIR SERIES 2016-17) CIRCULAR NO.5DATED 6-10-2016

Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to A.P. (DIR Series) Circular No. 65 dated April 28, 2016 read with section 5 of the Foreign Exchange Management Act 1999 (42 of 1999), Government of India Notification No. G.S.R. 381(E) dated May 3, 2000 viz., Foreign Exchange Management (Current Account Transaction) Rules, 2000 on import of goods and A.P. (DIR Series) Circular No. 9 dated August 24, 2000 which outlines the procedure, mode/manner of payment for imports and submission of related returns.

2. In order to enhance ease of doing business and facilitate efficient data processing for payment of import transactions and effective monitoring thereof, Import Data Processing and Monitoring System (IDPMS) has been developed in consultation with the Customs authorities and other stakeholders. The details of IDPMS were advised to the AD Category-I banks vide above mentioned A.P. (DIR Series) Circular No.65 dated April 28, 2016and banks were requested to be ready with the required IT changes in their system to generate/submit the data under IDPMS as per specified message format and technical specification.

3. As announced in the fourth Bi-monthly Monetary Policy Statement 2016-17 dated October 4, 2016, all AD Category-I banks are advised that IDPMS will go live with effect from October 10, 2016 and are directed to use IDPMS for reporting and monitoring of the import transactions.

4. Customs department has modified the Bill of Entry (BoE) format to display the AD Code of bank with effect from April 1, 2016 and SEZ from June 1, 2016 respectively. Primary import transaction data (from Customs/SEZ) with effect from the above mentioned dates will be made available to respective AD banks in the IDPMS database for further processing. Starting October 10, 2016 all transactions will flow to IDPMS on daily basis for AD banks, to log all subsequent activities and monitor the import transactions.

5. The User Acceptance Test (UAT) of IDPMS was launched on August 19, 2016 and banks were requested to login and familiarise themselves. AD banks were also advised to be ready with data related to all the outstanding import remittances as per the message “outward remittances against Import” to facilitate uploading of the same in IDPMS.

6. The detailed operational procedures are available at Help Menu on EDPMS Portal under “Import process” tag. The operational directions/guidelines are as below:

i. AD banks are required to create Outward Remittance Message (ORM) for all such outward remittance/s for import payments on behalf of their importer customer for which the prescribed documents for evidence of import have not been submitted.
ii. ii. Creation of ORM for all outstanding outward remittance/s for import payments needs to be completed on or before October 31, 2016.
Settlement of ORM with BoE
iii. Based on the AD code declared by the importer, the banks shall download the Bill of Entry (BoE) issued by EDI ports from “BOE Master” in IDPMS. For non-EDI ports, AD bank of the importer shall upload the BoE data in IDPMS as per message format “Manual BOE reporting” on daily basis on receipt of BoE from the customer/Customs office.
iv. AD banks will enter BoE details (BoE number, port code and date) for ORM associated with the advance payments for import transactions as per the message format “BOE settlement”.
v. In case of payment after receipt of BoE, the AD bank shall generate ORM for import payments made by its importer customer as per the message format “BOE settlement”.
vi. Multiple ORMs can be settled against single BoE and also multiple BoE can be settled against one ORM. Extension and Write Off
Extension and Write Off
vii. AD Category I banks shall give extension for submission of BoE beyond the prescribed period in terms of the extant guidelines on the matter, and the same will be reported in IDPMS as per the message “Bill of Entry Extension” and the date up to which extension is granted will be indicated in “Extension Date” column.
viii. AD Category I banks can consider closure of BoE/ORM in IDPMS that involves write off to the extent of 5% of invoice value in cases where the amount declared in BoE varies from the actual remittance due to operational reasons and the AD bank is satisfied with the reason/s submitted by the importer.
ix. AD Category I banks may close the BoE for such import transactions where write off of import payable is on account of quality issues; short shipment or destruction of goods by the port/Customs/health authorities in terms of extant guidelines on the matter subject to submission of satisfactory documentation by the importer irrespective of the amount involved. AD Bank shall settle and close ORM/BoE with appropriate “Adjustment Indicator” in IDPMS.
x. The above operational guidelines for extension and write off are meant to facilitate closure of bills in IDPMS and will be subject to extant guidelines on the matter and shall not absolve the importer from remitting/receiving the amount in case of change in circumstances.
xi. Extension and write off cases not covered by the extant guidelines may be referred to the concerned Regional Office of Reserve Bank of India for necessary approvals.
Follow-up for Evidence of Import
xii. AD Category – I banks are required to follow up for submission of prescribed documents for evidence of import in terms of extant guidelines on the subject.

7. Authorised Dealers may bring the contents of this circular to the notice of their constituents and customers concerned.

8. Master Direction No. 17/2015-16 dated January 1, 2016 is being updated to reflect the changes.

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

Cabinet clears India-AARDO MoU on rural development : 06-10-2016


The Union Cabinet on Wednesday gave its approval for the signing of Memorandum of Understanding (MoU) between India and African-Asian Rural Development Organisation (AARDO) for capacity building programmes in the rural development sector.

“The MoU for the triennium 2015-2017 is being signed under which capacity building programmes for AARDO member countries will be organised every year during the triennium at various institutions of excellence in India,” an statement here said.

AARDO is an autonomous, inter-governmental organisation formed to promote cooperation among the countries of the African-Asian region to eradicate thirst, hunger, illiteracy, disease and poverty in the region.

The programmes will be organised in institutes such as National Institute of Rural Development and Panchayati Raj (NIRD and PR), institutions governed by the Indian Council of Agricultural Research (ICAR) and Indian Institute of Management (IIM).

Each training programme would be of two to three weeks.

AARDO currently has 31 countries of the African-Asian region under its fold.

Source : Economic times

India Inc wants overhaul of S4A guidelines : 06-10-2016


Power, infrastructure and steel companies are seeking a complete overhaul of the Reserve Bank of India’s (RBI’s) guidelines for S4A (scheme for sustainable structuring of stressed assets).

These firms say the scheme has failed to gauge the liquidity crisis faced by projects that were stalled due to lack of last-mile funding and external factors such as delay in land acquisition and environment clearances.

According to chief financial officers (CFOs), for arriving at the sustainable part of the loan, the techno-economic viability study was to be based on the current cash-flows for the next six months. “This was regressive, as a large number of operational projects and stressed infrastructure companies, which are operating at low capacity, will struggle to service even half the debt and may not be able to participate in the scheme at all,” said the finance head of a large steel company.

He said the fortunes of the Indian steel sector changed only after the Narendra Modi government imposed a minimum import price on imported steel in October last year, thus, giving respite to local steel companies. In August this year, steel production rose to a 37-month high and cement production maintained momentum — auguring well for construction activity, RBI said on Tuesday.

Another hurdle was the scheme sought personal guarantees from Indian promoters for repayment of loans. Many  promoters were not ready to give personal guarantees, especially after what happened to Vijay Mallya, said a banker.

CFOs said the S4A scheme did not allow any moratorium on repayment of the sustainable part of the loan and locking it to five years. “The loan repayment should be elongated, so that it actually benefits a company that is facing difficulties due to global slowdown or commodity meltdown of last year,” said another CFO.

Bankers said the scheme was a non-starter, as it continued to put heavy burden of provisions on the banks, while continuing to treat the asset as non-performing. Another public sector executive said the scheme was taking time, as accounts would go through techno-economic viability study, forensic audit, apart from nod from an independent oversight panel.  A senior State Bank of India executive said now there would be incentive to take large cases under S4A, as treating sustainable portion as standard asset will reduce a substantial portion of NPA pool. Most of these cases would have loans in excess of Rs 40,000 crore. So, even if 25 per cent is being considered sustainable, it would help the balance sheet look better.


S4A: SUSTAINED BOTTLENECKS

  • Scheme applicable only for operating companies and not for stalled projects
  • Techno-viability study takes only six-months’ cash-flows into account
  • Banks not allowed to elongate “sustainable” part of loan
  • Promoters against giving personal guarantees

NO TAKERS
2016

  • June 13: RBI scheme allows banks to convert half the loan into “sustainable” and “unsustainable”. Sustainable loans were to be classified as NPAs
  • June 15: Scheme can curb fresh NPA slippages but has flaws, warns CRISIL
  • Jul 13: HCC is the first company to get debt relief under the scheme
  • Jul 15: Scheme needs changes to work better, Assocham writes to RBI
  • Oct 4: RBI says sustainable loans to not be classified as NPA

 

Source : PTI

Central excise officers’ body plans protest on GST : 06-10-2016


An association representing nearly 15,000 central exciseand customs officials on Wednesday said it will launch a nation-wide protest and go on a mass casual leave on the ‘budget day’ if its various demands related to implementation of goods and service tax (GST) are not addressed.

The All India Association of Central Excise Gazetted Executive Officers has strongly demanded that all assessees of central excise and service tax with the annual turnover of Rs 20 lakh per annum should only be controlled by the Centre for the purpose of levy and collection of Central GST (CGST) and Integrated GST(IGST).

“It has come to notice of the association that the states and their employees have now started demanding control over service tax assessees also falling within the annual turnover limit of Rs 20 lakh per annum to Rs 1.50 crore per annum due to a liberal stand shown by the Centre, it said.

“The Centre appears to be showing leniency towards states to implement GST at any cost with effect from April 1, 2017,” the association said in a memorandum to Finance Minister Arun Jaitley.

The association demanded that none of the assessees of central excise (to be levied CGST on the supply of goods) and service tax (to be levied CGST on the supply of services) should be transferred to states for the purpose of levy and collection of CGST by the officers of states.

“All central excise and service tax assessees falling above the annual turnover of Rs 20 lakh should necessarily be controlled by the Centre and its officers only. No need to say that we require a strong and powerful Centre in our federal system,” the memorandum said.

The association said if its demands are ignored then it would be compelled to initiate non co-operation movement.

To start with, it plans peaceful lunch hour gathering in front of the residence of the finance minister in New Delhi on October 14 and the similar protest on November 9 in all headquarters.

The officers of the association will also wear black badge in all offices on December 7, throughout the country besides a day-long protest programme on January 5, 2017. There will be mass casual leave on budget day by all officers, it said.

The association said that Central Board of Excise and Customs (CBEC), its officers and employees are smoothly, hassle-freely and effectively collecting central excise duty from 1944 and service tax from 1994.

These officers and employees have always contributed the indirect taxes collection to the Union government over and above the budgetary targets.

“The CBEC and its officers should only be allowed to collect CGST and IGST under the forthcoming concerned statutes of CGST Act and IGST Act. On the other hand, the state government officials should be allowed to collect only SGST on intra-state supply of goods and services.

“Any cross utilisation of powers may lead to serious implications on collection of revenue to the Centre,” the body said.

Source : Business Standard

Notification No. SO 3158(E) 05-10-2016


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – ZYDUS INFRASTRUCTURE PVT. LTD.

NOTIFICATION NO. SO 3158(E) [F.NO.F.2/44/2005-SEZ], DATED 5-10-2016

Whereas, M/s. Zydus Infrastructure Private 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 Special Economic Zone for Pharmaceuticals at Village-Matoda, Sari and Chachanvadi Vasna on National Highway 8-A, Taluk-Sanand District – Ahmedabad, in the State of Gujarat;

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 48.83 hectares at above Special Economic Zone vide Ministry of Commerce and Industry Notification Number S.O. 1630(E) dated 28th September, 2006;

And whereas, M/s. Zydus Infrastructure Private Limited, has now proposed to include an area of 1.4585 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 1.4585 hectares, as a part of above Special Economic Zone, thereby making total area of the Special Economic Zone as 50.2885 hectares, comprising the survey numbers and the area given below in the table namely:—

TABLE

Sl. No. Village Survey No. Area in hectares
1. Matoda 495/2 0.7575
2. 474 0.3558
3. 475/3 0.0168
4. 473/1 0.3284
Total 1.4585
Grant total area of SEZ after above addition 50.2885

 

Notification No.90/2016 05-10-2016


Income-tax (25th Amendment) Rules, 2016 – 90/2016 – Dated 5-10-2016

 

MINISTRY OF FINANCE (Department Of Revenue) (CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION NO. 90/2016

New Delhi, the 05th October, 2016

S.O. 3150 (E).- In exercise of the powers conferred by section 295 read with sub-section (2) of section 270AA 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, 2016.

(2) They shall come into force on the 1st day of April, 2017.

2. In the Income-tax Rules, 1962 (hereinafter referred to as the said rules), after rule 128, following rule shall be inserted, namely:-

“129. Form of application under section 270AA.- An application to the Assessing Officer to grant immunity from imposition of penalty under section 270A and from initiation of proceedings under section 276C or section 276CC shall be made in Form No.68.”.

3. In the said rules, in Appendix-II, after Form No.67, the following form shall be inserted, namely:-

“FORM No.68

Form of application under section 270AA(2) of the Income-tax Act, 1961

Personal Information First Name Middle Name Last Name or Name of Entity PAN
Flat/ Door/ Block No. Name of Premises/ Building/ Village Road/ Street/ Post Office
Area/ Locality Town/City/District State
Country Pin Code Phone No. with STD code/ Mobile No. Email Address

 

Details of orders and payments 1 Assessment Year  
2 Section under which assessment/reassessment* order is passed  
3 Date of the assessment/reassessment* order  
4 Date of service of the assessment/reassessment* order  
5 Amount of income assessed as per the assessment/reassessment* order  
6 Tax and interest payable as per notice of demand (in Rs.)  
7 Due date for payment as per notice of demand  
8 Details of amounts paid  
  Sl. No. BSR Code Date of Deposit

(DD/MM/YYYY)

Serial Number of Challan Amount (Rs.)
  (i)                                            
  (ii)                                            
  (iii)                                            

Form of verification

I, ____________________________son/daughter* of_____________________ do hereby declare that what is stated above is true to the best of my information and belief. I further declare that no appeal has been filed in respect of the order mentioned in column 2 above. I also undertake that no appeal shall be filed in respect of the said order before the expiry of the period specified in section 270AA(4) of the Income-tax Act, 1961. I declare that I am making this application in my capacity as ____________________ and I am also competent to file this application and verify it.

Signature

Seal

(wherever applicable)

Place

Date

*Strike off whichever is not applicable”

[F.No.370142/26/2016-TPL]

DR. T. S. MAPWAL, Under Secy.

Note: The principal rules were published vide Notification S.O. 969 (E), dated 26th March, 1962 and last amended vide Notification S.O. 3145(E), dated 04th October, 2016.

Jaitley as Chairman and Amit Mitra as Vice Chairman of GST Council : 05-10-2016


Two meetings of the GST Council have already been held – the inaugural one  for two days on September 22  and 23 and the second on September 30, but there is no official word yet on when the process of choosing the Council’s vice-chairman will be completed.

But does that mean that the issue is not engaging the attention of those who matter and that nothing is   happening   behind-the-scene ? Far from it, if   indications available from political quarters are to be given credence. Union finance minister Arun Jaitley, who is the chairman of the Council, is active on the issue. If he has his way and there are pointers he will have, West Bengal’s finance minister Amit Mitra may well be the first vice-chairman of the GST Council.

Mitra, who headed the now wound-up Empowered Committee of State Finance Ministers, enjoys cordial working  relations with Jaitley and the latter recognises his professionalism and deep understanding of subject.  There is  a great deal of appreciation in the Council that Mitra as number two will be of great help to Jaitley in discharging the huge responsibility that lies ahead. The Centre is keen to honour the roll-out date of April 1, 2017.

But the BJP-ruled states have a grievance that West Bengal has not cared to ratify   the Constitution Amendment Bill. Although    this is no more an issue because the requisite number of states ratified and the Bill received the President’s assent. The West Bengal government has  suggested that it strongly favours GST and has been consistently supporting all actions of the Centre in this regard. Paucity of time on August 26 last, when a day’s Assembly session was held, stood in the way of the Government taking up the GST Bill. The session was pre-occupied with the proposal of the state’s name change. It may, however,  be mentioned that when the announcement regarding the special session was made, indications were given by the treasury side   that ratification of the GST Bill would be on the agenda. Finally, that was not to be.

The BJP-ruled states’ contention seems to be that they have nothing as such against Mitra but his elevation would mean someone occupying the vice-chairman’s position is from a state which has not ratified the Bill. But, just because the President has assented to the Bill paving the way for the constitution of the GST Council and, in a sense, for roll-out of the path-breaking indirect tax reform, it does not mean that states which have not ratified the Bill so far cannot do so now. They can still fall in line.

While it is yet to unfold what the West Bengal government intends to do there are indications that Jaitley is already trying to sort out matters and he may well speak to the chief minister. It all hinges on him and Mitra may well emerge the winner  ; perhaps, without an election exercise.

Source : PTI

Sebi for curbs on compensation agreements with PE firms: 05-10-2016


The Securities and Exchange Board of India (Sebi) has proposed curbs on compensation agreements between promoters of a listed entity and private equity (PE) funds.

In a discussion paper, the markets regulator proposed that certain arrangements between listed entities and PEs would need prior approval from shareholders.

“No employee, including key managerial personnel, director or promoter of a listed entity shall enter into any agreement with any individual shareholders or any other third party with regard to compensation or profit sharing unless prior approval has been obtained from the board (of directors), as well as shareholders by way of an ordinary resolution,” Sebi proposed in a paper titled ‘Corporate Governance Issues in Compensation Agreements’.

The proposals were approved by the Sebi board on September 23 (public comments have been invited till October 18).

“Provided that all such existing agreements entered into prior to the date of notification and which may continue beyond such date shall be informed to the stock exchanges for public dissemination and approval obtained from shareholders by way of an ordinary resolution in the forthcoming general meeting. In case approval from shareholders is not received, all such agreements shall be discontinued,” proposed Sebi.

It said there had been instances where PE funds had entered into compensation agreements with promoters of listed companies and made gains but these were not disclosed.

“Certain PE firms have entered into side agreements with top personnel and key managerial personnel by which such firms (allotted shares on a preferential basis) would share a certain portion of the gains above a certain threshold limit made by them at the time of selling the shares and also subject to the conditions that the company achieves certain performance criteria and the employee continues with the company for a certain period,” said Sebi.

Adding: “It is not unusual for PE funds to incentivise promoters of investee companies, based on performance of such companies. However, when such reward agreements are executed between the PE investor and the respective promoters of the listed entity, without any prior approval of the shareholders, it does give rise to concerns. It could potentially lead to unfair practices.”

Sebi seeks public comments on the proposed norms by October 18.

Source : Economic Times

India, Singapore to speed up CECA review to boost bilateral trade : 05-10-2016


During a bilateral meeting between Prime Minster Narendra Modi and his Singaporean counterpart Lee Hsien Loong, India and Singapore have decided to “expedite” the second review of the Comprehensive Economic Cooperation Agreement (CECA) to boost two-way trade.

“The trade and investment ties form the bedrock of our bilateral relationship. We enjoy a strong network of business-to-business partnerships.

“In this context, Prime Minister Lee and I have agreed to expedite the second review of our Comprehensive Economic Cooperation Agreement,” Modi said after the meeting.

The India-Singapore CECA had been effective since 2005.

CECA logjam

However, the second review of the pact has been stuck for over six years now over the issue of India demanding more access in that market for its professionals and banks.

However, Singapore has maintained that Indian banks lack international standards and they have to follow certain quality benchmarks to be present in Singapore.

Bilateral trade between India and Singapore has been declining for the last five years with Indian exports to that country falling at a faster rate. Total trade between the two declined 11.25 per cent to $15.02 billion in 2015-16 from $17 billion in 2014-15, according to official statistics.

Shared priorities

On the issue of defence and security, which forms a crucial part of the strategic partnership between the two countries, Modi said it is a shared priority of both countries to maintain open sea lanes of communication and respect for international legal order of seas.

דThe rising tide of terrorism, especially cross-border terrorism, and the rise of radicalisation are grave challenges to our security. They threaten the very fabric of our societies. It is my firm belief that those who believe in peace and humanity need to stand and act together against this menace.

“Today, we have agreed to enhance our cooperation to counter these threats, including in the domain of cyber security,” he said.

Lee, who is on a five-day visit to India, also met External Affairs Minister Sushma Swaraj earlier in the day.

Both sides also signed three memorandums of understanding on intellectual property, skills development and technical and vocational education and training.

Source : Business Standard

Notification No.89/2016 04-10-2016


Income-tax (24th Amendment) Rules, 2016 – Expenditure for obtaining right to use spectrum for telecommunication services. – 89/2016 – Dated 4-10-2016 – Income Tax

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION NO. 89/2016

New Delhi, the 4th October, 2016

INCOME-TAX

S.O. 3145(E).-In exercise of the powers conferred by clause (iii) of Explanation to section 35ABA and 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 (24th Amendment) Rules, 2016.

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

2. In the Income-tax Rules, 1962, after rule 6, the following rule shall be inserted, namely:-

6A.Expenditure for obtaining right to use spectrum for telecommunication services.-(1) For the purpose of section 35ABA, the term “payment has actually been made” shall mean,-

(a) where an assessee has opted and been allowed by the Department of Telecommunications, Government of India to make full upfront payment of spectrum fee, the actual payment of expenditure irrespective of the previous year in which the liability for the expenditure was incurred according to the method of accounting regularly employed by the assessee;

(b) where an assessee has opted and been allowed by the Department of Telecommunications, Government of India to make deferred payment, the amount which would have been payable by the assessee had he opted for full upfront payment of spectrum fee irrespective of the previous year in which the liability for the expenditure was incurred according to the method of accounting regularly employed by the assessee.

(2) In case of deferred payment referred to in clause (b) of sub-rule (1), where there is failure by the assessee to comply with any of the conditions specified by the scheme of the Department of Telecommunications, Government of India and Department of Telecommunications terminates the allotment or assignment of spectrum, the Assessing Officer shall, in exercise of power vested in him under sub-section (3) of section 35ABA shall re-compute the total income of the assessee for the previous year in which the deduction has been claimed and granted to him by deeming that,-

(i) the total amount of spectrum fee paid up to the date of termination is the amount of “payment actually been made”;

(ii) the spectrum was in force up to the date of its termination for the purpose of computing “relevant previous year”;’.

[F.No.370142/14/2016 -TPL]

PITAMBAR DAS, Director (Tax Policy and Legislation)

Note: The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii) vide notification number S.O. 969 (E), dated the 26th March, 1962 and last amended by the Income-tax (23rd Amendment) Rules, 2016, vide notification number S.O. 3080 (E), dated 29/09/2016 .

India, Canada committed to strengthen economic ties: Arun Jaitley : 04-10-2016


India and Canada are committed to deepen the economic and financial relationship and enhance strategic partnership, Finance Minister Arun Jaitley has said as he invited Canadian investment in India’s infrastructure sector.

“Both countries are committed to strengthen economic ties as there is a positive environment. Negotiators from both countries will meet soon to resolve sticking points,” he said.

Jaitley yesterday met his Canadian counterpart Bill Morneau and Canada’s International Trade Minister Chrystia Freeland and reviewed progress in India Canada relationship including proposed Comprehensive Economic Partnership Agreement (CEPA) and Foreign Investment and Promotion and Protection Agreement (FIPA).

“Both countries are very keen to finalise both the proposed agreements,” Jaitley said.

He said that the two countries have also agreed to enhance strategic partnership.

The minister also held a series of meetings with Canadian pension funds, bankers, financial sector companies.

“Foreign Direct Investment by Canadian Investors was about 12 billion dollar in India in the past 24 months. This does not include portfolio investment by Canadian investors,” he said.

“India has a good story to tell and is moving much faster than rest of the world. The likely return on investments in India is much higher and the risk is much less than other nations,” he said.

Canadian Finance Minister Morneau in a statement said: “I am pleased to build on Canada’s longstanding relationship with India by exploring ways to deepen our economic and financial ties. It is important that Canada continues to engage with the world to create more opportunities and prosperity for the middle class.”

The two ministers will travel to the US later this week to attend the Annual Meetings of the International Monetary Fund and World Bank Group as well as a G20 meeting.

As co-chairs of the working group responsible for G20 growth strategies, both ministers are expected to highlight the importance of seizing the opportunity to invest in people and infrastructure to build a strong and prosperous global economy.

Canada and India have longstanding bilateral relations, built upon shared traditions of democracy, pluralism and strong interpersonal connections with an Indian diaspora of more than one million in Canada, Morneau said.

Building on this strong relationship, Morneau highlighted the Canada-India Finance Ministers Dialogue as an important initiative to deepen the economic and financial relationship between the two countries.

Source : Financial  Express

RBI to announce monetary policy review today : 04-10-2016


The Reserve Bank of India will announce its monetary policy review on Tuesday.

It will be announced in the afternoon at 2:30 pm against the existing practice of 11 am.

This will be Urjit Patel’s maiden policy announcement as the RBI Governor.

This is for the first time that decision-making on interest rates will shift to the six-member panel which has equal representation from RBI and the government.

Since January 2016, the RBI has cut the repo rate – the rate at which RBI lends to banks – five times. India’s retail inflation has touched a five-month low of 5.05 per cent in August, triggering hopes of a rate cut.

The RBI and the government have set a retail inflation target of four per cent for the next five years with an upper tolerance level of six per cent and lower limit of two per cent.

Most analysts expect a status quo on rates. Mounting bad loans will remain another focus area of Patel’s debut policy review.

Rajan has set a deadline of March 2017 for banks to clean up their balance sheets.

Patel has to ensure that there is no let-up on this cut-off date.

Source : Business Standard

Cabinet rejects labour ministry’s proposal on EPFO threshold : 04-10-2016


The labour ministry may restore the original threshold for any enterprise to be covered under Employees Provident Fund Organisation (EPFO) to 20 workers against 10 proposed by it following a directive from the Union Cabinet saying it would discourage formal employment.

The rollback of the proposed amendment, which had the potential to bring 50 lakh workers under under the social security net, would, however, hit labour ministry’s on-going push to widen the cover by bringing more and more workers under the EPFO fold.

“We are considering to reverse the threshold to 20 workers after the Cabinet rejected the proposal in view that lowering the threshold would put immense financial burden on the small enterprises,” a senior labour ministry official told ET on condition of anonymity.

According to the official, a revised Cabinet note would be moved again after consultation with stakeholders, including employers, employees and trade unions. At present, it is mandatory under the Employees’ Provident Fund and Miscellaneous Provisions Act for firms having 20 or more workers to subscribe to EFO social security schemes. Labour and employment minister Bandaru Dattatreya had said in Lok Sabha in August that the plan is to amend the law so that firms with 10 employees can also be  brought under the ambit of EPFO to ensure more workers come under the umbrella of soci-EPal security.

Under the EPF & MP Act, 1952, the employee contributes 12% every month towards EPF and a matching contribution is made by the employer.

However, of the 12% contribution by the employer, 8.33% goes into the employee pension scheme, 0.5% to the employees’ deposit linked insurance scheme while the rest goes to the provident fund account of each worker. “It is a welcome move because lowering the threshold was very anti-ease of doing business and would have prompted more informalisation as small companies would have preferred to stay small to avoid this hassle,” Rituparna Chakraborty of the Indian Staffing Federation said.

According to the federation, in the case of lowering of the threshold, small enterprises, which are struggling to establish themselves, would have to bear not just the cost of provident fund but also the cost of administering such a huge responsibility, something they would not want to do at that stage.

Source : Financial Express

Notification No. SO 3118(E) [F.No.1/5/2001-CL-V (PA [03-10-2016


SECTION 132 OF THE COMPANIES ACT, 2013, READ WITH SECTION 210A OF THE COMPANIES ACT, 1956 – NATIONAL FINANCIAL REPORTING AUTHORITY – CONSTITUTION OF – NOTIFIED COMMITTEE

NOTIFICATION NO. SO 3118(E)[F.NO.1/5/2001-CL-V (PART VI)], DATED 3-10-2016

In exercise of the powers conferred by sub-section (1) of section 210A of the Companies Act, 1956, (1 of 1956), the Central Government hereby constitutes an Advisory Committee to be called the National Advisory Committee on Accounting Standards, consisting of the following persons, to advise the Central Government on the formulation and laying down of accounting policies and accounting standards for adoption by companies or class of companies under the said Act or the Companies Act, 2013 (18 of 2013) as the case may be, namely:—

(1) Shri Amarjit Chopra,
Chartered Accountant
Chairperson,
[nominated under clause (a) of sub-section (2) of section 210A]
(2) ShRi Manas Kumar Thakur,
President, Nominee of the institute of,
Cost Accountants of India
Member,
[nominated under clause (b) of sub-section (2) of section 210A]
(3) Ms. Mamta Binani,
President, Nominee of the Institute of,
Company Secretaries of India
Member,
[nominated under clause (b) of sub-section (2) of section 210A]
(4) Shri M. Devaraja Reddy, President,
Nominee of the Institute of Chartered
Accountants of India
Member,
[nominated under clause (b) of sub-section (2) of section 210A]
(5) Joint Secretary,
Ministry of Corporate Affairs
Member,
[nominated under clause (c) of sub-section (2) of section 210A]
(6) Shri Sudarshan Sen,
Chief General Manager-in-Charge,
Nominee of the Reserve Bank of India
Member,
[nominated under clause (d) of sub-section (2) of section 210A]
(7) Director General (Commercial),
Nominee of Comptroller and Auditor-General of India
Member,
[nominated under clause (e) of sub-section (2) of section 210A]
(8) Dr. Sanjeev Singhal,
Former Associate Professor,
FORE School of Management
Member,
[nominated under clause (f) of sub-section (2) of section 210A]
(9) Joint Secretary, TPL-II,
Nominee of the Central Board of Direct Taxes
Member,
[nominated under clause (g) of sub-section (2) of section 210A]
(10) Shri Dipankar Chatterji,
Nominee of the Confederation of
Indian Industry
Member,
[nominated under clause (h) of sub-section (2) of section 210A]
(11) Shri Sushil Agarwal,
Nominee of the Federation of
Indian Chambers of Commerce and Industry
Member,
[nominated under clause (h) of sub-section (2) of section 210A]
(12) Dr. Ashok Haldia,
Nominee of the Associated Chambers of
Commerce and Industry of India
Member,
[nominated under clause (h) sub-section (2) of section 210A]
(13) Executive Director,
Nominee of Securities Exchange Board of India
Member,
[nominated under clause (i) of sub-section (2) of section 210A]

2. The Chairperson and members shall hold office for a period of one year From the date of publication of this notification in the Official Gazette or till the constitution of National Financial Reporting Authority under section 132 of the Companies Act, 2013 (18 of 2013), whichever is earlier.

3. This notification shall come into force on its publication in the Gazette.

Notification No. SO 3157(E) 03-10-2016


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

NOTIFICATION NO. SO 3157(E) [F.NO.F.1/19/2016-SEZ], DATED 3-10-2016

Whereas, M/s. Bagmane Developers 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 IT/ITES at Outer Ring Road, Doddanekundi Circle, Marathalli Post, Bengaluru in the State of Karnataka;

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 7th September, 2016;

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 1.34 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. Doddanekundi, Bengaluru 42/2 0.51
2. 42/3 0.83
Total 1.34

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 3rd day of October, 2016 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).

GST Council meeting: Waivers, draft rules okayed; differences over tax assessees : 03-10-2016


Cracks surfaced in the second meeting of the GST Council with disagreement between some states and Centre regarding the Centre’s administrative control of service tax assessees, a decision which was agreed upon in the first meeting of the council last week. As a result, minutes of meeting held on September 23 were not approved by the council in its meeting on Friday.

“With regard to one item recorded in the minutes with regard to the service tax assessment in the new dispensation. There was a long discussion on the interpretation on the decision taken in the last meeting and that discussion consumed a lot of time today. That discussion was inconclusive and therefore it will continue in the next meeting on 18th (October),” finance minister Arun Jaitley told reporters after the meeting.

However, there was consensus on the items listed in agenda for second meeting such as area-based exemptions and draft rules dealing with issues ranging from registration to invoicing.

“Now these rules are with regard to registration, rules for payments, return, refund and invoices. These rules are notified once the Act is passed…these five sets of rules were taken up of consideration and have been approved. So we are in a state of readiness with the subordinate legislation once the Act itself is approved,” he said.

The rules approved will form part of the supporting legislations needed to roll out the GST regime. “So once the Act is passed by Parliament or by the state legislatures as the case may be, we want the draft rules to be ready so that the rules can be notified immediately,” he said.

For the second item on agenda regarding existing tax incentives by the Centre and the state governments, he said GST will be levied on all exempted entities and later central and state governments will decide to reimburse the quantum of tax back to some entities.

“It is possible that some of the exemptions may get phased out…the Council took up for discussion the management of these exemptions and it was agreed that there would be a levy of tax under the GST system on all exempted entities…once the tax is levied, the central govt or state government, which gets that tax, would then reimburse from the Budget, that quantum of tax back to exempted entity,” he said.

The Centre has given some exemptions from excise duty to 11 Northeast and hill states, while states give out a series of incentives to incentivise industries to invest in their states.

When asked if tax exemptions would be grandfathered, Jaitley said: “It is not necessary to grandfather everything but if you do grandfather it then the process of payment of tax and reimbursement, it will be like a direct benefit cash being returned.”

Which exempted entities will remain, which will not remain will be decided by states and the Centre, he said adding that states would have to decide on exempted entities as they will reimburse tax to them.

Since the tax share will be shared between Centre and states in the ratio of 58 per cent to 42 per cent, respectively, the reimbursement for the area-based exemptions would also be in the same ratio.

“We (Centre) will reimburse only 58 per cent. How the remaining 42 per cent will be reimbursed that arrangement has to be worked out. I can’t get 58 per cent tax and reimburse 100 per cent,” he said.

The 14th Finance Commission in its report had scaled up devolution to states from the central pool of taxes to 42 per cent from 32 per cent. The GST Council, which is headed by the union finance minister, had last week decided to fix the exemption limit for the indirect tax at Rs 10 lakh for northeastern states and hill states and Rs 20 lakh for other states along with decision to subsume all cesses into GST.

Apart from the decision on dual control between states and the Centre, the council had then decided to maintain status quo for assessment of 11 lakh service tax assessees, with the powers continuing to stay with the Centre. Jaitley had said state government officials will be trained in due course to handle the service tax cases, but till then Centre will have exclusive jurisdictional control. New assessees which would be added to the list would be divided between the Centre and states. With the Friday’s meeting, as many as seven issues have been settled by the Council.

Discussions on service tax assessment and the formula for calculating compensation for states in case of revenue shortfall as a result of implementation of GST regime would be taken up in the next meeting on October 18-20.

Source : PTI

Centre constitutes Insolvency and Bankruptcy Board : 03-10-2016


The Centre has constituted a four-member Insolvency and Bankruptcy Board of India (IBBI) under the Chairmanship of MS Sahoo.

Sahoo, who was till recently Competition Commission of India (CCI) Member, assumed charge as Chairman of IBBI on Saturday.

The oath of office was administered by Finance and Corporate Affairs Minister Arun Jaitley here.

Sahoo was last month appointed as IBBI Chairman for a period of five years.

The members of the IBBI are Ajay Tyagi, Additional Secretary, Finance Ministry; Amardeep Singh Bhatia, Joint Secretary, Ministry of Corporate Affairs; GS Yadav, Joint Secretary, Department of Legal Affairs; and Unnikrishnan, Legal Advisor, Reserve Bank of India.

The main activity of IBBI would be to regulate the functioning of insolvency professionals, insolvency professional agencies and information utilities under the Insolvency and Bankruptcy Code 2016.

The Centre had notified the Insolvency Code in May. The fact that IBBI has been constituted in a span of four months is a commendable effort, say economy watchers.

While the Centre has for now set up the IBBI with four members, going forward this will be expanded to 10 (including the Chairman), official sources said.

Three whole-time members and two other members are to be appointed, which will take the overall tally to 10 in the coming days

Source : The Hindu

WTO panel to discuss India’s paper on TFA in services on October 6 : 03-10-2016


The first meeting of a WTO panel to discuss the new concept paper floated by India on a proposed trade facilitation agreement in services will be held on October 6 in Geneva. India is pitching for this agreement with a view to reduce transaction costs by doing away with unnecessary regulatory and administrative burden on trade in services.

“The Indian concept paper will be discussed at a meeting of the WTO’s working party on domestic regulation on October 6,” an official said. The country’s move assumes significance as the services sector contributes significantly in the economies of developing nations.

Services sector contributes about 60 per cent to India’s economy and 28 per cent in the total employment. With the growing importance of the sector, India has time and again pitched for liberalisation and streamlining of norms for the sector in the Geneva-based World Trade Organisation (WTO).

In its concept note, India has proposed for simplification of procedures and clarity in work permits and visas for smooth movement of professionals. India is making the case for this pact in line with the Trade Facilitation Agreement (TFA) in goods, signed by WTO in 2014, which aims at expediting movement, release and clearance of goods as well as co-operation on customs compliance issues.

“There is need for a counterpart agreement in services, an Agreement on Trade Facilitation in Services (TFS Agreement), which can result in reduction of transaction costs associated with unnecessary regulatory and administrative burden on trade in services,” India’s concept note has stated.

It said there is a need to look at the disciplines on measures relating to taxation, fees/charges, discriminatory salary requirements, social security contributions in relation to temporary entry in order to ensure that these do not unfairly disadvantage foreign service suppliers.

India has sought comments and suggestions from all the WTO members on this note. The 164-member body makes rules for global trade.

Source : Economic Times

Notification No: G.S.R 936(E) [F.NO.01/13/2013 CL-V Dated: 01-10-2016


COMPANIES (INCORPORATION) FOURTH AMENDMENT RULES, 2016 – AMENDMENT IN RULE 33; INSERTION OF RULES 38, 39; FORM NO.INC-11B, FORM NO.INC-32, FORM NO.INC-33 AND FORM NO.INC-34 AND SUBSTITUTION OF FORM NO.INC-27

NOTIFICATION NO. GSR 936(E) [F.NO.1/13/2013 CL-V], DATED 1-10-2016

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) fourth Amendment Rules, 2016.

(2) Save as otherwise provided, these rules shall come into force on the date of their publication in the Official Gazette.

2. In the Companies (Incorporation) Rules, 2014 (hereinafter referred to as the principal rules), in rule 33, for sub-rule (2), the following shall be substituted, namely:—

“(2) subject to the provision of sub-rule (1), for effecting the conversion of a public company into a private company, a copy of order of the Tribunal approving the alteration, shall be filed with the Registrar in Form No.INC-27 with fee together with the printed copy of altered articles within fifteen days from the date of receipt of the order from the Tribunal”.

3. In the principal rules, after rule 37, the following rule shall be inserted, with effect from 2nd October 2016, namely:—

“38. Simplified Proforma for Incorporating Company Electronically (SPICE)

(1) The simplified integrated process for incorporation of a company in Form No. INC-32 alongwith e-Memorandum of Association in Form No. INC-33 and e-Articles of Association in Form No. INC-34.
(2) The provisions of sub-rule (2) to sub-rule (13) of rule 36 shall apply mutatis mutandis for incorporation under this rule.

Provided that for the purposes of references to form numbers INC-29, INC-30 and INC-31 in rule 36 with Form No. INC-32, Form no. INC-33 and Form No. INC-34 shall be substituted respectively.

4. In the principal rules, after rule 38 as so inserted these rules, the following rule shall be inserted with effect from 1st November, 2016, namely:—

“39. Conversion of a company limited by guarantee into a company limited by shares (1) A company other than a company registered under section 25 of the Companies Act, 1956 or section 8 of the Companies Act, 2013 may convert itself into a company limited by shares.

(2) The company seeking conversion shall have a share capital equivalent to the guarantee amount.

(3) A special resolution is passed by its members authorising such a conversion omitting the guarantee clause in its Memorandum of Association and altering the Articles of Association to provide for the articles as are applicable for a company limited by shares.

(4) A copy of the special resolution shall be filed with the Registrar of Companies in Form no. MGT-14 within thirty days from the date of passing of the same along with fee as prescribed in the Companies (Registration Offices and Fees) Rules, 2014.

(5) An application in Form No. INC-27 shall be filed with the Registrar of Companies within thirty days from date of the passing of the special resolution enclosing the altered Memorandum of Association and altered Articles of Association and a list of members with the number of shares held aggregating to a minimum paid up capital which is equivalent to the amount of guarantee hither to provided by its members.

(6) The Registrar of Companies shall take a decision on the application filed under these rules within thirty days from the date of receipt of application complete in all respects and upon approval of Form No. INC-27, the company shall be issued with a certificate of incorporation in Form No. INC-11B.”.

5. In the principle rules, after the Form No. INC-11A, the following form shall be inserted, namely:—

“Form No. INC-11B

Certificate of Incorporation pursuant to conversion of a company limited by guarantee into a company limited by shares

[Pursuant to section 18 of the Companies Act, 2013 read with rule 39 of the Companies (Incorporation) Rules, 2014]

I hereby certify that……………(name of the company prior to conversion) limited by guarantee has been converted into……….(name of the company after conversion) a company limited by shares with effect from the date of this certificate.

The CIN of the company is……………………………

Given under my hand at…………… this………………… day of…………… two thousand………………

SEAL: …………………

Registrar of Companies

…………………………

(State).”.

6. In the principle rules for Form No. INC-27, the following form shall be substituted, namely:—

“FORM NO. INC-27

[Pursuant to sections 14 and 18 of the Companies Act, 2013 and Rule 33, Rule 37 and Rule 39 made there under of the Companies Rules, 2013]

Conversion of public company into private company or private company into public company and Conversion of Unlimited Liability Company into a Company Limited by shares or guarantee or conversion of guarantee company into a company limited by shares

7. in the principle rules, after Form no. INC-31, the following shall be inserted, namely:—

FORM NO. INC-32

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

(Simplified Proforma for Incorporating Company Electronically

 

FORM NO. INC-33

[Pursuant to Schedule I (see sections 4 and 5) to the Companies Act, 2013]  SPICe MOA

(e-Memorandum of Association)

 

FORM NO. INC-34

[Pursuant to Schedule I (see sections 4 and 5) to the Companies Act, 2013] SPICe MOA

(e-Articles of Association)

 

Sebi confirms ban on 20 entities in tax evasion case : 01-10-2016


The Securities and Exchange Board of India (Sebi) on Friday confirmed its interim order banning 20 entities fortax evasion and money laundering besides misusing stock exchange mechanism.

Among the 20 entities are Pushpdant Tradelink, Goodpoint Impex, Core Commodities, Shivsathi Mercantile, Jolly Pathak and Vinod Sukhani.

The regulator, via an interim order dated March 29, 2016, had barred 246 entities, including these 20, from marketsafter they were found to indulged in manipulation in shares of Kailash Auto Finance.

“Apart from market manipulation and misuse of stock exchange system in the scrip of Kailash Auto, the entire plan, device and artifice of private placement, fabrication of share premium, issuance of bonus shares, subsequent transfers and retransfers of shares and funds to connected entities was designed and structured to beguile the same as transactions with commercial sense to generate bogus LTCG which is exempt from tax,” the Sebi said in its Friday’s order.

The regulator said that these 20 entities have failed to make out a prima facie case for revocation or modification of the interim order and material available on record justifies the continuation of the directions passed against them under the ad interim ex-parte order dated March 29, 2016.

Accordingly, the Sebi has confirmed its interim order passed against the 20 entities.

“The interim order dated March 29, 2016, shall remain in force till further directions,” Sebi said in its latest order.

Source : Business Standard

Commerce Ministry not for imposing anti-dumping duty on batteries : 01-10-2016


India is unlikely to impose anti-dumping duty on batteries from China and Vietnam as the commerce ministry in its probe has concluded that the imports have not caused material injury to domestic players.

In its final findings, the directorate general of anti-dumping and allied duties (DGAD) has recommended that imposition of the duty on the imports “is not required”.

The Association of Indian Dry Cell Manufacturers had filed the application for the dumping probe on imports of ‘AA Dry Cell Batteries’ from the two countries.

“Having initiated and conducted the present investigation into dumping, injury and causal link in terms of the anti- dumping rules, the authority is of the view that the dumped imports have not caused material injury to the domestic industry,” DGAD has said in a notification.

It has concluded that a huge amount of profit is made by the domestic industry despite dumping and “production, sales and capacity utilisation have declined, but the market share of domestic industry has declined marginally”.

Though during the period of investigation (April 2014 – March 2015), it said, significant volume of imports have entered the Indian market at dumped prices, it has not impacted the domestic industry as it caters to a different market segment.

The final view on the DGAD’s recommendations will be taken by the finance ministry.

Countries initiate anti-dumping probes to determine if the domestic industry has been hurt by a surge in below-cost imports. As a counter-measure, they impose duties under the multilateral WTO regime.

Anti-dumping measures are taken to ensure fair trade and provide a level-playing field to the domestic industry.

They are not a measure to restrict imports or cause an unjustified increase in cost of products.

Source : PTI

New accounting norms change net worth of BSE 100 firms : 01-10-2016


If you thought you should buy shares of top listed companies because its profitability or net worth has gone up, think again.

Most of the companies in BSE 100 saw a change in their net worth, revenues and net profits due to the change in accounting methodology, according to a research by EY India on new accounting standards. Indian companies with net worth more than Rs 250 crore have shifted new accounting standards—Ind-AS—which are based on global standards IFRS.

According to EY, 22% of the top 100 companies saw change of more than 20% in their net worth while 56% of the companies saw a change in their net worth by less than 10%. The remaining companies in the BSE 100 saw a change of anywhere between 10-20% in their net worth.

“The transition to Ind-AS has been challenging not only for companies, but also for auditors. The review of management judgements, estimates and alternatives calls for extensive auditor involvement early on during the transition.

Added to this, changes in internal controls, systems and business processes will have significant audit implications for many companies,” said Sudhir Soni, partner in an Indian member firm of EY Global.

The research pointed out that 20% of the companies saw a 20% to 100% change in their net profit, while 72% of the companies witnessed less than 10% change in their net profit.

Source : Financial Express

4 – 30-9-2016


INVESTMENT BY FOREIGN PORTFOLIO INVESTORS (FPI) IN GOVERNMENT SECURITIES

A.P. (DIR SERIES 2016-17) CIRCULAR NO.4DATED 30-9-2016

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. The limits for investment by foreign portfolio investors (FPI) in Government securities were last increased in terms of the Medium Term Framework (MTF) announced vide A.P. (DIR Series) Circular No. 55 dated March 29, 2016.

2. As announced in the MTF, the limits for investment by FPIs in Central Government Securities for the next half year are proposed to be increased in two tranches, each of Rs. 100 billion from October 3, 2016 and January 2, 2017 respectively.

3. As in the previous half-year, the limits for State Development Loans (SDLs) are proposed to be increased in two tranches, each of Rs.35 billion, from October 3, 2016 and January 2, 2017 respectively.

4. The total increase in limits over the next two quarters would, accordingly, be as under:

INR Billion
Central Government securities State Development Loans Aggregate
For All FPIs Additional for Long Term FPIs Total For all FPIs (including Long Term FPIs)
Existing Limits 1440 560 2000 140 2140
Revised limits with effect from October 3, 2016 1480 620 2100 175 2275
Revised limits with effect from January 2, 2017 1520 680 2200 210 2410

5. As regards the transfer of unutilized portion of “Long Term FPI” category to “All FPIs” category, a separate communication will follow.

6. All other existing conditions, including the security-wise limits, investment of coupons being permitted outside the limits and investments being restricted to securities with a minimum residual maturity of three years, will continue apply.

7. The operational guidelines relating to allocation and monitoring of limits will be issued by the Securities and Exchange Board of India (SEBI).

8. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

9. 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.

No. 201/11/2016 Dated: 30-9-2016


Guidelines for arrest in relation to offences punishable under the Finance Act, 1994 and Central Excise Act, 1944

 

Circular No 201/11/2016-Service Tax

F.N0. 137/47/2013-Service Tax

Government of India Ministry of Finance Department of Revenue Central Board of Excise & Customs Service Tax Wing

New Delhi, the 30th September, 2016

To

All Principal Chief Commissioners/ Chief Commissioners of Central Excise/Service Tax

Principal Directors General/ Directors General of Goods & Service

Tax/Systems/Central Excise Intelligence/ Audit/Tax Payer Services

Chief Commissioner AR CESTAT

All Principal Commissioners/Commissioners of Central Excise/Service Tax

All Principal Additional Directors General/ Additional Directors General Audit

Madam/Sir,

Subject: Guidelines for arrest in relation to offences punishable under the Finance Act, 1994 and Central Excise Act, 1944

I am directed to draw your attention to the fact that the arrest provisions in Service Tax were introduced with effect from 10.05.2013 vide sub-sections (J) and (K) of section 103 of the Finance Act, 2013 which introduced sections90 and 91 in the Finance Act, 1994 and also amended section 89 of the Finance Act 1994. Vide sections 155, 156and 157 of the Finance Act 2016, with effect from 14.05.2016, sections 89, 90 and 91 of the Finance Act, 1994have been amended. As a consequence of these amendments, the power of arrest in Service Tax is available only if a person collects any amount as service tax but fails to pay the amount so collected to the credit of the Central Government beyond the period of six months from the date on which such payment becomes due and the amount exceeds rupees two crore.

2.0  Vide paragraph 2 of Board Circular F.No. 137/47/2013-Service Tax dated 17.09.2013 certain conditions precedent to carrying out arrests were indicated. These were:

2.1 Careful exercise of this power since arrest impinges on the personal liberty of an individual.

2.2 The reason to believe that a person has committed the specified offence which is rendering the person liable for arrest must be based on credible material which will stand judicial scrutiny.

2.3 The relevant factors before deciding to arrest a person must be, apart from fulfillment of the legal requirements, the need to ensure proper investigation and prevention of the possibility of tampering with evidence or intimidating or influencing witnesses.

3.0 In the context of the legislative amendments vide the Finance Act 2016 and the single offence for which the power of arrest exists, it is necessary to again emphasize and indicate the factors which must invariably be kept in mind before arresting a person:

4.0 Conditions precedent- Legal

4.1. At the outset there must be clear and unambiguous notings in the file, bringing out how all the ingredients of the offence have been established. The notings must specifically refer to evidence relating to-

4.1.1 Amount collected as service tax: Collection of an amount as service tax should be clear and self-evident from the invoices, bills, contracts, etc. An amount should be clearly indicated as service tax. The copies of sample invoices /bills, contracts, etc. which cover the period being investigated should be in the file.

4.1.2 Amount should exceed ₹ 2 crore.

4.1.3 Failure to pay the amount so collected to the credit of the Central Government: The ST3 return filed by the assessee for the relevant period, showing the self-assessed value of taxable services and service tax paid should be available in file. Where no such return has been filed, an observation to this effect should be made since this will make the departmental case stronger.

4.1.4 Such a failure should be beyond the period of six months from the date on which such payment becomes due: Fulfillment of the condition relating to the time period must be verified carefully, and a month wise abstract of the invoice numbers, due date of payment of service tax and date when the six month period was completed must be kept ready.

4.2 The suggestions in the preceding paragraph are intended at bringing uniformity in the approach to such matters and ensuring that evidence relating to the alleged offence is readily available for perusal by a judicial body, when necessitated.

5.0 Conditions precedent- factual

5.1 Even if all the legal conditions precedent mentioned in paragraph 4.1 to 4.2 are fulfilled, that will not, ipso facto, mean that an arrest must be made. Once the legal ingredients of the offence are made out, the Commissioner must then determine if the answer to the following questions is in the affirmative

5.1.1 Is the alleged offender likely to hamper the course of further investigation by his unrestricted movement?

5.1.2 Is the alleged offender likely to tamper with evidence or intimidate or influence witnesses?

5.2 If the answer to both the questions is yes, then the decision to arrest can be made.

5.3 If the alleged offender is assisting in the investigation and has deposited at least half of the evaded tax, then the need to arrest may not arise.

6.0 The Guidelines issued vide Board Circular F.No. 137/47/2013-Service Tax dated 17.09.2013 may be referred to for the procedure for arrest, post-arrest formalities and the reporting system.

7.1. It has been decided to revise the monetary limits for arrests and prosecution in Central Excise to maintain uniformity of practice in Central Excise and Service Tax. It is directed that henceforth arrest and prosecution of a person in relation to offences specified under clause (a) to (d) of sub-section (l) of section 9 of the Central Excise Act, 1944 may be considered only in cases where evasion of Central Excise duty or misuse of CENVAT Credit is equal to or more than rupees two crore. Central Excise Circular No. 974/08/2013-CX dated 17.09.2013 and1009/16/2015-CX dated 23.10.2015 stand amended accordingly. Circular No. 1010/17/2015-CX dated 23.10.2015is rescinded in view of the revision of monetary limits prescribed by this circular. It is again reiterated that arrest and prosecution should not be resorted to in cases of technical nature i.e. where the additional demand of duty/tax is based totally on a difference of opinion regarding interpretation of law

7.2 Transitional provisions as prescribed in para 11 of the Circular No. 1009/16/2015-CX dated 23.10.2015 shall apply mutatis-mutandis i.e. all cases where sanction for prosecution is examined and accorded after the issue of this circular, shall be dealt in accordance with the provisions of this circular, irrespective of the date of the offence. Cases where prosecution was sanctioned but no complaint has been filed before the magistrate shall also be reviewed by the prosecution sanctioning authority in light of the enhanced monetary limit and sanction withdrawn for cases where evasion of Central Excise duty or misuse of CENVAT Credit is below the revised monetary limit of rupees two crore.

8.0 It is emphasized once again that since an arrest impinges on the personal liberty of an individual, this power should be exercised with great responsibility and caution and only after a careful examination of the legal and factual aspects indicated in the preceding paragraphs.

Yours faithfully

(Sreeparvathy S.L)

Officer on Special Duty

Service Tax Wing

Phone : 011-23095438

sreeparvathy.sl@gov.in

Notification No : 45/2016 Dated: 30-09-2016


Service of transportation, by educational institutions to students, faculty and staff – 45/2016

Government of India Ministry of Finance Department of Revenue Central Board of Excise and Customs

Notification No. 45 /2016- Service Tax

New Delhi, the 30th September 2016

8 Asvina, 1938 Saka

G.S.R. 935 (E) - Whereas, the Central Government is satisfied that in the period commencing on and from the first day of April, 2013 and ending with the tenth day of July, 2014 (hereinafter referred to as the said period) according to a practice that was generally prevalent, there was non levy of service tax, on the provision of the service of transportation, by educational institutions as defined in clause (1) of section 66 D of the Finance Act, 1994(32 of 1994) during the said period, to students, faculty and staff of such institutions and this service was liable to service tax, in the said period, which was not being paid according to the said practice.

Now, therefore, in exercise of the powers conferred by section 11C of the Central Excise Act, 1944 (1 of 1944), read with section 83 of the Finance Act, 1944 (32 of 1994), the Central Government hereby directs that the service tax payable under section 66B of the Finance Act, 1994 but for the said practice, on the service of transportation, by educational institutions as defined in clause (1) of section 66 D of the Finance Act, 1994(32 of 1994) during the said period, to students, faculty and staff of such institutions, shall not be required to be paid.

[F. No. 137/73/2015- Service Tax]

(Rajeev Yadav)

Director to the Government of India

Participation of investors important for price discovery: Sebi : 30-09-2016


Market watchdog Sebi has said participation of large number of investors is desirable for democratising the price discovery process and making best use of the markets.

The Securities and Exchange Board of India (Sebi) also said that investors will get attracted to the market only when they feel the platforms are free from manipulation and in case of any manipulation, the regulator will take suitable action.

In this context, the role of surveillance and investigation departments in the regulation of any jurisdiction is important, Sebi’s Whole Time Member Rajeev Kumar Agarwal said at the fourth ‘Asia Pacific Regulators Dialogue on Market Surveillance’ here, according to a press release issued today.

Sebi hosted the two-day event in Mumbai starting September 22, in which nine Asia Pacific countries participated.

Agarwal said that surveillance of the market by the regulator is very crucial for maintaining market integrity, which is directly linked to investor protection.

Investor protection is the most important mandate given to Sebi by the statute and as such most of the regulations flow from this mandate, he said.

“Participation of as large number of investors as possible is desirable from the angle of democratising the price discovery process as well as from the angle of making best use of the markets,” he added.

Agarwal also said that in view of globalisation of markets interaction amongst regulators is need of the hour.

The Asia Pacific Regulators Dialogue on Market Surveillance was started three years back by the Securities Commission, Malaysia, along with other fellow regulators responsible for market surveillance in the Asia Pacific region.

The aim behind this initiative is to create a platform for the regulators to come together and discuss surveillance strategies, share their views on market integrity, maintaining fair and efficient markets, among others.

Source : Financial Express

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Dawn of a new era: Monetary Policy Committee notified; to meet on October 3 : 30-09-2016


The government has notified the Monetary Policy Committee, clearing the last formality in the switchover to a new regime for setting interest rates. The sixmember committee will meet on October 3, a day before the next monetary policy is announced, a member of the panel told ET. “A committee-based approach for determining the monetary policy will add lot of value and transparency to monetary policy decisions,” the finance ministry said in a statement on Thursday, making the formal announcement.

“The provisions of the RBI Act relating to monetary policy have been brought into force through a notification in the gazette.” Under the new arrangement, the RBI will need to target consumer inflation at 4%, with an upper limit of 6% and a lower limit of 2%. The committee will meet at least four times a year and will publish its decisions after each meeting. “The Monetary Policy Committee would be entrusted with the task of fixing the benchmark policy rate (repo rate) required to contain  inflation within the specified target level,” the ministry said.

There is some hope the RBI will cut rates in its October 4 review after consumer inflation fell sharply to 5.05% in August from 6.07% a year earlier.

If inflation stays outside the target band for three consecutive quarters, it would constitute failure of the monetary policy and the RBI will need to state the reasons and the corrective measures needed. The panel will take interest rate decisions through a majority vote and in the event of a tie, the RBI Governor will have a second vote.

The government appointed three members to the MPC earlier this month – Chetan Ghate, Professor, Indian Statistical Institute; Pami Dua, Director of the Delhi School of Economics, and Ravindra H Dholakia, Professor, IIM-Ahmedabad. The other members are from the RBI – the Governor, the deputy governor responsible for monetary policy and an officer of the central bank to be nominated by the Central Board.

Source : PTI

Finance ministry tighten grip over 3 exports schemes : 30-09-2016


The finance ministry is set to get greater control over at least three schemes to promote exports under another measure to improve the ease of doing business and hassle-free trade. The three measures are advanced authorisation scheme, export promotion capital goods scheme and deemed exports schemes, accounting for almost Rs 35,000 crore in government incentives. While the commerce ministry will keep the policy-making powers for the schemes, it has proposed that their implementation be shifted to  revenue department of the finance ministry.

Under the current system, traders approach the Directorate General of Foreign Trade (DGFT) for licences for the schemes and also have to register with the customs department, leading to duplication of effort and hassles “The idea is that policy-making will remain with us and implementation be done by MoF. Discussions are on to split roles for advanced authorisation scheme, EPCG scheme and deemed exports,” said a commerce ministry official A similar mechanism has already worked for the duty drawback scheme, under which exporters are compensated for customs and excise duties paid on inputs used to manufacture products meant for sales overseas.

While the Foreign Trade Policy sets the guidelines for the payments, the revenue department fixes the rates and refunds the exporters. Under the advance authorisation scheme, exporters can import raw material and inputs without paying duty after getting a licence from the DGFT.

Similarly, in the export promotion capital goods, or EPCG, scheme, exporters get full exemption from paying duty when importing machinery to manufacture goods meant for exports. Here, too, DGFT is the licensing authority. “Depending on how this takes shape, this can be extended to the merchandise and service exports from India schemes,” the official added.

The industry has called it a logical move as customs and excise officials are aware of manufacturing units even in far-flung areas and hence are better equipped to issue licenses. “This is a move towards simplification but revenue authorities will have to be more proactive and sensitive to trade,” said Ajay Sahai, director general of FIEO.

Source : Economic Times

Notification No.88/2016 29-9-2016


Income-tax ( 23rd Amendment) Rules, 2016 – 88/2016

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION No. 88/2016

New Delhi, the 29th September, 2016

INCOME-TAX

S.O. 3080(E).- In exercise of the powers conferred by section 44AB, 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 theIncome-tax Rules, 1962, namely:-

1. (1) These rule may be called the Income-tax ( 23rd Amendment) Rules, 2016.

(2) They shall come into force with effect from 1st April, 2017.

2. In the Income-tax Rules, 1962, in Appendix II , in Form No. 3CD, in Part-B, in clause 13, for sub-clause (d), the following shall be substituted ,namely, -

“(d) Whether any adjustment is required to be made to the profits or loss for complying with the provisions of income computation and disclosure standards notified under section 145(2)

(e) If answer to (d) above is in the affirmative, give details of such adjustments:

Effect Increase in profit (Rs.) Decrease in profit (Rs.) Net (Rs.)
ICDS I Accounting Policies      
ICDS II Valuation of Inventories      
ICDS III Construction Contracts      
ICDS IV Revenue Recognition      
ICDS V Tangible Fixed Assets      
ICDS VI Changes in Foreign Exchange Rates      
ICDS VII Governments Grants      
ICDS VIII Securities      
ICDS IX Borrowing Costs      
ICDS X Provisions, Contingent Liabilities and Contingent Assets      
  Total      

(f) Disclosure as per ICDS:

(i) ICDS I-Accounting Policies
(ii) ICDS II-Valuation of Inventories
(iii) ICDS III-Construction Contracts
(iv) ICDS IV-Revenue Recognition
(v) ICDS V-Tangible Fixed Assets
(vi) ICDS VII-Governments Grants
(vii) ICDS IX Borrowing Costs
(viii) ICDS X-Provisions, Contingent Liabilities and Contingent Assets”.

[F.No.133/23/2015-TPL]

(PITAMBAR DAS)

DIRECTOR (TAX POLICY AND LEGISLATION)

Note: The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii) vide notification number S.O.969(E), dated the 26th March, 1962 and last amended vide notification number S.O.2979(E), dated the 16/9/2016.

Notification No.87/2016 29-9-2016


Income Computation and Disclosure Standards (ICDS) – New ICDS to be effective from AY 2017-18 – 87/2016

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION 87/2016

 New Delhi, the  29th September, 2016

S.O. 3079 (E) In exercise of the powers conferred by sub-section (2) of section 145 of the Income-tax Act, 1961 (43 of 1961, the Central Government hereby notifies the income computation and disclosure standards as specified in the Annexure to this notification to be followed by all assessees (other than an individual or a Hindu undivided family who is not required to get his accounts of the previous year audited in accordance with the provisions ofsection 44AB of the said Act) following the mercantile system of accounting, for the purposes of computation of income chargeable to income-tax under the head “Profits and gains of business or profession” or “Income from other sources”.

2. This notification shall apply to the assessment year 2017-18 and subsequent assessment years.

Annexure

A. Income Computation and Disclosure Standard I relating to accounting policies

Preamble

This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” and not for the purpose of maintenance of books of accounts.

In the case of conflict between the provisions of the Income-tax Act, 1961 (‘the Act’) and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent.

Scope

1.      This Income Computation and Disclosure Standard deals with significant accounting policies.

Fundamental Accounting Assumptions

2.      The following are fundamental accounting assumptions, namely:-

(a)    Going Concern

“Going concern” refers to the assumption that the person has neither the intention nor the necessity of liquidation or of curtailing materially the scale of the business, profession or vocation and intends to continue his business, profession or vocation for the foreseeable future.

(b)     Consistency

“Consistency” refers to the assumption that accounting policies are consistent from one period to another;

(c)     Accrual

“Accrual” refers to the assumption that revenues and costs are accrued, that is, recognised as they are earned or incurred (and not as money is received or paid) and recorded in the previous year to which they relate.

Accounting Policies

3. The accounting policies refer to the specific accounting principles and the methods of applying those principles adopted by a person.

Considerations in the Selection and Change of Accounting Policies

4.  Accounting policies adopted by a person shall be such so as to represent a true and fair view of the state of affairs and income of the business, profession or vocation. For this purpose,

(i)      the treatment and presentation of transactions and events shall be governed by their substance and not merely by the legal form; and

(ii)     marked to market loss or an expected loss shall not be recognised unless the recognition of such loss is in accordance with the provisions of any other Income Computation and Disclosure Standard.

5.  An accounting policy shall not be changed without reasonable cause.

Disclosure of Accounting Policies

6.      All significant accounting policies adopted by a person shall be disclosed.

7.      Any change in an accounting policy which has a material effect shall be disclosed. The amount by which any item is affected by such change shall also be disclosed to the extent ascertainable. Where such amount is not ascertainable, wholly or in part, the fact shall be indicated. If a change is made in the accounting policies which has no material effect for the current previous year but which is reasonably expected to have a material effect in later previous years, the fact of such change shall be appropriately disclosed in the previous year in which the change is adopted and also in the previous year in which such change has material effect for the first time.

8.      Disclosure of accounting policies or of changes therein cannot remedy a wrong or inappropriate treatment of the item.

9.      If the fundamental accounting assumptions of Going Concern, Consistency and Accrual are followed, specific disclosure is not required. If a fundamental accounting assumption is not followed, the fact shall be disclosed.

Transitional Provisions

10. All contract or transaction existing on the 1st day of April, 2016 or entered into on or after the 1st day of April, 2016 shall be dealt with in accordance with the provisions of this standard after taking into account the income, expense or loss, if any, recognised in respect of the said contract or transaction for the previous year ending on or before the 31st March,2016.

B. Income Computation and Disclosure Standard II relating to valuation of inventories

Preamble

This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head “Profits and gains of Business or profession” or   “Income from other sources” and not for the purpose of maintenance of books of accounts.

In the case of conflict between the provisions of Income Tax Act, 1961 (‘the Act’) and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent.

Scope

1.  This Income Computation and Disclosure Standard shall be applied for valuation of inventories, except :

(a)    Work-in-progress arising under ‘construction contract’ including directly related service contract which is dealt with by the Income Computation and Disclosure Standard on construction contracts;

(b)    Work-in-progress which is dealt with by other Income Computation and Disclosure Standard;

(c)    Shares, debentures and other financial instruments held as stock-in-trade which are dealt with by the Income Computation and Disclosure Standard on securities;

(d)    Producers’ inventories of livestock, agriculture and forest products, mineral oils, ores and gases to the extent that they are measured at net realisable value;

(e)    Machinery spares, which can be used only in connection with a tangible fixed asset and their use is expected to be irregular, shall be dealt with in accordance with the Income Computation and Disclosure Standard on tangible fixed assets.

Definitions

2(1) The following terms are used in this Income Computation and Disclosure Standard with the meanings specified:

(a)    “Inventories” are assets:

(i)     held for sale in the ordinary course of business;

(ii)    in the process of production for such sale;

(iii)   in the form of materials or supplies to be consumed in the production process or in the rendering of services.

(b)    “Net realisable value” is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

2(2)   Words and expressions used and not defined in this Income Computation and Disclosure Standard but defined in the Act shall have the meanings assigned to them in that Act.

Measurement  

3.      Inventories shall be valued at cost, or net realisable value, whichever is lower.

Cost of Inventories 

4.  Cost of inventories shall comprise of all costs of purchase, costs of services, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Costs of Purchase 

5. The costs of purchase shall consist of purchase price including duties and taxes, freight inwards and other expenditure directly attributable to the acquisition. Trade discounts, rebates and other similar items shall be deducted in determining the costs of purchase.

Costs of Services

6.  The costs of services shall consist of labour and other costs of personnel directly engaged in providing the service including supervisory personnel and attributable overheads.

Costs of Conversion

7.      The costs of conversion of inventories shall include costs directly related to the units of production and a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods. Fixed production overheads shall be those indirect costs of production that remain relatively constant regardless of the volume of production. Variable production overheads shall be those indirect costs of production that vary directly or nearly directly, with the volume of production.

8.      The allocation of fixed production overheads for the purpose of their inclusion in the costs of conversion shall be based on the normal capacity of the production facilities. Normal capacity shall be the production expected to be achieved on an average over a number of periods or seasons under normal circumstances, taking into account the loss of capacity resulting from planned maintenance. The actual level of production shall be used when it approximates to normal capacity. The amount of fixed production overheads allocated to each unit of production shall not be increased as a consequence of low production or idle plant. Unallocated overheads shall be recognised as an expense in the period in which they are incurred. In periods of abnormally high production, the amount of fixed production overheads allocated to each unit of production is decreased so that inventories are not measured above the cost. Variable production overheads shall be assigned to each unit of production on the basis of the actual use of the production facilities.

9.      Where a production process results in more than one product being produced simultaneously and the costs of conversion of each product are not separately identifiable, the costs shall be allocated between the products on a rational and consistent basis.  Where by-products, scrap or waste material are immaterial, they shall be measured at net realisable value and this value shall be deducted from the cost of the main product.

Other Costs

10.    Other costs shall be included in the cost of inventories only to the extent that they are incurred in bringing the inventories to their present location and condition.

11.    Interest and other borrowing costs shall not be included in the costs of inventories, unless they meet the criteria for recognition of interest as a component of the cost as specified in the Income Computation and Disclosure Standard on borrowing costs.

Exclusions from the Cost of Inventories 

12.   In determining the cost of inventories in accordance with paragraphs 4 to paragraphs 11,   the following costs shall be excluded and recognised as expenses of the period in which they are incurred, namely:-

(a)    Abnormal amounts of wasted materials, labour, or other production costs;

(b)     Storage costs, unless those costs are necessary in the production process prior to a further production stage;

(c)     Administrative overheads that do not contribute to bringing the inventories to their present location and condition ;

(d)     Selling costs.

Cost Formulae

13.    The Cost of inventories of items

(i)     that are not ordinarily interchangeable; and

(ii)     goods or services  produced and segregated for specific projects  shall be assigned by specific identification of their individual costs.

14.    ‘Specific identification of cost’ means specific costs are attributed to identified items of inventory.

15.    Where there are a large numbers of items of inventory which are ordinarily interchangeable, specific identification of costs shall not be made.

First-in First-out and Weighted Average Cost Formula

16.    Cost of inventories, other than the inventory dealt with in paragraph 13, shall be assigned by using the First-in First-out (FIFO), or weighted average cost formula. The formula used shall reflect the fairest possible approximation to the cost incurred in bringing the items of inventory to their present location and condition.

17.    The FIFO formula assumes that the items of inventory which were purchased or produced first are consumed or sold first, and consequently the items remaining in inventory at the end of the period are those most recently purchased or produced. Under the weighted average cost formula, the cost of each item is determined from the weighted average of the cost of similar items at the beginning of a period and the cost of similar items purchased or produced during the period. The average shall be calculated on a periodic basis, or as each additional shipment is received, depending upon the circumstances.

Techniques for the Measurement of Cost

18(1) Techniques for the measurement of the cost of inventories, such as the standard cost method or the retail method, may be used for convenience if the results approximate the actual cost. Standard costs take into account normal levels of consumption of materials and supplies, labour, efficiency and capacity utilisation. They are regularly reviewed and, if necessary, revised in the light of the current conditions.

18(2) The retail method can be used in the retail trade for measuring inventories of large number of rapidly changing items that have similar margins and for which it is impracticable to use other costing methods. The cost of the inventory is determined by reducing from the sales value of the inventory, the appropriate percentage gross margin. The percentage used takes into consideration inventory, which has been marked down to below its original selling price. An average percentage for each retail department is to be used.

Net Realisable Value 

19.    Inventories shall be written down to net realisable value on an item-by-item basis. Where ‘items of inventory’ relating to the same product line having similar purposes or end uses and are produced and marketed in the same geographical area and cannot be practicably evaluated separately from other items in that product line, such inventories shall be grouped together and written down to net realisable value on an aggregate basis.

20.    Net realisable value shall be based on the most reliable evidence available at the time of valuation. The estimates of net realisable value shall also take into consideration the purpose for which the inventory is held. The estimates shall take into consideration fluctuations of price or cost directly relating to events occurring after the end of previous year to the extent that such events confirm the conditions existing on the last day of the previous year.

21.    Materials and other supplies held for use in the production of inventories shall not be written down below the cost, where the finished products in which they shall be incorporated are expected to be sold at or above the  cost. Where there has been a decline in the price of materials and it is estimated that the cost of finished products will exceed the net realisable value, the value of materials shall be written down to net realisable value which shall be the replacement cost of such materials.

Value of Opening Inventory

22.    The value of the inventory as on the beginning of the previous year shall be

(i)      the cost of inventory available, if any, on the day of the commencement of the business when  the business has commenced during the previous year; and

(ii)     the value of the inventory as on the close of the immediately  preceding  previous year, in any other case.

Change of Method of Valuation of Inventory 

23. The method of valuation of inventories once adopted by a person in any previous year shall not be changed without reasonable cause.

Valuation of Inventory in Case of Certain Dissolutions 

24. In case of dissolution of a partnership firm or association of person or body of individuals, notwithstanding whether business is discontinued or not, the inventory on the date of dissolution shall be valued at the net realisable value.

Transitional Provisions

25. Interest and other borrowing costs, which do not meet the criteria for recognition of interest as a component of the cost as per para 11, but included in the cost of the opening inventory as on the 1st day of April, 2016, shall be taken into account for determining cost of such inventory for valuation as on the close of the previous year beginning on or after 1st day of April, 2016 if such inventory continue to remain part of inventory as on the close of the previous year beginning on or after 1st day of April, 2016.

Disclosure

26.    The following aspects shall be disclosed, namely:-

(a)     the accounting policies adopted in measuring inventories including the cost formulae used. Where Standard Costing has been used as a measurement of cost, details of such inventories and a confirmation of the fact that standard cost approximates the actual cost; and

(b)     the total carrying amount of inventories and its classification appropriate to a person.

C. Income Computation and Disclosure Standard III relating to construction contracts

Preamble

This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” and not for the purpose of maintenance of books of accounts.

In the case of conflict between the provisions of the Income-tax Act, 1961(‘the Act’) and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent.

Scope 

1. This Income Computation and Disclosure Standard should be applied in determination of income for a construction contract of a contractor.

Definitions 

2 (1) The following terms are used in this Income Computation and Disclosure Standard with the meanings specified:

(a)    “Construction contract” is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use and includes :

(i)      contract for the rendering of services which are directly related to the construction of the asset, for example, those for the services of project managers and architects;

(ii)     contract for destruction or restoration of assets, and the restoration of the environment following the demolition of assets.

(b)     “Fixed price contract” is a construction contract in which the contractor agrees to a fixed contract price, or a fixed rate per unit of output, which may be subject to cost escalation clauses.

(c)    “Cost plus contract” is a construction contract in which the contractor is reimbursed for allowable or otherwise defined costs, plus a mark up on these costs or a fixed fee.

(d)    “Retentions” are amounts of progress billings which are not paid until the satisfaction of conditions specified in the contract for the payment of such amounts or until defects have been rectified.

(e)    “Progress billings” are amounts billed for work performed on a contract whether or not they have been paid by the customer.

(f)     “Advances” are amounts received by the contractor before the related work is performed.

2(2) Words and expressions used and not defined in this  Income Computation and Disclosure Standard but defined in the Act shall have the meaning respectively assigned to them in the Act.

3.      A construction contract may be negotiated for the construction of a single asset. A construction contract may also deal with the construction of a number of assets which are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use.

4.      Construction contracts are formulated in a number of ways which, for the purposes of this Income Computation and Disclosure Standard, are classified as fixed price contracts and cost plus contracts. Some construction contracts may contain characteristics of both a fixed price contract and a cost plus contract, for example, in the case of a cost plus contract with an agreed maximum price.

Combining and Segmenting Construction Contracts 

5.      The requirements of this Income Computation and Disclosure Standard shall be applied separately to each construction contract except as provided for in paragraphs 6, 7 and 8

herein. For reflecting the substance of a contract or a group of contracts, where it is necessary, the Income Computation and Disclosure Standard should be applied to the separately identifiable components of a single contract or to a group of contracts together.

6.      Where a contract covers a number of assets, the construction of each asset should be treated as a separate construction contract when:

(a)    separate proposals have been submitted for each asset;

(b)     each asset has been subject to separate negotiation and the contractor and customer have been able to accept or reject that part of the contract relating to each asset; and

(c)     the costs and revenues of each asset can be identified.

7.      A group of contracts, whether with a single customer or with several customers, should be treated as a single construction contract when:

(a)     the group of contracts is negotiated as a single package;

(b)     the contracts are so closely interrelated that they are, in effect, part of a single project with an overall profit margin; and

(c)     the contracts are performed concurrently or in a continuous sequence.

8.      Where a contract provides for the construction of an additional asset at the option of the customer or is amended to include the construction of an additional asset, the construction of the additional asset should be treated as a separate construction contract when:

(a)     the asset differs significantly in design, technology or function from the asset or assets covered by the original contract; or

(b)     the price of the asset is negotiated without having regard to the original contract price.

Contract Revenue 

9.      Contract revenue shall be recognised when there is reasonable certainty of its ultimate collection.

10.    Contract revenue shall comprise of:

(a)    the initial amount of revenue agreed in the contract, including retentions; and

(b)    variations in contract work, claims and incentive payments:

(i)     to the extent that it is probable that they will result in revenue; and

(ii)    they are capable of being reliably measured.

11.    Where contract revenue already recognised as income is subsequently written off in the books of accounts as uncollectible, the same shall be recognised as an expense and not as an adjustment of the amount of contract revenue.

Contract Costs 

12.    Contract costs shall comprise of :

(a)     costs that relate directly to the specific contract;

(b)     costs that are attributable to contract activity in general and can be allocated to the contract;

(c)     such other costs as are specifically chargeable to the customer under the terms of the contract; and

(d)     allocated borrowing costs in accordance with the Income Computation and Disclosure Standard  on Borrowing Costs.

These costs shall be reduced by any incidental income, not being in the nature of interest, dividends or capital gains, that is not included in contract revenue.

13.    Costs that cannot be attributed to any contract activity or cannot be allocated to a contract shall be excluded from the costs of a construction contract.

14.    Contract costs include the costs attributable to a contract for the period from the date of securing the contract to the final completion of the contract. Costs that are incurred in securing the contract are also included as part of the contract costs, provided

(a)     they can be separately identified; and

(b)     it is probable that the contract shall be obtained.

When costs incurred in securing a contract are recognised as an expense in the period in which they are incurred, they are not included in contract costs when the contract is obtained in a subsequent period.

15.    Contract costs that relate to future activity on the contract are recognised as an asset. Such costs represent an amount due from the customer and are classified as contract work in progress.

Recognition of Contract Revenue and Expenses 

16.    Contract revenue and contract costs associated with the construction contract should be recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the reporting date.

17.    The recognition of revenue and expenses by reference to the stage of completion of a contract is referred to as the percentage of completion method. Under this method, contract revenue is matched with the contract costs incurred in reaching the stage of completion, resulting in the reporting of revenue, expenses and profit which can be attributed to the proportion of work completed.

18.    The stage of completion of a contract shall be determined with reference to:

(a)    the proportion that contract costs incurred for work performed upto the reporting date bear to the estimated total contract costs; or

(b)     surveys of work performed; or

(c)     completion of a physical proportion of the contract work.

Progress payments and advances received from customers are not determinative of the stage of completion of a contract.

19.    When the stage of completion is determined by reference to the contract costs incurred upto the reporting date, only those contract costs that reflect work performed are included in costs incurred upto the reporting date. Contract costs which are excluded are:

(a)     contract costs that relate to future activity on the contract; and

(b)     payments made to subcontractors in advance of work performed under the subcontract.

20.    During the early stages of a contract, where the outcome of the contract cannot be estimated reliably contract revenue is recognised only to the extent of costs incurred. The early stage of a contract shall not extend beyond 25 % of the stage of completion.

Changes in Estimates 

21.  The percentage of completion method is applied on a cumulative basis in each previous year to the current estimates of contract revenue and contract costs.   Where there is change in estimates, the changed estimates shall be used in determination of the amount of revenue and expenses in the period in which the change is made and in subsequent periods.

Transitional Provisions

22.1 Contract revenue and contract costs associated with the construction contract, which commenced on or after 1st day of April, 2016 shall be recognised in accordance with the provisions of this standard.

22.2  Contract revenue and contract costs associated with the construction contract, which commenced on or before the 31st day of March, 2016 but not completed by the said date, shall be recognised based on the method regularly followed by the person prior to the previous year beginning on the 1st day of April, 2016.

Disclosure 

23.    A person shall disclose:

(a)    the amount of contract revenue recognised as revenue in the period; and

(b)     the methods used to determine the stage of completion of contracts in progress.

24.    A person shall disclose the following for contracts in progress at the reporting date, namely:-

(a)    amount of costs incurred and recognised profits (less recognised losses) upto the reporting date;

(b)     the amount of advances received; and

(c)     the amount of retentions.

D. Income Computation and Disclosure Standard IV relating to revenue recognition

Preamble

This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” and not for the purpose of maintenance of books of accounts.

In the case of conflict between the provisions of the Income-tax Act, 1961 (‘the Act’) and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent.

Scope

1(1) This Income Computation and Disclosure Standard deals with the bases for  recognition of revenue arising in the course of the ordinary activities of a person from

(i)     the sale of goods;

(ii)    the rendering of services;

(iii)   the use by others of the person’s resources yielding interest, royalties or dividends.

1(2)   This Income Computation and Disclosure Standard does not deal with the aspects of revenue recognition which are dealt with by other Income Computation and Disclosure Standards.

Definitions

2(1) The following term is used in this Income Computation and Disclosure Standard with the meanings specified:

(a) “Revenue” is the gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of a person from the sale of goods, from the rendering of services, or from the use by others of the person’s resources yielding interest, royalties or dividends.  In an agency relationship, the revenue is the amount of commission and not the gross inflow of cash, receivables or other consideration.

2(2)  Words and expressions used and not defined in this Income Computation and Disclosure Standard but defined in the Act shall have the meanings assigned to them in that Act.

Sale of Goods

3.      In a transaction involving the sale of goods, the revenue shall be recognised when the seller of goods has transferred to the buyer the property in the goods for a price or all significant risks and rewards of ownership have been transferred to the buyer and the seller retains no effective control of the goods transferred to a degree usually associated with ownership.  In a situation, where transfer of property in goods does not coincide with the transfer of significant risks and rewards of ownership, revenue in such a situation shall be recognised at the time of transfer of significant risks and rewards of ownership to the buyer.

4.      Revenue shall be recognised when there is reasonable certainty of its ultimate collection.

5.      Where the ability to assess the ultimate collection with reasonable certainty is lacking at the time of raising any claim for escalation of price and export incentives, revenue recognition in respect of such claim shall be postponed to the extent of uncertainty involved.

Rendering of Services 

6.      Subject to Para 7, revenue from service transactions shall be recognised by the percentage completion method. Under this method, revenue from service transactions is matched with the service transaction costs incurred in reaching the stage of completion, resulting in the determination of revenue, expenses and profit which can be attributed to the proportion of work completed. Income Computation and Disclosure Standard on construction contract also requires the recognition of revenue on this basis. The requirements of that Standard shall mutatis mutandis apply to the recognition of revenue and the associated expenses for a service transaction. However, when services are provided by an indeterminate number of acts over a specific period of time, revenue may be recognised on a straight line basis over the specific period.

7.      Revenue from service contracts with duration of not more than ninety days may be recognised when the rendering of services under that contract is completed or substantially completed.

The Use of Resources by Others Yielding Interest, Royalties or Dividends

8. (1) Subject to sub paragraph (2), interest shall accrue on the time basis determined by the amount outstanding and the rate applicable.

(2)     Interest on refund of any tax, duty or cess shall be deemed to be the income of the previous year in which such interest is received.

(3)     Discount or premium on debt securities held is treated as though it were accruing over the period to maturity.

9.      Royalties shall accrue in accordance with the terms of the relevant agreement and shall be recognised on that basis unless, having regard to the substance of the transaction, it is more appropriate to recognise revenue on some other systematic and rational basis.

10.    Dividends are recognised in accordance with the provisions of the Act.

Transitional Provisions

11.    The transitional provisions of Income Computation and Disclosure Standard on construction contract shall mutatis mutandis apply to the recognition of revenue and the associated costs for a service transaction undertaken on or before the 31st day of March, 2016 but not completed by the said date.

12.    Revenue for a transaction, other than a service transaction referred to in Para 10, undertaken on or before the 31st day of March, 2016 but not completed by the said date shall be recognised in accordance with the provisions of this standard for the previous year commencing on the 1st day of April, 2016 and subsequent previous year. The amount of revenue, if any, recognised for the said transaction for any previous year commencing on or before the 1st day of April, 2015 shall be taken into account for recognising revenue for the said transaction for the previous year commencing on the 1st day of April,  2016and subsequent previous years.

Disclosure

13.  Following disclosures shall be made in respect of revenue recognition, namely:-

(a)    in a transaction involving sale of good, total amount not recognised as revenue during the previous year due to lack of reasonably certainty of its ultimate collection along with nature of uncertainty;

(b)    the amount of revenue from service transactions recognised as revenue during the previous year;

(c)    the method used to determine the stage of completion of service transactions in progress; and

(d)    for service transactions in progress at the end of previous year:

(i)     amount of costs incurred and recognised profits (less recognised losses) upto end of previous year;

(ii)    the amount of advances received; and

(iii)   the amount of retentions.

E. Income Computation and Disclosure Standard V relating to tangible fixed assets

Preamble

This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” and not for the purpose of maintenance of books of accounts.

In the case of conflict between the provisions of the Income-tax Act, 1961 (‘the Act’) and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent.

Scope

1. This Income Computation and Disclosure Standard deals with the treatment of tangible fixed assets.

Definitions

2(1) The following terms are used in this Income Computation and Disclosure Standard with the meanings specified:

(a)    “Tangible fixed asset” is an asset being land, building, machinery, plant or furniture held with the intention of being used for the purpose of producing or providing goods or services and is not held for sale in the normal course of business.

(b)    “Fair value” of an asset is the amount for which that asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.

(2)      Words and expressions used and not defined in this Income Computation and Disclosure Standard but defined in the Act shall have the meanings assigned to them in that Act.

Identification of Tangible Fixed Assets

3.      The definition in clause (a) of sub-paragraph (1) of paragraph 2 provides criteria for determining whether an item is to be classified as a tangible fixed asset.

4.      Stand-by equipment and servicing equipment are to be capitalised. Machinery spares shall be charged to the revenue as and when consumed. When such spares can be used only in connection with an item of tangible fixed asset and their use is expected to be irregular, they shall be capitalised.

Components of Actual Cost

5.      The actual cost of an acquired tangible fixed asset shall comprise its purchase price, import duties and

other taxes, excluding those subsequently recoverable, and any directly attributable expenditure on making the asset ready for its intended use. Any trade discounts and rebates shall be deducted in arriving at the actual cost.

6.      The cost of a tangible fixed asset may undergo changes subsequent to its acquisition or construction on account of

(i)      price adjustment, changes in duties or similar factors; or

(ii)     exchange fluctuation as specified in Income Computation and Disclosure Standard on the effects of changes in foreign exchange rates.

7.      Administration and other general overhead expenses are to be excluded from the cost of

tangible fixed assets if they do not relate to a specific tangible fixed asset. Expenses which are specifically attributable to construction of a project or to the acquisition of a tangible fixed asset or bringing it to its working condition, shall be included as a part of the cost of the project or as a part of the cost of the tangible fixed asset.

8.      The expenditure incurred on start-up and commissioning of the project, including the expenditure incurred on test runs and experimental production, shall be capitalised. The expenditure incurred after the plant has begun commercial production, that is, production intended for sale or captive consumption, shall be treated as revenue expenditure.

Self- constructed Tangible Fixed Assets

9. In arriving at the actual cost of self-constructed tangible fixed assets, the same principles shall apply as those described in paragraphs 5 to 8. Cost of construction that relate directly to the

specific tangible fixed asset and costs that are attributable to the construction activity in general and can be allocated to the specific tangible fixed asset shall be included in actual cost.  Any internal profits shall be eliminated in arriving at such costs.

Non- monetary Consideration

10.    When a tangible fixed asset is acquired in exchange for another asset, the fair value of the  tangible fixed asset so acquired shall be its actual cost.

11.    When a tangible fixed asset is acquired in exchange for shares or other securities, the fair value of the tangible fixed asset so acquired shall be its actual cost.

Improvements and Repairs

12.    An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost.

13.    The cost of an addition or extension to an existing tangible fixed asset which is of a capital nature and which becomes an integral part of the existing tangible fixed asset is to be added to its actual cost. Any addition or extension, which has a separate identity and is capable of being used after the existing tangible fixed asset is disposed of, shall be treated as separate asset.

Valuation of Tangible Fixed Assets in Special Cases

14.    Where a person owns tangible fixed assets jointly with others, the proportion in the actual cost, accumulated depreciation and written down value is grouped together with similar fully owned tangible fixed assets.

15.    Where several assets are purchased for a consolidated price, the consideration shall be apportioned to the various assets on a fair basis.

Transitional Provisions

16. The actual cost of tangible fixed assets, acquisition or construction of which commenced on or before the 31st day of March, 2016 but not completed by the said date,  shall be recognised in accordance with the provisions of this standard. The amount of actual cost, if any, recognised for the said assets  for any previous year commencing on or before the 1st day of April, 2015 shall be taken into account for recognising actual cost of the said assets for the previous year commencing on the 1st day of April, 2016 and subsequent previous years.

Depreciation

17.    Depreciation on a tangible fixed asset shall be computed in accordance with the provisions of the Act.    

Transfers

18.    Income arising on transfer of a tangible fixed asset shall be computed in accordance with the provisions of the Act.

Disclosures

19.    Following disclosure shall be made in respect of tangible fixed assets, namely:-

(a)    description of asset or block of assets;

(b)    rate of depreciation;

(c)    actual cost or written down value, as the case may be;

(d)    additions or deductions during the year with dates; in the case of any addition of an asset, date put to use; including adjustments on account of-

(i)      Central Value Added Tax credit claimed and allowed under the CENVAT Credit Rules, 2004;

(ii)     change in rate of exchange of currency;

(iii)    subsidy or grant or reimbursement, by whatever name called;

(e)    depreciation Allowable; and

(f)      written down value at the end of year.

F. Income Computation and Disclosure Standard VI relating to the effects of changes in foreign exchange rates

Preamble

This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” and not for the purpose of maintenance of books of accounts.

In the case of conflict between the provisions of the Income-tax Act, 1961 (‘the Act’) and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent.

Scope

1.      This Income Computation and Disclosure Standard deals with:

(a)     treatment of transactions in foreign currencies;

(b)     translating the financial statements of foreign operations;

(c)     treatment of foreign currency transactions in the nature of forward exchange contracts.

Definitions

2. (1)    The following terms are used in this Income Computation and Disclosure Standard with the meanings specified:

(a)     “Average rate” is the mean of the exchange rates in force during a period.

(b)     “Closing rate” is the exchange rate at the last day of the previous year.

(c)     “Exchange difference” is the difference resulting from reporting the same number of units of a foreign currency in the reporting currency of a person at different exchange rates.

(d)     “Exchange rate” is the ratio for exchange of two currencies.

(e)     “Foreign currency” is a currency other than the reporting currency of a person.

(f)      “Foreign operations of a person” is a branch, by whatever name called, of that person, the activities of which are based or conducted in a country other than India.

(g)     “Foreign currency transaction” is a transaction which is denominated in or requires settlement in a foreign currency, including transactions arising when a person:-

(i)      buys or sells goods or services whose price is denominated in a foreign currency; or

(ii)     borrows or lends funds when the amounts payable or receivable are denominated in a foreign currency; or

(iii)    becomes a party to an unperformed forward exchange contract; or

(iv)    otherwise acquires or disposes of assets, or incurs or settles liabilities, denominated in a foreign currency.

(h)     “Forward exchange contract” means an agreement to exchange different currencies at a forward rate, and includes a foreign currency option contract or another financial instrument of a similar nature;

(i)      “Forward rate” is the specified exchange rate for exchange of two Currencies at a specified future date;

(j)      “Indian currency” shall have the meaning as assigned to it in section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999);

(k)     “Monetary items” are money held and assets to be received or liabilities to be paid in fixed or determinable amounts of money. Cash, receivables, and payables are examples of monetary items;

(l)      “Non-monetary items” are assets and liabilities other than monetary items. Fixed assets, inventories, and investments in equity shares are examples of non-monetary items;

(m)    “Reporting currency” means Indian currency except for foreign operations where it shall mean currency of the country where the operations are carried out.

(2) Words and expressions used and not defined in this Income Computation and Disclosure Standard but defined in the Act shall have the meaning assigned to them in the Act.

Foreign Currency Transactions

Initial Recognition

3(1) A foreign currency transaction shall be recorded, on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

(2)  An average rate for a week or a month that approximates the actual rate at the date of the transaction may be used for all transaction in each foreign currency occurring during that period.  If the exchange rate fluctuates significantly, the actual rate at the date of the transaction shall be used.

Conversion at Last Date of Previous Year

4. At last day of each previous year:-

(a)     foreign currency monetary items shall be converted into reporting currency by applying the closing rate;

(b)     where the closing rate does not reflect with reasonable accuracy, the amount in reporting currency that is likely to be realised from or required to disburse, a foreign currency monetary item owing to restriction on remittances or the closing rate being unrealistic and it is not possible to effect an exchange of currencies at that rate, then the relevant monetary item shall be reported in the reporting currency at the amount which is likely to be realised from or required to disburse such item at the last date of the previous year; and

(c)     non-monetary items in a foreign currency shall be converted into reporting currency by using the exchange rate at the date of the transaction.

(d)     non-monetary item being inventory which is carried at net realisable value denominated in a foreign currency shall be reported using the exchange rate that existed when such value was determined.

Recognition of Exchange Differences

5. (i) In respect of monetary items, exchange differences arising on the settlement thereof or on conversion thereof at last day of the previous year shall be recognised as income or as expense in that previous year.

(ii) In respect of non-monetary items, exchange differences arising on conversion thereof at the last day of the previous year shall not be recognised as income or as expense in that previous year.

Exceptions to Paragraphs 3, 4 and 5

6. Notwithstanding anything contained in paragraph 3, 4 and 5; initial recognition, conversion and recognition of exchange difference shall be subject to provisions of section 43A of the Act or Rule 115 of Income-tax Rules, 1962,as the case may be.

Financial Statements of Foreign Operations

7. The financial statements of a foreign operation shall be translated using the principles and procedures in paragraphs 3 to 6 as if the transactions of the foreign operation had been those of the person himself.

Forward Exchange Contracts

8.      (1) Any premium or discount arising at the inception of a forward exchange contract shall be

amortised as expense or income over the life of the contract.  Exchange differences on such a contract shall be recognised as income or as expense in the previous year in which the exchange rates change.  Any profit or loss arising on cancellation or renewal shall be recognised as income or as expense for the previous year.

(2)    The provisions of sub-para (1) shall apply provided that the contract:

(a)     is not intended for trading or speculation purposes; and

(b)     is entered into to establish the amount of the reporting currency required or available at the settlement date of the transaction.

(3)     The provisions of sub-para (1) shall not apply to the contract that is entered into to hedge the foreign currency risk of a firm commitment or a highly probable forecast transaction.  For this purpose, firm commitment, shall not include assets and liabilities existing at the end of the previous year.

(4)     The premium or discount that arises on the contract is measured by the difference between the exchange rate at the date of the inception of the contract and the forward rate specified in the contract. Exchange difference on the contract is the difference between:

(a)     the foreign currency amount of the contract translated at the exchange rate at the last day of the previous year, or the settlement date where the transaction is settled during the previous year; and

(b)    the same foreign currency amount translated at the date of inception of the contract or the last day of the immediately preceding previous year, whichever is later.

(5)    Premium, discount or exchange difference on contracts that are intended for trading or speculation purposes, or that are entered into to hedge the foreign currency risk of a firm commitment or a highly probable forecast transaction shall be recognised at the time of settlement.

Transitional Provisions

9. (1) All foreign currency transactions undertaken on or after 1st day of April, 2016 shall be recognised in accordance with the provisions of this standard.

(2)    Exchange differences arising in respect of monetary items or non-monetary items, on the settlement thereof during the previous year commencing on the 1st day of April, 2016 or on conversion thereof at the last day of the previous year commencing on the 1st day of April, 2016 , shall be recognised in accordance with the provisions of this standard after taking into account the amount recognised on the last day of the previous year ending on the 31st March, 2016 for an item, if any, which is  carried forward from said previous year.

(3)    The financial statements of foreign operations for the previous year commencing on the 1st day of April, 2016 shall be translated using the principles and procedures specified in this standard after taking into account the amount recognised on the last day of the previous year ending on the 31st March, 2016 for an item, if any, which is carried forward from said previous year.

(4)    All forward exchange contracts existing on the 1st day of April, 2016 or entered on or after 1st day of April, 2016 shall be dealt with in accordance with the provisions of this standard after taking into account the income or expenses, if any, recognised in respect of said contracts for the previous year ending on or before the 31st March,2016.

G. Income Computation and Disclosure Standard VII relating to government grants

Preamble

This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” and not for the purpose of maintenance of books of account.

In  case of conflict between the provisions of the Income Tax Act, 1961 (‘the Act’) and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent.

Scope

1.      This Income Computation and Disclosure Standard deals with the treatment of Government grants. The Government grants are sometimes called by other names such as subsidies, cash incentives, duty drawbacks, waiver, concessions, reimbursements, etc.

2.      This Income Computation and Disclosure Standard does not deal with:-

(a)     Government assistance other than in the form of Government grants; and

(b)     Government participation in the ownership of the enterprise.

Definitions  

3(1)   The following terms are used in the Income Computation and Disclosure Standard with the meanings specified:

(a)     “Government” refers to the Central Government, State Governments, agencies and similar bodies, whether local, national or international.

(b)     “Government grants” are assistance by Government in cash or kind to a person for past or  future compliance with certain conditions. They exclude those forms of Government assistance which cannot have a value placed upon them and the transactions with Government which cannot be distinguished from the normal trading transactions of the person.

3(2) Words and expressions used and not defined in this Income Computation and Disclosure Standard but defined in the Act shall have the meaning assigned to them in the Act.

Recognition of Government Grants

4(1)   Government grants should not be recognised until there is reasonable assurance that (i) the person shall comply with the conditions attached to them, and (ii) the grants shall be received. 

4(2)   Recognition of Government grant shall not be postponed beyond the date of actual receipt.

Treatment of Government Grants

5.      Where the Government grant relates to a depreciable fixed asset or assets of a person, the grant shall be deducted  from the actual cost of the asset or assets concerned or from the written down value of block of assets to which concerned asset or assets belonged to.

6.      Where the Government grant relates to a non-depreciable asset or assets of a person requiring   fulfillment of certain obligations, the grant   shall be recognised as income over the same period over which the cost of meeting such obligations is charged to income. 

7.      Where the Government grant is of such a nature that it cannot be directly relatable to the asset acquired, so much of the amount which bears to the total Government grant, the same proportion as such asset bears to all the assets in respect of or with reference to which the Government grant is so received, shall be deducted from the actual cost of the asset or shall be reduced from the written down value of block of assets to which the asset or assets belonged to.           

8.      The Government grant that is receivable as compensation for expenses or losses incurred in a previous financial year or for the purpose of giving immediate financial support to the person with no further related costs, shall be recognised as income of the period in which it is  receivable.

9.      The Government grants other than covered by paragraph 5, 6, 7, and 8 shall be recognised as income over the periods necessary to match them with the related costs which they are intended to compensate. 

10.    The Government grants in the form of non-monetary assets, given at a concessional rate, shall be accounted for on the basis of their acquisition cost.

Refund of Government Grants

11.    The amount refundable in respect of a Government grant referred to in paragraphs 6, 8 and 9 shall be applied first  against any unamortised deferred credit remaining in respect of the Government grant. To the extent that the amount refundable exceeds any such deferred credit, or where no deferred credit exists, the amount shall be charged to profit and loss statement. 

12.    The amount refundable in respect of a Government grant related to a depreciable fixed asset or assets shall be  recorded by increasing the actual cost or written down value of block of assets by the amount refundable. Where the actual cost of the asset is increased, depreciation on the revised actual cost or written down value shall be provided prospectively at the prescribed rate.

Transitional Provisions

13. All the Government grants which meet the recognition criteria of para 4 on or after 1st day of April, 2016 shall be recognised for the previous year commencing on or after 1st day of April, 2016 in accordance with the provisions of this standard after taking into account the amount, if any, of the said Government grant recognised for any previous year ending on or before 31st day of March,2016.

Disclosures

14.    Following disclosure shall be made in respect of Government grants, namely:-

(a)     nature and extent of Government grants recognised during the previous year by way of deduction from the actual cost of the asset or assets or from the written down  value of block of assets during the previous year;

(b)     nature and extent of Government grants recognised during the previous year as income;

(c)     nature and extent of Government grants not recognised during the previous year by way of deduction from the actual cost of the asset or assets or from the written down value of block of assets and reasons thereof; and

(d)     nature and extent of Government grants not recognised during the previous year as income and reasons thereof.

H. Income Computation and Disclosure Standard VIII relating to securities Preamble

This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” and not for the purpose of maintenance of books of account.

In the case of conflict between the provisions of the Income-tax Act, 1961 (‘the Act’) and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent.

Part A

Scope

1.      This part of Income Computation and Disclosure Standard deals with securities held as stock-in-trade.

2.      This part of Income Computation and Disclosure Standard does not deal with:

(a)     the bases for recognition of interest and dividends on securities which are covered by the Income Computation and Disclosure Standard on revenue recognition;

(b)     securities held by a person engaged in the business of insurance;

(c)     securities held by mutual funds, venture capital funds, banks and public financial institutions formed under a Central or a State Act or so declared under the Companies Act, 1956 (1 of 1956) or the Companies Act, 2013 (18 of 2013).

Definitions

3(1) The following terms are used in this part of Income Computation and Disclosure Standard with the meanings specified:

(a)    “Fair value” is the amount for which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction.

(b)     “Securities” shall have the meaning assigned to it in clause (h) of Section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and shall include share of a company in which public are not substantially interested but shall not include  derivatives referred to in sub-clause (ia) of that clause (h).

3(2) Words and expressions used and not defined in this part of  Income Computation and Disclosure Standard but defined in the Act shall have the meaning respectively assigned to them in the Act.

Recognition and Initial Measurement of Securities

4.      A security on acquisition shall be recognised at actual cost.

5.      The actual cost of a security shall comprise of its purchase price and include acquisition charges such as brokerage, fees, tax, duty or cess.

6.      Where a security is acquired in exchange for other securities, the fair value of the security so acquired shall be its actual cost.   

7.      Where a security is acquired in exchange for another asset, the fair value of the security so acquired shall be its actual cost. 

8.      Where unpaid interest has accrued before the acquisition of an interest-bearing security and is included in the price paid for the security, the subsequent receipt of interest is allocated between pre-acquisition and post-acquisition periods; the pre-acquisition portion of the interest is deducted from the actual cost.

Subsequent Measurement of Securities

9.      At the end of any previous year, securities held as stock-in-trade shall be valued at actual cost initially recognised or net realisable value at the end of that previous year, whichever is lower.  

10.    For the purpose of para 9, the comparison of actual cost initially recognised and net realisable value shall be done categorywise and not for each individual security.  For this purpose, securities shall be classified into the following categories, namely:-

(a)     shares;

(b)     debt securities;

(c)     convertible securities; and

(d)     any other securities not covered above. 

11.    The value of securities held as stock-in-trade of a business as on the beginning of the previous year shall be:

(a)     the cost of securities available, if any, on the day of the commencement of the business when the business has commenced during the previous year; and

(b)     the value of the securities of the business as on the close of the immediately preceding previous year, in any other case.  

12.    Notwithstanding anything contained in para 9, 10 and 11, at the end of any previous year, securities not listed on a recognised stock exchange; or listed but not quoted on a recognised stock exchange with regularity from time to time, shall be valued at actual cost initially recognised.

13.    For the purposes of para 9, 10 and 11 where the actual cost initially recognised cannot be ascertained by reference to specific identification, the cost of such security shall be determined on the basis of first-in-first-out method or weighted average cost formula.

Part B

Scope

1.  This part of Income Computation and Disclosure Standard deals with securities held by a scheduled bank or public financial institutions formed under a Central or a State Act or so declared under the Companies Act, 1956 (1 of 1956) or the Companies Act, 2013 (18 of 2013).

Definitions

2(1)   The following terms are used in this part of Income Computation and Disclosure Standard with the meanings specified:

(a)    “Scheduled Bank” shall have the meaning assigned to it in clause (ii) of the Explanation to clause (viia) of sub-section (1) of section 36 of the Act.

(b)    “Securities” shall have the meaning assigned to it in clause (h) of Section 2 of the Securities Contract (Regulation) Act, 1956 (42 of 1956) and shall include share of a company in which public are not substantially interested;

2(2) Words and expressions used and not defined in this part of Income Computation and Disclosure Standard but defined in the Act shall have the meaning respectively assigned to them in the Act.

Classification, Recognition and Measurement of Securities

3.    Securities shall be classified, recognised and measured in accordance with the extant guidelines issued by the Reserve Bank of India in this regard and any claim for deduction in excess of the said guidelines shall not be taken into account. To this extent, the provisions of Income Computation and Disclosure Standard VI on the effect of changes in foreign exchange rates relating to forward exchange contracts shall not apply.”

I.  Income Computation and Disclosure Standard IX relating to borrowing costs

Preamble

This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” and not for the purpose of maintenance of books of account.

In the case of conflict between the provisions of the Income-tax Act, 1961 (‘the Act’) and   this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent.

Scope

1.      (1)     This Income Computation and Disclosure Standard deals with treatment of borrowing costs.

(2) This Income Computation and Disclosure Standard does not deal with the actual or imputed cost of owners’ equity and preference share capital.

Definitions

2. (1) The following terms are used in this Income Computation and Disclosure Standard with the meanings specified:

(a) “Borrowing costs” are interest and other costs incurred by a person in connection with the borrowing of funds and include:

(i)     commitment charges on borrowings;

(ii)    amortised amount of discounts or premiums relating to borrowings;

(iii)   amortised amount of ancillary costs incurred in connection with the arrangement of borrowings;

(iv)   finance charges in respect of assets acquired under finance leases or under other similar arrangements.

(b)   “Qualifying asset” means:

(i)     land, building, machinery, plant or furniture, being tangible assets;

(ii)     know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets;

(iii)    inventories that require a period of twelve months or more to bring them to a saleable condition.

(2)    Words and expressions used and not defined in this Income Computation and Disclosure Standard but defined in the Act shall have the meaning assigned to them in the Act.

Recognition

3.      Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset shall be capitalised as part of the cost of that asset. The amount of borrowing costs eligible for capitalisation shall be determined in accordance with this Income Computation and Disclosure Standard. Other borrowing costs shall be recognised in accordance with the provisions of the Act.

4.      For the purposes of this Income Computation and Disclosure Standard, “capitalisation” in the context of inventory referred to in item (iii) of clause (b) of sub-paragraph (1) of paragraph 2means addition of borrowing cost to the cost of inventory.

Borrowing Costs Eligible for Capitalisation

5. Subject to paragraph 8, the extent to which funds  are borrowed specifically for the purposes of acquisition, construction or production of a qualifying asset, the amount of borrowing costs to be capitalised on that asset shall be the actual borrowing costs incurred during the period on the funds so borrowed.

“6. Subject to Para 8, in respect of borrowing other than those referred to in Para 5, if any, the amount of borrowing costs to be capitalised shall be computed in accordance with the following formula namely :-

A x B/C

Where        A =    borrowing costs incurred during the previous year except on borrowings referred to in Para 5 above;

B =    (i) the average of costs of qualifying asset as appearing in the balance sheet of a person on the first day and the last day of the previous year;

(ii)     in case the qualifying asset does not appear in the balance sheet of  a person on the first day, half of the cost of qualifying asset; or

(iii)    in case the qualifying asset does not appear in the balance sheet of  a person on the last day of the previous year, the average of the costs of qualifying asset as appearing in the balance sheet of a person on the first day of the previous year and on the date of put to use or completion, as the case may be,

excluding the extent to which the qualifying assets are directly funded out of specific borrowings;

C =    the average of the amount of total assets  as appearing in the balance sheet of  a person  on the first day and the last day of the previous year, other than assets to the extent they are directly funded out of specific borrowings;

Explanation -  For the purpose of this paragraph, a qualifying asset shall be such  asset that necessarily require a period of twelve months or more for its acquisition, construction or production.

Commencement of Capitalisation

7.      The capitalisation of borrowing costs shall commence:

(a)     in a case referred to in paragraph 5, from the date on which funds were borrowed;

(b)     in a case referred to in paragraph 6, from the date on which funds were utilised.

Cessation of Capitalisation

8.      Capitalisation of borrowing costs shall cease:

(a)     in case of a qualifying asset referred to in item (i) and (ii) of clause (b) of sub-paragraph (1) of  paragraph 2, when such asset is first put to use;

(b)    in case of inventory referred to in item (iii) of clause (b) of sub-paragraph (1) of paragraph 2, when substantially all the activities necessary to prepare such inventory for its intended sale are complete.

9.      When the construction of a qualifying asset is completed in parts and a completed part is capable of being used while construction continues for the other parts, capitalisation of borrowing costs in relation to a part shall cease:-

(a)    in case of part of a qualifying asset referred to in item (i) and (ii) of clause (b) of subparagraph (1) of paragraph 2, when such part of a qualifying asset is first put to use;

(b)    in case of part of inventory referred to in item (iii) of clause (b) of sub-paragraph (1) of paragraph 2, when substantially all the activities necessary to prepare such part of inventory for its intended sale are complete.

Transitional Provisions

10. All the borrowing costs incurred on or after 1st day of April, 2016 shall be capitalised for the previous year commencing on or after 1st day of April, 2016 in accordance with the provisions of this standard after taking into account the amount of borrowing costs capitalised, if any, for the same borrowing for any previous year ending on or before 31st day of March,2016.

Disclosure

11. The following disclosure shall be made in respect of borrowing costs, namely:-

(a)     the accounting policy adopted for borrowing costs; and

(b)     the amount of borrowing costs capitalised during the previous year.

J. Income Computation and Disclosure Standard X relating to provisions, contingent liabilities and contingent assets

Preamble

This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” and not for the purpose of maintenance of books of accounts.

In the case of conflict between the provisions of the Income-tax Act, 1961 (‘the Act’) and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent.

Scope

1.      This Income Computation and Disclosure Standard deals with provisions, contingent liabilities and contingent assets, except those:

(a)     resulting from financial instruments;

(b)     resulting from executory contracts;

(c)     arising in insurance business from contracts with policyholders; and

(d) covered by another Income Computation and Disclosure Standard.

2.      This Income Computation and Disclosure Standard does not deal with the recognition of revenue which is dealt with by Income Computation and Disclosure Standard – Revenue Recognition.

3.      The term ‘provision’ is also used in the context of items such as depreciation, impairment of assets and doubtful debts which are adjustments to the carrying amounts of assets and are not addressed in this Income Computation and Disclosure Standard.

Definitions

4(1) The following terms are used in this Income Computation and Disclosure Standard with the meanings specified:

(a)    “Provision” is a liability which can be measured only by using a substantial degree of estimation.

(b)    “Liability” is a present obligation of the person arising from past events, the settlement of which is expected to result in an outflow from the person of resources embodying economic benefits.

(c)    “Obligating event” is an event that creates an obligation that results in a person

having no realistic alternative to settling that obligation.

(d)    “Contingent liability” is:

(i)     a possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the person; or

(ii)    a present obligation that arises from past events but is not recognised because:

(A)    it is not reasonably certain  that an outflow of resources embodying economic benefits will be required to settle the obligation; or

(B)    a reliable estimate of the amount of the obligation cannot be made.

(e)    “Contingent asset” is a possible asset that arises from past events the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the person.

(f)     “Executory contracts” are contracts under which neither party has performed any of its obligations or both parties have partially performed their obligations to an equal extent.

(g)    “Present obligation” is an obligation if, based on the evidence available, its existence at the end of the previous year is considered reasonably certain.

4(2) Words and expressions used and not defined in this Income Computation and Disclosure Standard but defined in the Act shall have the meaning respectively assigned to them in the Act.

Recognition

Provisions

5.      A provision shall be recognised when:

(a)     a person has a present obligation as a result of a past event;

(b)     it is reasonably certain that an outflow of resources embodying economic benefits will be required to settle the obligation; and

(c)     a reliable estimate can be made of the amount of the obligation.

If these conditions are not met, no provision shall be recognised.

6.      No provision shall be recognised for costs that need to be incurred to operate in the future.

7.      It is only those obligations arising from past events existing independently of a person’s future actions, that is  the future conduct of its business, that are recognised as provisions

8.      Where details of a proposed new law have yet to be finalised, an obligation arises only when the legislation is enacted.

Contingent Liabilities

9.      A person shall not recognise a contingent liability.

Contingent Assets

10.    A person shall not recognise a contingent asset.

11.    Contingent assets are assessed continually and when it becomes reasonably certain that inflow of economic benefit will arise, the asset and related income are recognised in the previous year in which the change occurs.

Measurement

Best Estimate

12.    The amount recognised as a provision shall be the best estimate of the expenditure required to settle the present obligation at the end of the previous year.  The amount of a provision shall not be discounted to its present value.

13.    The amount recognised as asset and related income shall be the best estimate of the value of economic benefit arising at the end of the previous year.  The amount and related income shall not be discounted to its present value.

Reimbursements

14.    Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when it is reasonably certain that reimbursement will be received if the person settles the obligation. The amount recognised for the reimbursement shall not exceed the amount of the provision.

15.    Where a person is not liable for payment of costs in case the third party fails to pay, no provision shall be made for those costs.

16.    An obligation, for which a person is jointly and severally liable, is a contingent liability to the extent that it is expected that the obligation will be settled by the other parties.

Review

17.    Provisions shall be reviewed at the end of each previous year and adjusted to reflect the current best estimate. If it is no longer reasonably certain that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision should be reversed.

18.    An asset and related income recognised as provided in para 11 shall be reviewed at the end of each previous year and adjusted to reflect the current best estimate.  If it is no longer reasonably certain that an inflow of economic benefits will arise, the asset and related income shall be reversed.

Use of Provisions

19. A provision shall be used only for expenditures for which the provision was originally recognised.

Transitional Provisions

20. All the provisions or assets and related income shall be recognised for the previous year commencing on or after 1st day of April, 2016 in accordance with the provisions of this standard after taking into account the amount recognised, if any, for the same for any previous year ending on or before 31st day of March,2016.

Disclosure

21(1) Following disclosure shall be made in respect of each class of provision, namely:-

(a)     a brief description of the nature of the obligation;

(b)     the carrying amount at the beginning and end of the previous year;

(c)     additional provisions made during the previous year, including increases to existing provisions;

(d)     amounts used, that is  incurred and charged against the provision, during the previous year;

(e)     unused amounts reversed during the previous year; and

(f)      the amount of any expected reimbursement, stating the amount of any asset that has been recognised for that expected reimbursement.

21(2) Following disclosure shall be made in respect of each class of asset and related income recognised as provided in para 11, namely:-

(a)     a brief description of the nature of the asset and related income;

(b)     the carrying amount of asset at the beginning and end of the previous year;

(c)     additional amount of asset and related income recognised during the year, including increases to assets and related income already recognised; and

(d)     amount of asset and related income reversed during the previous year.

[F.No.133/23/2015-TPL]

(PITAMBAR   DAS)

DIRECTOR (TAX POLICY AND LEGISLATION)

PM asks I-T dept to resolve taxpayer grievances : 29-09-2016


rime Minister Narendra Modi has asked the Income Tax Department to set up a separate mechanism to deal with taxpayer grievances and resolve them at the earliest.

The issue was discussed at the Prime Minister’s PRAGATI meeting where he expressed concern over the large number of grievances of taxpayers.

“He also urged the concerned officials to use technology to the maximum extent possible, to ensure speedy resolution of issues,” said an official release on Wednesday.

Meanwhile, the Prime Minister also reviewed the progress in implementing the Pradhan Mantri Khanij Kshetra Kalyan Yojana and asked officials to work out a uniform set of processes and procedures for utilisation of the funds, so as to benefit the backward communities, including tribals, in the mineral rich districts, the statement said.

“An amount of ₹3,214 crore has been collected so far by the 12 mineral-rich States, and a much larger amount is expected to be collected in due course,” said the release.

The Prime Minister also reviewed the progress of infrastructure projects in various States were also reviewed at the meeting.

Source : Business Standard

Independent directors in real estate developers boards press exit buttons on RERA fear : 29-09-2016


Fearing that the new Real Estate (Regulation & Development) Act (RERA) could land them in trouble, many independent directors are resigning from the boards of real estate developers; and worse few are willing to replace them. The fear is that under RERA, independent directors can be held accountable in case a company fails to comply with the new regulations that are quite stringent.

“The way RERA reads today, many independent directors will have a liability in case the developer is unable to follow the regulatory guidelines. The increased liability of the independent director is also causing many people to stay away from real estate boards,” said Rajesh Narain Gupta, managing partner at law firm SNG & Partners. According to data compiled by Prime Database, about 33 independent directors resigned from the listed real estate companies since April this year. Of these, about 22 have resigned since August 1, when clarity around RERA emerged. Going ahead industry experts expect more independent directors to step down.

A person who recently quit as an independent director in an unlisted Mumbai-based realty company told ET: “I didn’t quite know what exactly was happening in the company; it was very opaque structure. Going ahead, this could be a huge risk. The promoters weren’t very happy, but it wasn’t worth the risk,” he said. The Indian real estate sector has a long history of delayed projects, poor quality and illegal construction. A recent research report by real estate consultancy Jones Lang LaSalle (JLL) said about 25% of the housing projects are delayed across India. The inventory of residential stock is more than 14-15 months, it said. Even the big organised players are fighting several lawsuits filed by disappointed homebuyers. RERA is aimed at keeping irregularities in the sector under control and is set to provide afillip to the overall real estate funding environment, said experts.

A developer would be required to take disciplined approach for project execution and the same should reflect in the investment agreements by any private equity investor. Experts said a bigger problem is with unlisted players where irregularities may be comparatively more than the listed players.

Many fear that that RERA combined with the Companies Act would unsettle independent directors on board of several real estate firms across the country, leading to several such people stepping down over the next six months. Industry trackers say that the first to resign would be directors in loss-making companies, where the directors’ income is impacted because of the inability to earn compensation on profits. This also comes at a time when private equity funds and strategic investors in the real  estate sector are looking to include their rights in the investment documents to avoid liability arising out of non-performance.

Many such investors who have invested mainly at project level are renegotiating their contracts with the developers, fearing litigation and fines once the new real estate regulations come in to force.

The fear is that under RERA they can be labelled as developer and may have to face strict penalties for any violation of rules by the projects they fund.

Source : PTI

1049/37/2016-CX – 29-9-2016


REVISED MONETARY LIMITS FOR ADJUDICATION OF SHOW CAUSE NOTICE IN CENTRAL EXCISE AND SERVICE TAX

CIRCULAR NO.1049/37/2016-CXDATED 29-9-2016

Kind attention is invited to the following circulars issued by the Board regarding adjudication of cases in Central Excise and Service Tax. In supersession of these circulars and any other circular issued on the above subject, instructions from paragraph 2 onwards are hereby issued to revise the existing monetary limits for adjudication and to allow greater flexibility in allocation of cases amongst adjudicating authorities.

(i) Circular No. 752/68/2003-CX dated 01.10.2003
(ii) Circular No. 806/3/2005-CX dated 12.01.2005
(iii) Circular No. 865/3/2008-CX dated 19.02.2008
(iv) Circular No. 922/12/2010-CX dated 18.05.2010
(v) Circular No. 957/18/2011-CX dated 25.10.2011
(vi) Circular No. 80/1/2005-ST dated 10.08.2005
(vii) Circular No. 99/2/2008-ST dated 11.03.2008
(viii) Circular No. 130/12/2010-ST dated 20.09.2010

2. Adjudication of confiscation and penalty by the Central Excise Officers is provided in section 33 of the Central Excise Act, 1944. Central Excise Officers have the power under section 11A to adjudicate show cause notices demanding duty short paid or not paid and erroneously refunded. Similar powers exist in Service Tax under section 73 and section 83A of the Finance Act, 1994 (Notification No. 44/2016-Service Tax dated 28-9-2016 refers). It is hereby directed that henceforth powers of adjudication both in Central Excise and Service Tax shall be exercised, based on the monetary limit of the duty/tax/credit involved in a case, as under:—

SI. No. Central Excise Officer Monetary Limits of duty/tax/credit demand for Central Excise and Service Tax
1. Superintendent Not exceeding rupees ten lakh
2. Deputy/Assistant Commissioner Above ten lakh but not exceeding rupees fifty lakh
3. Additional/Joint Commissioner Above fifty lakh but not exceeding rupees two crore
4. Commissioner Without limit i.e. cases exceeding rupees two crores
(i) Cases involving taxability, classification, valuation and extended period of limitation shall be kept out of the purview of adjudication by Superintendents. Such cases, upto rupees 10 lakhs, shall also be adjudicated by the Deputy Commissioner/Assistant Commissioner in addition to the cases exceeding rupees 10 lakhs but not exceeding rupees 50 lakh.
(ii) The above monetary limits are hereby prescribed for all categories of cases, except the following:
(a) cases of refund (including rebate) under section 11B of the Central Excise Act, 1944, as made applicable to Service Tax cases also under section 83 of the Finance Act, 1994, shall be adjudicated by the Deputy Commissioner/Assistant Commissioner without any monetary limit.
(b) cases related to issues mentioned at SI. No. (a) and (d) under the first proviso to section 35B(1) of the Central Excise Act, 1944 shall be adjudicated in the following manner:
SI. No. Central Excise Officer Monetary Limits for Central Excise
1. Additional/Joint Commissioner Exceeding Rs. 50 lakh
2. Deputy/Assistant Commissioner Above Rs. 10 lakh but not exceeding Rs. 50 lakh
3. Superintendent Not exceeding Rs. 10 lakh
(iii) In case different show cause notices have been issued on the same issue answerable to different adjudicating authorities, Show Cause Notices involving the same issue shall be adjudicated by the adjudicating authority competent to decide the case involving the highest amount of duty.
(iv) Every adjudicating authority of Central Excise and Service Tax in the field shall endeavour to adjudicate 100 cases in a year.

3. Further, in view of huge pendency of adjudication of Service Tax cases at the level of Commissioner, the Service Tax cases shall be earmarked to Commissioners of Central Excise and Commissioners (Audit) of Central Excise also, depending upon the pendency level in the Zone, in the following manner:

(a) Central Excise Zones with no exclusive Service Tax Commissionerate
In such Zones, the Chief Commissioners shall review the position of Service Tax cases pending for adjudication at the level of Commissioner, and in exercise of powers conferred under section 37A of the CEA, 1944 as made applicable to Service Tax by section 83 of the Finance Act, 1994, read with notification no. 6/2009-ST, dated 30-1-2009, earmark these cases to Commissioners of Central Excise and Commissioners (Audit) also within their respective Zones. Orders allocating cases for adjudication would be required to be issued. Similar exercise can be done on the Central Excise side also by exercising powers under section 37A of the CEA, 1944 read with notification no. 11/2007-CE(NT), dated 1-3-2007.
(b) Central Excise Zones having exclusive Service Tax Commissionerates (namely Ahmedabad, Bangalore, Hyderabad, Meerut and Pune Zone)
In case of Central Excise Zones having exclusive Service Tax Commissionerates, the cases may be transferred within the same Zone from Service Tax Commissionerates to Central Excise /Audit Commissionerates. The Chief Commissioner shall exercise powers conferred under section 37A of the CEA, 1944 as made applicable to Service Tax by section 83 of the Finance Act, 1994, read with notification no. 6/2009-ST dated 30-1-2009, and earmark these cases to the Commissioners of Central Excise and Commissioner (Audit) also within their respective Zones. Orders allocating cases for adjudication would be required to be issued.
(c) Service Tax Zones
In case of exclusive Service Tax Zones, the cases would have to be transferred across the Zones. The Zonal Member in-charge of the Zone concerned shall take stock of pending cases at the Commissioner level, and in exercise of powers conferred to the Board, earmark these cases to Commissioner (Audit) and Commissioners of Central Excise across Zones if there is a need to do so. Orders allocating cases would need to be issued in these cases also. While issuing such order, powers under Rule 3 of Central Excise Rules, 2002 would also be required to be exercised and specified in the order.
(d) It may be noted that the Commissioner (Audit) had been invested with powers of Central Excise Officer for the purposes of Audit and issue of Show Cause Notice, vide Notification No. 30/2014- CE (NT) dated 14-10-2014. The said notification has now been amended vide Notification no 47/2016-Central Excise (N.T.) dated 28th September, 2016 to invest the Commissioner (Audit) with powers of adjudication.

4. The above directions shall apply only to adjudication of cases where the personal hearing is yet to be commenced. In all cases where the personal hearing has been completed, orders will be passed by the adjudicating authority before which the hearing has been held. Such orders should normally be issued within a month of the date of completion of the personal hearing.

5. Notwithstanding the above directions, cases which have been remanded back for de novo adjudication shall be decided by an authority of the rank which passed the said remanded order.

6. After issue of this circular, an immediate exercise may be undertaken by the field formations to, take stock of the present pendency, redistribute them for adjudication and transfer the relevant files and records to respective adjudicating authorities. The exercise of transfer of case records should be completed within a month from the date of issue of this circular and the recast figures should be reflected in the subsequent Monthly Performance Report.

7. It may also be noted that the age-wise pendency of cases as shown in monthly report should be reflected based on the date of issuance of Show Cause Notice and not on the basis of transfer of cases to the new adjudicating authority.

8. The Chief Commissioners concerned are directed to ensure that once the Show Cause Notices pending for adjudication are re-distributed and re-asssigned, the pending cases are to be disposed by 31.03.2017. The Zonal Members, in-charge of respective Zones, may also monitor the progress of adjudication and ensure that these cases are disposed of within the prescribed timeline. It may be emphasised that the performance exhibited by the zones in this area shall form an important criteria at the time of performance appraisal of the officer concerned.

9. The field formations may be suitably informed. Difficulty faced, if any, in implementing the circular should be brought to the notice of the Board.

 

 

Notification No.86/2016 29-9-2016


Income Computation and Disclosure Standards (ICDS) – ICDS notified in 2015 rescinded – 86/2016

 

GOVERNMENT OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE) (CENTRAL BOARD OF DIRECT TAXES)

Notification 86/2016

New Delhi 29th September, 2016

S.O. 3078(E). - In exercise of the powers conferred by sub-section (2) of section 145 of the Income-tax Act, 1961(43 of 1961), the Central Government hereby rescinds the notification of the Government of India in the Ministry of Finance, Department of Revenue, published in the Gazette of India, Part-II, Section 3, Sub-section (ii), vide notification number S.O. 892(E) dated the 31st March, 2015, except as respects things done or omitted to be done before such rescission.

[F.No.133/23/2015-TPL]

(PITAMBAR DAS)

DIRECTOR (TAX POLICY AND LEGISLATION

FM Arun Jaitley upbeat on WEF rankings, says India will emerge big player : 29-09-2016


A 32-point jump on World Economic Forum’s Global Competitiveness Index in two years shows that India has covered a long distance and is well on its way to emerge as a major player in global economy, Finance Minister Arun Jaitley said on Wednesday, promising more measures in areas that need improvement.

The latest WEF’s global ranking released on Wednesday shows India rose 16 ranks, faster than any other, to climb to 39 in FY17 among 138 countries.

“India’s rank has steadily improved from 71 in 2014-15 to 55 in 2015-16 and to 39 in the latest report. With this improvement…India has covered a long distance and is well on its way to emerge as a major player in the global economy,” Jaitley said, terming the upgrade as an extremely positive development

He said there is no room for complacency and the government will continue to focus on areas that need improvement.

WEF data showed that India’s ranking in the Global Competitiveness Index improved by 16 places for the second year in a row, placing it ahead of BRICS countries other than China which is ranked 28.

“India’s competitiveness has improved across the board, in particular in goods market efficiency, business sophistication, and innovation,” the report noted while it listed labour market rigidities as major concerns.

“Recent reform efforts have concentrated on improving public institutions (up 16), opening the economy to foreign investors and global trade (up 4), and increasing transparency in the financial system (up 15),” the report said. The report covers both business and social  indicators which impact the competitiveness of the country in the global arena.

Asked if the international rating agencies would take a note of this, the minister said: “They follow their own procedures but let’s hope everyone takes note of it.”

Jaitley said the report had negatively ranked India on efficiency in goods market largely due to varying taxes but this was going to change with introduction of goods and services tax (GST). India is ranked 60 on this count.

“In the coming months and years, significant improvement in goods market efficiency may be expected from GST rollout which will reduce fragmentation of the domestic market,” he said.

The minister said this report holds a mirror as to where the country is doing well and where it is not, adding that healthcare and education require more work.

Economic Affairs secretary Shaktikanta Das said this development has to be seen as a consequence of the reform measures undertaken by the government over the past two years.

The government expects reforms to show up in the World Bank’s Ease of Doing Business in coming years.

India was ranked 130th among 189 countries in the ease of doing business rankings 2016, an improvement of four spots from the previous year.

Source : Economic Times

3 – 29-9-2016


EXIM BANK’s GoI SUPPORTED LINE OF CREDIT OF USD87.00 MILLION TO GOVERNMENT OF REPUBLIC OF ZIMBABWE

A.P. (DIR SERIES 2016-17) CIRCULAR NO.3DATED 29-9-2016

Export-Import Bank of India (Exim Bank) has entered into an Agreement dated October 27, 2015 with the Government of the Republic of Zimbabwe for making available to the latter, a Government of India supported Line of Credit (LOC) of USD 87.00 million (USD Eighty Seven million) for financing renovation/up-gradation of Bulawayo Thermal Power Plant in Republic of Zimbabwe. Subsequently, Exim Bank has signed First Amendatory Dollar Credit Line Agreement with the Government of the Republic of Zimbabwe on May 31, 2016 on account of the revision of the Guidelines on Lines of Credit extended by the Government of India to various countries under its Indian Development and Economic Assistance Scheme (IDEAS) dated December 7, 2015. The goods, machinery, equipment and services including consultancy services from India for exports under this Agreement are those 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. Out of the total credit by Exim Bank under this Agreement, the goods and services including consultancy services of the value of at least 75% of the contract price shall be supplied by the seller from India and the remaining 25% goods and services may be procured by the seller for the purpose of the eligible contract from outside India.

2. The credit agreement under the LOC is effective from August 19, 2016. Under the LOC, last date for opening letters of credit disbursement is 60 months after the scheduled completion date of the project.

3. Shipments under the LOC will have to be declared on EDF/SDF Forms as per instructions issued by the Reserve Bank from time to time.

4. No agency commission is payable under the above LOC. However, if required, the exporter may use his own resources or utilize balances in his Exchange Earners’ Foreign Currency Account for payment of commission in free foreign exchange. Authorised Dealer Category- l (AD Category-l) banks may allow such remittance after realization of full payment of contract value subject to compliance with the prevailing 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 Line of Credit from the Exim Bank’s office at Centre One, Floor 21, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005 or log on to 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.

Notification No : 44/2016 Dated: 28-09-2016


Seeks to amend Notification No. 20/2005-Service Tax dated 10th August, 2005 – 44/2016 – Dated 28-9-2016 – Service Tax

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise and Customs

Notification No. 44 /2016- Service Tax

New Delhi, the 28th September 2016

6 Asvina, 1938 Saka

G.S.R… (E) In exercise of the powers conferred by section 83A of the Finance Act, 1994 (32 of 1994), the Central Board of Excise and Customs hereby makes the following further amendment in the notification of the Government of India, Ministry of Finance, Department of Revenue, No. 30/2005 – Service Tax, dated the 10th August 2005, published vide number G.SR. 527(E), dated the 10th  August, 2005, namely: -

In the said notification, for the Table, the following Table shall be substituted, namely:-

“Table

Sr. No. Rank of the Central Excise Officer Amount of service tax or CENVAT credit specified in a notice issued under theFinance Act 1994.
(1) (2) (3)

(1)

Superintendent Not exceeding rupees ten lakh (excluding the cases relating to taxability of services or valuation of services and cases involving extended period of limitation).

(2)

Assistant Commissioner Or Deputy Commissioner Not exceeding rupees fifty lakh (except cases where Superintendents are empowered to adjudicate).
(3) Joint Commissioner or Additional Commissioner Rupees fifty lakh and above but not exceeding rupees two crore.

(5)

Commissioner Without limit.”

Shankar Prasad Sarma

Under Secretary to the Government of India

[F. No. 267/40/2016-CX 8]

Note.- The principal notification No. 30/2005 – Service Tax, dated 10th August 2005 Was published in the Gazette of India, Extraordinary, part II, section 3, sub-section (i), vide No. G.S.R. 527(E), dated the 10th August, 2005 and was last amended by notification No. 48/2010- Service Tax, dated 8th September, 2010, vide G.S.R. 738 (E) dated 08th September 2010.

Notification No : 43/2016 Dated: 28-09-2016


Government of India Ministry of Finance Department of Revenue

Central Board of Excise and Customs

New Delhi, the 28 September, 2016

6 Asvina, 1938 Saka

Notification No. 43 /2016-Service Tax

G.S.R. 923 (E). - In exercise of the powers conferred by sub-section (1) read with subsection (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend theService Tax Rules, 1994, namely:-

1. (1) These rules may be called the Service Tax (Third Amendment) Rules, 2016.

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

2. In the Service Tax Rules, 1994, in Form ST- 3,-

(i) in Part-A, in the Table, in A8,-

(a) in serial number A 8.1, for the words “Individual/Proprietary”, the words

“Individual/Proprietary/ One Person Company” shall be substituted;

(b) in serial number A 8.2, for the words “Limited Liability Partnership”, the words

“Partnership/Limited Liability Partnership” shall be substituted;

(ii) in Part -B,-

(a) in the Table “B1 FOR SERVICE PROVIDER”, after serial number B1.24 and the entries relating thereto, the following serial numbers and entries shall be inserted, namely:-

“B1.25 Krishi Kalyan Cess payable based on entries in serial number B1.15
B1.26 Krishi Kalyan Cess payable based on entries in serial number B1.16
B1.27 Total Krishi Kalyan Cess payable B1.27=B1.25+B1.26”;

(b) in the Table “B2 FOR SERVICE RECEIVER”, after serial number B2.24 and the entries relating thereto, the following serial numbers and entries shall be inserted, namely:-

“B2.25 Krishi Kalyan Cess payable based on entries in serial number B2.15
B2.26 Krishi Kalyan Cess payable based on entries in serial number B2.16
B2.27 Total Krishi Kalyan Cess payable B2.27=B2.25+B2.26”;

(iii) in Part-C, in the Table, after serial number C1.1 and the entries relating thereto, the following serial number and entries shall be inserted, namely:-

“C1.2 Krishi Kalyan Cess deposited in advance”;

(iv) for the Part-D heading, the following heading shall be substituted, namely:-

“Part-D SERVICE TAX PAID IN CASH AND THROUGH CENVAT CREDIT

Service Tax, Swachh Bharat Cess, Krishi Kalyan Cess, Education Cess, Secondary and Higher Education Cess and other amounts paid”;

(v) in Part DA, after serial number DA4 and the entries relating thereto, the following serial number and the entries shall be inserted namely :-

“DA4.1 By adjustment of excess amount paid earlier as Swachh Bharat Cess in respect of immovable property on account of non availment of deduction of property tax paid and adjusted in this periodunder rule 6(4C) of the Service Tax Rules,1994”;

(vi) after Part DA, the following part shall be inserted, namely:-

“PART DB- KRISHI KALYAN CESS PAID IN CASH AND THROUGH CENVAT CREDIT

DB1 In cash
DB2 By CENVAT credit (not applicable where the service tax is liable to be paid by the recipient of service)
DB3 By adjustment of amount paid as Krishi Kalyan Cess in advance under rule 6(1A) of the Service Tax Rules,1994
DB4 By adjustment of excess amount paid earlier as Krishi Kalyan Cess and adjusted, by taking credit of such excess Krishi Kalyan Cess paid, in this period under rule 6(3) of the Service Tax Rules,1994
DB5 By adjustment of excess amount paid earlier as Krishi Kalyan Cess and adjusted in this period under rule 6(4A) of the Service Tax Rules,1994
DB6 By adjustment of excess amount paid earlier as Krishi Kalyan Cess in respect of service of Renting of Immovable Property, on account of non-availment of deduction of property tax paid and adjusted in this period under rule 6(4C) of the Service Tax Rules,1994
DB7 By book adjustment in the case of specified Government departments
DB8 Total Krishi Kalyan Cess paid DB8=(DB1+DB2+DB3+DB4+DB5+DB6+DB7)”;

(vii) in Part G, in the Table, after serial number G16 and the entries relating thereto, the following serial numbers and the entries shall be inserted, namely:-

“G17 Arrears of Krishi Kalyan Cess paid in cash
G18 Arrears of Krishi Kalyan Cess paid by utilising Cenvat Credit
G19 Interest on Krishi Kalyan Cess paid in cash
G20 Penalty on Krishi Kalyan Cess paid in cash
G21 Total payment of arrears, interest, penalty on Krishi Kalyan Cess G21=(G17+G18+G19+G20)”;

(viii) in PART H,-

(a) for H1 Table heading, the following Table heading shall be substituted, namely:-

“H1 DETAILS OF CHALLAN (vide which Service Tax, Swachh Bharat Cess, Krishi Kalyan Cess, Education Cess, Secondary and Higher Education Cess and other amounts have been paid in cash)”;

(b) for H2 Table heading, the following Table heading shall be substituted, namely:-

“H2 Source document details for payments made in advance/adjustment, for entries made at column D3, D4, D5, D6, D7; DA2, DA3, DA4, DA4.1, DA5 ; DB3, DB4, DB5, DB6, DB7; E3, E4, E5, E6, E7; F3,F4, F5, F6, F7; G1 to G11, G13 to G15 and G17 to G20.”;

(ix) in PART – I,-

(a) for the Table I-1 the following Table shall be substituted, namely,-

“I1 DETAILS ABOUT THE ASSESSEE PROVIDING EXEMPTED AND NON-TAXABLE SERVICE OR MANUFACTURING EXEMPTED EXCISABLE GOODS

I1.1 Whether providing any exempted service or non-taxable service? (“Y”/ “N”)
I1.2 Whether manufacturing any exempted excisable goods? (“Y”/ “N”)
I1.3 If reply to I1.1 OR I1.2 is “Y”, Whether exclusively engaged either in the provision of exempted services or in the manufacture of exempted goods? [refer to rule 6(2) of the Cenvat Credit Rules, 2004] (“Y”/ “N”)
I1.3.1 If reply to I1.3 is “N” (i.e., providing both exempted and non-exempted goods/services), Whether paying an amount equal to 2%/7%/6% of the value of exempted services/goods under rule 6(3)(i) of CENVAT Credit Rules, 2004? (“Y”/ “N”)
If reply to I1.3.1 is “N” (i.e., opting to pay under Rule 6(3)(ii) read with rule 6(3A) of CENVAT Credit Rules, 2004), then -
I1.4 Value of exempted goods manufactured during the preceding financial year
I1.5 Value of exempted services provided during the preceding financial year
I1.6 Total value of exempted goods manufactured and services provided during the preceding financial year [refer to E in rule 6(3A)(b)(iv)] I1.6=(I1.4+I1.5)
I1.7 Value of non-exempted goods manufactured during the preceding financial year
I1.8 Value of non-exempted services provided during the preceding financial year
I1.9 Total value of non-exempted goods manufactured and services provided during the preceding financial year I1.9=(I1.7+I1.8)
I1.10 Total value of goods manufactured and services provided during the preceding financial year [refer to Fin rule 6 (3A)(b)(iv)] I1.10=(I1.6+I1.9)
I1.11 Total credit of inputs and input services taken [refer to in rule 6(3A)(b)]
I1.11.1 Ineligible credit [refer to A in rule 6(3A)(b)(i)]
I1.11.2 Eligible credit [refer to B in rule 6(3A)(b)(ii)]
I1.11.3 Common credit [refer to C in rule 6(3A)(b)(iii)] C=T-(A+B)  [I1.11.3 = I1.11 – (I1.11.1 + I1.11.2)]
I1.11.4 Ineligible common credit [refer to D in rule 6(3A)(b)(iv)]

D=(E/F) x C

(I1.11.4= [(I1.6 / I1.10) x I1.11.3]

 I1.11.5 Eligible common credit [refer to G in rule 6(3A)(b)(v)]

G=C-D

I1.11.5= (I1.11.3 – I1.11.4)

I1.12 Amount reversed under rule 6(3B) for banking companies and financial institutions

I1.11 to I1.12 will be a entry for each month / quarter.”;

(b) after I3.3, the following Table shall be inserted namely; -

“I3.4 DETAILS OF CENVAT CREDIT OF KRISHI KALYAN CESS TAKEN AND UTILISATION THEREOF –

I3.4.1 Opening Balance of Krishi Kalyan Cess
I3.4.2 Credit of Krishi Kalyan Cess taken
I3.4.2.1 on input services received directly
I3.4.2.2 as received from Input Service Distributor
I3.4.2.3 Any other credit taken (please specify)
I3.4.2.4 Total credit of Krishi Kalyan Cess taken I3.4.2.4=(I3.4.2.1+I3.4.2.2+I3.4.2.3)
I3.4.3 Credit of Krishi Kalyan Cess utilised
I3.4.3.1 for payment of Krishi Kalyan Cess on services
I3.4.3.2 for any other payments/adjustments/ reversal (please specify)
I3.4.3.3 Total credit of Krishi Kalyan Cess utilised I3.4.3.3=(I3.4.3.1+I3.4.3.2)
I3.4.4 Closing Balance of Krishi Kalyan Cess I3.4.4={(I3.4.1+I3.4.2.4)-I3.4.3.3}”;

(x) for Part J, the following Part shall be substituted, namely:-

“PART J

CREDIT DETAILS FOR INPUT SERVICE DISTRIBUTOR

(TO BE FILLED ONLY BY AN INPUT SERVICE DISTRIBUTOR):

Sl. Month/Quarter Apr/ May/ June/ July/ Aug/ Sep/
No. Oct Nov Dec Jan Feb Mar

J1 DETAILS OF CENVAT CREDIT OF SERVICE TAX AND CENTRAL EXCISE DUTY TAKEN AND DISTRIBUTION THEREOF –

J1.1 Opening Balance of CENVAT credit
J1.2 Credit taken (for distribution) on input services
J1.3 Credit of CENVAT distributed
J1.4 Closing Balance of Cenvat credit

J1.4={(J1.1+J1.2)- J1.3}

J2 DETAILS OF CENVAT CREDIT OF EDUCATION CESS TAKEN AND DISTRIBUTION THEREOF –

J2.1 Opening Balance of CENVAT credit of Education Cess
J2.2 Credit of Education Cess taken (for distribution) on input services
J2.3 Credit of Education Cess distributed
J2.4 Closing Balance of Cenvat credit of EC J2.4={(J2.1+J2.2) – J2.3}

J3 DETAILS OF CENVAT CREDIT OF SECONDARY AND HIGHER EDUCATION CESS TAKEN AND DISTRIBUTION THEREOF –

J3.1 Opening Balance of CENVAT credit of SHEC
J3.2 Credit taken of SHEC (for distribution) on input services
J3.3 Credit of SHEC distributed
J3.4 Closing Balance of Cenvat credit of SHEC= J3.4={(J3.1+J3.2)-J3.3}

J4 DETAILS OF CENVAT CREDIT OF KRISHI KALYAN CESS TAKEN AND DISTRIBUTION THEREOF –

J4.1 Opening balance of CENVAT credit of Krishi Kalyan Cess
J4.2 Credit of Krishi Kalyan Cess taken (for distribution) on input services
J4.3 Credit of Krishi Kalyan Cess distributed
J4.4 Closing Balance of CENVAT credit of Krishi Kalyan Cess J4.4={(J4.1+J4.2) – J4.3}”;

(xi) after Part L, under the heading Instructions to fill up Form ST-3, in the Table, the Column No. in form ST 3,the Sr. No. J1.4,J2.4 &J3.4 and the entries relating thereto shall be omitted.

(Anurag Sehgal)

Under Secretary

Government of India

[F.No.137 / 60 / 2016 -Service Tax]

Note:- The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide notification No. 2/94-SERVICE TAX, dated the 28th June, 1994 vide number G.S.R. 546 (E), dated the 28th June, 1994 and last amended vide notification No. 31/2016-SERVICE TAX, dated the 26th May,2016 vide number G.S.R 554(E) dated 26th May, 2016.

No. 10/2016 Dated: 28-9-2016


The Income Declaration Scheme, 2016 – reg. – Order-Instruction – Dated 28-9-2016 – Income Tax

Instruction No.10 of 2016

F.No.142/8/2016-TPL

Government of India Ministry of Finance Department of Revenue

(Central Board of Direct Taxes)

***

New Delhi, the 28th September, 2016

To,

All The Principal Chief Commissioners of Income-tax

Sub.: The Income Declaration Scheme, 2016 – reg.

The Income Declaration Scheme, 2016 (the Scheme) has come into effect from 1st June, 2016 and is open for declarations upto 30.09.2016. During the video conference held on 24.09.2016, concern was raised by field authorities that there can be few cases where the assessees may not have PAN but would like to file declaration under the Scheme towards the date of closure of the Scheme. In such cases, the assessee may not get PAN by the date of closure of the Scheme i.e. 30.09.2016

2. The issue has been examined. It has been decided that in such cases a declaration under the Scheme can be filed manually before the jurisdictional Pr.Commissioner/Commissioner by quoting the date and acknowledgment number of PAN application form. The Pr.Commissioners/Commissioners are directed to accept such declarations.

3. However, the jurisdictional Pr.Commissioner/Commissioner shall issue Form-2 only after the allotment of PAN to the declarant. The time limit provided for issuance of Form-2 under sub-rule (3) of rule 4 of the Income Declaration Scheme Rules, 2016 in such cases shall apply from the date on which PAN has been allotted to the declarant. In case, PAN allotment could not be made due to non-compliance/non-furnishing of documents by the declarant, the declaration shall be treated as invalid.

4. This instruction may be brought to the notice of all the officers concerned and other stakeholders.

5. Hindi version of the instruction will follow.

(Dr. T.S. Mapwal)

Under Secretary (TPL-IV)

Copy to:

1. The Chairperson, Members and all other officers in CBDT of the rank of Joint Secretary and above.

2. Web manager for posting on the departmental website.

3. Data base cell for posting on IRS officers website.

4. ITCC (3 copies)

5. Official language section for Hindi translation.

Notification No.85/2016 28-9-2016


U/s 32(1) and 32AD(1) of Income Tax Act 1961 – Central Government notifies the districts of the State of Andhra Pradesh as backward areas – 85/2016

MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION No. 85/2016

New Delhi, the 28th September, 2016

INCOME-TAX

S.O. 3075 (E).- In exercise of the powers conferred by section 32 and section 32AD of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies the following districts of the State of Andhra Pradesh as backward areas under the first proviso to clause (iia) of sub-section (1) of section 32 and sub-section (1) of section 32AD of the said Act, namely:-

1. Anantapur

2. Chittoor

3. Cuddapah

4. Kurnool

5. Srikakulam

6. Vishakhapatnam

7. Vizianagaram

2. This notification shall come into force on the date of its publication in the Official Gazette.

[F.No.142/13/2015-TPL]

PITAMBAR DAS, Director (Tax Policy & Legislation)

Investment in infrastructure, rural India crucial for growth : FM Arun Jaitley : 28-09-2016


Focusing on the health of public sector banks as well as channelising more investment in infrastructure and rural India will be crucial for the  country’s growth in the coming years, finance minister Arun Jaitley said on Tuesday at the State Bank of India Banking and Economics Conclave.

Jaitley said that there were a number of changes in past decade, that have led him to believe there was a reason for the country to feel encouraged about its prospects. “There has been a major change in the attitude of state governments.”

“If you look at the bigger picture, state governments have realised the importance of being competitive and being able to attract more resources. More states now have more resources than they had before.”

Another changing trend the finance minister highlighted was about how concepts like the monetary policy committeeand the GST tax, which has been discussed for decades, have transformed into reality this year. “Despite working in an adverse and unhelpful global environment globally, I think our desire to grow, and to take the necessary steps in order to grow has increased”.

When asked if the government could intervene in the case of settlements of stressed loans, especially by public sector banks, Jaitley said unlike private banks, public sector banks were still being governed by a number of obsolete laws, such as the 1988 Prevention of Corruption act, which hold them back. “I think the fear of consequences dilutes their potential,” he said, adding that there was now an oversight committee and a motion to amend the said obsolete laws.

Source : Financial Express

Arun Jaitley flays protectionist policies of developed : 28-09-2016


Finance Minister Arun Jaitley today frowned upon the growing tendency of protectionism across the world, especially in the US, leading to increased uncertainties in the global economy. “There is a growing evidence of protectionism in the advanced economies that have professed openness a few decades back,” Jaitley said while delivering the valedictory address at the ‘Seminar on Challenges in Developing the Bond Market in BRICS’ organised jointly by the finance ministry and industry body CII.

Addressing the SBI economic conclave later in the evening, the minister went on to name the US as the leading economy that is going back on an open trade policy.

“The tenor of debate in many countries, the US in particular, is becoming extremely protectionist. We can pass it off as what’s normally said in an election campaign is not exactly what is implemented. What’s implemented becomes far more moderate. But then the campaigns do push a part of the agenda itself,” the minister said.

Explaining his apprehension further he said “when the whole emphasis on protectionism comes from the most developed economies, then that doesn’t indicate a very positive signal for the future of the global economy itself. Brexit created some challenges, I hope the world overcomes it.”

In the light of these uncertainties many economies are taking unconventional measures such as low interest rates and negative interest rates, while India is pursuing a growth agenda, the minister added.

Meanwhile, he said the government has accepted the HR Khan Committee recommendations on the corporate bond markets and is in the process of implementing it over the next six-to eight months.

The Khan committee, set up by the Reserve Bank, has called for simplifying entry to and exit from the bond market, apart from enabling access to capital internationally and make the domestic bond market more robust to fuel the overall growth.

Calling for developing a robust corporate bond market Jaitley said, this is need to meet the increasing fund requirements in the infrastructure space, particularly in the areas of railways, smart cities, housing, ports and airports.

Currently, these projects are funded by banks and public finances, with a small portion coming from bond markets. But we need to create long-term alternate funding sources, which can be met by deepening the bond market, he said.

“After two-and-a-half decades of economic reforms, still there is a lot of deficit in funds required for undertaking various projects and to bridge the gap we have to tap new sources of investment,” Jaitley added.

Even experience in BRICS countries with bond market has also reflected that the deeper bond market has the potential to expand scope of raising more capital, he said.

Source : PTI

Parliamentary panel to submit report on budgetary reforms before next session : 28-09-2016


The Parliamentary Standing Committee on Finance is hopeful of submitting its report on merging Railway Budget with General Budget before the start of the next session of Parliament.

Speaking to presspersons on the sidelines of a programme in Mangaluru on Tuesday, M Veerappa Moily, Member of Parliament from Chikballapur constituency, who heads the standing committee, said that the Cabinet has taken a decision on budgetary reforms, including the merger of Railway Budget with General Budget.

Terming this as a major change, he said the committee will be examining the ramification of this process.

The committee will discuss this with the Statistics and Planning Department, and with the Finance Ministry. Railway Board will be consulted on the impact of this budgetary reform on Railways.

Stating that the report will be ready after two-three sittings, Moily said the committee wants to submit the report on the reform before the start of the next session of Parliament, which is scheduled in November.

Moily said that the decision of the committee may help the Government to think from certain aspects, and to make an appropriate appraisal of finances of the country.

Apart from this, he said, the standing committee has already examined the amendments to the Companies Bill. A report on this will be submitted to Parliament soon, he said.

Source : Financial Express

No. Press Release Dated: 27-9-2016


Government of India Ministry of Finance Department of Revenue

Central Board of Direct Taxes

New Delhi, 27th September, 2016.

Press Release

Sub: CBDT Extends working Hours on 30th September, 2016 for IDS Declarations -reg

The Income Declaration Scheme, 2016 came into effect from 1st June, 2016. It provides an opportunity to persons who have not paid full taxes in the past to come forward and declare their undisclosed income and assets.

Declarations can be made online as well in printed copies of the prescribed form up to midnight on 30th September, 2016.

In order to facilitate the declarants who would like to file the declaration in paper form, the CBDT has issued instructions to all Principal Chief Commissioners of Income Tax across India to ensure that arrangements are made for receiving such declarations till midnight of 30-09-2016.

Accordingly, the counters for receiving declarations under the Income Declaration Scheme – 2016 shall be functional till 12:00 midnight on 30th September, 2016.

(Meenakshi J Goswami)

Commissioner of Income Tax

(Media and Technical Policy)

Official Spokesperson, CBDT.

No. 9/2016 Dated: 27-9-2016


The Income Declaration Scheme, 2016 – Undisclosed Income Invested in Acquisition of such Capital Asset – Order-Instruction – Dated 27-9-2016 – Income Tax

 

Instruction No.9 of 2016

F.No.142/8/2016-TPL

Government of India

Ministry of Finance

Department of Revenue

(Central Board of Direct Taxes)

***

New Delhi, the 27th September, 2016

To,

All The Principal Chief Commissioners of Income-tax

Sub.: The Income Declaration Scheme, 2016 – reg.

Instances have been brought to the notice of the Board that some taxpayers are of the view that if a capital asset acquired out of undisclosed income is sold before 01.06.2016 and the sale proceeds so received are held in cash, then the amount of undisclosed income required to be declared under the Scheme shall be the amount of undisclosed income invested in acquisition of such capital asset as increased by the capital gain arising on sale of such asset determined in accordance with the provisions of the Income-tax Act, 1961 (i.e. sale consideration less indexed cost of acquisition).

2. In this context, it is clarified that the above method for arriving at the amount of undisclosed income for declaration under the Scheme is not in accordance with the provisions of the Scheme and clarificatory circulars issued by the Board from time-to-time.

3. The Board hereby reiterates the provisions contained in section 183(2) of the Scheme that where the income chargeable to tax is represented in the form of investment in any asset, the fair market value of such asset as on 01.06.2016 shall be deemed to be the undisclosed income for the purposes of the Scheme. In this context, it may be noted that cash in hand is an asset for the purposes of the Scheme.

4. This instruction may be brought to the notice of all the officers concerned and other stakeholders.

5. Hindi version of the instruction will follow.

(Dr. T.S. Mapwal)

Under Secretary (TPL-IV)

GST: Life insurers want exemption; general differential rates : 27-09-2016


As the GST rollout plans gathers momentum, life insurers sought exemption from the new taxation regime on premium income, while general insurers have demanded differential rates for their products.

Life insurers, who are set to write to the Prime Minister seeking exemption from the new tax regime, feel that their premium income has remained stagnant since the industry was brought under service tax in 2012.

Since life insurers are passing on service tax to customers, it has impacted their premium income growth which has been stagnant since then. The present service tax rate is 14.5 per cent and 0.5 per cent ‘Swachh Bharat’ cess.

A resolution to this effect was passed during the annual general meeting of the Life Insurance Council held here on September 16.

The demand comes as the first two-day GST Council meeting that ended on Friday in the National Capital, decided to meet on October 17-19 to finalise the maximum and minimum rates in the single national taxation regime.

Finance Minister Arun Jaitley has been repeatedly calling for ending tax exemptions to have lower GST rates as exemptions are forcing the government to impose higher rate of tax on other taxable items/sectors.

The Life Insurance Council, which is the umbrella body of 24 life insurers, is all set to write to the Prime minister in this regard shortly, as their representations to the finance ministry in the past have not been successful, a senior council executive said.

“Life insurers’ new business premium has remained stagnant at around Rs 1.25 trillion per annum since 2012 after the service tax was imposed by the government on premium income. This is in spite of the fact that earning capacity of the people has been constantly increasing,” Life Insurance Council secretary V Manickam told PTI.

“We have to pass it on to customers and they don’t find investing in insurance attractive anymore,” he added.

Forget service tax, the government has imposed a host of other taxes on life insurance premium which include income tax and ‘Swachh Bharat’ cess, he said and pointed out that in contrast, other financial products like fixed deposits, debentures, mutual funds, equities, NPS etc are exempted from these taxes.

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Moreover, investment under NPS is exempt from any tax under section 80(C) and even a special window has been opened under section 80 (C)(C)(D) which allows one to invest Rs 50,000 extra to save income tax payment.

Similarly, PF, at a time when an employee retires is not taxable at all. Similarly, the pension fund at the time of annuity is also tax free.

“Keeping this in view, we feel that a step-motherly treatment is being meted out to us and hence we are all set to write a letter to Prime Minister Narendra Modi soon,” Manickam said, adding “we have already made a host of representations on the topic to the finance ministry in the past.”

“We have been urging the government to exempt insurance premium from GST because we are doing a yeoman service to the nation. In fact, we are doing what the government was supposed to do by covering social security needs of the public,” he said.

Life insurers are making 50 per cent of their investments in central and state securities. As of March 2016, life insurers exposure to such debt instruments stood at Rs 15 trillion. While G-secs offer only an annual interest of around 7 per cent, corporate bonds get them 9 per cent or even more, thus losing 200 bps by investing in government bonds, he said.

Life insurers have paid Rs 7,000 crore in service tax to the government last year. When one includes other taxes like stamp duty, income tax and other such taxes and levies by 2.5 lakh employees of life insurance companies, the industry has paid Rs 25,000 crore in the form of taxes alone, he said.

Meanwhile, non-life insurers have already submitted their recommendations before the GST Council, the first meeting of which was held in New Delhi on September 22-23, demanding differential rates for their products.

There are four state-owned, and 17 private sector and two specialised general insurers in the country and majority of them are participating in the government-run scheme like Pradhan Mantri Suraksha Bima Yojana and Pradhan Mantri Fasal Bima Yojana.

“We want differential rating for our various types of products looking at the end beneficiary of these schemes,” General Insurance Council secretary R Chandrasekaran said.

“If it is a government-run scheme through which the government wants to reach out to the poor, then the GST rate must be on a lower side,” he said, adding, “we also want a centralised registration facility in GST as we are operating nationally.”

Source : Business Line

GST Council to finalise registration, other rules on September 30 : 27-09-2016


Moving on fast track to meet the April 2017 GST rollout deadline, the tax department today came out with draft rules relating to registration, invoice and payment which will be finalised by the GST Council on Friday.

“We intend to have these rules approved by the GST council in its meeting on September 30 so that business systems can be modified by all,” Revenue Secretary Hasmukh Adhia tweeted.

The draft rules, on which the Central Board of Excise and Customs (CBEC) has invited comments by Wednesday, come less than a week after the first meeting of the GST Council.

“Business community may view them and give quick comments, if any, by 28th night on gst-cbec@gov.in,” Adhia said.
The draft rules provide for online registration by residents within three days of submission of application.

The non-residents, who will come under the purview of GST, will be required to electronically submit the application for registration at least 5 days prior to the commencement of business and deposit full tax liability in advance.

The government aims to implement the new indirect tax regime Goods and Services Tax (GST) from April 1, 2017, and to that effect the GST Council will hold its second meeting on September 30. The meeting would finalise rules for GST.

The draft rules also provide that if a tax official fails to take action on registration application within a stipulated time-frame, the application for grant of registration shall be deemed to have been approved.

As per the draft norms, the applicant seeking registration will have to submit PAN, mobile number, email address on the common portal or through a facilitation centre.

The tax authorities will use PAN, one time password and Aadhaar number to verify the details of the applicant.

In case all documents are in order, the tax official will approve GST registration in three working days from the date of submission of application.

Source : PTI

CBEC will take up 50% posts in GST Secretariat, says Najib Shah : 27-09-2016


The Central Board of Excise and Customs (CBEC) has said the department will take up 50 per cent of the posts in the Secretariat of the GST Council and will also depute officers in the GST Network (GSTN).

This was stated by CBEC Chairman Najib Shah in a recent letter to his officers, where he also urged them to “welcome” the Goods and Services Tax.

“As a Central service, CBEC will continue to collect the Central GST and integrated GST…We are in the process of encardering 50 per cent of all posts in the GST Council Secretariat for CBEC,” he said, adding that the department has also called for willing officers to take up some more posts in the GSTN.

The GST Secretariat, located here, will be the administrative headquarters of the GST Council that will decide on all key issues related to the tax.

“The Directorate of Systems is in the process of being strengthened, the IT infrastructure is being revamped and upgraded to meet the requirement of GST. The GSTN already has CBEC officers on deputation,” he said.

Shah also expressed dismay at concerns being expressed in some quarters and asked his officials to “rise up to the challenges” to ensure the success of the indirect tax reform. “We are at the cusp of the most historic change in the indirect tax structure and should welcome the opportunity,” he said.

An association representing officers of the Indian Revenue Service (IRS) had written to Finance Minister Arun Jaitley, seeking the transfer of the management of GSTN to the Directorate General Systems of CBEC.

Shah also noted that petroleum and tobacco products, which account for substantial revenues, will continue to attract Central excise duty and will be out of the ambit of GST.

The CBEC is in the process of restructuring its central excise and service tax commissionerates for the rollout of GST from April 1, 2017, under which there will be a single uniform levy replacing the two Central levies, State value added tax and other local cesses and levies.

The CBEC is also likely to be renamed as the Central Board of Indirect Taxes.

In this context, the CBEC Chairman said the changes must be embraced and the officials must take the lead in the restructuring. “Change management will be of paramount importance. We will have to provide a lead role in meeting the implementation challenges, training the officials and trade and industry, holding workshops, acquiring and imparting necessary IT skills.”

He further said that about 60,000 tax officials of both the Centre and the States will be trained in the next few months on GST law.

Source : Financial Express

Notification No : 42/2016 Dated: 26-09-2016


Non-levy of service tax on the services by way of advancement of Yoga – 42/2016 – Dated 26-9-2016 – Service Tax

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF EXCISE AND CUSTOMS)

NOTIFICATION No. 42/2016-Service Tax

New Delhi, the 26th September, 2016

G.S.R. 914(E).- Whereas, the Central Government is satisfied that in the period commencing on and from the first day of July, 2012 and ending with the 20th day of October, 2015 (hereinafter referred to as the said period) according to a practice that was generally prevalent, there was non-levy of service tax on the services by way of advancement of Yoga provided by entities registered under section 12AA of Income-tax Act, 1961 (43 of 1961) and this service was liable to service tax, in the said period, which was not being paid according to the said practice.

Now, therefore, in exercise of the powers conferred by section 11C of the Central Excise Act, 1944 (1 of 1944), read with section 83 of the Finance Act, 1994 (32 of 1994), the Central Government hereby directs that the service tax payable under section 66B of the Finance Act, 1994, on the service by way of advancement of Yoga provided by entities registered under section 12AA of Income-tax Act, 1961 (43 of 1961) in the said period, but for the said practice, shall not be required to be paid.

[F. No. 137/37/2016-Service Tax]

RAJEEV YADAV, Director

Finmin may talk to EC before finalising Budget date : 26-09-2016


Before fixing a new date for the presentation of Union Budget 2017-18, the government is likely to hold discussions with the Election Commission to avoid any clash with the schedule of five states headed for polls.

Assembly elections are due to be held in February in Uttar Pradesh, Punjab, Uttarakhand, Goa and Manipur.

“When we traditionally had the Union Budget presentation on the last day of February, the Election Commission always knew of it and would weave around poll schedule accordingly. Now that the government has decided to advance the Budget, some kind of consultations need to happen with Election Commission,” a top official said.

The elections in five states, he said, are likely to be held in phases and the government in no way wants any of them to clash with the Budgetary exercise.

The Cabinet last week agreed to advance the presentation of the Budget to complete the legislative exercise before the beginning of new financial on April 1 as it would help plan spending on schemes better and boost economy. The new date is yet to be decided.

The Finance Ministry has proposed that the Budget presentation be fixed for February 1 and the entire exercises be completed by March 24.

It wanted the Budget Session of Parliament to begin before January 25 and go in for a three-week break between February 10 and 15 before reconvening between March 10 and 15 to complete the legislative exercise.

But with assembly elections in five states likely to be held in phases, this Budget schedule may clash with the campaigning and polling. So the government wants to get a fix on the likely dates after speaking to Election Commission.

While tenure of Punjab, Manipur and Goa assemblies is due to end on March 18, 2017, that of Uttarakhand is till March 26, 2017. Uttar Pradesh assembly tenure expires on May 27.

The Cabinet had on September 21 in-principle decided to end the colonial-era tradition of presenting Union Budget on last day of February and advance it to help complete the legislative approvals for the annual spending plans and tax proposals before the beginning of the new financial year on April 1.

It also decided to scrap 92-year old practice of having a separate railway budget and merge it with general budget.
Presently, the Budget approval process happens in two parts extending to the second or third week of May, hampering early implementation of schemes and spending programmes.

To facilitate early presentation of the Budget, the finance ministry had proposed that the Budget Session of Parliament be convened sometime before January 25, a month ahead of the current practice.

Consequently, the preparation for the Budget would now start in early October and GDP estimates made available on January 7 instead of February 7.

Source : PTI

Modi promises to ratify Paris Agreement on Oct 2 : 26-09-2016


Prime Minister Narendra Modi on Sunday announced the country would ratify the Paris Agreement on October 2, Mahatma Gandhi’s birth anniversary.

This marked an end to uncertainty and flip flops that had gripped India’s climate change diplomacy ever since the failure to attain the Nuclear Suppliers Group (NSG) membership in June this year.

Modi announced his government’s decision in Kozhikode, Kerala, at the national conclave of the Bharatiya Janata Party (BJP).

The ratification requires a simple Cabinet approval at a time of the prime minister’s choosing and not a Parliamentary approval.

The announcement comes after the government’s attempt to link country’s ratification of Paris Agreement with the US putting its weight behind India’s bid to win a NSG membership came to naught.

A successful linkage was hinged on two factors.

One, that the outgoing US President Barack Obama is keen to have the Paris Agreement come in to force before his term gets over as his legacy; and two, India’s ratification would be essential for it.

The linkage, drawn up at the highest level in the government in June, lacked credibility to start with. India’s emission reduction commitments under Paris Agreement do not require a substantial increase of nuclear power in the future energy mix.

After linking the ratification to producing more nuclear power, implying the need for NSGmembership (and a more robust support from the US for it), the government changed its tone in September. On the side-lines of G20 talks, the government claimed ratification would not be possible this year because of procedural concerns.

Regardless of the reason proffered in public, the decision at the highest level to not ratify the Paris Agreement left the rest of government to mull the consequences within the climate diplomacy arena.

But within days, the government re-calibrated its line in public yet again, claiming it was making all the efforts to ratify but remained uncertain if it could do so in time for end-2016. The diluted line was to deflect from the obvious reading that India was playing a manoeuvre against the US in the hope of getting better support for its NSG membership.

It was the first sign of emerging understanding in the government that the gambit was failing. And, the gambit did fail when about 30 more countries ratified the Paris Agreement last week taking the total tally to 60.

This included almost all major emerging economies including China, Brazil, Argentina and others. EU remained the only key developed country group yet to join, but it, too, on Friday announced that it would collectively ratify the global climate compact before November.  This promised to leave India isolated and embarrassed about the brinkmanship around climate talks as US President Obama looked on track to get the legacy gift without India’s help.

The agreement requires 55 countries accounting for 55 per cent of the global greenhouse gasemissions to ratify in order for the pact to come into force. 60 countries adding up to 48 per centemissions have already done so and both the necessary thresholds would have been crossed by countries by October leaving India behind — risking global opprobrium. The annual climate negotiations are to begin on November 7 and an informal meeting of environment ministers is planned for October — both in Morocco.

Source : Economic Times

Change in law to ease exporters : 26-09-2016


The finance ministry has revised the declarations to be furnished by exporters who manufacture export goods by using inputs procured from domestic sources without payment of excise duty or under claim of rebate of excise duty paid on them. The amendment aims to remove an unnecessary difficulty that exporters face.

Till September 17, 2010, the notifications governing duty drawback at All Industry Rates (AIR) provided that the rates of drawback in the drawback schedule would not be applicable to products manufactured or exported by availing the rebate of the central excise duty paid on materials used in the manufacture of export goods in terms of Rule 18 of the Central Excise Rules, 2002, or if such raw materials were procured without payment of central excise duty under Rule 19(2) of the Central Excise Rules, 2002. The exporters were required to give a declaration in form ARE-2 (the form they are required to fill out before removal of export goods manufactured from inputs they had procured without payment of excise duty or under claim of rebate of excise duty paid on them) that they shall not claim any drawback.

Exporters said they were being denied the Customs component of the AIR drawback although the manufacturers had taken only the rebate of central excise duties in respect of their inputs/procured the inputs without payment of central excise duties, and that the Customs duties which remained unrebated should be provided through the AIR drawback route.

Since September 17, the notifications granting duty drawback at AIR allow Customs component of AIR drawback even if the rebate of central excise duty paid on raw material used in the manufacture of export goods has been taken in terms of Rule 18 of the Central Excise Rules, 2002, or if such raw materials were procured without payment of Central Excise duty under Rule 19(2) of the Central Excise Rules, 2002.

However, this benefit did not accrue to exporters as the declarations the exporters had to give in the ARE-2 form remained un-amended. They had to either forego the customs portion of the drawback or pay the duty on the inputs used in the manufacture of the export product. Now, after almost six years the government has removed that difficulty by amending the declaration prescribed in the ARE-2 form.

The Central Board of Excise and Customs (CBEC) has issued a detailed circular explaining the position. It says that when diesel is procured without duty payment as an input or where input stage rebate is claimed on diesel, no drawback will be available because a part of the excise duty is already factored into the Customs component of the drawback.

The CBEC has also clarified that when export oriented units supply their manufactured goods without duty payment to advance authorisation holders, the duty exempted on their inputs need not be recovered. It is again a useful clarification that has come about after a lot of delay.

In the meantime, the Director General of Foreign Trade has notified 2901 more items for benefits under Merchandise Exports from India Scheme and raised the duty credit entitlement rates for 575 items under the scheme.

Overall, last week was a good one for exporters.

Source : Business Standard

Here’s how Narendra Modi govt is looking to cut your festive season food bill : 24-09-2016


In a bid to boost supplies and check prices of agricultural commodities during the upcoming festive season, the government on Friday cut import duty on wheat and potato to 10% while reducing it by 5% on crude as well as refined palm oils.

The move would help in importing the commodities once their prices start going up.

The Central Board of Excise and Customs (CBEC) in a notification stated that the import duty on wheat has been reduced from 25% to 10% till February 2017. It also said that the import duty on potatoes has been reduced to 10% from 30% till October 2016.

According to the notification, duty on crude palm oil has been reduced to 7.5% from 12.5% and on refined palm oil to 15% from 20%.

It’s noteworthy that in case of wheat, the government has reduced the import duty despite reported higher domestic production of 93.50 million tonne (MT) in the 2015-16 crop year (July-June).

Earlier, the food ministry had proposed the cut in wheat import duty as the procurement by the government-owned agencies like FCI had dropped sharply to close to 23 MT this year, from 28 MT reported last year.

 Industry sources said that the flour millers had demanded withdrawal of the import duty citing 5 MT shortfall in the domestic output. FE earlier this week had reported that the government would soon take a call on restricting sale of wheat stock by FCI through open market sale scheme (OMSS) to bulk buyers mainly because of inadequate stock level.

In FY16, FCI had sold 7.1 MT of wheat through OMSS while in the 2014-15, the corporation had sold more than 4.2 MT of grain to bulk purchasers. The food ministry in consultation with FCI is set to decide on continuing with OMSS for wheat to bulk buyers such as flour millers and food companies shortly.

Sources told FE that even prior to commencement of coming festive season when demand for wheat usually picks up, FCI has sold close to 2.2 MT of wheat under OMSS in the current fiscal so far.

In case of potato, the government reduced the import duty to improve the domestic availability. As per the official data, potato output has declined by 9% to 43.7 MT in 2015-16 crop year (July-June) compared to 48 MT last year.

Edible oil industry body Solvent Extractors Association of India has opposed the import duty cut on refined palm oil. It stated that higher duty difference between crude and refined palm oil would encourage domestic refining.

Currently the country’s half edible oil requirement is met through palm oil import from Malaysia and Indonesia. The country is set to import record 15 MT in the current 2015-16 oil year ending October.

Source : PTI

States happy with outcome of GST Council’s first meeting : 24-09-2016


Left-ruled Kerala on Friday sought a decision on the formula for compensating states for any loss of revenue post the implementation of goods and services tax (GST) before a rate is decided even as most others hailed the decisions taken at the first Centre-State council meeting on the new tax regime.

At the first meeting of the GST Council, states proposed certain formulae based on their revenues for calculating compensation while the Centre proposed compensating states if the revenue growth rate falls below 12 per cent.

“The Centre had suggested an average of last three years of revenue, some states said it should be best of three years out of five. Then the Centre went back and suggested that it should be based on pan-India revenue growth rate of 12 per cent. Almost all states are in agreement that it has to be the best of three years out of five,” Kerala Finance Minister Thomas Isaac said.

The compensation needs to be thrashed out before deciding the rate, he said.

Gujarat Minister of State for Finance Rohit Patel proposed the formula of the best three of the last 10 years for calculating compensation to states while West Bengal put it at the best three of the last 6 years.

Chhattisgarh Finance Minister Amar Agrawal said all states were on board for GST implementation by April 1, 2017.

States and the Centre on Friday agreed to Rs 20 lakh as the turnover limit for exemption from GST, with states saying their share of revenue would be protected.

“Delhi wanted that the exemption threshold should be kept at Rs 25 lakh, but the Council decided on Rs 20 lakh. Our revenues will be protected,” Delhi Deputy Chief Minister Manish Sisodia said.

Uttar Pradesh Minister of State for Skill Development Abhishek Mishra said the state is happy with the Rs 20 lakh figure and it would be hassle free for traders.

Haryana Finance Minister Captain Abhimanyu too said there will be no loss of revenue to the state.

“We would like to be fully compensated and the Centre has given that assurance. Now only the broad modalities are to be decided,” he said.

Odisha Finance Minister Pradeep Kumar Amat said the central government will compensate for five years for revenue loss and this will be discussed in the next meeting.

According to the West Bengal Finance Minister Amit Mitra, three alternatives were discussed.

A state can be compensated if the revenue under GST falls short of the average tax earnings in the best three years out of the past five.

Second, of the five years, two outliers are left out and an average is taken. If the revenue under GST is short of this, then states get compensated.

Third, a base year can be fixed and a particular growth rate decided for all states. If the revenue falls short of that, then compensation kicks in.

The base year for compensation has been agreed as 2015-16 and the average of five years will be taken, he said, adding that if for some reasons the base year becomes 2016-17, then the average would be taken for 6 years.

The GST Council, chaired by Union finance minister, will meet again on September 30 and discuss the compensation issue. In the October 17-19 meeting, the Council will decide on the rates.

The officials of both the Centre and states are working on thrashing out a consensus on the compensation formula.

Source : Business Standard

GST threshold fixed at Rs 20 lakh in GST council’s meet, rate to be decided in October : 24-09-2016


The Centre and states made substantial progress on the goods and services tax by arriving at several decisions on the levy at the first meeting of the GST Council, bolstering expectations that the government will be able to meet an April 1, 2017 deadline for its rollout.

The two-day inaugural meeting of the council, consisting of state and central representatives, has set the stage for a discussion on rules and what the eventual rates will be. The council will meet next on September 30 to finalise rules and subsequently on October 17-19 to thrash out the rates.

Given that views among the states and the Centre vary widely on rates, that meeting could see some tough negotiations. The government doesn’t want to set the rate too high as that could be inflationary and make it a harder sell, while states are wary of losing too much revenue with a low rate.

On Friday, the council agreed to an exemption threshold of Rs 20 lakh for all states barring the north-east and hill-area states. It also adopted a cross-empowerment model for tax administration, a formula for compensating states and agreed to subsume all cesses into the new tax.

“All decisions were taken by consensus at the first GST Council meeting spread over two days,” Finance Minister Arun Jaitley told reporters on Friday after the meeting ended. “We did not require voting on any issue.” Jaitley, who is chairman of the council, said significant progress had been made on all agenda items.
On Thursday, the first day of the meeting, the council bound itself to rules of functioning and agreed to a work and agenda schedule.

The GST threshold was set at Rs 10 lakh for the north-east and hill states, which had been given a carve-out in the constitutional amendment that paved the way for GST. “We discussed the issue informally before the meeting and then it was formally taken up,” Jaitley said. “It was decided that those with turnover below Rs 20 lakh would be exempted under GST.”

Some states including UP had favoured a lower threshold than the Rs 25 lakh proposed earlier. “We will try to finalise the rates and the slabs during our meeting on October 17, 18 and 19,” said the finance minister.

Experts welcomed the raft of decisions at the first council meeting. “The inclusion of cesses in the GST would significantly benefit all businesses and would increase the available pool of credits which can be used to offset the GST liability,” said MS Mani, senior director at Deloitte Haskins & Sells LLP.

“Industry would also welcome the move to have a single assessing authority, instead of having a dual system of assessment and scrutiny, which was a major concern for businesses,” said Pratik P Jain, leader, indirect tax, PwC India. “The decision that all cesses would also be subsumed in GST provides much-needed clarity to industry.”

Dual Control issue

The cross-empowerment model will allow taxpayers to restrict their interaction to a single tax authority for central GST, state GST and integrated or iGST. Central and state GST are two components of a single GST levied on intra-state sales, while iGST will apply to inter-state sales.

“This has been a very complicated issue… The empowered committee of state finance ministers had also deliberated on the issue for months,” Jaitley said, adding that the council decided on “cross-empowerment with single interface.” Jaitley said all 11 lakh service providers registered with the tax department will be assessed by central tax authorities and new ones will be shared with state authorities after due training.

This could, however, mean dual control for companies that have both services and goods supplies, said Harishanker Subramaniam, national leader, indirect tax, EY India. Assessees with a turnover of less than Rs 1.5 crore annually will be assessed by state tax authorities and those above that through the new cross-empowerment model.

Under this model, tax administrators will use a formula to decide which assessees they will audit or register. The taxpayer will then have to interact with one authority. “Principle has been agreed and details will be worked out,” Jaitley said.

Compensation design

The Centre is required to compensate states for any loss of revenue for the first five years. Jaitley said the draft compensation formula has been decided and the Centre has agreed to states’ demand that FY16 be set as the base year for measuring these losses apart from the payment of compensation at regular intervals on a quarterly basis.
The growth rate formula in revenue is yet to be worked out. “We have taken all suggestions about method of projecting revenues and have to decide on one… Officials will discuss on these and come up with a presentation,” he said. Some states want the three best of the last five years to be taken up, others want two outliers among five.

Source : Economic Times

 

Notification No: G.S.R 908(E) [F.NO.01/34/2013-CL-V-P Dated: 23-9-2016


COMPANIES (MANAGEMENT AND ADMINISTRATION) AMENDMENT RULES, 2016- AMENDMENT IN RULES 3, 9, 13, 17, 20, 22, 25 AND FORM MGT-6

NOTIFICATION NO. GSR 908(E) [F.NO.1/34/2013 CL-V-PART-I], DATED 23-9-2016

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 (Management and Administration) Rules, 2014, namely:—

1. (1) These rules may be called the Companies (Management and Administration) Amendment Rules, 2016.

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

2. In the Companies (Management and Administration) Rules, 2014 (hereafter referred to as principal rules), in rule 3,—

(a) in sub-rule (1), for the proviso, the following proviso shall be substituted, namely:—
“Provided that in the case of a company existing on the commencement of the Act, the particulars as available in the register of members maintained under the Companies Act, 1956 shall be transferred to the new register of members in Form No.MGT-1 and in case additional information, required as per provisions of the Act and these rules, is provided by the members, such information may also be added in the register as and when provided.”;
(b) in sub-rule (2), for the proviso, the following proviso shall be substituted, namely:—
“Provided that in the case of a company existing on the date of commencement of the Act, the particulars as available in the register of members maintained under the Companies Act, 1956 shall be transferred to the new register of members in Form No.MGT-1 and in case additional information, required as per provisions of the Act and these rules, is provided by the members, such information may also be added in the register as and when provided.”,

3. In the principal rules, in rule 9,—

(a) in sub-rule (1), the words “in duplicate” at both places where they occur, shall be omitted.
(b) in sub-rule (2), the words “in duplicate”, at both places where they occur, shall be omitted.

4. In the principal rules, for rule 13 the following rule shall be substituted, namely:—

“13. Every listed company shall file with the Registrar, a return in Form No.MGT-10, with respect to changes in the shareholding position of promoters and top ten shareholders of the company, in each case, representing increase or decrease by two per cent or more of the paid-up share capital of the company, within fifteen days of such change. ”

5. In the principal rules, in rule 17, in sub-section (2), in the Explanation, for the words “on working day”, the words “on any day except national holiday” shall be substituted.

6. In the principal rules, in rule 20, for sub-rule (2), the following sub-rule shall be substituted, namely:—

“(2) Every company which has listed its equity shares on a recognised stock exchange and every company having not less than one thousand members shall provide to its members facility to exercise their right to vote on resolutions proposed to be considered at a general meeting by electronic means:

Provided that a Nidhi, or an enterprise or institutional investor referred to in Chapter XB or Chapter XC of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 is not required to provide the facility to vote by electronic means:

Explanation.— For the purpose of this sub-rule, “Nidhi” means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from and lending to, its members only, for their mutual benefit, and which complies with such rules as are prescribed by the Central Government for regulation of such class of companies.”

7. In the principal rules, in rule 22, sub-rule (7) and sub-rule (14) shall be omitted.

8. In the principal rules, in rule 25, in sub-rule (1), in clause (e), the words “or such other place as may be approved by the Board” shall be omitted.

9. In the principal rules, for Form MGT-6, the following Form, shall be substituted, namely:—

FORM NO. MGT-6

[Pursuant to section 89(G) of The Companies Act, 2013 and pursuant to rule 9(3) of

The Companies (Management and Administration) Rules, 2014]

Return to the Registrar in respect of declaration under section 89 received by the company

 

Paris environment pact closer to coming into force : 23-09-2016


The world moved a step closer to bringing the Paris Agreement into force, with 60 countries in all ratifying the global contract on climate change.

These countries add up to 48 per cent of the global emissions. The chances of India standing isolated by the end of the year as the only large economy not to ratify increased as its partners, Brazil and Argentina, also ratified the agreement, along with 29 others at a special event organised by the UN secretary general in New York.

The agreement requires at least 55 countries, representing at least 55 per cent of the total greenhouse gas emissions, to ratify it before it comes into force. The first threshold has now been met, and observers, going by political commitments from other countries, estimate that the second threshold, too, would be met by the year end.

India’s big partners in the two key country groupings – BASIC and the Like Minded Developing Countries — have all now ratified the agreement. Other large economies such as Germany and the UK, too, have committed to come on board quickly, though the ratification by entire EU block within the year remained uncertain.

The increasing possibility of the Paris Agreement coming in to force without India promised to rob the National Democratic Alliance government of using the ratification as a negotiating card against the US.

Outgoing US President Barack Obama has pushed hard to ensure a legacy stamp on global climate negotiations before the end of his tenure. Obama’s push has been threefold — bringing the Paris Agreement into force, getting a deal on refrigerant gases through the Montreal Protocol, and a pact on greenhouse gas emissions from aviation. On all three fronts, US seemed to have got the better of India at the moment by locking in premature political agreements at the head-of-state levels.

The Indian government signed on to a weak Paris Agreement in 2015 – where Indian priorities such as climate justice got marginalised — only to try and hold back on the ratification in 2016, feeling let down by US’s not so robust support for its bid to join the Nuclear Supply Group. Initially, Foreign Minister Sushma Swaraj linked the need for nuclear power, and therefore a membership of the NSG to India’s commitments under Paris Agreement — a rather blunt signal to the US. Later, at the G20 meeting in China, India’s tone softened a bit even though it continued to hold out the threat of not ratifying the agreement this year — India said it couldn’t do so due to time taking domestic compliance issues. But soon after, it toned down further, claiming it was yet undecided if it could or could not ratify the agreement by end of 2016.

Diplomatic sabre-rattling aside, tactically, the chances of India being left off the negotiating table at the next round of climate negotiations remained dimmed because that would entail several dozen other countries that have also not ratified the Paris agreement being left out in the cold. But, the risk that India would be singled out in public domain by green groups turned only higher after the recent round of sing ups to the Paris Agreement in New York.

In the domestic policy arena, the Indian government has already set up five committees to assess the legal and other requirements that would have to be put in place once the ratification is done. The ratification itself requires only a short and simple Cabinet approval and therefore hinges on a political signal from the top of the government to be completed.

Holding back from the ratification process till the US presidency chances brings one advantage to India at the climate talks, its negotiators have assessed. In the case the next US President opts out of Paris Agreement — it takes only an executive order on his part to do so — India would not be left stuck to bear the burden of greenhouse gas emissions reduction without the biggest polluter in the ring.

Source : Business Line

FICCI women delegation begins NZ visit to explore business opportunities : 23-09-2016


An all-women business delegation today began a 14-day visit to New Zealand to explore business opportunities in sectors like education, textile, gems and jewellery, real estate and infrastructure.

The delegation of FICCI Ladies Organisation (FLO), the women’s wing of the industry body, consists of 42 women entrepreneurs and professionals.

They will be visiting multiple cities, including Auckland, Wellington, Queenstown, Franz Josef and Christchurch.

The business interest of the delegates include areas like education, textile, gems and jewellery, chemical, agriculture, waste management, real estate and infrastructure.

“We will have business meetings with businesswomen in areas of manufacturing, agriculture, education and knowledge transfer. The delegation will also be visiting and speaking at the Parliament. We will also interact with Parliamentarians and the Indian diaspora in New Zealand,” FLO President Vinita Bimbhet said.

Source : Financial Express

Govt appoints 3 academics to monetary policy panel : 23-09-2016


The next policy rate to keep the Consumer Price Index (CPI)-based inflation within two to six per cent would be fixed by the Monetary Policy Committee (MPC), headed by the Reserve Bank of India (RBI) governor. The government, on Thursday, appointed three academics to the panel. The RBI has already appointed its members to the panel.

The government nominees are Chetan Ghate, professor, Indian Statistical Institute; Pami Dua, director, Delhi School of Economics; and Ravindra H Dholakia, professor, Indian Institute of Management-Ahmedabad (IIM-A).

The RBI has already appointed Michael Patra as MPC member. The other two members are the RBI Governor Urjit Patel and Deputy Governor R Gandhi.

In the MPC, each member has one vote; the policy rate, currently at 6.5 per cent, would be fixed by a majority vote. In case of a tie, the RBI governor has a casting vote. At present, the governor takes feedback from a five-member technical advisory committee, while setting rates. But, he is not legally bound to go by their advice.

The RBI’s fourth bi-monthly monetary policy review for 2016-17 is scheduled on October 4. The CPI-based inflation fell to a five-month low of 5.05 in August, gross domestic product growth was five-quarter low of 7.1 per cent in April-June 2016 and the Index of Industrial Production contracted 2.4 per cent in July, according to the latest data.

Of the appointments made by the government, Ghate was part of a technical advisory committee.

Ghate, the winner of the 2014 Mahalanobis Memorial Gold Medal, awarded by the Indian Econometric Society, has done extensive research on monetary and fiscal policy in developing and emerging market economies and economic growth and development.

His ongoing research, expected to be published shortly, would deal with monetary transmission in India and fiscal policy, debt and business cycles.

Dholakia had held the RBI chair of industrial economics at IIM-A from May 2002 to April 2008. His research focused on demand analysis and forecasting, social cost-benefit analysis, analysis of macroeconomic environment and policy, analysis of economic growth and productivity, international trade-related issues, fiscal policy and public debt.

Dua has written extensively on macroeconomic developments and forecasting, including interest rate modelling and forecasting. One of her colleagues described her as an empirical macroeconomist, who is not beholden to any school of thought. In that sense, she is not ideological and more data-oriented.

The MPC was set up by amending the Reserve Bank of India Act, 1934, through this year’s Finance Act.

The government has also given a legal backing to the monetary policy agreement under which the RBI has to rein in CPI-based inflation in the range of two to six per cent. Any departure from this for three consecutive quarters would force the RBI to explain the failure to the government. The agreement has come into force from August this year and would be effective till March 2021.

The idea of setting up the MPC and inflation targeting was mooted by an RBI-appointed committee in February 2014, led by Urjit Patel, who was then deputy governor. It had recommended a five-member committee with three members from the RBI and two external members to be appointed by the RBI governor and the deputy governor in-charge.


MONETARY POLICY COMMITTEE: A PRIMER

  • It is a panel headed by the RBI governor to decide policy rate
  • It’s a six-member panel, three each  from the RBI, including the governor, and central appointees
  • Policy rate is to be fixed by a majority vote
  • The RBI governor will have the casting vote, but no veto power
  • The MPC was constituted after an amendment to the RBI Act
  • Earlier, there was opposition to the Financial Sector Legislative Reforms Commission’s suggestion on a seven-member MPC, with four appointees from the Centre
  • India has since moved to inflation targeting, given the RBI has to rein in inflation in the band of 2-6%, starting August this year till March 2021
  • Inflation targeting was first recommended by a panel headed by RBI Governor Urjit Patel

KNOW YOUR MPC MEMBERS

CHETAN GHATE

A professor of economics with the Planning Unit of the Indian Statistical Institute in New Delhi, he is currently a member of the technical advisory committee on monetary policy at the RBI. Ghate was a member of the Urjit Patel panel, which had recommended a shift to inflation targeting.

RAVINDRA DHOLAKIA

A professor at the Indian Institute of Management-Ahmedabad, he previously held the RBI chair of industrial economics from May 2002 to April 2008. A PhD in economics from M S University, Baroda, he was previously a member of the 6th Pay Commission – the expert committee on restructuring of state public sector units as well as the public debt management committee.

PAMI DUA

A professor and director at the Delhi School of Economics, she’s also PhD in economics from the London School of Economics. She has extensively written on contemporary developments such as global recession and the Eurozone debt crisis, interdependence of international financial markets, interest rate modelling and forecasting in India. Her research focus is on business cycle tracking and macroeconomic forecasts.

Source : Business Standard