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No.10/2017 Dated: 23-03-2017


SECTION 145 OF THE INCOME-TAX ACT, 1961 – SYSTEM OF ACCOUNTING – METHOD OF ACCOUNTING – CLARIFICATIONS ON INCOME COMPUTATION AND DISCLOSURE STANDARDS (ICDS) NOTIFIED UNDER SECTION 145(2) OF SAID ACT

CIRCULAR NO.10/2017 [F.NO.133/23/2016-TPL]DATED 23-3-2017

Sub-section (1) of section 145 of the Income-tax Act, 1961 (‘the Act’) provides that the income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Sub-section (2) of section 145 provides that the Central Government may notify Income Computation and Disclosure Standards (ICDS) for any class of assessees or for any class of income. Accordingly, the Central Government notified 10 ICDS videNotification No.S.O.892(E) dated 31st March, 2015 with effect from assessment year 2016-17.

After notification of ICDS, it has been brought to the notice of the Central Board of Direct Taxes (‘the Board’) by the stakeholders that certain provisions of ICDS may require amendment/clarification for proper implementation. The matter was referred to an expert committee. The Committee after duly consulting the stakeholders in this regard has recommended a two-fold approach for the smooth implementation of ICDS i.e. amendment to the provisions of ICDS in respect of certain issues and issuance of clarifications by way of FAQs for the rest of issues. Accordingly, vide Notification no. 87 dated 29th September, 2016 Central Government notified amended ICDS with effect from the assessment year 2017-18.

Further, the issues which require further clarification has been considered by Board and following clarifications are issued:

Question 1 : Preamble of ICDS-I states that this ICDS 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 purposes of maintenance of books of account. However, Para 1 of ICDS-I states that it deals with significant accounting policies. Accounting policies are applied for maintenance of books of account and preparing financial statements. What is the interplay between ICDS-I and maintenance of books of account?

Answer : As stated in the Preamble, ICDS is not meant for maintenance of books of account or preparing financial statements. Persons are required to maintain books of account and prepare financial statements as per accounting policies applicable to them. For example, companies are required to maintain books of account and prepare financial statements as per requirements of Companies Act, 2013. The accounting policies mentioned in ICDS-I being fundamental in nature shall be applicable for computing income under the heads “Profits and gains of business or profession” or “Income from other sources”.

Question 2 : Certain ICDS provisions are inconsistent with judicial precedents. Whether these judicial precedents would prevail over ICDS?

The ICDS have been notified after due deliberation and after examining judicial views for bringing certainty on the issues covered by it. Certain judicial pronouncements were pronounced in the absence of authoritative guidance on these issues under the Act for computing Income under the head “Profits and gains of business or profession” or Income from other sources. Since certainty is now provided by notifying ICDS under section 145(2), the provisions of ICDS shall be applicable to the transactional issues dealt therein in relation to assessment year 2017-18 and subsequent assessment years.

Question 3 : Does ICDS apply to non-corporate taxpayers who are not required to maintain books of account and/or those who are covered by presumptive scheme of taxation like sections 44AD, 44AE, 44ADA, 44B, 44BB, 44BBA, etc. of the Act?

Answer : ICDS is applicable to specified persons having income chargeable under the head ‘Profits and gains of business or profession’ or ‘Income from other sources’. Therefore, the relevant provisions of ICDS shall also apply to the persons computing income under the relevant presumptive taxation scheme. For example, for computing presumptive income of a partnership firm under section 44AD of the Act, the provisions of ICDS on Construction Contract or Revenue recognition shall apply for determining the receipts or turnover, as the case may be.

Question 4 : If there is conflict between ICDS and other specific provisions of the Income-tax rules, 1962 (‘the Rules’) governing taxation of income like rules 9A, 9B etc. of the Rules, which provisions shall prevail?

Answer : ICDS provides general principles for computation of income. In case of conflict, if any, between the provisions of Rules and ICDS, the provisions of Rules, which deal with specific circumstances, shall prevail.

Question 5 : ICDS is framed on the basis of accounting standards notified by Ministry of Corporate Affairs (MCA) vide Notification No. GSR 739(E) dated 7 December, 2006 under section 211(3C), of erstwhile Companies Act, 1956. However, MCA has notified in February, 2015 a new set of standards called ‘Indian Accounting Standards’ (Ind-AS). How will ICDS apply to companies which adopted Ind-AS?

Answer : ICDS shall apply for computation of taxable income under the head ” Profit and gains of business or profession” or “Income from other sources” under the Income-tax Act. This is irrespective of the accounting standards adopted by companies i.e. either Accounting Standards or Ind-AS.

Question 6 : Whether ICDS shall apply to computation of Minimum Alternate Tax (MAT) under section 115JB of the Act or Alternate Minimum Tax (AMT) under section 115JC of the Act?

Answer : MAT under section 115JB of the Act is computed on ‘book profit’ that is net profit as shown in the Profit and Loss Account prepared under the Companies Act subject to certain specified adjustments. Since, the provisions of ICDS are applicable for computation of income under the regular provisions of the Act, the provisions of ICDS shall not apply for computation of MAT.

AMT under section 115JC of the Act is computed on adjusted total income which is derived by making specified adjustments to total income computed as per the regular provisions of the Act. Hence, the provisions of ICDS shall apply for computation of AMT.

Question 7 : Whether the provisions of ICDS shall apply to Banks, Non-banking financial institutions, Insurance companies, Power sector, etc.?

Answer : The general provisions of ICDS shall apply to all persons unless there are sector specific provisions contained in the ICDS or the Act. For example, ICDS VIII contains specific provisions for banks and certain financial institutions and Schedule I of the Act contains specific provisions for Insurance business.

Question 8 : Para 4(H) of ICDS-I provides that Market to Market ( MTM) loss or an expected loss shall not be recognized unless the recognition is in accordance with the provisions of any other ICDS. Whether similar consideration applies to recognition of MTM gain or expected incomes?

Answer : Same principle as contained in ICDS-I relating to MTM losses or an expected loss shall apply mutatis mutandis to MTM gains or an expected profit.

Question 9 : ICDS-I provides that an accounting policy shall not be changed without ‘reasonable cause’. The term ‘reasonable cause’ is not defined. What shall constitute ‘reasonable cause’?

Answer : Under the Act, ‘reasonable cause’ is an existing concept and has evolved well over period of time conferring desired flexibility to the tax-payer in deserving cases.

Question 10 : Which ICDS would govern derivative instruments?

Answer : ICDS -VI (subject to para 3 of ICDS-VIII) provides guidance on accounting for derivative contracts such as forward contracts and other similar contracts. For derivatives, not within the scope of ICDS-VI, provisions of ICDS-I would apply.

Question 11 : Whether the recognition of retention money, receipt of which is contingent on the satisfaction of certain performance criterion is to be recognized as revenue on billing?

Answer : Retention money, being part of overall contract revenue, shall be recognised as revenue subject to reasonable certainty of its ultimate collection condition contained in para 9 of ICDS-III on Construction contracts.

Question 12 : Since there is no specific scope exclusion for real estate developers and Build -Operate- Transfer (BOT) projects from ICDS-IV on Revenue Recognition, please clarify whether ICDS-III and ICDS-IV should be applied by real estate developers and BOT operators. Also, whether ICDS is applicable for leases.

Answer : At present there is no specific ICDS notified for real estate developers, BOT projects and leases. Therefore, relevant provisions of the Act and ICDS shall apply to these transactions as may be applicable.

Question 13 : The condition of reasonable certainty of ultimate collection is not laid down for taxation of interest, royalty and dividend. Whether the taxpayer is obliged to account for such income even when the collection thereof is uncertain?

Answer : As a principle, interest accrues on time basis and royalty accrues on the basis of contractual terms. Subsequent non-recovery in either cases can be claimed as deduction in view of amendment to S.36 (1) (vii). Further, the provision of the Act (e.g. Section 43D) shall prevail over the provisions of ICDS.

Question 14 : Whether ICDS is applicable to revenues which are liable to tax on gross basis like interest, royalty and fees for technical services for non-residents under section 115A of the Act.

Answer : Yes, the provisions of ICDS shall also apply for computation of these incomes on gross basis for arriving at the amount chargeable to tax.

Question 15 : Para 8 of ICDS-V states expenditure incurred on commissioning of project, including expenditure incurred on test runs and experimental production shall be capitalized. It also states that expenditure incurred after the plant has begun commercial production i.e., production intended for sale or captive consumption shall be treated as revenue expenditure. What shall be the treatment of expense incurred after the conduct of test runs and experimental production but before commencement of commercial production?

Answer : As clarified in Para 8 of ICDS-V, the expenditure incurred till the plant has begun commercial production, that is, production intended for sale or captive consumption, shall be treated as capital expenditure.

Question 16 : What is the taxability of opening balance as on 1st day of April, 2016 of Foreign Currency Translation Reserve (FCTR) relating to non-integral foreign operation, if any, recognised as per Accounting Standards (AS) 11?

Answer : FCTR balance as on 1 April 2016 pertaining to exchange differences on monetary items for non-integral operations, shall be recognised in the previous year relevant for assessment year 2017-18 to the extent not recognised in the income computation in the past.

Question 17 : For subsidy received prior to 1st day of April 2016 but not recognised in the books pending satisfaction of related conditions and achieving reasonable certainty of receipt, how shall the same be recognised under ICDS on or after 1st day of April 2016?

Answer : Para 4 of ICDS-VII read with Para 5 to Para 9 of ICDS-VII provides for timing of recognition of government grant. The transitional provision in Para 13 of ICDS-VII provides that a government grant which meets the recognition criteria on or after 1st day of April, 2016 shall be recognised in accordance with ICDS-VII. All government grants actually received prior to 1st day of April 2016 shall be deemed to have been recognised on its receipt in accordance with Para 4(2) of ICDS-VII and accordingly will be outside the transitional provision and therefore the government grants received on or after 1st day of April, 2016 and for which recognition criteria provided in Para 5 to Para 9 of ICDS-VII is also satisfied thereafter, the same shall be recognised as per the provisions of ICDS-VII. The grants received prior to 1st day of April, 2016 shall continue to be recognised as per the law prevailing prior to that date.

For example, if out of total subsidy entitlement of 10 Crore an amount of 6 Crore is recognised in the books of account till 31st day of March, 2016 and recognition of balance 4 Crore is deferred pending satisfaction of related conditions and/or achieving reasonable certainty of receipt. The balance amount of 4 Crore will be taxed in the year in which related conditions are met and reasonable certainty is received. If these conditions are met over two years, the amount of 4 Crore shall be taxed over the period of two years. The amount of 6 Crore for which recognition criteria were met prior to 1st day of April, 2016 shall not be taxable post 1st day of April, 2016.

But if the subsidy is already received prior to 1st day of April, 2016, Para 13 of ICDS-VII shall not apply even if some of the related conditions are met on or after 1 April, 2016. This is in view of Para 4(2) of ICDS-VII which provides that Government grant shall not be postponed beyond the date of actual receipt. Such grants shall continue to be governed by the provisions of law applicable prior to 1st day of April, 2016.

Question 18 : If the taxpayer sells a security on the 30th day of April, 2017. The interest payment dates are December and June. The actual date of receipt of interest is on the 30th day of June, 2017 but the interest on accrual basis has been accounted as income on the 31st day of March, 2017. Whether the taxpayer shall be permitted to claim deduction of such interest i.e. offered to tax but not received while computing the capital gain?

Answer : Yes, the amount already taxed as interest income on accrual basis shall be taken into account for computation of income arising from such sale.

Question 19 : Para 9 of ICDS-VIII on securities requires securities held as stock-in-trade shall be valued at actual cost initially recognised or net realisable value (NRV) at the end of that previous year, whichever is lower. Para 10 of Part-A of ICDS-VIII requires the said exercise to be carried out category wise. How the same shall be computed?

Answer : For subsequent measurement of securities held as stock-in-trade, the securities are first aggregated category wise. The aggregate cost and NRV of each category of security are compared and the lower of the two is to be taken as carrying value as per ICDS-VIII. This is illustrated below —

Security Category Cost NRV Lower of cost or NRV ICDS Value
A Share 100 75 75
B Share 120 150 120
C Share 140 120 120
D Share 200 190 190
Total 560 535 505 535
E Debt Security 150 160 150
F Debt Security 105 90 90
G Debt Security 125 135 125
H Debt Security 220 230 220
Total 600 615 585 600
Securities Total 1160 1150 1090 1135

Question 20 : There arc specific provisions in the Act read with Rules under which a portion of borrowing cost may get disallowed under sections like 14A, 43B, 40(a)(1), 40(a)(ia), 40A(2)(b), etc of the Act. Whether borrowing costs to be capitalized under ICDS-IX should exclude portion of borrowing costs which gets disallowed under such specific provisions?

Answer : Since specific provisions of the Act override the provisions of ICDS, it is clarified that borrowing costs to be considered for capitalization under ICDS-IX shall exclude those borrowing costs which are disallowed under specific provisions of the Act. Capitalization of borrowing cost shall apply for that portion of the borrowing cost which is otherwise allowable as deduction under the Act.

Question 21 : Whether bill discounting charges and other similar charges would fall under the definition of borrowing cost?

Answer : The definition of borrowing cost is an inclusive definition. Bill discounting charges and other similar charges are covered as borrowing cost.

Question 22 : How to allocate borrowing costs relating to general borrowing as computed in accordance with formula provided under Para 6 of ICDS-IX to different qualifying assets?

Answer : The capitalization of general borrowing cost under ICDS-IX shall be done on asset-by-asset basis.

Question 23 : What is the impact of Para 20 of ICDS-X containing transitional provisions?

Answer : Para 20 of ICDS X provides that 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.

The intent of transitional provision is that there is neither ‘double taxation’ of income due to application of ICDS nor there should be escape of any income due to application of ICDS from a particular date. This is explained as under—

Provision required as per ICDS on 31 March 2017 for items brought forward from 31st day of March 2016 … (A) INR 3 Crores
Provisions as per ICDS for FY 2016-17 … (B) INR 5 Crores
Total gross provision .. .(C) = (A) + (B) INR 8 Crores
Less: Provision already recognised for computation of taxable income in F Y 2016-17or earlier… (D) INR 2 Crores
Net provisions as per ICDS in FY 2016-17 to be recognised as per transition provision… (E) = (C) -(D) INR 6 Crores

Question 24: Expenditure on most post-retirement benefits like provident fund, gratuity, etc. are covered by specific provisions. There are other post-retirement benefits offered by companies like medical benefits. Such benefits are covered by AS-15 for which no parallel ICDS has been notified. Whether provision for these liabilities are excluded from scope of ICDS X?

Answer : It is clarified that provisioning for employee benefit which are otherwise covered by AS 15 shall continue to be governed by specific provisions of the Act and are not dealt with by ICDS-X.

Question 25 : ICDS-I requires disclosure of significant accounting policies and other ICDS requires specific disclosures. Where is the taxpayer required to make such disclosures specified in ICDS?

Answer : Net effect on the income due to application of ICDS is to be disclosed in the Return of income. The disclosures required under ICDS shall be made in the tax audit report in Form 3CD. However, there shall not be any separate disclosure requirements for persons who are not liable to tax audit.

 

Waging war against tax evasion: Finance minister Arun Jaitley : 23-03-2017


Finance minister Arun Jaitley on Wednesday said the government was waging a war against tax evasion and black money through a series of follow-up measures to demonetisation. These included capping cash transaction at R2 lakh instead of the Budget proposal of R3 lakh and acting against more than 9 lakh people who have not yet responded to the taxmen’s queries on the purported mismatch between the amount of cash they deposited following the note ban and their tax returns. However, he also made it clear that the government’s tax administration will not be adversarial to anybody, including companies; rather taxmen will have to record solid reasons before any raid.

The government has proposed to make Aadhaar mandatory for filing income tax returns as well as for getting and retaining the permanent account number (PAN) to curb tax evasion through the use of multiple PAN cards, Jaitley said, replying to the debate on the Finance Bill 2017 in the Lok Sabha.

He said the government may even exceed the revised tax collection target for 2017-18 and tax buoyancy has improved over the past two years. “For 2016-17, the Budget estimate was R16.30 lakh crore. We revised it up to R17 lakh crore. It is possible to surpass even the revised target as well. For 2017-18, the target for tax collection is set at R19.25 lakh crore,” he said.

Data released so far, however, showed much of the rise in the tax mop-up came through the hikes in excise duty rates, especially in oil, and through one-time income disclosure schemes like PMGKY. Also, while the government is well-poised to meet the indirect tax collection target (revised
estimate) of R8.52 lakh crore for 2016-17, it has achieved only 72.9% of the full-year direct tax revenue target up to February.

Jaitley said as many as 98% of adults have got Aadhaar, so the move is unlikely to cause any inconvenience.
According to the proposed amendments to the Finance Bill, every taxpayer will have to quote their Aadhaar while applying for a PAN and while filing income tax returns from July 1. Even existing PAN holders will have to disclose their Aadhaar numbers to the government by a date to be announced later. PAN of those failing to intimate their Aadhaar numbers will also be deemed invalid.

The government on Tuesday introduced as many as 40 amendments to the Finance Bill, including tweaking the Reserve Bank Of India Act to pave the way for issuance of electoral bonds, keeping the identity of the donor secret — inviting strong criticism from the Opposition that termed the move “unprecedented”.

Explaining the government proposal on electoral bond, Jaitley had said on Tuesday that the RBI would authorise a particular bank to issue electoral bonds. “The buyer will buy by cheque and the money will go to the political party in a pre-declared account. RBI may authorise or notify a particular bank.”

Jaitley had also said the Representation of the People Act currently provides for revealing the identity of people making donations above R20,000. The latest amendment to the RBI Act would provide that if money comes by way of electoral bonds, the identity will not be disclosed.

The Budget has proposed income tax incentive for money paid by cheque, or small donation of R2,000, or mass collection by digital medium and electoral bond issued under the I-T Act.

‘Hopeful of GST rollout in July’
Earlier in the day, Jaitley said he is optimistic that the goods and services tax (GST) regime would be rolled out from July 1, which will make tax evasion difficult. He also added that achieving a growth rate of 7-8% in GDP is “plausible” for India and if there is a global recovery, the country’s growth rate can go up even further.

Source : Financial Express

Govt to soon introduce 5 bills for implementation of GST: FM Jaitley : 23-03-2017


Five legislations will soon be introduced in Parliament with the objective of rolling out the comprehensive indirect tax reform goods and services tax (GST) from July 1, Finance Minister Arun Jaitley told the Lok Sabha on Wednesday.

“The Government will bring before Parliament four GST legislations and there will be a fifth legislation as Excise and Customs Acts will have to be amended. We will bring these legislations together to Parliament in the next few days,” he said replying to a debate on the Finance Bill.

The Union Cabinet this week cleared four supplementary GST legislations which will be introduced in Parliament in the ongoing budget session.

Appreciating the fact that all decisions relating to the model GST laws were taken by consensus at the GST Council, Jaitley said not a single decision has been taken by voting.

GST Council, the apex decision-making body for GST, have representation from the central government as well as all the state governments.

So far 12 meetings of GST Council has taken place and many contentious issues were cleared by consensus, he said.

“First time a council was formed and it was the first time in federal politics and this is India’s first federal institution where collective decision making takes place. Even Prime Minister Narendra Modi’s guidance was that effort should be made that we should not decide on issues based on voting,” he said.

He said decisions at the Council were taken democratically and “it was a deliberative democracy and federalism in action that all decisions have been taken with consensus.”

Citing example of “participative democracy”, he said, Tamil Nadu was the only state which had reservations but it played very active role in framing of model GST laws.

“(Mallikarjun) Kharge ji your state Karnataka also played a very active role,” Jaitley added.

Karnataka is ruled by Congress while Tamil Nadu has government run by AIADMK.

As per the Constitution Amendment, GST has to be rolled out by September 15 but GST Council is of the view that it should be implemented from July 1, he said.

Source : Business Standard

Notification No.18/2017 23-03-2017


MINISTRY OF FINANCE

(Department of Revenue)

NOTIFICATION New Delhi,

the 23rd March, 2017

(Income Tax)

 S.O. 935(E).—Whereas, a Third Protocol amending the Agreement between the Government of the Republic of India and the Government of the Republic of Singapore for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income was signed at New Delhi on the 30th day of December, 2016 (hereinafter referred to as the Third Protocol);

And whereas, the Third Protocol entered into force on the 27th day of February, 2017, being the date of the later of the notifications of the completion of the procedures as required by the respective laws for the entry into force of the Third Protocol, in accordance with Article 6 of the Third Protocol;

Now, therefore, in exercise of the powers conferred by sub-section (1) of section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that all the provisions of the Third Protocol, as annexed hereto, shall be given effect to in the Union of India.

                                                                                             Notification No. 18/2017/ 500/139/2002-FTD-II] RAJAT BANSAL, Jt. Secy.

Annexure

“THIRD PROTOCOL

AMENDING THE AGREEMENT

BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA

AND

THE GOVERNMENT OF THE REPUBLIC OF SINGAPORE

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 the Republic of Singapore,

Desiring to conclude a Third Protocol to amend the Agreement between the Government of the Republic of India and the Government of the Republic of Singapore for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, signed at India on 24 January 1994, as amended by the Protocol signed at India on 29 June 2005 (hereinafter referred to as “the 2005 Protocol”) and by the Second Protocol signed at India on 24 June 2011 (the Agreement so amended hereinafter referred to as “the Agreement”),

Have agreed as follows:

 

Article 1

 1. The existing paragraph of Article 9 – Associated Enterprises of the Agreement shall be numbered as paragraph 1; and

2. After the said paragraph 1, the following paragraph shall be inserted:

“2. Where a Contracting State includes in the profits of an enterprise of that State – and taxes accordingly – profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the

profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of this Agreement and the competent authorities of the Contracting States shall if necessary consult each other.”

 

Article 2

Article 13 – Capital Gains of the Agreement shall be amended, with effect from 1 April 2017:

(i)                  by deleting paragraph 4; and

(ii)                by inserting the following paragraphs:

 

“4A. Gains from the alienation of shares acquired before 1 April 2017 in a company which is a resident of a Contracting State shall be taxable only in the Contracting State in which the alienator is a resident.

 

4B. Gains from the alienation of shares acquired on or after 1 April 2017 in a company which is a resident of a Contracting State may be taxed in that State.

 

4C. However, the gains referred to in paragraph 4B of this Article which arise during the period beginning on 1 April 2017 and ending on 31 March 2019 may be taxed in the State of which the company whose shares are being alienated is a resident at a tax rate that shall not exceed 50% of the tax rate applicable on such gains in that State.

 

5. Gains from the alienation of any property other than that referred to in paragraphs 1, 2, 3, 4A and 4B of this Article shall be taxable only in the Contracting State of which the alienator is a resident.”

 

Article 3

 

The Agreement is amended by adding after Article 24, the following Article, with effect from 1 April 2017:

 

“Article 24A

 

1. A resident of a Contracting State shall not be entitled to the benefits of paragraph 4A or paragraph 4C of Article 13 of this Agreement if its affairs were arranged with the primary purpose to take advantage of the benefits in the said paragraph 4A or paragraph 4C of Article 13 of this Agreement, as the case may be.

 

2. A shell or conduit company that claims it is a resident of a Contracting State shall not be entitled to the benefits of paragraph 4A or paragraph 4C of Article 13 of this Agreement. A shell or conduit company is any legal entity falling within the definition of resident with negligible or nil business operations or with no real and continuous business activities carried out in that Contracting State.

 

3. A resident of a Contracting State is deemed to be a shell or conduit company if its annual expenditure on operations in that Contracting State is less than S$ 200,000 in Singapore or Indian Rs. 5,000,000 in India, as the case may be:

 

(a)    in the case of paragraph 4A of Article 13 of this Agreement, for each of the 12-month periods in the immediately preceding period of 24 months from the date on which the gains arise;

(b)    in the case of paragraph 4C of Article 13 of this Agreement, for the immediately preceding period of 12 months from the date on which the gains arise.

 

 

4. A resident of a Contracting State is deemed not to be a shell or conduit company if:

 

(a) it is listed on a recognised stock exchange of the Contracting State; or

 

(b) its annual expenditure on operations in that Contracting State is equal to or more than S$ 200,000 in Singapore or Indian Rs. 5,000,000 in India, as the case may be:

 

(i)                  in the case of paragraph 4A of Article 13 of this Agreement, for each of the 12-month periods in the immediately preceding period of 24 months from the date on which the gains arise;

(ii)                in the case of paragraph 4C of Article 13 of this Agreement, for the immediately preceding period of 12 months from the date on which the gains arise.

5. For the purpose of paragraph 4(a) of this Article, a recognised stock exchange means:

(a) in the case of Singapore, the securities market operated by the Singapore Exchange Limited, Singapore Exchange Securities Trading Limited and The Central Depository (Pte) Limited; and

(b) in the case of India, a stock exchange recognised by the Securities and Exchange Board of India.

Explanation: The cases of legal entities not having bona fide business activities shall be covered by paragraph 1 of this Article.”

 

Article 4

Articles 1, 3, 5 and 6 of the 2005 Protocol shall be deleted, with effect from 1 April 2017.

Article 5

The Agreement is amended by adding after Article 28, the following Article:

“Article 28A

MISCELLANEOUS

This Agreement shall not prevent a Contracting State from applying its domestic law and measures concerning the prevention of tax avoidance or tax evasion.

“ Article 6

Each of the Contracting States shall complete the procedures required by its law for the bringing into force of this Protocol and notify the other State about such completion of the procedures. This Protocol shall enter into force on the date of the later of these notifications. If this Protocol does not enter into force as at 31 March 2017 due to either of the aforesaid notifications remaining pending, this Protocol shall enter into force on 1 April 2017.

Article 7

This Protocol, which shall form an integral part of the Agreement, shall remain in force as long as the Agreement remains in force and shall apply as long as the Agreement itself is applicable.

IN WITNESS WHEREOF, the undersigned, duly authorised thereto by their respective Governments, have signed this Protocol.

DONE in duplicate at New Delhi on this 30th day of December, 2016, in the English and Hindi languages, both texts being equally authentic. In the case of divergence between the two texts, the English text shall be the operative one.

 

FOR THE GOVERNMENT OF                                                FOR THE GOVERNMENT OF THE REPUBLIC OF

THE REPUBLIC OF INDIA                                                      SINGAORE

(Sushil Chandra)                                                                  (Lim Thuan Kuan)

Chairman, Central Board of Direct Taxes                         High Commissioner  of Singapore to India “

Gifts to trusts for benefit of kin exempted from tax : 23-03-2017


Gifts to trusts in the form of money or property for the benefit of relatives will not be taxed. The finance bill, approved by the Lok Sabha on Wednesday, has amended the original proposal that had expanded the scope of gifts to include money or property received for no consideration by trusts.

Gifts received from trusts registered under section 12A of the Income Tax Act will also be excluded. Besides, trusts receiving dividend income will be exempt from the additional 10% tax on dividend income exceeding Rs 10 lakh. The move benefits those looking at succession planning.

The provision had been introduced in the finance bill to prevent abuse and the exclusion was made to avoid hardship in genuine cases, a government official said.

“This is a welcome amendment and would not impact succession planning through trust structures as feared earlier. The amendment in Section 56 (2), as proposed by the Finance Bill 2017, would have made tax-free gifts to trusts taxable,” said Amit Maheshwari, a partner at Ashok Maheshwary & Associates LLP.

FINANCE BILL
The finance bill proposes to merge seven tribunals and bring uniformity in service rules, besides making Aadhaar mandatory for getting permanent account numbers and filing of income tax returns.

The Lok Sabha passed the Finance Bill 2017 by a voice vote on Wednesday. Finance minister Arun Jaitley defended making Aadhaar mandatory for PAN and IT returns, saying about 98% of the adults in the country already had Aadhaar and it would prevent misuse through multiple PANs. The opposition had demanded a relook at the provision.

“Aadhaar has biometric details, so its chances of misuse become minimal. When the country has so much technology and when it is being put to use, then why create such a hue and cry about it? It is an anti-evasion measure, which will benefit the country. So, the government considers it right to implement it,” Jaitley said.

CASH TRANSACTION LIMIT
The amended finance bill bans cash transactions of over Rs 2 lakh. Jaitley said the original proposal for a Rs 3 lakh limit was lowered to curb generation of black money.

“To encourage digital economy and to discourage cash economy, I had proposed in the budget that there will be a ban on cash transactions of over Rs 3 lakh. I am making it Rs 2 lakh by an amendment,” he said. The provision provides for a penalty equal to the transacted amount if the limit is breached.

9.29 lakh entities to face action
NEW DELHI: Action will “definitely” be taken against 9.29 lakh entities who have not responded to the I-T department’s queries over cash deposited by them which did not match their income profile, the government asserted on Wednesday. Over 18 lakh entities deposited old notes of Rs 500 and Rs 1,000 not commensurate with their income means, FM Arun Jaitley said in Lok Sabha. (PTI)

Source : Economic Times

Black money fight: Arun Jaitley says GST will make tax evasion difficult : 22-03-2017


Union Finance Minister Arun Jaitley on Wednesday said that “GST will transform complex indirect tax system to simple system” even as he emphasized that the pan India tax regime will make tax evasion difficult. Underlining that “GST will be the biggest reform”, he said the Narendra Modi government is trying to implement it by July 1. FM Jaitley reiterated that “demonetisation will act as disincentive to continue with shadow economy”. He also hailed PM Modi’s much debated move to scrap Rs 500 and Rs 1000 notes, saying it ntegrate informal with formal economy. “I can say with sense of confidence, almost every household in India, may be stray exception exists, has access to banking system,” says FM Jaitley. Emphasizing that the size of GDP will be bigger and cleaner, FM Jaitley said, “India will continue to remain the fastest growing economy and attaining 7-8 pc growth is reasonably plausible.”

Union Finance Minister Arun Jaitley was addressing the 23rd Conference of Auditors General of Commonwealth nations and British Overseas Territories in New Delhi this morning. This is the first time India is hosting this prestigious conference.

The Finance Ministry in a statement said the representatives of the participating nations will look into the scope of leveraging technology in public audit as well as share experiences on environment audit. It said the three-day conference will be attended by 52 Commonwealth Countries and nine British Overseas Territories.

The auditing organizations in these countries come together every three years to discuss the major challenges before them. The last such conference was held in Malta in 2014.

The government yesterday proposed to lower cap for cash transactions to Rs 2 lakh from April 1, make biometric identifier Aadhaar mandatory for filing tax returns and allow cheque-only contributions to electoral trusts as part of its campaign against blackmoney.

FM Arun Jaitley had moved an “unprecedented” 40 amendments to his seven-week old Finance Bill 2017, which were strongly opposed by opposition parties led by the RSP, the TMC and the BJD, which felt the government was tagging along non-tax bills in the legislation to make them Money Bills, obviating the need for a nod from the Rajya Sabha where it does not have a majority yet.

Source : Financial Express

Notification No.16/2017 22-03-2017


MINISTRY OF FINANCE

(Department of Revenue)

[CENTRAL BOARD OF DIRECT TAXES]

(Income tax)

NOTIFICATION

New Delhi, the 22nd March, 2017

S.O. 928 (E).—In exercise of the powers by sub sections (1) and (2) of Section 120 of the Income-tax Act, 1961) (43 of 1961), the Central Board of Direct Taxes hereby makes the following amendment to the notification of the Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, number S.O.2483(E), dated the 30th September, 2009, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), namely:-

In the said notification, —

(i)                  for the table, below the Schedule, following table shall be substituted, namely—

SCHEDULE

 

Sl.No. Designation of Income-tax Authority Headquarters Jurisdiction
(1) (2) (3) (4)
1.. Commissioner of Income-tax, Centralised Processing Centre, Bengaluru Bengaluru, Karnataka All the cases where the return of income has been furnished in – (i) electronic form, and (ii) paper form.

 

 

2. This notification shall come into force with effect from the date of its publication in the Official Gazette.

 

[Notification No. 16 /2017/ F. No.187/3/2017-ITA-I]

 ROHIT GARG, Director

Government may announce roll back or tweak of 10% LTCG tax by March 31 : 22-03-2017


 In what could give respite to some investors the government may be looking to roll back a budget announcement around long term capital gains (LTCG) tax, people in the know said.

In the budget, the government had introduced a provision whereby anyone who acquired shares in unlisted companies before October 1, 2004, and had not paid securities transaction tax (STT) will be liable to pay 10% LTCG tax.

Industry tracker says that the government had brought the provision to plug a loophole being used to evade taxes. Investigations by the income tax department and some other government agencies and earlier found that some of the listed companies were allotting back dated shares to investors to save on the tax. The budget proposal was aimed at curbing such deals, say experts.

The government was looking to plug the loophole in thinly traded or group-z category shares. ET had on January 19 written that the government was looking to introduce LTCG tax on group-Z category of shares. Group-Z is a category made up of listed companies that have not complied with regulatory requirements. There are about 2,200 companies under the category on the BSE.

Industry trackers say that not just private equity investors but even receipt of shares under gift, mergers, demergers, bonus issue, rights issue, acquisition of shares under IPO or shares of a company, which was listed after acquisition of shares, will be covered under the definition.

Source : Business Standard

 

Recourse to MAP and bilateral APA rollback available under revised tax treaty – PwC : 22-03-2017


The recent changes in the India and South Korea Agreement for Avoidance of Double Taxation provides recourse to taxpayers of both countries to apply for Mutual Agreement Procedure (MAP) in respect of transfer pricing disputes, and also to apply for bilateral Advance Pricing Agreements (APA) for APA period beginning FY 2017-18, a PwC research said.

An APA is mainly an agreement between a tax payer—mostly multinationals— and tax authority— CBDT in India’s case—where the transfer pricing methodology is determined. The methodology to calculate taxes could then be used for an agreed period of time on the tax payer’s future international transactions.

The availability of rollback option clearly enhances certainty for such taxpayers for up to nine years, and provides a great opportunity for them to seek assurance on their past years’ transfer pricing positions as well, the PwC research added.

Transfer pricing disputes are mainly related to the calculation of profit made by multinational companies and how they have been shifted to their parent. Many firms have gone to court, challenging the government’s transfer pricing calculations.

“All transfer pricing disputes where the above – mentioned three years are not completed prior to 12 September 2016, are eligible for MAP under the revised treaty. Accordingly, taxpayers who are contemplating a MAP application should bear in mind this timeline in mind,” PwC research added.

 For the first time the government may end up resolving about 100 transfer pricing issues by signing advance pricing agreements (APAs) with multinationals this fiscal, people in the know said. Till February end, the government has signed about 75 APAs with multinationals, and expects that more transfer pricing issues could be resolved by the end of March, this year.
Source : Economic Times

GST rollout from July 1: Cabinet clears the decks by okaying 4 draft Bills : 21-03-2017


Clearing the way for a July 1 roll-out, the Union Cabinet on Monday approved four Bills on a national goods and services tax (GST).

The decision comes two working days after the GST Council cleared these — Central GST (CGST), Union Territory GST (UTGST), Integrated GST (IGST) and the Compensation Bill. These are now set to be introduced in Parliament within this week, most likely as money Bills and so, not needing approval of the Rajya Sabha, where the ruling National Democratic Alliance does not have a majority.

“It is expected that implementation of the GST will lead to an increase in the gross domestic product by one to two per cent, leading to more employment and productivity,” went an official statement.

The GST will subsume various indirect levies of the Centre and states — service tax, excise duty, octroi and value-added tax, among others, and create an input tax credit chain for refunds. This would pave the way for a common national market. States will have to get the state GST Bills passed by their respective assemblies. Jammu & Kashmir will need to pass all in its state assembly, on account of special powers on taxation under the Constitution.

The GST Council has already approved four-tier tax slabs of five, 12, 18 and 28 per cent. And, an additional cess on ‘demerit goods’ like luxury cars, aerated drinks and tobacco products. The fitment of goods and services in these slabs is expected to be finalised by next month.

The CGST Bill makes provisions for levy and collection of tax on intra-state supply of goods or services or both by the central government. The SGST and UTGST Bills do so for movement within states and in Union Territories without assemblies. The IGST Bill makes provision for levy and collection of tax on inter-state supply of goods or services or both by the central government. The Compensation Bill is for recompensing states for loss of revenue arising on account of implementation for five years. This will be provided by the Centre via a cess imposed on ‘sin’ and demerit goods.

The council cleared a proposal to cap the cess on luxury cars and aerated drinks at 15 per cent over the peak rate of 28 per cent. For paan masala, the cap would be 135 per cent. On tobacco and cigarettes, the cap would be 290 per cent, or Rs 4,170 per 1,000 cigarette sticks. A call is yet to be taken on whether or not a cess would be imposed on bidis. The cess on coal and lignite (environment cess) would have an upper limit at Rs 400 a tonne.

Source : Business Standard

7 best tax-saving solutions which can help you save money : 21-03-2017


As 31st March nears, it is the last time to save tax for this financial year. Thankfully, there are various tax-saving instruments available in the market and one can invest in these instruments as per one’s risk appetite. However, to become a smart tax saver, you need to think beyond tax saving only. Your every investment should be made keeping in view a certain financial goal.

Here are 7 best tax-saving solutions which will not only help you in saving tax, but will also help you in achieving the financial goals of your life.

Public Provident Fund
The amount contributed, interest earned and the maturity amount all are tax-free if you invest in PPF. With its EEE benefit, the instrument has become one the most well-known tax-saving options. Withdrawals from PPF are allowed from the 7th year from the date of opening the account. However, anyone can avail a loan from the 3rd financial year after the account is opened. The maturity period is 15 years, which can be further extended for 5 years. If planning for retirement, it is one of the best instruments. The interest rate is compounded annually while investing in PPF. You can open a PPF account in a post office or any registered bank.

Senior Citizen Savings Scheme
A citizen above the age of 60 can open an account under this scheme. Age relaxation is given for those who is on superannuation or on VRS. In such a case one can open one’s account at the age of 55 years. A joint account can also be opened with a spouse in any number of capacity. Investments made under the scheme can be claimed under section 80C, which has a lock-in period of 5 years. Interest is payable quarterly in SCSS.

Equity Linked Savings Scheme
By investing in ELSS, you can save tax up to Rs 1.5 lakh under section 80C of the I-T Act. Also, no tax is imposed on long-term capital gains made through this fund. It has the minimum lock-in period of 3 years, and it also provides the maximum return as compared to other products. However, returns are market linked. Therefore, market and economic conditions do play an important role in deciding the annual returns achieved by making investment in ELSS funds.

Fixed Deposits
A secure rate of return with tax benefits makes fixed deposits one of the most popular investment options. You will get a tax deduction of Rs 1.5 lakh under Section 80C of the I-T Act in a particular financial year. Tax-saving bank FDs also have a minimum lock-in period of 5 years, which means that you cannot withdraw from the tax-saving FD until the maturity period. This instrument is mostly suited for individuals who want an assured return and have a low risk-taking profile.

Term deposit
Investments made for 5-year term deposits will only qualify for deductions under 80C of the I-T Act. The account can be opened by an individual. Moreover, there is no limit to open a term deposit account. The account can also be transferred from one post office to another as per the investor’s comfort. In case a minor wants to operate his account of TD, he needs to be above the age of 10 years. There is no upper limit for making deposits in a TD account. Here, interest is payable annually but calculated quarterly.

National Pension Scheme
One can get an additional income tax benefit of Rs 50000 for contribution towards NPS under Section 80CCD(1B). To avail the tax deduction benefit, the investment has to be made in Tier I account of NPS only. There is no upper limit on making investments to an NPS account. However, an individual will get the tax benefit of only up to Rs 50000, which is above the section 80C limit of Rs 1.5 lakh in a particular financial year.

Health Insurance
Health insurance is an important solution for saving tax. Tax deductions can be claimed under section 80D of the I-T Act 1961. According to this section, the deductions are made towards policies on self, spouse, children & parents, whether dependent or not.

Under this section, a maximum deduction of Rs 60000 and minimum deduction of Rs 25000 can be made in respect to the premium paid by any mode other than the cash option. However, if payments are made against health checkups, then in such a case you may include the cash option.

Source : Financial Express

No specific scheme to boost MSME sector’s role in defence manufacturing, says government : 21-03-2017


No specific scheme is being implemented to boost the contribution of Micro, Small and Medium Enterprises (MSME) sector towards manufacturing in the field of defence under the ‘Make-in-India programme, the government told the Lok Sabha today. “At present, there is no specific scheme implemented by the Ministry of MSME to boost micro, small and medium enterprises sector’s contribution towards indigenous manufacturing in defence under the ‘Make in India’ programme,” Minister of State for MSME Giriraj Singh said while replying to questions.

He said defence manufacturing is one of the 25 sectors identified for ‘Make in India’ programme. The Ministry of Defence has framed the Defence Procurement Procedure – 2016 which aims at enhancing the role of MSMEs in the defence sector.

However, he said there are various schemes being implemented by the Ministry of MSME such as National Manufacturing Competitiveness Programme, MSME Cluster Development Programme and Technology Centre Systems Programme for promotion and development of MSME across various sectors including defence.

Source : Financial Express

41 – 21-03-2017


RISK MANAGEMENT AND INTER-BANK DEALINGS – OPERATIONAL FLEXIBILITY FOR INDIAN SUBSIDIARIES OF NON-RESIDENT COMPANIES

A.P. (DIR SERIES 2016-17) CIRCULAR NO.41DATED 21-3-2017

Attention of Authorised Dealers Category – I (AD Category – I) banks is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 (Notification No. FEMA. 25/RB-2000 dated May 3, 2000) issued under clause (h) of sub-section (2) of Section 47 of FEMA, 1999 (Act 42 of 1999), as amended from time to time and Master Direction on Risk Management and Inter-Bank Dealings dated July 5, 2016, as amended from time-to-time.

2. With a view to providing operational flexibility to multinational entities and their Indian subsidiaries exposed to currency risk arising out of current account transactions emanating in India, the extant hedging guidelines have been amended as per the terms and conditions in the Annex I to this circular. An announcement to this effect was made in the Statement on Developmental and Regulatory Policies of Reserve Bank of India dated October 4th, 2016 (para 9).

3. Necessary amendments (Notification No.FEMA No.384/2017-RB dated March 17, 2017) to Foreign Exchange Management (Foreign Exchange Derivatives Contracts) Regulations, 2000 (Notification No. FEMA.25/RB-2000 dated May 3, 2000) (Regulations) have been notified in the Official Gazette vide G.S.R.No.260 (E) dated March 17, 2017 a copy of which is given in the Annex II to this circular. These regulations have been issued under clause (h) of sub-section (2) of Section 47 of FEMA, 1999 (42 of 1999).

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

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]

Operational flexibility for Indian subsidiaries of Non-resident Companies

Purpose

1. To provide operational flexibility for booking derivative contracts to hedge the currency risk arising out of current account transactions of Indian subsidiaries of Multi-National Companies (MNCs).

Users

2. Non-resident parent of an Indian subsidiary or its centralised treasury or its regional treasury outside India.

Products

3. All FCY-INR derivatives, OTC as well exchange traded that the Indian subsidiary is eligible to undertake as per FEMA, 1999 and Regulations and Directions issued thereunder.

4. Operational Guidelines, Terms and Conditions for hedging

(i) The transactions under this facility will be covered under a tri-partite agreement involving the Indian subsidiary, its non-resident parent/treasury and the AD bank. This agreement will include the exact relationship of the Indian subsidiary or entity with its overseas related entity, relative roles and responsibilities of the parties and the procedure for the transactions, including settlement. The ISDA agreement between the AD bank and the non-resident entity will be distinct from this agreement.
(ii) The non-resident entity should be incorporated in a country that is member of the Financial Action Task Force (FATF) or member of a FATF-Style Regional body.
(iii) The AD Bank may obtain KYC/AML certification on the lines of the format in Annex XVIII of the Master Direction on Risk Management and Inter Bank Dealings, as amended from time-to-time.
(iv) The non-resident entity may approach an AD Cat-I bank directly which handles the foreign exchange transactions of its subsidiary for booking derivative contracts to hedge the currency risk of and on the latter’s behalf.
(v) The non-resident entity may contract any product either under the contracted route or on past performance basis, which the Indian subsidiary is eligible to use.
(vi) The Indian subsidiary shall be responsible for compliance with the rules, regulations and directions issued under FEMA 1999 and any other laws/rules/regulations applicable to these transactions in India.
(vii) The profit/ loss of the hedge transactions shall be settled in the bank account and books of account of the Indian subsidiary. The AD bank shall obtain from the Indian subsidiary an annual certificate by its Statutory Auditors to this effect.
(viii) The concerned AD Bank shall be responsible for monitoring all hedge transactions (OTC as well as exchange traded) booked by the non-resident entity and ensuring that the Indian subsidiary has the necessary underlying exposure for the hedge transactions.
(ix) AD banks shall report hedge contracts booked under this facility by the non-resident related entity to CCIL’s trade repository with a special identification tag.

[Annex II]

FOREIGN EXCHANGE MANAGEMENT (FOREIGN EXCHANGE DERIVATIVE CONTRACTS) (AMENDMENT) REGULATIONS, 2017

NOTIFICATION NO. FEMA. 384/RB-2017, DATED 17-3-2017

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 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, 2017.

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

Amendment under Schedule II

2. In the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25/RB-2000 dated May 3, 2000), in Schedule II, after the existing para 6, the following shall be added, namely:

A non-resident may enter into a foreign exchange derivative contract with an Authorised Dealer bank in India to hedge an exposure to exchange risk of and on behalf of its Indian subsidiary in respect of the said subsidiary’s transactions subject to such terms and conditions as may be stipulated by the Reserve Bank from time-to-time.

80 per cent of informal economy will come under formal sector: J P Nadda : 20-03-2017


More than 80 per cent of informal economic activities, especially in the retail sector, will be brought into formal economy through digitalisation and cash-less transactions, Union minister J P Nadda said today. It will increase the number of tax payers with availability of adequate funds for development, the Union Health Minister said at ‘Digidhan Mela’ here.

He said 27 crore savings bank accounts were opened under Jan Dhan Yojana with a deposit of Rs 63,800 crore and that this amount could be used for economic development.

Himachal Pradesh Information Technology, Irrigation and Public Health Minister Vidya Stokes said that the state government was promoting computerisation in every department and advocating cash-less system for government transactions.

She said the state was ready for adopting the Goods and Services Tax (GST). Earlier addressing BJP workers, Nadda said that landslide victory of the party in the recent assembly polls was endorsement of policies of Prime Minister Narendra Modi and claimed that “winds of change are blowing in Himachal Pradesh and the BJP would oust the Congress government in coming assembly polls”.

He called upon the party workers to work hard to ensure victory of the party in the assembly polls later this year.

Source : Financial Express

One step closer to July deadline: Cabinet approves 4 GST bills : 20-03-2017


The Cabinet has approved four bills to implement a planned Goods and Services Tax (GST) bills, a government official said on Monday, paving the way for Prime Minister Narendra Modi to implement the landmark tax reform from July.

The four bills are likely to be taken up by Parliament this week, and a separate state GST bill in state assemblies later, the official also said, requesting anonymity ahead of a planned news briefing.

The GST Council, comprising central and state finance ministers, has already cleared all five draft laws – the Central GST, Integrated GST, state GST, Union territory GST and rules on compensating states for revenue losses.

There would be four tax slabs of 5, 12, 18 and 28 per cent, plus a levy on taxes on items like cars, aerated drinks and tobacco products to compensate states for any revenue losses in the first five years.

The new tax, biggest tax reform since India got independence, is expected to boost the rate of economic growth by about 0.5 percentage points, broaden the revenue base and cut compliance cost for firms.

Source : Business Standard

Union Cabinet approves draft GST bills, to be introduced in Parliament soon : 20-03-2017


The Union Cabinet today approved four bills to implement a planned Goods and Services Tax (GST) bills, a government official said on Monday, paving the way for Prime Minister Narendra Modi to implement the landmark tax reform from July.

The four bills are likely to be taken up by the parliament this week, and a separate state GST bill in state assemblies later, the official also said, requesting anonymity ahead of a planned news briefing.

The GST Council, comprising federal and state finance ministers, has already cleared all five draft laws – the Central GST, Integrated GST, state GST, Union territory GST and rules on compensating states for revenue losses.

There would be four tax slabs of 5, 12, 18 and 28 percent, plus a levy on taxes on items like cars, aerated drinks and tobacco products to compensate states for any revenue losses in the first five years.

The new tax, biggest tax reform since India got independence in 1947 from the British colonial rule, is expected to boost the rate of economic growth by about 0.5 percentage points, broaden the revenue base and cut compliance cost for firms.

Source : Economic Times

PM Narendra Modi led BJP’s win will facilitate further reforms: Moody’s : 18-03-2017


The BJP’s thumping victory in Uttar Pradesh and substantial gains made in other states will facilitate reforms as the ruling party inches closer to a majority in Upper House, Moody’s Investors Service said today. “The 2017 state election results in India demonstrate broad-based popular support for the Indian government’s policy agenda and will facilitate the implementation of further reforms, a credit positive for the sovereign,” it said in a statement. While the ruling NDA has an absolute majority in Lok Sabha, it currently does not have a majority in Rajya Sabha.

“…the party will increase its share of seats in the Upper House (Rajya Sabha) of India’s Parliament,” it said.

However, the changes will not be immediate, Moody’s said.

“The ruling party will not feel the benefit of electoral gains immediately, because the changes in the upper house will only occur next year, when some members retire,” says William Foster, Moody’s Vice President and Senior Credit Officer.

“Nevertheless, electoral support at the state level should translate into broader support for government policy in the upper house, facilitating the passage and implementation of additional reforms,” Foster added.

In its report, ‘Government of India: State Elections Demonstrate Broad Support for Reform Agenda, a Credit Positive’, Moody’s said the BJP has won a net 294 seats in the five state assembly elections held over the past month.

“The BJP’s solid gains were despite the negative economic hit from demonetisation in late 2016,” it said.

In 2018, 69 seats in Rajya Sabha, including 10 from UP and one from Uttarakhand, will come up for re-election.

“If the BJP-led coalition increases its seat tally to or close to an outright majority, passage of policies will become easier, helping to accelerate reform,” it said.

Also, collaboration between the central government and the new BJP-led states could improve, partially circumventing impediments to reform at the federal level on politically sensitive issues like land and labour reforms.

BJP-led states like Gujarat and Rajasthan have already amended some land and labour laws.

In UP, BJP secured 312 of the 403 state legislative assembly seats, up from just 47 in 2012.

Unlike rival parties in UP, the BJP did not nominate a local chief ministerial candidate but focused on the leadership of Modi himself.

“The BJP’s success reflects strong popular support for Prime Minister Narendra Modi and his national policy agenda.

By contrast, the 2012 UP election outcome reflected popular support for individuals in the Samajwadi Party and Bahujan Samaj Party,” Moody’s said.

In addition to UP, the BJP also took majority of the seats in Uttarakhand.

In Goa, Manipur and Punjab, the opposition Congress party won the largest number of seats, although the BJP did increase its share in Manipur.

Currently, the NDA government, led by the BJP, hold about 30 per cent of the total seats in Rajya Sabha.

“Therefore, the ruling party will continue to rely on alliances with representatives of other parties to push through policy measures,” it said.

Source : Financial Express

Raising tax can be a ‘retrograde’ method at times: Arun Jaitley : 18-03-2017


Government’s intention is to increase the revenue base but raising the taxation level could at times be a “retrograde” method, Finance Minister Arun Jaitley said on Friday
Jaitley, who also holds the additional charge of Defence Ministry, told the Lok Sabha that the intention of the government was to expand the revenue base.

“The revenue mobilisation of the states must increase, that is the primary resource that the government gets, and this is not necessarily to be done by raising the level of taxation. That could at times be a retrograde method of trying to raise the revenue,” he said.

Jaitley made the remarks while making an intervention during a debate on the demands for grants for the Defence Ministry.

“Therefore, whenever we take political positions on those issues, at the end of the day, we must realise that the size of the entire revenue cake has to increase. It is only then that the slice, which will be available for national security, will also increase,” the minister said.

Responding to All India Anna Dravida Munnetra Kazhagam (AIADMK) leader M Thambidurai’s remarks that the government was reducing the revenue base of the states through the Goods and Services Tax, Jaitley said the objective is to have a more efficient indirect taxation system.

“I know your party’s (AIADMK) and state government’s positions have been slightly different from everybody else. But one of the objects was to have a more efficient indirect taxation system which brings an end to evasion and, therefore, the revenue of the states and the Centre also increases. That is why we were able to develop a bipartisan consensus on it,” Jaitley said.

Source : Business Standard

GST success depends on preparedness of businesses: Parthasarathi Shome : 18-03-2017


Fiscal policy expert Parthasarathi Shome has said that the success of the goods and services tax (GST) hinges on the preparedness of businesses to comply with the new levy.

He reckons that the Centre and states will be forced to make improvements in the GST design if taxpayers find it difficult to comply with the new regime.

“I do not want to be unduly critical of GST. The Centre and states have done well to forge a consensus on the enabling laws after intense negotiations. Some give and take is inevitable.

“Hopefully, improvements will take place if taxpayers are discomforted,” said Shome, former advisor to the finance minister during the United Progressive Alliance regime, at a panel discussion followed by the launch of his book ‘Development and Taxation’.

GST is meant to create a seamless common market and the Centre is hopeful of rolling out the new levy on July 1.

The optimism follows the GST Council’s nod to all the enabling laws on March 16 — the draft central GST, integrated GST, state GST and the Union Territory GST laws. Besides the Centre, state legislatures too have to approve the law, after which all the rules have to be finalised and published.

India’s plan is to have a dual GST with a four-rate structure ranging from 5% to 28%.

But the levy excludes real estate, electricity and alcohol besides petroleum products (that will be brought under the net subsequently). An extra cess will be levied on luxury and non-merit goods.

Shome is, however, clear that the current version of GST is not internationally benchmarked. “It seems as complex as the value-added tax regime that was introduced in Brazil in the 1960s,” he said, adding that improvements can be made over time. Shome was involved in the exercise to improve the VAT regime in Brazil in the 1990s.

GST will be administered both by the Central and state tax authorities. So Shome underscores the need for proper training of the tax administration to ensure ease of doing business.

Ahead of the value-added tax regime that replaced archaic sales tax imposed by states, the empowered committee of finance ministers held several rounds of discussions with various stakeholders that included industry and trade, Shome said.

Are both taxpayers and the tax administration prepared to implement the new levy and is the IT system up and running? These are the crucial questions to be asked, he said. A robust implementation strategy is also important to ensure the success of the tax reform, he added.

Source : Economic Times

Notification No. 384/2017-RB/GSR 260(E) 17-03-2017


FEM (FOREIGN EXCHANGE DERIVATIVE CONTRACTS) (AMENDMENT) REGULATIONS, 2017 – AMENDMENT IN SCHEDULE II

NOTIFICATION NO.FEMA.384/RB-2017/GSR 260(E)DATED 17-3-2017

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 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, 2017.

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

Amendment under Schedule II

2. In the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25/RB-2000 dated May 3, 2000), in Schedule II, after the existing para 6, the following shall be added, namely:

A non-resident may enter into a foreign exchange derivative contract with an Authorised Dealer bank in India to hedge an exposure to exchange risk of and on behalf of its Indian subsidiary in respect of the said subsidiary’s transactions subject to such terms and conditions as may be stipulated by the Reserve Bank from time to time.

 

Sin tax: GST Council caps tax on tobacco, luxury cars, pan masala at 15% : 17-03-2017


The goods and services tax (GST) Council on Thursday approved two more laws — state GST (SGST) and Union Territory GST (UT-GST) — increasing chances of a roll-out of the new indirect tax regime from July 1. Earlier, the council had approved the CGST, IGST and the compensation law.

At its 13th meeting held in the Capital, the council also capped the cess on demerit goods or so-called sin tax at 15%, the proceeds of which will be used to compensate states that may face a reduction in revenue once GST is in force.
Finance minister Arun Jaitley said the cess would be restricted to five commodities. “We have kept a headroom of about 3% for imposing the cess on demerit goods,” the FM observed at a press conference. He clarified it would be levied in a manner such that the final tax incidence on such demerit items would not be lower than the existing tax rates. The cess is to be levied on tobacco, luxury cars, pan masala and aerated drinks.

Tax experts welcomed the cap on the cess of 15% and the fact that it would be limited to a few goods. However, several of them have drawn attention to the fact that the government needs to clarify on area-based exemptions given to companies in states such as Uttarakhand. They have pointed out that the exemptions cannot continue since they break the value chain.

While the four laws —CGST, IGST, UGST and compensation law, will require the Cabinet’s nod first and a parliamentary approval subsequently, the SGST law will have to be approved by the state Assemblies. The council in its next meeting on March 31 would approve four sets of rules under the GST laws. Jaitley said while five sets of rules — relating to registration, payment, refunds, invoices and returns — had already been approved, the council in its next meeting would discuss and approve the remaining four rules relating to composition, transition, input tax credit and valuation.

The council will need another major meeting to approve the fitment of different commodities in the four slabs — 5%,12%,18% and 28%, Jaitley said.Post the fitment exercise the GST will be ready for a rollout. The industry has often represented the delay in announcement of rates for commodities was proving to be hurdle in preparation for the new taxation regime.

The commerce ministry had asked for a zero rating of goods supplied to SEZs a proposal which has been approved by the council.

“It would also be critical for the government to immediately release the approved GST draft Bills along with relevant rules, rate schedules, etc for the industry to adequately assess the final impact of GST and align its business operations for a smooth and timely transition,” Krishan Arora of Grant Thornton India LLP said.

Source : Financial Express

Narendra Modi, armed with fresh mandate, revisits economic reform agenda : 17-03-2017


Prime Minister Narendra Modi, fresh from his landslide election victory in India’s most populous state, now has a chance to advance his economic reform agenda.

Voters in Uttar Pradesh handed Modi’s Bharatiya Janata Party (BJP) the biggest majority for any party in the state since 1977, effectively giving their blessing to his shock decision last November to scrap 86 percent of the cash in circulation.

The so-called demonetisation sought to wipe out ‘black cash’ – untaxed wealth and proceeds of corruption. While it caused huge disruption to daily and business life, voters backed Modi’s pitch that the undeserving rich would suffer most.

Armed with a new mandate as a champion of the poor, Modi still faces a struggle to implement reforms to boost growth and jobs in Asia’s third-largest economy, say experts.

Here are the government’s reform priorities:

There would be four tax slabs of 5, 12, 18 and 28 percent, plus a levy on taxes on luxury items like cars, aerated drinks and tobacco products to compensate states for any revenue losses in the first five years.

State of Play:

Federal and state finance ministers gave their final approval to GST legislation on Thursday. The government hopes to win parliamentary backing in the current session, and in state assemblies by next month, so that the GST  could be implemented in the second quarter of the 2017/18 financial year.

Likely upshot:

The new tax structure will be revenue neutral, and broadly keep the rates that apply to businesses in line with existing levies. Still, it is expected to boost the rate of economic growth by about 0.5 percentage points; broaden the revenue base; and cut compliance costs for firms.

BAD BANK:

The finance ministry and the Reserve Bank of India are still in talks on whether to set up a Public Sector Asset Rehabilitation Agency (PARA), or bad bank, to deal with stressed assets in the banking system.

State of play:

Technocrats at both the finance ministry and RBI have called for urgent action. Finance Minister Arun Jaitley has, however, not been won over to the idea of a bad bank, a senior finance ministry official said. The banking division of the finance ministry also opposes such a move.

Likely upshot:

Jaitley has told parliament the government is considering a range of options, while aides say the focus will continue on using existing mechanisms to deal with bad loans. The approach has failed to achieve much headway until now, weakening state banks that are poorly placed to extend credit.

LABOUR REFORMS:

Encouraged by the election results, the Modi administration wants to move forward with long-pending labour bills on wages and industrial relations. Labour Minister Bandaru Dattatreya has proposed boiling down 44 industrial laws into four codes to simplify employment rules and raise social security benefits for workers.

State of play:

Labour ministry officials say efforts continue to build a consensus, following a government decision to extend maternity leave to 26 weeks from 12 weeks. Yet India’s small but militant trade unions – even those allied to Modi’s ruling party – oppose the reforms. The measures may now be introduced to the next session of parliament in July.

Likely upshot:

Officials say that if consensus cannot be reached at federal level, the Modi administration will encourage BJP-ruled states – including newly won Uttar Pradesh – to adopt state-level reforms already adopted by Rajasthan and Madhya Pradesh.

That means there won’t be a big-bang simplification; but more of a gradual spread of reform under the model of “competitive federalism” championed by Modi.

Source : Business Standard

GST Council to take up State and UT Bills today : 17-03-2017


With the expected July 1 rollout of the Goods and Services Tax (GST) regime drawing closer, the GST Council, led by Finance Minister Arun Jaitley, will meet on Thursday to finalise two Bills — the State and the Union Territory GST Bills.

If these are firmed up, Jaitley will be able to table all four enabling legislations for the tax in Parliament in the ongoing Session. These comprise of the Central, Integrated and UT GST Bills as well as the proposed legislation for compensation to States for any revenue losses.

Sources said that once cleared by the GST Council, the Centre is keen to take it to the Cabinet latest by next week and then table it in Parliament. The Session adjourns on April 12 and passage of the Bills in the current Session is essential for implementation of GST from July 1.

States may want changes

But, with Assembly elections in key States completed and the process of government formation going on, it is unclear how far the discussions will proceed.

“Ideally, there should be Ministers from all States present at the meeting, as it will take up the crucial draft SGST Bill,” noted a State Finance Minister.

Some States seem keen to reopen discussions on at least some provisions of the Centre and Integrated GST Bills, which were approved by the Council at its last meeting on March 4.

The Council is also likely to review the process of migration of existing businesses and assessees to the GST Network (GSTN). Officials from the GSTN and the Finance Ministry are likely to make a presentation on the state of preparedness. The draft laws have called for a transitional period of about six months to carry forward tax credit.

According to official data, enrolment of existing taxpayers under GST is still going on with different States at varying stages in the registration process. Training of officials for the new tax regime is also almost complete.

Source : Economic Times

40 – 16-03-2017


EXIM BANK’s GOVERNMENT OF INDIA SUPPORTED LINE OF CREDIT OF USD 50 MILLION TO GOVERNMENT OF CO-OPERATIVE REPUBLIC OF GUYANA

A.P. (DIR SERIES 2016-17) CIRCULAR NO.40DATED 16-3-2017

Export-Import Bank of India (Exim Bank) has entered into an agreement dated March 16, 2016 with the Government of Co-operative Republic of Guyana for making available to the latter, a Government of India supported Line of Credit (LOC) of USD 50 million (USD Fifty million only) for financing East Bank East Coast Road Linkage Project in Guyana. The goods including plant, 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, goods and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 per cent of goods and services may be procured by the seller for the purpose of the eligible contract from outside India.

2. The credit agreement under the LOC is effective from March 02, 2017. Under the LOC, the terminal utilization period is 60 months after the scheduled completion date of the project.

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

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

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

6. 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.

 

39 – 16-03-2017


EXIM BANK’s GOVERNMENT OF INDIA SUPPORTED LINE OF CREDIT OF USD10 MILLION TO GOVERNMENT OF CO-OPERATIVE REPUBLIC OF GUYANA

A.P. (DIR SERIES 2016-17) CIRCULAR NO.39DATED 16-3-2017

Export-Import Bank of India (Exim Bank) has entered into an agreement dated November 09, 2016 with the Government of Co-operative Republic of Guyana for making available to the latter, a Government of India supported Line of Credit (LOC) of USD 10 million (USD Ten million only) for financing procurement of an ocean ferry for meeting the transportation requirements of passengers, vehicles and cargo in the northern region in Guyana. The goods including plant, machinery and 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, goods and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 per cent of goods and services may be procured by the seller for the purpose of the eligible contract from outside India.

2. The credit agreement under the LOC is effective from March 02, 2017. Under the LOC, the terminal utilization period is 60 months after the scheduled completion date of the project.

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

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

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

6. 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.

Karnataka hikes tax on high end bikes to 18%, dealers see minimal impact : 16-03-2017


The increase in Motor Vehicle Tax from 12% to 18% on motorcycles that cost over Rs 1 lakh means aspirational bike brands like Royal Enfield and KTM, and affluent superbikes like Harley Davidson will come at a superior price tag.

The increase, experts believe, will cause a minimal dent on sales. Royal Enfield bullet costs Rs 1,60,548 onwards, but its dealers are not worried. Roopa Manjunath, showroom in-charge at Sai Ram Autocraft, says, “There may be a 5-10% drop in sales. Brand-conscious customers do not hesitate to shell out a little extra these days.”

According to Sainik Raj Chordia, a KTM partner-dealer, “The tax levied in Maharashtra and Kerala is 20%, which makes bikes still cheaper in our state. Moreover, most bikes are sold on instalment basis through bank loans. The government has protected the common man by taxing only the high-end bikes.”

The superbike segment may not be exactly hit either. Ashok Yaraganal, brand and marketing head of Riders Republic (bike club) says, “The decision to buy a luxury bike is driven by passion and not by the need to commute. But where is the good infrastructure as the government happily collects heavy taxes?”

Harley owner Kripal Amanna shares that some of his biker friends are holding their decision to buy a new superbike. “Now, people will see a jump in the sales of second-hand bikes,” notes Amanna.

Industry insiders believe despite the higher taxes, two-wheeler sales will continue to be highest in Bengaluru, which already has around 46 lakh two-wheelers.

Source : Financial Express

As Karnataka inches closes to polls, CM Siddaramaiah showers sops on voters in Budget 2017 : 16-03-2017


Chief Minister Siddaramaiah on Wednesday presented a budget that is harsh on haves, but warms up to the low-income groups. While people will have to pay more for luxuries ­ read expensive bikes and hard alcoholic beverages ­ food from the proposed canteens will be cheaper.

So will be movies at multiplexes.The CM has paid special attention to Bengaluru and Mysuru ­ the first because it is the engine of growth and the second because he represents that district. He has generously announced programmes focussing on rural voters, though he is unsure how GST will play out on revenues, and if he will be able to fund even half of these announcements.

He has estimated that the next fiscal will end with a gap of Rs 372 crore, but it will be far higher going by past experiences. There are no major tweaks in the VAT structure as Karnataka is just a quarter away from implementing the GST.

If the CM pursues the populist programmes aggressively with his sight on the assembly polls next year, it may wreak havoc on finances. Since Siddaramaiah’s next budget will most likely read like a poll manifesto, this is his last budget where voters will hold him to account for his promises.

While Tamil Nadu is home to Amma canteens, Siddaramaiah will unveil Namma Canteen in Bengaluru municipal corporation limits, and Saviruchi mobile canteens in districts.

In one stroke, he will cover the entire state, and he plans to spend Rs 100 crore in Bengaluru alone ­ a city with 28 assembly segments. This, coupled with 3,000 city buses and a slew of roads, bridges and Metro in Bengaluru, should cheer citizens if implemented well and without delay.

The CM has clearly set a cat among the pigeons by announcing his intention to raise the retirement age for private sector employees by two years from the present 58.

Source : Business Standard

Karnataka Budget 2017: Retirement age in private sector up to 60, IT, ITeS exempted : 16-03-2017


Karnataka Chief Minister Siddaramaiah on Wednesday proposed to increase the retirement age of private sector employees from the present 58 to 60, leaving the captains of industry worried as they were hoping for more easing of labour regulations. The budget, however, did not talk of any major reforms in labour laws.

Bengaluru itself houses more than a million workers in technology and BPO sectors, and service sectors are known to hire workers on contract basis, and renew the employment contract on expiry on a need basis. Even public sector HAL has taken to contract hiring route. Its chairman T Suvarna Raju, at a recent press conference, said that the organisation has begun hiring engineers based on project tenures.

“Each company in the private sector has its own dynamics based on the industry in which it operates, and therefore, it is unfair to impose an extended age of retirement,“ said Shekar Viswanathan, vice chairman at Toyota Kirloskar Motor.

According to Madhu Damodaran, head of legal operations at Simpliance, a labour law compliance firm, Karnataka is well within its powers to mandate retirement age of 60 through standing orders under its existing state labour laws. He, however, clarified the retirement age regulations are not applicable to the IT and ITeS firms as they are exempt from following the standing orders by way of a notification.

Source : Economic Times

1054/03/2017-CX – 15-3-2017


CENTRAL EXCISE ACT, 1944 – CLARIFICATION OF SAREE UNDER CETA, 1985

CIRCULAR NO.1054/03/2017-CXDATED 15-3-2017

Representations have been received from the members of the trade requesting clarification regarding classification of ‘Saree’. The issue raised in these representations is whether the goods described as ‘Saree’ which has undergone further processing such as embroidery, stitching of lace and tikki etc. and stitched with two or more kinds of fabrics is classifiable as ‘Saree’ under Chapter 54 or as made-ups under Chapter 63 of the Central Excise Tariff Act, 1985.

2. The issue has been examined. As per Rule (1) of General Rules of Interpretation of the Schedule, “The titles of Sections, Chapters and Sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to terms of the headings and any relative Section or Chapter Notes…”. Further, as per Rule 3(a) of the said Rule, “The heading which provides the most specific description shall be preferred to headings providing a more general description….”.

3. ‘Saree’ has been specifically classified under Chapter 50, 52 and 54 of the Central Excise Tariff Act, 1985 depending upon the material of the fabrics. Further, even after stitching, embroidery work and fixing of falls etc., a ‘saree’ remains fabrics only as no new item emerges having distinct name, character and use. Stitching of two or more different kinds of fabrics also does not take away its classification from heading 50, 52 or 54 as in that case, by virtue of Section note 2(A) of Section XI, such ‘saree’ will be classifiable under the heading as if consisting wholly of that one textile material which predominates by weight over any other single textile material. In case no one textile material predominates by weight, ‘saree’ is to be classified as if consisting wholly of that one textile material which is covered by the heading which occurs last in numerical order among those which equally merit consideration.

4. Chapter 63 covers ‘Other made up textile articles; sets; worn clothing and worn textile articles; rags’ which is a more general description. ‘Saree’ is not specifically classified in this chapter and therefore application of Rule 3(a) [refer para 2] would take out ‘Saree’ outside the ambit of chapter 63.

5. In view of above, it is clarified that ‘Saree’ which has undergone further processing such as embroidery, stitching of lace and tikki etc. and stitched with two or more kinds of fabrics will be classifiable as ‘Saree’ under Chapter 50, 52 and 54 of the Central Excise Tariff Act, 1985 depending upon the material of the fabrics, and not as made-ups under Chapter 63 of the said Act. Each case may be decided on the basis of facts of the case and where further processing of ‘Saree’ does not change the essential characteristics of the fabric as that of ‘Saree’, it should continue to be classified as ‘Saree’.

6. Difficulty faced, if any, in implementing the circular should be brought to the notice of the Board.

 

Government likely to ease FDI rules for retail : 15-03-2017


The government is expected to move swiftly to ease foreign investment rules for the tightly-policed multibrand retail sector after BJP’s resounding win in the Uttar Pradesh assembly elections.

In his budget speech, finance minister Arun Jaitley had announced the government’s intent to ease foreign direct investment (FDI) rules further but had refrained from naming any sectors in the wake of assembly elections in five states.

Sources, however, told TOI that the broad contours of the FDI package have been prepared at the level of bureaucrats and there are two options for the retail sector, which is seen to be a key element of the Narendra Modi government’s job creation plan as it heads into the last two years of its five-year term.

One option is a limited opening up by allowing food retailers to generate around 20-25% of their sales from non-food items such as kitchen-use products or basic household requirements like toothpaste. The current policy allows 100% FDI in stores that sell only Made-in-India food products or locally produced farm goods. There have been no takers for the food retail business so far as several retailers are waiting for a further opening up.

The ministry of food processing was lobbying hard for letting these retailers sell everyday-use products but other government agencies were not on board.

Later, however, the department of industrial policy and promotion, the agency that drives FDI policy, agreed to the proposal and has already communicated its backing.

The second option is more radical and is seen as an option that will translate into “real opening up” of the multibrand retail business. Sources said the government may look to allow FDI in retail with the rider that only India-made goods would be sold in these stores.

This proposal, they said, would be more palatable to retailers as it would give them greater operational flexibility besides providing an arrangement where the entire canvas is available.

FDI in retail has been a contentious sector with UPA’s move to open up the sector facing stiff resistance from BJP before 2014. In fact, BJP-ruled states had said that they would not allow foreign-owned companies to open stores under the shops and Establishments Act, preventing a rollout of the policy.

Since coming to power in 2014, the Modi administration has not reversed the UPA decision but has not endorsed it earlier as none of the global players have sought permission.

While Carrefour and Auchan have exited India, Tesco has a tie up with the Tata Group. Walmart is studying its model in some of the Latin American markets to see if it can enter the food retail space but it would be more comfortable if given greater policy elbowroom.

Source : Financial Express

As Dubai prepares to change tax laws, Indians scramble to hide undeclared wealth : 15-03-2017


Many Indians are making a last-ditch attempt to hide their undeclared wealth stashed abroad, with Dubai — often the last resort for many — no longer remaining as friendly a tax haven as it once was.

They hope to mask their wealth behind financial structures and special arrangements with professional service providers before January 2018 when the United Arab Emirates (UAE) begins to share information with India on bank accounts.

As banks in the UAE turn more demanding, many rich Indians who have not come clean on their secret foreign bank accounts, are using ‘insurance wrappers’ and the time-tested services of nominee directors to escape tax, penalty, and possible prosecution.

For opening accounts of companies, banks in Dubai are insisting on tax ID of the home country, copies of passport, and, occasionally, the presence of Indian shareholders of these entities. Banks, according to an expert in foreign currency regulations, are taking more than a month to open accounts compared to 3-4 days before.

The modus operandi to park undisclosed funds entails buying shares of existing shell companies by using the RBIsanctioned liberalised remittance route — which allows a resident individual to invest up to $2,50,000 a year in properties and securities abroad — and later using the company’s bank account to hold untaxed money.

According to three senior finance professionals ET spoke to, more and more nominee directors are being used to camouflage the true ownership of such companies.

“You buy a company remitting say $1,00,000. Later, you transfer funds lying in other destination like Switzerland and Jersey to the bank account of a Dubai company.

Now, if you are holding 90% shares in such a company, it may be more difficult for you to wriggle out when questioned by the Indian IT department, which collects information from the UAE authorities. But if you are holding just 10% shares of the company and do not occupy any board seat, you can claim that the funds are business income and belongs to the company and not you. Here, nominee directors hold shares on behalf of you against a nominee shareholding agreement, which may not be disclosed to banks,” said one of them .

The other possible structure that is being tried out are insurance wrappers — life insurance policies similar to trusts but that can be formed and dismantled easily. “The arrangement is simple. The nominee or the ‘technical owner’ invests in insurance wrappers and the ultimate real owner is the beneficiary. The beneficiary then receives the amounts after a certain time period, say five years, as endowment; or, the family gets the benefit in the event of death or if they find themselves in  unforeseen circumstances,” said another person.

“Traditionally, Dubai has been used by Indians and NRIs to park their unaccounted money through different structures. But, now, banks are more agile and enquiring about the ultimate beneficial owners. This is possibly forcing many to think of innovative structures,” said senior chartered accountant Dilip Lakhani.

Since early 2016, banks are looking into remittances to and from entities in the UAE Free Trade Zone, while the UAE central bank is questioning so-called pass through transactions. Banks and regulatory authorities are being extra vigilant when they come across Indian names.

According to Mitil Chokshi, senior partner at Chokshi and Chokshi, and a cross-border business advisor, “Common reporting standards, or CRS, will have different deadlines of participating countries from Sept 2017 to Sept 2018… one will see modifications in bank application forms, several procedures are being changed even in countries like Mauritius where they require tax ID of Indians, Chinese, etc. An individual is becoming one transparent entity whose data and information is linked to home country tax ID. This will enhance reporting and compliance. The credit goes to the US as the CRS follows the FATCA.”

But, Chokshi and others interviewed by ET believe that while clever structures can help buy time, it will not hold back IT and ED from questioning transactions and the source of funds.

Source : Business Standard

Cost to fall with integrated transport & logistics policy: Nitin Gadkari : 15-03-2017


The government will launch an integrated transport and logistics policy aimed at increasing the average freight speed on highways to 50 km per hour and cutting costs by half, road transport and highways minister Nitin Gadkari has said.

“The plan includes construction of 50 economic corridors, 35 logistics parks and 10 intermodal stations at a cost of Rs 5 lakh crore,” Gadkari told ET’s Rajat Arora in an interview. Edited excerpts:

Road construction target is set to hit a record of 8,000 km this fiscal. What are your targets for the next financial year?

We are now coming out with an integrated transport and logistics framework which aims at increasing the average speed of freight transportation on the highways network from the current speed of 20-25 km per hour to 40-50 km per hour and to reduce the logistics cost by almost half.

In the budget speech, the finance minister had said that a specific programme for the development of multimodal logistics parks, together with multimodal transport facilities, will be drawn up and implemented.

The plan, being spearheaded by my ministry, will bring together road, rail, air and urban planning to provide seamless movement of freight traffic across states.

What all does this plan involve and how’s it going to be funded?

It involves construction of 50 economic corridors across the country and setting up of 35 logistics parks at the existing freight clusters at a cost of Rs 5 lakh crore. This will be the largest road construction programme ever undertaken by any government.

India is a growing economy and the high cost of logistics, currently at 14 per cent of GDP, is having a negative effect

We’ll launch the integrated transport and logistics framework on Wednesday which will be followed by an inter-ministerial logistics summit in New Delhi from May 3 to 5 where the action plan will be finalised.

As far as the funding part of economic corridors is concerned, we’ll do it through our budgetary allocation, raising NHAI bonds and also leasing out existing national highways to pension funds for collection of toll and operations at an upfront fee.

We could easily do highway works worth Rs 2 lakh crore on our own. We’ll also be awarding some projects on the hybrid annuity model. For logistics parks, we are going to tie up with state governments that will provide land.

We’ll develop trunk infrastructure on our own and railways will be responsible for building last-mile rail routes. Private players will be brought in for development and operations at logistics parks.

How will the integrated transport and logistics policy reduce the congestion on highways and the cost for transporters?

The policy is aimed at transforming India’s logistics from a point-to-point model to a hub-and-spoke model to achieve reduction in logistics costs.

To start with, we’ll have 50 economic corridors which have already been identified and will be awarded for construction on both government-funded and PPP (public private participation) model from April.

Most of these corridors are national highway expansion plans where two-lane highways will be expanded to six lanes. The move would increase the average distances covered by the freight vehicles from the existing 200-250 km to 350 km.

Then we have identified 35 clusters accounting for 50 per cent of the total freight movement in the country for logistics parks development.

We’ll form SPVs (special purpose vehicles) with state governments where the state will provide land on the outer periphery of urban centres and the Centre will provide trunk infrastructure such as feeder highways and rail connectivity

The private players will be invited to develop and maintain the logistics parks. The availability of such multimodal freight hubs will straightaway cut transport costs by 20 per cent.

Also, urban transportation will be an integral part of this framework where we need to bring in new technologies such as Metrino and Hyperloop to decongest our roads. Soon, I am going to make a presentation to the Prime Minister on the future of urban transportation technologies.

You’ve been pushing for electric cars at a mass scale and invited Tesla to set up a manufacturing base in India. What’s the progress on that?

Last week I had a meeting with finance minister Arun Jaitley where I sought his support to offer subsidies for people buying electric cars. I also want that e-taxis should be allowed to run without any commercial permits as needed in the case of diesel or CNG taxis.

This will immediately improve the sales of e-vehicles as the hassle of getting permits will be removed, hence reducing costs. I am in talks with several state governments for that

To start with, a cab aggregator is launching 300 e-taxis in Nagpur. I am providing the company full infrastructure support in terms of charging points. This will be the first large-scale trial of e-taxis in the country.

Source : Times of India

No.09/2017 Dated: 14-03-2017


PRADHAN MANTRI GARIB KALYAN YOJANA, 2016 – CLARIFICATIONS ON TAXATION AND INVESTMENT REGIME FOR

CIRCULAR NO.9 OF 2017 [F.NO.142/33/2016-TPL (PART)]DATED 14-3-2017

The Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016 (hereinafter ‘the Scheme’) has commenced on 17.12.2016 and is open for declarations upto 31-3-2017. Vide CBDT Circular No. 2 of 2017 dated 18th January, 2017, certain clarifications were issued on the Scheme.

2. Subsequent to issuance of the said circular, representations have been received from various stakeholders seeking clarification as to whether the deposits made in bank account or cash in hand which are eligible for being declared under the Scheme should exist on the date of filing of declaration under the Scheme.

3. In this context, it is clarified that where the undisclosed income is represented in the form of deposits in an account maintained with a specified entity, it is not necessary that the said deposits should exist on the date of making payments under the Scheme or furnishing a declaration under the Scheme. However, where the undisclosed income is represented in the form of cash, it is clarified that such cash should exist on the date of making payment of tax, surcharge and penalty under the Scheme or on the date of making deposit under the Pradhan Mantri Garib Kalyan Deposit Scheme, 2016, whichever is earlier.

 

Pending repayments remain high for MFIs: RBI staff repor : 14-03-2017


The financial sector may gradually be recovering from the effects of demonetisation, but microfinance companies, whose customers depend on cash transactions, are still grappling with pending payments with high risk of defaults.

A research paper by the Reserve Bank of India (RBI) staff said such customers often fall in the category of small farmers and unskilled labour.

Microfinance institutions faced problems in getting full repayment from clients in some pockets of the country because of currency shortage. As the time progresses, the prospects of recovery from people who stay in default reduce, said bankers.

Data provided by the Micro Finance Institution Network (MFIN), a self-regulatory body of finance companies working in micro finance segment, however, suggest that pending repayments were still high in January 2017, the paper said.

In November 2016, the RBI provided an additional 60 days beyond what was applicable for the regulated entities in this sector for recognition of a loan account as sub-standard.

Subsequently, on December 28, the central bank again announced forbearance of 30 days (in addition to the 60 days provided earlier). The impact of leeway on non-performing assets (NPAs) would be known by the end of March.
While the total loan amount outstanding declined by 4.1 per cent between November-end and January-end, loan amount disbursed increased by 9.2 per cent during the same period. The cash collections, which initially witnessed significant reduction, improved subsequently, except for some pockets in the western region.
The latest feedback received by MFIN from their member MFIs suggests that there has been some improvement in collections since late December. While repayments are mostly made in cash, MFIs are striving to opt for different cashless ways for disbursements.
The paper, titled ‘Macroeconomic Impact of Demonetisation — A Preliminary Assessment’, prepared by the staff of Monetary Policy Department at RBI, claimed the impact of demonetisation on the real economy has been transient.
Source : PTI

Cigarette sector poised for 5% growth on stable VAT : 14-03-2017


Thanks to stable tax rates on the cigarette industry across the states in the country and the Centre’s recent seemingly soft stance on the sector, the cigarette industry in India is poised for a five per cent volume growth in the coming fiscal year.

Cigarette market in India
Volume
(mn kg)
%age share in industry
Total tobacco consumption 562 100
Total legal cigarette market 62 11
Total non-duty paid cigarette market 22.5 4
Other forms of tobacco consumption 477.5 85
Figures are for financial year 2014-15; Source: Ficci Cascade Report, Tobacco Institute of India, Industry estimates

For the past three years, except Rajasthan, no other states have toyed with the value added tax (VAT) rate in the tobacco sector. While states like Uttar Pradesh, Himachal Pradesh and Jammu & Kashmir, which together accounts for six per cent of the total cigarette consumption, charge an average 40 per cent VAT on tobacco consumption in their respective state, West Bengal, which accounts for eight per cent of the sales volume charge as low as 12 per cent on consumption. Chattisgarh, which accounts for three per cent of the sales volume charge half a per cent more than West Bengal.

“Over the years, the states have realised that they need to rationalise taxes on cigarette so that they will not lose revenue to non-duty paid ones on account of tax evasion,” Abneesh Roy, Senior Vice President-Institutional Equities at Edelweiss Securities told Business Standard.

However, Rajasthan, which comprises two per cent of the cigarette sales, have increased the average VAT on the tobacco segment from 15 per cent in FY 2016 to 17.3 per cent in FY 2017 and has again increased the rate to 19.8 per cent.

VAT rates on tobacco in Indian states
Major tobacco consuming states Percentage of sales volume Rate in FY16 Rate in FY17 Rate in FY18
Andhra Pradesh 12 20 20 20
Tamil Nadu 12 30 30 30
Kerala 11 30 30 30
West Bengal 8 12 12 12
Maharashtra 8 35 35 35
Karnataka 8 24 24 24
Delhi 4 20 20 20
Haryana 2.5 20 20 20
Uttar Pradesh 4 40 40 40
Madhya Pradesh 3 13 13 13
Chattisgarh 3 12.5 12.5 12.5
Bihar 2 20 20 20
Gujarat 2 30 30 30
Rajasthan 2 15 17.3 19.8
Assam 2 30 30 30
Punjab 2 33 33 33
Odisha 1 25 25 25
Himachal Pradesh 1 40 40 40
Jammu & Kashmir 1 40 40 40
Source: Edelweiss Securities Ltd

Industry veterans don’t view the tax increase in Rajasthan to dent cigarette sales owing to its low cigarette consumption.

Instead, industry sources and Roy hope that this fiscal year, led by stable tax rates on the cigarette industry, the sector will register a five per cent volume growth.

“The industry, as well as ITC, may register a five per cent growth in the coming fiscal year with tax rates stabilised and rationalised to an extent”, Roy said.

In a statement released during its third quarter results for FY 2017 in January-end, quoting an independent study, industry leader, ITC, which commands a 79 per cent market share in the legal cigarette industry said India is now the fourth largest market for illegal cigarettes in the world. Illegal trade comprising smuggled foreign and domestically manufactured tax-evaded cigarettes is estimated to constitute one-fifth of the overall cigarette industry in India and is estimated to cost the exchequer a revenue loss of more than Rs. 9000 crores per annum.

“High taxes in the recent past on legal cigarettes and a discriminatory regulatory regime on the legal cigarettes in the country over the years has led to a significant shift in tobacco consumption to lightly taxed or tax-evaded tobacco products”, an industry official said.

However, with the government planning to bring in the non-cigarette tobacco sector under a licensing regime besides increasing the duty on it to create a level playing field, cigarette industry executives sound optimist.

“So far cigarette companies have borne the brunt of high taxes losing out considerable potential in the rural markets. Now with the proposed licensing for non-cigarette industry, there may be atleast some parity in the tobacco segment”, the official said.

Further, the Union Budget 2017-18 has also hiked the duty rate on cigarettes by six per cent which is the lowest in the past six years.

“The government has adopted a softer stance in two consecutive budgets and has also increased tax on other forms of tobacco. Also, compulsory licensing of non-cigarette tobacco products is likely and GST (goods and services tax) is poised to impact the unorganised cigarette market”, Roy said while reasoning for the projected growth in the cigarette industry.

As per industry estimates, out of the total 562 million kg (mkg) tobacco industry in India, legal or duty paid cigarettes comprise 11 per cent or 22.5 mkg in the trade while 85 per cent or 477.5 mkg tobacco is consumed in other forms like bidi, chewing tobacco and others.

Source : Business Standard

GST: New rules will have impact on retail chains, restaurants and contractual farming : 14-03-2017


Even as the government recently brought some parts of agriculture under goods and services tax (GST) gamut, some big retail chains and quick service restaurants (QSRs) may see the impact. This is mainly because contractual farming will now be under the purview of GST.

Many big retail chains give contracts to farmers for growing certain agricultural products which are then directly sold in the malls. Industry trackers say that such contractual farming would now attract GST. Also some of the multinational QSRs including some renowned burger chains give contracts for potato farming. That too would now attract GST, say industry experts.

Additionally some of the middle men that trade in agricultural commodities would also be included under GST. Industry experts say that some of the smaller retailers who sell different products including agricultural products too would come under the purview of GST.

As for traditional farmers, they would not be required to get themselves registered to pay GST. However, those buying products from the farmers may be required pay GST.

The government came out with the clarification on agriculture products recently. The government is looking to iron out issues before the centralised tax is rolled out in next couple of months.

Some of the sectors however are still concerned how the GST would impact them. Like many banks and financial institutions may be in for a lot of trouble as they could just see the complexity in paying taxes increase under the incoming goods and services tax (GST). Due to the place of supply regulations in GST framework transactions between two branches of a bank is set to trigger a tax, which could prove to be cumbersome. Indian banks have also approached the government to amend the rules  regarding this.

Source : Economic Times

Despite preventative measures, how do financial criminals evade laws? : 13-03-2017


Despite preventative measures against bankruptcy fraud and money laundering, criminals are finding ways to exploit differing regulations in the United States and Europe. In a recent study, two UT Dallas alumnae examine the frequency and implications of bankruptcy fraud and money laundering. They also assess the degree of cultural and ethical differences between these acts in the United States and Europe, where the crimes are more prevalent.

“The lack of uniformity between the financial systems and their regulations makes a lot of room for criminals to participate in these illegal activities. If somehow the nations of the world were able to create uniformity within their financial systems and the way regulations work, it would eliminate a lot of the crime that is happening right now,” said co-author Brenda Limon.

The study found that while auditors and financial analysts are in the process of reducing bankruptcy fraud and money laundering, completely nullifying these issues may never be possible without a uniform structure of financial regulations.

The researchers analysed Hofstede’s cultural model and how it pertains to financial regulations between the U.S. and Europe.

“It was interesting to see the cultural differences across different nations and how they manifest in the policies and financial regulations,” said co-author Pamela Wong.

She added, “Specifically for the U.S., one of the dimensions is low power distance, which means Americans prefer an equal distribution of power amongst individuals. This is exactly why the U.S. has strong whistleblower protection against retaliation for people who speak out against corporations that commit these types of fraud.”

“We found this tendency to look for short-term results sometimes pushes people in influential positions to commit crimes, either money laundering, bankruptcy fraud or the manipulation of financial statements,” Limon said.

“Because they find themselves under pressure to show stockholders that the company is growing, or has closed a deal, that pressure instigates them to make the mistake of doing whatever it takes to get quick results.

“On the other side of the coin, the United States has been one of the most active in trying to create uniformity in the rules. They’re one of the countries trying to come up with regulations that fit not only their standards, but standards of other countries that are strongly tied to them financially.”

Source : PTI

Expediting land acquisition, environmental clearance crucial for the economy: Nitin Gadkari : 13-03-2017


India has adequate growth underpinnings for infrastructure, but challenges in acquiring land and securing environmental clearances delay airports, roads, or ports in the world’s fastest-expanding major economy.

Nitin Gadkari, minister for road transport, highways and shipping, and industry leaders emphasised need to speed up decisions at the Connecting India panel discussion at the Economic Times India Infra Summit 2017. He said concerns over scrutiny from the judiciary, media and investigating agencies slowed down decisions

“We need to assess what the the country is paying due to stay orders from the judiciary in infrastructure projects. What is the cost due to delay in land acquisition and environment approvals? I am sure the cost is Rs 1 lakh crore,” Gadkari said at the discussion. “We need to change the atmosphere and improve decision-making process.”

Puneet Dalmia, MD at India’s third-biggest cement manufacturer Dalmia Bharat Group, said, “With candour and honesty, speed and lower prices can be achieved. There is strong political will too. The Rs 7-lakh crore NPA is a problem… But can people take decision boldly without being criticised? That is the question to address.”

Gadkari said the government had resources to fund projects but was keen on private participation. He said Indian contractors and investors would get the highest priority as his government would seek to solve the industry’s problems.

“To build the infrastructure India needs, we require a serious ecosystem. The financial infrastructure of the country is woefully inadequate to deal with what we are planning to do. We also need to look at the entire procurement system and assess how to better share the risks between the private and public sectors,” said Ajit Gulabchand, CMD at builder HCC.

Industry leaders praised the government and its agencies for bringing in transparency and efficiency in the system.

“A lot of infrastructure that has been created in the past one and a half years focuses on efficiency in using existing infrastructure. Earlier, private players were doing better at major ports but this is the first time that as a private player, we are competing with public sector on efficiency,” said Karan Adani, chief executive officer at Adani Ports.

“A lot of infrastructure that has been created in the past one and a half years focuses on efficiency in using existing infrastructure. Earlier, private players were doing better at major ports but this is the first time that as a private player, we are competing with public sector on efficiency,” said Karan Adani, chief executive officer at Adani Ports.

Source : Business Standard

GST induces conflicts among state governments : 13-03-2017


Even as the government readies itself for rolling out Goods and Services Tax (GST) many Indian companies are worrying that they may be stuck between cross fire of two states fighting for revenues.

According to the GST law a state can challenge and demand a separate tax under GST, even if the amount was paid in another territory. Industry trackers say that many states that are set to lose out on revenues could become aggressive and can challenge GST calculations conducted by companies that doesn’t benefit them.

The problems say experts, is that currently there is no proper dispute resolution mechanism between the states and they will have to approach the appellate body or the Supreme Court. Industry trackers say that a separate readdressal mechanism is required for GST.

Under the GST mechanism some of the states where there are manufacturing hubs are set to lose out on revenues. This is mainly because GST is a consumption based tax. So GST would be paid at the point where goods or services are consumed and not where they are manufactured or generated. This would mean that poorer states like Bihar,

Uttar Pradesh or North Eastern states could see their revenues going up. While states like Maharashtra, Gujarat and Tamil Nadu would see their revenues depleting.

Many companies have already started preparing themselves for the GST. Some of the biggest manufacturers in the country have moved to level the playing field even before GST is put in place demanding that their vendors cut prices of goods supplied to comply with the anti-profiteering clause in the new tax regime.

The companies have already calculated the exact jump in the vendors’ margins and want that they pass it on to them. Most automobile companies and a handful of petroleum companies have started communicating to their vendors about this from early February.

Source : Economic Times

Roll out innovative products, IRDAI chief tells insurers : 10-03-2017


The insurance regulator wants non-life insurers to work on innovations/segmentation strategy, whereby motor third-party insurance premium paid by a person driving a car for only a couple of hours a week is lower than that for a person driving for 10 hours. Likewise, a person regularly going to a gym should pay less medical insurance premium.

Giving examples of some of the product ideas coming up in the market, Insurance Regulatory and Development Authority of India Chairman TS Vijayan said: “Suppose you are driving your car for one hour a week and somebody else is driving 10 hours a week. Why should these two persons pay the same premium?

“That (thought) process is coming up in the market. Because of the Internet of Things (IOT), policyholders cannot cheat. If such innovative products come in, then the regulator will definitely consider.”

Similarly, in the case of health insurance, if a person goes to gym regularly then the premium could change (be lower). “So far, nobody has come up with such innovative products. I was telling the companies, you bring the products….if innovation comes, it is good for the customer.

“If it gives a better deal to the customer, then why not look (by the company) at it,” explained the IRDAI chief on the sidelines of a FICCI Insurance Summit.

Mayank Bathwal, CEO, Aditya Birla Health Insurance Company, said his company has launched ‘Activ Health’, where policy-holders can earn up to 30 per cent premium back as a reward for their health activities — such as recording 10,000 steps a day, working out at a gym for 30 minutes, practising yoga, and so on.

Motor third-party insurance

Referring to the IRDAI’s proposal to hike motor third-party insurance by 15-50 per cent in different categories of private and commercial vehicles, Vijayan said: “We are getting varied comments. Obviously, customers are not too happy with the (proposed) hike in premium.

“However, looking at the reality of the business, the loss-making nature of the business, a hike is inevitable. In some cases, even more than this (what has been proposed) may be inevitable…Insurance is all about pooling and settlement of risk.”

Vijayan underscored that the problem with motor third-party insurance is that the claim amount keeps varying, it is not fixed.

“So, when the claim amount keeps varying, naturally premium will also change….If there is a fixed compensation, then the premium is the same,” he said.

Source : Financial Express

1053/02/2017-CX – 10-3-2017


MASTER CIRCULAR ON SHOW CAUSE NOTICE, ADJUDICATION AND RECOVERY

CIRCULAR NO.1053/02/2017-CX [F.NO.96/1/2017-CX.1]DATED 10-3-2017

Kind attention is invited to Ninety two Circulars and Instructions on Show Cause Notices and Adjudication issued by the Board from time to time, placed at the Annexures to this Master Circular. These circulars address references from trade and field formations and provide clarity and uniformity on the issues raised. Board undertakes exercise of consolidating these circulars from time to time so as to ensure clarity and ease of reference. This master circular on the subject of show cause notices, adjudication proceedings and recovery is an effort to compile relevant legal and statutory provisions, circulars of the past and to rescind circulars which have lost relevance. Annexure-I to the circular provides list of the eighty nine circulars which stand rescinded. Three circulars listed in Annexure-II have not been rescinded as they contain comprehensive instructions on the subject they address.

2. The master circular is divided into four parts. Part I deals with Show Cause Notice related issues, Part II deals with issues related to Adjudication proceedings, Part III deals with closure of proceedings and recovery of duty and Part IV deals with miscellaneous issues.

3. The provisions of the Master Circular shall have overriding effect on the CBEC’s Excise Manual of Supplementary Instructions to the extent they are in conflict.

4. Difficulty, if any, in the implementation of this Circular may be brought to the notice of the Board. Hindi version will follow.

Part I : Show Cause Notice

1.1 Demand: Under the provisions of the Central Excise Act, 1944, demand can be issued when any duty of Central Excise has not been levied or paid or has been short-levied or short- paid or where any duty has been erroneously refunded, for any reason. The demand of duty may also arise on account of duty collected without the authority of levy or in excess of the levy but not deposited with the department in terms of Section 11D of the Central Excise Act, 1944.

1.2 Demand of duty from the assessee is made by way of issue of a Show Cause Notice (SCN in short) indicating therein charges of violations of provision of law requiring the assessee to explain as to why the duty not levied/not paid or short levied/short paid should not be recovered from the noticee with interest and penalty, if applicable. Similarly, a show cause notice can also be issued for recovery of refund erroneously paid by the Government to the taxpayer.

2.1 Show Cause notice (SCN): Show Cause Notice (SCN) is the starting point of any legal proceedings against the party. It lays down the entire framework for the proceedings that are intended to be undertaken and therefore it should be drafted with utmost care. Issuance of SCN is a statutory requirement and it is the basic document for settlement of any dispute relating to tax liability or any punitive action to be undertaken for contravention of provisions of Central Excise Act and the rules made thereunder. A SCN offers the noticee an opportunity to submit his oral or written submission before the Adjudicating Authoritiy on the charges alleged in the SCN. The issuance of show cause notice is a mandatory requirement according to the principles of natural justice which are commonly known as audi alteram partem which means that no one should be condemned unheard.

2.2 Structure of SCN: A SCN should ideally comprise of the following parts, though it may vary from case to case:

(a) Introduction of the case
(b) Legal frame work
(c) Factual statement and appreciation of evidences
(d) Discussion, facts and legal frame work,
(e) Discussion on Limitation
(f) Calculation of duty and other amounts due
(g) Statement of charges
(h) Authority to adjudicate.

2.3 Introduction of the case: This part of the SCN must contain the details of the person to whom the notice is to be issued. It must contain the name, registration number/IEC and address of the person and the manner in which the said person, has been identified in the later text of the notice. In case of issuance of SCN to many noticees, details of all such noticees should be stated separately irrespective of the fact that, the persons are closely related to each other. A very brief background as to how the present proceeding started should be discussed in the SCN. For example, a SCN may be based on audit of accounts by the internal audit or detailed scrutiny of return by the Range office or intelligence by anti-evasion etc. In this part, the gist of audit objections/observations/intelligence and a brief modus operandi of duty evasion adopted by the alleged offender may be discussed. Further, the details of verification/investigation conducted/carried out and the summary of the verification may also be discussed in this part.

2.4 Legal framework: The authority issuing the SCN should clearly lay down the legal provisions in respect of which the person shall be put to notice. While specifying the provisions, care should be taken to be very accurate in listing all the provisions and the law in respect of which the contraventions are to be alleged in the SCN.

2.5 Factual statement and appreciation of evidence: In this part of SCN, the facts relating to act of omission and commission pertinent to the initiation of the proceedings against the noticee need to be stated in a most objective and precise manner. All evidences in form of documents, statements and material evidence resumed during the course of enquiry /investigation should be organised serially in a manner so as to establish the charges against the noticee. While discussing the facts and evidences, care should be taken to be precise and succinct in expression so that unnecessary details are avoided.

2.6 Discussion, facts and legal frame work: In this part the facts and evidence need to be discussed against the legal framework set out in the show cause notice so as to arrive at the charges of omission and commission against each of the noticees separately. On the basis of discussion, the charges need to be clearly and succinctly spelt out against each noticee.

2.7 Discussion on Limitation: As per the provisions of Central Excise Act, 1944, the duty which has not been levied or paid or has been short levied or short paid or erroneously refunded can be demanded only within normal period i.e. within two years from the relevant date. However, in specific case, where any duty of excise has been not paid or short paid or erroneously refunded, by reason of fraud or collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the Act or rules made thereunder with intent to evade payment of duty, then the duty can be demanded within a period of five years from the relevant date. The SCN should clearly spell out the ingredients for invoking the extended period of five years with evidence on record. A more detailed discussion on the subject is contained in paragraphs 3.1 to 3.6.

2.8 Quantification of duty demanded: It is desirable that the demand is quantified in the SCN, however if due to some genuine grounds it is not possible to quantify the short levy at the time of issue of SCN, the SCN would not be considered as invalid. It would still be desirable that the principles and manner of computing the amounts due from the noticee are clearly laid down in this part of the SCN. In the case of Gwalior Rayon Mfg. (Wvg.) Co. Vs. UOI, 1982 (010) ELT 0844 (MP), the Madhya Pradesh High Court at Jabalpur affirms the same position that merely because necessary particulars have not been stated in the show cause notice, it could not be a valid ground for quashing the notice, because it is open to the petitioner to seek further particulars, if any, that may be necessary for it to show cause if the same is deficient.

2.9 Interest: Interest is chargeable on the delayed payment of duty under the provisions of Section 11AA of CEA, 1944 or Rule 8 of the Central Excise Rules, 2002 or mutatis mutandis for CENVAT Credit taken or/and utilized wrongly or for recovery of refund or on amount collected in excess of the duty payable on any excisable goods from the buyer of the goods under Section 11DD. There may not be need for any explicit mention of the interest liability in the show cause notice since the legal provisions in this regard are explicit and contained in Section 11A(14). However, to make the SCN a self-contained notice of charges, it may still be desirable to mention the liability of interest in the SCN.

2.10 Statement of charges: In this part, the SCN list of all charges against the noticees need to be summarized and the notice should be charged as to why action as provided in law, should not be taken against them.

2.11 Authority to adjudicate: A SCN must state the authority to whom the reply to the show cause notice is required to be answered. In case of seizure of goods, the issue of show cause notice is mandatory before any order for confiscation of goods is passed. Where there is a change in the adjudicating authority, a corrigendum to the SCN may be issued and served on the noticees to ensure that the noticees have a fair opportunity to present their case to the appropriate adjudicating authority. Corrigendum to SCN is issued due to change in jurisdiction, monetary limit, re assignment, etc. The authority who issued the SCN has to issue the corrigendum and then transfer the file to the new adjudicating authority.

3.1 Limitation to demand duty: A show cause notice demanding duty not paid or short paid or erroneous refund can be issued by the Central Excise Officer normally within two year from the relevant date of non-payment or short payment of duty, whereafter the demand becomes time-barred. Where duty has not been paid or short paid by any person chargeable with the duty by reason of fraud or collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the Central Excise Act, 1944 or of the Rules made thereunder with intent to evade payment of duty, a longer period of limitation applies and show cause notice demanding duty can be issued within five years from the relevant date.

3.2 Ingredients for extended period: Extended period can be invoked only when there are ingredients necessary to justify the demand for the extended period in a case leading to short payment or non-payment of tax. The onus of establishing that these ingredients are present in a given case is on revenue and these ingredients need to be clearly brought out in the Show Cause Notice alongwith evidence thereof. The active element of intent to evade duty by action or inaction needs to be present for invoking extended period.

3.3 The Apex Court’s in the case of M/s Cosmic Dye chemical Vs Collector of Cen. Excise, Bombay [1995 (75) E.L.T. 721 (S.C.), has laid the law on the subject very clearly. The same is reproduced below for ease of reference.

Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word “wilful” preceding the words “mis-statement or suppression of facts” which means with intent to evade duty. The next set of words “contravention of any of the provisions of this Act or Rules” are again qualified by the immediately following words “with intent to evade payment of duty”. It is, therefore, not correct to say that there can be a suppression or mis-statement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11A. Mis-statement or suppression of fact must be wilful.

3.4 Extended period in disputed areas of interpretation: There are cases where either no duty was being levied or there was a short levy on any excisable goods on the belief that they were not excisable or were chargeable to lower rate of duty, as the case may be. Both trade and field formations of revenue may have operated under such understanding. Thus, the general practice of assessment can be said to be non-payment of duty or payment at lower rate, as the case may be. In such situations, Board may issue circular clarifying that the general practice of assessment was erroneous and instructing field formations to correct the practice of assessment. Consequent upon such circular, issue of demand notice for extended period of time would be incorrect as it cannot be said that the assessee was intentionally not paying the duty.

3.5 On the other hand, there can be Board circulars which only reiterate the correct practice of assessment which is being followed by the compliant segment of the assessees. In such situations, decision to invoke extended period would depend on examination of facts of a case and where the ingredient to invoke extended period is present, show cause notice for extended period can be issued. In such situations it would be unfair to the compliant segment of the assessees to not invoke the extended period of time, if active ingredients are present to invoke extended period.

3.6 Power to invoke extended period is conditional: Power to issue notice for extended period is restricted by presence of active ingredients which indicate an intent to evade duty as explained above. Indiscriminate use of such restricted powers leads to fruitless adjudications, appeals and reviews, inflates the figures of outstanding demands and above all causes unnecessary harassment of the assessees. Therefore, before invoking extended period, it must be ensured that the necessary and sufficient conditions to invoke extended period exists.

3.7 Second SCN invoking extended period: Issuance of a second SCN invoking extended period after the first SCN invoking extended period of time has been issued is legally not tenable. However, the second SCN, if issued would also need to establish the ingredients required to invoke extended period independently. For example, in cases where clearances are not reported by the assessee in the periodic return, second SCN invoking extended period is quite logical whereas in cases of wilful mis-statement regarding the clearances made under appropriate invoice and recorded in the periodic returns, second SCN invoking extended period would be difficult to sustain as the department comes in possession of all the facts after the time of first SCN. Therefore, as a matter of abundant precaution, it is desirable that after the first SCN invoking extended period, subsequent SCNs should be issued within the normal period of limitation.

3.8 Applicability of limitation in demanding interest: In cases where duty and interest is demanded, it is quite clear that limitation prescribed in Section 11A applies. However, it may be noted that in cases where the duty has been paid belatedly and interest has not been paid, interest needs to be demanded and recovered following the due process of demand and adjudication. In such cases, the period of limitation as prescribed in Section 11A applies for demand of interest. Section 11A(15) may be referred in this regard.

4.1 Demand due to Departmental or CERA (CAG Audit): Show Cause Notice may be required to be issued due to audit objection arising out of either internal audit or CERA conducted by the office of CAG. The decision to issue Show Cause Notice due to internal audit rests with the Audit Commissioner. As far as CERA audit is concerned, a detailed circular has been issued vide Circular No. 1023/11/2016-CX dated 8.4.16. Important directions in the circular in this regard are as follows:

4.2 Where the department has agreed with the audit objection on merits constitute a large proportion of the audit objections. In such situations, Show Cause Notices should be issued immediately and where practicable view of the assessee should be obtained before issue of Show Cause Notice. Such cases should not be transferred to the Call-Book and should be adjudicated forthwith and revenue realized in cases of confirmed demand at the earliest.

4.3 Where the department has not agreed with the audit objection on merits no show cause notice should be issued in cases and should be replied giving detailed reasoning and case- laws on the subject. For further details of the procedure to reply to CERA, the said circular may be referred.

4.4 Where a contested audit objection has become DAP and on examination it is found by the Commissioner (PAC) or Joint Secretary (Customs) in CBEC that the objection should have been admitted, they may give necessary directions to the field formations to issue show cause notice and adjudicate the case on merits.

4.5 It may be noted that the procedure of transferring the show cause notice arising out of CAG objection to call-book has been discontinued vide the said circular. It may be noted that Para 4.2 to para 4.4 above only give the gist of the instructions regarding issue of Show Cause Notice and for further details, the said circular dated 8.4.2016 may be referred. The procedure for adjudication of Show Cause Notices issued due to CERA objections are contained in the circular dated 8.4.2016(ibid) and have been reproduced from para 18.1 to 18.4 of this circular for ease of reference.

5. Consultation with the noticee before issue of Show Cause Notice: Board has made pre show cause notice consultation by the Principal Commissioner/Commissioner prior to issue of show cause notice in cases involving demands of duty above Rs. 50 lakhs (except for preventive/offence related SCN’s) mandatory vide instruction issued from F No. 1080/09/DLA/MISC/15 dated 21st December 2015. Such consultation shall be done by the adjudicating authority with the assessee concerned. This is an important step towards trade facilitation and promoting voluntary compliance and to reduce the necessity of issuing show cause notice.

6. Authority to issue SCN: A SCN should ideally be issued by the authority empowered to adjudicate the case as this ensures accountability as well as rigour of examination as demands of higher amounts are adjudicated by the officers of higher rank. Details of authority empowered to adjudicate the cases as per demand of duty are discussed in paragraph no. 11. Though, issue of SCN by an officer of the rank empowered to adjudicate the case is the accepted norm, a SCN issued by a Central Excise officer of rank other than the one prescribed in the circular would not ipso facto be an invalid SCN.

7. Issue of unjust enrichment to be raised in SCN itself : In case of consequential refund of excess duty paid, the applicant should be granted a refund of such claims as is found to be in conformity with the order of the appellate authority. The question of unjust enrichment may be examined independently, if not covered by the appellate order. Where a refund application is prima-facie found to be liable for rejection after such examination, a notice should be served on the applicant stating the ground on which the refund application is liable to be rejected. In cases where refund is admissible on merits but is liable to be paid to the Consumer Welfare Fund on grounds of unjust enrichment, the assessee will be adversely affected by the decision and therefore, a notice should be served on the applicant before any such decision is taken.

8. Changing a long standing practice of assessment: A long standing practice of assessment which is widely prevalent across the country should not be suddenly changed by issuing show cause notice demanding duty. Such issues should be referred to the Board in a comprehensive manner with inputs obtained from the other zones regarding the proposed change in the practice of assessment. Demand of duty if any should be limited to normal period in such cases as the practice of assessment in such cases is known to both trade as well as the department.

9.1 Waiver of SCN: The issue of waiver of SCN has been dealt with in circular issued vide F.No. 137/46/2015-Service tax dated 18.08.2015. The crux of the clarification given is that on receipt of written request of the assessee the requirement of written SCN may be waived and the charges alongwith duty payable may be explained orally. This clarification was given in the context of closure of cases on payment of duty, interest and penalty. However, where the issue is likely to be litigated at a later date by the assessee, it would be appropriate that a written SCN be issued. This would hold true in particular for offences of serious nature or where the duty involved in high. Conclusion of proceedings may be approved by an officer equal in rank to the officer who is competent to adjudicate such cases. The cases can be closed by the competent authority in DGCEI/Executive Commissionerate/Audit Commissionerate, as the case may be. If multiple issues involving different monetary values arise from the same proceedings, then the sum total involved in all the issues arising from the same proceedings should be considered for conclusion of proceedings.

9.2 The conclusion of proceedings should invariably be intimated to the assessee in writing. There is no need to issue an adjudication order. Further, there is no need to undertake review of such conclusion of proceedings.

9.3 Call-Book Cases: A call book of cases is maintained of such cases which cannot be adjudicated immediately due to certain specified reasons and adjudication is to be kept in abeyance. The following categories of cases can be transferred to call book:-

i. Cases in which the Department has gone in appeal to the appropriate authority.
ii. Cases where injunction has been issued by Supreme Court/High Court/CEGAT, etc.
iii. Cases where the Board has specifically ordered the same to be kept pending and to be entered into the call book.
iv. Cases admitted by the Settlement Commission may be transferred to the Call-book, as

it is already covered under Category (ii) above. Where there are multiple noticees, the case can be transferred only in respect of those noticees who have made application in the Settlement Commission, and whose case has been admitted by Settlement Commission, Cases shall be taken out of the Call-Book after Settlement Order has been issued or where the case has been reverted back for adjudication.

9.4 Intimation of Call Book cases to noticee: A formal communication should be issued to the noticee, where the case has been transferred to the call book.

Part II : Adjudication of Show Cause Notice

10. Adjudication: Officers of Central Excise have been vested with powers under Section 33A of Central Excise Act, 1944 to adjudicate the Show cause notice issued to the noticees and answerable to the officers. They, in their capacity as adjudicating officers act as quasi-judicial officers. Further as per Section 2(a) “Adjudicating authority” means any authority competent to pass any order or decision under this Act, but does not include the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), Commissioner of Central Excise (Appeals) or Appellate Tribunal.

11.1 Monetary limits: Board has revised monetary limits for adjudication on 29.09.2016. The revised monetary limits and other instructions in relation to adjudication are as follows:

Sl. No. Central Excise Officer Monetary Limits of duty/tax/credit demand for Central Excise and Service Tax
1. Superintendent Not exceeding Rupees Ten lakhs
2. Deputy/Assistant Commissioner Above Ten Lakhs but not exceeding Rupees Fifty Lakhs
3. Additional/Joint Commissioner Above Fifty Lakhs but not exceeding Rupees Two Crore
4. Commissioner Without limit i.e. cases exceeding rupees two crores

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 Sl.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:
S. 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

11.2 Other important points:

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.

i. Refund matters (including rebate), shall be adjudicated by the Deputy Commissioner/Assistant Commissioner without any monetary limit
ii. 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.

11.3 Where differential duty/demand of duty is paid without interest, in such cases, Show Cause Notices demanding interest and levy of penalty should be issued. In the Show Cause Notice, the reference of duty already paid should also be mentioned.

11.4 As regards adjudication of the notices issued for recovery of interest alone, it is clarified that these cases should be decided by the proper officer based on the monetary limit fixed for the duty amount involved and not on the basis of the amount of interest. Therefore, the amount of duty on which interest has not been paid, should be the monetary criterion for deciding the authority to decide such cases.

11.5 In case different show cause notices have been issued on the same issue to same noticee(s) 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.

12.1 Jurisdiction of Executive Commissionerate: Officers of Central Excise within the jurisdiction of a Commissionerate normally issue a SCN for demands of duty pertaining to assessees or units falling within the jurisdiction of the Commissionerate and such cases are adjudicated by the Officers of the Executive Commissionerate. Officers of Executive Commissionerate also adjudicate SCNs issued by the Audit Commissionerates under normal circumstances.

12.2 Adjudication by officers of Audit Commissionerate: Central Excise Officers of all ranks in the Audit Commissionerate shall also have powers to adjudicate Show Cause Notice in Zones where the pendency position warrants adjudication by Audit Commissionerates Officers. Power has been accorded to the Chief Commissioners to distribute the cases for adjudication within the Zone, including to the officers of various ranks of the Audit Commissionerate. In case of Service Tax Zones, the cases would have to be transferred across the Zones. The Zonal Member in-charge 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. The function of review, appeal etc even for cases adjudicated by the officers of the Audit Commissionerate shall continue with the Executive Commissionerate as adjudication by officers of Audit Commissionerate shall continue be an exception rather than as a rule.

12.3 Cases investigated by DGCEI: DGCEI after investigation issues show cause notice which may be answerable to either ADG (Adjudication) or to Executive Commissioner as the case may be. Board has issued detailed circulars regarding adjudication of cases booked by DGCEI vide Circular no 994/01/2015-CX dated 10.02.2015 and Circular No. 1000/7/2015-CX dated the 3rd March, 2015. The salient points of the instruction given are as follows.

12.4 To assign cases for adjudication amongst the Additional Director General (Adjudication) and the field Commissioners, following general guidelines may be followed:—

(i) Cases including cases pertaining to the jurisdiction of multiple Commissionerates, where the duty involved is more than Rs. 5 crore shall be adjudicated by the ADG (Adjudication). However in case of large pendency of cases or there being a vacancy in the rank of ADG (Adjudication), Director General, CEI may assign cases involving duty of more than Rs. 5 crore to the field Commissioners following clauses (iv) and (v) of the guidelines.
(ii) Director General, CEI may issue general orders assigning the show cause notices involving duty of more than Rs. 5 crore issued by the specified Zonal Units and/or the DGCEI Headquarters to a particular ADG (Adjudication).
(iii) Where ADG (Adjudication) is the adjudicating authority in one of the cases involving identical issue or common evidences, the Director General, CEI may assign all such cases to that ADG (Adjudication).
(iv) Cases to be adjudicated by the executive Commissioner, when pertaining to jurisdiction of one executive Commissioner of Central Excise, shall be adjudicated by the said executive Commissioner of the Central Excise.
(v) Cases to be adjudicated by the executive Commissioners, when pertaining to jurisdiction of multiple Commissionerates, shall be adjudicated by the Commissioner in whose jurisdiction, the noticee from whom the highest demand of duty has been made, falls. In these cases, an order shall be issued by the Director General, CEI exercising the powers of the Board, assigning appropriate jurisdiction to the executive Commissioner for the purposes of adjudication of the identified case.
(vi) Show Cause Notices issued prior to 1st March, 2015 shall continue to be adjudicated by the Commissioner before whom the adjudication proceedings are continuing unless the Director General, CEI issues orders appointing a new adjudicating authority in terms of the guidelines above or where Board appoints a new adjudicating authority on the basis of proposal of DGCEI.
(vii) Where DGCEI proposes appointment of an adjudicating authority not in conformity with the above guidelines, DGCEI shall forward such proposal to the Board.
(viii) Cases to be adjudicated by the officers below the rank of Commissioner may be adjudicated only by the field officers in the executive Commissionerates and the above guidelines shall apply mutatis mutandis.”

12.5 Above guidelines shall also apply mutatis mutandis to the Service Tax cases booked by DGCEI. Notification No. 2/15-Service Tax, dated 10-2-2015 has been issued to provide necessary jurisdiction to the DG, CEI over the Principal Commissioners and Commissioners of Service Tax in this regard.

13. Service of Show Cause Notice and Relied upon Documents: A show cause notice and the documents relied upon in the Show Cause Notice needs to be served on the assessee for initiation of the adjudication proceedings. The documents/records which are not relied upon in the Show Cause Notice are required to be returned under proper receipt to the persons from whom they are seized. Show Cause Notice itself may incorporate a clause that unrelied upon records may be collected by the concerned persons within 30 days of receipt of the Show Cause Notice. The designation and address of the officer responsible for returning the relied upon records should also be mentioned in the Show Cause Notice. This would ensure that the adjudication proceedings are not delayed due to non-return of the non-relied upon documents.

14.1 Settlement of Cases: As per Board instruction every show cause notice should be forwarded, along with a letter stating that party can approach settlement of case through Settlement Commission. Where the noticee approaches the Settlement Commission, the matter needs to be transferred to call book till the matter is decided by Settlement Commission. In case matter is not finally accepted for settlement by the settlement commission, the show cause notice should be adjudicated in normal manner, in case the Settlement Commission, settles the matter, the show cause notice should be taken out of call book and shown as disposed off.

14.2 Filing of Written submissions: Show Cause Notice generally provides a time limit of thirty days for submission of written reply, however the time limit may be extended by the adjudicating authority on written request of the assessee. Where the assessee fails to submit a written reply, the adjudicating authority may issue a letter requesting the noticee to submit reply to the SCN.

14.3 Personal hearing: After having given a fair opportunity to the noticee for replying to the show cause notice, the adjudicating authority may proceed to fix a date and time for personal hearing in the case and request the assessee to appear before him for a personal hearing by himself or through an authorised representative. At least three opportunities of personal hearing should be given with sufficient interval of time so that the noticee may avail opportunity of being heard. Separate communications should be made to the noticee for each opportunity of personal hearingIn fact separate letter for each hearing/extension should be issued at sufficient interval. The Adjudicating authority may, if sufficient cause is shown, at any stage of proceeding adjourn the hearing for reasons to be recorded in writing. However, no such adjournment shall be granted more than three times to a noticee.

14.4 Record of personal hearing: The adjudicating authority must maintain a record of personal hearing and written submission made during the personal hearing. Evidence of personal hearing and written submission on record is very important while adjudicating the case.

14.5 Adjudication order: The adjudication order must be a speaking order. A speaking order is an order that speaks for itself. A good adjudication order is expected to stand the test of legality, fairness and reason at higher appellate forums. Such order should contain all the details of the issue, clear findings and a reasoned order.

14.6 Analysis of issues: The Adjudicating authority is expected to examine all evidences, issues and material on record, analyse those in the context of alleged charges in the show cause notice. He is also expected to examine each of the points raised in the reply to the SCN and accept or reject them with cogent reasoning. After due analysis of facts and law, adjudicating authority is expected to record his observations and findings in the adjudication order.

14.7 Body of the order: The adjudication order should generally contain brief facts of the case, written and oral submissions by the party, observation of the adjudicating authority on the evidences on record and facts of omission and commission during personal hearing and finally the operating order. At any cost, the findings and discussions should not go beyond the scope and grounds of the show cause notice.

14.8 Quantification of demand: The duty demanded and confirmed should be clearly quantified and the order portion must contain the provisions of law under which duty is confirmed and penalty is imposed. The duty demanded in an adjudication order cannot exceed the amount proposed in the Show Cause notice.

14.9 Corroborative evidence and Cross-examination: Where a Statement is relied upon in the adjudication proceedings, it would be required to be established though the process of cross-examination, if the noticee makes a request for cross-examination of the person whose statement is relied upon in the SCN. During investigation, a statement can be fortified by collection of corroborative evidence so that the corroborative evidence support the case of the department, in cases where cross-examination is not feasible or the statement is retracted during adjudication proceedings. It may be noted retracted statement may also be relied upon under given circumstances. Frivolous request for cross-examination should not be entertained such as request to cross examine officers of CERA.

14.10 Issue and Communication of order: In all cases where personal hearing has been concluded, it is necessary to communicate the decision as expeditiously as possible as but not later than one month in any case, barring in exceptional circumstances to be recorded in the file. The order is required to be communicated to the assessee in terms of provisions of Section 37C of the CEA, 1944.

15. Corrigendum to an adjudication order: A corrigendum to an adjudication order can only be issued by the adjudicating authority himself and not by any subordinate authority, after careful examination of details obviating the need to issue any corrigendum to correct minor clerical mistakes which do not alter the adjudication order per se. Therefore, adjudicating order should normally be issued. It may be noted that after issuing an adjudication order, the adjudicating authority becomes functus officio, which means that his mandate comes to an end as he has accomplished the task of adjudicating the case. As a concept, functus officio is bound with the doctrine of res judicata, which prevents the re-opening of a matter before the same court or authority. It may also be noted that under the Central Excise Act, adjudicating authority does not have powers to review his own order and carry out corrections to the adjudication order.

16. Transfer of adjudicating authority: Adjudicating officers are expected to issue order-in-original before being relieved in cases where personal hearing has been completed. The successor in office can not issue any order on the basis of personal hearing conducted by the predecessor. The successor in office should offer a fresh hearing to the noticee before deciding the case and issuing adjudication order/formal order.

16.1 Signing of the order: The adjudicating order should be signed by the adjudicating authority only and it should not be further delegated to any other officer and the adjudicating order furnished to the noticee(s) has to be an originally signed copy and not an attested copy.

17.1 Adjudication of SoFs/LARs raised by CERA which are not converted into DAP :

SoFs/LARs are replied by the Commissionerate and therefore these cases may be adjudicated after ensuring that the reply given by the Commissionerate is available on record.

17.2 Adjudication of admitted DAPs/APs: DAPs are replied by the Ministry (CBEC) and therefore adjudication of DAPs should be undertaken after ensuring that the reply given by the Ministry (CBEC) is available on record.

17.3 Adjudicating authority is a quasi-judicial authority and is legally bound to adjudicate the case independently and judiciously taking into consideration the audit objection by CERA/CRA, reply of the department as referred above, reply of the party, relevant legal provisions, case laws on the subject and relevant circulars of the Board, if any. In this regard the following extract from the judgment in the matter of Simplex Infrastructure Ltd vs Commissioner of Service Tax of the Hon’ble Kolkata High Court dated 07.04.2016 at para 74 may be followed in letter and spirit while discharging one’s role as an Adjudicating authority.

‘It is well settled that a quasi-judicial authority must act judiciously and not at the dictates of some other authority. It is quite evident that the Commissioner issued the impugned show-cause notice at the instance of CERA without any independent application of mind, and thereby, abdicated his powers and duty, which is not permissible in law’.

Accordingly, it is directed that the audit objection by CERA should be independently examined and where necessary, Show cause Notice should be issued. It is expected that the SCN is a consequence of independent examination carried out on receipt of CERA/CRA objection. Such independent findings should be incorporated in the show cause notice as well as in the adjudication order.

17.4 Where an issue was under audit objection and has been subsequently either judicially settled, by say judgment of Hon’ble Supreme Court or where a circular of the Board has been issued on the subject, further correspondence with the Board on the audit objections, even if they have become DAPs, is not necessary and such cases may be adjudicated on merits taking into consideration the latest judgments and circulars.

Part III: Confirmed demands/Recovery

18. Confirmed demands: Section 11 of the Central Excise Act, 1944 provides powers which may be exercised for recovery of duty and any other sums of any kind payable to the Central Government. It may be noted that duty and other sums are considered payable to the Government in the following situations:

(i) Where there is no appeal filed against the confirmed order in adjudication or appeal and statutory period of appeal is over;
(ii) Where the CESTAT or High Court has confirmed the demand and no stay is in operation as explained in para 23.2.
(iii) Where there is an admitted liability reflected in the periodic return as explained in para 24.

19. Powers of recovery: Recovery of confirmed demand can be made by exercising any of the powers under Section 11 of the CEA, 1944 such as adjustment from refunds payable, attachment and sale of excisable goods of such person or through certificate action treating the recoverable amounts as arrears of land revenue. After exhausting the option of taking action as above, if dues remain unrecovered, action is to be taken under the provisions of Section 142 of the Customs Act, 1962 which have been made applicable to like matters in Central Excise. Further, where the entire business is disposed off with assets and liabilites, duty or any other sums are recoverable from the successor in business also. It may be noted that under sub-Section (2) of Section 11 of the Central Excise Act, 1944, now Central Excise Officers are empowered to issue an order to any other person from whom money is due to such person from whom recovery of arrears is required to be made. Such notice for recovery to the other person is generally referred as Garnishee Notice.

20. Recovery from the assets under liquidation: Section 53 of the Insolvency and Bankruptcy Code, 2016 provides for order of priority for distribution of proceeds from the sale of the liquidation assets. Pari-materia changes have been made in Section 11E of the Central Excise Act, 1944. In effect, the Central Excise dues shall have first charge, after the dues, if any, under the provisions of Companies Act, Recovery of Debt due to Bank and Financial Institution Act, 1993 and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the Insolvency and Bankruptcy Code, 2016, have been recovered.

20.1 Recovery during pendency before BIFR/IFCL/OL/DRT/Insolvency and Bankruptcy Code, 2016: When the cases are pending before BIFR/IFCL/OL/appropriate authority under Insolvency and Bankruptcy Code, 2016 then in such cases recovery measures should not be resorted. In such cases public counsel should be advised to file affidavits for first charge under Section 11E of Central Excise Act, 1944 informing the quantum of confirmed demand to BIFR/IFCL/OL/DRT/Insolvency and Bankruptcy Code Authorities.

20.2 Recovery during pendency of litigation: Board has issued two circulars on the subject vide Circular no 984/08/2014- CX dated 16.9.2014 and Circular no 1035/23/2016-CX dated 4.7.2016.

(i) Sub-section (iii) of Section 35F of the Central Excise Act, 1944 and Section 129E of the Customs Act, 1962 stipulate payment of 10% of the duty or penalty payable in pursuance of the decision or order being appealed against i.e. the order of Commissioner (Appeals). In the event of appeal against the order of Commissioner (Appeals) before the Tribunal, 10% is to be paid on the amount of duty demanded or penalty imposed by the Commissioner (Appeals). This need not be the same as the amount of duty demanded or penalty imposed in the Order-in-Original in the said case.
(ii) In a case, where penalty alone is in dispute and penalties have been imposed under different provisions of the Act, the pre-deposit would be calculated based on the aggregate of all penalties imposed in the order against which appeal is proposed to be filed.
(iii) In case of any short-payment or non-payment of the amount stipulated under Section 35F of the Central Excise Act, 1944 or Section 129E of the Customs Act, 1962, the appeal filed is liable for rejection.
(iv) Section 35F of the Central Excise Act, 1944 has been amended with effect from 6.8.14 to provide for mandatory payment of 7.5% or 10% of the of the duty demanded where duty demanded is in dispute or where duty demanded and penalty levied are in dispute for admission of appeal before Commissioner (Appeals) or CESTAT. Once the amount is paid, no coercive action shall be taken for recovery of the balance amount during the pendency of the appeal proceedings before these authorities.

20.3 In cases where stay application is pending before Commissioner (Appeals) or CESTAT for periods prior to 6-8-2014, no recovery shall be made during the pendency of the stay application.

20.4 Recovery of demand confirmed by CESTAT or High Court: Where a demand has been confirmed by the CESTAT or High Court, recovery proceedings may be initiated after sixty days of issue of order provided no stay has been granted by the High Court or Supreme Court as the case may be.

21. Recovery of admitted liability in periodic returns: Rule 8(4) of the Central Excise Rules, 2002 provide that provisions of Section 11 of the Central Excise Act, 1944 would apply for recovery of sums declared payable in periodic returns but not paid. Section 11 provides wide ranging power for recovery of dues as explained in paragraph 21 above. Section 11A(16) on the other hand provides that provisions of Section 11A shall not apply for duty short paid or not paid which is self-assessed and declared in the periodic returns. The conjoined reading of these two provisions provide that where the liability of duty is admitted but not paid by the assessee, adjudication proceedings envisaged under Section 11A are not required to be undertaken. Such self-admitted liability would be covered under the expression duty and any other sums of any kind payable to the Central Government used in Section 11A notice for recovery of admitted liability may be served on the assessee under Section 11 and when such dues are not paid within a reasonable time, recovery proceedings may be initiated.

22. Recovery in instalments: Board has issued Circular No. 996/3/2015-CX dated the 28th Feb., 2015 to provide the facility of payment of confirmed demand in installments.

22.1 It has been decided by the Board to allow recovery of arrears of taxes, interest and penalty in installments. The power to allow such payment in monthly installments shall be discretionary and shall be exercised by the Commissioners for granting sanction to pay arrears in installments upto a maximum of 24 monthly installments and by the Chief Commissioners for granting sanction to pay arrears in monthly installments greater than 24 and upto a maximum of 36 monthly installments.

22.2 The facility to pay arrears in installments shall generally be granted to companies which show a reasonable cause for payment of arrears in installments such as the company being under temporary financial distress. Approval to pay in installments and the number of installments should be fixed such that an appropriate balance between recovery of arrears and survival of business is maintained taking into consideration the overall financial situation of the company, its assets, liabilities, income and expenses. Frequent defaulters may not be allowed payment of arrears in instalments. The decision shall be taken on a case to case basis taking into consideration the facts of the case, interest of the revenue, track record of the company, its financial situation, etc.

22.3 The application for allowing payment of arrears shall be made to the jurisdictional Commissioner giving full justification for the same. The approval of the application should be in writing with due acknowledgment taken on record. The permission should clearly identify the number of installments and the month from which the payments of installments should begin and should also clearly stipulate that in case of default in payment of installments, the permission shall be withdrawn and action shall be taken for recovery of arrears.

22.4 For this purpose, Commissioner shall also exercise the power to cancel the permission to pay arrears in installments. Cancellation should be resorted to in cases of default in the payment of installments or when the company is becoming financial unviable and there is likelihood of winding up of business. After cancelling the permission to pay in installments, action should be taken forthwith for recovery of arrears.

Part IV: Miscellaneous

23. Service of decisions, orders, summons, etc: The statutory provisions for Service of decisions, orders, summons, etc. have been provided under Section 37C of the CEA, 1944. The Section provides that the service of interalia of any order or notice, which would include a SCN or an adjudication order needs to be carried out in prescribed manner for the service to be considered complete. The Section provides for various methods of service such as by tendering or sending it by registered post with acknowledgment due or as a fallback, by affixing a copy thereof to some conspicuous part of the factory or warehouse or other place of business or usual place of residence of the person or as a further fallback, by affixing on the notice board of the officer. For further details, the Section may be referred.

24. De novo or Adjudication remanded by appellate authority: In cases of de novo adjudication in pursuance of the order of Appellate Authority, such cases should be decided by the adjudicating authority of the same rank who had passed the order which was in appeal before the Appellate authority, notwithstanding the enhancement of the power of adjudication of the officers. On receipt of the order for de novo adjudication from the Appellate authority, such case should be shown as pending in the list of cases pending adjudication of such adjudicating authority till it is decided by him. Close monitoring of such pending de-novo cases should be done to ensure that these cases are adjudicated well within the time limit, if any, laid down by the Appellate authority.

25. No SCN on voluntary payment: In any case of short payment or non-payment of tax/duty in a case not involving extended period of timea person who has paid the duty payable along with interest, if any, by ascertaining the duty himself, or as ascertained by the Central Excise Officer shall not be served any notice in respect of the duty so paid or for any penalty. The provisions of Section 11A(1)(b) read with Section 11A(2) may be referred to in this regard.

26. Refund of pre-deposits:-(i) Where the appeal is decided in favour of the party/assessee, he shall be entitled to refund of the amount deposited along with the interest at the prescribed rate from the date of making the deposit to the date of refund in terms of Section 35FF of the Central Excise Act, 1944

(ii) Pre-deposit for filing appeal is not payment of duty. Hence, refund of pre-deposit need not be subjected to the process of refund of duty under Section 11B of the Central Excise Act, 1944. Therefore, in all cases where the appellate authority has decided the matter in favour of the appellant, refund with interest should be paid to the appellant within 15 days of the receipt of the letter of the appellant seeking refund, irrespective of whether order of the appellate authority is proposed to be challenged by the Department or not.

(iii) If the Department contemplates appeal against the order of the Commissioner (A) or the order of CESTAT, which is in favour of the appellant, refund along with interest would still be payable as per the time limits prescribed in the law or in the order, unless such order is stayed by a competent Appellate Authority. It is important to note that in such cases of consequential refund, besides filing of appeal against the order, it is also necessary that a protective demand of the refunded amount be issued under Section 11A by not lower than Assistant/Deputy Commissioner of Central Excise as per new monetary limits for adjudication of cases by the Central Excise officers and transferred to the call-book.

(iv) In the event of a remand, refund of the pre-deposit shall be payable along with interest.

ANNEXURE-I

List of Circulars/Instructions which stand rescinded

S. No. Circulars/Instructions
1 32/80-CX.6 dated 26.7.80
2 5/83-CX.6 dated 10.3.1983
3 207/47/85-CX.6, dated 12.8.1986
4 17/87, dated 18.3.1987
5 267/104/87, dated 15.12.1987
6 27/88-CX.6, dated 7.4.1988
7 42/88-CX.6, dated 24.5.1988
8 48/88-CX.6, dated 10.6.1988
9 50/88-CX.6, dated 17.6.1988
10 67/17/88-CX.2, dated 18.8.1988
11 76/88-CX.6, dated 2.11.1988
12 79/88-CX.6, dated 15.11.1988
13 66/88,dated 20.12.1988
14 2/89, dated 9.1.1989
15 29/89, dated 2.5.1989
16 50/89, dated 29.8.1989
17 53/90-CX.3, dated 6.9.90
18 1/90-AU dated 19.3.90
19 18/90-CX.8, dated 28.3.1990
20 53/90, dated 26.9.1990
21 21/90, dated 6.12.1990
22 289/10/91-CX.9 dated 18.03.1991
23 3/92-CX.6
24 167/39/92-CX.4, dated 13.10.1992
25 5/92, dated 13.10.1992
26 20/92-CX.6, dated 21.12.1992
27 13/93-CX.6 dated15.10.93
28 9/93-CX.6, dated 8.7.1993
29 19/93-CX.6, dated 29.12.1993
30 20/20/94-CX, dated 10.2.1994
31 67/67/94-CX, dated 19.10.1994
32 32/32/94-CX dated 11.04.1994
33 162/73/95-CX.3, dated 14.12.95
34 163/74/95-CX, dated 14.12.1995
35 171/5/96-CX, dated 2.2.1996
36 228/62/96-CX, dated 8.7.1996
37 268/102/96-CX, dated 14.11.1996
38 208/42/96-CX dated 02.05.1996
39 354/118/96-TRU, dated 6.1.1997
40 290/6/97-CX. dated 20.1.1997
41 295/11/97-CX., dated 10.2.1997
42 298/14/97-CX, dated 25.2.1997
43 299/15/97, dated 27.2.1997
44 312/28 /97-CX., dated 22.4.1997
45 317/33/97-CX, dated 18.6.1997
46 328/44/97-CX, dated 13.8.1997
47 350/66/97-CX. dated 4.11.1997
48 362/78/97-CX, dated 9.12.1997
49 385/18/98-CX dated 30/3/98
50 373/06/98-CX, dated 20.1.98
51 444/10/99-CX, dated 12.3.1999
52 502/68/99-CX, dated 16.12.1999
53 518/14/2000-CX, dated 3.3.2000
54 523/19/2000-CX. Dated 6.4.2000
55 534/30/2000-CX, dated 30.5.2000
56 540/36/2000-CX., dated 8.8.2000
57 552/48/2000-CX, dated 4.10.2000
58 555/51/2000-CX, dated 19.10.2000
59 588/25/2001-CX,dated 19.9.2001
60 592/29/2001-CX, dated 19.10.2001
61 606/43/2001-CX, dated 4.12.2001
62 674/65/2002-CX dated1.11.2002
63 275/37/2K-CX.8A dated2.1.2002
64 655/46/2002-CX dated26.6.2002
65 712/28/2003-CX., dated 5-5-2003
66 718/34/2003-CX, dated 23.5.2003
67 723/39/2003-CX, dated 10.6.2003
68 744/60/2003-CX, dated 11.9.2003
69 752/68/2003-CX, dated 1.10.2003
70 762/78/2003-CX. dated 11.11.2003
71 765/81/2003-CX, dated 10.12.2003
72 766/82/2003-CX dated15.12.2003
73 732/48/2003-CX dated 5.8.03
74 794/27/2004-CX, dated 23.6.2004
75 806/3/2005-CX, dated 12.1.2005
76 207/09/2006-CX.6, dated 8.9.2006
77 208/27/2003-CX.6, dated 18.12.2006
78 865/3/2008-CX. dated 19.2.2008
79 922/12/2010-CX., dated 18.5.2010
80 957/18/2011-CX.3, dated 25.10.011
81 962/05/2012-CX dated 28/03/2012
82 967/1/2013-CX, dated 1.1.2013
83 201/01/2014-CX.6, dated 26-6-2014
84 994/01/2015-CX, dated 10.2.2015
85 996/3/2015-CX, dated 28.2.2015
86 1000/7/2015-CX, dated 3.3.2015
87 390/CESTAT/69/2014-JC, dated 22.12.2015
88 1035/23/2016-CX, dated 4.7.2016
89 1049/37/2016-CX, dated 29.9.2016

ANNEXURE-II

List of Circulars/Instructions which have not been rescinded

S. No. Circulars/Instructions
1 984/08/2014-CX, dated 16.9.2014
2 137/46/2015-S.T., dated 18.8.2015
3 1023/11/2016-CX, dated 8.04.2016

Maternity Bill passed: 26 weeks paid leave, creche a must, other highlights : 10-03-2017


A day after the world celebrated the International Women’s Day, the Parliament on Thursday passed a bill that will benefit about 1.8 million women in India. The Maternity Benefit (Amendment) Bill, 2016 was passed by the Lok Sabha, months after the Rajya Sabha approved the measure that takes India to the third position in terms of the number of weeks for maternity leave after Canada and Norway where it is 50 weeks and 44 weeks, respectively. While the bill has given many women reasons to cheer, it has left others with a heartburn.

It is a “historic day for women”, the Ministry of Women and Child Development said, adding that the Bill will “pave the way for a healthy and secure mother and a well-nourished child”. Women and Child Development Minister Maneka Gandhi called it a “momentous step” and thanked her colleagues for supporting the Bill.
Top highlights of The Maternity Benefit (Amendment) Bill, 2016
* The Bill aims to protect the employment of women during the time of pregnancy and entitles them to full paid absence from work to take care of their child
* Women working in the organised sector will now be entitled to paid maternity leave of 26 weeks, up from 12 weeks
* The maternity leave beyond the first two children will continue to be 12 weeks
* The new law will apply to all establishments employing 10 or more people and the entitlement will be for only up to first two children. For third child, the entitlement will be for only 12 weeks.
* The bill also makes it mandatory for employers in establishments with 30 women or 50 employees, whichever is less, to provide crèche facilities either in office or in any place within a 500-metre radius.
* The mother will be allowed four visits to the creche in a day. This will include her interval for rest.
* It also allows employers to permit woman to work from home if it is possible to do so
* Recognising that women who adopt or use a surrogate to bear a child also need time to bond with the child in the initial months, the bill also extends a 12-week maternity leave to adapting and commissioning mothers.
* The commissioning mother has been defined as “one whose egg is used to create an embryo planted in surrogate’s womb (in order words – a biological mother).” The period of maternity leave will be calculated from the date the child is handed over to the commissioning or adoptive mother.
The bill has left out surrogate mothers from the benefit — an issue over which the government had faced criticism from the opposition benches in the Rajya Sabha during the winter session. Moreover, the bill will benefit only a minuscule percentage of women, while ignoring the majority who are working as contractual labourers, farmers, self-employed women etc.
“Even if the law is fully implemented,” the activist told IPS, “studies show that it will benefit only 1.8 million women in the organised sector leaving out practically 99% of the country’s women workforce. If this isn’t discrimination, what is? In India, women’s paid workforce constitutes just 5% of the 1.8 million. The rest fall within the unorganised sector. How fair is it to leave out this lot from the ambit of the new law?” asks Sengupta.
Kavita Krishnan, secretary of the All India Progressive Women’s Association, opines that maternity benefits should be universally available to all women, including wage earners.
“But the act ignores this completely by focussing only on women in the organised sector. In India most women are waged workers or do contractual work and face hugely exploitative work conditions. They are not even recognised under the ambit of labour laws. The moment a woman becomes pregnant she is seen as a liability. The new law has no provisions to eliminate this mindset, ” Krishnan told IPS.
Lack of interest in ‘Maternity Bill’
According to The Economics Times the Lok Sabha had just 3 MPs, including 11 women members, when the Maternity Benefit (Amendment) Bill, 2016, came up for discussion in the House on Thursday. For all the eloquent speeches on women rights, Labour and Employment Minister Bandaru Dattatreya moved the bill for consideration and passage in the Lower House in the post-lunch session when only 53 members were present in the House. They included 8 women MPs from the Opposition and 3 from the treasury benches.
Creating gender neutral Bill
The Maternity Bill allows even a male employee to take his child to a crèche, if it is far away from the mother’s workplace.
However, the opposition party demanded that the government include a non-discrimination clause in the bill so no person is discriminated against in employment for having availed any parental benefits. ALSO READ: New law: Working women will now be entitled to 26 weeks of maternity leave
Participating in the debate, Sushmita Dev (Congress) said since amendments raise the period of maternity leave to 26 weeks from the present 12 weeks, it could act as a deterrent for the private sector to employ women workforce.
“Since the employer has to pay the salary during the leave period, the amendment might turn out to be counter productive. The innovative thing to do would be to bring in paternity benefit,” she said.
She said such a benefit can also be extended to single fathers who adopt a child.
Pritam Munde (BJP) said a father also has equal responsibility towards the child like a mother and paternity benefits would help a couple to raise their child together as majority are now nuclear families.
Ratna De Nag (TMC) too made a case for paternity benefit and said her state government in West Bengal is already providing paternity leave for 30 days.
Tathagata Satpathy (BJD) termed the Maternity Benefit (Amendment) Bill, 2016, a social bill and said instead of reducing the period of leave from 26 week to 12 week after the second child, the Centre should say that up to third child there would be 26 week leave and after that no leave. He too sought paternity benefits.

The bill will now be sent to the President for his assent before it becomes an Act.

Source : Business Standard

Select farm goods to be taxed under revamped GST : 10-03-2017


India has incorporated a new definition of ‘agriculturalist’ in the goods and services tax law to enable select farm items to be brought under the tax net nationwide. While farmers won’t have to register to pay the tax, registered buyers may need to collect the levy on a ‘reverse charge’ basis, similar to the purchase tax principle adopted in Punjab and Haryana.

Most farm produce will likely be exempted from the new tax and some cash crops are expected to attract the threshold rate. As per the latest definition, an agriculturalist is a person or a Hindu undivided family undertaking cultivation of land by own labour or labour of the family or by servants paid wages in cash or kind or by hired labour under personal supervision or supervision by any family member.

The draft central and integrated GST laws, which were approved by the GST Council, have incorporated the new definition. The Bills are expected to be introduced in the budget session of Parliament. The budget session resumed on Thursday after a recess.

“It was felt that the earlier definition was vague and open to interpretation,” a senior government official privy to the development told ET.
agriculturalists are those who cultivate land personally for the purpose of agriculture. Agriculture itself was defined separately in the earlier draft. It said that agriculture, with all its grammatical variations and cognate expressions, includes floriculture, horticulture, sericulture, the raising of crops, grass or garden produce and also grazing, but does not include dairy farming, poultry farming, stock breeding, the mere cutting of wood or grass, gathering of fruit, raising of man-made  forest or rearing of seedlings or plants.

“Expansion of the definition of agriculturalist would ensure that the entire activity of agriculture would get consistent GST treatment, irrespective of the manner in which cultivation is done,” said Pratik Jain, indirect tax leader at PwC.

Jain said anyone other than an agriculturalist and dealing with agri-commodities, such as a trader, could still be subject to GST if the government so chooses. Purchasers of these commodities could be subject to GST under a ‘reverse charge’ enabling provision in the draft GST laws.
As of now, the understanding is that raw agricommodities such as wheat and grains may be exempt from GST while processed commodities such as packed rice would attract the tax, although at a lower rate. GST, which replaces multiple central taxes including excise duty, service tax, countervailing duty and state taxes such as value-added tax, entry tax, octroi and purchase tax with a single levy, is proposed to be implemented from July 1.
Source : Economic Times

Parliament Budget Session: From PM Narendra Modi’s GST stress, to Rajnath Singh’s ‘sympathy’ towards slain terrorist’s father; Top 5 things to know : 09-03-2017


Second half of Budget Session in Parliament started on Thursday. Noisy protests were witnessed over recent racial attacks on Indians in the US. With the government planning to introduce in Parliament the Central GST (CGST) Bill, PM Modi underlined the importance of it. Union Home Minister Rajnath Singh has made a statement in Parliament on the killing of a suspected ISIS terrorist in Lucknow. Opposition Congress has sought to corner the Narendra Modi government attacks on Indians in the US. Congress today also gave adjournment motion notice in Lok Sabha on ‘hatred generating for Indians in USA’. Noisy protests over PM Modi’s demonetisation move had stalled Parliament in the Winter Session. Hope both houses will witness more transactions of business this time.

Here are top 5 highlights.

1. PM Modi calls for bipartisan support for GST

Prime Minister Narendra Modi expressed hope that the Goods and Services Tax (GST) will be passed in the current session. Speaking to the media persons in the Parliament complex, the prime minister said that he was confident of the bill to be passed as most states and regional parties have supported it. He also expressed hope that the Parliament will be conducted in a peacful manner this time, without any chaos.

2. Rajnath Singh briefs Lok Sabha on Lucknow encounter

In a first in India, a day after the killing of the terrorist Saifullah and the end of the dramatic Lucknow shootout and the arrest of 7 other members of the gang, Home Minister Rajnath Singh stood up in Parliament today and gave his statement in the Lok Sabha on the case in the presence of Prime Minister Narendra Modi and Speaker Sumitra Mahajan.

NIA will probe Lucknow encounter, said Home Minister Rajnath Singh in Lok Sabha. Saifullah’s father has refused to take his body as he was a “traitor.” Government and Parliament is proud of him, Rajnath Singh said. The government is expressing sympathy to slain terrorist Saifullah’s father, the Home Minister said.

3. Congress, TMC attack PM Modi over racial attacks on Indians in US

Launching a scathing attack against PM Modi, Leader of Opposition Mallikarjun Kharge must issue statement over the attacks on Indians in the US. Taking a dig at PM Modi, he said “PM tweets on every other issue, why doesn’t he talk on this issue? Why silent? He should make statement today.”

TMC MPs staged protest in front of Gandhi statue at Parliament complex over the attacks of Indians in US.

4. Security beefed up

Security was heightened in and outside Parliament in the wake of killing of one terrorist in Lucknow encounter. Red alert has been issued in the national capital.

5. Rajya Sabha adjourned

Rajya Sabha was adjourned for the day today without transacting any business as a mark of respect to the memory of its sitting member Haji Abdul Salam who died recently. When the House met for the second part of the Budget session, Chairman Hamid Ansari mentioned the passing away of Salam on February 28 at the age of 69 years. Salam represented Manipur in the Upper House since April 2014.

“In the passing away of Haji Abdul Salam, the country has lost a distinguished parliamentarian, an able administrator and a dedicated social worker,” Ansari observed in his obituary reference.

Source : Financial Express

Mauritius-based SPVs eligible to claim tax benefits under DTAA: AAR : 09-03-2017


Even as the industry trackers plan for place of effective management (PoEM) guidelines, Authority for Advance Ruling (“AAR”) in a recent case has ruled that Mauritius-based SPVs are eligible to claim tax benefits under DTAA.

The case involved Mahindra – BT Investment (“Applicant”), a company incorporated in Mauritius that transferred shares of an Indian company to a US company is not liable to get taxed in India under the beneficial provisions of India-Mauritius Treaty, the AAR ruled.

In this ruling, the AAR has dealt with the issue of residential status of the applicant which is guided by the place where the control and management of affairs of the applicant exists. Treaty benefit is only available to a tax resident of the contracting states, Nangia and Co, a tax consultant said in a concept note.

In the present case, the revenue authorities argued that the control and management of the applicant was situated in India since the sole purpose of existence of the applicant was “transferring the shares of TML (i.e. the Indian company) to AT&T (the US company). The real transaction is between TML and AT&T and control and management lies in India, according to the concept note.

The applicant argued that the board meetings wherein the business decisions were taken were held in Mauritius and hence the place of control and management of affairs of the applicant is situated in Mauritius.

“Though an AAR is only binding on the applicant, persuasive value can be drawn from the same. Where a foreign company is able to establish that major business transactions such as decisions on financial matters; approving of financial budgets and statements; decisions on declaration of dividends and decision on buyback of shares among other decisions are taken outside India, its residential status shall remain outside India,” said Rakesh Nangia, managing partner, Nangia & Co.

The AAR ruling can have some bearing on future disputes under PoeM, say industry trackers.

Place of Effective Management or PoEM is a framework to determine the tax payable by a foreign company that for all purposes is managed from India and yet does not pay tax domestically. Many Indian companies that have traditionally used holding companies and subsidiaries overseas for various reasons are assessing how they may be affected and are racing to put new structures in place before they come under scrutiny from next year.

While the government has said that operational subsidiaries of Indian multinationals won’t be targeted, many such units are held via pass through companies registered in tax-friendly countries.

“As per this ruling even an SPV merely earning dividend and interest income shall be construed as an entity having commercial purpose. Revenue authorities in this case argued that the incorporation of the applicant was solely to hold the shares of TML to facilitate a tax neutral transfer. This ruling of AAR has laid a striking principal that an SPV which is established without any economic substance, shall be construed as having commercial purpose where the future transfer of shares by the SPV  is linked to the happening of a future event,” said Nangia.

Source : Business Standard

India proposes smallest duty cuts for China, highest for ASEAN in RCEP pact : 9-03-2017


India has offered least tariff concessions to Chinese goods under the proposed free trade agreement between 16 Asia-Pacific countries including China and Australia.

The highest duty cuts have been offered to imports from ASEAN under the Regional Comprehensive Economic Partnership (RCEP) trade agreement.

The formula, intended to reduce the rising trade deficit with China, has not found many takers. “The deviations are being discussed. Nothing is final,” said an official aware of the development.

The proposal was discussed in the latest round of RCEP negotiations held in Japan from February 27-March 3.

This was the 17th round of talks and the next round would be held in the Philippines in April before a likely ministerial level meeting in May. The new approach of differential treatment to duty cuts comes in the wake of India’s burgeoning trade deficit with China.

In FY2015-16, India’s exports to China were mere $9 billion while the imports were $61.7 billion leaving a $52.7 billion deficit.

RCEP is a comprehensive free trade agreement subsuming goods, services, investment, competition, economic and technical cooperation, dispute settlement and intellectual property rights between 16 countries — 10 members of the Association of Southeast Asian Nations and their six free trade agreement partners — Australia, China, India, Japan, Korea and New Zealand.

The RCEP grouping comprises over 45% of the world’s population, with a combined GDP of about $21 trillion.

However, despite India being able to convince the other countries to negotiate goods, services and investments together, not much progress has been made on liberalising services trade in the RCEP. “There is progress on the goods front but not in services,” said another official.

Source : Economic Times

38 – 09-03-2017


EXIM BANK’S GOVERNMENT OF INDIA SUPPORTED LINE OF CREDIT OF USD 92.18 MILLION TO GOVERNMENT OF TANZANIA

A.P. (DIR SERIES 2016-17) CIRCULAR NO.38DATED 9-3-2017

Export-Import Bank of India (Exim Bank) has entered into an agreement on July 10, 2016 with the Government of Tanzania for making available to the latter, a Government of India supported Line of Credit (LOC) of USD 92.18 million (USD Ninety two million one hundred eighty thousand only) for financing rehabilitation and improvement of water supply system in Zanzibar in Tanzania. The goods including plant, 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, goods and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 per cent of goods and services may be procured by the seller for the purpose of the eligible contract from outside India.

2. The credit agreement under the LOC is effective from February 20, 2017. Under the LOC, the terminal utilization period is 60 months after the scheduled completion date of the project.

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

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

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

6. The directions contained in this circular have been issued under 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.

37 – 09-03-2017


EXIM BANK’S GOVERNMENT OF INDIA SUPPORTED LINE OF CREDIT OF USD 750 MILLION TO GOVERNMENT OF NEPAL

A.P. (DIR SERIES 2016-17) CIRCULAR NO.37DATED 9-3-2017

Export-Import Bank of India (Exim Bank) has entered into an agreement on September 16, 2016 with the Government of Nepal for making available to the latter, a Government of India supported Line of Credit (LOC) of USD 750 million (USD Seven hundred fifty million only) for financing the post-earthquake reconstruction projects in Nepal. The goods including plant, 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, goods and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India, except for civil works for which 50 per cent of the contract price shall be supplied by the seller from India.

2. The credit agreement under the LOC is effective from February 24, 2017. Under the LOC, the terminal utilization period is 60 months after the scheduled completion date of the project.

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

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

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

6. The directions contained in this circular have been issued under 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.

Notification No. 2/2017 09-03-2017


SECTION 139A OF THE INCOME-TAX ACT, 1961 – PERMANENT ACCOUNT NUMBER (PAN) – PROCEDURE OF PAN APPLICATION THROUGH SIMPLIFIED PROFORMA FOR INCORPORATING COMPANY ELECTRONICALLY (SPICe) (FORM NO.INC-32) OF MINISTRY OF CORPORATE AFFAIRS

NOTIFICATION NO.2/2017 [F.NO.PR.DGIT(S)/TECH/E-BIZ/2008-09/PART]DATED 9-3-2017

Proviso to sub-rule (1) to rule 114 of Income Tax Rules, 1962 notified vide notification G.S.R. No. 117(E) dated 9-2-2017, states that :—

“an applicant may apply for allotment of permanent account number through a common application form notified by the Central Government in the Official Gazette, and the Principal Director General of Income Tax(Systems) or Director General of Income-tax(Systems) shall specify the classes of persons, forms and format along with procedure for sale and secure transmission of such forms and formats in relation to furnishing of Permanent Account Number(PAN)”.

2. A common application form in the form of Simplified Proforma for Incorporating Company Electronically (SPICe)(Form No. INC-32) has been notified by the Ministry of Corporate Affairs vide notification G.S.R. No. 70(E), dated 25-1-2017.

3. In exercise of the powers delegated by the Central Board of Direct Taxes vide notification G.S.R. No. 117(E), dated 9-2-2017, the Principal Director General of Income-tax(Systems) lays down the classes of persons, forms, format and procedure for Permanent Account Number(PAN) as under ;—

S. No. Particulars
1 Classes of persons to which SPICe form will apply Newly incorporated Company
2 Applicable form Simplified Proforma for Incorporating Company Electronically (SPICe) (Form No. INC-32) of Ministry of Corporate Affairs(MCA) notified vide notification G.S.R. No. 70(E), dated 25-1-2017.
3 Procedure Application for allotment of Permanent Account Number(PAN) will be filed in SPICe (INC-32) form using Digital Signature of the applicant as specified by the Ministry of Corporate Affairs. After generation of Corporate Identity Number (CIN). MCA will forward data in form 49A to prescribed Income Tax Authority through digital signature. Class 2/Class 3, of MCA.
4 Format xml

EFS Instruction No. 62 – 9-3-2017


SECTION 143 OF THE INCOME-TAX ACT, 1961 – ASSESSMENT – GENERAL – ONLINE VERIFICATION OF CASH TRANSACTIONS -2016 ON AIMS MODULE IN INCOME TAX BUSINESS APPLICATION (ITBA)

EFS INSTRUCTION NO.62 [F.NO.DGIT(S)-ADG(S)-2/ONLINE VERIFICATION OF CASH TRANSACTIONS/157/2016]DATED 9-3-2017

Kindly refer to the EFS Instruction No. 61 on the above mentioned subject.

2. The response(s) filed by the tax payer(s) on Cash Transaction 2016 module on e-filing portal is shared with the officer/Assessing officer(s) through AIMS module. This directorate has issued the EFS Instruction No. 61 dated 21-2-2017 related to its functionalities.

3. In addition to the existing functionalities, new additions/enhancements are being introduced for the field users (Annexure). The salient features of the newly added functionalities are:

(a) Designated user can click on Generate Notice u/s 133(6) button to generate notices. The designated user will be prompted to enter approval date and remarks. After submitting the approval details, the designated user will be able to generate the notice u/s 133(6).
(b) Designated user has a provision to capture details of survey u/s 133A. The user can click on “Select Other Activity” button and select “Survey u/s 133A” from Activity dropdown and enter the respective details i.e. Survey date, Unexplained cash/deposit detected and Remarks for a case and click on Submit button. In case user needs to attach any supporting document, the same can be done by using the Case Attachment functionality on Cash Transaction Details screen.
(c) Designated user has the provision to mark the case as ‘Not Traceable’ in case the taxpayer is not traceable despite efforts of locating the taxpayer undertaken by AO.
(d) Designated User has the provision to mark the case as ‘Not Responsive’ in case taxpayer is traceable but is not submitting any response despite issue of reminders.
(e) Investigation/I&CI wing users (DIT/PDIT and above) and supervisory hierarchy of designated user can view the Cash Transaction 2016 cases and provide inputs (Enquiry/Survey/Search related information) for a case. In case of Investigation/I&CI wing users, PAN will be mandatory to enter in search criteria. These users will be able to search for PAN on All-India basis.

4. It is requested to contact ITBA helpdesk in case of any issues in this regard.

a. URL of helpdesk – http://itbahelpdesk.incometax.net
b. Help desk number – 0120-2772828 – 42
c. Email ID – helpdesk messaging @ incometax.gov.in
d. Help desk Timings – 8.30 A.M. – 7.30 P.M. (Monday to Friday)

Notification No : 10/2017 Dated: 08-03-2017


[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

NOTIFICATION No. 10/2017-Service Tax,

New Delhi, the 8th March, 2017

 

GSR_______(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 20th June, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 467 (E), dated the 20th June, 2012, namely:-

In the said notification, in the opening paragraph, in entry 9, in clause (b), after sub-clause (iv), the following proviso shall be inserted, namely:-

“Provided that nothing contained in clause (b) of this entry shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent;”.

2. This notification shall come into force on the 1st day of April, 2017.

[F. No.334/7/2017 -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 20th June, 2012 and last amended vide notification No.7/2017 – Service Tax, dated the 2 nd February, 2017 vide number G.S.R. 100(E), dated the 2nd February, 2017.

Demonetisation effect to spill over to next quarter: RBI Deputy Governor Viral Acharya : 08-03-2017


With the latest GDP data failing to register any negative blip at all to the surprise of most analysts, expectations were that the impact of the note ban order by Prime Minister Narendra Modi announced on November 8 last, that caused shortage of currency notes in the financial system, would be seen in the next quarter has been affirmed by the Reserve Bank of India (RBI). Speaking on the subject today, RBI Deputy Governor Viral Acharya said, “Effects of demonetisation to spill over to the next quarter in some segments.”

However, Acharya added that recovery was going on apace and the system per se would get back to its original state soon. The Deputy Governor added, “Remonetisation pace quick, should be completed in 2-3 months.”

While the fight against black money is going on in the wake of the demonetisation drive, Acharya highlighted a key gain for the Indian economy that has come through the note ban order by the government. One of the key goals of the ban on Rs 500 and Rs 1000 currency notes was to move the Indian economy to a less-cash status and that seems to have happened even though the sudden surge towards digital payments by the people has reduced as the cash component in the system increased as RBI pumped in notes to get back to the pre-November 8 period and thereby end the cash crunch situation that led people to stand in long, snaking lines at bank ATMs. He said, “Level of cash in circulation to be less in post-demonetisation era.”

December GDP data revealed on February shows 7% yoy growth versus 7.4% in September, and with GVA at 6.6% versus September’s 6.7%. However, this shocked the economists as statistics that had been coming through other sources had painted a darker scenario. Data for sales of cars, two-wheelers and commercial vehicles had contracted both in November and December and the same was the case with sales of consumer staples, cement and steel. What is more, CSO kept GDP growth forecast for the current financial year at 7.1%.

Source : Financial Express

CBDT asks officials to monitor tax collections, take measures to achieve budget target : 08-03-2017


The income tax department has asked its officials to monitor tax collections on a weekly basis, pointing to lower rate of growth in collections than budgeted.

In a letter sent on Tuesday, the chairman of the Central Board of Direct Taxes, Sushil Chandra, asked principal chief commissioners of income tax to take measures to achieve the budget target.

“On review of the position of budget collections as on March 4, 2017, it is noted that as against the target growth rate of above 14%, the current rate of growth of net collections is only 10.6%, which does not augur well for achievement of the budget target in this year,” the letter says. Combined corporate, income tax collections are budgeted at Rs 8.47 lakh crore in FY17.

The letter urges the commissioners to “personally review and monitor the position of collections through advance tax, TDS and recovery from arrear and current demand” on a weekly basis.

The letter says the budget target needs to be achieved. “It may be reiterated that the achievement of revenue target is sacrosanct and the single most parameter for evaluating the performance of department and, accordingly, no efforts must be spared to achieve the same,” the letter says.

In the revised estimates for FY17, presented along with the budget for FY18, the government has retained its direct tax estimate as budgeted. The estimate of indirect taxes has been raised.

Revised estimates show gross tax revenues at Rs 17 lakh crore in FY17, compared with the budgeted figure of Rs 16.3 lakh crore.

Source : PTI

FM-led panel to decide on labour codes today : 08-03-2017


Finance minister Arun Jaitley-led inter-ministerial committee on labour is set to consider on Wednesday two labour codes on wages and industrial relations, a move aimed at improving the ease of doing business in the country.

In his 2017-18 budget speech, Jaitley had said that his government will initiate legislative reforms to simplify, rationalise and amalgamate the existing labour laws into four codes.

A senior labour ministry official told ET that the high-level committee will take a call on the two codes before they are put before the Cabinet.

The ministry has held several rounds of tripartite consultation with all the stakeholders, including trade unions and employers before finalising the draft codes.

The ministry has decided to amalgamate 44 labour laws into four codes that include the code on wages, the code on industrial relations, the code on social security and the code on safety, health and working conditions.

The government intends to place the codes on wages and industrial relations before the parliament in the second half of the budget session, which is due to begin on March 9.

Source : Economic Times

Preventing tax exemptions abuse: Changes in laws will make charitable trusts transparent : 07-03-2017


A trust is considered charitable if the object of the trust is directed to the benefit of the community or a section of the community and not for an individual or group of individuals. Charitable purpose includes relief of the poor, education, medical relief or any other object of public utility.

Owing to its aim of social development of the country, a charitable trust has received favoured and preferential treatment since 1886. Under the extant provisions of the Income Tax Act, 1961, income of such charitable trusts is granted tax exemption.

With instances of misuse of funds by trusts owned by corporate entities, the government is tightening regulation governing such entities. The Budget 2017 saw a slew of changes in this direction.

In order to prevent a charitable trust’s practice of receiving money/property for inadequate consideration/without consideration, section 56 has been amended to provide that money/property received by charitable trusts for inadequate consideration/without consideration in excess of R50,000 shall be liable to tax as ‘income from other sources’ in the hands of the trust.

Trusts are believed to engage in giving corpus donations without actual applications. Curbing these practices, any charitable/religious/private trust making any contribution to another trust with specific direction that such donation/contribution shall form part of corpus donation in the hands of recipient trust, will not be regarded as the application of income for the donor. This shall ensure that the income of the charitable trust is actually expended towards social causes.

In case of any modification or adoptions of objects, a charitable trust shall be required to obtain fresh registration by furnishing an application to assessing officer within 30 days from the date of such modification or adoption. This way the assessing officer shall be able keep a check on any changes in the objects of the charitable trust and ensure that the same qualify for the tax benefits provided under the tax laws.

Return of income must be filed within the time allowed under section 139 of the Act by every trust or institution which receives income chargeable to tax, else they may not be able to claim the tax exemption. This way trusts have been brought on the same page as any other taxpayer, sending a clear message that any taxpayer claiming tax benefits should report in time to ensure that the tax authorities have ample time to scrutinise their return of income.

Restriction has been imposed on cash donation under section 80G by reducing the capping from R10,000 to R2,000. This is to ensure that unaccounted money does not flow into the charitable institutions in the form of anonymous donations. Giving more powers to the tax authorities, it has been provided that now the income tax officers can conduct surveys under section 133A on trustees and places of activity for charitable purpose.

Section 35AC which allowed 100% tax deduction to individuals and companies making contributions to specific charitable organizations for specific schemes, shall no longer be available to donors starting April 1, 2017. With these changes, there will be substantial reduction in the corporate donations for specified charitable trusts. These changes will prevent abuse of tax exemptions and improve tax administration.

Source : Financial Express

Finance Bill will be passed in the Parliament before March 31, says FM Arun Jaitley : 07-03-2017


Union Finance Minister Arun Jaitley today said that the Finance Bill of 2017 would be passed at the Parliament before March 31. A Finance Bill is a secret bill that is introduced every year in Lok Sabha after the presentation of the Union Budget by the Finance Minister. The introduction of the finance bill is done so that all financial proposals made by the Government of India in the Union Budget are carried by ease.

Further details awaited.

Source : PTI

Change to gratuity Act likely in coming session : 07-03-2017


The government is likely to bring a change to an Act to make gratuity up to Rs 20 lakh tax-free in the upcoming second half of the Budget session of Parliament slated to begin on Thursday.

The change to the Payment of Gratuity Act will not only raise the tax-free portion of the gratuity but also allow the government to increase it through the executive order in the future, official sources said.

Ceiling on gratuity will be linked to inflation and that way it would be raised through an executive order in the future, if the Bill is passed by Parliament.

Pavan Kumar, organising secretary of the Bharatiya Mazdoor Sangh, said the government has conveyed to the trade unions that the change to the Act is slated to be introduced in the Budget session.

However, he said trade unions have also demanded other changes, including a change in the current formula of calculation of gratuity to increase the number of days for which gratuity is calculated from 15 days in a year to 26 days. Currently, gratuity received is tax-free to the extent that it does not exceed 15 days’ salary for every completed year of service.

The unions, he said, have also demanded removal of the five-year ceiling. Currently, one gets gratuity only if he has completed five years of service.

The Act applies to those establishments where the number of employees is not fewer than 10.

Source : Business Standard

Imports like electronics, machinery go against Make in India : 06-03-2017


The government’s “Make in India” programme to boost manufacturing should target on priority basis high import-intensive items like electronics, machinery, steel and transport equipment, industry chamber Assocham said on Sunday. “There are other major import items like crude oil, gold and precious stones which cannot be produced indigenously or are used for re-exports,” the Associated Chambers of Commerce and Industry of India said in a statement here.

“But a growing economy like India which is witnessing a huge expansion in usage of telecom and other items using electronics, should go about in a focused manner to drastically cut imports of the items which can be substituted by domestic production and add to the country’s manufacturing strength,” it said.

“This is eminently doable, provided the policy initiatives are put in place and implemented with great clarity and speed both by the Centre and the states.”

According to Assocham there were imports of close to $4 billion of electronics, $2.36 billion of electrical and non-electrical machinery, $1.47 billion of transport equipment and about $1 billion of iron and steel.

“Thanks to expanding demand for user industries particularly telecom, automobile, smart consumer devices, the annualized imports of electronics goods grew at a whopping 24.56 per cent in January, 2017,” the chamber said.

“Import of products which can be manufactured within the country runs contrary to the basic grain of the Make In India. The tax structure should be such that it should make the domestic manufacture far more competitive than imports,” Secretary General D.S. Rawat said.

“Electronics is one area where the country does not have adequate capacity and is highly import dependent. Thus, investment in the sector from both domestic and global firms should be welcomed and promoted,” he added.

Source : Financial Express

Centre to hike dearness allowance by 2% from Jan 1 : 06-03-2017


The Centre is likely to announce a hike of 2-4 per cent in dearness allowance for its about 50 lakh employees and 58 lakh pensioners later this month.

Dearness allowance and dearness relief are provided to employees and pensioners to neutralise the impact of inflation on their earnings. The labour unions, however, are not happy with the proposed hike saying it would not be able to offset the real impact of price rise.

“The dearness allowance as per the agreed formula by  the Centre works out to be 2 per cent which would be effected from January 1, 2017,” Confederation of Central Government Employees’ President K K N Kutty told PTI.

However, Kutty expressed dissatisfaction over such a “meagre” hike saying that the consumer price index for industrial workers (CPI-IW) which is an agreed benchmark for increasing dearness allowance is far from reality.

He said that there is difference between the quantum of price rise of commodities ascertained by the Labour Bureau and the Ministry of Agriculture.

CPI-IW is an imaginary number due to poor quality of data collection by Labour Bureau and it is far from reality, he claimed.

The average CPI-IW to be taken into account for raising DA is 4.95 per cent from January 1 to December 31, 2017. Since the government has already hiked the dearness allowance by 2 per cent in October last year from July 1, 2016, it will now raise it further by 2 per cent.

The dearness allowance is paid as proportion of the basic pay of the central government employees.

Kutty said that the federation in the next meeting of the national council would make a case for considering the fractions while fixing DA.

The national council is an apex forum functioning under the Department of Personnel and Training where unionists and senior official discuss issues concerning central employees.

Earlier last year, the government hiked DA by 6 per cent to 125 per cent of basic pay. The DA was later merged into the basic pay following the implementation of the 7th Pay Commission award.

At present the Central government employees and pensioners are entitled to 2 per cent dearness allowance, which was effected from July 1, 2016.

Source : Business Standard

Single form soon for firms to enrol with EPFO, ESIC : 06-03-2017


New Delhi, Mar 5 (PTI) Companies will soon have to fill just a single common form to enrol themselves with retirement fund body EPFO and state insurer ESIC.

The government is planning to introduce this common registration form soon and the basic idea is to make the job easier for firms by cutting down layers of paperwork they go through for the process of registration.

“We are working on a single composite form for registration with the Employees’ Provident Fund organisation (EPFO) and the Employees’ State Insurance Corporation (ESIC) which will be used by employers,” a senior official said.

This form is expected to reduce the tedious work of filling multiple forms for registering with these two social security bodies and improve ease of doing business.

The schemes run by EPFO and ESIC provide mandatory cover to formal sector workers in the country.

The firms with 20 or more employees are required to register with EPFO while this ceiling is 10 or more in the case of ESIC.

 The EPFO runs three social security schemes — Employees Provident Fund Scheme, 1952, Employees Pension Scheme, 1995, and Employees Deposit Linked Insurance Scheme, 1976.

Similarly, ESIC provides mandatory health cover to formal sector workers and facility of cashless health treatment.

EPFO has a subscriber base of over 4 crore while ESIC has 2 crore insured persons and covers a population of around 8 crore people under its health insurance.

According to the latest World Bank report, India was ranked at 130th out of 190 in ease of doing business. The government is working on all the 10 parameters to improve its ranking. It aims to break into top 50.

The parameters in question are starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

Source : Economic Times

Good news: Unemployment rate falls on Narendra Modi govt’s rural infrastructure drive : 04-03-2017


After the very optimistic GDP numbers released on February 28, there is another good news that unemployment rates have fallen as Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has perked up rural infrastructure. The report by the Economic Research Department of State Bank of India points out that contrary to market perception, India’s unemployment rate declined sharply and consistently from 9.5% in Aug’16 to 4.8% in Feb’17. The states that witnessed major decline in unemployment include Uttar Pradesh (17.1% to 2.9%), Madhya Pradesh (10.0% to 2.7%), Jharkhand (9.5% to 3.1%), Odisha (10.2% to 2.9%) and Bihar (13.0% to 3.7%).

According to the report, this decline is primarily due to government’s effort in providing new employment opportunities in the rural areas. This decline is also explained by household allocated work under MGNREGA, which increased from 83 lakh households in Oct’16 to 167 lakh households in Feb’17. Hence, on the one hand, the unemployment rate has almost halved, on the other hand, the demand for work has almost doubled. Further, the report points out that the number of work completed under the scheme has also increased by a whopping 40% to 50.5 lakh in fy 17 compared to 36.0 lakh in fy 16.

The most creditworthy increase was seen in Anganwadi work at 166%, drought proofing 158%, rural drinking water at 698% and water conservation and harvesting at 142%. This is a welcome trend and will contribute greatly for developing rural infrastructure as a sine qua non for sustained agriculture growth.

After the very optimistic GDP numbers released on February 28, there is another good news that unemployment rates have fallen as Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has perked up rural infrastructure. The report by the Economic Research Department of State Bank of India points out that contrary to market perception, India’s unemployment rate declined sharply and consistently from 9.5% in Aug’16 to 4.8% in Feb’17. The states that witnessed major decline in unemployment include Uttar Pradesh (17.1% to 2.9%), Madhya Pradesh (10.0% to 2.7%), Jharkhand (9.5% to 3.1%), Odisha (10.2% to 2.9%) and Bihar (13.0% to 3.7%).

According to the report, this decline is primarily due to government’s effort in providing new employment opportunities in the rural areas. This decline is also explained by household allocated work under MGNREGA, which increased from 83 lakh households in Oct’16 to 167 lakh households in Feb’17. Hence, on the one hand, the unemployment rate has almost halved, on the other hand, the demand for work has almost doubled. Further, the report points out that the number of work completed under the scheme has also increased by a whopping 40% to 50.5 lakh in fy 17 compared to 36.0 lakh in fy 16.

The most creditworthy increase was seen in Anganwadi work at 166%, drought proofing 158%, rural drinking water at 698% and water conservation and harvesting at 142%. This is a welcome trend and will contribute greatly for developing rural infrastructure as a sine qua non for sustained agriculture growth.

In Union Budget speech, MGNREGA scheme has been allocated a budgetary resource of Rs 48,000 crore. During fy 18, another 5 lakh farm ponds will be taken up, compared to expected 10 lakh farm ponds during fy 17. This single measure will contribute greatly to drought proofing of gram panchayats.

The report that was released on Friday has been authored by Dr. Soumya Kanti Ghosh, Chief Economic Adviser, Economic Research Department, SBI.

If the GST Council makes GST any more onerous, or raises taxes, it may not be worth it : 04-03-2017


Though the weekend meeting of the GST Council is not expected to finalise the rates at which individual goods and services will be taxed under GST, negotiations in the council are reaching a critical stage, and how they progress will determine whether India will have a good or a bad GST. Chief economic advisor Arvind Subramanian has, in this newspaper, made a last-minute pitch to get land and realty under GST – as he rightly puts it, this does not remove the state government’s ability to levy stamp duties but allows more tracking of transactions to check black money in real estate.

While it is not clear if this concern will be taken care of, the peak rate of 40% being proposed – from the current 28% — is a big cause for worry. On the face of it, officials are saying this is just a precautionary move, to obviate the need for going to Parliament in case tax rates need to be raised, the idea of putting a 28% cap was precisely to ensure rates never went up – indeed, the lower the highest tax, the more the benefits from GST. It is true that, even now, goods that pay a 40% tax – excise plus VAT – will pay the same rate through the 28% GST plus a 12% cess. But while the cess is a temporary measure, putting a 40% rate in the statute could bind us to high rates. Even before this proposal, the top rate of 28% was problematic since, the way things look right now, over a fourth of the tax base falls in this bucket – Subramanian is on record saying, just recently, that if the 28% tax slab has more than 6-7% of the base, it would be disappointing and it will be a high-rate GST.

More worrying is the fact that the centre and states seem agreed on an anti-profit clause in the GST. So, if the GST rate brings down the current tax on a good or service from, say 22% to 18%, the difference has to be passed on to consumers. Imagine the harassment if tax inspectors are to examine a company’s pricing structure to see whether a tax cut has been passed on or not – if a cut is not passed on, this could be because inputs have become costlier or the company was absorbing some costs or any of several other reasons. Normally, markets decide on pricing structures and it is quite draconian to pass on part of the power to tax inspectors. Equally amazing is the proposal, in the first draft of the GST law, that allows states to issue some kind of documentation on the goods being transported that truckers need to carry in case they are stopped for checking.

The idea behind GST was to stop border checkposts where such documents are verified right now, and where trucks waste precious hours while doing so, so why is this practice being resurrected? Given the reluctance of states to adopt GST, if finance minister Arun Jaitley wants the law to go through, it is true he needs to be a lot more flexible and accommodate state government demands. But, if the new law is going to be worse than what is there at the moment, you have to wonder whether it is worth all the heartburn.

Source : Financial Express

Liability linkage provision in GST to hit small traders : 04-03-2017


A provision in the model goods and services tax (GST) law to ensure the smooth flow of credit and minimise tax evasion could hit small businesses and suppliers by favouring bigger and financially stronger ones.

The ‘liability linkage provision’ allows the buyer credit for tax paid on inputs used only if the supplier has paid the tax within a given window. The provision, to be discussed at the meeting of the GST Council on March 4-5, calls for reversal of credit to the buyer in case of noncompliance by the vendor. That is, a buyer would be penalised for the supplier’s non-compliance. “This seems unfair as it penalises the buyer for someone else’s fault,” said Pratik Jain, indirect tax leader, PwC.

“It could lead to preference in terms of dealing with bigger vendors which could hit the SME (small and medium enterprises) sector hard.” The provision has its roots in the concept of vendor matching that was introduced to ensure that the government has an audit trail to see if every sale has a corresponding purchase. In case of any mismatch, tax officials will proceed against the concerned vendor. Tally Solutions managing director Bharat Goenka said SMEs sometimes face payment cycle issues and  will be penalised for delayed payments.

He suggested that the valid return of a supplier should be made the basis for input credit instead of linking validity to payment of liability.

“This simple change will anyway unlock the businesses, improve compliance, and dramatically reduce fraud due to the triangulated nature of GST,” Goenka said.

The government wants to roll out GST from July 1. The relevant laws need to be approved by the GST Council and passed by parliament to ensure the legal process is complete by then. The GST Council will try and clear all the legislation during its two-day meeting on March 4-5.

Source : Economic Times

Benami Act violators will face double whammy of legal action, Income Tax dept warns : 03-03-2017


The tax department today warned that those who undertake Benami transactions would invite Rigorous Imprisonment (RI) of up to 7 years and such violators would also stand to be charged under the normal I-T Act.In advertisements issued in leading national dailies today, the Income Tax department stated: “Do not enter into benami transactions” as the Benami Property Transactions Act, 1988, is “now in action” from November 1, 2016.

“Black money is a crime against humanity. We urge every conscientious citizen to help the government in eradicating it,” it said.

The department also spelled out some salient features of the new Act: “Benamidar (in whose name benami property is standing), beneficiary (who actually paid consideration) and persons who abet and induce benami transactions are prosecutable and may get RI up to 7 years besides being liable to pay fine up to 25 per cent of fair market value of benami property.

“It added that “persons who furnish false information to authorities under the Benami Act are prosecutable and may be imprisoned up to 5 years besides being liable to pay fine up to 10 per cent of fair market value of benami property.”

The department made it clear that the benami property “may be attached and confiscated by the government” and that these actions are in “addition to actions under other laws such as Income Act, 1961.Advertisement

The tax department today warned that those who undertake Benami transactions would invite Rigorous Imprisonment (RI) of up to 7 years and such violators would also stand to be charged under the normal I-T Act.In advertisements issued in leading national dailies today, the Income Tax department stated: “Do not enter into benami transactions” as the Benami Property Transactions Act, 1988, is “now in action” from November 1, 2016.

“Black money is a crime against humanity. We urge every conscientious citizen to help the government in eradicating it,” it said.

The department also spelled out some salient features of the new Act: “Benamidar (in whose name benami property is standing), beneficiary (who actually paid consideration) and persons who abet and induce benami transactions are prosecutable and may get RI up to 7 years besides being liable to pay fine up to 25 per cent of fair market value of benami property.

“It added that “persons who furnish false information to authorities under the Benami Act are prosecutable and may be imprisoned up to 5 years besides being liable to pay fine up to 10 per cent of fair market value of benami property.”

The department made it clear that the benami property “may be attached and confiscated by the government” and that these actions are in “addition to actions under other laws such as Income Act, 1961.

“The department, since the enactment of the law last year, has registered over 230 cases and attached assets worth Rs 55 crore nationwide, which also coincided with the action against black money post demonetisation.

“A total of 235 cases and instances have been registered under the said Act by the department till mid-February this year.

Show cause notices for attachment have been issued in 140 cases where benami assets worth Rs 200 crore are involved.

“In 124 cases, benami assets worth more than Rs 55 crore have been provisionally attached till now,” an I-T report, accessed by PTI, had said.

The attached assets, officials had said, include deposits in bank accounts, agricultural and other land, flats and jewellery, among others.

Post demonetisation on November 8 last year, the I-T department had carried out public advertisements and had warned people against depositing their unaccounted old currency in someone else’s bank account. The I-T department is the nodal department to enforce the said Act in the country.

The taxman had initiated a nationwide operation to identify suspect bank accounts where huge cash deposits have been made post November 8 when the government demonetised the Rs 500/1000 currency notes.

Source : Financial Express

Higher tax fears spur capital restructuring in Corporate India : 03-03-2017


With a new higher tax regime coming into effect from April 1, top corporates and wealthy investors are in a rush to restructure their shareholding. On Wednesday, Reliance Industries (RIL) announced a restructuring involving Rs 1.3 lakh crore of shares within promoter entities. Similarly, Aurobindo Pharma last week transferred shares totalling Rs 13,200 crore belonging to promoters into a family trust. Investment guru Shivanand Mankekar, too, was seen undertaking similar restructuring. Legal experts said shares worth a few lakh crores or more could be restructured before March 31.

Mukesh Ambani-controlled RIL said 15 promoter group entities would transfer their 1.19 billion shares in the company to eight other promoter group entities at a price of Rs 1,100.78 per share. While this amounts to 36.7 per cent of the company’s share capital, the transfer will not result in any change in the promoter group’s shareholding, which stands at 45.24 per cent in the company.

  Until now, such transfers didn’t have tax implications. However, with the new Budget proposal, transfers between individuals and trusts or limited liability partnerships (LLPs) — which were earlier considered a gift — will now be regarded as income and attract tax in the hands of the recipient. In what would make matters more complex, any transfer made at less than the market value will be deemed ‘fair market value’ for computation of tax by tax authorities.

 To incorporate these changes, a new section — Section 56 (2) (X) — has been proposed to be introduced into the Income Tax Act. Stringent provisions under this could sound the death knell for corporate restructuring plans, said experts.

 “The broad-basing of the deemed income provision under Section 56 is unfortunately an extreme provision, and can have unintended consequences, including virtually killing any kind of restructuring, even where the economic interest before and after the transfer is identical or similar, within a family or otherwise,” said Ketan Dalal, senior tax partner, PWC, while declining to comment on any individual company’s plans.

 Tax experts said the impact of Section 56 (2) (X) could be felt beyond the stock markets.

 For instance, the changes could have a bearing on transfers in real estate, mergers & acquisitions, asset restructuring companies (ARCs) and estate management. The ‘fair market value’ computation for non-stock market transactions could even become a contentious issue, said experts.

 “I think the section could have a lot of unintended consequences – in case of transfers within families or assets purchased by ARCs. Typically, ARCs purchase assets from other institutions at prices lower than the market value,” said Pranay Bhatia, partner-direct tax, BDO India.

 Experts said transfers made to family trusts, in a majority of the cases, are part of an inheritance plan and the shares received are not a consideration but an obligation to safeguard the assets and pass it on to the end-beneficiaries.

 “The inheritance and succession planning is usually driven by several non-tax considerations. Logically, if the transfer is between relatives, there should be no tax, either on the transferor or the transferee. However, as a result of the amendment made in the Budget, even if the recipient is a private trust with beneficiaries being relatives of the settler or transferor, there can be potential tax exposure, which does not seem to have been intended; this should be addressed before the Bill becomes an Act,” said Dalal.

 Source : Business Standard

Peak GST rate to be pegged higher at 40% : 03-03-2017


India has decided to peg the peak goods and services tax (GST) rate at 40% in the legislation instead of 28%, giving it the flexibility to raise rates without having to reach out to Parliament.

This is only an enabling provision and the highest rate levied on goods will still be 28% (14% central GST and 14% state GST). The demerit and luxury goods will attract higher 28 rate plus cess.

This provision will also allow the government to remove the cess at some stage and instead have a higher GST rate only, which will make for a neater GST.

The GST Council has decided to peg the peak tax rate at 40% (20% central GST and 20% state GST) in the model GST law to preclude the requirement of approaching Parliament or state assemblies for any change in future.

This has been done to ensure that when the cess is removed or merged, the flexibility to impose higher rate on luxury goods is not taken away, a senior finance ministry official told ET.

“Some members of the council felt such an enabling provision was needed,” the official privy to the development said.

The Centre is looking at GST rollout from July 1.

The change in the peak rate will not alter the four-slab rate structure of 5%, 12%, 18% and 28% agreed upon last year, but is only a provision being built into the model law to take care of contingencies in future.

“There shall be levied a tax called central/state goods & services tax (CGST/SGST) on all intra-state supplies of goods and/or services… at such rates as may be notified by the central/state government… but not exceeding 14%on recommendation of the council and collected in such manner as may be prescribed,” the draft GST law says. Officials said this “14%” will now be changed to say the rate will not exceed “20%”.

Experts said this raises the fear of rates being raised. “While it seems that it will not immediately impact the current slabs which have been envisaged, industry would be afraid that rates could increase once GST is implemented,” said Pratik Jain, indirect tax leader,

“It is important for the government to realise that benefits of GST will only accrue if rates are moderate and tax base is enhanced. It might be prudent for the council to reconsider this decision,” said Pratik Jain of PwC India.

The official dismissed these fears. “There is no thinking to tinker with the rates at present,” the official said.

The GST Council, headed by finance minister Arun Jaitley and comprising representatives of all states, is to take up the model laws at its next meeting.

Mirroring the model GST law, the CGST, SGST and UTGST law will be firmed up by the Centre, states and Union Territories, respectively. The Centre plans to introduce in Parliament the Central GST Bill in the session beginning March 9. After it is ratified, the states will introduce the State GST Bill in their respective legislative assemblies. The central and state officials will soon start the exercise to determine which goods and services should fall in which tax bracket and the same will be taken to the council for approval.

They will also decide the goods and services that would attract a cess on top of the peak rate to create a corpus that can be used for compensating states for any loss of revenue.

Source : Economic Times

Notification No. 385/2017-RB/GSR 188(E) 03-03-2017


FEM (TRANSFER OR ISSUE OF SECURITY BY A PERSON RESIDENT OUTSIDE INDIA) (SECOND AMENDMENT) REGULATIONS, 2017 – AMENDMENT IN REGULATION 5 AND SUBSTITUTION OF SCHEDULE 9

NOTIFICATION NO. FEMA.385/2017-RB/GSR 188(E)DATED 3-3-2017

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 and Commencement

1. (i) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Second Amendment) Regulations, 2017.

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

Amendment of the Regulations

2. A. 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 Regulation 5, for the existing sub-regulation (9), the following shall be substituted, namely:

“5 (9) A person resident outside India (other than a citizen of Pakistan or Bangladesh) or an entity incorporated outside India (other than an entity in Pakistan or Bangladesh), not being a Foreign Portfolio Investor or Foreign Institutional Investor or Foreign Venture Capital Investor registered in accordance with SEBI guidelines, may contribute foreign capital either by way of capital contribution or by way of acquisition/transfer of profit shares in the capital structure of an LLP under Foreign Direct Investment, subject to the terms and conditions as specified in Schedule 9″

B. Schedule 9 shall be substituted, namely

“Schedule 9

[See Regulation 5 (9)]

The Scheme shall be called Foreign Direct Investment (FDI-LLP) in Limited Liability Partnerships (LLP) formed and registered under the Limited Liability Partnership Act, 2008.

1. Eligible Investors
A person resident outside India (other than a citizen of Pakistan or Bangladesh) or an entity incorporated outside India (other than an entity in Pakistan or Bangladesh), not being a Foreign Portfolio Investor or Foreign Institutional Investor or Foreign Venture Capital Investor registered in accordance with SEBI guidelines, may contribute foreign capital either by way of capital contribution or by way of acquisition/transfer of profit shares in the capital structure of an LLP.
2. Eligible investment
Contribution to the capital of an LLP would be an eligible investment under the scheme.
Note: Investment by way of ‘profit share’ will fall under the category of reinvestment of earnings
3. Eligibility of a LLP
FDI in LLPs is permitted, subject to the following conditions:
i. FDI is permitted under the automatic route in LLPs operating in sectors/activities where 100% FDI is allowed through the automatic route and there are no FDI linked performance conditions. For ascertaining such sectors, reference shall be made to Annex B to Schedule 1 of these Regulations
ii. An Indian company or an LLP, having foreign investment, will be permitted to make downstream investment in another company or LLP engaged in sectors in which 100% FDI is allowed under the automatic route and there are no FDI linked performance conditions. Onus shall be on the Indian company/LLP accepting downstream investment to ensure compliance with the above conditions.
iii. FDI in LLP is subject to the compliance of the conditions of Limited Liability Partnership Act, 2008.
iv. A company having foreign investment can be converted into an LLP under the automatic route only if it is engaged in a sector where foreign investment up to 100 percent is permitted under automatic route and there are no FDI linked performance conditions.
4. Pricing
FDI in a LLP either by way of capital contribution or by way of acquisition/transfer of profit shares, would have to be more than or equal to the fair price as worked out with any valuation norm which is internationally accepted/adopted as per market practice (hereinafter referred to as “fair price of capital contribution/profit share of an LLP”) and a valuation certificate to that effect shall be issued by the Chartered Accountant or by a practicing Cost Accountant or by an approved valuer from the panel maintained by the Central Government. In case of transfer of capital contribution/profit share from a resident to a non-resident, the transfer shall be for a consideration equal to or more than the fair price of capital contribution/profit share of an LLP. Further, in case of transfer of capital contribution/profit share from a non-resident to resident, the transfer shall be for a consideration which is less than or equal to the fair price of the capital contribution/profit share of an LLP.
5. Mode of payment
Payment by an investor towards capital contribution in LLPs shall be made:
(i) by way of inward remittance through banking channels; or
(ii) by debit to NRE/FCNR(B) account of the person concerned, maintained with an AD Category-I bank in accordance with Foreign Exchange Management (Deposit) Regulations, 2016, as amended from time to time.
6. Reporting
(i) Reporting of foreign investment in LLPs and disinvestment/transfer of capital contribution or profit shares between a resident and a non-resident may be made in a manner as prescribed by Reserve Bank of India from time to time.
(ii) All LLPs which have received Foreign Direct Investment in the previous year(s) including the current year shall submit to the Reserve Bank of India, on or before the 15th day of July of each year, a report titled ‘Annual Return on Foreign Liabilities and Assets’ as specified by the Reserve Bank from time to time.”

Instruction No. 4/2017 – 3-3-2017


SECTION 133 OF THE INCOME-TAX ACT, 1961 – INCOME TAX AUTHORITIES – POWER TO CALL INFORMATION – ISSUE OF NOTICE UNDER SECTION 133(6) FOR VERIFICATION OF CASH DEPOSITS UNDER OPERATION CLEAN MONEY

INSTRUCTION NO.4/2017 [F.NO.225/100/2017-ITA.II], DATED 3-3-2017

Vide Instruction No. 3/2017 dated 21-2-2017, in file of even number, CBDT has issued a SOP to be followed by the Assessing Officer(s) for Online Verification of Cash Transactions pertaining to the demonetisation period. In continuation thereof, the Board hereby prescribes a Template, to be used for issue of notices under section 133(6) of the Income-tax Act, 1961 (‘Act’) in appropriate cases, for Online Verification of Cash Deposits. The format is enclosed herewith as Annexure.

2. Following issues may kindly be kept into consideration while issuing notices under section 133(6) of the Act, in applicable cases:

i. Notice under section 133(6) of the Act is required to be issued, after obtaining prior approval of Pr. CIT/CIT/Pr. DIT/DIT as provided in the Act, in cases where the ‘person under verification’ fails to file Online response in a timely manner in spite of issue of reminder by the Assessing Officer. The approval would be taken Online once the facility in ITBA module gets operationalised;
ii. Notice shall be generated through the ITD System only. Hence, no hand written/typed notice is required to be issued by the Assessing Officer in an individual case;
iii. Response to notice under section 133(6) of the Act has to be furnished within the stipulated period by the ‘person under verification’ only through the Online mode;
iv. It is re-iterated that verification under ‘Operation Clean Money’ is to be made through the Online Verification Portal only in accordance with SOP dated 21-2-2017;
v. In case no response is furnished within the specified timeframe, Assessing Officer may form a view that ‘person under verification’ has no plausible explanation to offer regarding the cash deposits in his/her bank account(s) and consequentially, the case may be escalated as ‘Not-Acceptable’ for further action in accordance with the procedure prescribed in the SOP of CBDT vide Instruction No. 3/2017 dated 21-2-2017.

3. This may be brought to the notice of all for necessary compliance.

(ANNEXURE)

Subject: Furnishing information under section 133(6) of the Income-tax Act, 1961 (‘Act’) regarding cash transactions made during 9th November to 30th December, 2016-regd.-

Dear. . . . . . . . .

Income-tax Department has received. . . . . . . . . information record(s) showing total cash deposits of Rs. . . . . . . . relating to you. The information in respect of these transactions has already been made available in the online verification portal.

2. You are hereby required to furnish the requisite information/particulars in the matter above, under section 133(6) of the Act, within 5 days of receipt of this communication. The response has to be furnished online only and there is no need to visit the Income-tax office for submitting the same. The steps for furnishing the response are as under:

Step 1 : Login to e-filing portal at https://incometaxindiaefiling.gov.in. If you are not registered with the e-filing portal, use the ‘Register Yourself’ link to register.

Step 2 : Click on ”Cash Transactions 2016″ link under ”Compliance” section.

Step 3 : The details of transaction(s) related to cash deposits during 9th November to 30th December, 2016 will be displayed.

Step 4 : Submit your online response for each transaction and keep acknowledgement for record.

3. Non-compliance of this notice may lead to forming a view that there is no plausible explanation in respect of cash so deposited and the matter may be further dealt with in accordance with the relevant provisions under the Act. Please also note that non-compliance within the prescribed time may attract penal proceedings under section 272A of the Act.

4. This issues with prior approval of Pr. CIT/CIT/Pr. DIT/DIT.

Note:

Please refer to the User Guide and Frequently asked Questions (‘FAQs’) which is available in the help section of the e-filing portal home page.
Kindly verify and update the email address and mobile number on the e-filing portal to receive electronic communication.
Please ignore this notice, if response has already been furnished in the matter.

India, UK discuss agenda of Economic and Financial Dialogue : 02-03-2017


During his recent visit to the United Kingdom, Finance Minister Arun Jaitley met Chancellor of the Exchequer Philip Hammond at 10 Downing Street. Both leaders discussed the agenda of the upcoming Economic and Financial Dialogue scheduled to be held in Delhi in April 2017. The agenda for the EFD will include, among other things, progress on the India-UK sub-fund under India’s National Investment Infrastructure Fund, raising of capital in London including through issue of ‘masala bonds’ and exploring co-operation in the FinTech sector which has opened up immense opportunities post-demonetization in India.

The two leaders appreciated the balanced two-way flow of investments between the two countries and the keenness on both the sides to pursue a trade agreement post-Brexit. They reaffirmed their personal commitment to further strengthening of India-UK economic and commercial ties. In a special gesture, Prime Minister Theresa May dropped in to meet Finance Minister Jaitley during his meeting with the Chancellor. Recalling her visit to India in November last year, she expressed her appreciation on the follow-up of the agenda agreed upon by both the prime ministers.

She remarked that the upcoming Economic and Financial Dialogue, Energy Summit and Migration dialogue will help consolidate on the momentum generated by the prime ministerial visits in the last two years and reiterated her keenness to promote UK’s relations with India, particularly post-Brexit and even otherwise. On Monday, Mr. Jaitley met UK Foreign Secretary Boris Johnson at the Foreign and Commonwealth Office. Welcoming the India-UK Year of Culture, the two leaders hailed the strong India-UK bilateral ties and the potential to further strengthen them.

In all these meetings, Mr. Jaitley raised the issue of Indians wanted by Indian government and courts residing in the UK and requested for UK Government’s assistance in facilitating their return to India. Mr. Jaitley also attended Her Majesty the Queen’s reception to launch the activities of the 2017 India-UK Year of Culture. He was accompanied by a FICCI business delegation. He also met with investors and business community in various events organised by London Stock Exchange, UKIBC, JP Morgan and the CBI. He also delivered a talk on Transforming India: Vision for the next Decade at London School of Economics under the 100 Foot Journey Club, jointly organised by LSE and High Commission of India.

Source : PTI

35 – 02-03-2017


EXIM’ BANK’S GOVERNMENT OF INDIA SUPPORTED LINE OF CREDIT OF USD 26 MILLION TO GOVERNMENT OF REPUBLIC OF SENEGAL

A.P. (DIR SERIES 2016-17) CIRCULAR NO.35DATED 2-3-2017

Export-Import Bank of India (Exim Bank) has entered into an agreement dated July 15, 2016 with the Government of the Republic of Senegal for making available to the latter, a Government of India supported Line of Credit (LOC) of USD 26 million (USD Twenty Six million only) for financing acquisition of buses in the Republic of Senegal. The goods including plant, 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 of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 per cent of goods and services may be procured by the seller for the purpose of the eligible contract from outside India.

2. The credit agreement under the LOC is effective from February 16, 2017. Under the LOC, the terminal utilization period is 60 months after the scheduled completion date of the project.

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

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

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

6. 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.

34 – 02-03-2017


EXIM’ BANK’S GOVERNMENT OF INDIA SUPPORTED LINE OF CREDIT OF USD 23.50 MILLION TO GOVERNMENT OF REPUBLIC OF MALAWI

A.P. (DIR SERIES 2016-17) CIRCULAR NO.34DATED 2-3-2017

Export-Import Bank of India (Exim Bank) has entered into an agreement dated August 05, 2016 with the Government of the Republic of Malawi for making available to the latter, a Government of India supported Line of Credit (LOC) of USD 23.50 million (USD Twenty three million and five hundred thousand only) for financing construction of a new water supply system from Likhubula river in Mulanje to Blantyre in the Republic of Malawi. The goods including plant, 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, goods and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 per cent of goods and services may be procured by the seller for the purpose of the eligible contract from outside India.

2. The credit agreement under the LOC is effective from February 20, 2017. Under the LOC, the terminal utilization period is 60 months after the scheduled completion date of the project.

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

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

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

6. 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.

34 – 02-03-2017


EXIM’ BANK’S GOVERNMENT OF INDIA SUPPORTED LINE OF CREDIT OF USD 23.50 MILLION TO GOVERNMENT OF REPUBLIC OF MALAWI

A.P. (DIR SERIES 2016-17) CIRCULAR NO.34DATED 2-3-2017

Export-Import Bank of India (Exim Bank) has entered into an agreement dated August 05, 2016 with the Government of the Republic of Malawi for making available to the latter, a Government of India supported Line of Credit (LOC) of USD 23.50 million (USD Twenty three million and five hundred thousand only) for financing construction of a new water supply system from Likhubula river in Mulanje to Blantyre in the Republic of Malawi. The goods including plant, 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, goods and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 per cent of goods and services may be procured by the seller for the purpose of the eligible contract from outside India.

2. The credit agreement under the LOC is effective from February 20, 2017. Under the LOC, the terminal utilization period is 60 months after the scheduled completion date of the project.

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

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

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

6. 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.

33 – 02-03-2017


EXIM’ BANK’S GOVERNMENT OF INDIA SUPPORTED LINE OF CREDIT OF USD 15 MILLION TO GOVERNMENT OF REPUBLIC OF KENYA

A.P. (DIR SERIES 2016-17) CIRCULAR NO.33DATED 2-3-2017

Export-Import Bank of India (Exim Bank) has entered into an agreement dated July 11, 2016 with the Government of the Republic of Kenya for making available to the latter, a Government of India supported Line of Credit (LOC) of USD 15 million (USD Fifteen million only) for financing development of various small and medium enterprises in the Republic of Kenya. The goods including plant, 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, goods and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 per cent of goods and services may be procured by the seller for the purpose of the eligible contract from outside India.

2. The credit agreement under the LOC is effective from February 17, 2017. Under the LOC, the terminal utilization period is 60 months after the scheduled completion date of the project.

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

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

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

6. 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.

32 – 02-03-2017


EXIM’ BANK’S GOVERNMENT OF INDIA SUPPORTED LINE OF CREDIT OF USD 29.95 MILLION TO GOVERNMENT OF REPUBLIC OF KENYA

A.P. (DIR SERIES 2016-17) CIRCULAR NO.32DATED 2-3-2017

Export-Import Bank of India (Exim Bank) has entered into an agreement dated July 11, 2016 with the Government of the Republic of Kenya for making available to the latter, a Government of India supported Line of Credit (LOC) of USD 29.95 million (USD Twenty Nine million and Nine hundred Fifty thousand only) for financing up gradation of Rift Valley Textiles factory (RIVATEX East Africa Limited) in the Republic of Kenya. The goods including plant, 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, goods and services of the value of at least 72 per cent of the contract price shall be supplied by the seller from India and the remaining 28 per cent of 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 February 17, 2017. Under the LOC, the terminal utilization period is 60 months after the scheduled completion date of the project.

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

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

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

6. 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.

 

Government notifies law to make banned note possession punishable : 02-03-2017


 The government has notified the law that makes holding of more than 10 scrapped notes punishable with a minimum fine of Rs 10,000.

The Specified Bank Notes (Cessation of Liabilities) Act, 2017, was passed by Parliament last month with a view to eliminating the “possibility of running a parallel economy” using the old Rs 500/1,000 notes that have been demonetised.

The law, signed by President Pranab Mukherjee on February 27, also provides for a minimum fine Rs 50,000 for false declaration by persons who were abroad during the demonetisation period (November 9-December 30, 2016) and given time to deposit such scrapped notes with RBI till March 31.

With the law coming into force, possession of more than 10 pieces of the old notes by individuals and more than 25 pieces for study, research or numismatics purpose will be a criminal offence, attracting fine of Rs 10,000 or five times the cash held, whichever is higher.

The government took the demonetisation decision on the recommendations of the RBI’s central board to eliminate unaccounted money and fake currency notes from the financial system.

The law prohibits the holding, transferring or receiving of scrapped notes from December 31, 2016, and seeks to confer power on the court of a first class magistrate to impose penalty.

Source : Economic Times

Virtual currencies are prone to risks, cautions RBI : 02-03-3017


The Reserve Bank of India has cautioned that virtual currencies (VCs), including bitcoins, pose potential financial, operational, legal, customer protection and security risks to users, holders and traders as no central bank or monetary authority has an oversight role on these currencies.

Speaking at a fintech conference jointly organised by FICCI, IBA and Nasscom, R Gandhi, Deputy Governor, RBI, underscored that as VCs are stored in digital/electronic form, they are prone to, among others, losses arising out of hacking, loss of password, compromise of access credentials and malware attacks.

“Payments by VCs are on a peer-to-peer basis. No established framework for recourse to customer problems, disputes, charge backs, etc., is feasible. There is no underlying or backing of any asset for VCs. Value seems to be a matter of speculation.

“Legal status is definitely not there. While this is a purported objective of a VC, it puts a natural limit for its progression…And finally, the usage of VCs for illicit and illegal activities has been reported as uncomfortably large,” explained Gandhi.

Confidence, anonymity

The Deputy Governor said his arguments against VCs stem from two key elements — confidence and anonymity. He elaborated that a ‘currency’ should be able to sustain these two elements for ever; its exalted status will be impaired once either of these elements gets affected.

“The ‘confidence’ in bitcoins or for that matter any VC based on blockchain or any other technology is limited to its initial rounds and circles only. The initial rounds are always filled with adventurists and risk seekers.

“The moment the masses get in, the risk-avoiders get in, they will need greater ‘confidence’ for acceptance and that can come only if an ‘authority’ issues it,” said Gandhi.

As regards ‘anonymity’, the Deputy Governor observed that blockchain technology apologists say it can be made very difficult to track. But ‘difficult to track’ is not ‘anonymity’, he pointed out.

Therefore, the idea that blockchain will eliminate ‘currency’ by ushering in ‘virtual currency’ would remain a pipe-dream, added Gandhi.

“Has currency died? Is it dying? Or at least will it die? In all these years, you will find that currency has actually increased in absolute terms, not just in developing and emerging economies, where penetration of banking and finance is not yet complete, but also in developed economies, where penetration of banking and finance has been far larger.

“Countries are printing more and more currency. Perhaps the Nordic countries are the exceptions,” said the Deputy Governor.

Marketplace financing

Marketplace financing (or crowd funding/ peer-to-peer lending) links the fund-raiser and the fund-provider, thereby eliminating the need for a financial intermediary and, therefore, all the costs associated with it. But Gandhi posed, “Who guarantees the good performance of the fund-raiser and fund-provider? Who will enforce the contractual obligations?”

When each of them is faceless to one another and at a great distance, even beyond borders, the issue gets complicated. Therefore, marketplace financing may not be suitable for large amounts, he added.

Source : The Hindu

Despite curbs by Narendra Modi government, fiscal deficit overshoots target of Rs 5.64 lakh cr : 01-03-2017


Despite some curbs imposed on expenditure, the Centre’s fiscal deficit in the first 10 months of the current fiscal was at R5.64 lakh crore or 105.6% of the full-year target of R5.34 lakh crore. However, the government is confident of meeting the fiscal deficit target of 3.5% of GDP as the last two months will see increase in tax/disinvestment/dividend revenue and control on spending. In the same period last year, the deficit was 99.5% of the corresponding annual target.

In April-January this year, the Centre’s capex (Plan and non-Plan) has declined nearly 3% to R2.03 lakh crore as against R2.08 lakh crore in the year-ago period. However, Plan capex, seen critical to ignite economic activity, rose 4% during the period while non-Plan capex fell by 11%. The improvement in Plan capex, which was lagging behind until December, indicated the government’s effort to ramp up productive spending to partly offset the adverse impact of demonetisation on economic activity.

The April-January net tax collection was R8.16 lakh crore, which was 75% of the revised estimate (RE) for the full year; in the corresponding period a year ago, it stood at R6.79 lakh crore or 71.65% of that year’s target. The strong performance in tax revenue was mainly due to central excise and improvement in personal advance tax payment post-demonetisation.

However, overall revenue receipts during the first 10 months of FY17 were R10.53 lakh crore, or 71.2% of the full-year target; in the same period last year, revenue receipts were 72.3% of the target. Due to weak dividend receipts from PSUs, non-tax revenue receipts were lagging behind with collections at R1.93 lakh crore or 57.6% of the FY17 target while it was 78.2% of the target in the year-ago period.

According to the data compiled by the Controller General of Accounts, the total expenditure was R16.18 lakh crore in April-January or 80.3% of the RE for the full year. Total expenditure in the corresponding period last year was R14.36 lakh crore, or 80.4% of the RE. Primary deficit (PD), fiscal deficit minus interest payments that reflects government’s efforts at bridging the fiscal gap during a financial year, has soured.

 The primary deficit surged to R1.95 lakh crore or 381.9% of the FY17 target as compared to 206.2% in the corresponding period last year. Chief economic adviser Arvind Subramanian, the key author of the latest pre-budget Economic Survey, is understood to have said in a dissent note to the Fiscal Responsibility and Budget Management (FRBM) panel (tasked to suggest measures to rejig the fiscal road map) that India should target PD, not fiscal deficit. The survey also flagged PD as a key vulnerability of India compared to other emerging economies.
Source : Financial Express

Implementation of TFA of WTO can bring down exporters’ costs significantly: CBEC : 01-03-2017


Implementation of various articles in the Trade Facilitation Agreement (TFA) of the World Trade Organisation (WTO) will bring down exporters’s costs by up to Rs 15,000 per 40-foot equivalent units (FEU) containers, increasing the competitiveness of Indian exporters immensely, Beni Bhattacharya, principal commissioner of customs, Central Board of Excise and Customs (CBEC), said.

TFA, which facilitates movement of goods, including release and clearance of goods which are in transit, was ratified by 110 or two-thirds of members of the 164-member WTO on February 22, 2017, and it came into operation forthwith. India is ranked very low, at 143, in the World Bank study in international trade facilitation out of about 190 countries.

Ms Seema Jere Bisht, Additional Director General, Risk Management Division, Directorate of Revenue and Intelligence, CBEC added that India has successfully done a lot of work that was required to be done under TFA, though there was a lot of ground yet to be covered in the next two years.

Bisht added that India’s ranking was also low because because the industry is not giving its feedback to CBEC or World Bank on a regular basis.

Dr. Danish Hashim proposed that CBEC should limit the post audit vetting to a select few trades. He exuded hope that with the advent of GST, the audit teams of customs and excise, service tax, VAT etc will merge into a comprehensive team to do intelligence- based audit instead of routine audit at the factory premises.

Source : Business Standard

ESIC plans super speciality medical benefits for retired insured persons : 01-03-2017


From April 1, the Employees State Insurance Corporation (ESIC) plans to provide super speciality treatment to retired insured persons (IPs), with a ceiling of ₹10 lakh a year.

“The retired IPs and their spouses are getting in-house medical facility benefit on payment of ₹120 per anum. Now, the Corporation has approved in principle, extending the facility of super speciality treatment (SST) to retired IPs”, subject to some eligibility conditions, ESIC said in a release. This was decided at a ESIC recent meeting in Kochi.

The ESIC said the “option to join shall be one time on retirement (under Rule 61). No enrolment shall be allowed thereafter.” The“ceiling of expenditure on SST/all referrals to tie-up hospitals in a financial year may be restricted to ₹10,00,000.”

On the hike in premium, it said: “The actuary has made a rough assessment of ₹1,700/month for ₹10 lakh cover to retired member and spouse for SST. However, monthly contribution to be paid to avail SST along with medical benefits by retired IPs will be decided later by the Ministry of Labour & Employment. This facility is likely to be made available w.e.f. 01.04.2017.”

Under the norms, only the IP and his/her spouse shall be eligible for treatment; a retired IP who has opted out at any time after retirement shall not be eligible to rejoin on any subsequent date; IPs already retired but not enrolled so far may be given a one time opportunity to join the scheme within three months.

However, they shall be eligible for SST only after six months.

Source : Economic Times

Notification No : 09/2017 Dated: 28-02-2017


SECTION 66B OF THE FINANCE ACT, 1994 – SERVICE TAX ON AND AFTER FINANCE ACT, 2012 – CHARGE OF – SERVICE TAX PAYABLE ON SERVICES BY WAY OF ADMISSION TO A MUSEUM NOT LIABLE TO BE PAID FOR PERIOD COMMENCING ON AND FROM 1-7-2012 TO 31-3-2015 ACCORDING TO A GENERALLY PREVALENT PRACTICE

NOTIFICATION NO.9/2017-ST, DATED 28-2-2017

Whereas, the Central Government is satisfied that in the period commencing on and from the 1st day of July, 2012 and ending with the 31st day of March, 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 admission to a museum 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 on the services by way of admission to a museum under section 66B of the Finance Act, 1994 but for the said practice, during the said period, shall not be required to be paid.

 

India can grow at higher rate; job creation plans underway: FM Arun Jaitley : 28-02-2017


India has potential to grow faster and plans are underway to reduce poverty and create jobs in rural areas, Finance Minister Arun Jaitley said today, even as he ruled out the country becoming totally ‘cashless’ immediately. “One of the reasons for note ban was tax non-compliant. One of the objectives of the demonetisation was to reduce and eliminate anonymity. I don’t see India becoming a cashless system immediately. I see India becoming less-cash economy,” Jaitley told PTI here.

The Finance Minister, who is meeting top government officials and business leaders here, further said the GST regime would also make generation of cash more difficult, besides making the taxation system much more efficient. He hoped that the GST would be implemented by July 1.

On the Centre’s efforts to move towards digitalisation and cash-less regime, he said, “Major business, property transactions, salary payments, and school fees will be done through cash-less system. Will it be totally cash-less? I don’t see it happening immediately.”

Talking about retrospective taxation, the Finance Minister said the government has decided not to resort to such measures and the existing disputes are being sorted out either bilaterally or through the judicial system.

“India still has the potential to grow at a higher rate than today. A series of action is needed to reduce poverty in the rural areas. We have planned several programmes for rural India coupled with measures to create jobs,” Jaitley said.

“Today, India is one of the most open economies of the world. While the world is turning protectionist, India is opening up more,” he added.

On the Goods and Services Tax (GST) roll-out, the FM said, “The first requirement is constitutional amendment, the law has been passed unanimously and by September 15, 2017 the curtain will be down. We have resolved most of the critical issues. Legislations have been drafted. Two weeks ago, we approved the first draft. By March first week, the second draft will come up. Parliament will be resuming from march 9.”

The Finance Minister said, “Despite teething problems, hopefully GST will come up for implementation by July 1. The entire process has to be completed by September 15. At the moment, it is the biggest tax reform since Independence. Once implemented, it will be far more efficient tax system. The quantum of taxation will go up. GST will make generation of cash more difficult.”

Defending the government surprise move to ban old Rs 500/1,000 notes in last November, Jaitley said “one of the reasons for note ban was tax non-compliant. One of the objectives of the demonetisation was to reduce and eliminate anonymity… Today there is much greater support for any reform in India.”

On trade deal with the UK, the FM said “in my discussion with my counterpart here, he clearly convinced me that Brexit should not be confused with protectionism”. On visa liberalisation, he said it depends on the policy of the UK government.

Source : Financial Express

As GST methodologies, CBEC takes a gander at rebuilding itself : 28-02-2017


Amid staff concerns over redundancy in the post-goods and services tax (GST) regime from the coming financial year, the Central Board of Excise and Customs (CBEC) is identifying new areas of work in international customs, risk assessment, post-clearance audits and taxpayer services, among others, to remain relevant.

With limited administrative role under GST, the indirect tax department is aiming to redeploy. “There are a lot of areas where maturity of administration needs to go up. We are not able to perform in those due to lack of workforce and resources. GST is one opportunity — it will free-up manpower to concentrate on important areas like data analysis, intellectual property, risk assessment, etc,” said a senior official.

CBEC administers service tax, Customs duty and excise duty. GST, expected to be rolled out from July 1, will subsume service tax and excise duty, to be jointly administered with states. CBEC officers had protested to the finance minister on this division of powers. By the Centre-states agreement, the latter will monitor 90 per cent of the taxpayer base, whose annual revenue is up to Rs 1.5 crore each. The other 10 per cent will be with the Centre.

Officers had protested that many of them would have little work. Finance Minister Arun Jaitley had assured that the new regime would generate adequate opportunities.

“I see no reason for disquiet. Opportunities available in the service are protected, except that the nature of activities will change. The extent of revenue to be collected will expand (under GST). Economic activity will expand,” he’d told CBEC officials.

The Indian Revenue Service (Customs and Central Excise) Officers’ Association had even sought Prime Minister Narendra Modi’s intervention to reverse the decisions taken by the GST Council.

CBEC is also working on setting up a National Targeting Centre to intercept consignments and do risk profiling. It would identify, develop, update and maintain risk parameters in relation to trade, commodities, services and all stakeholders in the domestic supply chain, among other things.

There could also be a wing to work on data analysis, mutual recognition and free trade agreements with other countries. Post clearance audit is another area to be strengthened. “There is a lot of emphasis on improving facilitation levels without inspection and examination. So, there must be simultaneous strengthening of post-clearance audit. If you are opening doors, we should also focus on revenue and security,” said another official.

Last year, CBEC had launched a ‘single window interface for facilitating trade, to speed clearance for consignments and improve the ‘ease of doing business.’ The idea was that importers should not need to run around to get approvals from multiple government agencies for consignments.

The GST Council, chaired by Jaitley and with a minister of state (finance) and state finance ministers as members, will meet over the weekend to discuss the proposed GST laws.

Source : Business Standard

Give fewer action points for ease of doing business ranking: State Governments : 28-02-2017


State governments have urged the Centre to reduce the action points for reforms to a doable number for this year’s ease of doing business ranking, raising issues with the agenda drawn up by the Department of Industrial Policy and Promotion (DIPP).

After cutting the number of action points to less than 300, the department had introduced sub-points, taking the total to nearly 680 reforms. In contrast, last year states had to implement 340 reforms and the rankings were based on the outcome achieved.

The DIPP, while stressing that it had brought down the number of reforms, had gone for a deeper dive into every individual action point. This nearly doubled the work for states this year.

“States have conveyed that it would not be possible to implement so many reforms within a few months… We are still finalising the final set of reforms,” said a senior government official, who did not wish to be identified.

The government has this year drawn focus on specific sectoral reforms at state level in areas such as transport, state excise, licences for health, drug, pharma and fertiliser.

In consultation with the World Bank, the government has clubbed various reforms to reduce the overall number of headline reforms. However, for each reform states have been given a series of detailed action points which has increased their task.

Due to the delay in the finalisation of reforms agenda for states, the rankings for 2017 are likely to miss the October deadline. Andhra Pradesh and Telangana tied for the first spot in last year’s rankings.

Source : Economic Times

GST: DGFT wants GST Council to create an e-wallet facility to ease exporters fears : 27-02-2017


Showing allegiance to exporters who fear that the proposed policy of tax refunds — as opposed to exemptions — for exports under the Goods and Services Tax (GST) regime will jack up their capital costs, the Director General of Foreign Trade (DGFT) has written to the GST Council, saying that, instead, an e-wallet facility could be created for virtual payment of taxes so that the GST chain is not disrupted.

“The provision for no-exemption-and-only-refund (as proposed in the model GST law) will lead to blockage of about R1,85,500 crore annually for manufactured goods exporters,” an official source, with direct knowledge of the DGFT’s move told FE. “This estimate assumes exports of $200 billion, 30% value addition and cost of capital of 12%,” the source said.

The reason behind the GST Council’s decision is the notion that the present system of tax exemptions under various export promotion schemes will besmirch the integrity of the proposed comprehensive indirect tax, the hallmarks of which are envisaged to be an uninterrupted chain of taxation and seamless input tax credits.

Exporters, on the other hand, cite their practical experience of state VAT refunds getting unduly delayed, leading to increased capital requirement/working capital problems. “The capital cost for the government is lower than that of the exporters.. the government should also consider the possible consequences of hurting exporters’ competitiveness when the global demand is weak and exports are struggling to recover,” said Ajay Sahai, director-general and CEO, Federation of Indian Export Organisations.

The DGFT has also urged the Council to continue with the current practice of treating supplies to projects under global bidding, mega power plants and World Bank-funded projects as “deemed exports.” The council had mooted removal of this tag which will make these supplies taxable.

However, with the latest revision, GST model law has addressed the exporters’ concern with regard to GST’s impact of special economic zones (SEZs). These zones and the units therein, many of which not in good shape with average value addition just around 10%, are now eligible for duty-free import of inputs. Imports into SEZs will continue to be exempted from both basic customs duty (which will continue in GST regime) and integrated GST (IGST), which will replace the present countervailing and special additional duties on imports, sources said.
“There is however an area of concern regarding possible taxation of inter-unit transfers in SEZs,” Sahai said. Currently, exporters can import inputs duty-free under advance-licence and duty-free import authorisation schemes. They are also eligible for excise duty exemption for domestic sourcing of inputs. Besides, the export promotion capital goods scheme allows duty-free imports of machinery against export obligations (which are up to six times the tax foregone).

Under the council’s proposal, manufacturer-exporters will require to pay IGST on inputs and then seek its refund. Also, merchant exporters, who source domestic goods and export, will require to pay IGST on exports and then ask for credits. While duty waiver will be available in regard to basic customs duty, IGST will have to be first paid by the exporter although he can subsequently seek its refund.

While the GST Council, that comprises the central and state governments, is committed to the principle that exports should be tax-free, it reckons that exporters should be made to pay taxes at the time of a transaction so that the GST chain is intact. Refunds, the model GST law says, will be given in “a reasonable period of time.” Sahai said although it is said that 90% of the VAT credit (refunds) will be paid in 30 days after shipment and the balance 10% (which are scrutinised) in 180 days, in practice, these refunds get delayed. So, there is an apprehension that in GST system, this problem will be compounded.

The DGFT has suggested that exporters be allowed to pay the taxes through e-currency – which could be in the nature of an I Owe You (IOW) certificate under which a firm would agree to set off its IOUs with actual payment within a year or at the time of completion of exports whichever is earlier. A firm, the official quoted above said, could be allowed to use IOU equal to the value of its past year’s export performance

Source : Financial Express

PwC seeks GAAR clarity on various M&A deals : 27-02-2017


As mergers and acquisitions gain momentum in India, tax consultant PwC has said the income-tax department should provide more clarity on General Anti-Avoidance Rules (GAAR) on these activities.

GAAR will be effective from the next financial year.

Also, it should be made clear whether GAAR will be invoked when a private limited company is converted into a limited liability partnership (LLP) and its profits are distributed, the tax consultant says in its report Mergers and Acquisitions: The evolving Indian Landscape.

PwC wants to know what will happen when a company with substantial reserves is merged into a new concern and the resultant entity is converted into an LLP.

Another situation in which clarity is required is when a listed company’s controlling stake is gifted by an entity to an individual, PwC says.

The Central Board of Direct Taxes (CBDT) came up with a clarification on GAAR on January 27.

However, industry wants more of them and case-by-case examples. A tax official said some uncertainty in GAAR would remain; otherwise, it would become Specific Anti-Avoidance Rules (SAAR).

The PwC report says the first half of 2016 saw a 12 per cent increase in the value of M&As despite a fall in the number of deals. It did not mention the recent M&As in the telecom space since those came later.

Hiten Kotak, Partner and Leader, M&A Tax, PwC, says ever since the litigation on the tax dues of Vodafone started in 2007, uncertainties surrounding M&As in India came into prominence, so much so that companies have now started taking tax-insurance policies.

He, however, also says that while the government is issuing clarifications on indirect transfers, it is also tightening the screws on various fronts, such as the renegotiation of India’s tax treaties, the looming advent of GAAR in 2017 and the adoption of the Base Erosion and Profit Shifting (BEPS) action plans.

The report says these are challenging times for businesses, with economic and political volatility dominating the headlines the world over.

Brexit, a potential Grexit, a slowing Chinese economy and the growing threat of terrorism—all tend to contribute to a negative and gloomy investor sentiment.

However, despite global volatility, CEOs are continuing to search for growth and value.

Source : Business Standard

IRS officers seek PM’s intervention for smooth roll-out of GST : 27-02-2017


An association representing indirect tax officers has sought Prime Minister Narendra Modi’s intervention to reverse certain decisions taken by the Goods and Services Tax (GST) Council.

In a memorandum submitted to the Prime Minister’s Office (PMO), the officers’ body has also highlighted the serious security and financial concerns raised by the Comptroller and Auditor General (CAG) and the Home Ministry against the Goods and Services Tax Network (GSTN).

The GSTN is a special purpose vehicle set up to provide information technology infrastructure for the implementation of the new tax regime.

The GST Council had in its January 16 meeting agreed to give states the powers to levy tax on economic activity within 12 nautical miles of territorial waters and to administer 90 per cent of the tax payers under Rs 1.5 crore annual turnover, besides drafting certain provisions of Integrated GST.

The Indian Revenue Service (Customs and Central Excise) Officers’ Association said that states have no experience of Service Tax which is very different as a concept.

“In such a scenario, divergent views on similar tax issues may emerge across states leading to a plethora of litigations,” it said.

The association demanded revision of the division of assessees below Rs 1.5 crore in the ratio of 50:50. This would mean a vertical split of the entire assessee base in the ratio of 50:50.

It also raised concerns over the GSTN which is manned by non-IRS officers at senior levels.

“There are security and financial concerns in GSTN, which could have been avoided by giving this work to the Directorate General, Systems, Central Board of Excise and Customs. CAG and Home Ministry have already raised concerns regarding GSTN,” the association said.

In written reply to a question in the Lok Sabha, the government had recently said no security clearance was obtained by the Ministry of Finance from the Ministry of Home Affairs at the time of incorporation of GSTN-Special Purpose Vehicle.

The officers’ association has demanded that the Chairman and Chief Executive Officer of GSTN be from IRS, serving or retired or “GSTN kindly be placed under CBEC”.

The association said in many countries GST implementation has failed because of faulty execution in the hand of “generalists”, instead of giving it to “specialists”.

“There is a feeling that the dignity and the vital role of the central government has been compromised and the role of Indirect Tax experts has been undermined in the hand of generalists, which is the major cause of above perceived problems. It may be seen that here is no one to represent this Service in GST Council to give expert advice and technical input. The Chairman, CBEC is only an invitee,” it said.

It said that the Additional Secretary in the GST secretariat is an IAS officer without any experience.

“We will be failing in our constitutional duties, if we do not bring these concerns to your kind notice before the roll-out of GST. Final call is always with the government, to which we promise to abide by.

“We sincerely hope that the issues raised above would be redressed, for the smooth and successful implementation of GST, unlike other countries. Successful GST is our utmost desire,” the association said.

Source : Economic Times

GST represents one tax, one market, one India: CEA Arvind Subramanian : 25-02-2017


A few months ahead of the incorporation of the much-awaited Goods and Services Tax (GST), Chief Economic Advisor Arvind Subramanian revealed that internal trade has drastically improved; this being a boon to the country’s progress in the wake of GST. Addressing a session at the Indian Institute of Management (IIM) in Ahmedabad yesterday, Subramanian presented results of a survey that was conducted in various regions of India analysing tax collection, trade statistics, urban density and the need for a Universal Basic Income.

“In spite of Octroi and other tax barriers across states, movement of goods in India is going well. Trade within India is 56 percent. This goes to show that trade barriers have not affected statistics much,” stated Subramanian. Furthermore, the Chief Economic Advisor revealed that according to statistics, India has managed to overtake China, as the latter’s economic growth ‘plummeted post the financial crisis.’ However, Subramanian emphasised on the importance of timely tax collection, stating that the State Governments need to impose stricter penalties on deferring tax payment.

“The survey done in Bengaluru and Jaipur has showed only five to 15 percent of the total tax to be collected. States need to be less lenient with regards to tax matters,” said Subramanian. “One of India’s biggest concerns at the minute is the growing disparity among states.

Globally, statistics from the past 25 to 30 years has revealed that poorer countries are now catching up with developed countries, thus diversifying standard of living. However, within the states, a division of growth is still prevalent,” added Subramanian. Highlighting the proposal to implement a minimum basic income for Indians, Subramanian said that the implications are being monitored and will be discussed as and when a consensus is made. “The idea of having a universal basic income has garnered a lot of attention, both nationally and internationally,” added Subramanian.

Source : Financial Express

Govt takes a big leap in tax administration : 25-02-2017


The income tax (I-T) department has decided to waive tax arrears up to ~100 for individuals struggling with small dues.

The unprecedented step by the Central Board of Direct Taxes (CBDT) has been approved by Finance Minister Arun Jaitley.

The government will forego ~7 crore in tax revenue but will be able to close 1.8 million cases, making up at least 10 per cent of total I-T arrears entries by volume. The move will also ensure smoother tax refunds.

“Most of these cases are older than three years. It will de-clutter our database,” an official said. He added the move was aimed at focusing on the big default accounts. “The exercise may be expanded, going forward,” another official said.

Jaitley has approved the move under the Delegation of Power Rules, 1978, which empower the finance minister to write off any tax dues. The rules allow chief commissioners of I-T to write off arrears up to ~25 lakh. “It is a good move. If collection costs too much, it is a burden on taxpayers. But this should not be seen as an encouragement to not pay taxes,” said Rahul Garg, leader, direct tax, PwC.

Around 2.2 million cases of tax arrears involve amounts between ~100 and ~5,000. Widening the initiative will promote a friendlier tax regime.

“Such petty dues affect tax refunds,” said the official. “The cost of recovery is higher than the pending amount in many cases.”

Earlier in the financial year, the government expedited refunds of up to ~5,000 and cases where the amount in arrears was up to ~5,000. The Centralised Processing Centre (CPC) of the I-T department has processed over 41.9 million tax returns and issued over ~1.62 crore in refunds during the current financial year. This is 40 per cent higher than the corresponding period of the previous year. Of these, around 92 per cent of the refunds were below ~50,000.

Source : Business Standard

Government warns banks over non-acceptance of PMGKY tax : 25-02-2017


The government has warned banks of “de-authorisation” of branches if they refuse to accept taxes under the amnesty scheme PMGKY, which ends on March 31.

The finance ministry, in a communication to heads of banks authorised to accept deposits under the Pradhan Mantri Garib Kalyan Yojana (PMGKY), has asked them to issue directions to all branches for making necessary changes in their system/software to accept the tax.

“Non-compliance of this order may be viewed seriously and may lead to de-authorisation of that branch in case of refusal to accept taxes,” the ministry said.

Post demonetisation, the government came out with PMGKY under which people holding unaccounted cash can deposit them in bank accounts till March 31by paying 50 % tax plus penalty. A quarter of the total sum will have to be parked in a non-interest bearing deposit for four years.

The scheme opened on December 1. There have been complaints that many banks were not accepting payments of tax under PMGKY due to lack of awareness of prescribed challan and certain technical reasons.

Accordingly, the matter was referred to principal chief controller of accounts, who issued an order directing banks to accept taxes under PMGKY or face action.

Source : Economic Times

1052/01/2017-CX – 23-2-2017


CENTRAL EXCISE TARIFF ACT, 1985 – CLASSIFICATION OF ARTICLES OF PAPER AND PRINTING INDUSTRY TO ENSURE UNIFORMITY IN PRACTICE OF ASSESSMENT ACROSS COUNTRY

CIRCULAR NO.1052/01/2017-CXDATED 23-2-2017

Representations have been received from trade associations that consequent upon insertion of Chapter note 14 (w.e.f 28-5-2012) to the Chapter 48 of Central Excise Tariff Act, 1985 disputes have cropped up in respect of classification of railway/bus/other tickets/passes, railway ticket rolls and bus ticket rolls, mark sheets/certificates, OMR Sheets/Answer Books with OMR, Answer booklets, inland letter cards, passbooks, applications forms, paper outer strip seal, Railway receipt (RR) and practical notebook. Also, reports received from field formations suggest that there is divergent practice of assessment of these goods. It is therefore, proposed to clarify the classification of these goods to ensure uniformity in practice of assessment across the country.

2. In this connection, statutory provisions are as under:

(a) As per Rule 3 (c) of General Rules for the interpretation of the Schedule, “when goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration”.
(b) As per Rule 4 of General Rules for interpretation of the Schedule, “goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin”.
(c) As per Chapter note 10 of Chapter 48, heading 4820 does not cover loose sheets or cards, cut to size, whether or not printed, embossed or perforated.
(d) As per Chapter note 12 of chapter 48, except for the goods of heading 4814 or 4821, paper, paperboard, cellulose wadding and articles thereof, printed with motifs, characters or pictorial representations, which are not merely incidental to the primary use of goods, fall in Chapter 49.
(e) As per Chapter note 14 (inserted on 28-5-2012) paper and paper products of heading nos. 4811, 4816 or 4820 intended to be used for further printing or writing are classifiable in their respective headings even if printing is merely incidental to the primary use of goods.
(f) HSN explanatory note (2) to heading 48.20 excludes educational workbooks, sometimes called writing books, with or without narrative texts, which contain printed textual questions or exercises not incidental to their primary use as workbooks and usually with spaces for completion in manuscript. Further, as per HSN explanatory notes (A) to heading 4901, “…literary works of all kinds, text books (including educational workbooks sometimes called writing books) with or without narrative texts which contain questions or exercises (usually with spaces for completion in manuscript); technical publications….’” are classifiable under this heading.
(g) Also, as per HSN explanatory notes to heading 49.01 printed cards bearing personal greetings, messages or announcements (heading 49.09), and printed forms which require the insertion of certain additional information for completion are excluded from this heading.
(h) As per explanatory notes to heading 4907 (F), “Stock, share or bond certificates and similar documents of title are formal documents issued, or for issue, by public or private bodies conferring ownership of, or entitlements to, certain financial interests, goods or benefits named therein. Apart from the certificates mentioned these documents include letters of credit, bills of exchange, travelers’ cheques, bills of lading, title deeds and dividend coupons. They usually require completion and validation.”
(i) As per explanatory note to heading 49.11, “Certain printed articles may be intended for completion in manuscript or typescript at the time of use but remain in this heading provided they are essentially printed matter. Thus, printed forms (e.g., magazine subscription forms), blank multi-coupon travel (e.g., air, rail and coach) tickets, circulars, letters, identity documents and cards and other articles printed with messages, notices, etc., requiring only the insertion of particulars (e.g dates and names) are classified in this heading… ”. The heading 4911 also includes tickets for admission to places of entertainment (e.g., cinemas, theatres and concerts), tickets for travel by public or private transport and other similar tickets.

3. Hon’ble Apex Court in the case of Holostick India Ltd. v. Commissioner of Central Excise 2004 (2015 (318) E.L.T. 529 (S.C)) has held that holograms would not fall under chapter 39 though they had the self-adhesive property and were primarily goods made of plastic, yet due to the security features of the stickers, the said holograms will be placed under chapter 49. The reason for such a classification was that the security features gave the hologram their essential feature.

4. In the light of above statutory provisions and decision of the Hon’ble Apex Court, classification of the goods ibid was examined and it is clarified as under:

(a) Railway/bus/other tickets/passes— (i) These are loose sheets or cards, cut to size and therefore are not covered under heading 4820 and also the provision of Chapter note 14 is inapplicable in the matter. Printing is not merely incidental to the primary use these goods. Printing alone brings these goods in existence. Explanatory note to heading 49.11 specifically covers these goods. Therefore, these goods are classifiable under heading 4911.
(ii) Similarly, railway ticket rolls, bus ticket rolls and like goods, which have cut/identifiable marks for separation of railway tickets/bus tickets therefrom and tickets are easily identifiable therein, are also classifiable under heading 49.11.
(b) Mark sheets/certificates— These are loose sheets, cut to size and therefore are not covered under heading 4820 and also provision of Chapter note 14 is inapplicable in the matter. The printing on these documents gives their essential character and on being issued (after completion and validation) by the appropriate authority they have fiduciary value in excess of the intrinsic value. In view of explanatory notes to heading 4907 (F) they are classifiable under heading 4907.
(c) OMR sheets— Like mark sheets and certificates these are loose sheets cut to size and therefore are not covered under heading 4820 and also provision of Chapter note 14 is inapplicable in the matter. The printing on these documents gives their essential character. In view of explanatory note to heading 4911 they are classifiable under heading 4911.
(d) Answer books with or without OMR, answer booklets and passbooks— These are not loose sheets, cut to size and therefore these are not out of the purview of heading 4820. Printing on these goods is merely incidental and such goods are intended to be used for further printing or writing. Answer books with or without OMR and answer booklets are intended for completion in manuscript while passbooks are intended for completion in manuscript or typescript. Provisions of Chapter notes 12 and 14 of Chapter 48 and provisions of Rule 4 of General Interpretative Rules are applicable in the matter and therefore these are classifiable under heading 4820.
(e) Inland letter cards— These are loose sheets or cards, cut to size and therefore are not covered under heading 4820 and also provision of Chapter note 14 is inapplicable in the matter. These Inland letter cards are printed with all particulars and shall not undergo any further printing or writing. They contain personal information like notices, reminders etc. Sometimes these cards require only insertion of particulars like names and addresses. In the situation, where printing on inland letter cards is not merely incidental, goods are classifiable under heading 4911. However, plain letter cards are classifiable under heading 4817, which reads as “envelopes, letter cards, plain postcards and correspondence cards, of paper or paper boards… “
(f) Application forms— These are for example bank account opening forms, forms of telecom companies, education institutions, insurance company forms and similar forms printed on specific order of the concerned bank, telephone companies etc. These are loose sheets, cut to size and therefore are not covered under heading 4820 and also provision of Chapter note 14 is inapplicable in the matter. Printing on these forms is not merely incidental. In view of explanatory note to headings 4901 and 4911 these forms are classifiable under heading 4911.
(g) Paper outer strip seals— These strips are used to seal EVMs (electronic voting machines) and are used by the election commission. For example State Election Commission, Haryana is printed on these strip seals. These are basically stickers having a self-adhesive feature where printing brings the product into existence. They have security features like guilloche patterns and anti-photocopy features. Therefore in view of printing not merely incidental and decision of Hon’ble Apex Court in the matter of Holostick India Ltd ibid, these strip seals are classifiable under heading 4911.
(h) Railway Receipts (RRs) — These are continuous computer stationery (4820) and also a document of title (4907). They have security numbering with special features like specific and patterns digit size printed by mechanical boxes using penetrating inks and also hatching of Indian Railway logo in the background. Printing on these receipts is not merely incidental. In view of Rule 3 (c) of General Rule for the interpretation of the Schedule, Hon’ble Apex Court decision in the case of Holostick India Ltd ibid and explanatory notes to heading 4907 (F), these are classifiable under heading 4907.
(i) Practical notebook— This notebook contains some texts, questions and spaces for exercises. In view of explanatory notes to heading 4820 and explanatory notes (A) to heading 4901, this is classifiable under heading 4901. However, practical notebook which have merely certain questions followed by blank spaces for writing are classifiable under heading 4820 only.

5. Field formations may be suitably informed. Past instructions and circulars on the subject shall stand amended to the extent of conflict with the above circular. Hindi version would follow.

 

LETTER [F.NO.609/23/2017-DBK] – 23-2-2017


GOODS AND SERVICES TAX (GST) – SUGGESTIONS ON ALL INDUSTRY RATES OF DUTY DRAWBACK UNDER GST FRAMEWORK

LETTER [F.NO.609/23/2017-DBK]DATED 23-2-2017

As you are aware, Goods and Services Tax (GST) is likely to be implemented by 1st July, 2017. The Model GST Laws are already in public domain. To ensure smooth transition to GST framework, the Drawback Committee is to formulate and recommend revised All Industry Rates (AIRs) of drawback on exports and/or any other relevant drawback like rebate to be implemented for exports in the context of new GST environment and/or remnant tax structure.

2. Your considered suggestions/views are sought in this regard, which may be provided by 15-3-2017. These may also be sent by email to dirdbk-rev@nic.in.

 

Realtors express concern on Supreme Court ruling on consumers vs builders disputes : 23-02-2017


Realtors body CREDAI today expressed concern that the Supreme Court judgement that flat buyers can jointly approach the apex consumer commission NCDRC will open the floodgates of legal cases against builders. The Supreme Court has upheld the order of the National Consumer Disputes Redressal Commission (NCDRC) that flat buyers can jointly approach it in case of a dispute with a builder. According to the Consumer Protection Act, if the cost involved is less than Rs 1 crore, the complainant has to first file the plea at the district consumer forum.

Commenting on the Supreme Court judgement regarding the Rs 1 crore criteria for the plea in NCDRC, Credai President Getamber Anand said: “While the Supreme Court judgement has brought a semblance of relief to the concerned home buyers, it has opened the floodgates on similar lawsuits which will look to bypass the due process set forth initially.”

“In such a scenario, any and all developers are vulnerable to the misuse of this precedent which, during this difficult and transitionary time for the sector increases confusion and uncertainty,” he added.

The Supreme Court has upheld the order of the NCDRC that flat buyers can jointly approach it in case of a dispute with a builder. (Reuters)

Realtors body CREDAI today expressed concern that the Supreme Court judgement that flat buyers can jointly approach the apex consumer commission NCDRC will open the floodgates of legal cases against builders. The Supreme Court has upheld the order of the National Consumer Disputes Redressal Commission (NCDRC) that flat buyers can jointly approach it in case of a dispute with a builder. According to the Consumer Protection Act, if the cost involved is less than Rs 1 crore, the complainant has to first file the plea at the district consumer forum.

Commenting on the Supreme Court judgement regarding the Rs 1 crore criteria for the plea in NCDRC, Credai President Getamber Anand said: “While the Supreme Court judgement has brought a semblance of relief to the concerned home buyers, it has opened the floodgates on similar lawsuits which will look to bypass the due process set forth initially.”

“In such a scenario, any and all developers are vulnerable to the misuse of this precedent which, during this difficult and transitionary time for the sector increases confusion and uncertainty,” he added.

Anand said the impetus right now should be to comfort homebuyers without laying undue burden on the developers who are working towards complying with the new administrative structure being brought in by the real estate regulatory law.

A bench headed by Justice Dipak Misra rejected the appeal of Amrapali Sapphire Developers Pvt Ltd challenging the NDCRC decision on the ground that a plea can be filed directly before the apex consumer commission if the total value of the disputed deal is over Rs 1 crore and the 43 buyers could not have filed a joint plea before the NCDRC.

Source : Financial Express

 

Govt mulls reducing MDR charges on card payments : 23-02-2017


The government is working to reduce Merchant Discount Rate (MDR) charges to encourage digital payments, Niti Aayog CEO Amitabh Kant said today.

“We are pushing digital transactions. Our aim is to bring down MDR charges. Also if volume of transactions increase, MDR charges will come down,” Kant said.

Referring to RBI’s recent draft circular on rationalisation of MDR for debit card transactions, the Niti Aayog CEO said, “We are examining RBI’s draft circular on MDR.

There are challenges to see MDR rates come dowm…We will meet those challenges.”

Last week, RBI had proposed to drastically cut MDR charges on debit card payments from April 1 with a view to maintain momentum of digital transactions post note ban, especially among small merchants.

For small merchants with annual turnover of Rs. 20 lakh and special category merchants, like utilities, insurance, mutual funds, educational institutions and government hospitals, the MDR charge has been proposed at 0.40 per cent of the transaction value.

Merchant Discount Rate (MDR) charge, which is levied on debit card transaction, would be even less at 0.3 per cent if transaction is through digital PoS (QR Code), the RBI had said in a draft circular on rationalisation of MDR for debit card transactions.

The existing MDR is capped at 0.75 per cent for transactions up to Rs. 2,000 and 1 per cent for over Rs.2,000.

However, there is no RBI cap on MDR on credit card payments.

Post demonetisation, the RBI has reduced the charge till March 31. The new charges, as per the RBI draft would come into effect from April 1.

MDR for debit cards for petrol/fuel shall be decided subsequently after the industry consultation process with Oil Ministry is completed, the Reserve Bank had proposed.

As per an official document, the allocation for making payment to RBI towards reimbursement of Merchant Discount Rates (MDR) charges for 2017-18 is Rs. 200 crore. It is estimated at Rs. 50 crore this fiscal.

Post demonetisation, the Finance Ministry had announced that MDR charges will be absorbed by the government for payments of tax, non—tax and other payments to the government by citizens using debit cards.

 Source : Business Standard

Notification No.15/2017 23-02-2017


MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 23rd February, 2017 (INCOME-TAX)

S.O. 617(E).— Whereas the Central Government in exercise of the powers conferred by clause (iii) of subsection (4) of Section 80-IA of the Income-tax Act, 1961(43 of 1961)(hereinafter referred to as the said Act), has framed and notified a scheme for industrial park, by the notifications of the Government of India in the Ministry of Commerce and Industry (Department of Industrial Policy and Promotion) vide number S.O. 354(E), dated the 1st day of April, 2002, for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2006;

And whereas M/s. Ascendas IT Park (Chennai) Ltd. having its registered office at 1st Floor, Pinnacle Building, International Tech Park, CSIR Road, Taramani., Chennai- 600 113 has developed an industrial park located at Survey No. TS 8/2, Block No.9, Kanagam Village, Mambalam Guindy Taluk, Survey No. TS 1/6, Block NO.7, Thiruvanmiyur Village, Mylapore Triplicane, Chennai, Tamil Nadu-600 113.

And whereas the Central Government has approved the said Industrial Park vide Ministry of Commerce and Industry letter No. 15/19/2006-ID-II dated 15-03-2016.

Now, therefore, in exercise of the powers conferred by clause (iii) of sub-section (4) of section 80-IA of the said Act, the Central Government hereby notifies the undertaking, being developed and being maintained and operated by M/s. Ascendas IT Park (Chennai) Ltd, as an industrial park for the purposes of the said clause (iii) subject to the terms and conditions mentioned in the annexure of the notification

 

ANNEXURE

The terms and conditions on which the approval of the Government of India has been accorded for setting up of an industrial park by M/s. Ascendas IT Park (Chennai) Ltd.

 

1. (i) Name of the Industrial           :   M/s. Ascendas IT Park (Chennai) Ltd.

(ii) Proposed location                      :   Survey No. TS 8/2, Block No.9, Kanagam Village,                   Mambalam Guindy Taluk, Survey No. TS 1/6, Block NO.7, Thiruvanmiyur Village, Mylapore Triplicane, Chennai, Tamil Nadu-600 113

(iii) Area of Industrial Park            :   25,848.53 Sq. Mtrs.

(iv) Proposed activities :

 

Nature of Industrial activity with NIC code

 

NIC Code                                                                                                                   Description

 

S. No.              Section        Division        Group     Class

A                         8                    89                892        892.1                             Software consultancy services

B                         8                    89                892        892.2                             Software supply services

C                         8                    89                893        893.3                             Data processing services

 

(v) Percentage of allocable area earmarked for Industrial use                               :   93.9%

(vi) Percentage of allocable area earmarked for commercial use                          :   6.1%

(vii) Minimum number of industrial units                                                                   :  12 Units

(viii) Total investments proposed (Amount in Rupees)                                            :   Rs.138 crores

(ix) Investment on built up space for Industrial use (Amount in Rupees)             :   Rs. 105 crores

(x) Investment on Infrastructure Development including investment on built up space for industrial use (Amount in Rupees)                                                                                                 :   Rs. 118 crores

(xi) Proposed date of commencement of the Industrial Park                                  :  16-08-2005

 

2. The minimum investment on infrastructure development in an Industrial Park shall not be less than 50% of the total project cost. In the case of an Industrial Park which provides built-up space for industrial use, the minimum expenditure on infrastructure development including cost of construction of industrial space, shall not be less than 60% of the total project cost.

3. Infrastructure development shall include, roads (including approach roads), water supply and sewerage, common effluent treatment facility, telecom network, generation and distribution of power, air-conditioning and such other facilities as are for common use for industrial activity which are identifiable and are provided on commercial terms.

4. No single unit referred to in column (2) of the Table given in sub-paragraph (b) of paragraph 6 of S.O. 354(E) dated the 1st April, 2002, shall occupy more than fifty per cent of the allocable industrial area of an Industrial Park. For this purpose a unit means any separate and distinct entity for the purpose of one and more state or Central tax laws.

5. Necessary approvals, including that for foreign direct investment or non-resident Indian investment by the Foreign Investment Promotion Board or Reserve Bank of India or any authority specified under any law for the time being in force, shall be taken separately as per the policy and procedures in force.

6. The tax benefits under the Act can be availed of only after the number of units indicated in Para 1 (vii) of this Notification, are located in the industrial Park.

7. M/s. Ascendas IT Park (Chennai) Ltd., shall continue to operate the Industrial Park during the period in which the benefits under clause (iii) of sub-section (4) of section 80-IA of the Income-tax Act, 1961 are to be availed.

8. In case the Industrial Park did not commence by 31-3-2006, fresh approval will be required under the Industrial Park Scheme, 2008 subject to the applicability under that Scheme for availing benefits under sub-section 4(iii) of Section 80- IA of the Income Tax Act, 1961.

9. The approval will be invalid and M/s. Ascendas IT Park (Chennai) Ltd., shall be solely responsible for any repercussions of such invalidity, if

(i) the application on the basis of which the approval is accorded by the Central Government contains wrong information/misinformation or some material information has not been provided in it.

(ii) it is for the location of the industrial park for which approval has already been accorded in the name of another undertaking.

10. In case M/s. Ascendas IT Park (Chennai) Ltd., transfers the operation and maintenance of the industrial park (i.e., transferor undertaking) to another undertaking (i.e., the transferee undertaking), the transferor and transferee shall jointly intimate to the Entrepreneurial Assistance Unit of the Secretariat for Industrial Assistance, Department of Industrial Policy and Promotion, Udyog Bhawan, New Delhi-110001 along with a copy of the agreement executed between the transferor and transferee undertaking for the aforesaid transfer.

11. The conditions mentioned in this notification as well as those included in the Industrial Park Scheme, 2002 should be adhered to during the period for which benefits under this scheme are to be availed. The Central Government may withdraw the above approval in case M/s. Ascendas IT Park (Chennai) Ltd., fails to comply with any of the conditions.

12. Any amendment of the project plan without the approval of the Central Government or detection in future or failure on the part of the applicant to disclose any material fact, will invalidate the approval of the industrial park.

                                                                                                 [Notification No. 15 /2017, F.No.178/7/2016-ITA-I]

DEEPSHIKHA SHARMA, Director(ITA-I)

Notification No.14/2017 23-02-2017


MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 23rd February, 2017

S.O. 618(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 for the said clause, Assam Electricity Regulatory Commission, constituted by the Government of Assam, 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 license fees, petition fees and fines; and

(c) interest earned on government grants, license fees, petition fees and fines kept as deposits or fixed deposits with banks.

2. This notification shall be effective subject to the conditions that Assam 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) of section 139 of the Income-tax Act, 1961.

3. This notification shall be applicable for the financial year 2016-17 to 2020-21.

[Notification No. 14/2017/F. No. 196/30/2016-ITA-I]

DEEPSHIKHA SHARMA, Director

India-Israel DTAA protocol notified : 23-02-2017


The Central Board of Direct Taxes (CBDT) has given effect to the provisions in the Protocol that amended the double taxation avoidance pact between India and Israel.

This Protocol, which was signed at Jerusalem in October 2015, had entered into force on December 19, 2016.

The provisions of the Protocol have been given effect to in India with the CBDT’s latest move.

Among other things, the Protocol has introduced a new article on exchange of information based upon international best practices.

It also permits the application of domestic General anti avoidance rules (GAAR) in case of treaty misuse.

The newly inserted limitation of benefit clause provides that treaty benefit will not be available “if one of the main purposes of the creation or existence of such resident or of the transaction undertaken by it, was to obtain benefits under this Convention that would not otherwise be available”. Amit Maheshwari, Partner, Ashok Maheshwary & Associates LLP, said that after Singapore, this (India-Israel) is another treaty wherein it has been specifically provided that GAAR will override the treaty.

“Addition of LOB has become a gold standard for all new treaties which India is signing,” Maheshwari added.

Amit Singhania, Partner, Shardul Amarchand Mangaldas & Co, a law firm, said that the Protocol has introduced the concept of beneficial ownership of item of income for the purposes of availing tax treaty benefits.

Source : Economic Times

Manish Sisodia on GST: It will be another economic disaster after note ban if it doesn’t address traders’concerns : 22-02-2017


Manish Sisodia on Tuesday hit out at the Centre saying that if GST talks don’t address traders’ concerns then it will be yet another economic disaster after note ban. In an conversation with CNBC TV 18, Sisodia said, “Centre has no answers to queries of traders on GST. Deadlines are important for GST roll-out but ambiguity remains”. The main focus, according to Sisodia, needs to be on the traders who will be impacted and not the implementation deadline.

Last week Sisodia said that Land and real estate should be brought within the Goods and Services Tax (GST) regime and consumer durables should be taxed at the lowest slab to make the new indirect tax regime consumer friendly. The Minister assured industry chambers that he would take up the aforesaid issues in the forthcoming GST Council meeting as keeping land and real estate being outside purview of GST and that higher taxation slab for consumer durables would kill its basic purpose, a PHD Chamber release said.

Addressing a seminar on GST, Sisodia said dual control of GST also defeated its intended objectives and sought more intense consultations on the issue in future course of GST Council, arguing that the objective of the GST should be consumer and traders oriented and it should not entirely aim at raising taxation with higher rates.

“I fought tooth and nail for inclusion of land and real estate within the ambit of GST but somehow there couldn’t be an absolute consensus on the issue at number of GST Council Meetings of all the States Finance Ministers because of obvious reasons,” Sisodia said.

“Consumer durables such as TV, Mobiles, electric appliances and host of similar such articles should not be taxed luxuriously. That is our view and we will continue to articulate them whenever necessary in the interest of Aam Aadmi though the GST tax rates have yet to be finalized,” he said. CBEC Chairman Najib Shah asked the industry not to keep seeking exemptions under the GST regime as most of such exemptions would go away after it is put in place.

The Chairman also clarified that the anti-profiteering clause in GST Law is there as an enabler and industry should not read too much on it, promising that post GST host of indirect taxes would subsume in it making the new law user friendly, the statement said.

Source : PTI

Market took demonetisation positively; rising dollar dampened sentiment, says FinMin : 22-02-2017


The Finance Ministry today said demonetisation of Rs 500/1,000 notes last year was viewed “positively” by the market though the bullish sentiment was restrained due to strengthening of US dollar. “The government’s decision on November 8, 2016 to demonetise high denomination value notes was viewed positively by the market as deposits were expected to surge in banks and led to bullish market sentiment, particularly for short-end bonds,” said the quarterly debt management report. The bullish market sentiment was, however, “restrained to a certain extent” with US 10 year treasury yield rising to 2.15 per cent level and led to dollar strengthening — adversely affecting the market, said the report for October-December quarter. The mid-November of lower October inflation figures — both WPI and CPI – further supported the market with yields making fresh 7-1/2 year lows. However, the market was restrained to a certain extent on hardening of US treasury yields on likely expectations of adoption of stimulative economic policies by US President Donald Trump.

The rupee continued to trade with volatility during November and breached all-time low levels, however, ample system liquidity ensured position building across securities in the bond market, it said.

The rupee slumped in the third week of November 2016 as USD continued to create pressure on the domestic currency. The domestic currency hit an all-time intra-day low of Rs 68.86 per USD on November 24, 2016, on concerns of demonetisation and also about a possible US Fed Reserve rate hike in the near term.

Intermittently, the rupee gained on few occasions to touch a quarter high of Rs 66.43 per USD on November 9, 2016, ahead of US presidential election result and on others occasions due to positive CPI and IIP data.

The report further said the deficit in liquidity was at an average of Rs 3,065 crore in October but turned into a surplus in November (average Rs 5.19 lakh crore) post the demonetisation decision and increasing further in December 2016 (average Rs 7.04 lakh crore).

The report further said India’s public debt increased to Rs 61.76 lakh crore at end-December, up 2.4 per cent over the previous quarter, the government said today.

The debt (excluding liabilities under the Public Account) was Rs 60.33 crore at end-September 2016.

“This represented a quarter-on-quarter (QoQ) increase of 2.4 per cent (provisional) in Q3 FY17 as compared with an increase of 2.1 per cent in the previous quarter (Q2 of FY17),” it said.

Internal debt constituted 92.6 per cent of public debt as at end-December 2016, while marketable securities accounted for 83.6 per cent.

Source: Financial Express

Insurance penetration will improve if regulations are reduced: New India chief : 22-02-2017


Insurance is important for the political growth of our country, especially when there is no social security among the below poverty line (BPL) population in India, G Srinivasan, CMD, New India Assurance, said at the recent Fourth Insurers’ Conclave here.

The conclave was organised by the Asean Institute of Insurance and Risk Management at the Rizvi Institute Of Management Studies and Research, Mumbai. Srinivasan concluded that insurance penetration will improve if regulations are reduced and people are expected to bring in lesser capital.

The first panel discussion was on the role of commercial insurance, and was moderated by Haris Ansari, former member, IRDAI. He noted that the biggest problem with insurance is that it is a push product and not a pull product and that a consumer can be taken care of only if the product is properly explained to him/her, which is often not the case.

R Chandrasekaran, Secretary-General, General Insurance Council, deliberated on the performance of commercial insurance companies, while PVS Nagaraja Rao, Chief, P&GS, LIC, spoke on LIC’s roles in propagating inclusive insurance through socially-relevant insurance policies.

Yogesh Lohiya, CEO & MD, Iffco-Tokio General, highlighted the challenges in the propagation and spread of social and inclusive insurance in India and how they can be overcome.

The second session focussed on the role of alternative insurance, moderated by Liyaquat Khan, Managing Partner of Global Risk Consultant and a former long serving president of the Institute of Actuaries of India.

Abhijeet Chattoraj of Amity Business School, Amity University, Mumbai, one of the very few practising insurers to do a PhD on health insurance, drew a vivid graph of the decline of mutuals and cooperative forms of insurance in India post-nationalisation and post-IRDAI Act.

The second panellist, Kumar Shailabh, Executive Director, Uplift Mutuals, showed how mutuals make insurance work for the poor, while Shariq Nisar, Senior Research Fellow on Takaful or Islamic Insurance from Harvard University, explained the nuances of the concept.

The third session, on the confluence of alternative channels of insurance, was moderated by AK Roy, former CMD, General Insurance Corporation Re. He was of the view that the confluence of the alternative channels of insurance with the existing one, if brought about with supporting regulations and controlled experimentation, can speed up universal inclusive insurance.

Anil Kumar Singh, Chief Actuarial Officer, Birla Sunlife Insurance, relied upon his vast experience in the field to suggest best practices for cooperative insurance, while G Mallikarjun, General Manager, Reserve Bank of India, and former OSD, IRDAI, expertly blended his experiences of working with both the regulatory bodies to put forward succinct and practical suggestions on the the cooperative format.

Kalim Khan, Director, Rizvi Institute of Management Studies and Research, spoke about the urgent need for sustained mass education to bring about inclusive insurance.

PK Behl, former ED of LIC and Chairman of the Organising Committee of the conclave, gave the welcome address, while KC Mittal, Ex-Chairman of GIC, and RN Bhardwaj, Ex-Chairman of LIC, were felicitated for their contribution to the industry.

Arun Agarwal, India Representative of Lloyds Insurers, gave the concluding address, saying that insurance will only be inclusive when insurance mutual and cooperatives cater to the underdeveloped sections of the economy through instruments such as healthcare management.

Source : Economic Times

Instruction No.3/2017 [F.NO.225/100/2017/ITA-II], DATED 21-2-2017


SECTION 143 OF THE INCOME-TAX ACT, 1961 – ASSESSMENT – GENERAL – STANDARD OPERATING PROCEDURE (SOP) TO BE FOLLOWED BY ASSESSING OFFICERS IN VERIFICATION OF CASH TRANSACTIONS RELATING TO DEMONETISATION

INSTRUCTION NO.3/2017 [F.NO.225/100/2017/ITA-II], DATED 21-2-2017

Post demonetisation of Rs. 500 and Rs. 1000 notes on November 8, 2016, several malpractices has been noticed. The Income Tax Department is enquiring/seeking information and analysing instances of deposits to identify cases involving risk of tax evasion. Based upon vast amount of information of cash deposits collected and analysed by CBDT, a number of persons have been identified in whose case the cash transactions did not appear to be in line with their profile available with the Income-tax Department (‘ITD’). In such cases, it has been decided to undertake on-line verification of select transactions through jurisdictional Assessing Officers (‘AOs’).

2. OVERVIEW OF ONLINE VERIFICATION

The online verification has been enabled on e-filing portal (for persons under verification) which will be synchronized with the internal verification portal (AIMS module of ITBA) of ITD. The salient features of online verification mechanism are as under:

2.1 ITD has enabled online verification of these transactions to reduce compliance cost for persons under verification while optimizing its resources. The information in respect of these cases has been made available in the e filing window of the PAN holder (after log in) at the portal https://incometaxindiaefiling.gov.in. The PAN holder can view the information using the link ‘Cash Transactions 2016′ under ‘Compliance’ section of the portal. The person under verification will be able to submit online explanation without any need to visit Income Tax office.

2.2 Email and SMS were sent to the persons under verification for submitting online response on the e- filing portal. Such persons who are not yet registered on the e-filing portal (at https://incometaxindiaefiling.gov.in) should register immediately by clicking on the ‘Register Yourself link. Registered taxpayers should verify and update their email address and mobile number on the e- filing portal to receive electronic communication.

2.3 The user guide, quick reference guide and frequently asked questions (‘FAQs’) are available on the portal for assisting the person under verification for submitting online response.

2.4 Cases meeting the low risk criteria will be closed centrally. Cases which are not closed automatically will be pushed in batches to the AO for verification.

2.5 The AO will be able to view each information record, information as submitted by the person under verification for each record and also capture the verification result. In case additional information is required, the AO will be able to send a request for additional information electronically. The person concerned will also be automatically informed about the request for additional information by email and SMS. The information request will be visible to the person under verification with a hyperlink for uploading information. All the additional documents (including supporting evidence) are required to be submitted online.

2.6 The response filed by person under verification will be appraised against available information. The uploaded information can be downloaded by the Assessing Officer. In case explanation of source of cash is found justified, the verification will be closed by the AO electronically without any physical interface with the person concerned.

3. REFERENCE DOCUMENTS

A Cash Transactions 2016 User Guide and Frequently asked Questions (‘FAQs’) has been prepared to help the persons under verification so that the process of furnishing online information is clearly understood (available in the help section of the e-filing portal home page). Further, a ‘User Guide for Verification of Cash Transactions on ITBA – AIMS Module’ (‘Verification Guide) has also been prepared for assisting the AOs involved in the verification process. It is advised that all stakeholders may go through the documents before filing response/initiating action.

4. ENSURING ONLINE RESPONSE

It is seen that many persons in the target segment have still not registered with e-filing portal. Further many registered persons who are under verification have not yet submitted online response. Pr. CCIT/CCIT/Pr. CIT/Range Heads are expected to give publicity and organize meetings with the taxpayer community and CAs/Bar Associations to educate them about the online verification facility and its benefits. So far, communication with the person under verification has been made under section 133C of the Income-tax Act, 1961 (‘Act’). In cases where online response has not been submitted, AO shall generate a letter from the Verification portal on ITBA to the person under verification for submission of online response (except when immediate survey is contemplated) on the e-filing portal and ensure its service. This process should be completed within 7 days of availability of information on the portal.

5. CONDUCTING VERIFICATION

At the outset, it should be clearly understood that this exercise relates to preliminary verification of information only and the same should not be construed as conducting scrutiny or in-depth authentication. The entire process envisages end-to-end e-verification in which the concerned person would be required to electronically file his response on e-filing portal which shall be examined and monitored electronically by the tax department through Online Verification platform (ITBA). The two systems are harmonized in a manner so that the person under verification is not required to attend the Income-tax office personally under any circumstance and at any stage during the verification exercise. It has been endeavour of CBDT to identify and target the potential cases through e-verification so that possible instances of grievances arising from the process of verification are minimized.

5.1 The online verification should be focussed and limited to the issue under verification the outcome of which is either ‘Acceptable’ or ‘Non-Acceptable’. The queries raised should be relevant and limited in number since this is a preliminary verification process only.

5.2 The Assessing Officer is required to verify each information record individually and take a decision about each record being ‘Acceptable’ (where the nature and source of cash deposit for that particular record is explained by the person under verification to the prima-facie satisfaction of the Assessing Officer) or ‘Non-Acceptable’ (where the Assessing Officer is not satisfied with the explanations offered by the person under verification based on the information available). For each ‘Non-Acceptable’ information record, the undisclosed income will have to be ascertained and recorded along with verification remarks on the portal [the format has been reproduced in the Verification Guide].

5.3 The information relating to cash transactions and response submitted by the person under verification will be visible to the Assessing Officer and his supervisory officers.

5.4 The Assessing Officer will also be able to send a request for additional information, if required. The information request would be communicated to the PAN holder with a Hyperlink for uploading the information. The uploaded information can also be downloaded by the Assessing Officer.

5.5 It is reiterated that no independent enquiry or third party verifications are required to be made by the Assessing Officer outside the online portal. Whatever information is necessary during verification, the same has to be collected through the person under verification using online platform only. Even telephonic queries are to be avoided.

5.6 While conducting verification, seeking additional information and drawing inference regarding source of deposits in bank or other accounts, for general and broad guidance of the AOs, the source specific verification guidelines has been given in the Annexure with a view to maintain consistent approach during verification. If the sources informed by the person under verification are other than those indicated in the Annexure, suitable parameters should be decided by the AO in consultation with the range head and Pr. CIT concerned.

5.7 It should be ensured that the communications made online with the persons under verification should be in very polite language without containing any element of threat or warning. No show cause of any kind should be given.

5.8 The verification of a particular case shall be complete only when:

(a) each information record reflected in that case gets verified and has been marked either as ‘Acceptable’ or ‘Non-Acceptable’ (with mentioning of undisclosed income in the latter category); and
(b) Approval has been given by the supervisory authority as prescribed at Para 7 of this instruction.

5.9 If no satisfactory explanation is provided, the undisclosed income may be quantified considering the facts of the case. Brief summary of verification may be mentioned under verification remarks.

5.10 The cases under the ‘Non Acceptable’ category would get escalated back to the Directorate of Systems and may lead to advance processing of such cases for further handling as cases involving possible tax- evasion.

5.11 In case the person under verification does not respond within the time frame prescribed, it might lead to a possible inference that the cash deposit under verification is prima-facie undisclosed and consequently the AO may treat these cases under the ‘Non Acceptable’ category with relevant remarks.

5.12 A holistic view should be adopted looking into the various aspects of the circumstances leading to deposit of cash (e.g. family-size, financial status and background of person) and uniformity in approach must be adopted while forming a view about quantum of undisclosed income.

6. ADHERENCE TO THE TIME-LIMIT DURING VERIFICATION

6.1 It shall be necessary to complete the process of online verification as quickly as possible so that the option to avail the benefits under the Prime-Minister Garib Kalyan Yojana, 2016 (‘PMGKY’) can be exercised by the persons under verification by the prescribed date for the said scheme. It will be desirable if the additional information required from the person under verification is communicated to the taxpayer within 5 working days (wherever considered necessary), from the receipt of online information from such person.

6.2 The Pr. CIT concerned should frame the intervening timelines depending upon the number of cases and content of information handled by the Assessing Officer in the charge.

6.3 The Additional/Joint CIT will monitor the adherence to the above time schedule and guide AOs wherever required.

7. APPROVAL FROM HIGHER AUTHORITIES

7.1 After all information records of a particular person have been verified by the AO, he would be required to take approval for closure of verification from the prescribed approving authority.

7.2 If the total value of transactions is below Rs. 10 lakh (Rs.25 Lakh in Delhi, Mumbai, Kolkata, Chennai, Bangalore, Pune, Hyderabad and Ahmedabad), the prescribed approving authority will be Additional/Joint CIT heading the Range. For cases where the total value of transactions in a particular case exceeds the above limits, the prescribed approving authority will be the Pr. CIT concerned.

7.3 The above approvals would be through online portal only for which the procedure has been specified in the Verification Guide.

7.4 The time-frame prescribed above in Para 6 will be inclusive of the time involved in granting approval by the prescribed approving authority.

8. DEALING WITH NON-COMPLIANCE

In cases where online response has not been submitted even after service of letter, the ITS profile of such PAN holders may be viewed to access information reported in earlier returns and under TDS/AIR/CIB. In case the cash deposit is not in line with the earlier return or information profile of the person under verification, necessary facts may be collected inter-alia by exercising the powers under section 133(6) with the approval of prescribed authority. In appropriate cases depending upon the online response or otherwise, survey action u/s. 133A can be considered. During survey, where there is suspicion of back dating or fictitious cash transactions, CCTV recording of the cash counter at relevant banks may also be checked, if necessary. Reference can also be sent to the Investigation wing in appropriate cases.

In cases of intrusive actions [133(6)/133A/ref. to Inv. Wing], the outcome needs to be reported by the AO in the online portal also.

9. INITIATION OF PENALTY PROCEEDINGS UNDER SECTIONS 269SS/269T OF THE ACT

In case, the transaction being loan received/repaid in cash above the permissible threshold comes to notice, the AO may consider initiation of penal proceedings under the relevant provisions separately.

10. FACILITATION

10.1 DIT(I&CI) has been designated as the local resource person for supporting the field formation in the e- verification process.

10.2 In case of technical difficulty, ITBA helpdesk and contact persons given in ITBA instruction may be contacted.

10.3 Further, clarifications would be issued by CBDT as and when required.

11. The above may be brought to the notice of all concerned.

ANNEXURE

Source Specific General Verification Guidelines 1.

1. Cash out of earlier income or savings

1.1 In case of an individual (other than minors) not having any business income, no further verification is required to be made if total cash deposit is up to Rs. 2.5 lakh. In case of taxpayers above 70 years of age, the limit is Rs. 5.0 lakh per person. The source of such amount can be either household savings/ savings from past income or amounts claimed to have been received from any of the sources mentioned in Paras 2 to 6 below. Amounts above this cut-off may require verification to ascertain whether the same is explained or not. The basis for verification can be income earned during past years and its source, filing of ROI and income shown therein, cash withdrawals made from accounts etc.

1.2 In case the individual claims that cash deposit includes savings of other person(s), the necessary information is required to be submitted under Para 4 or Para 5 below, as the case may be.

1.3 In case of an individual having no business income, if the cash out of earlier income or savings exceeds the above mentioned threshold, the AO needs to consider the remarks provided by the person under verification and seek further relevant information. During verification, the AO needs to consider the information provided by the person concerned, income earned during past years, source of such income, filing of ROI and income shown therein, cash withdrawals made from accounts etc. before quantifying the undisclosed amount, if any. In case the person under verification has filed return of Income, a reasonable quantum can be considered as explained while quantifying the undisclosed amount, if any.

1.4 In case of persons engaged in business or requirement to maintain books of accounts, no additional information is required to be submitted by the person under verification if total cash out of earlier income or savings (sum of responses for all cash transactions) is not more than the closing cash balance as on 31st March 2016 in the return for AY 2016-17. However, if the AO has reason to believe that the closing cash balance as on 31st March 2016 has been increased by revising the return or backdating transactions in the books of account, further verification may be carried out.

1.5 In case of persons engaged in business or required to maintain books of accounts, if total cash out of earlier income or savings (sum of responses for all cash transactions) is more than the closing cash balance as on 31st March 2016 in the return for AY 2016-17, the AO needs to consider the remarks provided by the taxpayer and seek relevant information, i.e. closing balance as on 31st March 2016 as reflected in the books of account. During verification, the AO may consider the information provided by the person under verification, income earned during past years, source of such income, filing of ROI and income shown therein, cash withdrawals made from accounts etc. before quantifying the undisclosed amount, if any.

1.6 If the person under verification has claimed that the cash deposit has been disclosed in IDS 2016 and if the same is found to be correct, no further verification should be made.

1.7 In case, there is information or apprehension/ suspicion that a particular bank account(s) has been misused for money laundering/tax evasion/entry operations in shell companies, the monetary cut-off or cash-balance based cut off prescribed in clauses above requiring no-verification, shall not be applicable.

2. Cash out of receipts exempt from tax

2.1 If the cash is explained to be out of receipts exempt from tax, and the same is not in line with the earlier returns filed by the person under verification, the AO needs to consider the remarks provided by the person and seek relevant information (e.g. records of land-holding and other relevant evidences etc. in case of agricultural income), to form appropriate view and quantify unexplained income.

3. Cash withdrawn out of bank account

3.1 The AO needs to consider the remarks provided by the person under verification and seek relevant information i.e. copy of bank statement/passbook to form appropriate view and quantify unexplained income.

3.2 Bank statement/passbook may be verified to confirm the name of the account holder. The date and amount of cash withdrawals and cash deposits in the bank account may be matched to verify whether claim that the cash deposited is out of cash withdrawn out of bank account is acceptable. Further removed in time the withdrawal is from the date of demonetization i.e. 8th November, 2016, the more suspicious it looks. The AO should take a balanced view in analyzing the time gap from the point of view of normal human behaviour and specific circumstances of the case.

4. Cash received from identifiable persons (with PAN)

4.1 No additional information is required to be submitted by the person under verification as the information will be pushed to the AO of the identifiable persons (with PAN).

4.2 In case the identifiable person (with PAN) does not confirm the transaction, the response will be referred back for further verification.

4.3 In case of a gift, it may be seen whether the same is taxable in the hands of the recipient under section 56(2) of the Act.

5. Cash received from identifiable persons (without PAN)

5.1 The AO needs to verify if the cash receipts are not in line with the normal practices of concerned business as mentioned in the earlier returns of Income after considering the remarks provided by the taxpayer, nature of business and earlier history before seeking additional information.

5.2 In case of other cash receipts, strategies for verification may be made in consultation with the Pr. CIT so that consistency is maintained in the entire charge based on nature of transaction.

6. Cash received from un-identifiable persons

6.1 The AO needs to verify if the cash transactions or its quantum are not in line with the normal practices of concerned business as mentioned in the earlier returns of Income.

6.2 During verification, the AO may seek relevant information e.g. monthly sales summary (with breakup of cash sales and credit sales), relevant stock register entries, bank statement etc. to identify cases with preliminary suspicion of back-dating of cash sales or fictitious sales. Some indicators for suspicion of back dating of cash sales or fictitious sales could be :

i. Abnormal jump in the cash sales during the period Nov to Dec 2016 as compared to earlier history.
ii. Abnormal jump in percentage of cash sales to unidentifiable persons as compared to earlier history.
iii. More than one deposit of specified bank notes in the bank account late in the demonetization period.
iv. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases.
v. Transfer of deposited cash to another account/entity which is not in line with earlier history.

6.3 In case of receipt of cash on account of donation, indicators similar to above may be kept in mind.

6.4 In case of other cash receipts, strategies for verification may be made in consultation with the Pr. CIT.

7. Cash Disclosed/To be disclosed under PMGKY

7.1 In case the taxpayer mentions that the Cash Disclosed/to be disclosed under PMGKY, the same may be verified.

7.2 If the process of disclosure is informed to be pending, verification can be kept pending till the evidence is furnished.

7 3 The verification should be closed on the basis of evidence of disclosure made under PMGKY.

Notification No.13/2017 21-02-2017


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

NOTIFICATION New Delhi,

The 23rd February, 2017

INCOME-TAX

S.O. 600(E).–In exercise of the powers conferred by clause (48) of section 10 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Government, having regard to the national interest, hereby notifies for the purposes of the said clause, the National Iranian Oil Company, as the foreign company and the Memorandum of Understanding entered between the Government of India in the Ministry of Petroleum and Natural Gas and the Central Bank of Iran on the 20th day of January, 2013 as modified by the minutes of meeting signed on the 16th August, 2016 between the Government of India, Ministry of Finance, Department of Economic Affairs and Bank Markazi Jomhouri Islami Iran, as the agreement subject to the condition that the said foreign company shall not engage in any activity in India, other than the receipt of income under the agreement aforesaid.

2. This notification shall be deemed to have come into force from the 16th day of August, 2016.

[Notification No. 13/2017/ F. No. 370142/2/2017-TPL]

RAJESH KUMAR KEDIA, Director

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

Notification No.12/2017 21-02-2017


SECTION 138 OF THE INCOME-TAX ACT, 1961 – DISCLOSURE OF INFORMATION RESPECTING ASSESSEES TO SPECIFIED OFFICER, AUTHORITY OR BODY PERFORMING FUNCTIONS UNDER ANY OTHER LAW – NOTIFIED AUTHORITY UNDER SECTION 138(1)(a)(ii) – AMENDMENT IN NOTIFICATION NO. SO 576(E) [NO.137 (F.NO 225-21-2003-ITA-II)], DATED 23-5-2003

NOTIFICATION NO.12/2017 (F.NO.225/120/2016-ITA.II)], DATED 21-2-2017

In exercise of the powers conferred by sub-section (2) of section 138 of the Income-tax Act, 1961 (43 of 1961), the Central Government, having regard to all the relevant factors, hereby makes the following amendment in the notification of Government of India in the Ministry of Finance, Department of Revenue (Central Board of Direct Taxes) published in the Gazette of India, Part II, section 3, sub-section (ii) vide number S.O. 576(E), dated the 23rd of May, 2003, namely:—

In the said notification, in the proviso, in clause (ii), for the words and figures, ”the notifications issued under section 138 from time to time”, the words, brackets and figures, ”provisions of sub-section (1) of section 138 of the Act” shall be substituted and shall be deemed to have been substituted with effect from 23rd May, 2003.

ANNEXURE

Explanatory Memorandum

Notification No. 137 dated 23-5-2003 SO (E)-576 issued by the Central Govt., in exercise of its powers under section 138(2) of the Income-tax Act, 1961 (‘Act’), prohibited providing information/record/ document to any person or authority by the Income-tax Authorities. While the said notification prescribed a general prohibition in furnishing of information/documents before any person/authority, two exceptions were, however, mentioned where the information can be made available. The first exception pertained to providing information by DGIT (Systems) in respect of records or data related to PAN, tax deduction account number and computerization of income-tax records of taxpayers. The second exception was related to disclosure of information in accordance with notifications issued under section 138 of the Act from time to time.

As notification dated 23-5-2003 was issued under sub-section (2) of section 138, which starts with a non-obstante clause, the implication appeared to be that the information could be provided only to the authorities/ persons which are so notified under section 138(1)(a)(ii) of the Act by the Central Government while disclosure of information under section(s) 138(1)(a)(i) and section 138(1)(b) of the Act was prohibited. Therefore, an apprehension was raised by some of the stakeholders that the said notification puts restriction on the powers of the authorities mentioned in sub-sections (1)(a)(i) & (1)(b) of section 138 of the Act, thereby, making these provisions virtually redundant.

Therefore, in order to remove any ambiguity in interpretation of the said notification, Central Government, with retrospective date, has decided to clarify that clause (ii) of the proviso in the notification dated 23/05/2003 would mean the disclosure of any information in accordance with the provisions of section 138(1) from time to time.

The above partial amendment in notification dated 23-5-2003, would, in effect, remove the restraint placed by the notification dated 23-5-2003 and harmonize it with provisions of section 138 of the Act.

Narendra Modi reluctant to go ahead with key reforms that could lift India’s growth : 21-02-2017


Across Asia, the world has supposedly been witnessing the return of the strongman. Chinese President Xi Jinping has been grasping more and more control in his own hands since claiming power in 2012. Two years later, Prime Minister Narendra Modi in India and President Joko Widodo (known as “Jokowi”) in Indonesia won office by selling themselves as forceful economic and political reformers. All three were heralded as the firm hands these giant developing nations needed to rejuvenate their promising but troubled economies.

Yet here we are, at the start of 2017, still waiting. Jokowi’s lackluster reform program has produced equally lackluster growth. Xi’s much-hyped pro-market manifesto, approved in 2013, has gone almost nowhere, leaving China to limp along on ever-greater infusions of debt. While India is the best performing of the bunch, Modi has remained reluctant to press ahead on key changes that could lift growth even higher.

The truth is that Asia’s strongmen aren’t strong enough.

This matters to a world counting on emerging markets in Asia and elsewhere to lift global growth. In October, Capital Economics released a report darkly entitled “The End of the Golden Age,” which predicted that “widespread expectations for a sustained rebound in emerging market growth after the slowdown of recent years will be disappointed.” Emerging economies’ GDP, the research outfit forecast, would grow no more than 4 percent in coming years, sharply slower than the 6 percent notched since 2000.

To be fair, as big economies like India and China advance, eye-popping growth rates naturally become harder to come by. But these countries don’t lack potential — they lack leadership.

Compare current policies to the bold decision-making witnessed during Asia’s go-go years. In India in the early 1990s, Prime Minister P.V. Narasimha Rao and his finance chief Manmohan Singh tore down large swaths of a regulatory raj that had been considered sacrosanct. In the early 1980s, Deng Xiaoping and a team of forward-thinkers discarded the economic irrationalities of Mao. Even Suharto in Indonesia, with his myriad faults, instituted dramatic changes that greatly alleviated poverty in the world’s fourth-most populous country.

Why haven’t today’s leaders acted as forcefully? Partly it’s a problem of success. Though millions of people in these countries remain trapped in poverty, overall they are a lot less desperate than they once were, easing some of the urgency to force through difficult and potentially unpopular changes. Since 1980, GDP per capita in Indonesia has increased more than five times, in India, six times, and in China more than 26 times. Despite the fact that globalization has been the prime driver of these gains, there are still powerful voices who aren’t convinced further opening is necessary or desirable, especially in light of the turmoil in the global economy over the past decade.

Arguably, too, most of the low-hanging fruit has been plucked. Previously, connecting low-cost economies to global trade, services and supply chains was sufficient to spur dramatic gains in productivity and incomes. Today’s economies are far more complex and their challenges — such as spurring innovation — much tougher. The prospect of opening protected sectors and untangling regulations threatens special interests that benefited from the earlier booms. Xi’s reform roadmap, for instance, affects everyone from state enterprises and banks to Communist cadres and coddled tycoons.

True, none of these Asian leaders are free to act as they wish. Modi still must contend with a spirited political opposition, and Jokowi has had to tiptoe through a political minefield even within his own party. Even Xi faces a major Communist Party conference later this year, which may lead to a reshuffling of the country’s top leaders.

At the same time, democracy isn’t the roadblock. There seems to be an inverse relationship between Xi’s expanding grip on China and the pace of free-market reform, for instance. The democratically elected Modi has arguably introduced more meaningful reforms in India — reducing barriers to foreign investors and ushering in a major and long overdue tax reform — than Xi has. After a slow start, Jokowi, too, has at least sliced red tape and made it easier to start new companies in Indonesia.

For another self-proclaimed economic strongman — Donald Trump — the lessons abound. Much like Xi, Modi and Jokowi, Trump’s arrival has boosted the hopes of investors and CEOs for great, business-friendly changes. But high expectations can very quickly turn into even bigger disappointment. Trump’s Asian counterparts all allowed political distractions to sidetrack their reform agendas; with his White House in turmoil, Trump may be making the same mistake.

Unless today’s Asian leaders get back on track, their economies won’t either. Modi must resume the campaign for land reform to speed the process of building industry, and launch a sweeping privatization of lumbering state companies. Jokowi needs to push forward with a productivity-enhancing infrastructure program. Both Modi and Jokowi must also reduce barriers to hiring and firing workers to attract the manufacturing that would increase exports and incomes. Xi needs to stop subsidizing zombie enterprises, slim excess capacity and, most of all, allow market forces to have greater sway in financial and capital markets. If they can’t act more boldly — and soon — Asia’s golden age might truly be over.

Source : Financial Express

RBI asks banks to collaborate with fintech cos : 21-02-2017


 The RBI deputy governor has said that in view of the competition from fintech companies, banks should reorient their business model and look at collaborating with more efficient players after assessing the likely impact of disruption.

Delivering the inaugural address at a seminar organised by College of Agricultural Banking in Mumbai, RBI deputy governor SS Mundra said, “Fintech companies have leveraged on growing technological advances and pervasiveness of smartphones and have targeted niches to bridge the funding gap for small businesses with innovative and flexible credit products.”

He added that fintech lending companies and the marketplace based lending companies have an underlying potential to emerge as an alternative source of finance for the small businesses. “Considering the need to strike a balance between regulation of these entities even while preserving their ability to innovate, the RBI is currently consulting on approach to regulate the P2P lending,” said Mundra.

Mundra said that potentially, the ministry of micro, small and medium enterprises (MSMEs) borrowers can apply online in minutes, select desired repayment terms and receive funds in their bank accounts within 2-3 days with minimal hassle. “There are few documentation requirements, very quick turnaround time and flexible loan sizes and tenors. That the P2P lenders can become a significant source of finance for the small borrowers is evident from the UK example where the P2P lending represents about 14% of the new lending to the SMEs,” said Mundra.

The deputy governor said that SME lending, being a hugely underserved market, is a major opportunity for fintech startups to build and scale up sustainable businesses by offering services such as credit underwriting, and marketplace lending.

With around 51 million units throughout the geographical expanse of the country, MSMEs contribute around 8% of GDP, 40% of the total exports and around 45% of the manufacturing output. There are several Fintech companies in the MSME financing space which have been growing rapidly. Fintech companies are improving access to finance for SMEs by giving loans themselves or by connecting SMEs to banks and financial institutions or by becoming financial aggregators.
Source : PTI

Expect a visit from taxman if you’ve ignored I-T dept’s email : 21-02-2017


Income Tax officials could soon be at your doorstep if you have deposited a huge amount during the note-swapping exercise last year, and have not yet explained the source of the cash. “We have tried to keep the exercise non-intrusive. But if people have not come forward, then some kind of verification is needed especially in cases that involve deposits of large sums,” a senior income-tax department official told ET.

Under the ‘Operation Clean Money’, the I-T department had sent out SMSes and e-mails to about 18 lakh people who deposited over Rs 5 lakh each during the 50-day window from November 10 to December 30, because the desposits did not tally with their income.

The depositors were asked by the I-T department to explain the source of the money by logging in to its portal. By February 15, about 7.3 lakh people responded to the emails and explained their deposits.

According to the official, the department is now contemplating issuing notices or carrying out surveys in cases where no response has come or the replies are unsatisfactory.

“In cases where responses are not satisfactory, notices would be issued. In some cases where big sums are involved and response is not satisfactory, surveys could be carried out,” the official said, adding that people could be also asked to come to income-tax offices or tax officers may pay them a visit.

Incidentally, the I-T department is soon expected to send out the next batch of emails and SMSes, beginning the part two of the ‘Operation Clean Money’, which will target suspicious deposits below Rs 5 lakh identified through data analytics.

The department is examining the voluminous data received from banks on deposits made during the 50-day period. It is also hiring external experts to work on the data to identify splitting of deposits or use of other means to evade notice.

Source : Economic Times

Notification No. GSR 151(E) [F.NO.11022/59/2012-AD.ED] 20-02-2017


FEM (COMPOUNDING PROCEEDINGS) AMENDMENT RULES, 2017 – AMENDMENT IN RULE 8

NOTIFICATION NO. GSR 151(E) [F.NO.K-11022/59/2012-AD.ED]DATED 20-2-2017

In exercise of the powers conferred by section 46 read with sub-section (iii) of section 15 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Central Government hereby makes the following rules further to amend the Foreign Exchange (Compounding Proceedings) Rules, 2000, namely:—

1. (1) These rules may be called the Foreign Exchange (Compounding Proceedings) Amendment Rules, 2017.

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

2. In the Foreign Exchange (Compounding Proceedings) Rules, 2000, in rule 8, in sub-rule (2), the following proviso shall be inserted, namely:—

“Provided that with respect to any proceeding initiated under rule 4, if the Enforcement Directorate is of the view that the said proceeding relates to a serious contravention suspected of money laundering, terror financing or affecting sovereignty and integrity of the nation, the Compounding Authority shall not proceed with the matter and shall remit the case to the appropriate Adjudicating Authority for adjudicating contravention under section 13″.

Notification No : 08/2017 Dated: 20-02-2017


st08-2017

Sebi to enlist resource persons to spread financial literacy in select districts : 20-02-2017


Markets regulator Sebi has decided to empanel ‘resource persons’ to help spread financial literacy in select districts.

The Securities and Exchange Board of India (Sebi) will empanel financial education resource persons (RPs) on part-time basis for various districts in Uttar Pradesh, Haryana, Punjab, Jammu and Kashmir, Himachal Pradesh and Uttarakhand.

The individuals will be part of the financial education efforts of the regulator for the districts where it does not have any financial education resource person and/or where there is deficiency of RPs.

Sebi has invited applications from interested candidates by February 28.

“This empanelment is not a full-time job but an exercise to enlist experienced persons having good communication skills, including effective presentation ability and passion for social work along with knowledge of computer/net to spread message of importance of financial literacy among masses in their identified area of operations,” Sebi said in a notice.

Serving or retired teachers, professionals, bank and government officials as well as defence persons can apply for the opportunity.

The candidates should have at least a graduate degree and minimum three years working experience.

The RPs should have proficiency in the local language of the district that he/she is based in and should be willing to travel across the assigned area and conduct financial education workshops at various locations in the assigned area.

The individual should also preferably have experience of conducting programs of interest to retail investors, it said.

Successful candidates would be required to undergo four days’ training by Sebi.

In Uttar Pradesh, Sebi is looking to empanel resource persons in as many as 46 districts including Etah, Fatehpur, Ghazipur, Mathura, Moradabad, Muzaffarnagar and Pilibhit.

Similarly, it would empanel individuals for seven districts in Himachal Pradesh — Kinnaur, Lahaul-Spiti, Sirmour, Solan, Una, Kangra and Chamba — and five districts in Haryana, including Fatehabad and Faridabad.

Sebi requires RPs in seven districts in J&K — Doda, Kargil, Kishtwar, Leh, Poonch, Ramban and Reasi.

In Uttarakhand, RPs are needed for six districts — Almora, Bageshwar, Champawat, Garhwal (Pauri), Chamoli (Gopeshwar) and Pithoragarh.

Barnala, Kapurthala and Pathankot are among the seven districts in Punjab where Sebi will empanel resource persons.

Source : Financial Express

Goods and ServiceTax Council clears pay Bill : 20-02-2017


The goods and services tax (GST) Council on Saturday formally approved a Bill for compensating the state governments for any revenue loss they might have to suffer in the first five years in the GST regime, as the constitutionally empowered body entered the last lap of its key legislative business. At its 10th meeting held at Udaipur, the council also resolved to make some clarificatory changes in the model GST Bill — which will be replicated as the central and state GST bills — with a view to amplifying their legal tenability.

The model GST and integrated GST drafts are also likely to be endorsed by the council at its next session to be held in New Delhi on March 4-5. The Centre is hoping to introduce all the three crucial bills in Parliament in the second half of the Budget session, which will commence on March 9, finance minister Arun Jaitley said.

The Centre has set a July 1 deadline for ushering in the GST regime, the journey towards which has been a decade-long and chequered one, marred by political squabbles and bureaucratic turf battles.

As for the remaining agenda, Parliament needs to pass the three bills and the state assemblies will have to approve the state GST bills. The fitment of items under the four-tier (5%, 12%, 18% and 28%) rate structure, in keeping with the principles of revenue neutrality (for the government) and ensuring minimal inflationary impact, is a key challenge too. Jaitley said there would a 12th session of the council to finalise the fitment, while a technical committee has already made considerable headway in this regard.

The GST Network, the IT backbone for running GST, must be up and running and the businesses will have to get ready for the proposed destination-based tax on consumption that will replace all major existing indirect taxes except the basic customs duty and have a seamless input tax credit facility. As per the compensation Bill cleared by the council on Saturday, the states will be given full compensation for the first five years for any shortfall in revenue from what 14% annual growth from the 2015-16 base would have otherwise yielded. The compensation will be funded via a clutch of cesses, including the extent clean energy cess and the impost on tobacco. While some states like West Bengal had earlier said that the compensation requirement could turn out to be much higher than R50,000 crore estimated earlier due to the negative impact of demonetisation on state finances, analysts said states have actually nothing to worry in this regard as the compensation is being computed on the 2015-16 revenue base and assuming 14% annual growth.

However, at the Udaipur meeting of the council, the Central bureaucracy is learnt to have sought to raise the issue of “dual control” again. While the proposed division of powers will lead to a significant shifting of the taxpayer base from the states to the Centre, states will gain hugely from the 50:50 division of the above-R1.5 crore taxpayer base, in terms of the taxpayer base to be under their control. Businesses with a turnover above R1.5 crore contribute to over 95% of the revenue attributable to the taxes to subsumed in GST, while 93% of the service tax assessees and 85% of those registered for state VAT have a turnover below the threshold.

As regards the model GST law, Jaitley said the council brought additional legal clarity on aspects like how to tax work contracts (currently both VAT and service tax are levied on them), definition of “agriculture,” exemptions to be accorded to small businesses during the transitional phase, and the composition of the appellate tribunals at the central and state levels.

Besides, the council discussed the composition scheme that allows a registered trader up to pay tax at a fixed rate (likely 1%) on turnover and avoid any further scrutiny by the taxman, as far as local (intrastate) sales up to a threshold are concerned. Those who opt for the scheme, sources said, would not be eligible for input tax credit, a reason why not all manufacturers and service providers might not find it attractive, analysts said.

Saturday’s meeting did not discuss the dreaded anti-profiteering clause. This is sought to be an enabling provision for designated agencies to examine whether input tax credits availed of by any registered taxable person, or the benefit of a reduction in the tax rate, has resulted in a commensurate reduction in the price of the goods or services supplied. While most analysts and industry bodies oppose this provision, saying it would disrupt market dynamics, some say if it is judiciously used by the government as a tool to curb inflation, it might be legitimate.

Source : Financial Express

Government mulls proposal to free up retail FDI policy but only for India-made goods : 20-02-2017


The government is considering a proposal to free up foreign direct investment (FDI) policy on retail but only for domestically manufactured goods.

The policy under consideration applies to both offline and online retail and would remove restrictions on companies such as Walmart, Tesco, Amazon and others when it comes to the sale of things produced in the country. Apart from attracting investment in retail, such a policy would also give a big boost to the Make in India programme, a senior official told ET.

“It has been proposed that FDI restrictions in retail be lifted to the extent of goods manufactured in India,” he said. “The matter will be deliberated by the government in the near future.”

The government is expected to take a decision after the Uttar Pradesh assembly elections. Overseas-owned online retailers can only function as marketplaces, or platforms for buyers and vendors, and aren’t to sell goods on their own account through an inventory model. Multibrand retailers such as Walmart can only own up to 51% of Indian ventures and are subject to other constraints as well.

The current policy allows domestic manufacturers to sell just their own goods through any channel — online or offline. Only in the case of food products can locally processed items be sold by anyone through any mode, a policy change made in August last year to give a boost to food processing.

Retailers have been lobbying for similar exceptions to be made for grocery and personal care items as well. They say confining such stores to food product doesn’t make business sense.

Finance minister Arun Jaitley said in his February 1 budget speech that the government is considering further liberalising the FDI policy. More than 90% of FDI is currently through the automatic approval route.

Amazon recently submitted a proposal to the government for setting up brick-and-mortar stores to sell locally made food products alongside its online platform in India. In an earlier proposal, the online retailer had pushed for a hybrid model under which it could sell its own products as well as those of independent sellers. This was turned down as it didn’t support the Make in India strategy.

Easing restrictions will benefit producers, experts said. “It is in the interest of the Indian economy to relax these rules for retailers just like they did for manufacturers,” said Devraj Singh, executive director, EY. “Jobs will not be affected and overall manufacturing will get a boost.”

The government wants to bolster manufacturing as part of its job-creation strategy. Manufacturing has lagged behind services in total FDI.

India’s retail sector has been gradually opened over the years but with multiple conditions such as local sourcing rules amid strong resistance over fears that smaller, family-run stores would be hit.

Source : Business Standard

GST Council To finish draft display law, meeting being held headed by Arun Jaitley : 18-02-2017


The GST Council, which is meeting on today, is likely to finalise the draft Model GST Law including final drafting of the anti-profiteering clause to ensure benefit of lower taxes gets shared with consumers.

The Council, headed by Finance Minister Arun Jaitley and comprising representatives of all states, is also likely to finalise the definition of ‘agriculture’ and ‘agriculturist’ as well as constitution of a ‘National Goods and Services Tax Appellate Tribunal’ to adjudicate disputes, reports Bloomberg.

The law ministry has sent the approved language and draft of the Model GST Law, which outlines how the new national sales tax will be levied on goods and services.

The law ministry-approved draft and the language were discussed on Friday by the Council’s sub-committee comprising central and state officials. The vetted draft will then be put up before the Council at its 10th meeting being held in Udaipur on Saturday.

The government intends to introduce the Model GST Law in Parliament in the second half of the current Budget Session beginning next month, officials said.

The government is keen to roll out the new regime from July 1 but for that, it will have to get two laws – the Central GST (CGST) Act and Integrated GST (IGST) Act – approved by Parliament and each of the state legislatives have to pass the State GST (SGST) Act.

The Model GST Law provides a common draft of CGST Act, SGST Act. Besides, there is an IGST law and Compensation law.

Officials said that the government is keen to pass benefit of lower taxes to consumers and so an anti-profiteering measure has been incorporated in the draft law.

It provides for constituting an authority to examine whether input tax credits availed by any registered taxable person, or the reduction in the price on account of any reduction in the tax rate, have actually resulted in a commensurate reduction in the price of the said goods and/or services supplied by him.
For example, a good or service is to be levied with a GST of 5 percent.

But in course of supply, a 20 percent tax is paid, whose input credit is taken. So, the final consumer will be levied only 5 percent tax and not 25 percent, as the input credit of 20 percent is already taken, an official explained.

“This has to be declared at the time of filing returns by the taxpayer,” the official said.

Source : Financial Express

50 CPSEs headed for listing, government to also cut stake in listed firms to 75% : 18-02-2017


As many as 50 state-run companies could be listed on the stock exchanges soon with the government putting out rules and guidelines for biggest ever plan to invite public participation in its profit-making enterprises.

It will also bring down shareholding in already listed firms to 75%. On Friday, the department of investment and public asset management (DIPAM) issued the mechanism for listing of state run firms, announcing the details of the decision announced in the budget.

“The government will put in place a revised mechanism and procedure to ensure time-bound listing of identified CPSEs on stock exchanges,” finance minister Arun Jaitley had said. The government will look to list all its companies that have a positive net worth, no accumulated losses and have earned net profit in three preceding consecutive years.

According to Public Enterprise Survey 2014-15, there are 157 profit-making companies, of which 45 are listed. Some of the profitable companies are Airports Authority of India, Central Warehousing Corporation, Magazon Dock Shipbuilders Ltd and ONGC Videsh Ltd.

As many as 50 companies meet all three conditions an assessment will be made every year according to the guidelines put out. The administrative department or DIPAM will draw the list of eligible CPSEs for listing within one month from the finalisation of audited accounts of the last financial year.

“The department will work closely with the administrative ministry to ensure that timelines set by the government for listing of CPSEs is adhered to,” said DIPAM secretary Neeraj Gupta. In case of issue of fresh equity in conjunction with the sale of government stake (piggyback transactions) for listing, the union cabinet’s approval will be sought by the administrative ministry.

The government aims to list the staterun companies within 165 days of the agreement by the administrative ministry on their listing. An empowered committee will be set up to ensure that the timeline is adhered to. The committee will be headed by DIPAM secretary.

“Both administrative ministries and CPSEs understand the advantage of listing and accessing capital for business expansion,” said Gupta. For FY2017-18, the government has set a mammoth disinvestment target of Rs 72,500 crore, of which Rs 46,500 crore is to come from regular stake sales including ETFs.

Source : Business Standard

Demonetisation unnecessarily demonised: Aditya Puri : 18-02-2017


A day after Rajiv Bajaj lashed out at the demonetisation exercise, industrialist Anand Mahindra and banker Aditya Puri today stood by the government, saying the move has created transparency but is unnecessarily demonised.

“He (Prime Minister Modi) has created transparency and traceability. He has changed the mindset (in such a way that) everybody is going to think twice about going back to their old ways and from what I understand, the conversion to digital has occurred at a pace much faster,” Mahindra said at the annual NILF here.

Puri, who heads the second largest private sector lender HDFC BankBSE 3.75 %, concurred, saying, “demonetisation is being demonised for nothing” and listed several positives from the move.

It may be noted that speaking at the same event yesterday, Bajaj AutoBSE -0.25 % managing director Rajiv Bajaj had said it is incorrect to blame the government for bad execution during the demonetisation exercise, saying the idea to ban high value notes was itself “wrong”.

The positives of demonetisation drive listed out by Puri included more money in the system, a wider tax base, lower interest rates with possibility of going down further, greater transparency and cost reductions in the system.

Improvising on yesteryears’ Bollywood actor Dharmendra’s famous dialogue ‘Chun chun Ke maroonga’ to ‘Chun chun ke nikalenge’, Mahindra, who termed Modi as a “practical man”, said the government may not have succeeded in getting a windfall out of the exercise but will get “somewhere” to bridge the deficit.

Puri explained that depositing money into bank accounts does not legitimise it and added that the government will be using data science to get to the wrongdoers and called this a “big idea”.

Mahindra said corruption is “virtually non-existent” in the corridors of power in New Delhi under the present Modi regime.

Drawing from his recent field visits, Puri asserted that agricultural activities have not been affected because of the demonetisation exercise.

“The sowing was at a record level, let us be very clear about this, agriculture did not suffer,” he said. Puri also dismissed notions of newer ways of corruption being found out because of demonetisation.

It can be noted that industrial activity and consumption have been impacted due to the November 8, 2016 announcement of the Prime Minister to ban Rs 500 and Rs 1,000 currency notes, which accounted for 86 per cent of the outstanding currency in the system in a cash-dependent economy like India.

The RBI had to resort to a cash rationing consequent to the move and the long queues because of it led to over 80 deaths in the country.

Source : Economic Times

India’s GDP to expand post demonetisation: Arjun Ram Meghwal : 17-02-2017


Demonetisation of old high value currency and the government’s push towards digital economy will definitely expand India’s GDP, Minister of State for Finance Arjun Ram Meghwal said today. Referring to the ongoing debate on impact of note ban on GDP, he said experts are divided on the issue, but stressed that “it will definitely increase”. Meghwal said that about 23.2 per cent of the economic activity is “shadow economy” and government’s push to cashless transactions will widen the tax bracket. “Our tax net will increase and this economic activity under shadow economy will start getting counted (in the GDP) …(and hence) GDP will definitely increase,” he said at the ‘Digital and Cashless Economy’ conference organised by industry body CII.

The minister also expressed concern over the high cash to GDP ratio in India in comparison to developed countries and said the demonetisation and digitisation of payments would narrow the gap. In advance countries, the cash to GDP ratio is in range of 4 while in India it is estimated at 12.

Following its move to demonetisation old Rs 500/1000 notes on November 9 last year, the government has been taking several measures to push the country towards less cash economy.

A reward programme for customers as well as merchants has been launched to promote digital payments. The government has also launched BHIM, a mobile app for facilitating cashless transactions.

Source : PTI

Notification No.11/2017 17-02-2017


SECTION 35(1)(ii) OF THE INCOME-TAX ACT, 1961 – SCIENTIFIC RESEARCH EXPENDITURE – APPROVED SCIENTIFIC RESEARCH ASSOCIATIONS/INSTITUTIONS

NOTIFICATION NO.11/2017 (F.NO.203/06/2016/ITA-II)], DATED 17-2-2017

It is hereby notified for general information that the organization M/s. Jawaharlal Institute of Postgraduate Medical Education and Research (JIPMER), Puducherry (PAN:- AAAJJ0846M) has been approved by the Central Government for the purpose of clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961 (said Act), read with Rules 5C and 5E of the Income-tax Rules, 1962 (said Rules), from Assessment year 2016-17 onwards in the category of ‘University, College or other Institution’, engaged in research activities, subject to the following conditions, namely:—

(i) The sums paid to the approved organization shall be used to undertake scientific research;
(ii) The approved organization shall carry out scientific research through its faculty members or enrolled students;
(iii) The approved organization shall maintain separate books of account in respect of the sums received by it for scientific research, reflect therein the amounts used for carrying out research, get such books audited by an accountant as defined in the explanation to sub-section (2) of section 288 of the said Act and furnish the report of such audit duly signed and verified by such accountant to the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the case, by the due date of furnishing the return of income under sub-section (1) of section 139 of the said Act;
(iv) The approved organization shall maintain a separate statement of donations received and amounts applied for scientific research, such donations shall be used exclusively for core scientific research and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to above.
(v) Donations being received by the organization under clause (ii) of sub-section (1) of section 35 of the Act, shall be used exclusively for core scientific research only and not for hospital activities, activities related to treatment of patients, general educational activities (other than research) or any other object of the organization.
(vi) The approved organization shall, by the due date of furnishing the return of income under sub-section (1) of section 139, furnish a statement to the Commissioner of Income-tax or Director of Income-tax containing—
a detailed note on the research work undertaken by it during the previous year;
a summary of research articles published in national or international journals during the year;
any patent or other similar rights applied for or registered during the year;
programme of research projects to be undertaken during the forthcoming year and the financial allocation for such programme.

2. The Central Government shall withdraw the approval if the approved organization:—

(a) fails to maintain separate books of account referred to in sub-paragraph (iii) of paragraph 1; or
(b) fails to furnish its audit report referred to in sub-paragraph (iii) of paragraph 1; or
(c) fails to furnish its statement of the donations received and sums applied for scientific research referred to in sub-paragraph (iv) of paragraph 1; or
(d) ceases to carry on its research activities or its research activities are not found to be genuine; or
(e) ceases to conform to and comply with the provisions of clause (ii) of sub-section (1) of section 35 of the said Act read with rules 5C and 5E of the said Rules.

Financial crisis likely under Donald Trump, says RBI Governor, Urjit Patel in the first ever interview : 17-02-2017


Urjit Patel, the RBI Governor in a first ever elaborate interview to CNN, TV 18 spoke about demonetisation, growth, rates and rupee. He said financial crisis was likely under the new US President, Donald Trump. And that nobody would be spared of financial volatility from the United States. He said nobody would be spared of financial volatility from the United States.

Speaking on demonetisation of Rs 500 and Rs 1000 that happened in November 2016, he said that it was well managed and that remonetisation has been very quick. The Governor said that quick and faster remonetisation was part of the plan. However, “we are open to constructive criticism”. On asking as to when was demonetisation planned, he said that currency printing plans were set in motion much before. “There are tens of thousands of bank branches and 4,000 currency chests. We need to be careful and try that this is a number which is not a mere estimate but a verified number both physically and in the accounting sense,” Patel added when asked about the estimated amount of old currency notes that have come back.

On macro economic indicators he said that the best way to support durable growth is to keep the inflation low. India’s 7.5 per cent GDP growth target should not be ridiculed.

Source : Business Standard

Govt may cut potash subsidy in potential blow to demand : 17-02-2017


An Indian government ministry has proposed slashing potash subsidies by 17% in the next financial year to reduce the fiscal deficit, officials said, a move that would hit demand in one of the world’s largest importers of the fertiliser.
Although global prices have been falling, a reduction in government support in India would make potash relatively expensive for the companies that import it.
Some officials at those companies said that were the proposal to be adopted, they would seek lower prices when negotiating annual contracts with global suppliers and also raise retail prices charged to farmers, dampening demand.
Global producers including Uralkali, Potash Corp of Saskatchewan, Agrium Inc, Mosaic, K+S, Arab Potash and Israel Chemicals have been hoping for robust demand to help counter weak prices.
Asian import prices have fallen around 10% in the last 12 months.
India’s fertiliser ministry has proposed fixing the potash subsidy at Rs 7,669 ($114.61) a tonne for the 2017-18 fiscal year beginning in April, down from Rs 9,280 per tonne this year, said a senior government official.
He did not wish to be identified because he was not authorised to talk to the media.
Prime Minister Narendra Modi’s cabinet has to decide on the proposal, said the official, who is directly involved in the decision-making process.
If India were to import 4 million tonnes of potash in 2017-18, the savings from the proposed subsidy cut would equate to almost $100 million.
Two other industry officials confirmed the plan.
A spokesperson for the Ministry of Chemicals and Fertilisers declined to comment on the proposed changes.
Not so rosy outlook
India relies on imports to meet its annual potash demand of about 4 million tonnes, but higher prices are expected to limit how much its 263 million farmers use.
India buys potash from global miners in annual contracts that the south Asian country usually signs before the start of the fiscal year.
Contracts signed by India and China are considered benchmarks globally and are closely watched by other potash buyers such as Malaysia and Indonesia.
“The subsidy reduction will weigh on the new contract negotiations. We cannot offer higher prices in new contracts due to the proposed subsidy reduction,” said an official who takes part in the negotiation process with overseas miners.
The potential subsidy cut seems counter to recent government decisions aimed at an imbalance in subsidies for potash compared with nitrogen, Potash Corp spokesperson Denita Stann said.
The impact of a possible subsidy cut will not be known until India sets the maximum retail price for fertilisers and other details are known, said Agrium spokesman Richard Downey, adding that its subsidy system was complicated.
Some industry officials in India say the demand outlook is not so rosy and doubted imports of the crop nutrient would exceed 4 million tonnes if the subsidy cut went through.
Last year suppliers had to sell potash to India at $227 per tonne, down from $332 previously and the lowest in a decade, after India delayed purchases due to sluggish demand.
That allowed importing companies to reduce retail prices, but that could be reversed in 2017-18.
“If the subsidy goes down, then we have no choice but to raise retail prices,” said an official with a state-run fertiliser company. The official declined to be named.
In his budget for the 2017-18 fiscal year, Finance Minister Arun Jaitley, in fact, kept the overall fertiliser subsidy unchanged at Rs 700 billion.
But fertiliser importers said that almost half of the amount would be spent on settling arrears accumulated from 2016-17, necessitating savings.
Source : Economic Times

31 – 16-02-2017


ISSUANCE OF RUPEE DENOMINATED BONDS OVERSEAS – MULTILATERAL AND REGIONAL FINANCIAL INSTITUTIONS AS INVESTORS

A.P. (DIR SERIES 2016-17) CIRCULAR NO.31, DATED 16-2-2017

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to paragraph No. 4 of A. P. (DIR Series) Circular No. 60 dated April 13, 2016 and paragraph No. 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 about the criteria of recognized investors in the Rupee denominated bonds issued overseas.

2. In order to provide more choices of investors to Indian entities issuing Rupee denominated bonds abroad, it has been decided to also permit Multilateral and Regional Financial Institutions where India is a member country, to invest in these Rupee denominated bonds.

3. All other provisions of the aforesaid circular dated April 13, 2016 and applicable provisions of A. P. (DIR Series) Circular No. 29 dated September 29, 2015 remain unchanged. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers.

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

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

6. The directions contained in this circular have been issued under sections 10(4) and 11(2) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

INSTRUCTION [F.NO.206/01/2017-CX.6] – 16-02-2017


EXCISE – COST OF PRODUCTION OF CAPTIVELY CONSUMED GOODS – PERIODICITY OF CAS-4 CERTIFICATES

INSTRUCTION [F.NO.206/01/2017-CX.6], DATED 16-2-2017

Kind attention is invited to Board’s Circular No. 692/08/2003-CX dated 13th February, 2003 by which it was clarified that cost of production of captively consumed goods shall be done strictly in accordance with CAS-4.

2. Instances have been highlighted during C &AG audit that some assessees are not preparing CAS-4 certificates even after substantial time lapse from ending of financial year and filing of Tax Audit reports and therefore these assessees could not calculate the differential duty.

3. In this regard, it is directed that assessees should be requested that CAS-4 certificate of the financial year ending on 31st March shall be issued by 31st December of the next financial year. For example, for the Financial Year 2016-17, CAS-4 certificate should be issued by 31.12.2017. The assessing officer shall thereafter finalize the provisional assessment expeditiously. Jurisdictional Commissioners shall suitably issue the trade facility in this regard.

4. Difficulty, if any, in the implementation of this instruction may be brought to the notice of the Board.

No. 204/02/2017 Dated: 16-02-2017


Circular No.204/2/2017-Service Tax

F.No.354/42/2016-TRU

Government of India Ministry of Finance

Department of Revenue

(Tax Research Unit)

*****

                                                                                                                                                                                                                          Dated- 16th February, 2017

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)

Sub:- Applicability of service tax on the services by way of transportation of goods by a vessel from a                      place outside India to the customs station in India w.r.t. goods intended for transhipment to any country outside India – reg.

Madam/Sir,

Representations seeking clarification on levy of service tax on the services by way of transportation of goods by a vessel from a place outside India to the customs station in India with respect to goods intended for transshipment to any country outside India.

2. In this regard, it is mentioned that the goods landing at Indian ports which are destined for any other country are allowed to be transshipped through Indian territory without payment of Customs duty in India. This is subject to the condition that such goods imported into a customs station are mentioned in the import manifest or the import report, as the case may be, as for transhipment to any place outside India. [Section 54(2) of the Customs Act, 1962]. Further, Goods Imported (Conditions of Transhipment) Regulations, 1995 have been prescribed for the procedure to be followed for transhipment of such goods.

3. It is pertinent to mention that as per the charging Section 66B of the Finance Act, 1994, service tax is leviable on services provided or agreed to be provided in the taxable territory. Whether a service is provided or agreed to be provided in the taxable territory or not, is determined as per Section 66C of the Finance Act, 1994 and the Place of Provision of Services Rules, 2012 made thereunder. In terms of the applicable rule 10 of the Place of Provision of Services Rules, 2012, the place of provision of services of transportation of goods by air/sea, other than by mail or courier, is the destination of the goods.

4. Thus, with respect to goods imported into a customs station in India intended for transhipment to any country outside India, the destination of goods is not a place in taxable territory in India but a country other than India if the same is mentioned in the import manifest or the import report as the case may be and the goods are transhipped in accordance with the provisions of the Customs Act, 1962 and rules made there under. Hence, with respect to such goods, services by way of transportation of goods by a vessel from a place outside India to the customs station in India are not taxable in India as the destination of such goods is a country other than India.

5. All concerned are requested to acknowledge the receipt of this circular.

6. Trade Notice/Public Notice to be issued. Difficulty if any, in the implementation of the circular should be brought to the notice of the Board. Hindi version would follow.

Yours faithfully,

(Dr. Abhishek Chandra Gupta)

 Technical

Trump effect: IT industry expects to log lower growth : 16-02-2017


The information technology (IT) industry lobby body Nasscom said the sector will grow at the lower end of its revised target in fiscal 2017 but deferred guidance for the next financial year by a quarter as it faces headwinds.

Amid continuous technology disruptions, political upheavals and slowdown in IT-BPM (Business Process Management) global spending, the Indian IT-BPM industry is projected to grow 8.6% (in constant currency) to cross $155 billion in FY2017, according to a statement from Nasscom. Nasscom had earlier revised downward its fiscal 2017 revenue growth target to 8%-10% from an initial 10%-12% as the headwinds started emerging.

In an unprecedented move, Nasscom president R.Chandrasekhar said the association will come out with its guidance for the IT and the BPM sector in the next quarter, most probably in May, once it is done with “deeper interactions” with customers and other stakeholders.

Mr. Chandrasekhar accepted that there were headwinds on factors such as change in policies in the U.S., the industry’s largest market, under a ‘protectionist’ Donald Trump regime but was optimistic on analysts’ estimate that growth in global IT spending would double to 5% from 2.6% this fiscal.

While the world and especially Indian IT industry tries to adjust to Mr. Trump’s policies, Reliance Industries chairman Mukesh Ambani opined that the protectionist policies were ‘blessings in disguise’ for India.

Mr. Trump’s ‘protectionist’ moves would get India’s IT industry to focus on solving local problems, Mr. Ambani told participants at the Nasscom Summit.

Stressing the significance of data Mr. Ambani said, “Data is the new oil and Indians should not have scarcity of it in terms of quality, quantity or affordability.”

Addressing the summit, TCS CEO and Tata Sons chairman-designate N. Chandrasekaran asserted there was no turbulence in the Indian IT industry and there was only ‘opportunity’.

‘IT, most important’

“Every time there is a regulation change, everybody thinks that IT industry is in doldrums, I want to categorically say it’s the most important industry to be in. Fundamentally, every business will be powered by technology. The biggest difference digital has made is that it has driven technology to such a level that every business is embedded in technology,” said Mr. Chandrasekaran.

“We have been fortunate that opportunity is everywhere as every country and every industry needs technology. Many industries are not fully addressed, so are many markets, so we have great opportunity,” he added.

Source : Financial Express

India slips to 143 in economic freedom index: US thinktank : 16-02-2017


India ranked a dismal 143 in an annual index of economic freedom by a top American thinktank, behind its several South Asian neighbours including Pakistan, as progress on market-oriented reforms has been “uneven”. The Heritage Foundation in its Index of Economic Freedom report said despite India sustaining an average annual growth of about 7 per cent over the past five years, growth is not deeply rooted in policies that preserve economic freedom. Putting India in the category of “mostly unfree” economies, the conservative political thinktank said progress on market-oriented reforms has been “uneven”.

It said the state “maintains an extensive presence” in many areas through public-sector enterprises. “A restrictive and burdensome regulatory environment discourages the entrepreneurship that could provide broader private-sector growth.”

Also, India’s overall score of 52.6 points is 3.6 points less than that of last year, when India ranked 123rd.

Hong Kong, Singapore and New Zealand topped the index. Among South Asian countries, only Afghanistan (163) and Maldives (157) were ranked below India. Nepal (125), Sri Lanka (112), Pakistan (141), Bhutan (107), and Bangladesh (128) surpassed India in economic freedom.

The thinktank, however, credited Prime Minister Narendra Modi with “reinvigorating” India’s foreign policy. It said Modi, who in June 2016 made his fourth visit to the US in two years, has bolstered bilateral ties, particularly in defence cooperation.

“India has technology and manufacturing sectors as advanced as any in the world as well as traditional sectors characteristic of a lesser developed economy. Extreme wealth and poverty coexist as the nation both modernises rapidly and struggles to find paths to inclusive development for its large and diverse population,” it said.

India is a significant force in world trade, the report noted, but corruption, underdeveloped infrastructure, and poor management of public finance undermine overall development.

China with a score of 57.4 points – an increase of 5.4 points compared to previous year – was placed at 111 position. The United States was ranked 17 with 75.1 points. The world average score of 60.9 is the highest recorded in the 23-year history of the index.

Forty-nine countries – the majority of which are developing countries, but also including countries such as Norway and Sweden – achieved their highest-ever index scores.

Source : PTI

CBDT proposal to tap Aadhar database needs Cabinet OK : 16-02-2017


The proposal by Central Board of Direct Taxes (CBDT) to use Aadhar database to verify PAN card recipients will need cabinet approval as it involves multiple agencies of the central government, said a spokesperson for the body.

“Currently it takes up to three weeks to verify the applicant. If the Aadhaar database has all the latest details of a person including address, finger prints, that can be used for verification of the PAN applicant and reduce the time taken,” Meenakshi Goswami, CBDT spokesperson, said.

Goswami said the proposal has not yet been finalised.

The idea is that it will drastically reduce the time taken to verify from a few weeks to five-six days. KYC is know your customer.

Source : Eonomic Times

Union Budget 2017 – merger of oil cos: Does India really need a giant oil PSU? : 15-02-2017


The idea of merging state-owned oil companies germinated during the AB Vajpayee years and surfaced during Mani Shankar Iyer’s tenure as the UPA petroleum minister. An advisory committee on Synergy in Energy, chaired by V Krishnamurthy in 2005, strongly recommended against such a merger. After the NDA came to power in 2014, petroleum minister Dharmendra Pradhan floated the idea of a giant company in July 2016. Surprisingly, it did not feature on the national agenda as significantly as it has after the presentation of Budget 2017.

The finance minister wants a giant integrated oil company to compete with the likes of Exxon, BP, Shell, Chevron, Total, etc, “to bear higher risks, to avail of economy of scales, to take higher investment decisions and create more stakeholder value”. The petroleum minister wants instead multiple mega-oil companies. The accompanying table gives some idea of the size of India’s six large state-owned oil companies to challenge the feasibility of such a plan. Market capitalisation of all six is approximately equal to BP, half of Chevron and one-third of Exxon and twice that of Reliance.
The following analysis of India’s oil sector, based on eight criteria, shows that the demand for the merger policy is not well-founded.

Managing risk: Undoubtedly, to take higher risks, one needs a minimum amount of capital. All the six major Indian oil companies have more than this minimum amount of required capital. Let me give the example of a little-known Irish company, Tullow. There are several companies like Tullow in oil industry. With market capitalisation of just $2.6 billion, it has managed to have exploration acreages in 19 countries and succeeded in finding oil in Ghana, Uganda and Kenya in recent years. In each country, by forming consortia with small and large oil companies, Tullow managed to reduce the risk.

While exploring either in virgin or well-established territory, oil companies, even the largest ones, always try to reduce risk by taking partners to form a consortium. It is not necessary that India needs a giant oil company to bear higher risks. ONGC’s overseas subsidiary ONGC Videsh Ltd has been able to do this already by joining other oil companies and is active in 17 countries.

Success of discovering oil depends not on the size of a company. It is largely dependent on the company’s ability to attract world-class geologists and managers, and its access to the latest technology.

Economies of scale: As discussed above, in the case of upstream operations, there is no economy of scale to discover oil and gas, or to develop them. It is not the size which results in discovering oil reserves, but the technical ability to identify sweet spots, to drill in difficult environment and develop discovered reserves efficiently. Large and complex discoveries require large investment and the size of a company has no impact. However, there are economies of scale to be achieved in refinery investment. Tea-kettle and small refineries have higher per barrel cost while large refineries have a lower per barrel cost of operations and thus higher profits. However, after an optimum size, there may be some amount of negative returns. Thus, one has to optimise the size against complexity. The three downstream, state-owned companies—IOC, BPCL and HPCL—have already achieved such economies of scale. Thus, merging them will not result in any economy of scale.

Ability to invest in large projects: It is certainly true that unless a company is of the “minimum required” size in terms of asset, profit and market value, it cannot invest in projects requiring huge amount of capital. In the oil industry, even small projects, especially in the upstream sector, need millions of dollars, and mid-sized ones, billions. Offshore oil and gas projects require tens of billions of dollars. However, by forming consortia as oil companies around the world do often, large capital can be raised to support even projects requiring $10 billion or more. When a new oil discovery has attractive economics, banks are willing to lend huge amounts of money based on project finance. Also, equity money can be raised, just as companies like Tullow have done.

Some have attributed the failure of ONGC to buy into oil properties abroad—competing against Chinese or oil companies from other jurisdictions—to its “small” size. These failures are not because of it being small. They have more to do with bidding strategies, evaluation of attractiveness, and the practically unlimited capital available to Chinese companies.

At present, the largest oil project (requiring more than $50 billion) in the world is the development of Kashagan field in Kazakhstan. ONGC tried to buy Conoco’s share in Kashagan. But it failed not because of its size. The Chinese government succeeded in convincing the Kazakh government to partner with the Chinese National Petroleum Corporation. What is needed is not integration, but strategic thinking.

Creating shareholder value: In recent years, oil companies have realised that it is better to be small rather than big to create better shareholder value. Marathon Oil (2011), ConocoPhillips (2012) and Marathon (2013) have spilt up functions into two—upstream and downstream. Is this a herd mentality which we often see in the oil industry, or a sincere effort by the management to create better value for their shareholders? Time will tell. It is possible that in the future some of these companies may merge back again.
From 2012 to 2016, the average shareholder return of the two companies formed after the breakup of ConocoPhillips was 40% whereas, for the same period, it was 12% for Chevron and 18% for Exxon. This example refutes the argument merger is better for the shareholders. There are many studies which have showed that more often than not, in other industries as well, mergers have often failed to generate value for shareholders.

This is the first of a two-part series

Source : Financial Express

Employees ready to pay for insurance facilitated by employer : 15-02-2017


Employees are willing to pay for additional insurance if it is provided by their employers. This is because employer facilitated insurance offers better coverage, efficiency in cost and better claim recovery. This was the key theme of Marsh India’s 9th annual Employee Health and Benefits Survey.

According to the survey, 92 per cent of the employees were willing to share premium costs and buy voluntary plans offered to them by their employers. The survey was conducted among 500 corporates and over 2,000 employees. It included employees for the first time this year.

Of the total employees who were surveyed, 33 per cent were willing to spend 1-2 per cent and another 37 per cent were willing to spend 3-5 per cent of their annual salaries on voluntary insurance plans.

“The average sum insured for medical insurance provided to employees was Rs 3 lakh. It has now increased to Rs 3.5 lakh. Similarly, the average limit on room rent was Rs 3,000. It has now increased to Rs 4,000. But even these are inadequate because of greater utilisation,” said Sanjay Kedia, Country Head and CEO of Marsh India.

In case of parents coverage, 100 per cent employee funded coverage is on a decline, but partly funded parent coverage is increasing. The percentage of employers who provide 100 per cent sponsored parents’ coverage is now 35 per cent, as against 41 per cent last year, said the survey. But the percentage of companies that facilitate parents coverage has increased to 80 per cent from 76 per cent last year.

“Employees want to leverage the buying power of corporates. So, companies in turn are asking insurance companies for specific enhancements in coverage. For instance, features like coverage for women, medical advancements like robotic surgery, chronic conditions etc in medical insurance,” Kedia said.

Source : Business Standard

GST likely to halt economy: Avendus Capital Alternate chief executive Andrew Holland : 15-02-2017


Even as the economy is getting itself together post-noteban shock, the implementation of goods and services tax (GST) is also likely to cause serious disruptions, Avendus Capital Alternate chief executive Andrew Holland said today.

“Valuations are challenging. We are seeing early signs of pick-up from demonetisation but its not a V-shape pick-up and will not be a V-shaped recovery” Holland told reporters here.

In a V-shaped decline, the economy suffers a sharp but brief period of decline with a clearly defined trough, followed by a strong recovery.

“GST implementation has the real risk of again halting or having shock effects on the economy… these are the short-term challenges to the economy,” he added.

“Large companies may understand how to implement GST but we are not so sure about small and medium enterprises,” he added.

Further, he noted that while various financial experts have pegged earnings growth at 20 per cent for fiscal 2018, it is likely to be lower at 10 per cent considering the many downside risks.

GST will replace a jumble of levies to create one of the world’s biggest single market. A single tax will make it easier to do business in the Asia’s third largest economy as also help combat evasion, boost revenue for the government.

Source : Times of India

Aadhaar bill: Tentatively not convinced, says Supreme Court : 14-02-2017


Supreme Court today said it was “tentatively not convinced” with the grounds taken by Congress leader Jairam Ramesh to challenge Lok Sabha Speaker’s decision to certify a bill to amend Aadhaar law as a money bill. As the government asserted that it fulfilled the criteria as the expenditure for the welfare schemes has to be drawn from the Consolidated Fund of India, the apex court said the issue was “important and serious” and it did not want to take a call on it in haste.

It granted four weeks to Ramesh’s counsel and senior advocate P Chidambaram to prepare his case by taking into account all the objections raised by Attorney General Mukul Rohatgi, who also said that the decision of the Speaker cannot be brought under judicial scrutiny.

The remarks “tentatively, we are not convinced and you can convince us” came from a bench comprising Chief Justice J S Khehar and Justice N V Ramana, after the Attorney General countered Chidambaram’s submissions by stating that all criteria laid down under the Constitution have been incorporated in the bill to be designated a money bill.

Chidambaram, the former Finance Minister, was trying to convince the bench that the bill was certified as a money bill to avoid its scrutiny before the Rajya Sabha which does not have any say on a money bill.

“More and more bills are certified as money bills to bypass the Rajya Sabha,” Chidambaram told the bench which asked, “what ex-facie can you show us in it (Aadhaar bill) that does not fall in the criteria for money bill”.

However, after Rohatgi said the bill fulfilled all the constitutional requirements including that all the expenditure incurred on subsidies for welfare scheme would be withdrawan from the consolidated fund, the bench told the Congress leader that before this submission by the Attorney General, it was in agreement with the points raised by them.

“We were quite agreeable but now certain points have been raised by the Attorney General,” the bench said.

Rohatgi submitted that the Speaker of the House was a high constitutional post and decisions are taken with responsibility.

 However, the bench said, “So be it. But does it mean it cannot be examined. We are also holding constitutional posts. We also pass judgements and the constitution bench overturns them”.

“This is a serious issue. Your (Centre) intention may be good,” the bench observed.

Attorney General submitted that the amendment was a money bill and the argument that since the parent bill was not a money bill, so the amendment bill cannot be a money bill, was rejected by the court.

During the hearing, the bench wanted to know whether the Rajya Sabha at the time of amendment said it was a money bill.

Pressing for the scrutiny of the Speaker’s decision to certify the Aadhaar bill as money bill, Chidambaram said it is important to see what can be certified as money bill.

He tried to make distinction between a money bill and a financial bill saying all financial bills are not money bills.

However, the Attorney General focussed his arguments only on the bill for Aadhaar and said Ramesh has no locus standi to file such petition as there was no violation of any of his fundamental rights.

He said that Speaker has all the privilege to take action in the House which is supreme and there is no question of courts examining the decisions taken there.

“You have to give flesh and blood. It’s a withdrawal of money from the consolidated funds,” the AG said while stressing that the bill was rightly certified as a money bill by the Speaker and referred to the Preamble of the Aadhaar Act that the expenditure on subsidies have to be incurred from the consolidated fund.

“This is the main feature. Money is withdrawn from the consolidated fund,” he said while pointing to the relevant provision of the law.

The Aadhaar (Targeted Delivery of Financial & Other Subsidies, Benefits & Services) Bill, 2016 was discussed and passed in the Lok Sabha on March 11 last year. It was then taken up in Rajya Sabha on March 16, where several amendments were made to it. The bill was then returned the same evening to Lok Sabha which rejected all amendments proposed by the Upper House and passed it.

Source : Financial Express

Notification No.10/2017 14-02-2017


Incometax Notification pdfFile

Sebi initiates process to integrate commodity spot and derivatives markets : 14-02-2017


After meeting Finance Minister Arun Jaitley on Saturday, the board of Sebi, regulator for the financial markets, including commodities, has decided to take forward the issue of integration of the commodity spot markets and the derivatives markets.

Jaitley had proposed this in the Union Budget on February 1. The move is significant as even for the futures market, a transparent price for the relevant commodity traded in the spot market is required.

Some to whom Business Standard spoke said there were several challenges for integrating spot and derivatives. The latter are standard contracts, with specified allowances in grades. In the spot market, several varieties, qualities and grades of the same commodities are traded in the same market and they differ regionwise.

Also, there are now several forms of spot markets. One is the traditional Agriculture Produce Marketing Committees (APMCs), national electronic agri spot market platform (‘e-NAM’) — where at present hardly any trading is happening — and the state-level e-spot markets, known as the Karnataka model.

The minister had said in his Budget speech, “the commodities markets require further reforms for the benefits of farmers. An experts committee will be constituted to study and promote creation of an operational and legal framework to integrate the spot market and derivatives market for commodities trading. e-NAM would be an integral part of such a framework”.

With Sebi stepping into this, an expert says, “The regulator can use its experience in also regulating commodity futures for the spot markets.” In APMCs or wholesale markets where a large part of trading happens on a spot basis, “there is a lack of transparency and the traders’ lobby is stronger than farmers”. Which is why farmers get much less than what consumers pay for the same commodity, explained an official.

Separately, the finance ministry is considering a committee to discuss integration as proposed in the Budget. Vijay Sardana, an expert on commodity markets, said: “The committee should have experts who understand derivatives, the functioning of APMCs and the electronic market, apart from crop-specific issues.” The issue needs much more deliberation, as market price discovery is inefficient in spot markets — there is no national reference price. Another person, involved in electronic spot market trading, said: “As originally proposed, state-level electronic platforms should be allowed to be integrated with the national platform, e-NAM, as agriculture is a state subject and states should have the flexibility to select their platforms.”

Apart from integrating spot and derivatives, the minister asked the Sebi board on Saturday to look at “further integrating the commodities and securities derivative markets by integrating the participants, brokers, and operational framework”. This means allowing equity and currency trading exchanges, as well as commodities trading exchanges, to penetrate in each other’s areas.

The Sebi board has also discussed as part of its 2017-18 agenda the linkages among various markets — equity, forex, commodity, etc. And on allowing, in consultation with stakeholders and regulators, institutional participation in commodity derivatives markets. Another item on the agenda, apart from investing more in commodity research, is designing a system of risk-based supervision for commodity brokers.

Integrating of commodities and equity markets means allowing equity trading stock exchanges to penetrate into commodities, and for commodity exchanges to trade in equities and currencies. This will be a big reform as and when permitted but “may not be in the immediate phase”, said an official.

Source : Business Standard

Government focus on clean economy, bold decisions: Arun Jaitley : 14-02-2017


The Modi government’s emphasis is on bold decision making and a clean economy with business friendly environment, the returns of which can be spent on the poor, Finance Minister Arun Jaitley said today.

He also said the fundamental problem during the UPA rule was that its Prime Minister (Manmohan Singh) was not a natural leader of the ruling party or the government that committed mistakes in its approach to policy as well as in intention.

“But now we have someone who is willing to take courageous decisions in the form of Narendra Modi,” he added.

“Our overall emphasis has been on faster decision, bolder decisions, cleaner economy, freedom from black money, freedom from corruption and a friendly environment for doing business, so that the larger returns that come to the economy in terms of taxes can be spent on the poor of this country,” Jaitley said, adding that it is the Prime Minister’s approach which has been followed in the recently presented budget.

He was speaking at ‘Budget 2017 – An Analysis’, organised by Bengaluru City BJP and attended by Union Ministers Ananth Kumar and Sadananda Gowda and State party President B S Yeddyurappa, among others.

Stating that changes were visible in the last two-and- half years after the Modi government came to power, compared to the last 10 years, Jaitley said the first change is that the Prime Minister must also be the natural leader of the country or be the natural leader of the ruling party of the government.

The UPA Prime Minister, he further said, did not have the last word as far as the government was concerned.

This model can be prevalent in a company where a hired CEO is brought in by shareholders to run it and he reports to the board, but not applicable to the world’s largest democracy. “Democracies don’t work like this. Countries need an inspirational leadership which leads from the front.”

The UPA government committed two fundamental mistakes in its approach — one in terms of policy and the second in terms of its intention, Jaitley said.

He said every politician wants the vestige of arbitrary and absolute power, but good governance does not permit that.

“They were quite satisfied with the system in which contracts and natural resources were to be arbitrarily distributed. Whether it was coal mine or spectrum, the arbitrary power of the government or the discretionary power of the government is what they relished,” he said.

Stating that this discretionary power can create a lot of complications and that is why corruption charges came up, some of which were proved, people were jailed and led to a scare in taking decisions, he said that “there was a problem of intention.”

Jaitley said the UPA government’s second mistake was that instead of concentrating on improving productivity and growth, they went back to resource reallocation and re-distribution.

The combined effect of both these was that certain amount of paralysis set into the government. The world was thus referring to it as a policy paralysis, he said.

He said the Modi government’s first objective was not to have such power. It was decided that things will be determined by a mechanism which is fair and not discretionary, where markets decide the rate and who gets what he gets is decided through auction.

“We distanced our government from arbitrary exercise in almost all areas of distribution of resources like minerals, coal mining and spectrum,” Jaitley said.

“The first effect of it was nobody could raise fingers and therefore we started cleansing the whole system where the last government was paralysed from functioning and this helped in taking economic decisions and courageous decisions one after the other,” he added.

On steps taken towards Ease of Doing Business in India, Jaitley said every move of the government has been to have a convenient environment for business activity.

“We have a decisive government, Prime Minister who is willing to take courageous decisions, red tapism has been eliminated…there is no charge of scandal against this government, all that is coming out is of previous government.”

Jaitley also spoke of the impetus given to the rural economy and rural infrastructure by the government in the budget

He said that as far the rural and agriculture sector was concerned, this year alone from the central government “we are spending Rs 1,83,000 crore, so that we can have a quality of life in rural India”.

“The entire developmental budget of UPA in its last year was less than Rs 4,00,000 crore. This year I have allocated Rs 3,96,000 crore only for infrastructure, of this Rs 2,41,000 crore is on transportation,” he added.

Listing out government’s developmental steps, he said demonetisation has been a “big blow” to black money and corruption.

Advocating a less cash society, he said “cash is the facilitator of crime. Quantum of bribery and other things will come down”.

Jaitley said electoral reform was possible only because the Prime Minister has been stressing on cleaning up political funding of the world’s largest democracy, where funding was only through black money.

The Finance Minister also spoke of the steps taken towards a tax compliant society in the budget.

Source : Economic Times

Remember disastrous merger before this oil slick : 13-02-2017


Finance minister Arun Jaitley indicated, in his budget speech, that the government is considering bundling of all oil public sector enterprises (PSEs) into one giant unit: “We propose to create an integrated public sector ‘oil major’ which will be able to match the performance of international and domestic private sector oil and gas companies.“ This is a terrible idea.

Jaitley has not clarified as to whether the intention is to bundle all PSEs into one company or into a number of companies. When such a proposal was mooted in 2005, the then minister of petroleum and natural gas, Mani Shankar Aiyar, wanted one giant corporation under his chairmanship like Aramco of Saudi Arabia or Russia’s Gazprom.

Fortunately , an expert panel did not recommend this and this did not happen. Such a corporation would be too tempting for politicians not to interfere and capture through appointments that are not strictly based on merit.

There are a number of issues that need to be carefully considered before the government takes this step. Unbundling has been carried out in the power sector and generation, transmission and distribution were separated to ensure that overall, the sector works efficiently . The same arguments for efficiency are relevant for the oil sector.

In the oil industry there are four main activities. Exploration and production of crude oil; refining the crude oil into products such as petrol, diesel, kerosene, lubricating oils, etc; transport of these products and distribution of these products to consumers through retail outlets.

When these activities are combined into one unit, inefficiency in one activity can be hidden by efficiency of another.This reduces the incentive to be efficient for the loss making company and reduces resources for growth and investment for the profit making company .

One giant oil corporation will increase the bargaining power of the company in purchasing crude in the international market. But the bureaucratic and political oversight that is inherent in public sector procurement may more than negate such gains.

The larger financial clout of the company may provide some advantage in upstream acquisition or bidding for oil or gas blocks overseas. However, these benefits can be captured by other measures such as bidding jointly with financial institutions who can do independent risk assessment, and provision of risk capital support by the government.

Dharmendra Pradhan, minister of petroleum and natural gas, is reported to have said that they are not thinking of one giant corporation but two or three vertically integrated firms. This would preserve some competition, but the risks of hiding inefficiency of one with the other will be there.

If all the downstream companies are to be bundled together such as IOC, HPCL, BPCL, MRPL and CPCL, they could gain some advantage of using certain infrastructure such as import or transport facilities. However, efficient use of such facilities can be obtained by putting such infrastructure in a separate company , in the spirit of separation of wire and content in the power sector.

A merger of downstream companies can make it possible to procure crude from international markets at lower price. However this can be realised by a mechanism to jointly import crude oil.

While private companies often grow through mergers and acquisitions it is difficult for PSEs to do so, particularly in India. The cultural differences between two units can be a huge obstacle to capturing the gains of synergy .

The example of Indian Airlines and Air India merger should open our eyes to this fact. The two airlines merged officially on February 27, 2011. Five years later, as reported in The Economic Times on July 1, 2016, the chairman of Air India observed that the biggest reason for the downfall of this airline was the merger between erstwhile Air India and Indian Airlines, which was done despite the fact that the carriers are total opposites of each other.

There were many differences between the two companies in terms of work culture, areas of operation, compensation, working conditions, entitlements, etc.The merger resulted in massive discontent and frustration amongst the staff.

Very recently , six years after the merger, Air India chairman Ashwani Lohani has indicated that merger related issues still haunt Air India. When two PSEs merge the employees demand and inevitably get the better of the two emoluments and benefits that are the better of the two, very likely with responsibilities that are the lesser of the two.

Also many employees will feel that they did not get a fair deal and jealousies will eat away their motivation to put their best into the job. That is why the merger has turned the profit making Air India into a sick unit.

I will urge the government to unbundle the oil PSEs more, while finding alternate means of reaping the envisaged gains of bundling.

The writer is Chairman, Integrated Research and Action for Development (IRADe) .

Source : Financial Express

Universal Basic Income will be set in motion over next 1 year, hopes Arun Jaitley : 13-02-2017


Finance Minister Arun Jaitley today hoped that the Universal Basic Income (UBI) scheme mooted by the Economic Survey will be implemented over the next one year in some parts of the country at least on experimental basis. The Economic Survey, authored by Chief Economic Advisor Arvind Subramanian, had suggested that the Centre may come out with UBI scheme under which the government should provide a minimum cash to poor people to meet their basic needs. Speaking at a function to release the book ‘India 2047 Voices of the Young’, Jaitley said under the proposed system UBI could be given to people and subsidies can be done away with.

“His (Subramanian) Economic Survey has been unconventional, very different from the past. This year, he wants to do away with the current system of subsidies altogether and substitute it with the UBI.

Let’s hope, by the time he publishes his next Survey, at least in some part of the country, his idea of the UBI gets experimented and therefore we start thinking on steps which overnight, at least where it is experimented, can bring poverty rates down. I think that will help us in reaching the destination 30 years from now,” Jaitley said.

In his first Economic Survey last year, Subramanian had flagged the issue of subsidies meant for poor benefiting the rich, an idea which Jaitley said had generated a “good debate”.

The Minister further said that with the current pace of reforms it would be possible to significantly reduce poverty, create world class infrastructure and achieve high level of global competitiveness.

He, however, expressed concerns over issues like rising insurgency and social and caste divide which has increased since 1970s.

“In terms of growth, economic development, our place in the world — we can look at far more positive 30 years down. But the jury would still be out whether we would be able to get rid of these baggage (insurgency, social, caste divide). Because in last 30 years this is one area in which we have actually slided down on the index,” Jaitley added.

Source : Business Standard

Chidambaram asks Jaitley to cut indirect taxes immediately : 13-02-2017


Former finance minister P Chidambaram, who feels the Union Budget for 2017-18 is “aimless and directionless”, says the government should immediately cut indirect taxes across the board to revive the sagging economy.

Demonetisation, he said, damaged India’s GDP growth in 2016-17 and fears that its shadow will fall on 2017-18 and some parts of 2018-19.

He also said lack of creation of jobs for the youth is a powder keg and a small spark can lead to a large explosion. Resentment may not be visible but it can be a “silent killer”.

“What is the overarching goal of this budget? It is aimless and directionless,” said Chidambaram, who has presented nine Union Budgets in a span of nearly two decades.

“Sometimes, you chase growth. Sometimes, you chase financial and monetary stability. Sometimes, the goal is boosting growth in a slowing economy,” he told PTI in an interview.

Chidambaram said Finance Minister Arun Jaitley missed an opportunity at reviving the economy hit by demonetisation.

“That (cutting indirect taxes) is a tried and tested and proven method of boosting economy. He could have easily cut between 4-8 per cent (tax) across the board.

“It is only up to GST time and when GST comes, GST will take over. He had a window of about 8 months to cut indirect taxes. It would come into force from 1st of February and I don’t think GST is going to come before October 1. So, he had eight full months to give a boost to economy by cutting indirect taxes,” he said.

Asked if the finance minister should still cut indirect taxes now that the Budget has been presented, he said, “Yes, he should. Even now it is not too late.”

Chidambaram said slashing indirect taxes would push consumption and in turn perk up production.

“If you cut indirect taxes by 4-8 per cent, there is going to be a revenue loss, I am not denying that. But just imagine the signal that would have gone to both producers and consumers. And if consumption rises much above the level of the cut, some of the cut will be made up. The idea is to boost consumption which in turn will boost production,” he said.

Source : Economic Times

No decision yet on imposing tax on cash transactions: Economic Affairs Secretary Shaktikanta Das : 10-02-2017


The government has not taken any decision on levying a Banking Cash Transaction Tax (BCTT) on cash deals of Rs 50,000 and above as suggested by the high- powered Chief Ministers’ panel, Economic Affairs Secretary Shaktikanta Das said today. Besides, expressing hope that GDP growth would be upwards of 7 per cent next fiscal, he said that reduction in corporate tax cannot be done overnight but in phases because of fiscal constraint. “Some suggestions have come (on imposing tax on cash transactions)… The government has not taken any decision on the recommendation of Chief Ministers’ panel. The government will go through the report very carefully and take appropriate decision,” he said.

The Andhra Pradesh Chief Minister Chandrababu Naidu-headed committee on digitisation had in its report last month recommended a cap on cash in all types of big-ticket transactions and a levy on cash deals beyond Rs 50,000 as it sought to discourage the use of physical currency.

On tax rate, Das said: “Two years ago the Finance Minister had announced that the corporate taxes will be reduced…but the government also has certain fiscal constraints. It is difficult to reduce the tax rates overnight to 25 per cent because the fiscal cost will be very high and he government will not be able to do justice to various other sectors of the economy.”

It is dependent on the financial affordability of the government without compromising the spending requirements in various critical sectors like infrastructure, he said at an event organised here by industry body Assocham.

On the back of various policy measures undertaken by the government, the economy growth would be over 7 per cent next year, he said.

“So far as the next year is concerned I think the outlook is very positive despite some talk of some uncertainty which is seen in some parts of the world. We would expect the growth to be upwards of 7 per cent on the back of various policy measures that have been taken by the government,” he said.

Source : PTI

LETTER [F.NO.225/92/2017/ITA.II], DATED 10-2-2017


SECTION 143 OF THE INCOME-TAX ACT, 1961 – ASSESSMENT – GENERAL – FRAMING OF QUALITY ASSESSMENTS – REQUEST FOR SUBMISSION OF REPORT

LETTER [F.NO.225/92/2017/ITA.II]DATED 10-2-2017

As a mechanism to monitor quality of scrutiny assessment orders, it was laid down in para 4 of Instruction No. 4 of 2016 of CBDT dated 13-7-2016 that Pr. CCslT/CCIT(Central)/Pr. CCIT(lnternational-tax)/CCIT(Exemptions)/DsGIT(lnv.) would submit a report containing details of at least 25 quality assessment orders from their respective charge by 31st January, 2017. In this regard, I am directed to state that no such report has been received from any of the charge till now. In the past also, many of the quality assessments reported by the field, in fact, did not reflect any quality in true sense.

2. The strategy for framing quality assessments has been elaborated by the Board in detail in Annual Central Action Plan for last three years under the Heading-Strategies, Part 2.

3. The Board has now decided to monitor quality of assessments more closely. It shall now be required that Pr.CCslT/CCIT(Central)/Pr.CCIT(lnternational-tax)/CCIT(Exemptions)/ DsGIT(lnv.), shall furnish report of quality cases in their respective charge to Member (IT), CBDT by 6-3-2017. It is expected that at least ten quality cases from each Range will be reported. These would cover the assessments, where orders have been passed till 31-12-2016 and the report is to be submitted in the Annexed format. It is requested that the reports should be compiled in a CD/DVD and send to the Board in a safe package.

4. I am further directed to request that that a consolidated report for your entire region be submitted indicating the Pr. CIT/Range/Circle/Ward along with name of officers concerned relating to the cases. If any of the assessing authorities or their supervisory authorities fail to submit reports within the compliance timeframe, Pr. CCslT/CCIT(Central)/Pr. CCIT(lnternational-tax)/CCIT(Exemptions)/DsGIT(lnv.) shall furnish their report to Board based on available reports without waiting for belated reports. Details of charges which failed to submit reports in a timely manner should also be mentioned. In such cases, it shall be presumed that that these charges have no quality assessments to report and this inference may be reported in the APARs of concerned officers.

5. The above issues with the approval of Member (IT), CBDT.

GST: Understandable Arun Jaitley did not want to take chance by lowering income tax rates : 10-02-2017


Given the likelihood of a large compensation to states on account of GST, it is perhaps understandable that finance minister Arun Jaitley didn’t want to take a chance on increased compliance by lowering income tax rates beyond what he did for the lowest income bracket—that was done as a sop for the problems this group faced due to demonetisation. What is not understandable, though, is how many economists argue that there is no point lowering rates since there is dramatic evidence of increased compliance. Indeed, though we still have far too few people paying taxes, there can be little doubt the sharp increase in personal income tax collections is largely correlated with the fall in tax rates. To be sure, increased efforts by the taxman in computerisation and in keeping tabs on expenditure has increased compliance—if people are confident they will not get caught, even a 5% tax rate as opposed to 35% today will not have too many takers.

In 1990, the lowest tax rate was 20% and it was applied at an income of R22,000 or around 3.5 times the per capita income; the top rate was 50% and applied at an income of over R100,000 or 18 times the per capita income. By 1997, when P Chidambaram became the finance minister, the lowest rate was cut to 10% and levied on an income of R40,000 (3.3 times the per capita income) and the top rate was cut to 30% and applied to an income of R150,000 (12.2 times the per capita income). Though personal income tax collections fell after that—from 1.3% of the GDP in FY97 to 1.1% in FY98 and FY99—they recovered soon enough to rise to 1.5% of the GDP in FY2000 and are today at 2.3% of the GDP; the GDP collapse in FY98 is probably responsible for the slowdown in tax-to-GDP in that year.

If tax collections haven’t risen as much in recent years, apart from the slowdown since FY12, one reason could be that tax rates are too high—the bottom rate of 10% kicks in at R2,50,000 which is just 2.5 times per capita income and the top rate of 30% at R10 lakh which is just 10 times per capita income. Indeed, comparing the tax returns for assessment year 2014-15 with a theoretical income structure for the year, you get a compliance ratio of around 25% for R3.5-10 lakh income bracket, but that falls to around 10% for those in the R10-15 lakh tax bracket—that is, those earning around R10-15 lakh per year pay lesser taxes than they should, probably the result of the 30% tax bracket kicking in at R10 lakh itself.  Since the GST should start stabilising by next year, and there will be a significantly larger number of taxpayers—or incomes disclosed—because of demonetisation, the finance minister would do well to address the larger issue of tax reforms next year.

 

Source : Financial Express

 

Note ban lends a hand to consumer lending as consumer-durables & personal loans jump in Nov, Dec : 10-02-2017


Consumer lending was the surprise beneficiary of the November 8 currency swap as Indians borrowed more to spend on high-value items and travel, upending conventional financial wisdom that only basic needs and staples make up the typical shopping list during periods of economic stress.

Central bank data at the end of November showed that demand for white goods — such as refrigerators or automatic washing machines — drove credit expansion in India.

Consumer-durables loans at banks increased 18.2 per cent and personal loans 15.2 per cent in the month while total non-food credit rose 4.8 per cent.

“Demonetisation has played out differently for different segments,” said Rajiv Jain, MD at Bajaj FinanceBSE 0.37 %. “It was a highly volatile quarter. Originally, our expectation was it would be much worse. Our consumer balance sheet was up 47 per cent in the quarter.”

The Centre on November 8 decided to demonetise currencies of .Rs 500 and.Rs 1,000 denominations to help combat counterfeiting and root out the source of parallel economy. The government sought to replace about 85 per cent of the total currency circulation by value at one go.

Source : Economic Times

Notification No. SO 387(E) 09-02-2017


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – RGA INFRASTRUCTURE

NOTIFICATION NO. SO 387(E) [F.NO.F.1/30/2016-SEZ], DATED 9-2-2017

WHEREAS, M/s. RGA Infrastructure 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 S. No. 31/1, Chikkankannelli Village, Varthur Hobli, Bangalore East Taluk, Bangalore, 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 5th January, 2017;

NOW, THEREFORE, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the Special Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, hereby notifies the 1.59 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. Chikkakannelli Village 31/1 1.59
Total 1.59

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 9th February, 2017 as the date from which the above Special Economic Zone shall be deemed to be Inland Container Depot under section 7 of the Customs Act, 1962 (52 of 1962).

Notification No.9/2017 09-02-2017


[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]

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

Notification

New Delhi, the 9 th February, 2017

G.S.R.117(E)- In exercise of the powers conferred by section 139A and sub-section(1) of section 203A, 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 (2 nd Amendment) Rules, 2017. (2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Income-tax Rules, 1962, – (i) in rule 114, in sub-rule (1) for the proviso the following proviso shall be substituted, namely:-

“Provided that an applicant may apply for allotment of permanent account number through a common application form notified by the Central Government in the Official Gazette, and the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) shall specify the classes of persons, forms and formats along with procedure for safe and secure transmission of such forms and formats in relation to furnishing of permanent account number.”;

(ii) in rule 114A, in sub-rule (1) for the proviso the following proviso shall be substituted, namely:-

“Provided that an applicant may apply for allotment of a tax deduction and collection account number through a common application form notified by the Central Government in the Official Gazette, and the Principal Director General of Income-tax (Systems) or Director General of Income-tax(Systems) shall specify the classes of persons, applicable forms and formats along with procedure for safe and secure transmission of such forms and formats in relation to furnishing of tax deduction and collection account number.”.

[Notification No. 9/2017/F.No. 370142/40/2016-TPL]

Dr T. S. MAPWAL, Under Secy.

Note: The principal rules were published vide notification number S.O. 969 (E), dated the 26th March, 1962 and last amended by Income-tax (1 st Amendment) Rules, 2017 vide notification number G.S.R.No.14 (E), dated the 6 th January, 2017.

What the RBI is really saying about Indian economy : 09-02-2017


The Reserve Bank of India has not exactly covered itself in glory since Nov. 8, when Prime Minister Narendra Modi sprung the news on a startled nation that 86 percent of its currency would be worthless within a few hours. The central bank’s refusal to release up-to-date data about the demonetization, its constant stream of confusing and contradictory orders to banks and its apparently supine acquiescence in the government’s grand experiment prompted accusations it was abdicating its responsibility and independence.

With its decision Wednesday to hold the policy interest rate steady at 6.25 percent rather than lower it, as many in the government and Indian industry had hoped, the RBI has put some of those fears to rest. Its reasons for doing so, however, raise different concerns about the government’s policies — and its basic assumptions about the economy.

In declining to cut rates, the RBI went so far as to say its monetary policy stance was no longer accommodative; the era when India could expect several more rate cuts to be around the corner appears to have ended. The bank was optimistic about growth next financial year — which begins April 1 — and praised the government’s fiscal restraint in its recent budget. It even rosily announced that money rationing would end soon.

What the decision acknowledges, however, is that the fallout from demonetization isn’t as easy to predict as the government seems to think. Some of India’s recent and welcome moderation in inflation might well be the result of distress sales following the crash in consumer demand after Nov. 8. India’s headline inflation is driven by food prices, which form a big chunk of the bundle of goods from which the consumer price index is calculated. Conditions have been so bad that reports have come in from across the country of farmers dumping their produce because it barely seems worthwhile to take it to market.

At the same time, the RBI should have been even more wary of the government’s arithmetic. The numbers in the most recent federal budget appear healthy: The government claims to have done the impossible, staying fiscally responsible while pushing more public investment. But look a little deeper and that story doesn’t quite hold up.

For one, the government’s revenue estimates for the coming year are largely a feat of imagination, not projection. It’s not hard to see why: From July 1, a new, nationwide goods-and-services tax is supposed to go into force, replacing the existing tangle of indirect taxes. Yet the budget has been calculated as if the GST doesn’t exist. Government finances have been shown as depending on existing indirect taxes that will cease to exist a few months from now.

In other words, the much-ballyhooed fiscal deficit target the government has set for itself is based on numbers that have little basis in reality — assuming, that is, the government is still committed to the GST. It’s difficult to suppose then that its fiscal restraint leaves much space for the RBI to cut rates in future.

The bank left another critical question unspoken. Even if the RBI were to cut rates, how much would it help cure India’s sharp investment slowdown? Private investment has shrunk for several quarters. But that’s not because rates are too high. Rather, banks remain unwilling to lend, even after receiving a flood of new deposits since November. Bank credit to Indian companies has declined by 60 percent since 2011.

Banks aren’t lending partly because they aren’t confident about the quality of their existing loan books, and partly because they’re worried about their overall capital adequacy requirements. The government — state-owned banks comprise most of India’s banking system — has done little to fix either problem.

On the first, it continues to dither about how to approach the issue. Should there be a so-called bad bank that will take soured loans off bank balance sheets, and at what price? On the second, the government designated a paltry $1.5 billion in the budget for bank recapitalization. None of this suggests that the bank problem — and thus the pipeline for new investment — is going to be addressed any time soon.

So yes, it’s heartening that the RBI has managed to stand up and sound a note of caution about India’s economy. But the assumptions driving an optimistic view of the Indian economy are clearly flawed. Reviving growth is now very much up to the government. And, as the ill-conceived and poorly-implemented demonetization experiment revealed, the government doesn’t seem like it’s prioritizing growth and investment at the moment.

Source : Financial Express

Modi govt allows people to deposit unaccounted cash in parts under amnesty scheme : 09-02-2017


The government has allowed people declaring unaccounted cash under the new black money amnesty scheme PMGKY to deposit in parts the mandatory 25 per cent of the total in a 4-year fund by March 31

Offering one last chance to black money holders, the government has given them time until March end to come clean by paying 50 per cent tax on bank deposits of junk currencies made post demonetisation.

Under the Pradhan Mantri Garib Kalyan Yojana (PMGKY), declarants also have to park a quarter of the total sum in a non-interest bearing deposit scheme (PMGKDS) for four years.

“The Government has decided to allow declarants to make deposits on one or more occasions in the Pradhan Mantri Garib Kalyan Deposit Scheme (PMGKDS), 2016,” said a statement by the Finance Ministry.

As per the scheme, taxes will have to be paid first and then the scheme can be availed of on production of tax receipt, unlike the recent Income Disclosure Scheme and other such plans wherein disclosures were made first and taxes were recovered later.

The PMGKY scheme commenced on December 17 and will remain open for declarations up to March 31. The scheme is part of The Taxation Laws (Second Amendment) Act, 2016, which was approved by the Lok Sabha on November 29.

Also, as the disclosures will be kept confidential, the holder of unaccounted cash need not disclose it in Income Tax Returns forms.

After the shock November 8 demonetisation announcement, the government allowed the junked Rs 500 and Rs 1000 notes to be deposited in bank accounts.

For those depositing unaccounted cash, the government offered the tax evasion amnesty scheme wherein 50 per cent tax will be charged on declarations and quarter of the total sum be parked in a non-interest bearing deposit for four years.

Non declaration of undisclosed cash or deposit under the Scheme will render such undisclosed income liable to tax, surcharge and cess totalling to 77.25 per cent of such income if it is declared in the income tax returns.

In case the same is not shown in the return of income a further penalty of 10 per cent of tax shall also be levied followed by prosecution.

Source : PTI

Accounting curriculum needs to be aligned with Ind-AS, feel auditors : 09-02-2017


India needs to revise its accounting curriculum to align it with ever increasing companies adopting the new Indian Accounting Standards (Ind-AS) which is expected to significantly boost the demand for accounting practitioners in the country, feel industry leaders.

Several companies having net worth over Rs 500 crore like Tata Consultancy ServicesBSE 1.08 % (TCS), Coromandel InternationalBSE -0.18 % etc. have already started reporting their financials in the Ind-AS format while many others with turnover above Rs 250 crores will be implementing it since April 1, 2017.

According to Ganesh Balakrishnan, partner, Deloitte, “There is expected to be a significant jump in the demand for accounting practitioners in the next three to four years with the implementation of Ind-AS which requires higher level of accounting standard domain expertise.”

“In order to meet the growing demand, we need to start aligning our accounting curriculum with the new accounting standards,” said T. Murlidharan, chairman of TMI Group, adding that “currently at the B.Com, M.Com level, we haven’t aligned our curriculum with Ind-AS while at chattered accountants (CA) level, we have started the transition.”

The TMI group’s subsidiary, C&K Management on Tuesday unveiled an e-learning course for students and practitioners in partnership with ICWAI- Management Accounting Research Standards, a body promoted by the Institute of Cost Accountants of India (ICWAI).

Source : Economic Times

Notification No. SO 403(E) 08-02-2017


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – LARSEN AND TOUBRO LIMITED

NOTIFICATION NO. SO 403(E) [F.NO.F.1/183/2007-SEZ], DATED 8-2-2017

Whereas, M/s. Larsen and Toubro Limited, had proposed under section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act) to set up a sector specific Special Economic Zone for Information Technology and Information Technology Enabled Services Sector at Village Ankhol and Bapod, Taluka Vadodara, District-Vadodara 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 10 hectares and 2.1974 ha at above Special Economic Zone vide Ministry of Commerce and Industry Notifications Numbers S.O. 2686 (E) dated 18th November, 2008 and S.O. 1753 (E) dated 9th May, 2016;

And, whereas, M/s. Larsen and Toubro Limited has now proposed for de-notification of 07.0867 hectares at the above Special Economic Zone;

And, whereas, the State Government of Gujarat has given its approval to the proposal vide their letter No. IC/Infra/SEZ-Cell/1234146 dated 24th September, 2016 and letter No. IC/Infra/SEZ-Cell/1190015 dated 24th May, 2016;

And, whereas, the Development Commissioner, Kandla Special Economic Zone has recommended the proposal for de-notification of an area of 07.0867 hectares of the Special Economic Zone;

Now, whereas, the Central Government is satisfied that the requirements under sub-section (8) of section 3 of the said Act and other related requirements are fulfilled;

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 de-notifies an area of 07.0867 hectares, thereby making resultant area as 05.1107 hectares, comprising the survey numbers and the area given below in the table, namely:—

TABLE

S.No. Name of village. Survey No. Area to be de-notified (in Hectares)
1. Ankhol 225 2.3176
2. 228 0.1922
3. 230 0.5160
4. 232/A 0.1214
5. 226 0.2529
6. 227 0.3845
7. 231 0.0405
8. Bapod 513/P 0.0050
9. 514 0.3732
10. 515 1.2647
11. 518 0.5969
12. 519 0.8903
13. 517 0.1315
Total 7.0867 hectares
Total Remaining Area of SEZ after above deletion 05.1107 hectares

Ministries, regulators sufficient to decide FDI proposals’ fate: Sitharaman : 08-02-2017


With the government sounding the death knell for the Foreign Investment Promotion Board (FIPB), foreign investment proposals may now be directly considered by various line ministries and regulatory bodies.

An inter-ministerial body under the Finance Ministry, the FIPB processes proposals for Foreign Direct Investments (FDI) entering the country.

Speaking to reporters, Commerce and Industry Minister Nirmala Sitharaman on Monday said that of the only 6-7 per cent of sectors not covered under automatic route, every department already has a departmental framework or a regulator for it.

While the FIPB had the final say in approving FDI proposals in the country for long, its power has been systematically reduced under the current government. Most notably, back in June 2016, the government had announced relaxed FDI norms in a large number of sectors including single brand retail, pharmaceuticals, animal husbandry and food products.

Even though more than 90 per cent of all sectors are currently allowed under the automatic route, full or partial investments in sectors considered sensitive by the government like defence, media and broadcasting, aviation and telecom continues to need the FIPB approval.

Currently, the Finance Minister considers the recommendations of FIPB on proposals with total foreign equity inflow of and below Rs 5,000 crore. The recommendations of FIPB on proposals with total foreign equity inflow of more than Rs 5,000 crore is placed for consideration of Cabinet Committee on Economic Affairs (CCEA).

The CCEA will continue to decide on important matters, a senior government official said under conditions of anonymity.

Incoming FDI grew 27 per cent in the first seven months of the financial year 2016-17 to $27.82 billion from $21.87 billion a year ago. Manufacturing accounted for 41.5 per cent of the total equity inflows into the country during April-October 2016, according to the Department of Industrial Policy and Promotion’s (DIPP) year-end review.

The figures for net FDI inflow as a proportion to GDP have risen sharply after the current government took office, but it is still 1.7 per cent, compared to 2.8 per cent of China or 4.9 per cent in the case of Vietnam – the highest among major developing countries.

H1B visa issue

On the contentious issue of H1-B visas, used by IT professionals heading to the United States becoming expensive, Sitharaman said the government will hold stakeholder consultations with the industry.

After the current Parliament session ends, the government will talk to major IT industry players as well as Nasscom.

The High-Skilled Integrity and Fairness Act of 2017, introduced in the United States lower house of Parliament calls for doubling the minimum salary that an H1-B visa applicant should have for qualifying to $130,000 from the current minimum wage of $60,000.

Industry body Nasscom has announced its plans to take a delegation of senior executives to Washington DC later this month to reach out to the new US administration. According to its estimates, the proposed overhaul of the H-1B visa regime may result in higher operational costs and shortage of skilled workers for the $110 billion Indian outsourcing industry.

Source : PTI

Brexit bill set to clear major parliamentary hurdle : 08-02-2017


MPs look set to approve a bill on Wednesday empowering Prime Minister Theresa May to start Brexit negotiations, in a major step towards Britain leaving the European Union.

Seven months after the historic referendum vote to leave the 28-nation bloc, the House of Commons is expected to grant its approval for May to trigger Article 50 of the EU’s Lisbon Treaty.

The bill must now still pass through the House of Lords, where there may be more opposition from unelected peers less concerned about defying the majority of voters who backed Brexit.

But if, as expected, the bill passes its Commons stage in a vote late Wednesday, May will be significantly closer to her goal of starting the two-year exit talks by the end of March.

Under pressure from MPs, the government was forced to concede on Tuesday that parliament would have a vote on the final Brexit deal before it is signed off.

The move helped fend off a rebellion by pro-European members of May’s Conservative party, who had threatened to back an opposition amendment to the two-clause bill.

But ministers stressed that if lawmakers rejected the final deal, the alternative was not to return to negotiations but to leave the EU without an agreement.

“This will be a meaningful vote. It will be a choice between leaving the European Union with a negotiated deal or not,” Brexit minister David Jones said.

More than two-thirds of MPs campaigned against Brexit in the June referendum, but after 52 percent of Britons voted to leave the EU, most have reluctantly accepted that they must uphold the result.

When May introduced her Brexit bill last month, following a Supreme Court ruling that she must seek parliament’s approval to start the process, the opposition Labour party promised not to block it.

Some 47 Labour MPs rebelled to vote against the legislation, backed by the Scottish National Party (SNP) and the smaller Liberal Democrats party, and more could defy their party leadership on Wednesday.

In a symbolic move on Tuesday, the SNP-dominated Scottish Parliament voted overwhelmingly against the bill passing through Westminster.

But there are not enough critics to thwart the bill, and efforts to amend it to tie the government’s hands in negotiations have so far failed.

Brexit minister Jones said the “final draft agreement” on leaving the EU would be put to MPs and peers before it was put to the European Parliament for ratification.

A number of lawmakers are sceptical that both the exit terms and a new trade deal can be agreed within two years of talks.

But Jones said he was confident of getting agreement on both areas, but said that if there was no deal, Britain would fall back on World Trade Organization rules to determine its trade with the EU.

Labour MP Chris Leslie warned: “On the nightmare scenario, that we could leave the EU with no deal at all, and face damaging barriers to trade with Europe, it seems parliament could have no say whatsoever.”

Source : Financial Express

RBI monetary policy: How long can Urjit Patel stay accommodative : 08-02-2017


Economists predict RBI Governor Urjit Patel will deliver a final interest-rate cut Wednesday to buoy growth, though the question is whether he will acknowledge it as the last of this cycle.

The Reserve Bank of India will lower the repurchase rate to 6 percent from 6.25 percent, according to 34 of 39 economists in a Bloomberg survey. The rest see no change. The rate will stay there at least until June 2018, a separate survey shows, ending a streak of seven reductions since January 2015. If Patel omits any mention of “accommodative” policy, it would be the RBI’s first change in stance since June 2015.

With deposits surging and economic growth seen dipping to a four-year-low after Prime Minister Narendra Modi’s cash ban, Patel’s under pressure to lower borrowing costs before a global window for easing closes. The U.S. Federal Reserve left its benchmark lending rate unchanged last week and said inflation will rise to its target even with “gradual” adjustments in interest rates.

“We retain our call of a residual 25 basis point cut even as the decision in the upcoming policy review will be a close call,” said Abhishek Upadhyay, an economist at ICICI Securities PD in Mumbai. “This is also amplified by how the monetary policy committee chooses to communicate that interest rates have bottomed out along with the forecast of a prolonged pause.”

The monetary authority will announce its decision at 2:30 p.m. in Mumbai followed by a press conference 15 minutes later.

Growth Concerns

Government officials have sought monetary stimulus to boost gross domestic product. Growth may dip as low as 6.5 percent in the year through March from 7.9 percent the previous year as the cash squeeze dents demand, Finance Minister Arun Jaitley’s advisers predicted last week. While the government will publish its forecast on Feb. 28, investment is poised to fall for the first time since 2013 even before accounting for the impact of the cash ban.

Inflation Soothes

Consumer prices rose 3.4 percent in December from a year earlier, below the 4 percent mid-point of India’s inflation target for the second straight month. Bloomberg Intelligence analyst Abhishek Gupta says the dip in core inflation — which strips out volatile food and fuel — opens space for Patel to cut rates.

The RBI’s six-member panel voted unanimously to keep rates unchanged in December as it wanted to assess the impact of the cash clampdown and the Fed’s stance. It reiterated its commitment to the inflation target and warned about the risk of rebounding oil prices.

Budget Comfort

Patel will have some comfort on government spending. Jaitley on Feb. 1 vowed to narrow the budget deficit to 3.2 percent of gross domestic product in the year starting April 1 from 3.5 percent the previous year. While wider than an earlier target of 3 percent, the goal is lower than economists’ estimates of 3.3 percent and, if met, the shortfall would be the smallest in a decade.

“We expect the RBI to deliver a 25 basis point repo rate cut on Feb. 8, given continued fiscal consolidation and likely undershooting of its near-term inflation target,” said Sonal Varma, Singapore-based economist at Nomura Holdings Inc. “However, with global factors turning adverse, this is a close call.”

Source : Economic Times

F.NO.DIT(R)/BIFR/2016-17/1643 – 7-2-2017


SECTION 139 OF THE INCOME-TAX ACT, 1961 – INCOME – RETURN OF – CLAIM OF RELIEFS ENVISAGED BY BIFR IN SANCTIONED REHABILITATION SCHEMES BY SICK COMPANIES IN THEIR ITRs

LETTER [F.NO.DIT(R)/BIFR/2016-17/1643]DATED 7-2-2017

The BIFR Unit of Directorate of Income-tax (Recovery) looks after the work relating to sick companies who had have filed references under the erstwhile Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) which has now been repealed w.e.f. 1-12-2016. On the date of repeal, the processing of reliefs envisaged in the Rehabilitation Schemes approved by BIFR is pending in many cases.

In the course of processing the relief, it has been noticed that some of the sick companies, in whose cases the BIFR had sanctioned Rehabilitation Schemes envisaging reliefs/concessions for consideration of the Department, have claimed the reliefs in their returns. Most of the reliefs envisaged by BIFR are beyond the provisions of Income-tax Act, 1961 as under Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), the BIFR had sweeping powers overriding all provisions of various laws including Income-tax Act. However, in most of the cases, these reliefs envisaged by BIFR from the Department are for consideration and approval of the competent authority i.e. CBDT. The reliefs/concessions envisaged by BIFR in such cases are therefore, not automatic and can be claimed and allowed only after approval and issue of appropriate orders by CBDT. As the reliefs are yet to be processed by the Department in several cases, the apprehension that these companies have not already availed the reliefs merely on the basis of passing of orders by BIFR has to be ruled out to safeguard the interest of revenue and prevent any leakage thereof.

It is therefore requested that the Assessing Officers may kindly be directed to examine the assessment records of the companies starting from the Cut-Off-Date to find out whether any relief has been wrongly claimed by the company and inadvertently allowed though the reliefs envisaged in Sanctioned Scheme have not been processed by this Directorate and the order allowing the relief has not been passed by the CBDT. In case, the reliefs/concessions have been wrongly allowed, appropriate remedial action has to be taken immediately. The process of identifying the Assessing Officers of such cases has been under taken separately and a specific communication in the matter to the jurisdictional Pr.Chief Commissioner of Income-tax is also being sent shortly.

 

Slow notification impacts bankruptcy code : 07-02-2017


The Insolvency and Bankruptcy Code in India is unable to realise its potential because its provisions are being notified in bits and pieces and not at one go, say professionals.

By not notifying the sections that will make the part of the code on bankruptcies of individuals effective, the interests of the guarantors are not being safeguarded, while companies enjoy the 180-day breather.

The current law is somewhat biased in favour of the debtor, as evidenced by the fact that it does not have to settle its dues for 180 days after filing for insolvency, experts say.

“Since they (guarantors) do not have immunity in the NCLT (National Company Law Tribunal), their assets can be liquidated,” Misha, partner at leading law firm Shardul Amarchand Mangaldas, says.

According to the new code, corporate insolvencies are to be filed at NCLTs, while individual and partnership bankruptcies are to be handled by Debt Recovery Tribunals (DRTs).

None of the sections related to individual bankruptcies has been notified.

Nilesh Sharma, an insolvency professional and senior partner with Dhir and Dhir Associates, says that because of the provisions on insolvency resolutions and bankruptcies of individuals and partnerships not being notified, corporate debtors can file for an insolvency resolution but their guarantors cannot do so. Because of this, the guarantors and their assets do not get the breather and the creditors can proceed against them.

Part III of the code deals with insolvency resolutions and bankruptcies for individuals and partnership firms.

While the principal debtor cannot be pulled up, the assets of the guarantor can be liquidated. Sharma says, “Sales of the assets of the guarantor and appropriation of the sales proceeds by one or more of their creditors will result in an unfair distribution of sale proceeds of their assets.”

Insolvency professionals are also of the opinion that guarantors will not be able to work efficiently in such a situation.  The code came into force in December 2016. As things stand now, corporate insolvency codes have been notified and their insolvencies can be filed at an NCLT. Within two weeks of receiving an insolvency petition, the NCLT has the powers to accept or decline it. Vijay Mallya-led UB Engineering and Innoventive Industries are some of the instances in which insolvency cases have been filed under the new code.

Source : Financial Express

Capital gains tax on unlisted firms, government to issue exemption list : 07-02-2017


The government will come out with an “exhaustive list” of transactions on which the “anti-abuse” provision of levying long-term capital gains tax on share transfer in unlisted companies will not be applicable.

Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra said the provision was introduced in Budget 2017-18 to plug bogus long-term capital gains being availed by investment in penny stocks and put an end to “sham transactions”.

“We are taking information from all stakeholders and we will give a very exhaustive list as to where Section 10(38) will not be applicable. It is absolutely an anti-abuse law which we have brought in and it will be used where the law is abused,” he said at a CII post budget meet here.

Chandra said genuine investors in IPO or those which have come in through FDI need not worry as there will be no change in policy with regard to capital gains.

“We will come out with clarification as to what kind of share transactions will be put (under this provision) so that there is no harassment,” he said.

The tax department has found that the route of long-term capital gains in unlisted shares was being misused in the last 2-3 years and estimated that ‘bogus’ gains availed by ‘khoka’ (shell) companies last year were Rs 80,000 crore.

Chandra said out of 15 lakh companies incorporated under Ministry of Corporate Affairs, only 6 lakh companies file Income Tax returns.

Out of this 6 lakh, 2.5 lakh companies show losses or zero income and 2.85 lakh companies disclose income less than Rs 1 crore.

Only Rs 36,500 companies file income tax return showing income over Rs 1 crore.

“Our purpose is everyone should be tax compliant. The big challenge is how to make it happen. Our work is clear, more people should come under the tax net,” Chandra said.

Source : Business Standard

Prime Minister Narendra Modi now faces the primary test of authority : 07-02-2017


Narendra Modi has reached a very delicate and significant phase of his term, one that has little to do with his party’s prospects in Uttar Pradesh but a lot to do with the stamp of authority he wants to cement on his office by the time he is up for re-election in 2019.

This relates to the PM’s institutional role as head of executive. And, by now, the broad consensus is that he runs a tight ship, steered by a powerful PMO that has sought to actively explore the boundaries of executive authority. The impact of the change he brought has been felt on other institutions: legislature, judiciary, even the bureaucracy.

This was well in tune with the sweeping mandate for change that catapulted him to Delhi. But three years down the line, Prime Minister Modi is no longer an outsider correcting the system. He is very much at the heart of the system: as much the rulekeeper as the challenger. Why is any of this power nuance relevant? Because change is in the air again: in judiciary, legislature, the presidency and a range of other statutory authorities. This, in turn, will test the relatively stable executive.

By August, when there’s a new president and vice-president, which also means a new chair of the Rajya Sabha, Modi would appear every bit a veteran on Raisina Hill. The onus to guide these relationships would lie very much with him and his executive regardless of who is elected and how.

The conversation with the judiciary is already on test with a new Chief Justice of India (CJI) at the helm. Both sides are striving hard to close the gap on the Memorandum of Procedure to appoint judges. CJI J S Khehar also doesn’t go beyond August. Which means we may have another new head in the Supreme Court along with the president and vice-president. Thus, the constitutional responsibility of harmonising these new relations will fall on the PMO.

On Uneven Keel
This task is harder than it seems. Take the case of the RBI governor, a statutorily autonomous office that has been under scrutiny for the nature of its role since Raghuram Rajan’s last few months in office to the recent handling of the demonetisation issue. GoI has had to engage in coursecorrection of late to ensure that the grammar of the relationship doesn’t get skewed against RBI’s institutional autonomy.

Yet, there’s no doubt that a powerful executive through higher offices of the government will have a dominant say in reshaping these new equations. A typical example was the RBI-Election Commission (EC) standoff on candidates in the ongoing state elections unable to access fund amounts mandated by the EC.

RBI said it could not grant an exemption just to election contestants. Eventually, GoI’s silent intervention and honest brokering at the highest levels resolved the matter.

But it’s not easy to attain the same degree of effectiveness each time. In the Jallikattu case, the Tamil Nadu government did engage in a sleight of hand by categorising ‘bull taming’ as a sport, hence a state subject on which it could legislate. So, all it sought was an approval on a point of law. The Centre played along, ostensibly to ensure the crowds got off the streets but knowing well that the stage for a fresh court battle was being set.

Events like J Jayalalithaa’s death did alter the board in a way that the Tamil Nadu government could author such a script with the Centre. Similarly, one can say Rajan’s departure did impact the nature of RBI’s response on key issues with the government.

But broadly, all of this firmly indicates that the executive — and, so, the PM — will probably take institutional centre-stage in the rejig of the constitutional balance of power within the next few months. This, especially, after the gradual exit of powerful political personalities, including some key UPA appointees.

But with centre-stage comes greater scrutiny. Questions will be asked that if GoI can exercise more institutional muscle on the Supreme Court to develop a screening mechanism to shortlist judges for appointment, will it also initiate a conversation with its own party back end on the quality of the selection of governors, a crucial constitutional office?

Governors selected for the sensitive northeast states of Arunachal Pradesh and Meghalaya have had to resign within the first two years. They were outright political appointees, who became a source of embarrassment for the government. There are a few others constantly treading the thin line. One of them has even been told off for venting political views on social media.

Chill, Deep Dive Ahead
And then there’s the other side of the problem in Jammu & Kashmir. There, the Centre is struggling to find its own suitable candidate to replace octogenarian N N Vohra, who is now in the fourth year of his second term. From meeting standards to setting standards is always a challenging journey. It can be both heady and humbling at the same time. Not all PMs have had the popular mandate to traverse this space with authority.

Modi is among those rare exceptions with the opportunity to define his own institutional stamp. And it’s that leg that’s now begun, where winning elections is not necessarily the primary test of authority.

Source : Economic Times

Multi modal hubs, mass rapid electric transport soon: Nitin Gadkari : 06-02-2017


After award of a record Rs 4.5 lakh crore contracts in the highways sector, a multi-modal transport planning comprising airports, railways, bus stations and waterways will be implemented in a big way, Union Minister Nitin Gadkari today said. “We broke all records in highways…We have awarded contracts worth Rs 4.5 lakh crore so far. We will be awarding contracts for 15,000 km of highways by March taking the highways building pace to 30 km from 20 km a day in December,” Road Transport, Highways and Shipping Minister said addressing media here.

He said 15 per cent rise in budget allocation for highways was a welcome step and for the first time Budget has made a provision for multi-modal transport hubs which will comprise air, rail, surface and water transports.

The country needs to adopt a holistic and integrated multi-modal transport planning for the sector including roads, railways, waterways and airways to reduce traffic congestion, bring down pollution and make the overall movement of passengers and goods more efficient and cost effective.

The Minister pointed out that in most cities, bus stations, airports and railway stations are situated at quite a far distance from each othe and if these are properly integrated, a lot traffic congestion and pollution can be reduced.

The government is committed to set up multi-modal hubs where all modes of transport — air, road, rail and waterways wherever possible — are within close proximity to each other.

Besides this, latest technology for electricity based Mass Rapid Transport like the metrino and hyperloop will be set up.

Talking about the Shipping sector Gadkari said that Sagarmala is all set to be a game changer with its stress on port led development.

The programme will create 1 crore jobs, including 40 lakh direct and 60 lakh indirect ones, he said, adding ports are being mechanised and modernised.

He said waterways are also being developed in a big way and 111 rivers would be developed as National Waterways besides promoting coastal shipping along the country’s 7,500 km of coastline.

Ro-Ro services are being launched to cut down travel time and distance and cruise services are being brought in to carry both goods and passengers.

The agenda of the Ministry is to harness the full potential of the maritime sector through its Sagarmala programme, he said.

Source : PTI

Property as investment to lose edge due to capping of tax break proposed in Budget 2017 : 06-02-2017


Borrowers claiming unlimited tax benefits on interest payment towards home loans for a rented out second property will have their tax deduction capped from 1 April 2018. While individuals today use this window to set off any loss arising from property against salary or other income, without any upper limit, they will be able claim a set off only up to Rs 2 lakh in subsequent years. By paring down this major tax sop for second home buyers, the Budget has diluted the potential of property as an investment.

This is how it works: Assume you had taken a loan for a second home with an interest outgo of Rs 6 lakh last year. If you had rented out the house for Rs 15,000 a month, or Rs 1.8 lakh a year, you were allowed to set-off or adjust the entire loss of Rs 4.2 lakh (Rs 6 lakh – Rs 1.8 lakh) against your salary income or any other source of income. From 1 April 2018, the set-off you can claim will be capped at Rs 2 lakh, even if the loss extends beyond this threshold. Kuldip Kumar, Partner and Leader, Personal Tax, PwC India, says, “You will be allowed to carry forward the remaining losses not claimed for up to eight years, but the immediate relief will be capped at Rs 2 lakh.” This effectively removes an anomaly that allowed individuals buying second homes on loan to enjoy higher tax relief than those buying for own use.

Many invested in the property market using this relief to lower their tax burden and bolster effective rental yield. With the tax shield removed, investment in housing is expected to take a hit. “This can be a double-edged sword. It can bring down property prices significantly. But it can also demotivate investors who can invest in property and rent it to those less privileged,” says Vaibhav Sankla, Managing Director, H&R Block India

“Some individuals were taking on heavy loan burdens for second homes simply to avoid taxes. This rationalisation in tax relief will put a break on this habit,” says Suresh Sadagopan, Founder, Ladder 7 Financial Services. According to him, the habit made little sense given the low rental yields and high maintenance cost of property. The Rs 2 lakh cap will particularly affect those who have high-ticket home loans and are in the initial years of repayment, when the interest component comprises a chunk of the EMIs. There is another dampener for landlords. Tenants will now have to deduct 5% TDS on rent exceeding Rs 50,000 a month. However, this will affect only a small number of home owners, given the high threshold.

The Budget has given some relief on capital gains taxation on immovable property by lowering the holding period requirement for long-term capital gains to two years from the earlier three. This means homeowners can enjoy a slightly lower tax rate—20% after indexation benefit—on capital gains at the time of sale of the house after two years. Earlier, they would have incurred tax at the marginal rate if property was sold within three years.

“Home owners can now liquidate the property earlier at lower tax rates,” says Rahul Manjrekar, Partner, Tax & Regulatory Services, KPMG. The reduction in holding period is expected to bring more inventory into the resale housing market as existing homeowners who have been holding on to their property to qualify for indexation benefits on sale will be in a position to do so immediately.

In another development, the base year for indexation of capital gains is proposed to be shifted from 1 April 1981 to 1 April 2001 for all classes of assets including immovable property. Experts say this shift in base year will allow more realistic computation of acquisition cost of the house when claiming indexation benefits at the time of sale, and possibly reduce the capital gains tax burden .

Source : Business Standard

Jaitley’s fiscal pledge, easing inflation make case for a rate cut on February 8, say ET poll participants : 06-02-2017


The Reserve Bank of India is likely to cut the policy rate by a quarter percentage point, with the government adhering to fiscal prudence amid growth optimism and easing inflation, according to an ET poll of 18 market participants. RBI is scheduled to announce the monetary policy on February 8, a week after the Budget was unveiled.

“A conservative fiscal policy, easing inflation trajectory and short-term risks to growth keep the door open for further easing,” said Radhika Rao, a Singapore-based economist at DBS Bank. “The government plans to adhere to fiscal discipline while also making room for inclusive growth policies.”

Finance minister Arun Jaitley’s pledge to bring the fiscal deficit back on track despite some deviation in the next fiscal year has encouraged expectations of further moderation in the policy. Added to that is the government’s plan to step up spending on infrastructure. “Budget’s underlying philosophy on fiscal prudence too has underscored a strong case for RBI rate cut,” said Shubhada Rao, chief economist, Yes Bank. “Together with easing monetary policy and fiscal expenditures towards capex,  this should push up the country’s growth.”

The key concerns weighing on the six RBI monetary policy committee members in seeking to push growth won’t be inflation but overseas factors, analysts said. These include US policy changes, rate increases by the US Federal Reserve and China’s growth outlook “RBI’s biggest challenge this year will be to strike a right balance between supporting growth and increased external uncertainties,” said Anubhuti Sahay, chief India economist at Standard Chartered. “Retail inflation is unlikely to pose any challenge with easing food prices and contained core inflation (excluding gold)… Increased infrastructure and rural allocation are key positives from the Budget.”

The central bank left rates unchanged at the last policy announcement on December 7, despite widespread expectations of a rate cut. Wednesday’s policy statement will also be keenly parsed for anything RBI has to say about demonetisation, which was announced on November 8. With the window for deposits of old notes at banks having closed on December 30, the central bank will have a better understanding of how much cash has come into the system .

BOND WORRY
Domestic debt securities could well lose their sheen in the event of the Federal Reserve raising rates, thus narrowing the differential with Indian bonds, adding to RBI’s policy complications.

During the fiscal, the benchmark bond yield has dipped by 110 basis points, pushing prices up. One basis point is one hundredth of a percentage point. Retail inflation, a key trigger for rate actions, has been in line with RBI’s 5% target for March end. The Consumer Price Index dropped to 3.4% in December from 6% in July 2016.

Banks, meanwhile, have slashed lending rates across the board, emboldened to pass on RBI’s previous rate cuts as deposits of demonetised notes have left the system flush with funds. Overall system liquidity is running at more than Rs 5 lakh crore, according to India Ratings, against a deficit nearly a year ago. But with remonetisation picking up, that’s expected to recede ahead of the fiscal year-end as withdrawal limits are eased, shoring up market rates, experts said.

“With commercial banks already having cut their lending rates by about 80-90 bps (basis points) in one clip earlier this year, it is unlikely that they will reduce the rates any further without the policy rate being lowered further,” Kaushik Das, Mumbai-based economist at Deutsche Bank, said in a note.

In the current financial year, the central bank has collectively slashed the repo rate, at which banks borrow short-term funds from RBI, by half a percentage point to 6.25%.

“There has already been significant lending rate transmission, which is expected to persist in the near future,” said Saugata Bhattacharya, chief economist at Axis Bank.

Source : Economic Times

Govt may impose anti-dumping duty on aluminium products : 04-02-2017


To safeguard the interests of domestic aluminium industry, the government may soon take some steps including imposing of anti-dumping duties or minimum import price in wake of rising imports of downstream aluminium products in the country.

“Aluminium industry has faced a lot of stress in the last one year. I believe aluminium has huge potential in India. Our neighbouring countries are giving 13 per cent subsidy to downstream aluminium products and helping them to dump those in India,” Power, Coal and Mines Minister Piyush Goyal said on Friday.

“I have had a conversation with the aluminium industry. I found the imports of downstream products in India has gone up, which impacts both the primary manufacturers and the entire industry.

An industry expert said, “The import duty on the aluminium downstream products like food packaging foil, alloy wheel, is about 7.5 per cent which is much lower than levies of 12-15 per cent in other countries.”

He further said, “In the present scenario, it is difficult to crack or match with their cost of products as these countries give a lot of subsidies to their manufacturers including on transport and power.”

The minister said, “When we have large economies (like the US) who focus on protecting their own businesses, think it is time, India also respects the fact that Indian businesses, entrepreneurs and innovators have the ability to meet the needs of growing India.”

Further, he said, “Sadly over the past 15-20 years…I think this is the cost of economic liberalisation and the so-called globalisation, which has cost India some of its competitive edge in the face of dumping which we need to set this right.”

Talking about the government taking a pro-industry stand he made a specific reference to India’s proactive stance to bring in minimum import price of steel to future-proof the industry.

He also said, “India cannot afford to be sitting on the sidelines and showing weakness when it comes to taking strong policy decisions. This government does not wait for any industry to die.

Source : Financial Express

Tax Dept need not reveal reason for raid even to Appellate Tribunal, proposes Budget 2017 : 04-02-2017


Budget 2017 was delivered at a time when one is still reeling under the impact of demonetisation. In fact, the actual process of unearthing unaccounted wealth has already started.

The Central Board of Direct Taxes (CBDT) recently identified and sent communication to 18 lakh individuals asking them to explain cash deposits made in their bank accounts. It will also be sending notices to holders of those accounts where a potential tax evasion has been detected.

The role of the Income-tax Department (ITD) will be important in making the defaulters accountable and pay up for any tax evasion. Budget 2017 has put forth at least four proposals to help the ITD take necessary action.

Power to call for information
Budget 2017 proposes that the power in respect of inquiry or proceeding may also be exercised by the Joint Director, the Deputy Director and the Assistant Director. And for this, they need not seek prior approval of higher authorities.

The existing provisions of Section 133 empower certain I-T authorities to call for information for the purpose of any inquiry or proceeding under the I-T Act. But in a case where no proceeding is pending, these powers shall not be exercised by any I-T authority below the rank of the Principal Director or Director or the Principal Commissioner or Commissioner without the prior approval of such authorities. Budget 2017, however, proposes to grant powers to Joint Director, the Deputy Director  and the Assistant Director too.

Reason to believe to conduct a search, etc., not to be disclosed
Under Section 132, the IT authority, based on the information in his possession, and if there is ‘reason to believe’ or ‘reason to suspect’ of circumstances, may authorise another authority to carry out search and seizure operation. Also, under Section 132A, he may authorise some other officer or another IT authority to deliver books of account, documents or asset of the assessee to the I-T authority so authorised.

However, as per Budget 2017, certain judicial pronouncements have created ambiguity in respect of the disclosure of ‘reason to believe’ or ‘reason to suspect’ recorded by the I-T authority to conduct search under Section 132 or to make requisition under Section 132A.

Budget 2017, therefore, proposes to insert an explanation to Section 132 and Section 132A to declare that the ‘reason to believe’ or ‘reason to suspect’, as the case may be, shall not be disclosed to any person or any authority or the Appellate Tribunal.

Helping hand to I-T Department from CBDT

It is well acknowledged fact that the I-T department will be short of manpower when it comes to collecting post demonetisation data. The IT authority may issue notice under Section 133C calling for information and documents for the purpose of verification of information in its possession.

But sending notices itself can take a long time. And therefore, the CBDT is helping in centralised issuance of notices and calling for information and documents for the purpose of verification of information in its possession, processing of such documents and making the outcome thereof available to the Assessing Officer for necessary action, if any.

Extension of power to survey charitable trusts
Budget 2017 proposes to empower an I-T authority to enter any place at which an activity for charitable purpose is carried on. Currently, the provisions of Section 133A empower an I-T authority to enter any place of business or profession, but exclude activity for charitable purposes.

Source : Economic Times

Budget 2017 proposes to slash tax benefit on cash donations to religious entities, notified funds : 04-02-2017


Budget 2017 proposes to reduce tax benefit on cash donations to Rs 2000 from the current limit of Rs 10,000 under section 80G of the Income Tax Act. This appears to be aimed at plugging a loophole that many may have been exploiting by getting fake receipts of cash donations.

According to Section 80G of the I-T Act, all donations made to specified relief funds and notified charitable institutions can be claimed as deductions from gross total income before arriving at the taxable income. Currently, the limit allowed to avail the deduction under the 80G for donations made in cash is Rs. 10,000.

However, a receipt for this cash donation is a must to claim the tax benefit. There is no limit on the deduction that can be claimed for donations made by cheque or digital payment methods provided you have a proper receipt and the institution you have donated to qualifies for the deduction you are claiming. The donations made in ‘Kind’ such as donating clothes during a disaster does not qualify for deductions.

The amount of deduction available for specified institutions as per Section 80G is either 100% or 50% of the amount donated subject to ‘with’ or ‘without’ any upper limit.

Donations made to foreign trusts and political parties do not qualify for deductions under this section. It would appear that this change is proposed in order to curb misuse of the deduction allowed for cash donations by people. It was suspected that people were claiming the deduction on the basis of fake receipts obtained without making actual donation or donating a lesser amount.

The rules allow donations made for the renovation or repair of temples, mosques, gurudwaras, churches or any other place notified by the central government to be claimed as deductions. However, the deduction that can be claimed on such donations is 50% of the amount donated or 50% of 10% of the ‘adjusted gross total income’ whichever is less. Thus in such cases an upper limit is imposed on the deduction that can be claimed on the amount donated.

Adjusted gross total income for this purpose is = Gross total income minus (i) all exempted income, (ii) long-term capital gains and (ii) all deductions under sections of the Income Tax Act except for 80G.

The government notifies separate lists of institutions/funds donations to which would be eligible for 100% or 50% deductions with or without upper limit.

First, you can claim deduction only on donations to funds/entities which are notified for this purpose by the central government.

Second, the amount of donation you can claim as deduction from income depends on how much is allowed, as per the notification, for the fund/entity you are donating to. Certain government funds such as the Prime Minister’s Relief Fund, National Defence Fund allow the donor to claim 100% deduction of the amount donated without any other limit related to gross total income.

However, other funds such as Prime Minister’s Drought Relief Fund allows the donor to claim only 50% deduction of the amount donated also without any other limitation.

Source : Economic Times

Memorandum Explaining the Provisions in The Finance Bill, 2017


Memorandum Explaining the Provisions in The Finance Bill, 2017

Budget Speech 2017-2018


Budget Speech 2017-2018

Key Features of Budget 2017-2018


Key Features of Budget 2017-2018

ITBA-ASSESSMENT INSTRUCTION NO.3 – 3-2-2017


MISCELLANEOUS – LAUNCH OF INCOME TAX BUSINESS APPLICATION (ITBA) – ASSESSMENT MODULE – PHASE 3 (FUNCTIONALITY FOR (1) ISSUE OF SUMMON; (2) ISSUE OF NOTICE UNDER SECTION 133(6) AND (3) REFERENCE FOR AUDIT UNDER SECTION 142(2A)

ITBA-ASSESSMENT INSTRUCTION NO.3 [F.NO.SYSTEM/ITBA/INSTRUCTION/ASSESSMENT/177/16-17]DATED 3-2-2017

This is in reference to the subject mentioned above. The following processes forming a part of the Assessment module are now available to the users in ITBA: (A) Issue of Summon u/sec 131.(B) Issue of Notice u/sec 133 and (C) Reference for Audit u/sec 142(2A). This is the next step, if required, after any case is selected in ITBA for Scrutiny/Reopening etc and issue of hearing notice u/s 143(2) , as part of the assessment process.

2. Assessment module of the ITBA can be accessed by entering the following URL in the browser: https://itba.incometax.gov.in

The path for the module is: ITBA Portal → Login → Modules → Assessment

The following functionalities are now available to the Users:

(A) Issue of Summon u/sec 131 (1) (for use by the Assessing Officer):

(i) User will have access to the Link for Issue of Summon u/sec 131, through Initiate Other Actions button.
(ii) Details of the person summoned can be entered alongwith time and date for compliance and summon can then be generated and issued.
(iii) The User can then go to the Inquiry Status screen to record Statement of the summoned person and documents submitted, if any, can be placed on record as attachment.

(B) Issue of Notice u/sec 133 :

(i) User will have access to the Link for Issue of Notice under various sub-sections of Sec 133, through Initiate Other Actions button.
(ii) Details of the Authority/party from whom information is requisitioned can be entered alongwith date for compliance and the Notice can then be generated and issued.
(iii) The User can then go to the Inquiry Status screen to capture Details of Information received in response to the notice u/sec 133 and place on record the documentary evidence so gathered, as an attachment.

(C) Reference for Audit u/sec 142(2A):

(i) User will have access to the Link for Special Audit through Initiate Other Actions button.
(ii) For the purpose of Audit u/sec 142(2A), AO can issue a show cause Notice to the assessee, record the response, capture details of approval for referring the case for Audit (though proposal is to be sent offline),
(iii) On receiving approval, directions to the assessee to get his accounts audited by the specified Auditor can be issued. Letter to the Auditor can also be issued, assigning the Audit. Time limit for Special can also be extended.
(iv) On submission of Audit report, the User can capture the details and place on record the Special audit report by way of an attachment.

3. MIS : There shall be a facility for viewing and generating various MIS in respect of the aforesaid processes. The MIS is accessible through module home page. List of cases where summon/Notice u/sec 133/Cases referred for Audit u/sec 142(2A) shall be available to the User. The path for the same is Assessment Home Page → MIS Reports

4. Functionality for issue of summons by the Investigation Wing Users under sec 131(1A) is under development and will be deployed shortly. Similarly, order passing functionality is also in the making and will be available to the Users in the coming days.

5. Relevant users will need their individual name based department email IDs and RSA tokens. The username and passwords will be communicated on their respective email ID. The log in to the system will be through the username and password (sent on individual email ID) along with the RSA token over the Taxnet nodes. Users are advised to contact their respective RCC Admin for name based department email ID.

6. Users on Windows XP system are advised to download the Chrome (version 43) or Firefox (version 36) browser (if unavailable) from ITBA Portal → Download Pre-Requisites to access the new ITBA application.

7. Training material including user manual, help content and frequently asked questions (FAQs) are available on the Assessment module Home Page and also on ITBA Portal → Online Training on ITBA. Users can click on the Online training functionality to access the following: User Manual, Step by Step, Frequently Asked Questions, and a Power Point Presentation to understand how to use the new functionalities in the Assessment module. A screen shot displaying the Online Training resource is made available on the following page:

image

8. It is expected that the relevant users may henceforth use the Assessment module as available in ITBA to conduct enquiries during the course of Assessment proceedings and to also utilise the functionality for referring cases for Audit u/sec 142(2A).

9. Users are advised to contact helpdesk in case of any issues in respect of ITBA.

a. URL of helpdesk – http://itbahelpdesk.incometax.net
b. Help desk number - 0120-2811200 (new); 2770120-2772828 – 42 (old)
c. Email ID – helpdesk_messaging@incometax.gov.in
d. Help desk Timings – 8.30 A.M. – 7.30 P.M. (Monday to Friday).

LETTER D.O.F. NO.450/10/2017-CUS IV – 03-02-2017


FINANCE BILL, 2017 – MAKING STAKEHOLDERS AWARE OF BUDGETARY CHANGES

LETTER D.O.F. NO.450/10/2017-CUS IV, DATED 3-2-2017

As you are aware, Finance Minister has presented the Union Budget and introduced the Finance Bill, 2017 in the Parliament on 1-2-17. Apart from the duty rate changes, there are many proposals concerning legislative changes in the Customs Act. These changes are a part of the said Finance Bill and would come into effect only upon enactment unless specified otherwise.

2. Out of the said legislative proposals concerning changes in the provisions of the Customs Act, I want to specifically bring to your attention the proposals relating to the amendment in sections 46, 47 and 27 of the Customs Act. The summary of the changes in these sections is:

a. Sub-section (3) of section 46 is being substituted so as to make it mandatory to file a Bill of Entry before the end of the next day following the day (excluding holidays) on which the vessel or aircraft or vehicle carrying the goods arrives at a customs station at which such goods are to be cleared for home consumption or warehousing and to provide for imposition of such charges for late presentation of the bill of entry as may be prescribed.
b. Sub-section (2) of section 47 is being amended so as to provide the manner of payment of duty and interest thereon in the case of self-assessed Bill of Entry or as the case may be assessed, re-assessed, provisionally assessed bills of entry.
c. Sub-section (2) of section 27 is being amended so as to keep the refund of duty paid in excess by the importer before an order permitting clearance of goods for home consumption is made, outside the scope of principle of unjust enrichment where—
i. such excess payment is evident from the bill of entry in the case of self-assessed bill of entry or
ii. the duty actually payable is reflected in the reassessed bill of entry in the case of reassessment.

3. I am sure by now you must have gone through all the provisions of the Finance Bill, 2017 very carefully and realised the significance of these changes.

4. These proposals are of far reaching impact and would take the force of law immediately upon the enactment of the Finance Bill. Given the fact that the legislative process affords us sometime before the Parliament enacts the Bill, therefore, it is opportune that the time available is used to understand the provisions, make an outreach to the various stakeholders and also undertake systemic changes wherever needed so that the provisions are implemented smoothly on their due date.

5. In order to have better grasp, I would like to share the intention of the Government driving these proposals.

a. Government has been concerned about the dwell time in clearance of the imported goods. There are various factors for this. One of the reasons is that the provision of advance/ prior filing of bill of entry is not being fully utilised. Similarly, even after arrival of goods, statistics have revealed that the bill of entry is not being filed expeditiously The amendment in section 46 is to address these issues. The change in section 46 is to make it mandatory to file the bill of entry by the end of the next day on which the goods arrive at any customs station at which they are to be cleared. In other words, if the clearance is to take place at the gateway port, the time period for filing bill of entry would start from the date of entry inwards and in case the clearance for home consumption is at a hinterland ICD, the time period would start from the day the goods arrived at the ICD. This is other than the facility of advance/ prior filing of bill of Entry which is separately provided. Board also intends to prescribe through regulations a late charge for delayed filing. Hitherto entry inwards in ICES 1.5 was used for checking the rate of duty applicable for advance bills of entry By virtue of the proposed changes in the section 46, the entry inward has become important because default in compliance with the new provision would result in late charge. While entry inward is there in sea ports and airports, in ICDs cargo arrival report (CAR message) is available to record the time of arrival of cargo. However, the cargo arrival report is not operational in all ICDs. It is imperative to make it operational before the ascent of Finance Bill,
b. Changes have been proposed in sub-section (2) of section 47. These changes concern payment of duty and attendant interest liability in the case of delays. The existing provision is that a time period of two days is given to an importer to pay customs duty from the time of return of bill of entry The implication of this change is that the importer shall have to make payment of duty in the same day as in the case of self-assessed bill of entry and in case of re-assessment or provisional assessment the importer has one day after the bill of entry is returned.
c. I am mentioning the changes in section 27 in the end for the reason that the changes in this are consequent to the change in section 47. The intention behind this change is to allow a simplified regime of refund of customs duty paid in excess in specified cases by providing that such refunds shall be outside the scope of unjust enrichment

6. All the three proposals which I have discussed above even though procedural, are however, substantive in nature with a definite financial impact should there be non-compliance. It is therefore critical for the smooth implementation of these provisions that the said legislative changes are understood correctly and the trade and industry/other stakeholders is also made familiar as early as possible.

7. We have a time of almost six weeks before the bill is enacted. I would, therefore, request the Chief Commissioners/Commissioners to ensure connectivity with Custodians for the purposes of cargo arrival information and carry out an outreach programme so as to make the stakeholders aware of the budgetary changes. Difficulties or challenges, if any with regard to implementation may be reported immediately to the CBEC.

ITBA-APPEAL REGISTER & CSR INSTRUCTION NO.1 – 3-2-2017


MISCELLANEOUS – LAUNCH OF APPEAL REGISTER & CSR MODULE OF INCOME TAX BUSINESS APPLICATION (ITBA)

ITBA-APPEAL REGISTER & CSR INSTRUCTION NO.1
[F.NO.SYSTEM/ITBA/INSTRUCTION/APPEAL REGISTER & CSR/185/2016-17], DATED 3-2-2017

This is in reference to the subject mentioned above. The functionality for generating the Central Scrutiny Report (CSR) on orders of CIT(A)/ITAT/High Court is now available in Appeal Register & CSR module of ITBA.

2. The Appeal Register & CSR module of the ITBA can be accessed by entering the following URL in the browser: https://itba.incometax.gov.in

The path for the module is: ITBA Portal → Login → Modules → Appeal Register & CSR

3. The CSR module has been designed primarily based on the CBDT’s Instructions No. 4/2011, 7/2011 & 8/2011. Following functionalities shall be available through ITBA – Appeal Register & CSR Module:

A. Appeal Receipt Register

On receipt of an appellate order1 the PCIT or HQ. & Staff of PCIT shall enter the basic details of such order in the Appeal Receipt Register, maintained in the office of the PCIT. The period of limitation for filing of further appeal will be based on date of receipt of the Appellate order in the office of the PCIT.

Following functions can be performed in the Appeal Receipt Register:

PCIT/HQ. of PCIT/Staff of PCIT can select the receipt date, Appellate authority and enter other particulars of the Appeal order and Save. Such entry would then be visible to the concerned range Head and the AO, so as to enable the AO to initiate the CSR workflow.
If required, the AO/ Staff can also edit details of an Appellate order entered by the office of PCIT and save such details (except date of receipt of Appellate order).
On completion of various appeal filing processes, details of new appeals filed will keep getting updated so that User can monitor the same, for the purpose of scrutiny selection, keeping penalty in abeyance, recovery of demand etc.

B. CSR on CIT(A) Order:

Following are the steps to prepare CSR on CIT(A) Order:

AO will enter Appeal order details and then proceed to analyse the order of CIT(A) as per the proforma. After completing analysis, AO will submit the request to Range.
Range Head will discuss the issues involved and wherever applicable, enter the draft grounds of appeal with his recommendation for filing appeal. Range will thereafter submit the request to PCIT.
PCIT will record the decision whether appeal is to be filed or not and transfer the workitem to AO with the directions on filing of appeal. PCIT will also be able to issue Authorisation letter to the AO for filing of appeal.
In case appeal is to be filed, AO will generate Form 36 and enter the details of filing of appeal with ITAT. Once details are saved AO will close the workflow. On closure status of the request will be updated in Appeal Receipt Register as well.
Facility to submit, delegate and send back the workitem is available to the users.
Facility to download and print the content of CSR is also available to the user. A printout can be generated at any stage by clicking on Print button. A pdf file will get download and the User can then print the downloaded file.

C. CSR on ITAT Order:

Following are the steps to prepare CSR on ITAT Order:

AO will record various aspects of the ITAT’s order and provide necessary analysis of the appellate order. After doing the analysis AO will submit the request to Range.
Range Head will record the issues involved and will enter the draft grounds of appeal with recommendation for filing appeal, wherever applicable. Range will thereafter submit the request to PCIT.
PCIT will record his recommendation whether appeal has to be filed or not and draft Substantial Question of Law. He will then submit the request to CIT(Judicial).
CIT(Judicial) will view the recommendation on filing appeal and then submit the request to CCIT with his observations.
CCIT will make the decision whether appeal has to be filed or not. Once decision is taken by CCIT, the workflow will be sent to PCIT.
PCIT will then issue necessary directions to AO by clicking on Direction on filing, and the workitem will then flow to AO for filing of appeal.
Facility to download and print the content of CSR is also available to the user. A printout can be generated at any stage by clicking on Print button. A pdf file will get download and the User can then print the downloaded file
After filing the appeal, AO will update the details in Filing of Appeal Tab and thereafter will close the workflow. Once workflow is closed status will be updated in Appeal Receipt Register.
Facility to submit, delegate and send back the workitem is available to the users.

D. CSR on High Court Order:

Following are the steps to prepare CSR on High Court Order, where appeal is proposed to be filed by preparing Proforma B:

PCIT will enter the following details:
Details of high court judgment along with limitation date for filing SLP in Supreme Court.
Facts of the case in brief.
Substantial question of law to be proposed in the SLP.
Details of respondent as well as his own communication details.
Thereafter, he will submit the request to CCIT.
CCIT will record his comments/recommendation and assign the workflow to PCIT.
PCIT will record the comments of CCIT in Performa B and thereafter physically sent the Proforma B report to the Directorate of L&R along with necessary annexures.
In case appeal is not to be filed, PCIT will close the workflow.
Facility to download and print the content of CSR is also available to the user. A printout can be generated at any stage by clicking on Print button. A pdf file will get download and the User can then print the downloaded file
Once appeal is filed, AO will enter and save the details of filing of appeal and close the workflow.
Once workflow is closed status will be updated in Appeal Receipt Register.
Facility to submit, delegate and send back the workitem is available to the users.

4. MIS and Dashboard -

i. MIS: There shall be a facility for viewing and generating various MIS in respect of this module. The MIS is accessible through module home page. The AO and its staff, Range and its staff, PCsIT/CsIT, HQ and staff of PCsIT/CsIT, HQ & staff of CCIT, can view and generate MIS reports.
The path for the same is Appeal Register & CSR Home Page → MIS Reports
ii. Dashboard: The dashboard is available through module home page. The AO and its staff, Range and its staff, PCsIT/CsIT, HQ and staff of PCsIT/CsIT, and HQ and Staff CCIT, have facility to view the dashboard. The path for the same is Appeal Register & CSR Home Page → MIS Reports → Dashboard

5. It is requested that the relevant Officers may henceforth use the Appeal Register and CSR module as made available in ITBA, for processing second appeal/Appeal before higher judicial fora.

6. Relevant users will need their individual name based department email IDs and RSA tokens. The username and passwords will be communicated on their respective email ID. The log in to the system will be through the username and password (sent on individual email ID) along with the RSA token over the Taxnet nodes. Users are advised to contact their respective RCC Admin for name based department email ID.

7. Users on Windows XP system are advised to download the Chrome (version 43) or Firefox (version 36) browser (if unavailable) from ITBA Portal → Download Pre-Requisites to access the new ITBA application.

8. Users are advised to contact helpdesk in case of any issues in respect of the ITBA.

A. URL of helpdesk – http://itbahelpdesk.incometax.net
B. Help desk number - 0120-2811200 (new); 2770120-2772828 – 42 (old)
C. Email ID – helpdesk messaging@incometax.gov.in
D. Help desk Timings – 8.30 A.M. – 7.30 P.M. (Monday to Friday).

9. Training material including user manual, help content and frequently asked questions (FAQs) are available on the Appeal Register & CSR Module Home Page and on ITBA Portal → Online Training on ITBA. User can click on the Online training functionality to access the following: User Manual, Frequently Asked Questions, and a Power Point Presentation to understand how to use the Appeal Register & CSR module. Screen shot depicting access to the Online Training facility on CSR module is as follows:

Budget 2017: How demonetisation and GST can benefit customers in the coming financial year : 03-02-2017


This year’s budget was expected to be a common man’s budget. It was only to be seen how Mr. Jaitley and his government would go about restarting the beleaguered economy after taking the toughest decision of demonetization, that brought the economy to a near standstill.

During his budget speech, the FM said that we are a non-tax compliant economy. Almost, 99 lakh people declare an income that is below Rs 2.5 lakh, 50 lakh people declare income above Rs 5 lakh and only 24 lakh people declare income above Rs 10 lakh. However, it is heartening to know that the demonetisation move has come up with various benefits for a common man.

We are taking a look at some of the things to understand how demonetisation and GST can benefit us:

Higher GDP Growth: One may wonder that how GDP can help a common man, but one should understand that GDP measures how fast an economy is growing. Quarterly growth is compared to measure the ongoing growth of the economy. As the economy grows, it directly impacts the growth of citizens. Growth in GDP will help in creating jobs. Arun Jaitley in his current budget announced various aspects of GDP like investments, consumption, government spending and said that current account deficit declined from .3% to 1 of GDP.

“In the aftermath of demonetisation drive, the union budget had fuelled our expectations to soar high. The budget 2017 focused on the overall theme of — Transform, Energise and Clean India (TEC India). Under TEC India, the government has introduced 10 different sub-themes to transform various sectors in India, energise & empower the youth, women and underprivileged sector. A GDP growth rate pegged at 6.75-7.5 per cent for 2017-18 is encouraging. The Finance Minister has ensured adherence to economic growth by targeting to keep the fiscal deficit to 3.2% of GDP,” says Yashish Dahiya- Co-Founder and CEO, Policybazaar.com.

Development of poor people: The government is going to increase the spending on infrastructure, rural economy, housing and agriculture which will help in making a better economy in the coming few months. This Budget has already followed several initiatives and has preserved its continuity since the beginning. Over Rs.3lakh cr are being spent in the rural area, establishing gram panchayat in villages at a wider level to maintain and create harmonious growth in small villages. The FM also said, “The government is planning to double the income of farmers in the coming years”. And at least providing 100 days employment will be granted to farmers. Various spending has been done in regards to providing houses to poor people in rural areas.

Reducing lending rates: Demonatisation will help in decreasing the lending rates which help customers by providing housing loans at low rates. Various schemes are already launched by the prime minister

Promote higher investments: In his budget, the FM announced a new pension scheme for senior citizens with 8% guaranteed return (for 10 years) which will help provide some relief to retired people, especially during the current falling interest rate regime.

“On personal taxes, the 5% reduction in income tax rates for people earning below Rs 5 lakh will provide some relief for middle classes. As this segment has the highest Marginal Propensity to Consume (MPC), it may help boost consumer spending. Private investments through lower credits were one of the main criteria in his budget.

“Providing infrastructure status to affordable housing projects will encourage more builders/promoters to focus on this segment, thereby increasing the supply for the middle classes in the near future,” says Naveen Kukreja – CEO& Co-founder, Paisabazaar.com.

Digital payments & GST: The budget 2017-18 reflects the government’s continuous efforts to move towards less cash economy and bringing transparency in value chain through digital payments & GST. The digital transaction will also help in increasing the investments opportunity. BHIM and Aadhaar payments applications are coming up with bonus schemes. Aadhaar pay is also going to be launched who do not have a mobile phone, credit card or debit card. Aadhaar card users will get medical benefits and insurance benefit.

“The budget has stressed upon the importance of strengthening India’s digital economy by bringing down the cost of digital infrastructure. The acceleration of PoS infrastructure with 10 Lakh PoS machines by March 2017 and another 20 Lakh Aadhaar based PoS by September 2017 is a reflection of pushing digital payments at last mile by 300% from the current base of 15 Lakh PoS achieved so far in last 20 years. The decision to exempt duty on various POS machines will help in reducing a cost of digital infrastructure implementation and benefits companies like Oxigen.” says Pramod Saxena – Chairman & Managing Director, Oxigen Services

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Budget 2017: How demonetisation and GST can benefit customers in the coming financial year

This year’s budget was expected to be a common man’s budget. It was only to be seen how Mr. Jaitley and his government would go about restarting the beleaguered economy after taking the toughest decision of demonetization, that brought the economy to a near standstill.

By: Navneet Dubey | Published: February 3, 2017 10:14 AM
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demonatisation, GST, Union Budget, budget 2017, investments, digital payments, tax, taxation, lending rates, GDPOne may wonder that how GDP can help a common man, but one should understand that GDP measures how fast an economy is growing.

This year’s budget was expected to be a common man’s budget. It was only to be seen how Mr. Jaitley and his government would go about restarting the beleaguered economy after taking the toughest decision of demonetization, that brought the economy to a near standstill.

During his budget speech, the FM said that we are a non-tax compliant economy. Almost, 99 lakh people declare an income that is below Rs 2.5 lakh, 50 lakh people declare income above Rs 5 lakh and only 24 lakh people declare income above Rs 10 lakh. However, it is heartening to know that the demonetisation move has come up with various benefits for a common man.

We are taking a look at some of the things to understand how demonetisation and GST can benefit us:

Higher GDP Growth: One may wonder that how GDP can help a common man, but one should understand that GDP measures how fast an economy is growing. Quarterly growth is compared to measure the ongoing growth of the economy. As the economy grows, it directly impacts the growth of citizens. Growth in GDP will help in creating jobs. Arun Jaitley in his current budget announced various aspects of GDP like investments, consumption, government spending and said that current account deficit declined from .3% to 1 of GDP.

“In the aftermath of demonetisation drive, the union budget had fuelled our expectations to soar high. The budget 2017 focused on the overall theme of — Transform, Energise and Clean India (TEC India). Under TEC India, the government has introduced 10 different sub-themes to transform various sectors in India, energise & empower the youth, women and underprivileged sector. A GDP growth rate pegged at 6.75-7.5 per cent for 2017-18 is encouraging. The Finance Minister has ensured adherence to economic growth by targeting to keep the fiscal deficit to 3.2% of GDP,” says Yashish Dahiya- Co-Founder and CEO, Policybazaar.com.

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Budget 2017: If Trump cuts, Then India May Have To Reduce Corporate Tax As Well, Says Gaurav Karnik Of EY

 

Development of poor people: The government is going to increase the spending on infrastructure, rural economy, housing and agriculture which will help in making a better economy in the coming few months. This Budget has already followed several initiatives and has preserved its continuity since the beginning. Over Rs.3lakh cr are being spent in the rural area, establishing gram panchayat in villages at a wider level to maintain and create harmonious growth in small villages. The FM also said, “The government is planning to double the income of farmers in the coming years”. And at least providing 100 days employment will be granted to farmers. Various spending has been done in regards to providing houses to poor people in rural areas.

Reducing lending rates: Demonatisation will help in decreasing the lending rates which help customers by providing housing loans at low rates. Various schemes are already launched by the prime minister earlier. “The reduction in holding period for land & building for computation of long term capital gain from 3 years to 2 years will spur the sale/purchase activity in the Real-Estate sector,” says Anil Chopra- Group CEO & Director, Bajaj Capital.

Job Opportunity: Whether in any of the sector, FM Arun Jaitley has focused on creating job opportunities which is a very good step keeping in mind that India’s major population consists of youth. He said in his budget that he has formulated various strategies to increase jobs in the public sector. Not only this he has also lowered the taxes of corporates to 25%, which means somewhere indirectly he wants to create jobs in private sectors too by lowering the tax burden levied upon them.

“It is surprising that those with an annual income of Rs. 1 crore or above will also get relief of Rs. 12,500. However, the biggest benefit will accrue to Small & Medium corporates whose annual turnover is less than Rs. 50 crore per annum as their Income Tax rates have been reduced from 30% to 25%. This will encourage entrepreneurship & growth of small business, and help in job creation,” says Chopra.

Personal Tax Slabs After Budget 2017: How Will Your Tax Come Down?

Promote higher investments: In his budget, the FM announced a new pension scheme for senior citizens with 8% guaranteed return (for 10 years) which will help provide some relief to retired people, especially during the current falling interest rate regime.

“On personal taxes, the 5% reduction in income tax rates for people earning below Rs 5 lakh will provide some relief for middle classes. As this segment has the highest Marginal Propensity to Consume (MPC), it may help boost consumer spending. Private investments through lower credits were one of the main criteria in his budget.

“Providing infrastructure status to affordable housing projects will encourage more builders/promoters to focus on this segment, thereby increasing the supply for the middle classes in the near future,” says Naveen Kukreja – CEO& Co-founder, Paisabazaar.com.

Digital payments & GST: The budget 2017-18 reflects the government’s continuous efforts to move towards less cash economy and bringing transparency in value chain through digital payments & GST. The digital transaction will also help in increasing the investments opportunity. BHIM and Aadhaar payments applications are coming up with bonus schemes. Aadhaar pay is also going to be launched who do not have a mobile phone, credit card or debit card. Aadhaar card users will get medical benefits and insurance benefit.

“The budget has stressed upon the importance of strengthening India’s digital economy by bringing down the cost of digital infrastructure. The acceleration of PoS infrastructure with 10 Lakh PoS machines by March 2017 and another 20 Lakh Aadhaar based PoS by September 2017 is a reflection of pushing digital payments at last mile by 300% from the current base of 15 Lakh PoS achieved so far in last 20 years. The decision to exempt duty on various POS machines will help in reducing a cost of digital infrastructure implementation and benefits companies like Oxigen.” says Pramod Saxena – Chairman & Managing Director, Oxigen Services

Does Budget 2017 Incentivise Investment Into Housing Or Not?

Through the launch of GST, there may be a good news coming for people who like to watch movies on a big screen. Ticket prices may go down due to the standardisation in tax rates. “An industry that is audience led, with the GST finally getting implemented this April, ticket prices will go down by 15-20% which in turn will increase the demand and consumption by the audience. Overall, with the rollout of GST, access to digital media and a strong action against film piracy bring a lot of promise for the M&E Industry,” said Ranjit Thakur, Founder and CEO, Media Konnect.

earlier. “The reduction in holding period for land & building for computation of long term capital gain from 3 years to 2 years will spur the sale/purchase activity in the Real-Estate sector,” says Anil Chopra- Group CEO & Director, Bajaj Capital.

Job Opportunity: Whether in any of the sector, FM Arun Jaitley has focused on creating job opportunities which is a very good step keeping in mind that India’s major population consists of youth. He said in his budget that he has formulated various strategies to increase jobs in the public sector. Not only this he has also lowered the taxes of corporates to 25%, which means somewhere indirectly he wants to create jobs in private sectors too by lowering the tax burden levied upon them.

“It is surprising that those with an annual income of Rs. 1 crore or above will also get relief of Rs. 12,500. However, the biggest benefit will accrue to Small & Medium corporates whose annual turnover is less than Rs. 50 crore per annum as their Income Tax rates have been reduced from 30% to 25%. This will encourage entrepreneurship & growth of small business, and help in job creation,” says Chopra.

Source : Financial Express

Budget 2017: Plan to simplify labour laws irks industry : 03-02-2017


Finance minister Arun Jaitley’s announcement in the budget that the government intends to simplify labour laws hasn’t gone down well with the industry, which is apprehensive about action on the ground in the absence of any deadline given to rationalise the 44 labour laws.

Work on the four labour codes began immediately after the BJP-led NDA government came to power in May 2014 and at least two codes, the labour code on wages and the labour code onindustrial relations, are pending for Cabinet’s approval for quite some time.

Prime Minister Narendra Modi had in his Independence Day speech last year talked about labour codes but the entire process was put on the backburner in view of the assembly elections in five states in early 2017.

“We are not sure whether any action will happen around this anytime soon because there was no sense of urgency in the budget announcement related to labour codes,” a labour expert in the staffing industry said, requesting not to be identified. The expert further said,

“We understand that there is a political challengeto it but we have to work our way around considering manufacturing is the biggest need of the hour and that will not kick-start unless we ease our labour laws.”

According to another expert, who also spoke on condition of anonymity, the budget announcement is only to soothe investors coming to India and any progress on labour reforms will be a tough task for the government.

“Labour codes were announced only to send a message to potential investors that the government is seriously pursuing labour reforms. However, the fact that no major labour reform has been undertaken in the last one year may be because of the fear of its repercussions on the assembly elections or lack of intent. This makes it very difficult for industry to believe the government’s intent to simplify labour laws,” the second person said.

Jaitley had said in his budget speech on Wednesday that legislative reforms will be undertaken to simplify, rationalise and amalgamate the existing labour laws into four codes – wages, industrial relations, social security and welfare, safety/working conditions. Archaic labour laws have been cited by foreign investors as a major obstacle to investment.

Source : PTI

Assessees can heave a sigh of relief! Draconian powers gone, there’s no flashback to 1961 : 03-02-2017


“Please note the department can even go back till 1961 to track untaxed income.” This was a grim warning sent out by an income-tax commissioner last year to a room-full of tax practitioners while hard-selling the first income declaration scheme (IDS). No one felt it was an empty threat as the law then had indeed given tax officers the power. But not anymore.

The 2017 Budget has proposed that this sweeping power of the assessing officer would now be taken back. The assessing officer can only reopen accounts which are not more than six years old – unless there is a search and survey by the department, which will then have the power to question the source of income generated as old as a decade ago.

It’s widely perceived that the somewhat draconian clause — allowing the department to question 40 or 50-year-old earnings and assets — was inserted by the government to drive people to come clean by availing the quasi-amnesty scheme. Even after the scheme closed, the power was retained by the department. Thus, there was a lurking fear of the taxman — partly because many had misplaced their old records and invoices.

“Many assessees can now heave a sigh of relief as the apprehended exercise of the power by the tax authorities will not be any more exercisable. Under Section 197(c) of The Finance Act, 2016, the government tried to acquire the power to reassess the income of the assessee beyond six years, being the time limit prescribed u/s 147 of I T Act, 1961. The validity of the said provision was doubted. It was apprehended that the tax officials will use this clause to reopen the cases right from 1961. The finance minister has withdrawn the said clause 197(c) w.e.f. 01.06.2016,” said senior chartered accountant Dilip Lakhani.

The general understanding, even after the IDS was over, was that if a notice for re-opening or regular assessment was received by an assesse, the escaped income could be taxable for the year for which the notice was issued. According to Mitil Chokshi, senior partner, Chokshi and Chokshi, “This could have resulted in tax being levied only in one year for accumulated income. Before that, one could not have been subject to re-opening for escaped income beyond six years unless there were foreign  assets/income involved where the department could go back up to 16 years. Now, in regular scrutiny they can go back up to 6 years as was the case earlier; but, in cases of search and survey it has been extended from six to 10 years if the escaped income per year exceeds Rs 50 lakh. This also means that those who did not opt for IDS and did not face an income-tax search cannot be questioned for any escaped income/assets beyond six years.”

Source : Economic Times

Notification No : 07/2017 Dated: 02-02-2017


Amendment In Notification No.25/2012 Service Tax, dated the 20th June, 2012 – 7/2017

GOVERNMENT OF INDIA MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

Notification No. 07/2017-Service Tax

New Delhi, the 2nd February, 2017

G.S.R.100 (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 20th June, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 467 (E), dated the 20th June, 2012, namely:-

1. In the said notification, in the opening paragraph,-

(i) in entry 9B, in item (a), the word “residential” shall be omitted;

(ii) after entry 23, the following entry shall be inserted, namely:-

“23A. Services provided to the Government by way of transport of passengers, with or without accompanied belongings, by air, embarking from or terminating at a Regional Connectivity Scheme Airport, against consideration in the form of Viability Gap Funding (VGF):

Provided that nothing contained in this entry shall apply on or after the expiry of a period of one year from the date of commencement of operations of the Regional Connectivity Scheme Airport as notified by the Ministry of Civil Aviation.”;

(iii) after entry 26C, the following entry shall be inserted, namely:-

“26D. Services of life insurance business provided or agreed to be provided by the Army, Naval and Air Force Group Insurance Funds to members of the Army, Navy and Air Force, respectively, under the Group Insurance Schemes of the Central Government;”;

(iv) for entry 30, the following entry shall be substituted with effect from the date on which the Finance Bill, 2017 receives assent of the President, namely:-

“30. Services by way of carrying out,-

(i) any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption; or

(ii) any intermediate production process as job work not amounting to manufacture or production in relation to –

(a) agriculture, printing or textile processing;

(b) cut and polished diamonds and gemstones; or plain and studded jewellery of gold and other precious metals, falling under Chapter 71 of the Central Excise Tariff Act, 1985 (5 of 1986);

(c) any goods excluding alcoholic liquors for human consumption, on which appropriate duty is payable by the principal manufacturer; or

(d) processes of electroplating, zinc plating, anodizing, heat treatment, powder coating, painting including spray painting or auto black, during the course of manufacture of parts of cycles or sewing machines upto an aggregate value of taxable service of the specified processes of one hundred and fifty lakh rupees in a financial year subject to the condition that such aggregate value had not exceeded one hundred and fifty lakh rupees during the preceding financial year;”.

2. In paragraph 2, after clause (y), the following clause shall be inserted with effect from the date on which the Finance Bill, 2017 receives assent of the President, namely: -

“(ya) “process amounting to manufacture or production of goods” means a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 (1 of 1944), or the Medicinal and Toilet Preparation (Excise Duties) Act, 1955(16 of 1955) or any process amounting to manufacture of opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any State Act for the time being in force;”.

3. Save as otherwise provided in this notification, this notification shall come into force on the 2nd of February, 2017.

[F. No. 334/7/2017-TRU]

(Mohit Tewari)

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 20th June, 2012 and last amended vide notification number 5/2017 – Service Tax, dated the 30th January, 2017, vide number G.S.R. 72 (E), dated the 30th January, 2017.

No. 203/01/2017 Dated: 02-02-2017


Mentioning of Minor Head Code for accounting of Refund

Circular No. 203/1/2017-Service Tax

F. No 137/22/2012-Service Tax (Pt. II)

Government of India Ministry of Finance Department of Revenue

Central Board of Excise & Customs

Service Tax Wing

Dated: 2nd February 2017

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/Central Excise Intelligence.

Director General of Audit/Tax Payer Services/Chief Commissioner AR CESTAT

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,

Sub: Mentioning of Minor Head Code for accounting of Refund- regarding

The Chief Controller of Accounts has informed that the format of List of Payments (LOP) of Refunds sent by many Central Excise and Service Tax Commissionerates to the Pay and Accounts Office (PAO herein) is not as per the format prescribed under the Annexure 9.5 with reference to Para-9.8.2 of the Manual on Accounting of Indirect Taxes (Manual herein after). In the format prescribed under the Manual, there are 11 columns and column No. 10 is specifically for mentioning the Minor Head code for accounting of refunds under the appropriate Service Head. LOP sent by many Commissionerates are not having such Minor head of account. In the absence of the minor/service wise head concerned, it is not possible to exactly identify the appropriate head of Account under which the service wise refunds are to be accounted for eventually leading to erroneous accounting.

2.  Hence it is requested that all Commissionerates of Service Tax/ Central Excise/ Customs may follow the prescribed format of List of Payments for refunds/drawback payments and send it to the respective PAOs on weekly basis i.e. on 7th, 14th and 21st of every month as prescribed under Para-9.8.2 of the Manual.

3.  Principal Chief Commissioners/Chief Commissioners may please ensure strict compliance of these instructions.

Yours faithfully

Dr. Gaurav Mittal

Officer on Special Duty

Service Tax Policy Wing

Phone no: 011-23095438

Enclosure: Annexure 9.5 as above

 

Annexure 9.5

(Refer para 9.8.2)

List of Payment of Revenue Refunds & Drawbacks etc.

S. No.

Name of the Party

Cheque No. & date

Amount

Commissionerate Code

Assesse Type CE/ST

Location code

FPB Code

Refund Bank Code

Minor Head Code

Indicator (Refund /Drawback)

1

2

3

4

5

6

7

8

9

10

11

Signature of Divisional Officer

Notification No. : 07/2017 [CE (NT)] Dated: 02-02-2017


RATE OF DUTY PAYABLE ON BRANDED TOBACCO AND JARDA – AMENDMENT IN NOTIFICATION NO. 16/2010-CE, DATED 27-2-2010

NOTIFICATION NO.7/2017-C.E.DATED 2-2-2017

In exercise of the powers conferred by sub-section (3) of section 3A of the Central Excise Act, 1944 (1 of 1944), 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. 16/2010-Central Excise, dated the 27th February, 2010, published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (i), vide number G.S.R. 118 (E), dated the 27th February, 2010, namely :—

In the said notification, —

(a) in the first paragraph,—
(i) for Table-1, the Note and the Illustrations, the following shall be substituted, namely:—

“TABLE-1

S. No. Retail sale price (Per pouch) Rate of duty per packing machine per month (Rupee in lakh)
Chewing Tobacco (other than Filter Khaini) Chewing tobacco (commonly known as Filter Khaini)
Upto 300 pouches per minute 301 to 450 pouches per minute 451 pouches per minute and above Any speed
(1) (2) (3) (4) (5) (6)
Without lime tube/lime pouches With lime tube/lime pouches Without lime tube/lime pouches With lime tube/lime pouches Without lime tube/lime pouches With lime tube/lime pouches
(3a) (3b) (4a) (4b) (5a) (5b)
1. Upto Re. 1.00 32.39 30.77 46.28 43.96 98.34 93.42 19.67
2. Exceeding Re. 1.00 but not exceeding Rs. 1.50 48.59 46.16 69.41 65.94 147.50 140.13 29.50
3. Exceeding Re. 1.50 but not exceeding Rs. 2.00 58.31 55.07 83.30 78.67 177.01 167.17 37.37
4 Exceeding Re. 2.00 but not exceeding Rs. 3.00 87.46 82.60 124.94 118.00 265.51 250.76 53.25
5 Exceeding Re. 3.00 but not exceeding Rs. 4.00 108.84 102.36 155.49 146.23 330.41 310.74 67.45
6 Exceeding Re. 4.00 but not exceeding Rs. 5.00 136.05 127.95 194.36 182.79 413.01 388.43 80.10
7 Exceeding Re. 5.00 but not exceeding Rs. 6.00 163.26 153.54 233.23 219.35 495.61 466.11 91.31
8 Exceeding Re. 6.00 but not exceeding Rs. 7.00 259.14 242.95 370.21 347.07 786.69 737.52 101.20
9 Exceeding Re. 7.00 but not exceeding Rs. 8.00 259.14 242.95 370.21 347.07 786.69 737.52 109.87
10 Exceeding Re. 8.00 but not exceeding Rs. 9.00 259.14 242.95 370.21 347.07 786.69 737.52 117.43
11 Exceeding Re. 9.00 but not exceeding Rs. 10.00 259.14 242.95 370.21 347.07 786.69 737.52 123.95
12 Exceeding Re. 10.00 but not exceeding Rs. 15.00 365.39 347.12 521.99 495.89 1109.23 1053.77 123.95+12. 40 x (P-10)
13 Exceeding Re. 15.00 but not exceeding Rs. 20.00 457.96 435.06 654.23 621.52 1390.24 1320.73
14 Exceeding Re. 20.00 but not exceeding Rs. 25.00 538.10 511.20 768.72 730.28 1633.53 1551.85
15 Exceeding Re. 25.00 but not exceeding Rs. 30.00 606.98 576.63 867.12 823.76 1842.62 1750.49
16 Exceeding Re. 30.00 but not exceeding Rs. 35.00 665.66 632.37 950.94 903.39 2020.74 1919.70
17 Exceeding Re. 35.00 but not exceeding Rs. 40.00 715.10 679.35 1021.58 970.50 2170.85 2062.31
18 Exceeding Re. 40.00 but not exceeding Rs. 45.00 756.22 718.41 1080.32 1026.30 2295.68 2180.89
19 Exceeding Re. 45.00 but not exceeding Rs. 50.00 789.83 750.34 1128.33 1071.92 2397.71 2277.82
20 Above Rs. 50.00 789.83+15 80× (P-50) 750.34+15 .01 × (P-50) 1128.33+2 2.57 × (P-50) 1071.32+2 1.44× (P-50) 2397.71+4 7.95× (P-50) 2277.82+4 5.56 × (P-50)
Where ‘P’ above represents retail sale price of the pouch for which rate of duty is to be determined.
Note:- For the purposes of entry in column (6), against Sl.No.12, the entry in column (2) shall be read as Rs. 10.01 and above.
Illustration 1:— The rate of duty per packing machine per month for a chewing tobacco (other than filter khaini) pouch not containing lime tube having retail sale price of Rs.55.00 (i.e. ‘P’) packed with the aid of a machine having maximum packing speed, at which it can be operated for packing of chewing tobacco (other than filter khaini) pouch of the said retail sale price, of 450 pouches per minute, shall be = Rs. 1128.33 +22.57 x (55-50) lakh = Rs. 1241.18 lakh.
Illustration 2:— The rate of duty per packing machine per month for a filter khaini pouch having retail sale price of Rs.15.00 (i.e. ‘P’) packed with the aid of a machine having any maximum packing speed shall be = 123.95+12.40 x (15-10)= Rs. 185.95 lakh.”;
(ii) for TABLE-2 and the Illustration, the following shall be substituted, namely :—

“TABLE-2

S. No. Retail sale price (per pouch) Rate of duty per packing machine per month (rupees in lakh)
Jarda Scented Tobacco Unmanufactured Tobacco
Upto 300 pouches per minute 301 to 450 pouches per minute 451 pouches per minute and above Any speed
(1) (2) (3) (4) (5) (6)
Without lime tube/ lime pouches With lime tube/lime pouches
(6a) (6b)
1 Up to Re. 1.00 32.39 46.28 98.34 16.24 15.43
2 Exceeding Re. 1.00 but not exceeding Rs. 1.50 48.59 69.41 147.50 24.36 23.14
3 Exceeding Rs. 1.50 but not exceeding Rs. 2.00 58.31 83.30 177.01 29.23 27.61
4 Exceeding Rs. 2.00 but not exceeding Rs. 3.00 87.46 124.94 265.51 43.85 41.42
5 Exceeding Rs. 3.00 but not exceeding Rs. 4.00 108.84 155.49 330.41 54.57 51.32
6 Exceeding Rs. 4.00 but not exceeding Rs. 5.00 136.05 194.36 413.01 68.21 64.15
7 Exceeding Rs. 5.00 but not exceeding Rs. 6.00 163.26 233.23 495.61 81.86 76.98
8 Exceeding Rs. 6.00 but not exceeding Rs. 7.00 259.14 370.21 786.69 129.93 121.81
9 Exceeding Rs. 7.00 but not exceeding Rs. 8.00 259.14 370.21 786.69 129.93 121.81
10 Exceeding Rs. 8.00 but not exceeding Rs. 9.00 259.14 370.21 786.69 129.93 121.81
11 Exceeding Rs. 9.00 but not exceeding Rs. 10.00 259.14 370.21 786.69 129.93 121.81
12 Exceeding Rs. 10.00 but not exceeding Rs. 15.00 365.39 521.99 1109.23 183.20 174.04
13 Exceeding Rs. 15.00 but not exceeding Rs. 20.00 457.96 654.23 1390.24 229.62 218.13
14 Exceeding Rs. 20.00 but not exceeding Rs. 25.00 538.10 768.72 1633.53 269.80 256.31
15 Exceeding Rs. 25.00 but not exceeding Rs. 30.00 606.98 867.12 1842.62 304.33 289.12
16 Exceeding Rs. 30.00 but not exceeding Rs. 35.00 665.66 950.94 2020.74 333.75 317.06
17 Exceeding Rs. 35.00 but not exceeding Rs. 40.00 715.10 1021.58 2170.85 358.54 340.62
18 Exceeding Rs. 40.00 but not exceeding Rs. 45.00 756.22 1080.32 2295.68 379.16 360.20
19 Exceeding Rs. 45.00 but not exceeding Rs. 50.00 789.83 1128.33 2397.71 396.01 376.21
20 Above Rs. 50.00 789.83+15.80x (P-50) 1128.33+22.57 x (P-50) 2397.71+47.95x (P-50) 396.01+7.92 x (P-50) 376.21+7.52 x (P-50)
Where ‘P’ above represents retail sale price of the pouch for which rate of duty is to be determined.
Illustration :— The rate of duty per packing machine per month for a jarda scented tobacco pouch having retail sale price of Rs. 55.00 (i.e. ‘P’) packed with the aid of a machine having maximum packing speed, at which it can be operated for packing of jarda scented tobacco pouch of the said retail sale price, of 400 pouches per minute, shall be = Rs. 1128.33+22.57 x (55-50) = Rs. 1241.18 lakh.”;
(b) in paragraph 3, for Table-3, the following shall be substituted, namely :—

“TABLE-3

S. No. Duty Duty ratio for Unmanufactured Tobacco Duty ratio for Chewing Tobacco/ Jarda Scented Tobacco/Filter Khaini
(1) (2) (3) (4)
1 The duty leviable under the Central Excise Act, 1944 (1 of 1944) 0.8852 0.7864
2 The additional duty of excise leviable under section 85 of the Finance Act, 2005 (18 of 2005) 0.1148 0.1165
3 National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001 (14 of 2001) 0.0 0.0971
4 Education Cess leviable under section 91 of the Finance Act, 2004 (23 of 2004) 0.0 0.0
5 Secondary and Higher Education Cess leviable under section 136 of the Finance Act, 2007 (22 of 2007) 0.0 0.0.”.

Notification No. : 06/2017 [CE (NT)] Dated: 02-02-2017


SECTION 5A OF THE CENTRAL EXCISE ACT, 1944 – EXEMPTION FROM DUTY OF EXCISE – POWER TO GRANT -EXEMPTION TO SPECIFIED EXCISABLE GOODS – PROVISION OF CONCESSIONAL RATE OF CENTRAL EXCISE DUTY ON SPECIFIED GOODS – SUPERSESSION OF NOTIFICATIONS NO.3/2005-C.E., DATED 24-2-2005; NO.3/2006-C.E., NO.4/2006-C.E., NO.5/2006-C.E., NO.6/2006-C.E. AND NO.10/2006-C.E., ALL DATED 1-3-2006 - AMENDMENT IN NOTIFICATION NO.12/2012-C.E., DATED 17-3-2012

NOTIFICATION NO.6/2017-C.E.DATED 2-2-2017

In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), 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.12/2012-Central Excise, dated the 17th March, 2012, published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (i) vide number G.S.R. 163(E), dated the 17th March, 2012, namely:—

In the said notification,—

(a) in the opening paragraph,—
(i) in the eighth proviso, for the figures, letters and words “31st day of March, 2017″, the figures, letters and words “30th day of June, 2017″ shall be substituted;
(ii) after the eighth proviso, the following proviso shall be inserted, namely :—
“Provided also that nothing contained in this notification shall apply to goods specified against serial numbers 145 B, 145C, 148AAA, 187 C, 187 D, 256 C and 321 A of the said Table after the 30th day of June, 2017.”;
(b) in the Table,
(i) against serial number 48, for the entry in column (3), the entry “All goods other than paper rolled biris” shall be substituted;
(ii) after serial number 48 and the entries relating thereto, the following serial numbers and entries shall be inserted, namely:—
(1) (2) (3) (4) (5)
“48A 2403 19 29 Hand made paper rolled biris Rs.28 per thousand -
48B 2403 19 29 Machine made paper rolled biris Rs.78 per thousand -”;
(iii) against serial number 128, for the entry in column (2), the entry “31 (except 3101)” shall be substituted;
(iv) after serial number 145A and the entries relating thereto, the following serial numbers and entries shall be inserted, namely :—
(1) (2) (3) (4) (5)
“145 B 3815 90 00 Catalyst for use in the manufacture of cast components of Wind Operated Electricity Generator Nil 53
145 C 3909 40 90 Resin for use in the manufacture of cast components of Wind Operated Electricity Generator Nil 53″;
(v) after serial number 148AA and the entries relating thereto, the following serial number and entries shall be inserted, namely:—
(1) (2) (3) (4) (5)
“148AAA 3921 1900 Membrane Sheet and Tricot/spacer for use in the manufacture of Reverse Osmosis (RO) membrane for household type filters 6% 2″;
(vi) for serial number 187C and the entries relating thereto, the following serial numbers and entries shall be substituted, namely :—
(1) (2) (3) (4) (5)
“187C 70 Solar tempered glass for use in the manufacture of:-

(a) solar photovoltaic cells or modules;
(b) solar power generating equipment or systems;
(c) flat plate solar collectors;
(d) solar photovoltaic module and panel for water pumping and other applications.
6% 2
187D Any Chapter Parts/Raw material for use in the manufacture of Solar tempered glass for use in:—

(a) solar photovoltaic cells or modules;
(b) solar power generating equipment or systems;
(c) flat plate solar collectors;
(d) solar photovoltaic module and panel for water pumping and other applications.
6% 2″;
(vii) for serial number 195 and the entries relating thereto, the following serial number and entries, shall be substituted, namely:—
(1) (2) (3) (4) (5)
“195 7105 or 7112 (i) Dust and powder of natural precious or semi-precious stones; Nil -
(ii) waste and scrap of precious metals or metals clad with precious metals, arising in course of manufacture of goods falling in Chapter 71. Nil 52A”;
(viii) against serial number 196, for the entry in column (5), the entry “52A” shall be substituted;
(ix) in serial number 199, against item (III) of column (3), for the entry in column (5), the entry “52A” shall be substituted;
(x) in serial number 200, against item (III) of column (3), for the entry in column (5), the entry “52A” shall be substituted;
(xi) after serial number 256 B and the entries relating thereto, the following serial number and entries shall be inserted, namely:—
(1) (2) (3) (4) (5)
“256C 84 or 85 The following goods, namely :—
(i) Micro ATMs as per standards version 1.5.1;
Nil -
(ii) Fingerprint reader/scanner;
Nil -
(iii) Iris scanner;
Nil -
(iv) Miniaturised POS card reader for mPOS (other than Mobile phone or Tablet Computer);
Nil -
(v) Parts and components for use in the manufacture of the goods mentioned at (i) to (iv) above.
Nil 2″;
(xii) for serial number 321A and the entries relating thereto, the following serial number and entries shall be substituted, namely:—
(1) (2) (3) (4) (5)
“321 A Any Chapter All parts for use in the manufacture of LED lights or fixtures including LED Lamps 6% 2″;
(xiii) for serial number 332A and the entries relating thereto, the following serial number and entries shall be substituted, namely :—
(1) (2) (3) (4) (5)
“332A Any Chapter Parts (except solar tempered glass) consumed within the factory of production for the manufacture of goods specified in List 8 Nil 2

Notification No. : 07/2017 Dated: 02-02-2017


Amendment In Notification No. 16/2010-Central Excise, dated the 27th February, 2010 – 07/2017 – Central Excise – Tariff

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(Department of Revenue)

Notification No. 07/2017-Central Excise

New Delhi, the 2nd February, 2017

G.S.R. 95 (E).- In exercise of the powers conferred by sub-section (3) of section 3A of the Central Excise Act, 1944 (1 of 1944), 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. 16/2010-Central Excise, dated the 27th February, 2010, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 118 (E), dated the 27th February, 2010, namely :-

In the said notification, -

(a) in the first paragraph,-

(i)  for Table-1, the Note and the Illustrations, the following shall be substituted, namely:-

“TABLE-1

S. No.

Retail  sale price

(Per pouch)

Rate of duty per packing machine per month (Rupee in lakh)

Chewing Tobacco (other than Filter Khaini)

Chewing tobacco (commonly known as Filter Khaini)

Upto 300 pouches per minute

301 to 450 pouches per minute

451 pouches per minute and above

Any speed

(1)

(2)

(3)

(4)

(5)

(6)

Without lime tube/lime pouches

With  lime tube/lime pouches

Without lime tube/lime pouches

With lime tube/lime pouches

Without lime tube/lime pouches

With  lime tube/lime pouches

(3a)

(3b)

(4a)

(4b)

(5a)

(5b)

1 Upto Re.1.00 32.39 30.77 46.28 43.96 98.34 93.42 19.67
2 Exceeding Re. 1.00 but not exceeding ₹ 1.50 48.59 46.16 69.41 65.94 147.50 140.13 29.50
3 Exceeding Re. 1.50 but not exceeding ₹ 2.00 58.31 55.07 83.30 78.67 177.01 167.17 37.37
4 Exceeding Re. 2.00 but not exceeding ₹ 3.00 87.46 82.60 124.94 118.00 265.51 250.76 53.25
5 Exceeding Re. 3.00 but not exceeding ₹ 4.00 108.84 102.36 155.49 146.23 330.41 310.74 67.45
6 Exceeding Re. 4.00 but not exceeding ₹ 5.00 136.05 127.95 194.36 182.79 413.01 388.43 80.10
7 Exceeding Re. 5.00 but not exceeding ₹ 6.00 163.26 153.54 233.23 219.35 495.61 466.11 91.31
8 Exceeding Re. 6.00 but not exceeding ₹ 7.00 259.14 242.95 370.21 347.07 786.69 737.52 101.20
9 Exceeding Re. 7.00 but not exceeding ₹ 8.00 259.14 242.95 370.21 347.07 786.69 737.52 109.87
10 Exceeding Re. 8.00 but not exceeding ₹ 9.00 259.14 242.95 370.21 347.07 786.69 737.52 117.43
11 Exceeding Re. 9.00 but not exceeding ₹ 10.00 259.14 242.95 370.21 347.07 786.69 737.52 123.95
12 Exceeding Re. 10.00 but not exceeding ₹ 15.00 365.39 347.12 521.99 495.89 1109.23 1053.77 123.95+12. 40 x(P-10)
13 Exceeding Re. 15.00 but not exceeding ₹ 20.00 457.96 435.06 654.23 621.52 1390.24 1320.73
14 Exceeding Re. 20.00 but not exceeding ₹ 25.00 538.10 511.20 768.72 730.28 1633.53 1551.85
15 Exceeding Re. 25.00 but not exceeding ₹ 30.00 606.98 576.63 867.12 823.76 1842.62 1750.49
16 Exceeding Re. 30.00 but not exceeding ₹ 35.00 665.66 632.37 950.94 903.39 2020.74 1919.70
17 Exceeding Re. 35.00 but not exceeding ₹ 40.00 715.10 679.35 1021.58 970.50 2170.85 2062.31
18 Exceeding Re. 40.00 but not exceeding ₹ 45.00 756.22 718.41 1080.32 1026.30 2295.68 2180.89
19 Exceeding Re. 45.00 but not exceeding ₹ 50.00 789.83 750.34 1128.33 1071.92 2397.71 2277.82
20 Above ₹ 50.00 789.83+15.80x (P-50) 750.34+15 .01 x (P-50) 1128.33+2 2.57 x (P50) 1071.32+2 1.44x (P50) 2397.71+47.95x (P50) 2277.82+4 5.56 x (P50)
Where ‘P’ above represents retail sale price of the pouch for which rate of duty is to be determined.

Note:- For the purposes of entry in column (6), against Sl.No.12, the entry in column (2) shall be read as ₹ 10.01 and above.

Illustration 1:- The rate of duty per packing machine per month for a chewing tobacco (other than filter khaini) pouch not containing lime tube having retail sale price of ₹ 55.00 (i.e. ‘P’) packed with the aid of a machine having maximum packing speed, at which it can be operated for packing of chewing tobacco (other than filter khaini) pouch of the said retail sale price, of 450 pouches per minute, shall be = ₹ 1128.33 +22.57 x (55-50) lakh = ₹ 1241.18 lakh.

Illustration 2:- The rate of duty per packing machine per month for a filter khaini pouch having retail sale price of ₹ 15.00 (i.e. ‘P’) packed with the aid of a machine having any maximum packing speed shall be = 123.95+12.40 x (15-10)= ₹ 185.95 lakh.”;

(ii) for TABLE-2 and  the Illustration, the following shall be substituted, namely :-

“TABLE-2

S.No.

Retail sale price (per pouch)

Rate of duty per packing machine per month (rupees in lakh)

Jarda Scented Tobacco

Unmanufactured Tobacco

Upto 300 pouches per minute

301 to 450 pouches per minute

451 pouches per minute and above

Any speed

(1)

(2)

(3)

(4)

(5)

(6)

Without lime tube/ lime pouches

With lime tube/lime pouches

(6a)

(6b)

1

Up to Re. 1.00

32.39

46.28

98.34

16.24

15.43

2

Exceeding Re. 1.00 but not exceeding ₹ 1.50

48.59

69.41

147.50

24.36

23.14

3

Exceeding ₹ 1.50 but not exceeding ₹ 2.00

58.31

83.30

177.01

29.23

27.61

4

Exceeding ₹ 2.00 but not exceeding ₹ 3.00

87.46

124.94

265.51

43.85

41.42

5

Exceeding ₹ 3.00 but not exceeding ₹ 4.00

108.84

155.49

330.41

54.57

51.32

6

Exceeding ₹ 4.00 but not exceeding ₹ 5.00

136.05

194.36

413.01

68.21

64.15

7

Exceeding ₹ 5.00 but not exceeding ₹ 6.00

163.26

233.23

495.61

81.86

76.98

8

Exceeding ₹ 6.00 but not exceeding ₹ 7.00

259.14

370.21

786.69

129.93

121.81

9

Exceeding ₹ 7.00 but not exceeding ₹ 8.00

259.14

370.21

786.69

129.93

121.81

10

Exceeding ₹ 8.00 but not exceeding ₹ 9.00

259.14

370.21

786.69

129.93

121.81

11

Exceeding ₹ 9.00 but not exceeding ₹ 10.00

259.14

370.21

786.69

129.93

121.81

12

Exceeding ₹ 10.00 but not exceeding ₹ 15.00

365.39

521.99

1109.23

183.20

174.04

13

Exceeding ₹ 15.00 but not exceeding ₹ 20.00

457.96

654.23

1390.24

229.62

218.13

14

Exceeding ₹ 20.00 but not exceeding ₹ 25.00

538.10

768.72

1633.53

269.80

256.31

15

Exceeding ₹ 25.00 but not exceeding ₹ 30.00

606.98

867.12

1842.62

304.33

289.12

16

Exceeding ₹ 30.00 but not exceeding ₹ 35.00

665.66

950.94

2020.74

333.75

317.06

17

Exceeding ₹ 35.00 but not exceeding ₹ 40.00

715.10

1021.58

2170.85

358.54

340.62

18

Exceeding ₹ 40.00 but not exceeding ₹ 45.00

756.22

1080.32

2295.68

379.16

360.20

19

Exceeding ₹ 45.00 but not exceeding ₹ 50.00

789.83

1128.33

2397.71

396.01

376.21

20

Above ₹ 50.00

789.83+15.80x (P-50)

1128.33+22.57 x (P-50)

2397.71+47.95x (P-50)

396.01+7.92 x (P-50)

376.21+7.52 x (P-50)

Where ‘P’ above represents retail sale price of the pouch for which rate of duty is to be determined.

Illustration :- The rate of duty per packing machine per month for a jarda scented tobacco pouch having retail sale price of ₹ 55.00 (i.e. ‘P’) packed with the aid of a machine having maximum packing speed, at which it can be operated for packing of jarda scented tobacco pouch of the said retail sale price, of 400 pouches per minute, shall be = ₹ 1128.33+22.57 x(55-50) = ₹ 1241.18 lakh.”;

(b) in paragraph 3, for Table-3, the following shall be substituted, namely :-

“TABLE-3

S.No.

Duty

Duty ratio for Unmanufactured Tobacco

Duty ratio for Chewing Tobacco/ Jarda Scented Tobacco/Filter Khaini

(1)

(2)

(3)

(4)

1

The duty leviable under the Central Excise Act, 1944 (1 of 1944)

0.8852

0.7864

2

The additional duty of excise leviable under section 85 of the Finance Act, 2005 (18 of 2005)

0.1148

0.1165

3

National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001 (14 of 2001)

0.0

0.0971

4

Education Cess leviable under section 91 of the Finance Act, 2004 (23 of 2004)

0.0

0.0

5

Secondary and Higher Education Cess leviable under section 136 of the Finance Act, 2007 (22 of 2007)

0.0

0.0.”.

[F.No. 334 /7/2017 –TRU]

(Mohit Tewari)

Under Secretary to the Government of India

Note: - The principal notification No. 16/2010-Central Excise, dated the 27th February, 2010 was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 118 (E), dated the 27th February, 2010 and last amended vide notification No. 16/2016 Central Excise, dated the 1st March, 2016, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 233 (E), dated the 1st March, 2016.

Notification No. : 06/2017 Dated: 02-02-2017


Amendment In Notification No. 12/2012-Central Excise, dated the 17th March, 2012 – 06/2017 – Central Excise – Tariff

GOVERNMENT OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE)

Notification No. 06/2017-Central Excise

New Delhi, the 2nd February, 2017

G.S.R. 94 (E). - In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), 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.12/2012-Central Excise, dated the 17th March, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 163(E), dated the 17th March, 2012, namely: -

In the said notification,-

(a) in the opening paragraph,-

(i) in the eighth proviso, for the figures, letters and words “31st day of March, 2017”, the figures, letters and words “30th day of June, 2017” shall be substituted;

(ii) after the eighth proviso, the following proviso shall be inserted, namely :-

Provided also that nothing contained in this notification shall apply to goods specified against serial numbers 145 B, 145C, 148AAA, 187 C, 187 D, 256 C and 321 A of the said Table after the 30th day of June, 2017.”;

(b) in the Table,

(i) against serial number 48, for the entry in column (3), the entry “All goods other than paper rolled biris” shall be substituted; 

(ii) after serial number 48 and the entries relating thereto, the following serial numbers and entries shall be inserted, namely:-

(1)

(2)

(3)

(4)

(5)

“48A 2403 19 29 Hand made paper rolled biris Rs.28 per thousand -
48B 2403 19 29 Machine made paper rolled biris Rs.78 per thousand -”;

(iii) against serial number 128, for the entry in column (2), the entry “31 (except 3101)” shall be substituted; 

(iv) after serial number 145A and the entries relating thereto, the following serial numbers and entries shall be inserted, namely :-

(1)

(2)

(3)

(4)

(5)

“145 B 3815 90 00 Catalyst for use in the manufacture of cast components of Wind Operated Electricity Generator Nil 53
145 C 3909 40 90 Resin for use in the manufacture of cast components of Wind Operated Electricity Generator Nil 53”;

(v) after serial number 148AA and the entries relating thereto, the following serial number and entries shall be inserted, namely:-

(1)

(2)

(3)

(4)

(5)

“148AAA 3921 19 00 Membrane Sheet and Tricot / spacer for use in the manufacture of Reverse Osmosis (RO) membrane for household type filters 6% 2”;

(vi) for serial number 187C and the entries relating thereto, the following serial numbers and entries shall be substituted, namely :-

(1)

(2)

(3)

(4)

(5)

“187C 70 Solar tempered glass for use in the manufacture of:-

(a) solar photovoltaic cells or modules;

(b) solar power generating equipment or systems;

(c) flat plate solar collectors;

(d) solar photovoltaic module and panel for water pumping and other applications.

6% 2
187D Any Chapter Parts / Raw material for use in the manufacture of

Solar tempered glass for use in:-

(a) solar photovoltaic cells or modules;

(b) solar power generating equipment or systems;

(c) flat plate solar collectors; solar photovoltaic module and panel for water pumping and other applications.

6% 2”;

(vii) for serial number 195 and the entries relating thereto, the following serial number and entries, shall be substituted, namely:-

(1) (2) (3) (4) (5)
“195 7105 or 7112 (i) Dust and powder of natural precious or semiprecious stones;

(ii) waste and scrap of precious metals or metals clad with precious metals, arising in course of manufacture of goods falling in Chapter 71.

Nil

Nil

-

52A”;

(viii) against serial number 196, for the entry in column (5), the entry “52A” shall be substituted;

(ix) in serial number 199, against item (III) of column (3), for the entry in column (5), the entry “52A” shall be substituted;

(x) in serial number 200, against item (III) of column (3), for the entry in column (5), the entry “52A” shall be substituted;

(xi) after serial number 256 B and the entries relating thereto, the following serial number and entries shall be inserted, namely:-

(1)

(2)

(3)

(4)

(5)

“256C 84 or 85 The following goods, namely :-

(i) Micro ATMs as per standards version 1.5.1;

(ii) Fingerprint reader / scanner;

(iii) Iris scanner;

(iv) Miniaturised POS card reader for mPOS  (other than Mobile phone or Tablet Computer);

(v) Parts and components for use in the manufacture of the goods mentioned at (i) to (iv) above.

 

Nil

Nil

Nil

Nil

Nil

 

-

-

-

-

2”;

(xii) for serial number 321A and the entries relating thereto, the following serial number and entries shall be substituted, namely:-

(1)

(2)

(3)

(4)

(5)

“321 A Any Chapter All parts for use in the manufacture of LED lights or fixtures including LED Lamps 6% 2”;

(xiii) for serial number 332A and the entries relating thereto, the following serial number and entries shall be substituted, namely :-

(1) (2) (3) (4) (5)
“332A Any Chapter Parts (except solar tempered glass) consumed within the factory of production for the manufacture of goods specified in List 8 Nil 2”.

[F.No.334/7/2017 -TRU]

(Mohit Tewari) 

Under Secretary to the Government of India 

Note.- The principal notification was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 163(E), dated the 17th March, 2012 vide No. 12/2012-Central Excise, dated the 17th March, 2012 and was last amended vide number G.S.R. 22 (E), dated the 11th January 2017 vide notification No. 02/2012-Central Excise, dated the 11th January 2017.

Notification No. : 05/2017 [CE (NT)] Dated: 02-02-2017


CENTRAL EXCISE (AMENDMENT) RULES, 2017 – AMENDMENT IN RULE 21

NOTIFICATION NO.5/2017-C.E. (N.T.)DATED 2-2-2017

In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944), the Central Government hereby makes the following rules further to amend the Central Excise Rules, 2002, namely:—

1. (1) These rules may be called the Central Excise (Amendment) Rules, 2017.

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

2. In the Central Excise Rules, 2002, rule 21 shall be re-numbered as sub-rule (1) thereof, and after sub-rule (1) as so re-numbered, the following sub-rule shall be inserted, namely:—

“(2) The authority referred to in sub-rule (1) shall, within a period of three months from the date of receipt of an application, decide the remission of duty:

Provided that the period specified in this sub-rule may, on sufficient cause being shown and reasons to be recorded in writing, be extended by an authority next higher than the authority before whom the application for remission of duty is pending, for a further period not exceeding six months.”.

 

Notification No. : 04/2017 [CE (NT)] Dated: 02-02-2017


CENVAT CREDIT (AMENDMENT) RULES, 2017 – AMENDMENT IN RULES 6 AND 10

NOTIFICATION NO.4/2017-C.E. (N.T.)DATED 2-2-2017

In exercise of the powers conferred by section 37 of the Central Excise Act,1944 (1 of 1944) and section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the CENVAT Credit Rules, 2004, namely:—

1. (1) These rules may be called the CENVAT Credit (Amendment) Rules, 2017.

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

2. In the CENVAT Credit Rules, 2004 (hereinafter referred to as the said rules), in rule 6, in sub-rule (3D), in Explanation I, in clause (e), the following proviso shall be inserted, namely:—

“Provided that this clause shall not apply to a banking company and a financial institution including a non-banking financial company, engaged in providing services by way of extending deposits, loans or advances.”.

3. In rule 10 of the said rules, after sub-rule (3), the following sub-rule shall be inserted, namely:—

“(4) Subject to the provisions contained in sub-rule (3), the transfer of the CENVAT Credit shall be allowed within a period of three months from the date of receipt of application by the Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be:

Provided that the period specified in this sub-rule may, on sufficient cause being shown and reasons to be recorded in writing, be extended by the Principal Commissioner of Central Excise or Commissioner of Central Excise, as the case may be, for a further period not exceeding six months.”.

MAT extension a benefit for companies : 02-02-2017


The extension of the minimum alternate tax (MAT) credit carry forward period to 15 years from 10 years may come as a positive step for Indian companies even though there was a strong demand to scrap it, industry experts said.

The extension means MAT could be carried forward in the books of accounts for another five years. Currently MAT is at 18.5% on business income.

“There was an expectation that MAT would be removed completely. However, the increase in carry forward is a positive sign, too, for many companies,” said Samir Gandhi, a partner at Deloitte Haskins & Sells.

The government said it is not practical to remove or reduce MAT at present as the full benefit of its phase-out will be available only after seven to 10 years, when all those already availing of exemptions exhaust them.

Industry experts said this could also be a good step in the context of the new accounting standards, Ind-AS. With the implementation of Ind-AS, many transactions could start attracting MAT and they can now be set off for five years. There was concern that MAT liability would increase due to Ind-AS.

The extension could mean that companies will have a larger window to set off the accounting entry and it could mainly impact infrastructure companies

“Especially considering the large forthcoming investments in oil and gas, the measure will serve to de-risk some of the infrastructure projects in the sector,” said Anish De, a partner at KPMG in India.

Source : Financial Express

Notification No. : 03/2017 [CE (NT)] Dated: 02-02-2017


CHEWING TOBACCO AND UNMANUFACTURED TOBACCO PACKING MACHINES (CAPACITY DETERMINATION AND COLLECTION OF DUTY) AMENDMENT RULES, 2017 – AMENDMENT IN FORM NO.2

NOTIFICATION NO.3/2017-C.E. (N.T.)DATED 2-2-2017

In exercise of the powers conferred by sub-sections (2) and (3) of section 3A of the Central Excise Act, 1944 (1 of 1944), the Central Government hereby makes the following rules further to amend the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010, namely:—

1. (1) These rules may be called the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Amendment Rules, 2017.

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

2. In the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010, —

(i) in FORM-2, in serial number 4, in item (iv), after the Table and Illustration, for the Table, the following shall be substituted, namely:—

“TABLE

S. No. Duty Break-up of total duty (as per duty ratios already prescribed) CENVAT Credit available CENVAT Credit utilised for payment of duty Cash payment of duty
(1) (2) (3) (4) (5) (6)
1 The duty leviable under the Central Excise Act, 1944 (1 of 1944) 786408 10000 10000 776408
2 The additional duty of excise leviable under section 85 of the Finance Act, 2005 (18 of 2005) 116505 1000 1000 115505
3 National Calamity Contingent Duty leviable under section 5 of the Finance Act, 2001 (4 of 2001) 97087 1500 1500 95587
4 Education Cess leviable under section 91 of the Finance Act, 2004 (23 of 2004) 0.0 0.0 0.0 0.0
5 Secondary and Higher Education Cess leviable under section 136 of the Finance Act, 2007 (22 of 2007) 0.0 0.0 0.0 0.0
Total Duty 1000000 12500 12500 987500.”.

30 – 2-02-2017


RISK MANAGEMENT AND INTER-BANK DEALINGS – PERMITTING NON-RESIDENT INDIANS (NRIs) ACCESS TO EXCHANGE TRADED CURRENCY DERIVATIVES (ETCD) MARKET

A.P. (DIR SERIES 2016-17) CIRCULAR NO.30, DATED 2-2-2017

Attention of Authorised Dealers Category – I (AD Category – I) banks is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 (Notification No. FEMA. 25/RB-2000 dated May 3, 2000) issued under clause (h) of sub- section (2) of Section 47 of FEMA, 1999 (Act 42 of 1999), as amended from time to time and Master Direction on Risk Management and Inter-Bank Dealings dated July 5, 2016, as amended from time to time.

2. Currently NRIs are permitted to hedge their Rupee currency risk through OTC transactions with AD banks. With a view to enable additional hedging products for NRIs to hedge their investments in India, it has been decided to allow them access to the exchange traded currency derivatives market to hedge the currency risk arising out of their investments in India under FEMA, 1999. An announcement to this effect was made in the Monetary Policy Statement on April 5, 2016.

3. NRIs may access the ETCD market as per the following terms and conditions:

i. NRIs shall designate an AD Cat-I bank for the purpose of monitoring and reporting their combined positions in the OTC and ETCD segments.
ii. NRIs may take positions in the currency futures/exchange traded options market to hedge the currency risk on the market value of their permissible (under FEMA, 1999) Rupee investments in debt and equity and dividend due and balances held in NRE accounts.
iii. The exchange/clearing corporation will provide details of all transactions of the NRI to the designated bank.
iv. The designated bank will consolidate the positions of the NRI on the exchanges as well as the OTC derivative contracts booked with them and with other AD banks. The designated bank shall monitor the aggregate positions and ensure the existence of underlying Rupee currency risk and bring transgressions, if any, to the notice of RBI/SEBI.
v. The onus of ensuring the existence of the underlying exposure shall rest with the NRI concerned. If the magnitude of exposure through the hedge transactions exceeds the magnitude of underlying exposure, the concerned NRI shall be liable to such penal action as may be taken by Reserve Bank of India under the Foreign Exchange Management Act (FEMA), 1999.

4. Necessary amendments (Notification No. FEMA 378/2016-RB dated October 25, 2016) to Foreign Exchange Management (Foreign Exchange Derivatives Contracts) Regulations, 2000 (Notification No. FEMA.25/RB-2000 dated May 3, 2000) (Regulations) have been notified in the Official Gazette vide G.S.R. No. 1005 (E) dated October 25, 2016 a copy of which is given in the Annex I to this circular. These regulations have been issued under clause (h) of sub-section (2) of Section 47 of FEMA, 1999 (42 of 1999).

5. The Notifications No. FMRD.13/CGM (TRS) dated February 2, 2017 and No. FMRD. 14/CGM (TRS) – 2017 dated February 2, 2017 viz., Currency Futures (Reserve Bank) (Amendment) Directions, 2017 and Exchange Traded Currency Options (Reserve Bank) (Amendment) Directions, 2017 amending the Directions notified vide Notifications No. FED.1/DG (SG) – 2008 dated August 6, 2008 and Notifications No. FED. 1/ED (HRK) – 2010 dated July 30, 2010 respectively have been issued. Copies of the Directions are enclosed (Annexes II & III). These Directions have been issued under Section 45W of the Reserve Bank of India Act, 1934.

6. This circular has been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permission/approvals, if any, required under any other law.

[Annex I]

FOREIGN EXCHANGE MANAGEMENT (FOREIGN EXCHANGE DERIVATIVE CONTRACTS) (AMENDMENT) REGULATIONS, 2016

NOTIFICATION NO. FEMA.378/RB-2016, 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 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 in to 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.
[Annex II]

CURRENCY FUTURES (RESERVE BANK) (AMENDMENT) DIRECTIONS, 2017

NOTIFICATION NO. FMRD. 13/CGM (TRS)-2017, DATED 2-2-2017

The Reserve Bank of India having considered necessary in public interest and to regulate the financial system of the country to its advantage, in exercise of its powers conferred by section 45W of the Reserve Bank of India Act, 1934 and of all the powers enabling it in this behalf, hereby gives the following directions to all the persons dealing in currency futures.

Short title and commencement of the directions

1. These directions may be called the Currency Futures (Reserve Bank) Amendment Directions 2017 and they shall come into force with effect from February 2, 2017.

Amendment to Currency Futures (Reserve Bank) Directions 2008

2. (As amended vide Currency Futures (Reserve Bank) (Amendment) Directions, 2014 as per Notification No. FED. 1/ED (GP)-2014 dated June 10, 2014 and Currency Futures (Reserve Bank) (Amendment) directions, 2015 as per Notification No. FMRD. 1/ED(CS)-2015 dated December 10, 2015).

In para. 3, for sub-para. (iii), the following shall be substituted:

“(iii) Persons resident outside India, as defined in section 2(w) of Foreign Exchange Management Act, 1999 (Act 42 of 1999), who are 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 futures 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.

[Annex III]

EXCHANGE TRADED CURRENCY OPTIONS (RESERVE BANK) (AMENDMENT) DIRECTIONS, 2017

NOTIFICATION NO. FMRD. 14/CGM (TRS)-2017, DATED 2-2-2017

The Reserve Bank of India having considered necessary in public interest and to regulate the financial system of the country to its advantage, in exercise of its powers conferred by section 45W of the Reserve Bank of India Act, 1934 and of all the powers enabling it in this behalf, hereby gives the following directions to all the persons dealing in exchange traded currency options.

Short title and commencement of the directions

1. These directions may be called the Exchange Traded Currency Options (Reserve Bank) Amendment Directions, 2017 and they shall come into force with effect from February 2, 2017.

Amendment to Exchange Traded Currency Options (Reserve Bank) Directions 2010

2. (As amended vide Exchange Traded Currency Options (Reserve Bank) (Amendment) Directions, 2014 as per Notification No. FED. 2/ED (GP)-2014 dated June 10, 2014 and Exchange Traded Currency Options (Reserve Bank) (Amendment) Directions, 2015 as per Notification No. FMRD. 2/ED(CS)-2015 dated December 10, 2015).

In para. 3 for sub-para. (iii), the following shall be substituted:

“(iii) Persons resident outside India, as defined in section 2(w) of Foreign Exchange Management Act, 1999 (Act 42 of 1999), who are 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 exchange traded currency options 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.

■■

29 – 2-02-2017


COMPOUNDING OF CONTRAVENTIONS UNDER FEMA, 1999

A.P. (DIR SERIES 2016-17) CIRCULAR NO.29, DATED 2-2-2017

Attention of all the Authorised Dealer Category – I (AD Category – I) banks and their constituents is invited to A.P. (DIR Series) Circular No. 117 and 36 dated April 4, 2014 and October 16, 2014 respectively, and the Foreign Exchange (Compounding Proceedings) Rules, 2000 notified by the Government of India vide G.S.R.No.383 (E) dated 3rd May 2000, as amended from time to time, regarding delegation of powers to the Regional Offices of the Reserve Bank of India to compound the contraventions of FEMA.

2. In partial modification thereof, it has been decided to delegate further powers to Regional Offices as under:

FEMA Regulation Brief Description of Contravention
Regulation 9(2) of Schedule I to FEMA 20/2000-RB dated May 3, 2000 Delay in filing the Annual Return on Foreign Liabilities and Assets (FLA return), by all Indian companies which have received Foreign Direct Investment in the previous year(s) including the current year

3. The powers to compound the contraventions at Paragraph 2 above have also been delegated to all Regional Offices (except Kochi and Panaji) without any limit on the amount of contravention.

4. Kochi and Panaji Regional offices can compound the above contraventions for amount of contravention below Rupees One hundred lakh (Rs.1,00,00,000/-) only. The contraventions of Rupees One hundred lakh (Rs.1,00,00,000/) or more under the jurisdiction of Kochi and Panaji Regional Offices will continue to be compounded at Central Office as hitherto.

5. Accordingly, applications for compounding the above contraventions as at Paragraph 2, up to the amount of contravention stated in paragraph 3 and 4 may be submitted by the concerned entities to the respective Regional Offices under whose jurisdiction they fall. For all other contraventions, applications may continue to be submitted to Foreign Exchange Department, 5th floor, Amar Building, Sir P.M.Road, Fort, Mumbai – 400001.

6. The above modifications will come into force with immediate effect. All other instructions on compounding shall remain unchanged. This provision is being clarified in Paras 3 and 7.4 of the Master Direction on Compounding of Contraventions under FEMA, 1999.

7. Authorised Dealers may bring the contents of this circular to the notice of their constituents and customers concerned.

8. 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).

Notification No. : 05/2017 Dated: 02-02-2017


Exempts All items of Machinery, Including Instruments, Apparatus and Appliances, Transmission Equipment and Auxiliary Equipment (including those required for testing and quality control) and components. – 05/2017  - Central Excise – Tariff

GOVERNMENT OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE)

Notification No. 5/2017- Central Excise

New Delhi, the 2nd February, 2017

G.S.R. 93 (E).-In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts all items of machinery, including instruments, apparatus and appliances, transmission equipment and auxiliary equipment (including those required for testing and quality control) and components, required for,-

(a) initial setting up of fuel cell based system for generation of power or for demonstration purposes; or

(b) balance of systems operating on bio-gas or bio-methane or by-product hydrogen, so much of the duty of excise leviable thereon which is specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), as is in excess of 6% ad valorem, subject to the following conditions, namely:-

(1) before the clearance of the items from the factory, the manufacturer produces to the Deputy Commissioner of Excise or the Assistant Commissioner of Central Excise, as the case may be, a certificate from an officer not below the rank of a Deputy Secretary to the Government of India in the Ministry of New and Renewable Energy recommending the grant of this exemption and the said officer certifies that the items are required for,-

(a) initial setting up of fuel cell based system for generation of power or for demonstration purposes; or

(b) balance of systems operating on bio-gas or bio-methane or by-product hydrogen;

(2) the manufacturer furnishes an undertaking to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction to the effect that the said items shall be used for the purposes as specified above and, if the manufacturer fails to fulfil this condition, he shall pay the duty which would have been leviable at the time of clearance of items, but for this exemption.

2. Nothing contained in this notification shall apply to said items after the 30th day of June, 2017.

[F.No.334/07/2017-TRU]

(Mohit Tewari)

Under Secretary to the Government of India

Budget 2017: How to pay less tax this year and beyond : 02-02-2017


It is said that nothing in this world is certain except for death and taxes. However, you can soften the blow from the latter, legally of course.

It starts with knowing the difference between your salary income and total income and includes minimising tax on allowances that are part of your salary. Your income is from five broad sources:

Salary Income from an employer, including value of perks and allowances
House
Gain or loss from the real estate you own
Business
Net profit from any business or profession
Capital Gains
Profit/loss from sale of a capital asset (property, shares, jewellery, mutual fund units)
Other
Any income other than the four mentioned

DEDUCTIONS AVAILABLE
*HRA, medical expense reimbursement, LTA, conveyance allowance etc
*Standard deduction (30% of income post house tax), and interest paid on loan for buying/construction of the property
*Expenditure for business or profession, and losses from previous years
*Depends on asset, holding term, indexation, losses carried forward and investment in specified options
*Dividends are tax free. As are gifts from specified relatives or  received on certain occasions. Interest from NRE accounts, PPF account etc

A taxpayer has to pay tax on certain income even if he/she has not earned it. It includes:
*Income earned through investments in the name of a child (below 18 years). In this case, the minor’s income is clubbed with that of the parent who earns more.
*Income from investments made from the taxpayer’s income in spouse’s name.
*Income deemed to be earned from letting out a second property even if it is lying vacant.

The exemption is limited to the lowest of
1. Rent paid less 10% of salary*
2. 50% of salary* where the house is situated either in Delhi, Mumbai, Kolkata or Chennai, and 40% of salary in other cities
3. Actual HRA received

*Salary means basic salary and dearness allowance

*If your CTC doesn’t contain HRA, deduction for rent paid is available from gross taxable income, subject to various limits (maximum deduction 5,000 per month).

*If you live in a house you own, the HRA component is fully taxable.

What if accommodation is provided by the employer?
Tax implications depend on:
*Type of accommodation – hotel, serviced apartment, leased accommodation.
*Whether the property is owned by the employer or leased by the employer for you.
*Whether the accommodation is furnished or not.
*Your salary level.

Depending on a combination of factors, you may check with a tax advisor which is more beneficial to you — claiming HRA or living in flat provided by employer.

Leave travel concession (LTC)
You and your family’s travelling expenses on an annual holiday within India are eligible for a tax break. For eg, if you are travelling by air, it is limited to economy class airfare for the shortest route to your destination. No exemption is available for hotel and local conveyance expenses. Keep the bills handy.

Leave Encashment : If you haven’t availed of your entitled leave, you may have an option to get it encashed. With an increasing realisation that employees who avail of annual leave are more productive, most employers permit such encashment only on retirement or resignation. The maximum aggregate exemption available in a lifetime is 3 lakh.

Reimbursements
Reimbursements such as medical expenses of up to 15,000 per year or your telephone expenses, including data charges, are exempt. There is no cap on the maximum amount that can be claimed for phone expenses. However, your employer may pose an internal cap. In addition, if you get meal vouchers, such as Sodexo coupons, these are exempt from tax to the extent of 50 per meal

Children’s education allowance:
This gets you a limited monthly tax break of 100 per child and 300 per child for hostel expenses (both restricted to two children)

Car perquisites: The perquisite value of a car benefit provided by an employer to you depends on who owns the car, the capacity of the engine, whether you or the employer pays for its maintenance, running cost (including fuel), driver, and if the use is official or personal. Some employers also offer car on lease, which could bring down your income tax significantly Transport allowance: Any such allowance paid by employer to meet your daily conveyance needs between office and home is tax-exempt up to 1,600 per month .

Employee Provident Fund (EPF) & gratuity
PF withdrawal after rendering 5 or more years of continuous services is tax-free. However, if you withdraw prior to completion of 5 years of service, the withdrawal becomes taxable under various heads of income. There are a few other scenarios where the PF withdrawal is tax-free such as termination on account of ill health etc. You will be entitled to receive gratuity after rendering 5 years of services and any such payment on  termination or retirement is tax exempt up to a maximum of 10 lakh in a lifetime.

Source : PTI

Notification No. : 04/2017 Dated: 02-02-2017


Amendment In Notification No. 42/2008-Central Excise, dated the 1st July, 2008 – 04/2017 – Central Excise – Tariff

GOVERNMENT OF INDIA MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

Notification No.  4/2017-Central Excise

New Delhi, the 2nd February, 2017

G.S.R. 92 (E).- In exercise of the powers conferred by sub-section (3) of section 3A of the Central Excise Act, 1944 (1 of 1944), 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. 42/2008-Central Excise, dated the 1st July, 2008, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 492(E), dated the 1st July, 2008, namely :-

In the said notification, -

(i) in the first paragraph, for Table-1 and the Illustration, the following shall be substituted, namely:-

“TABLE-1

S. No.

Retail saleprice (per pouch)

Rate of duty per packing machine per month   (Rs. in lakh)

Up to 300 pouches per minute

301 to 750 pouches per minute

751 pouches per minute and above

(1)

(2)

(3)

(4)

(5)

Pan  masala

Pan masala containing tobacco

Pan  masala

Pan masala containing tobacco

Pan  masala

Pan masala containing tobacco

(3a)

(3b)

(4a)

(4b)

(5a)

(5b)

1.

Up to ₹ 1.00 19.60 35.35 32.08 57.84 71.29 128.54

2.

From ₹ 1.01 to ₹ 1.50 29.41 53.02 48.12 86.77 106.93 192.82

3.

From ₹ 1.51 to ₹ 2.00 37.25 67.16 60.95 109.91 135.44 244.23

4.

From ₹ 2.01 to ₹ 3.00 55.87 100.75 91.42 164.86 203.16 366.35

5.

From ₹ 3.01 to ₹ 4.00 72.14 130.09 118.05 212.87 262.33 473.04

6.

From ₹ 4.01 to ₹ 5.00 90.18 162.61 147.56 266.09 327.91 591.30

7.

From ₹ 5.01 to ₹ 6.00 108.21 195.13 177.07 319.30 393.50 709.56

8.

Above ₹ 6.00 108.21+1

7.64 x (P- 6)

195.13+31.8 1 x (P-6)

177.07 +28.87 x (P-6)

319.30+52.06 x (P-6)

393.50+

64.15 x

(P-6)

709.56+115.69 x (P-6)

  Where ‘P’ above represents retail sale price of the pouch for which rate of duty is to be determined.

Illustration. – The rate of duty per packing machine per month for a pan masala pouch having retail sale price of ₹ 8.00 (i.e. ‘P’) packed with the aid of a machine having maximum packing speed, at which it can be operated for packing of pan masala pouch of the said retail sale price, of 600 pouches per minute shall be =  ₹ 177.07+28.87 x (8-6) = ₹ 234.81 lakh.”;

(ii) in paragraph 3, for Table-2, the following shall be substituted, namely:-

S. No.                                                          Duty

Duty ratio for pan masala

Duty ratio for pan masala  containing tobacco

(1)

(2)

(3)

(4)

1.

The duty leviable under the Central Excise Act, 1944 (1 of 1944)

0.3725

0.7864

2.

The additional duty of excise leviable under section 85 of the Finance Act, 2005 (18 of 2005)

0.1765

0.1165

3.

National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001 (14 of 2001)

0.4510

0.0971

4.

Education Cess leviable under section 91 of the Finance Act, 2004 (23 of 2004)

0.0

0.0

5.

Secondary and Higher Education Cess leviable under section 136 of the Finance Act, 2007 (22 of 2007)

0.0

0.0.”.

                 [F.No. 334 / 7 /2017 –TRU]

(Mohit Tewari)

Under Secretary to the Government of India

Note: – The principal notification No. 42/2008-Central Excise, dated the 1st July, 2008 was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R.492 (E), dated the 1st July, 2008 and last amended, vide notification No. 17/2016-Central Excise, dated the 1st,March, 2016, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R.234 (E), dated the 1st March 2016.

Notification No. : 02/2017 [CE (NT)] Dated: 02-02-2017


PAN MASALA PACKING MACHINES (CAPACITY DETERMINATION AND COLLECTION OF DUTY) AMENDMENT RULES, 2017 – AMENDMENT IN FORM NO.2

NOTIFICATION NO.2/2017-C.E. (N.T.)DATED 2-2-2017

In exercise of the powers conferred by sub-sections (2) and (3) of section 3A of the Central Excise Act, 1944 (1 of 1944), the Central Government hereby makes the following rules further to amend the Pan Masala Packing Machines (Capacity Determination And Collection of Duty) Rules, 2008, namely :—

1. (1) These rules may be called the Pan Masala Packing Machines (Capacity Determination And Collection of Duty) Amendment Rules, 2017.

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

2. In the Pan Masala Packing Machines (Capacity Determination And Collection of Duty) Rules, 2008, in FORM – 2, in serial number 4, for item (iv), the following shall be substituted, namely:—

“(iv) Break-up of duty payment for apportionment between various duties is as per details below:—

Sl. No. Duty Duty ratio for pan masala Duty paid (in rupees) Duty ratio for pan masala containing tobacco Duty paid (in rupees)
(1) (2) (3) (4) (5) (6)
1 The duty leviable under the Central Excise Act, 1944 (1 of 1944) 0.3725 0.7864
2 The additional duty of excise leviable under section 85 of the Finance Act, 2005 (18 of 2005) 0.1765 0.1165
3 National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001 (14 of 2001) 0.4510 0.0971
4 Education Cess leviable under section 91 of the Finance Act, 2004 (23 of 2004) 0.0 0.0
5 Secondary and Higher Education Cess leviable under section 136 of the Finance Act, 2007 (22 of 2007) 0.0 0.0.”.

Has Arun Jaitley’s Budget left you richer or poorer? : 02-02-2017


For taxpayers

Benefits
Tax rate for individual income in the lowest Rs 2.5 lakh-5 lakh bracket halved to 5 per cent. One-page tax form for those with taxable income up to Rs 5 lakh.

No tax scrutiny for such first-time return filers.

Deduction to self-employed on contributions to National Pension Scheme doubled from 10 per cent to 20 per cent, subject to a limit of Rs 1.5 lakh.

Drawbacks
Tax rebate cut from 5,000 to 2,500 for individuals with income up to Rs 3.5 lakh.

Tax break due to interest paid on rented homes (whether first or second) will now be capped at Rs 2 lakh. This is likely to impact investment in real estate.

10 per cent surcharge on income of Rs 50 lakh-1 crore.

Pay up to Rs 10,000 for late filing of tax return.

Limit of cash donation to charitable trusts reduced from Rs 10,000 to Rs 2,000.

For investors

Benefits
Base for computing indexation benefit for long-term capital gains shifted from April 1, 1981 to April 1, 2001. Holding period for computing long-term capital gains on land and building reduced from three years to two years.

Reinvestment of capital gains  in notified redeemable bonds beyond NHAI, REC to qualify for long-term CG tax exemption.

Partial withdrawal from NPS tax-exempt up to 25 per cent of employee’s contributions.

Drawbacks
►No exemption from long-term capital gains on transfer of listed shares if securities transaction tax not paid on purchase of then unlisted shares bought after Oct 1, 2004.

FOR CONSUMERS

Benefits
►Professionals, salaried employees and smaller businessmen paying more than 50,000 a month as rent will have to deduct tax at source at 5 per cent

►Train travel set to get cheaper with withdrawal of service charge on tickets bought online through IRCTC.

►Non-residential MBA programmes at IIMs exempt from service tax, to get cheaper.

►Customs duty exemption revised on goods imported through postal parcels, packets and letters where CIF value less than 1,000.

Drawbacks
►Excise duty on cigarettes up across the board; pan masala, bidis, gutkha and other tobacco products to also cost more.

►Silver coins, medallions to become more expensive due to higher customs duty.

FOR BUSINESSMEN

Benefits
►Reduced tax rate of 25 per cent on firms with turnovers upto 50 cr in FY 2015-16 Period for carry-forward and use of MAT credit in creased from 10 to 15 years.

►Beneficial withholding tax rate of 5 per cent on interest on ECBs of Indian firms extended by three yrs till June 2020. Also extended to their rupee-denominated bonds.

►Tax holiday to start-ups now available for 3 out of 7 years instead of existing 3 out of 5 years.

Drawbacks
►No cash deals above Rs 3 lakh.

►No reduction in the corporate tax rate other than for small and medium firms.

►Money, immovable property or specified movable property worth over Rs 50,000 received as gift or for inadequate sum to be taxable.

Tax rate for lowest income slab slashed to 5% from 10%, surcharge of 10% slapped on incomes over Rs 50 lakh 

The finance minister has proposed to slash the tax rate for individuals in the lowest income tax slab – Rs 2.5 lakh to Rs 5 lakh –to 5% instead of 10%. The existing rebate under Section 87A (currently given to people with income up to Rs 5 lakh) is proposed to be reduced to Rs 2500 from the existing Rs 5000 for individuals earning between Rs 2.5 lakh to Rs 3.5 lakh.

As a result of the combined effect of the new Section 87A rebate and the reduction in the lowest slab tax rate to 5% the tax burden for those with income upto Rs 3 lakh would be zero and tax burden those in the Rs 3 lakh to Rs 3.5 lakh bracket would be Rs 2500.

Those earning Rs 4.5 lakh can therefore reduce their tax liability to zero by fully utilising the tax break under Section 80C combined with these new proposals.

Those falling in the higher income tax slabs will also be eligible for this lower tax rate of 5% on income between Rs 2.5 lakh and Rs 5 lakh. Therefore, those in the higher tax slabs will pay lower tax by Rs 12500 per person.

Individuals earning between Rs 50 lakh and Rs 1 crore will have to pay a surcharge of 10% on the total income tax payable by them. Currently there was no such surcharge on this category. Only those with income above Rs 1 crore were required to pay surcharge of 15% which continues.

Proposed income-tax slabs for FY 2017-2018 (assessment year 2018-19) announced in Budget 2017

Tax rate for lowest income slab slashed to 5% from 10%, surcharge of 10% slapped on incomes over Rs 50 lakh

Tax rate for lowest income slab slashed to 5% from 10%, surcharge of 10% slapped on incomes over Rs 50 lakh

Tax rate for lowest income slab slashed to 5% from 10%, surcharge of 10% slapped on incomes over Rs 50 lakh
The tax an Indian pays every year is calculated on the basis of his/her gross total income. The tax is calculated according to the income tax slabs announced by the government every year in the Budget. The annual union budget is normally announced in the month of February.

Says Sonu Iyer, Tax Partner & people advisory services leader, EY India: “Glad fiscal prudence has prevailed over populism. Budget continues the agenda of growth for all and focus on global and India realities . The FM recognised the contribution of the salaried class to the tax revenues yet did not meet the expectation of standard deduction of this class of taxpayers. However, a tax saving for all is proposed by reducing the rate of tax from 10% to 5% for the income slab of Rs 250,000 to Rs 500,000. So for income up to Rs 300,000, no tax payable. Simplification of tax return forms for income up to Rs 500,000 provided no business income. LTCG period of land and building reduced to 2 years from 3 years.  Fine print of the budget document will surely have more details.”

Income tax slab rates for the financial year 2016-17 (assessment year 2017-18) are given below in the table:

1. Normal tax rates applicable to a resident individual below the age of 60 years, non-resident individual, resident/non-resident HUF, AOP, BOI, artificial juridical person.

Tax rate for lowest income slab slashed to 5% from 10%, surcharge of 10% slapped on incomes over Rs 50 lakh
2. Normal tax rates applicable to a resident individual of the age of 60 years or above at any time during the year but below the age of 80 years
Tax rate for lowest income slab slashed to 5% from 10%, surcharge of 10% slapped on incomes over Rs 50 lakh
3. Normal tax rates applicable to a resident individual of the age of 80 years or above at any time during the year
Tax rate for lowest income slab slashed to 5% from 10%, surcharge of 10% slapped on incomes over Rs 50 lakh
After taking the deductions under Section 80 (C) to 80 (U), the tax is payable after adding the cess and surcharge, if applicable.
The education cess of 2% and secondary cess of 1% are calculated on the amount of tax payable separately. Both the cess are then added to the tax payable to arrive at the Gross tax payable amount.
The surcharge is levied @ 15% on the amount of income tax where net income exceeds Rs 1 crore. In the case where the surcharge is levied, the cess will be levied on the tax amount plus surcharge.
A resident individual can also avail rebate under Section 87(A) whose net income is equal to or less than Rs 5 lakh. The amount of rebate under this section is 100% of the income tax or Rs 5,000 whichever is less. It is deductible before calculating the cess.
Source : Economic Times

Notification No. : 03/2016 Dated: 02-02-2017


Amendment In Notification No. 6/2005-Central Excise, dated the 1st March, 2005 – 03/2017 –  Central Excise – Tariff

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

Notification No. 3 /2017-Central Excise

New Delhi, the 2nd February, 2017

G.S.R. 91 (E).- In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) read with sub-section (3) of section 85 of Finance Act, 2005 (18 of 2005), 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. 6/2005-Central Excise, dated the 1st March, 2005, published in the Gazette of India, Extraordinary, vide number G.S.R. 126 (E), dated the 1st March, 2005, namely :-

In the said notification, in the Table,-

(i) against S. No. 1, for the entry in column (4), the entry “9 %” shall be substituted;

(ii) against S. No. 2, for the entry in column (4), the entry “8.3 %” shall be substituted;

(iii) S. Nos. 13, 15 and 20 and the entries relating thereto shall be omitted;

(iv) against S. No. 21, in column (3), after the words “a brand name” the brackets and words “(other than pan masala containing tobacco ‘gutkha’)” shall be inserted.

[F.No. 334 / 7 /2017 –TRU]

(Mohit Tewari)

Under Secretary to the Government of India

Note: – The principal notification No. 6/2005-Central Excise, dated the 1st March, 2005 was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 126 (E), dated the 1st March, 2005 and last amended vide notification No. 18/2016 Central Excise, dated the 1st March, 2016, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 235 (E), dated the 1st March, 2016.

Notification No.3/2017 01-02-2017


U/s 35AC – Notifies the various institutions Approved by the National Committee – 3/2017 – S.O.333 (E)

MINISTRY OF FINANCE

(Department of Revenue)

NOTIFICATION No. 3/2017

New Delhi, the 1st February, 2017

S.O.333 (E).- In exercise of the powers conferred by sub-section (I) read with clause (b) of the Explanation  to Section 35 AC of the Income Tax Act, 1961 (43 of 1961), the Central Government, on the recommendation of the National Committee for Promotion of Social and Economic Welfare, hereby notifies the institutions approved by the said National Committee, mentioned in column (2) of the Table below, and approves the eligible projects or schemes specified to be carried on by the said institutions and the estimated cost thereof as mentioned in column (3) of the said Table, and also specifies in the column (4) of the Table the maximum amount of such cost which may be allowed as deduction under the said section 35 AC for the period of approval, namely:-

TABLE

Sl. No. Name of the Institution/Organization Project or scheme and estimated cost  thereof Maximum amount of cost to be allowed as deduction under section 35AC and period of approval
(1) (2) (3) (4)
1 Shivesh Autism Charitable Trust, 9-H, K.K. Nagar, Avarampalayam Coimbatore – 641044 Awareness Creation on autism and development for autism centre ₹ 1.01 crore  Approved the cost of  Rs.  1.00 crore for financial year 2016-17
2 Seva Chakkara Orphanage  89/41, Sami Pillai Street Choolai,  Chennai-600112.  Renovation of existing building and purchase & construction of  new building   Rs. 993.40 Lakh  Approved the cost of  Rs.  993.40 lakh  for financial year 2016-17
3 Shri Akkalkot Swami Seva Mandal   C/o. C. S. Rahatekar Plot No. 40, Shri Swami Kripa,  1st Floor, Vadavali Section, Ambarnath,  ( East ) Dist:- Thane, Maharashtra – 421501 Rehabilitation cum Recreational Home for child beggars, street dwelling and underprivileged slum children, Old Age Home for Senior Citizen. ₹ 3.60 Crore Approved the cost of  Rs.  3.60 crore for financial year 2016-17
4 Govinda Pradhan Smruti Sansad(GPSS) AT – Bank Colony, 1st Lane Gate Bazar, Berhampur Ganjam-760001 Setting up of a vocational education centre (i) Short term (ITI courses) in Computer, Mobile repairing, short hand and typing and (ii) Para Medical Courses like Nursing, DMLT, Ex-Ray Machine Operator, Physiotherapy for rural poor people of Ganjam District of Odisha ₹ 7.35 Crore Approved the cost of  Rs.  7.35 crore for financial year 2016-17
5 Harishpur Prostitute Children Rehabilitation Centre Village Bidyadharpur P.O. Sonarpur, Kolkatta-700150 Destitute Children Rehabilitation Centre ₹ 126.00 Lakh Approved the cost of  Rs.  126.00 lakh for financial  year 2016-17
6 Shri K.K. Shah Sabrkantha Arogya Mandal, Vatrak At & PO  Vatrak TA: Bayad, District Aravalli, Gujarat-383326 Shri K.K.Shah Sabarkantha Arogya Mandal ₹ 202.43 Lakh Approved the cost of  Rs.  202.43 lakh for financial year 2016-17
7 Centurion Science and Technology Entrepreneurship Facilitation Centre AT: Alluri Nagar PO: R.Sitapur,   VIA Uppalada, Paralakhemundi District Gajpati-761211 Skill Training of BPL Women & Youth for Nano Mini Entrepreneurship ₹ 10.31 Crore Approved the cost of  Rs.  10.31 crore for financial year 2016-17
8 Budhuvir Educational Trust AT – Bartoli, PO Jabaghat Via Jhirpani, Rourkela769042 PS Bondamunda District Sundargarh, Odisha Provide Quality skill India Digitalized Vocational Training for the BPL & ST/SC students ₹ 12.00 Crore Approved the cost of  Rs.  12.00 crore for financial year 2016-17
9 Bai Jerbai Wadia Hospital for Children Acharya  Donde Marg, Parel District Mumbai- 400012 Maharashtra Upgradation & modernization of research centre at Bai Jerbai Wadia Hospital for children ₹ 110.00 Crore Approved the cost of  Rs.  110.00 crore for financial year 2016-17
10 Future Hope India 1/8, Rowland Road, Kolkatta-700020 Construction of a school and hostel at Rajarhat, Kolkatta, West Bengal ₹ 41.40 Crore Approved the cost of  Rs.  41.40 crore for financial year 2016-17
11 Suryoday Trust, 105, Shraddha Shopping Centre CHSL, Old Nagardas Road Andheri East,  Mumbai-401203 School construction for the mentally challenged children (Approx. 15-200 children at Nalasopara West) ₹ 2.60 Crore Approved the cost of  Rs.  2.60 crore for financial year 2016-17
12 Jain India Trust Siyat House, 4th floor, No. 961, Poonamallee High Road Chennai-600084 Scholarship Project ₹ 475.09 Lakh Approved the cost of  Rs.  475.09 lakh for financial year 2016-17
13 Shree Ganesh Seva Trust for the Exceptional Persons Shree Ganesh Kandettu, Bikarnakatta Mangalore-575005 ‘Saanidhya – Shaswath’ Life Time Stay home for the Adult Mentally Challenged ₹ 6.00 Crore Approved the cost of  Rs.  6.00 crore for financial year 2016-17
14 Bharat Sevashram Sangha 211, Rash Behari Avenue Kolkatta-700019 Extension of Bharat Sevashram Sangha Hospital from 100 Bed to 500 Bed ₹ 73.24 crore Approved the cost of  Rs.  73.24 crore for financial year 2016-17
15 Health and Education for all (HEAL) Heal Paradise, Thotapalli Village Agiripalli Mandal, Krishna District Andhra Pradesh-521211 Heal Paradise ₹ 57.00 Crore Approved the cost of  Rs.  23.70 crore for second phase for financial year 2016-17
16 Ranapara Gram Bikash Kendra Village Ranapara P.O. Deorah, P.S. Amta Howrah-711401 West Bengal Women empowerment & children education for the rural poor in the backward District of East Midnapore, West Midnapore & Bankura ₹ 6.84 Crore Approved the cost of  ₹ 6.84 Crore crore for financial year 2016-17
17 Anandam No.2, Sarangapani St. Krishnapuram Ambattr Chennai-600053 Anandam/Anandam Hospice/Anandam Tuition Centre/Anandam Medical Care Centre ₹ 881.00 Lakh Approved the cost of  Rs.  881.00 lakh for financial year 2016-17
18 Vivekananda Kendra Rock Memorial  and Vivekanand Kendra Vivekanandapuram, Kanyakumari-629702 Vivekananda Kendra Academy for Indian Culture, Yoga and Management (VK AICYAM) ₹ 6.25 Crore Approved the cost of  Rs.  6.25 crore for financial year 2016-17
19 Jagriti Yuva Sansthan Gram Jamgaon Post Vermi Compost Jaivik Khad Nirman Approved the cost of  Rs.  10.00 lakh for financial year 2016-17
Jamgaon, Tehsil Nainpur District Mandla-481776 Madhya Pradesh Training Programme ₹ 10.00 Lakh
20 Iskon Food Relief Foundation 19, Jaywant Industrial Estate 63, Tardeo Road, Tardeo Mumbai-400034 Cooking and Providing Meals to needy person, such as patients of Municipal/Zila Parishad/Government Hospitals and their relatives and needy sections of the population living in slums ₹ 107.68 Crore Approved the cost of  Rs.  107.68 crore for financial year 2016-17
21 Shree Navkar Sarvar Kendra 501, Nalanda Enclave Opp. Sudama Resort Pritam Nagar, First Slop Ellis Bridge Ahmedabad-06 Medical Services to Monk and Pilgrims in Gujarat State ₹ 2.50 Crore Approved the cost of  Rs.  2.50 crore for financial year 2016-17
22 Kamdhenu Ati Nirdhan Chiktsa Sahayata Society Administrative Block, SGPGI, Raebareilly Road, Lucknow-226014 Uttar Pradesh Kamdhenu Ati Nirdhan Chikitsa Sahayata Society ₹ 846.47 Lakh Approved the cost of  Rs.  846.47 lakh  for financial year 2016-17
23 Dr. C.J. Desai and Jaswantiben Desai Foundation SB Tower, 1st Floor 37, Shakespeare Sarani Kokatta-700017 Establishment of EYE & Dialysis Centre, Pathology & Dental Lab at Dharampur, District Valsad, Gujarat ₹ 1000.00 Lakh Approved the cost of  Rs.  1000.00 lakh for financial year 2016-17
24 Yuva Unstoppable B/3/13, Skylark Apartment Satellite Road Ahmedabad-380015 True Hero & Evolution ₹ 4.37 Crore Approved the cost of  Rs.  4.37 crore for financial year 2016-17
25 Ubedullah Abdulrehman Rashid Education and Charitable Trust Wansya Gate, Kanka Road, AT Post Lunawada District Mahisagar Gujarat Extension of present activities in School and Technical Education project ₹ 22.60 Crore Approved the cost of  Rs.  22.60 crore for financial year 2016-17

II. In exercise of the powers conferred by sub-section (I) read with clause (b) of the Explanation to Section 35 AC of the Income Tax Act, 1961 (43 of 1961), the Central Government, on the recommendation of the National Committee for Promotion of Social and Economic Welfare, under sub-rule (5) of Rule 11M of the Income Tax Rules, 1962 hereby notifies the extension of the projects/schemes for a further period and/or enhanced sanctioned cost for the existing projects/schemes for exemption under section 35 AC of the Income Tax Act, 1961, in respect of the associations and  institutions approved by the said National Committee, mentioned in the Table below.

TABLE

Sl. No Name & address of the Institution Project or scheme  Notification No. and date and sanctioned cost with validity Maximum amount of cost and extended period of approval recommended by the Committee

(1)

(2)

(3)

(4)

(5)

1

MAITRI J-92, A.R.D. Complex, R.K. Puram, Sector-13, New Delhi-110066

Maitri Ghar

  •  S.O. 2854(E) dated 16.10.2015 for a period of three financialyears till 2017-18.

Approved enhancement of cost from ₹ 2.00 core to ₹ 5.00 crore (including ₹ 3.00 crore as corpus fund) for the financial year 2016-17.

2

Brahmavetta Shree Devaraha Hans Baba Trust, 179, Cariappa Marg, Sainik Farm, New Delhi.

Construction of building and running of Vridha Bhakt Niwas (Old Age Home), Dhyan Yoga Kendra and Ayurvedic dispensary.

  • S.O.497(E) dated 26.5.2000 for a period of three financial years till 2002-03;
  • S.O. 690(E) dated 13.6.2003 for a period of three financial years till 2006-07;
  • S.O. 1411(E) dated 04.09.2006 for a period of three financial years till 2008-09;
  • S.O. No.637 (E) dated 22.03.2010 for a period of three financial years till 2011- 12 alongwith enhancement of cost from ₹ 7.55 crore to ₹ 11.85 crore;
  • S.O. 651(E) dated 12.03.2013 for a period of three financial years till 2014-15;
  • S.O. 3039(E) dated 10.11.2015 for a period of three financial years till 2017-18.

Approved enhancement of cost from ₹ 11.85 crore to ₹ 19.35 crore for the financial year 2016-17.

3

Christian Social Society, Balaji Apartment, Pada No.3, Lokmanya Nagar, Near Gangwal Hospital,Thane 400606.

Dayasagar Rural Hospital. ₹ 7.49 crore
  • S.O. No. 2349 (E) dated 28.09.2010 for a period of three financial years 2012-13;
  • S.O. No. 3169 (E) dated 17.10.2013 for a period of three financial years till 2015- 16

Approved extension of period of approval for the financial year 2016-17 without any change in the approved cost of ₹ 7.49 crore.

4

Delhi Association of the Deaf, Regd. Office, 92 Kamla Market, New Delhi 110002. Research and Rehabilitation Centre for the Deaf ₹ 100 lakh
  • S.O. No. 878 (E) dated 30.11.1992 for a period of three financial years till 1994- 95;
  • S.O. 404(E) dated 3.5.1995 for further three financial years till 1997-98;
  • S.O. No. 437(E) dated 20.5.1998 for further three financial years till 2000-2001;
  • S.O. No. 1049(E) dated 18.10.2001 for further three financial years till 2003-2004;
  • S.O. No. 717(E) dated 25.05.2005 for three financial years till 2006-07;
  • S.O.No.1314(E) dated 4.6.2008 for a period of three financial years till 2009-10;
  • S.O. 2526(E) dated 11.10.2010 for a period of three financial years till 2012-13;
  • S.O. 477(E) dated 11.2.2015 for a period of three financial years till 2015-16.
Approved extension of period of approval for the financial year 2016-17 without any change in the approved cost of ₹ 100.00 lakh.

III. This notification shall remain in force for the period of and in relation to financial year in respect of the projects or schemes mentioned above against the respective institutions/projects.

IV. The exemption u/s 35 AC will not apply to the funds received under Schedule VII of the Section 135 of the Companies Act and Companies (CSR) Rules 2014.

[ F.No.V.27015/7/2016-SO (NAT.COM)]

S.R. SHARMA, Director (National Committee)

F. No.334/7/2017-TRU – 1-2-2017


Union Budget 2017 – Changes in Service Tax – reg.

F. No.334/7/2017-TRU

Government of India Ministry of Finance Department of Revenue

(Tax Research Unit)

***

Amitabh Kumar

Joint Secretary (Tax Research Unit)

Tel: 011-23093027; Fax: 011-23093037

E-mail: amitabh.kumar@nic.in

D.O.F. No. 334/7/2017-TRU

New Delhi, dated February 1st, 2017

Dear Madam/Sir,

Subject: Union Budget 2017 – Changes in Service Tax – reg.

The Finance Minister has, while presenting the Union Budget 2017-18, introduced the Finance Bill in the Lok Sabha on the 1st of February, 2017. Clauses 120 to 128 of the Bill cover the amendments made to,-

  • Chapters V and VA of the Finance Act, 1994;
  • the Service Tax (Determination of Value) Rules, 2006;

Other changes are being given effect to by inserting new entries, and amending/omitting existing entries in notification No. 25/2012-ST dated 20.6.2012 and by amending the CENVAT Credit Rules, 2004.

2. It may be noted that changes being made in the Budget are coming into effect on various dates, as indicated in the following paragraphs. These changes are categorized below based on the above criterion:

(i) Changes coming into effect immediately w.e.f. the 2nd day of February, 2017;

(ii) The amendments which will get incorporated in the Finance Act, 1994 on enactment of the Finance Bill, 2017 [paras 3.1, 3.2, 3.3 and 4];

(iii) Certain fresh entries and amendments to existing entries in notification No. 25/2012-ST, will come into effect on the day Finance Bill receives assent of the President.

The salient features of the changes being made are discussed below.

3.1 Negative List -The changes proposed in the Negative List in Section 66 D are as follows:

(a) Presently, clause (f) of section 66D of the Act [Negative List] covers “services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption”. These services are proposed to be omitted from the negative list (Clause 121 of the Bill refers). The service tax exemption on them is being continued by incorporating them in the general exemption notification (Notification No. 25/2012-ST as amended by notification No. 07/2017-ST, dated 2nd February, 2017 refers).

(b) Consequently, the definition of ‘process amounting to manufacture’ [clause (40) section 65B] is also proposed to be omitted from of the Finance Act (Clause 120 of the Bill refers) and is being incorporated in the general exemption notification (Notification No. 25/2012-ST as amended by notification No 07/2017-ST, dated 2nd February, 2017 refers).

3.2 Advance Ruling Changes- The changes proposed are as follows:

(a) Clause (d) of section 96A is being amended so as to substitute the definition of “Authority” to mean the Authority for Advance Ruling as constituted under section 28E of the Customs Act, 1962. Section 28 (E) of the Customs Act, 1962, is also being amended so as to substitute the definition of “Authority” to mean the Authority for Advance Ruling as constituted under section 245-O of the Income-tax Act, 1961.

(Clause 122 of the Bill refers)

(b) Section 245P of the Income-tax Act, 1961 provides that no proceeding before, or pronouncement of advance ruling by the Authority for Advance Ruling would be invalidated on the ground merely due to any vacancy or defect in the constitution of the Authority. In view of the same, Section 96B relating to vacancies not to invalidate proceedings is being omitted.

(Clause 123 of the Bill refers)

(c) Sub-section (3) of section 96C is being amended so as to increase the application fee for seeking advance ruling from rupees two thousand five hundred to rupees ten thousand on the lines of the Income Tax Act.

(Clause 124 of the Bill refers)

(d) Sub-section (6) of section 96D is being amended so as to extend the existing time limit of ninety days to six months by which time the Authority shall pronounce its ruling, on the lines of the Income Tax Act.

(Clause 125 of the Bill refers)

(e) A new section 96HA is being inserted so as to provide for transferring the pending applications before the Authority for Advance Rulings (Central Excise, Customs and Service Tax) to the Authority constituted under section 245-O of the Income-tax Act from the stage at which such proceedings stood as on the date on which the Finance Bill, 2017 receives the assent of the President.

(Clause 126 of the Bill refers)

3.3 Repeal of Research and Development Cess Act, 1986

(a) Research and Development Cess Act, 1986 (32 of 1986) is proposed to be repealed.

(Clauses 139 to 142 of the Finance Bill refers)

(b) Notification No. 14/2012-ST dated 17-03-2012 exempts the taxable service involving import of technology from so much of the service tax leviable thereon as is equivalent to the amount of cess payable on the said import of technology under the Research and Development Cess Act, 1986. Consequently, with effect from the enactment of the Finance Bill, 2017, the exemption from service tax under notification No. 14/2012-ST would be not available to a taxable service involving import of technology on which Research and Development Cess is not payable. Full service tax along with cesses (Swachh Bharat Cess and Krishi Kalyan Cess) would be applicable to such taxable service.

4. Other Legislative provisions:

(a) Service tax exemption to taxable services provided or agreed to be provided by the Army, Naval and Air Force Group Insurance Funds by way of life insurance to members of the Army, Navy and Air Force under the Group Insurance Schemes of the Central Government, is being made effective from 10th day of September, 2004, the date from when the services of life insurance became taxable.

(Clause 127 of the Bill refers)

(b) Benefit of the exemption notification No. 41/2016-ST dated 22.09.2016 is being extended with effect from 1.6.2007, the date when the services of renting of immovable property became taxable. Notification No. 41/2016-ST dated 22.09.2016, exempts one time upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable for grant of long-term lease of industrial plots (30 years or more) by State Government industrial development corporations/ undertakings to industrial units was exempted.

(Clause 127 of the Bill refers)

(c) Rule 2 A of Service Tax (Determination of Value) Rules, 2006 is being amended with effect from 01.07.2010 so as to make it clear that value of service portion in execution of works contract involving transfer of goods and land or undivided share of land, as the case may be, shall not include value of property in such land or undivided share of land.

(Clause 128 of the Bill refers)

5. New Exemptions

(a) Services provided or agreed to be provided by the Army, Naval and Air Force Group Insurance Funds by way of life insurance to members of the Army, Navy and Air Force under the Group Insurance Schemes of the Central Government is being exempted from service tax.

(New entry at S. No. 26D of notification No. 25/2012-ST refers)

(b) The exemption vide S. No. 9B of notification No. 25/2012-ST dated 20.06.2012, is being amended so as to omit the word “residential” appearing in the notification. The exemption remains the same in all other respects. S. No. 9B of notification No. 25/2012-ST exempts services provided by Indian Institutes of Management (IIMs) by way of two year full time residential Post Graduate Programmes (PGP) in Management for the Post Graduate Diploma in Management (PGDM), to which admissions are made on the basis of the Common Admission Test (CAT), conducted by IIM.

(S. No. 9B of notification No. 25/2012-ST refers)

(c) Under the Regional Connectivity Scheme (RCS), exemption from service tax is being provided in respect of the amount of viability gap funding (VGF) payable to the selected airline operator for the services of transport of passengers, with or without accompanied belongings, by air, embarking from or terminating in a Regional Connectivity Scheme (RCS) airport, for a period of one year from the date of commencement of operations of the Regional Connectivity Scheme (RCS) as notified by Ministry of Civil Aviation.

(New entry at S. No. 23A of notification No. 25/2012-ST refers)

6. Rationalisation measure:

(a) Explanation-I (e) applicable to sub-rule 3 and 3A of Rule 6 of CENVAT Credit Rules, 2004 is being amended so as to exclude banks and financial institutions including NBFCs engaged in providing services by way of extending deposits, loans or advances from its ambit. It has been provided in the said explanation that value for the purpose of reversal of common input tax credit taken on inputs and input services used in providing taxable and exempted services, shall not include the value of service by way of extending deposits, loans or advances against consideration in the form of interest or discount.

(CENVAT Credit Rules, 2004 as amended by notification No. 04/2017-C.E.(NT), dated 2nd February, 2017 refers).

(b) Amendment of Rule 10 of CENVAT Credit Rules, 2004

A new sub-rule 4 is being inserted in Rule 10 of CENVAT Credit Rules, so as to provide that transfer of CENVAT Credit by the jurisdictional Dy./Assistant Commissioner of Central Excise, shall be allowed within 3 months from the date of receipt of application from the manufacturer or service provider in this regard, subject to the fulfillment of the conditions prescribed under Rule 10 (3).

(CENVAT Credit Rules, 2004 as amended by notification No. 04/2017-C.E.(NT), dated 2nd February, 2017 refer).

7. General

7.1 Changes explained above are not an exhaustive list and are meant only to draw attention to major changes. The text of the statutory provisions and the wordings of the notifications should be read carefully for interpreting the law.

7.2 Field formations are requested to go through the changes made in the Budget carefully. Any issues or doubts which may arise or any omission/error observed may kindly be brought to the notice of the undersigned, Dr. Somesh Chander, Director at somesh.chander@nic.in or Shri Pramod Kumar, OSD (TRU) at pramod.kumar@nic.in as soon as possible.

7.3 I shall be grateful if you could either inform me or my colleagues of any inadvertent error as soon as possible. You may also inform about any operational, administrative or any other difficulty faced or anticipated in the implementation of the new proposals either by the trade or by the field formations.

7.4 I would like to express my gratitude for the pre-budget suggestions and inputs which have been received from field formations. I would be found wanting if I do not express my deep gratitude to my team in TRU II comprising the Director, OSD and the three Technical Officers, Dr Abhishek Chandra Gupta, Dr. Ravinder Kumar and Shri Abhishek Verma, who have worked very diligently during the course of the year.

With regards,

Yours sincerely,

(Amitabh Kumar)

Union Budget 2017 Live Updates: FM Arun Jaitley begins his Budget speech : 01-02-2017


Union budget 2017 live updates by  Arun Jaitley. Arun Jaitley live from Parliament presenting budget 2017 live. Arun Jaitley presented the Union Budget 2017. He has done away with a decade-old practice of presenting it on the last working day of February. After presenting the Budget, Jaitley will reply to questions by Twitterati on the Budget proposals. Will he reduce Income Tax rates for the common man, will he announce sops for SMEs hit by demonetisation? Track FE.COM for the latest on the Union Budget 2017:

11:29AM: India’s macroeconomic stability continues to the foundation of our economic success, says FM

11:28AM: Signs of retreat from globalization have potential to affect exports from many emerging economies, including India, says FM

11:27AM: Uncertainty around commodity prices, esp. around crude oil, second major challenge, says FM

11:26Am: Current monetary plance of the US Federal reserve one of 3 challenges, says FM

11:25AM: My approach in preparing the Budget 2017 is to spend more on rural areas, infrastructure & poverty alleviation with fiscal prudence, says FM

11:24AM: We have moved from discretionary based administration to policy based administration, says Jaitley.

11:23AM: Demonetisation was a bold & decisive strike in a series of measures to arrive at a new normal of bigger, cleaner & real GDP, says FM

11:23AM: Demonetization seeks to create a new normal where in the GDP would be bigger, cleaner and real, says FM Jaitley

11:23AM: Pace of remonetisation has picked up &will soon reach comfortable levels; effects of demonetisation not expected to spill over to next yr-FM

11:22AM: Spend more in rural areas and infrastructure while keeping fiscal deficit mind …. FM is quite reassuring, Sunil Jain, Managing Editor, Financial Express

11:21AM: I am reminded of what our father of the nation Mahatma Gandhi said ‘a right cause never fails’, says FM Jaitley

11:20AM: Demonetisation is a bold and decisive measure, for many decades tax evasion was a way of life for many, says FM Jaitley

11:19AM: India is seen as engine of global growth, have witnessed historic reform in last one year, says FM Jaitley

11:19AM: The advanced economies are expected to increase their growth from 1.6%-1.9% and emerging economies from 4.1%-4.5%, says FM Arun Jaitley

11:18AM: Growth in a number of emerging economies is expected to recover in 2017, says FM

11:17AM: There are positive signs, that point to a positive outlook for the next year, says FM There are positive signs, that point to a positive outlook for the next year, says FM

11:16AM: EY India Insta-Analysis on Budget 2017: India becomes 6th largest manufacturer in the world

11:16Am: We are moving from informal to formal economy & the Government is now seen as a trusted custodian of public money, says Arun Jaitley

11:15AM: IMF estimates world GDP to grow at 3.1% in 2016 and 3.4% in 2017: FM

11:14AM: The Government is now seen as a trusted custodian of public money, says FM

11:13AM: Energizing youth, to reap benefits of growth and employment: our focus, says FM

11:12AM: Govt has no money to invest in capital spending, but needs to. So, like last year, expect more off-budget spending for roads and railways, financed through borrowing from LIC-types, says Sunil Jain, Managing Editor, Financial Express

11:11AM: Jaitley thanks the people for support to the Government, assures of more measures for people’s welfare

11:10AM: Expectations included burning issues like inflation and price rise, issue of corruption & crony capitalism, says FM

11:09AM: Our government was elected amidst huge expectations of people, the underlying theme of expectations being good governance, says FM Jaitley

11:08AM: The government is now seen as a trusted custodian of public money,I express gratitude to people for their strong support, says FM Jaitley

11:07AM: Massive war on black money launched

11:06AM: FM Jaitley begins his Budget speech

11:05AM: I would have adjourned the house, but today’s sitting has been fixed by President for presentation of Union Budget 2017, says Sumitra Mahajan in Lok Sabha

11:04Am: EY India Insta-Analysis on Budget 2017: Exemption base may be trimmed to align with proposed GST framework

11:04AM: EY India Insta-Analysis on Budget 2017: Changes expected under customs, Make in India policy and broad GST road map may be laid down

11:03AM: EY India Insta-Analysis on Budget 2017:Basic tax exemption limit may undergo some beneficial change

11:00Am: Speaker Sumitra Mahajan reads out obituary of E Ahamed who passed away due to cardiac arrest

10:57AM: Cabinet approves the budget 2017, budget 2017 live, FM to present shortly in the parliament. Arun Jaitley live in parliament in another 5-10 minutes.

10:55AM: Lalu Yadav demanding adjournment of the house

10:53AM: Manishi Raychaudhuri to BTVI: Hope long term capital gains is not re-introduced; increase in ltcg will dampen sentiments

10:51AM: EY India Insta-Analysis on Budget 2017: The retirement benefits, specifically the NPS withdrawals may see some change

10:49AM: Budget has a sanctity, we are already in the 11th hour. There should be no controversy over it. Its constitutional obligation, says Venkaiah Naidu

10:46AM: EY India Insta-Analysis on Budget 2017: Rate of service tax may be raised from current 15 percent to align with higher GST rate

10:43AM: Saddened by E Ahamed ji’s demise but Budget 2017 will be presented, says Sumitra Mahajan. We have to keep in mind that budget is a constitutional obligation, will have to be presented, says Speaker

10:40AM: EY India Insta-Analysis on Budget 2017: Exemption for interest payments for housing loans may go up to 2.5 Lakhs from the current 2 Lakhs.

10:37AM: Budget 2017 live: There was no need to go to the President with the budget, what is the hurry? Shows the  mentality of the government. This is surprising, says HD Deve Gowda. Meanwhile, Lalu Yadav of RJD offered his condolences to the family of E Ahamed. He went on to say that Budget shouldn’t be presented today.

10:36AM: EY India Insta-Analysis: 80C likely to be increased to Rs 2 Lakhs

10:35AM: Speaker confirms that the Union Budget 2017 will be presented today

10:33AM: Budget 2017 live EY India Insta-Analysis: With GST proposed to be implemented from 1 July 2017, not much changes are expected on excise & service tax which are to be subsumed under GST

10:30AM: EY India Insta-Analysis: Reduction in Corporate tax rate expected

10:29AM: Huge shortfall in disinvestment receipts and zero privatization … Going to be a test of government reform credentials, Sunil Jain, Managing Editor, Financial Express

10:26AM: Postponement of budget will be no big deal, its not as if secrecy will break-HD Deve Gowda,former PM

10:23AM: Watch me present Union Budget 2017 at 11 am today, tweets Finance Minister Arun Jaitley

10:20AM: This year’s budget is historic in several ways. The budget is for the first time being presented on February 1, earlier it was February end event. The government is aiming at implementing the budgetary provisions from the beginning of the financial year which is April 1.

10:17AM: The cloud hovering around the presentation of Union Budget got cleared as the government has arrived at a consensus after speaking to all political parties

10:14AM: Sunil Singhania to BTVI: Market is expecting huge cap expenditure from the government; Budget is getting more off a routine exercise

How much money FM puts aside for proposed PARA to fix banks critical, assuming FM even agrees. Survey suggests using demonetization dividend — that is more people flocking to amnesty scheme — for funding PARA, not wasting it. Let’s see what FM does, Sunil Jain, Managing Editor, Financial Express

10:30 AM: Budget 2017 live, FM Arun Jaitley and Narendra Modi attend the cabinet meeting ahead of budget presentation.

10:12AM: PM Modi reaches E Ahamed’s residence

1011AM: It’s not March 31, there is a lot of time to present budget. Govt can postpone it, says Mallikarjun Kharge

10:10AM: I think Govt already knew that he had passed away, but they were trying to maybe delay announcement: Mallikarjun Kharge,Congress

10:09AM: In our opinion,including JDU leaders and former PM Deve Gowda, the budget should be postponed: Mallikarjun Khadge, Congress

10:08 AM: Given the really bad shape of telecom companies, there cannot be any spectrum auction in FY18. That could reduce telecom revenue for FM in FY18 by 20,000-25,000 crore at the very least, Sunil Jain, Managing Editor, Financial Express

10:06AM: Economic Survey points to critical issues … Slowing consumption, contracting private investment, critical condition of PSU banks due to NPAs and this resulting in negative flows to industry …Judge budget by what it does on these issues, says Sunil Jain, Managing Editor, Financial Express

10:03AM: Cabinet meeting to be held shortly in Parliament

10:00AM: Fresh positions created by retail and domestic institutional investors on hopes of an investor-friendly
budget lifted sentiment. Realty, PSU, oil and gas, capital goods, consumer durables and banking stocks were lapped up, accounting for much of the gains.

9:59AM: The 30-share BSE index, which had lost 226.50 points in the previous two sessions, recovered 64.15 points, or 0.23 per cent, to 27,720.11. Similarly, the NSE Nifty moved up 21.90 points, or 0.26 per cent, to 8,583.20.

9:57AM: Market rose by over 64 points in opening trade today as investors built up positions ahead of the Union budget, which is slated to be unveiled later in the day.

9:54AM: The Union budget comes less than three months after Prime Minister Narendra Modi’s bold and risky gamble to outlaw high-value old currency notes, which has slammed the brakes on Asia’s third-largest economy and hit the poor particularly hard.

9:51AM: Hitting a positive note for the sixth session, the rupee today strengthened by another 24 paise to 67.63 against the dollar early on after banks and exporters continued to cut back on the US currency. Dealers said dollar’s weakness against a basket of other currencies overseas gave the domestic currency more muscle. Moreover, a higher opening in the domestic equity market provided some support.

9:48AM: Lok Sabha speaker Sumita Mahajan to visit E Ahamed’s residence at 10 am

9:46AM: FM Arun Jaitley reaches the Parliament

9:45AM: Union Budget 2017 on track, FM Jaitley to present Budget in Parliament at 11AM

9:44AM: Eight core industries register a growth of 5.6 per cent in December 2016 on the back of healthy output recorded by refinery products and steel.

9:43AM: ICRA says that a Budget that boosts economic growth through targeted spending while balancing fiscal considerations, may help revive FII interest in the immediate term, particularly in the country’s equity market.

9:40AM: India’s fiscal deficit in the first nine months to December was $73.87 billion or 93.9 percent of the budgeted target for the fiscal year ending in March 2017, as per government data. The fiscal deficit was 87.9 percent of the full-year target during the same period a year ago. Net tax receipts in the first nine months of 2016/17 fiscal year were Rs 7.52 trillion. Senior officials say Jaitley may allow the deficit to overshoot an earlier target of 3 percent of GDP to create room for more public investment – a move against that ratings agencies such as Standard & Poor’s have warned against because of India’s high national debt.

9:37AM: Startup industry is expecting more incentives this financial year. According to the market leaders, Startups are looking forward to a continuing tax exemption as well as other tax-related incentives.

9:33AM: Running trains at 200 kmph on the Delhi-Howrah and Delhi-Mumbai routes, allocation of Rs 20,000 crore for safety upgrade and customised trains for agri products are likely to be in focus as FM Jaitley presents the first Rail Budget subsumed in the General Budget. Besides, the budget may also give thrust on infrastructure development including laying new lines, electrification, modernisation and station redevelopment with private participation. Making all stations disabled-friendly ones and connectivity for religious places are likely to find mention in the Budget 2017-18. This may have a direct and significant effect on the second class and AC-3 tier tickets, while ticket prices of AC 1-tier and 2-tier will increase marginally. The Railways, which expected Rs 1.84 lakh crore revenue in the current financial year, but has already lowered down it to Rs 1.7 lakh crore, would definitely witness a boost in its finances due to the fare hike.

9:30AM: Ahead of the Budget, a survey has revealed that India Inc’s business confidence slipped to a four quarter low as demonetisation pulled down performance and clouded its assessment of the economy. According to Ficci’s latest Business Confidence Survey, the Overall Business Confidence Index (OBCI) slipped to a four quarter low of 58.2 vis-a-vis 67.3 in the last round as 4 out of 5 companies reported weak demand. The survey was conducted between December 2016 and January 2017 to capture the assessment of the current situation as well as gauge expectations regarding performance for the next six months. It drew responses from about 207 companies belonging to a wide array of sectors.

9:27AM: Expectations of an economically balanced Budget by sticking to its fiscal consolidation path which will give room for RBI to cut key rates, say experts

9:24AM: FM Jaitley will reply to questions by Twitterati on the proposals in the Budget after its presentation in the Lok Sabha. “I shall be presenting the Union Budget for 2017-18. I shall be happy to respond to your questions which you can send directly to me,” Jaitley said in a video message. The questions can be asked on Twitter by using hastag #MyQuestionToFM.

9:22AM: Jaitley is expected to offer some tax “sops” to individuals to ease the pain of demonetisation, and ramp up public sector investment to offset weak consumption and private capital investment.

9:20AM: Budget 2017 copies reach Parliament

9:10AM: FM Jaitley meets President Pranab Mukherjee in Rashtrapati Bhavan

Source : Financial Express

Union Budget 2017 tipped to offset pain of cash crisis : 01-02-2017


India will unveil a budget Wednesday expected to contain measures to ease the pain of its sudden decision to pull most of its currency from circulation, a policy it concedes has dragged on the economy.

Finance Minister Arun Jaitley is tipped to increase spending to offset the impact of the so-called demonetisation scheme, which triggered countrywide cash shortages and forced the government to lower its growth forecast.

“It’s a foregone conclusion that there will be an increase in spending,” said Jaijit Bhattacharya, partner at KPMG in India.

“The more pertinent question is what will it spend on. I expect the government to spend on infrastructure and on schemes for social safety nets.”

On the eve of the budget, the government concluded the shock move to remove all 500 ($7.30) and 1,000 rupee notes from circulation had hurt a host of sectors, but could boost long-term tax revenues.

The cash crunch has already prompted the International Monetary Fund to knock a percentage point off its forecast for India’s economy in the current fiscal year to 6.6 percent, bringing it below China’s projected rate of 6.7 percent.

Prime Minister Narendra Modi’s unanticipated decision removed around 86 percent of India’s available cash at one stroke, triggering massive queues outside banks as the authorities struggled to print enough new notes.

The abrupt shortage of high-value notes hit businesses across the country, especially in cash intensive sectors like agriculture, real estate and jewellery.

This pain, coupled with looming elections in key battleground states Uttar Pradesh and Punjab, has analysts predicting the government will be tempted to spend big on health, education and rural employment.

But the drag on growth, and its related impact on revenue collection, has many asking where the government will source the money for this unexpected stimulus kick.

“The finance minister will have a fairly tough task in terms of balancing his revenues, which are contingent on GDP growth and expenditure,” Sunil Sinha, principal economist at India Ratings and Research, told AFP.

The government could relax its fiscal deficit target, experts say, to bolster demand. The current deficit of 3.5 percent is set to drop by half a percentage point come April, but analysts predict that the government may not stick to that target.

“Silence on the fiscal deficit target perhaps indicates the government’s desire to loosen the purse strings to spur growth and demand,” said Mukesh Butani, managing partner at BMR Legal.

The government Tuesday lowered its growth forecast for the 2016-17 fiscal year ending in March to 7.1 percent, down from 7.6 percent in the previous year, acknowledging the pain of its demonetisation scheme.

“Growth slowed as demonetisation reduced demand… and increased uncertainty,” stated the annual economic survey.

The survey said the estimate was based mainly on data for the first seven to eight months of the financial year, before Modi’s announcement in November to withdraw notes from circulation.

Source : Economic Times

Economic Survey hints at demonetisation ‘windfall’ doles in Budget 2017 : 01-02-2017


The Economic Survey says demonetisation has hit India’s growth by 0.25-0.5% of GDP, but will yield a fiscal “windfall”. This hints at a big hand-out of the bonanza, possibly through Jan Dhan accounts, in Wednesday’s budget, burnishing BJP’s hopes in the coming state elections.

GDP growth is estimated at 6.75-7.5% next year, well below the “sweet spot” of over 8% that the Modi government started with. The Survey emphasises that 8-10% GDP growth needs 15-20% export growth, and right now exports are in poor shape. Brexit, Donald Trump’s election and other global trends suggest that the West’s “political capacity for openness” is falling, a major structural barrier.

The Survey estimates that even going by new real effective exchange rate giving high weights to India’s Asian competitors, the rupee has strengthened by 8.3-10.4% in the last two years. Urjit Patel, please take note. The Survey also suggests free trade pacts with the UK and European Union, estimating the gains at 1.5 million new jobs and $3 billion of extra exports per year.

It devotes much space to the possibility of a Universal Basic Income (UBI) for all. Yet, its enthusiastic tone is tempered by the admission that this is completely unaffordable. Even if limited to 45% of the population —and hence nowhere near universal — it will cost 4.9% of GDP, far more than explicit central subsidies of 2% of GDP today.

Costs apart, the digital financial architecture is insufficient, as shown in the partial failure of pilot schemes to substitute cash transfers for subsidised food in Chandigarh and Puducherry. However, existing schemes are also leaky and deficient, with the Centre alone having 950 pro-poor plans and states having many more that don’t reach the masses. So, the Survey seeks a debate on ways to phase in UBI gradually.

The coming fiscal year will face headwinds. Falling oil prices had yielded an opportunity to raise duties on petroleum products by 1% of GDP in the last two years, but prices are now rising. Rising interest rates in the US are one reason for the flight of $9.8 billion from Indian financial markets in November and December, of which two-thirds was from debt markets.

The shift to a goods and services tax is a notable achievement, and has huge long-term promise, yet will initially cause glitches and large revenue losses for the states, that have to be made good by New Delhi. The banking system has more bad debts than earlier expected and needs much more recapitalisation. This will limit the scope for budget freebies. The Survey sees the need for raising public investment to offset the continuing slack in private investment. But it also sees the need for fiscal restraint, especially since the fiscal deficits of the states have risen from 2.5% to 3.6% of GDP. One heartening feature is the sharp rise in foreign direct investment, running at an annual rate of $75 billion. This is comparable to FDI into China at a similar development phase.

Looking ahead, the Survey presents an economic vision for a “precocious, cleavaged India”. This makes India sound like a busty teenager aiming for Bollywood. What the Survey means is that India has instituted democratic rights far earlier than most countries in history, but is cloven by more regional, religious and caste distinctions than almost any other country.

The road ahead is marked by three metachallenges — ambivalent attitudes to the private sector, weak state capacity, and (as a corollary) inefficient redistribution to the needy. The World Values Survey shows that India is one of the most anti-business countries in the world. This explains the reluctance of successive governments to privatise state enterprises, or free agricultural marketing. Public sector banks are kept dominant since they are useful milch cows for political goodies to  sundry vote banks.

Cleaning up bank balance sheets is proving difficult since any attempt to write off losses of big corporations may be interpreted as corruption. The perception of corruption has led to excessive caution and delay in decision-making, and to sub-optimal decisions (like auctioning spectrum at the highest price instead of providing low-cost spectrum to reach more people).

State capacity is dismal and unreformed. India is worse at delivering educational and health services than any other country at similar development levels. Absenteeism, corruption, clientism and red tape dominate. One consequence is inefficient redistribution to the poor. Hundreds of welfare schemes fail to reach the masses. The Survey presents research showing that the most backward districts, most in need of support, typically get far less from welfare schemes than the national average. This is because state capacity to deliver tends to be weakest in the poorest regions. One consequence of pathetic state delivery is that the middle class is progressively defecting to private institutions for education, health and other services. This further erodes the legitimacy of the state, leading to more defection and even less pressure on the state to improve services. India needs massive administrative reform to get out of this vicious cycle.

Source : Economic Times

Due date for PF ESI Monthly Consolidated Statement of dues and remittance under EPF Scheme, 1952, EPS 1995 and Employees’ Deposit Linked Insurance Scheme, 1976 of the previous month to which the dues relate.


Title: Due date for PF ESI Monthly Consolidated Statement of dues and remittance under EPF Scheme, 1952, EPS 1995 and Employees’ Deposit Linked Insurance Scheme, 1976 of the previous month to which the dues relate.
Date: 2017-02-24

Due date for PF ESI Monthly Payment of ESI Contribution for the previous month (plus grace period of 5 days)


Title: Due date for PF ESI Monthly Payment of ESI Contribution for the previous month (plus grace period of 5 days)
Date: 2017-02-16

6. Due date for PF ESI Exempted establishment EPS/ EDLIS Monthly Return of members joining service during the previous month.


Title: 6. Due date for PF ESI Exempted establishment EPS/ EDLIS Monthly Return of members joining service during the previous month.
Date: 2017-02-15

5. Due date for PF ESI Monthly EPF Return of member leaving service during the previous month


Title: 5. Due date for PF ESI Monthly EPF Return of member leaving service during the previous month
Date: 2017-02-15

4. Due date for PF ESI Monthly EPF Return of Employees qualifying for membership to the EPF for the first time during previous month.


Title: 4. Due date for PF ESI Monthly EPF Return of Employees qualifying for membership to the EPF for the first time during previous month.
Date: 2015-02-15

3. Due date for KVAT Deposit of tax deducted at source during the previous month


Title: 3. Due date for KVAT Deposit of tax deducted at source during the previous month
Date: 2017-02-15

3. Due date for KVAT Deposit of tax deducted at source during the previous month.


Title: 3. Due date for KVAT Deposit of tax deducted at source during the previous month.
Date: 2017-02-10

2. PF ESI Monthly Payment of Provident Fund Contribution for the previous month (plus grace period of 5 days)


Title: 2. PF ESI Monthly Payment of Provident Fund Contribution for the previous month (plus grace period of 5 days)
Date: 2017-02-15

1. Due date for Income Tax Quarterly issuance of certificate of tax deducted at source (other than salary) for the quarter ending June 30,September 30 or December 31


Title: 1. Due date for Income Tax Quarterly issuance of certificate of tax deducted at source (other than salary) for the quarter ending June 30,September 30 or December 31
Date: 2017-02-15

3. Due date for Central Excise Monthly Details of receipt and consumption of principal inputs and finished excisable goods – Declarations under central excise to be filed by a unit paying total duty (Cenvat Credit + Cash) of more than 1 crore per annum


Title: 3. Due date for Central Excise Monthly Details of receipt and consumption of principal inputs and finished excisable goods – Declarations under central excise to be filed by a unit paying total duty (Cenvat Credit + Cash) of more than 1 crore per annum
Date: 2017-02-10

2. Central Excise Monthly Return Last Date for filing of Return of Central Excise and Cenvat Credit for the previous month for 100% EOU units


Title: 2. Central Excise Monthly Return Last Date for filing of Return of Central Excise and Cenvat Credit for the previous month for 100% EOU units
Date: 2017-02-10

1. Central Excise Monthly Return Last Date for filing of Return of Central Excise and Cenvat Credit for the previous month For non SSI Units


Title: 1. Central Excise Monthly Return Last Date for filing of Return of Central Excise and Cenvat Credit for the previous month For non SSI Units
Date: 2017-02-07