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

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

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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

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Title: Due date for PF ESI Monthly Payment of ESI Contribution for the previous month (plus grace period of 5 days)
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Date: 2017-02-07

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Notification No.8/2017 31-01-2017


U/s 35(1) (ii) Of IT Act 1961 Central Government approved M/s Christian Medical College Vellore Association, Vellore – 8/2017

Government of India Ministry of Finance(Department of Revenue)

(Central Board of Direct Taxes)

Notification No. 08/2017

New Delhi, the 31st January, 2017

S.O. - It is hereby notified for general information that the organization M/s Christian Medical College Vellore Association, Vellore (PAN:- AAATC1278N) 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 2016-2017 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 accounts 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 accounts 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 subparagraph (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.

(F. No. 203/04/2016/ITA-II)

(Ankita Pandey)

Under Secretary to Government of India

Notification No.7/2017 31-01-2017


U/s 35(1) (ii) of IT Act 1961 Central Government approved M/s Center of Innovative & Applied Bio-processing( CIAB ) – 7/2017

Government of India Ministry of Finance (Department of Revenue)

(Central Board of Direct Taxes)

Notification No. 07/2017

New Delhi, the 31st January, 2017

S.O. - It is hereby notified for general information that the organization M/s  Center of Innovative & Applied Bio-processing(‘CIAB’) (PAN:- AABAB8297N) 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 5D of the Income tax Rules, 1962 (said Rules), from Assessment year 2016-2017 onwards in the category of ‘Scientific Research Association‘, subject to the following conditions, namely:-

(i)  The sole objective of the approved ‘Scientific Research Association’ ‘CIAB’ shall be to undertake scientific research;

(ii)  The approved organization shall carry out scientific research by itself;

(iii)  The approved organization shall maintain separate books of accounts for ‘CIAB’ 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 for ‘CIAB’ and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to above.

2.  The Central Government shall withdraw the approval if the approved organization:-

(a)  fails to maintain separate books of accounts 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 5D of the said Rules.

(F. No. 203/02/2016/ITA-II)

(Ankita Pandey)

Under Secretary to Government of India

Budget session 2017 kickstarts with President Pranab Mukherjee’s address: Key highlights of speech : 31-01-2017


The 2017 budget session of the parliament began with President Pranab Mukherjee’s address to members of both the houses on Tuesday. Speaking to the legislators of the country, the President said that this was a historic session heralding advancement of the budget cycle and merger of general budget with rail budget for the first time. He praised the countrymen for going through the struggle of demonetisation and said that the resilience showed by the citizens, particularly the poor in the fight against black money and corruption was remarkable. He further said, “the core of all my government policies, is the welfare of ‘gareeb’, ‘peedit’, ‘Dalit’, ‘vanchhit’. Govt committed to growth, ‘sabka saath sabka vikaas’.” The President praised the countrymen for voluntarily giving up the LPG subsidy to help the poor. He praised the Modi government for having taken many initiatives to improve the quality of life of the poor, and the commitment to provide shelter.

Here are the highlights of the speech:

A favourable monsoon supplemented by farmer-oriented schemes has increased the acreage and yield of most Kharif crops

Pradhan Mantri YUVA Yojana launched for promoting entrepreneurship education and training amongst 7 lakh students. National Apprenticeship Promotion Scheme has been launched with a budget outlay of Rs. 10,000 crore. With motto of “Har Haath ko Hunar”, my govt has taken several steps for skilling youth & improving their employability: President Mukherjee

The revision of Maternity Benefit Act will support pregnant women at the workplace. Pradhan Mantri Surakshit Matritva Abhiyan will provide comprehensive ante-natal care to all pregnant women. The Beti Bachao Beti Padhao scheme is yielding encouraging results. Our women deserve equal opportunity. My government is making Nari Shakti an integral part of our development journey: President Mukherjee

Three crore Kisan Credit Cards will be converted into RUPAY debit cards soon. Pradhan Mantri Fasal Bima Yojana expanded ambit of risk-coverage, doubled sum insured & facilitated lowest-ever premium: President Mukherjee. My Government has taken various steps to transform the lives of our farmers. The sown area in the current Rabi season has shown six percent increase in comparison to last year: President Mukherjee

Mission Indradhanush commits to vaccinate “every child everywhere” against preventable diseases: President Mukherjee

Under Deen Dayal Upadhayay Gram Jyoti Yojana over 11,000 villages have been electrified in a record time. 37 percent of the Ujjwala beneficiaries belong to the Scheduled Castes and Scheduled Tribes: President Mukherjee

The Pradhan Mantri Ujjwala Yojana will make clean energy accessible to the poor: President Mukherjee

Swachh Bharat Abhiyan aims to ensure health and sanitation, particularly for the poor: President Mukherjee

My Government is committed to providing shelter to every houseless poor household through the Pradhan Mantri Aawas Yojana. My Government has taken many initiatives to improve the quality of life of the poor: President Mukherjee

Under Deen Dayal Antyodaya Yojana, over Rs. 16000 crores have been made available to SHGs in the current Financial Year. Over Rs 2 Lakh Crore has been provided through 5.6 crore loans sanctioned under Pradhan Mantri Mudra Yojana: President Mukherjee

To take the banking system to the doorstep of the poor and the unbanked, the Indian Postal Payment Bank has been started. Close to 13 crore poor have been covered under various social security scheme. An unprecedented 26 crore plus Jan Dhan accounts have been opened for the unbanked: President Mukherjee

Financial inclusion is key to poverty alleviation. My government is guided by the Antyodaya philosophy of Pandit Deendayal Upadhyaya. At the core of all my Govt’s policies is the welfare of the garib, Dalit, peedit, shoshit, vanchit, kisan, shramik &yuva. My government salutes the strength of janashakti and pledges to constructively utilise it in Rashtra Nirman. Janashakti has transformed Swachh Bharat Mission into a jan-andolan. Resilience & forbearance demonstrated by countrymen recently in fight against black money & corruption is remarkable: President Mukherjee

Source : Financial Express

Budget 2017: 3 new taxes that Modi government could introduce, but won’t : 31-01-2017


Our tax to GDP ratio is abysmally low at just 16.6%, which is much lower than the emerging market average of 21% and OECD (comprising largely of rich countries) of 34%. This isn’t surprising, less than 1% of India’s billion plus population pays Income-tax (I-T) and only 3 crore I-T returns were filed for the financial year (FY) 2015-16. Various committees down the years have advocated widening of the tax base. Here are top three potential avenues, which could be explored.

1 Tax the super rich farmer

Over the past decade, according to data given by Ministry of agriculture, the GDP from agricultural activities has increased from Rs 8.2 lakh crore to Rs 16 lakh crore in FY 201516. While fragmentation is rampant in the agricultural sector and many farmers, even if taxed, would fall below the Income-tax (I-T) exemption limit of Rs 2.5 lakh, there is still scope for garnering tax from the super rich farmers.

Let us take a more precise figure. As reported by TOI earlier -in its edition dated March 13, 2016 -there are thousands of individuals declaring an agricultural income of over Rs 1 crore each. During the nine-year period from financial year 2006-07 up to 2014-15, the number of cases with Rs 1 croreplus agricultural income was 2,746. For the financial year 2014-15, 307 such cases existed. CBDT asked its ground level officers to examine these cases and also detect any errors which may have crept  into the I-T returns when declaring agricultural income. A PIL is pending in the Patna High Court, which points to the rampant misuse of tax-free agricultural income.

Mind you, these are statistics of agricultural income based on I-T returns filed, there may be many more cases of crorepati farmers who have not filed their I-T returns.

How much can govt get? Assuming profit from agricultural income to be 5% of the GDP of Rs 16 lakh crore, we arrive at profit of Rs 80,000 crore. If such profit is subject to tax at the lowest slab of 10% (assuming that all farmers would not fall in the highest tax slab), the government can get Rs 8,000 crore Or, let’s just focus on crorepati farmers. Assuming that each of the 307 crorepati farmers, who filed their I-T returns during 2014-15 earned only Rs 1 crore each and not more.It works out to an agricultural income of at least Rs 300 crore. Tax at a flat rate of 10% would fetch government Rs 30 crore.

Suggestion: Parthasarathi Shome-led committee on Tax Administration Reforms in its report (2014) had suggested bringing large farmers having income above a higher threshold limit, say Rs 50 lakh into the I-T net.

Budget 2016, introduced a flat rate tax on dividend income for rich shareholders. Dividend income is no longer tax free for those shareholders earning dividends of Rs 10 lakh or more.Likewise, a case can be made out for taxing crorepati farmers, earning more than Rs 1 crore at a flat rate of 10%. Or the agricultural income threshold can even be lower as suggested by the committee.

This will require both a constitutional change (as agricultural income is a state subject) and a political to be a reality.

2 Legalise gambling & betting and tax it

The gambling industry is booming despite it being largely illegal. All forms of gambling except horse racing, rummy and lotteries are banned in India, with some state specific exceptions -such as casinos in Goa. As per an industry report, the betting market in India is worth Rs 3 lakh crore approximately (this includes betting of all kinds including betting on cricket matches, which is a large chunk).

According to news reports, on an average, bets worth Rs 1,300 crore are placed when the Indian team plays an ODI cricket match. In 2015, the Indian team played 21 ODIs, which bring the betting figure to Rs 27,300 crore. Every IPL match adds as much as Rs 530 crore to the domestic illegal betting pool. On this basis, given that 60 IPL matches were played during 2015, the total betting amount aggregates to Rs 31,800 crore.

How much can govt get? According to the industry report, if the Rs 3 lakh crore gambling market is legalised, the government could garner Rs 12,000 -19,000 crore a year from taxes.

Or, the government could make a start with India’s most popular sport, cricket. Given the aggregate betting figure of Rs 59,100 crore and a basic tax rate of 30% the tax could be Rs 17,730 crore.

Suggestion:
Many countries are earning tax from gambling activities (see chart).Legalising cricket betting was recommended by the Justice R N Lodha committee appointed by the Supreme Court to investigate the IPL match fixing scandal which rocked the country in 2013. In addition to brining in revenue, legalising gambling and betting will also crack down on money laundering operations.

3 Estate Duty is gaining ground world over, but…

Estate Duty is also referred to as Inheritance Tax or Death Tax and it exists in many countries across the world. Simply put, Estate Duty is a tax on the value of the property left behind by a deceased person to his heirs. In India, Estate Duty was payable under the Estate Duty Act, 1953.This Act was finally abolished in March 1985. It was a complex law riddled with different valuation rules for different kinds of  property, thus it gave rise to a host of litigation and the collections were not commensurate with the cost of administration of this tax.

When estate duties existed, estates valued at over Rs 20 lakh, attracted a high duty of 85%. For the 198485, it garnered Rs 20 crore (which was 0.4% of the total direct tax collection in that year).

How much can govt get? Direct tax collections for 2015 rect tax collections for 201516 were Rs 14.6 lakh crore.Assuming the collection ratio remains unchanged at 0.4%, it works out to a collection of Rs 5,840 crore .

Suggestion: India must not be hasty in reintroducing estate tax for several reasons. A fair share of Indian business entities are family run. Introduction of estate duties will impede economic growth and could result in cessation by Indian promoters of their India residential status. Business operations could also move overseas. If at all, at some time in the future, India decides to walk down this path, exemptions must be carved out -such as for residential houses.  The basic exemption limit must also be quite high -such as, in the US, it is $5.45 million, which translates into Rs 36.8 crore per person.

Source : PTI

Reserve Bank removes cap on withdrawals from current a/cs : 31-01-2017


In view of the upcoming Assembly elections in five States, the Reserve Bank of India (RBI) on Monday withdrew the limits placed on cash withdrawals from current accounts/cash credit accounts/overdraft accounts with immediate effect. However, the limits on savings bank accounts will continue.

PTI reports that the Election Commission has decided to ask all candidates to open current accounts to meet election expenses after the latest relaxation by the apex bank.

The central bank also said the limits placed on cash withdrawals from ATMs (₹10,000 per day, per card, within the existing overall weekly limit of ₹24,000) stands withdrawn from February 1, 2017.

What this means is that a customer can withdraw his weekly limit at one go at an ATM.

However, the RBI added that banks may, at their discretion, have their own operating limits.

The revocation on limits comes in the backdrop of the Election Commission of India’s request that candidates contesting elections in the five poll-bound States be able to make higher withdrawals to meet poll-related expenses. This will also benefit traders and small and medium enterprises.

Earlier, the central bank was not in favour of the Commission’s proposal to up the withdrawal limits only for candidates contesting Assembly elections in Manipur, Uttarakhand, Goa, Uttar Pradesh and Punjab.

So far, the limit on withdrawal from current accounts/cash credit accounts/overdraft accounts was ₹1 lakh per week.

In a notification to all banks, the RBI said in a review of the pace of remonetisation that it has been decided to partially restore the status quo ante (the previously existing state of affairs) vis-a-vis cash withdrawals from bank accounts and ATMs. “The limits placed on cash withdrawals from current accounts/cash credit accounts/overdraft accounts stand withdrawn with immediate effect.

“The limits on savings bank accounts will continue for the present and are under consideration for withdrawal in the near future,” said the RBI. Further, the RBI has urged banks to encourage their constituents to sustain the move towards digitisation of payments and switching over from cash to non-cash payments.

Source : Business Line

Notification No : 06/2017 Dated: 30-01-2017


Service Tax (Second Amendment) Rules, 2017 – 6/2017

MINISTRY OF FINANCE

(Department of Revenue)

NOTIFICATION No. 6/2017-Service Tax

New Delhi, the 30th January, 2017

G.S.R. 73(E).-In exercise of the powers conferred by sub-section (1), read with sub-section (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the Service Tax Rules, 1994,namely:-

1.  (1) These rules may be called the Service Tax (Second Amendment) Rules, 2017.

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

2. In the Service Tax Rules, 1994, in rule 6, in sub-rule (1), after the last proviso, the following proviso shall be inserted, namely,-

“Provided also that in case of online information and database access or retrieval services provided or agreed to be provided by any person located in a non-taxable territory and received by non-assessee online recipient, the service tax payable for the month of December, 2016 and January, 2017, shall be paid to the credit of the Central Government by the 6th day of March, 2017.”.

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

MOHIT TEWARI, Under Secy.

Note: The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide notification No. 2/94-Service Tax, dated the 28th June, 1994 vide number G.S.R. 546 (E), dated the 28th June, 1994 and last amended vide notification No. 2/2017-Service Tax, dated the 12th January, 2017 vide number G.S.R. 25(E), dated the 12th January, 2017.

Notification No : 05/2017 Dated: 30-01-2017


Seeks to amend Notification No. 25/2012-Service Tax, dated the 20th June, 2012 – 5/2017

MINISTRY OF FINANCE

(Department of Revenue)

NOTIFICATION No. 5/2017-Service Tax

New Delhi, the 30th January, 2017

G.S.R. 72(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 34, in the proviso, for the word, brackets, and letter “clause (a)”, the words, brackets and letters “clause (a) or clause (b)” shall be substituted.

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

MOHIT TEWARI, Under Secy.

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 1/2017-Service Tax, dated the 12th January, 2017, vide number G.S.R. 24(E), dated the 12th January, 2017.

Budget 2017: GAAR alert! Your salary and reimbursements may be under greater income tax scrutiny soon : 30-01-2017


Budget 2017: GAAR, or General Anti-Avoidance Rule, will kick in from April 1, 2017 and it may very well mean that your company will have to restructure your salary! Finance Minister Arun Jaitley may announce further clarifications on the ambit of GAAR in Budget 2017, but for now the way it has been proposed, its implementation may bring various components of your salary, such as reimbursements, under the taxman’s radar.

Talking about this in detail, Ravi Shingari, Partner, Tax at KPMG India tells FE Online that aspects of your salary, such as a company-leased car, may also come under GAAR. “GAAR, the way it will be introduced, says that if step or transaction has been taken with the main purpose of ‘tax avoidance’, then GAAR will trigger in. When GAAR triggers in then the Income Tax officer has the power to recharacterise the transaction and charge income tax on it. If we apply this, then it doesn’t really restrict the application to corporates. It applies to every taxpayer,” he says in an exclusive chat with FE Online.

“This means that if an individual taxpayer, whether salaried or non-salaried, is doing some tax planning which doesn’t have enough substance behind it, then that is in the radar of getting questioned under GAAR. We haven’t seen the detailed guidelines under what circumstances GAAR will apply. So, that probably will throw some light. But, for example, a lot of corporates have this provision for the salaried, where there is a scheme of giving the company-leased car. The lease amount is reduced from the salary and there is a tax saving of some percentage on that lease amount. There is a possibility that the way GAAR is today, the company leased car arrangements could be challenged under GAAR,” he explains.

Meanwhile, individual taxpayers are looking forward to a lot incentives from FM Jaitley in Budget 2017, given that it comes within months of demonetisation. According to Shingari, Finance Minister Arun Jaitley needs to give more disposable income in the hands of the individual taxpayers. “The basic or most realistic expectation would be that today you don’t have to pay tax for an annual income up to Rs 2.5 lakh – that at least can be increased to Rs 3 lakh,” he says. Shingari also believes that the tax slabs need to be revised, especially if one were to compare it to the neighbouring countries.

“The peak rate above which you start paying 30% tax is Rs 10 lakh which is really really low and if you compare that to the countries around India, especially in the ASPAC region, or you look at Singapore and Malaysia – both these countries have an upper limit of Rs 1.5 crore. After that the peak rate starts applying, and the peak rate is even lower than 30%,” Shingari says. “So, if our neighbours working in the similar economic set up can do it, I think it is probably time now that we also change that Rs 10 lakh to at least Rs 20 lakh. That again will increase the disposable income in the hands of the individuals,” he adds.

Source : Financial Express

Beware Mr FM, if your Budget largesse deflates rate cut hope, we’re done for this year : 30-01-2017


You break it, you fix it. That’s the sentiment ahead of India’s annual budget this week. Amid signs that New Delhi’s Nov. 8 ban on 86 per cent of the country’s currency has disrupted demand, snapped supply chains and cratered credit growth, investors expect a fiscal lollipop from Prime Minister Narendra Modi and Finance Minister Arun Jaitley.

Bigger tax rebates for the mere 3 per cent of the population that files returns would not be amiss. Without some feel-good sops for the middle class, the V-shaped recovery in consumption could become painfully U-shaped.

At the same time, a cut in the 30 per cent corporate tax rate to lift sagging investments could be tricky. If fiscal largesse ends up deflating hopes of a 100 to 200 basis point reduction in domestic interest rates, India Inc. will be in a worse place a year from now.

India’s fiscal house, always a little shaky, is precariously perched right now atop the crude oil market. Federal and state governments opportunistically increased their take as international prices fell, to a point where taxes account for more half the price of gasoline in New Delhi. Energy consumers never got much of a boost to disposable incomes. Now, as imported crude oil gets costlier, there’s no room to raise taxes further.

With important state elections around the corner, the petroleum levies may even have to be cut to spare voters the angst of higher pump prices on top of everything else they’ve suffered since the demonetization drive.

Morgan Stanley estimates that a $10 per barrel increase in global oil prices would require New Delhi to forgo 0.25 per cent of GDP in excise duties. That may not sound like much, but bond investors have already accepted that the coming year’s budget deficit will skip a targeted pruning of 0.5 per cent of GDP. A further 0.25 per cent slippage could raise risk-free rates, which have headed sharply lower in the past couple of months because of a surge in bank deposits.

Who’ll be hurt? From New Delhi airport operator GMR Infrastructure LtdBSE -0.23 %. to project construction company Larsen & Toubro Ltd. as well as Tata Steel LtdBSE -1.31 %. and Tata Power Ltd., there are nine large Indian firms with leverage — or the ratio of assets to equity — of more than 4 times. Put another way, they have at least 3 times as much debt as equity.

When Modi came to power in 2014, there were 13 such companies on the BSE 100 Index. If the likes of Adani Power LtdBSE -2.19 %. and Jaiprakash Associates LtdBSE 0.57 %. hadn’t been dropped from the gauge, it would become clear that India’s crisis of extreme leverage is raging just as intensely as ever. If anything, the malaise has spread to companies like truckmaker Ashok Leyland LtdBSE -0.38 %.

A lower cost of capital would help far more than a smaller tax bill. Markets, though, might cheer a bold corporate tax cut for the simple reason that the last time they saw one was 20 years ago, although if the government tries to pay for it by taxing long-term capital gains, investors will be less than impressed.

India’s corporate tax rate is 30%

More importantly, if the net result of the budget is higher interest rates and a weaker rupee later this year, stock markets may be ecstatic at first — but get cranky later. So while they’ve indeed broken a fragile economy by banning currency notes, Modi and Jaitley should eschew a quick fix. That could just make things worse.

Source : PTI

Before investing for Sec 80C tax break find out how much you really need to put in : 30-01-2017


The deadline for investing to save tax is fast approaching. For many, this period is fraught with worries about investing enough to save as much tax as possible under Section 80C. But this might not be something you need to lose sleep over. Follow these steps to find out if you really need to invest at all.

First, check out your total contribution to the Employees’ Provident Fund (EPF) account during the financial year. For salaried individuals, this is usually a decent sum that helps save a good amount of tax. For instance, if you have a basic salary of Rs 15,000 per month, your yearly EPF contribution would be around Rs 21,600 (usually 12% of basic), which is eligible for deduction.

Second, you need to understand that Section 80C does not cover only investments. It also includes various expenses that are eligible for tax deduction. Many people don’t know that the tuition fees of up to two children are eligible for deduction. Given the rising cost of education, this is a welcome relief for many parents with school-going children, as it can take care of a large portion of the Section 80C limit.

The next big expense that you can get tax deduction for is the home loan EMI that you pay (principal portion). This can also exempt you from paying a significat amount of tax. For example, if you pay a home loan EMI of Rs 20,000, you could claim a tax deduction of close to Rs 84,000 per year for the principal portion. The stamp duty and the registration charges for a house bought during the year are also eligible for the deduction.

Further, if you include the premiums of your existing insurance policies, you might discover that your tax planning under Section 80C is already taken care of. “If eligible expenses take care of 80C, no additional investments need to be made,” says Archit Gupta, Founder & CEO, ClearTax. “Taxpayers can then consider other tax saving avenues such as medical insurance premium or NPS, or invest the available funds in other options,” he adds

So, before you worry about investing in tax saving instruments, carefully tally up your EPF, children’s tuition fees, and home loan EMIs, etc. to see if the 80C limit of `1.5 lakh has already been reached. If it hasn’t, you have time until March 31 to make tax-saving investments. Even if you fail to submit investment proofs to your employer in time, you can claim these tax benefits directly in your tax return.

Save tax without investing more
Here are the deductions you can claim without making additional investments. 

Before investing for Sec 80C tax break find out how much you really need to put in

Source : Economic Times

No.07/2017 Dated: 27-01-2017


Clarifications on implementation of GAAR provisions under the Income Tax Act, 1961 – Circular – Dated 27-1-2017 – Income Tax

 

Circular No. 7 of 2017

F.No. 500/43/2016-FT&TR-IV

Government of India Ministry of Finance Department of Revenue

Central Board of Direct Taxes

Date 27/01/2017

Clarifications on implementation of GAAR provisions under the Income Tax Act, 1961

The provisions of Chapter X-A of the Income Tax Act, 1961 relating to General Anti-Avoidance Rule will come into force from 1st April, 2017. Certain queries have been received by the Board about implementation of GAAR provisions. The Board constituted a Working Group in June, 2016 for this purpose. The Board has considered the comments of the Working Group and the following clarifications are issued:

Question no. 1: Will GAAR be invoked if SAAR applies?

Answer:  It is internationally accepted that specific anti avoidance provisions may not address all situations of abuse and there is need for general anti-abuse provisions in the domestic legislation. The provisions of GAAR and SAAR can coexist and are applicable, as may be necessary, in the facts and circumstances of the case.

Question no. 2: Will GAAR be applied to deny treaty eligibility in a case where there is compliance with LOB test of the treaty?

Answer: Adoption of anti-abuse rules in tax treaties may not be sufficient to address all tax avoidance strategies and the same are required to be tackled through domestic anti-avoidance rules. If a case of avoidance is sufficiently addressed by LOB in the treaty, there shall not be an occasion to invoke GAAR

Question no. 3: Will GAAR interplay with the right of the taxpayer to select or choose method of implementing a transaction?

Answer: GAAR will not interplay with the right of the taxpayer to select or choose method of implementing a transaction.

Question no. 4: Will GAAR provisions apply where the jurisdiction of the FPI is finalised based on non-tax commercial considerations and such FPI has issued P-notes referencing Indian securities? Further, will GAAR  be invoked with a view to denying treaty eligibility to a Special Purpose Vehicle (SPV), either on the ground that it is located in a tax friendly jurisdiction or on the ground that it does not have its own premises or skilled professional on its own roll as employees.

Answer: For GAAR application, the issue, as may be arising regarding the choice of entity, location etc., has to be resolved on the basis of the main purpose and other conditions provided under section 96 of the Act. GAAR shall not be invoked merely on the ground that the entity is located in a tax efficient jurisdiction. If the jurisdiction of FPI is finalized based on non-tax commercial considerations and the main purpose of the arrangement is not to obtain tax benefit, GAAR will not apply.

Question no. 5: Will GAAR provisions apply to (i) any securities issued by way of bonus issuances so long as the original securities are acquired prior to 01 April, 2017 (ii) shares issued post 31 March, 2017, on conversion of Compulsorily Convertible Debentures, Compulsorily Convertible Preference Shares (CCPS), Foreign Currency Convertible Bonds (FCCBs), Global Depository Receipts (GDRs), acquired prior to 01 April, 2017; (iii) shares which are issued consequent to split up or consolidation of such grandfathered shareholding?

Answer: Grandfathering under Rule 10U(1)(d) will be available to investments made before 1st April 2017 in respect of instruments compulsorily convertible from one form to another, at terms finalized at the time of issue of such instruments. Shares brought into existence by way of split or consolidation of holdings, or by bonus issuances in respect of shares acquired prior to 1st  April 2017 in the hands of the same investor would also be eligible for grandfathering under Rule 10U(1) (d) of the Income Tax Rules.

Question no. 6: The expression “investments” can cover investment in all forms of instrument – whether in an Indian Company or in a foreign company, so long as the disposal thereof may give rise to income chargeable to tax. Grandfathering should extend to all forms of investments including lease contracts (say, air craft leases) and loan arrangements, etc.

Answer: Grandfathering is available in respect of income from transfer of investments made before 1st  April, 2017. As per Accounting Standards, ‘investments’ are assets held by an enterprise for earning income by way of dividends, interest, rentals and for capital appreciation. Lease contracts and loan arrangements are, by themselves, not ‘investments’ and hence grandfathering is not available.

Question no. 7: Will GAAR apply if arrangement held as permissible by Authority for Advance Ruling?

Answer: No. The AAR ruling is binding on the PCIT/CIT and the Income Tax Authorities subordinate to him in respect of the applicant.

Question no. 8: Will GAAR be invoked if arrangement is sanctioned by an authority such as the Court, National Company Law Tribunal or is in accordance with judicial precedents etc.?

Answer: Where the Court has explicitly and adequately considered the tax implication while sanctioning an arrangement, GAAR will not apply to such arrangement.

Question no. 9: Will a Fund claiming tax treaty benefits in one year and opting to be governed by the provisions of the Act in another year attract GAAR provisions? An example would be where a Fund claims treaty benefits in respect of gains from derivatives in one year and in another year sets-off losses from derivatives transactions against gains from shares under the Act.

Answer: GAAR provisions are applicable to impermissible avoidance arrangements as under section 96. In so far as the admissibility of claim under treaty or domestic law in different years is concerned, it is not a matter to be decided through GAAR provisions.

Question no. 10: How will it be ensured that GAAR will be invoked in rare cases to deal with highly aggressive and artificially pre-ordained schemes and based on cogent evidence and not on the basis of interpretation difference?

Answer: The proposal to declare an arrangement as an impermissible avoidance arrangement under GAAR will be vetted first by the Principal Commissioner / Commissioner and at the second stage by an Approving Panel, headed by judge of a High Court. Thus, adequate safeguards are in place to ensure that GAAR is invoked only in deserving cases.

Question no. 11: Can GAAR lead to assessment of notional income or disallowance of real expenditure? Will GAAR provisions expand the scope of charging provisions or scope of taxable base and/or disallow the expenditure which is actually incurred and which otherwise is admissible having regard to diverse provisions of the Act?

Answer: If the arrangement is covered under section 96, then the arrangement will be disregarded by application of GAAR and necessary consequences will follow.

Question no. 12: A definite timeline may be provided such as 5 to 10 years of existence of the arrangement where GAAR provisions will not apply in terms of the provisions in this regard in section 97(4) of the IT Act.

Answer: Period of time for which an arrangement exists is only a relevant factor and not a sufficient factor under section 97(4) to determine whether an arrangement lacks commercial substance.

Question no. 13: It may be ensured that in practice, the consequences of a transaction being treated as an ‘impermissible avoidance arrangement’ are determined in a uniform, fair and rational basis. Compensating adjustments under section 98 of the Act should be done in a consistent and fair manner. It should be clarified that if a particular consequence is applied in the hands of one of the participants, there would be corresponding adjustment in the hands of another participant.

Answer: Adequate procedural safeguards are in place to ensure that GAAR is invoked in a uniform, fair and rational manner. In the event of a particular consequence being applied in the hands of one of the participants as a result of GAAR, corresponding adjustment in the hands of another participant will not be made. GAAR is an anti-avoidance provision with deterrent consequences and corresponding tax adjustments across different taxpayers could militate against deterrence.

Question no. 14: Tax benefit of INR 3 crores as defined in section 102(10) may be calculated in respect of each arrangement and each taxpayer and for each relevant assessment year separately. For evaluating the main purpose to be obtaining of tax benefit, the review should extend to tax consequences across territories. The tax impact of INR 3 crores should be considered after taking into account impact to all the parties to the arrangement i.e. on a net basis and not on a gross basis (i.e. impact in the hands of one or few parties selectively).

Answer: The application of the tax laws is jurisdiction specific and hence what can be seen and examined is the ‘Tax Benefit’ enjoyed in Indian jurisdiction due to the ‘arrangement or part of the arrangement’. Further, such benefit is assessment year specific. Further, GAAR is with respect to an arrangement or part. of the arrangement and therefore limit of ₹ 3 crores cannot be read in respect of a single taxpayer only.

Question no. 15: Will a contrary view be taken in subsequent years if arrangement held to be permissible in an earlier year?

Answer: If the PCIT/Approving Panel has held the arrangement to be permissible in one year and facts and circumstances remain the same, as per the principle of consistency, GAAR will not be invoked for that arrangement in a subsequent year.

Question no. 16: No penalty proceedings should be initiated pursuant to additions made under GAAR at least for the initial 5 years.

Answer: Levy of penalty depends on facts and circumstances of the case and is not automatic. No blanket exemption for a period of five years from penalty provisions is available under law. The assessee, may at his option, apply for benefit u/s 273A if he satisfies conditions prescribed therein.

(Dr. O. N. Supriya Rao)

Under Secretary to the Government of India

India plans expansive budget despite growth, revenue worries : 27-01-2017


India’s finance minister is likely to borrow more than originally planned when he presents the budget on Feb. 1, senior aides and officials said, despite counting on revenues from a national sales tax whose launch date is still unknown.

Arun Jaitley is looking at how to fund giveaways to taxpayers and higher public investment to help nurse Asia’s third-largest economy back to health after the government’s shock decision in November to abolish high-value banknotes.

That is raising concern among some economists and investors that the government will take too many fiscal risks.

Yet officials say that, given the choice, they would choose growth sustained by state investment over a fiscal straitjacket.

“Some degree of flexibility on fiscal discipline should not be seen as irresponsible fiscal management,” one senior government official told Reuters, requesting anonymity due to the sensitivity of the matter.

A fiscal advisory panel, which includes central bank head Urjit Patel, has advocated widening the budget deficit to “slightly over” 3 percent of gross domestic product to free up funds for road, railway and irrigation projects.

“It is not possible to keep up the pace of capital expenditure without increasing the fiscal deficit beyond 3 percent of GDP,” another official, briefed on the committee’s findings, added.

New Delhi earlier aimed to cut the federal deficit to 3 percent of GDP over the next two fiscal years, compared with 3.5 percent in the year now drawing to a close.

Independent economists are also pencilling in a higher federal deficit in the coming fiscal year, at 3.3-3.4 percent of GDP, creating room for the government to invest an extra $6 billion.

That has drawn a warning from ratings agency Standard & Poor’s, which says that slowing the pace of fiscal consolidation could delay India’s chances of an upgrade due to its high and rising debt levels.

HEROIC ASSUMPTIONS
Jaitley’s team forecasts a recovery in nominal GDP growth, the key driver of tax revenues, to around 12 percent in 2017/18.

Yet that assumes oil prices of $55-60 per barrel and a long-delayed Goods and Services Tax being implemented in July.

And the economy is still getting over the shock of Prime Minister Narendra Modi’s decision in November to scrap 86 percent of cash in circulation in a bid to purge the economy of illicit “black money”.

The International Monetary Fund has chopped a percentage point off India’s forecast of real economic growth to 6.6 percent in the current fiscal year to March, meaning China regains the crown as the world’s fastest-growing large economy.

The Washington-based lender has also shaved 0.4 of a percentage point off its forecast for the coming fiscal year.

Finance ministry officials remain tight-lipped about how quickly they expect growth to bounce back after it slowed following so-called demonetisation.

International prices for crude oil, India’s most expensive import item, could meanwhile overshoot the finance ministry’s expectations as exporting nations curb output, hurting the growth and revenue outlook.

“This budget is presented in a very uncertain situation,” said N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a New Delhi think-tank that is partly funded by the government.

Modi faces the imminent verdict of voters in five regional elections, most importantly in the battleground state of Uttar Pradesh that is home to more than 200 million people.

A setback there for his nationalist party could harm his chances of winning a second term in 2019.

Election authorities have barred the government from offering targeted budget ‘sops’ to buy votes.

And even if the government does ramp up public investment in Jaitley’s fourth budget, it has little room for manoeuvre – nearly nine in every 10 rupees it spends go on servicing debt or paying wages and subsidies.

“It will not be a populist, but a pragmatic budget,” said a senior finance ministry official with direct knowledge of budget planning.

Source : PTI

FM Arun Jaitley may cut taxes, lack of indirect-tax data may make it tough : 27-01-2017


Battling slump in demand after shock demonetisation, Finance Minister Arun Jaitley may look to spur consumption through lower taxes in next week’s Budget, but he faces a peculiar situation as precise projections of indirect tax collection in 2017-18 are unavailable due to GST.

Finance Ministers usually weave around their welfare spending proposals based on projections of direct and indirect tax collections in the fiscal.

Projections of collection in direct taxes, made up of personal and corporate tax, would be available but with the rollout of Goods and Services Tax (GST) deferred till July 1, no reliable projection of indirect tax collection for 2017-18 fiscal is likely to be available, tax experts said.

Indirect taxes have three major components — customs, central excise and services tax. While a projections of customs revenue would be available, the same for excise and service tax may not be present as the same are to be subsumed in GST.

The GST is also to subsume state VAT.

And typically the Centre would account for roughly half of the total nationwide GST revenues after excise, service tax and VAT are subsumed and weave around its budget.

But this year is peculiar, experts say. “No reliable projection of the GST revenue is available because the GST Council is yet to decide which product or service will be taxed at what rate. In absence of that one cannot have a reliable projection of GST revenue collection,” a tax expert said.

VAT data of states cannot be taken to calculate the total GST revenue because the rate of taxation for different products may change under GST and also that the data with states is not always very reliable, he said.

Until tax rates for different products and services are decided, one cannot arrive at a reliable revenue projection for 2017-18, another expert said.

Also, the Centre has to compensate states for loss of revenue from implementation of GST. This compensation in first year is projected at a minimum of Rs 55,000 crore even as some states have put it at Rs 90,000 crore in view of slowdown in economic activity following demonetisation.

So in effect, the government will have projections of direct tax collections in 2017-18 as well as that of customs or import duty, but it will have to do presumptive calculation for other indirect taxes to project the overall revenue collections which it could spend on welfare and infrastructure schemes, he said.

Another tax expert said that since the GST is not likely before July 1, Jaitley may in his February 1 Budget propose some changes in indirect tax rates on some products and services till such time that the GST takes over.

With the scrapping of 86 per cent of the currency in circulation slowing economic growth, he will have to improve demand for goods and services.

One of the options he has to raise exemption in personal income tax or tinker with tax slabs or rate to give higher purchasing power to consumers.

The other option is to give relief by raising house loan exemption limit or medical allowance, experts said.

Indirect tax receipts or net revenue from customs, excise and service tax rose 25 per cent in April-December to Rs 6.30 lakh crore, meeting 81 per cent of the government’s budgeted target for the 2016-17 fiscal.

Direct tax collection were up 12.01 per cent at Rs 5.53 lakh crore, 65 per cent of the budgeted number.

Source : Economic Times

With little room to beat cash ban gloom with Budget goodies, Modi faces his toughest economics test yet : 27-01-2017


Three months into a cash ban that has sucked out momentum from one of the world’s fastest-growing economies, Prime Minister Narendra Modi has little room to boost spending.

While economists urge more investment in roads, ports and railways when the government presents its budget Feb. 1, and maybe even direct cash transfers to boost consumption, a splurge carries the risk of a rating downgrade. India is rated just one step above junk by S&P Global, Moody’s and Fitch, who cite Asia’s widest budget deficit as a drag on the sovereign rating.

Any erosion in credit quality risks scaring investors who’re already net sellers of Indian bonds and stocks this year, which can push the rupee toward a record low and stoke inflation. Moreover, a downgrade could tarnish Modi’s reputation — already hit by the abrupt demonetization move — before a slew of state elections starting Feb. 4

“The government has limited avenues available to stimulate the economy,” said Neelkanth Mishra, managing director for equity research at Credit Suisse SA in Mumbai. At best Finance Minister Arun Jaitley could scrounge up about 2.5 trillion rupees ($37 billion), an “insignificant” amount for the $2 trillion economy that saw 86 percent of its currency invalidated in November and is estimated to face cash shortages through May.

A worsening of public finances risks spurring price pressures and deny the inflation-targeting central bank space to lower interest rates, belying economists’ predictions of a cut to 6 percent from 6.25 percent this quarter. If the Reserve Bank of India holds, the yield on the 10-year sovereign bond will rise to 7 percent in 2017 from about 6.5 percent and worsen outflows, said Arvind Chari, head of fixed income and alternatives at Mumbai-based brokerage Quantum Advisors Pvt.

“This budget is thus critical, for it would decide the near term direction of the bond markets, interest rates and the currency,” he said. “We do not expect any significant reforms given upcoming elections in key states, only populist measures are expected.”

For the new year starting April 1, Jaitley will ease the government’s goal to shrink the budget deficit to 3 percent of GDP and will target 3.3 percent instead, according to the median estimate in a Bloomberg survey of economists published this month. He will meet the current year’s 3.5 percent target, buoyed by tax collections as the cash ban pushes people out of India’s vast shadow economy and into the formal banking sector.

The cash squeeze will slow gross domestic product growth to 6.8 percent in the current year from 7.6 percent the previous year, the Bloomberg survey shows.

Another complication for Jaitley would be uncertainty surrounding the rollout of a national sales tax, due by September. Analysts expect the introduction to be messy in the near term with implementation costs likely to borne by India’s private sector, which could drag down growth. Modi may need to spend about 0.3 percent of GDP to compensate states for revenue losses, HSBC Holdings Plc estimates .

There’s also talk of a universal basic income, which could win Modi voters as well as help ease the strife of the cash ban. This would however be immensely expensive for the world’s second-most populous country unless it replaces a plethora of existing poverty alleviation programs, said Pranjul Bhandari, an economist at HSBC. Modi may opt to kick off a similar offering in a few districts first, she said.

For instance, about 30 percent of India’s $300 billion annual expenditure goes toward servicing its debt, and 15 percent on defense purchases. Another 15 percent — some $45 billion — is spent on subsidized food and fuel for the poor, many of whom live on less than $2 a day. Transferring $15 into each Indian’s bank account every month will cost the government $235 billion.

“The budget has two immediate tasks cut out: assuage the shock received by private consumption from demonetization, and bolster faltering investment demand,” analysts at Crisil Ltd., the local unit of S&P, said in a report this week. Can the government do it and meet its existing fiscal targets? “Short of a miracle, no.”

Source : Economic Times

28 – 25-01-2017


PROHIBITION ON INDIAN PARTY FROM MAKING DIRECT INVESTMENT IN COUNTRIES IDENTIFIED BY THE FINANCIAL ACTION TASK FORCE (FATF) AS NON-CO-OPERATIVE COUNTRIES AND TERRITORIES

A.P. (DIR SERIES 2016-17) CIRCULAR NO.28, DATED 25-1-2017

Attention of the Authorised Dealer Category – I (AD – Category I) banks is invited to Regulation 6 of FEMA Notification No. FEMA.120/RB-2004 dated July 07, 2004, as amended from time to time.

2. At present, there is no restriction on an Indian Party with regard to the countries, where it can undertake Overseas Direct Investment. In order to align, the instructions with the objectives of FATF, on a review, it has been decided to prohibit an Indian Party from making direct investment in an overseas entity (set up or acquired abroad directly as JV/ WOS or indirectly as step down subsidiary) located in the countries identified by the FATF as “non co-operative countries and territories” as per list available on FATF website www.fatf-gafi.org or as notified by the Reserve Bank of India from time to time.

3. Necessary amendments to the Notification ibid have been notified vide Notification No. FEMA 382/2016-RB dated January 02, 2017 c.f. G.S.R. No. 01(E) dated January 02, 2017.

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

5. Master Direction No.15/2015-16 dated January 01, 2016 is being updated to reflect the changes.

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

Centre may tweak credit guarantee fund norms to help MSMEs : 25-01-2017


The centre may soon tweak the norms of Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme to favour small and medium enterprises (MSE) in the country.

During an interaction with the Bihar Industries Association (BIA), Minister of State for Finance Arjun Ram Meghwal agreed to revisit the norms of the scheme, so that small businesses will be abloe to avail financial assistance up to Rs 2 crore.

“MSME sector is our focus. On December 31, the Prime Minister announced that the CGTMSE limit would be raised. We want to provide our MSEs all the facilities and remove all hurdles. This issue will be discussed at length after the Budget. We are ready to take measures to protect our small and medium entrepreneurs,” Meghwal said.

According to the trade bodies in the state, industrial units are getting loans up to Rs 50 lakh under this scheme because of an amendment added in March 2015.

“Under the CGTMSE scheme, 75 per cent of the risk on loans up to Rs 50 lakh is covered. However, after the amendment, the risk coverage for loans above Rs 50 lakh has been reduced to 60 per cent. Therefore, banks are reluctant to provide assistance beyond Rs 50 lakh. This has created a major problem for small-scale industries in the state,” said BIA member Sanjay Goyenka.

Source : Financial Express

Dear FM, if Budget has LTCG, is hazy over FPI tax, only God can help D-St! : 25-01-2017


Ever since the retro-tax trauma, Dalal Street has come to relate the Union Budget with some tweaking of taxes that can hurt or help equity investors.

Foreign portfolio investors have taken the experience more seriously than anyone else and learnt to be once bitter, twice shy.

Prime Minister Narendra Modi himself fuelled such fears in the runup to the Union Budget, by openly asking people who make money from the equity market to pay more taxes.

While the average equity investor read signs of a return of the long-term capital gains tax, FPIs quickly developed cold feet, wary as they have been of a weakening rupee cutting into their profits even as they began responding to the changed dynamics of the financial world, following tightening by the UD Fed and Donald Trump assuming US presidency.

The recent FPI outflow from India had some bit that was in line with the outflow seen from other emerging markets, while some bit had to do with a surge in the dollar and some fuelled by the confusion over long-term capital gains (LTCG) tax.

Analysts say if the LTCG is indeed brought back, it is going to send the benchmark equity indices tumbling. One analyst projected at least a 15 per cent correction in the market in such a scenario.

January was the fourth consecutive month when foreign portfolio investors have dumped domestic stocks. They sold Rs 33,000 crore worth of stocks in the domestic market.

Domestic institutional investors have played saviour all this while and kept the domestic stock market afloat. They pumped in some Rs 40,000-odd crore into domestic equities over the past five months, which helped somewhat cushion the downward pressure due to the FPI selloff. DIIs have been putting such large bets on domestic equities despite the delay in earnings revival.

“Around Christmas I projected a 10-15 per cent correction over the next four-five months as a base case scenario. I fear such a correction unless the Budget gives FPIs an assurance on their tax standing. The December 21 CBDT circular said FPIs who have more than 50 per cent of assets in India will get taxed over here. While that circular was put in abeyance last week, FPIs expect some decision in the Budget,” said Saurabh Mukherjea of Ambit Capital.

Mukherjea expects some repercussions, if the decision is not to the liking of the FPIs. He said his clients are quite worried about it.

Ajay Tyagi, EVP & Fund Manager for Equities at UTI Mutual Fund, said the market was not ready for a rise in the tax structure.

He noted how Prime Minister Modi’s remark on low capital gains taxation in India haunted the market and forced Finance Minister Arun Jaitley to immediately issue an clarification.

“If there were to be any incidence of either long-term or short-term capital gains tax being introduced at a higher rate, I am sure that will completely spook the market,” Tyagi said.

Mukherjea said DIIs were the force that pushed the market higher over the past 12 months. “But that power might crack, if the assault on the economy continues.”

“Three moving parts -tax structure for FPIs, Trump’s own Budget and what happens back home around the black money crackdown – will ultimately have a bearing on economic growth and on the domestic investor sentiment,” the Ambit Capital analyst said.

Foreign investors would be looking forward to the Union Budget with their fingers crossed.

There are also fears that the domestic anti-avoidance law could prevail over treaty benefits in the event of any dispute under the Singapore and Mauritius treaties, which could threaten the lower tax rate for FPIs in the two years between April 1, 2017 and March 31, 2019

Source : Economic Times

Biscuit-makers demand exemption from GST : 25-01-2017


The ₹36,000-crore Indian biscuit industry, on Tuesday, demanded complete waiver ofGood and Services Tax (GST) on Low Price-High Nutrition (LPHN) biscuits priced under a maximum retail price of ₹100 a kg.

“LPHN biscuits are the only hygienically produced and affordable snack sold in small packs retailing at ₹2-5. Consumed mainly by the low-income group, any increase in price of LPHN biscuits causes a direct reduction in demand,” said Mayank Shah, Vice-President and spokesperson of the Biscuit Manufacturers’ Welfare Association.

He said while there is a 62 per cent weighted average hike in input costs (maida, sugar and vegetable oil) over the last decade, the biscuit manufacturers have been unable to increase their realisation pro-rata.

Glucose biscuits offer consumers 72 kilo calories/ per rupee (Kcal/re) compared to 55 by bread, 18 by potato chips and 29 by namkeens.

All three enjoy concessional rate of taxes. A 70 gram pack of glucose biscuits which retails at ₹5 offers 315 Kcal, which is about 16 per cent of the daily dietary recommendation of the government.

Last year, the biscuit industry procured agriculture produce of over ₹13,300 crore. Sugar prices have more than doubled in the last decade and the current wheat flour and vegetable oil prices make net margins on LPHN biscuits reduced to just 3 per cent.

Fear of the advent of negative margins phase forces manufacturers to curtail production leaving demand unsatiated. Glucose biscuits retailing at ₹70 a kg today attract net taxes of ₹7.21 which is higher than the value addition earned by the industry (₹7.01).

Premium category

“The government may tax premium biscuits as they deem fit. We are a highly compliant industry with last annual contribution to the exchequer at ₹3,075 crore. However, on behalf of over 600 manufacturers of LPHN biscuits retailed at up to MRP of ₹100 a kg, I urge the GST Council to completely exempt the LPHN biscuits,” Shah added.

Modi Abe bhai bhai? Japan threatens India with WTO on steel as Trump era heralds rising trade tensions : 24-01-2017


Japan is threatening to take India to the WTO over restrictions that nearly halved its steel exports to the South Asian nation over the past year, a step that could trigger more trade spats as global tensions over steel and other commodities run high.

Such action is rare for Japan. The world’s second-biggest steel producer typically tries to smooth disputes quietly through bilateral talks, but with global trade friction increasing, Japan’s defence of an industry that sells nearly half of its products overseas is getting more vigorous.

Besides concern over India’s protection of its domestic steel industry, Japan is also worried about the more rough and tumble climate for global trade being engendered by incoming US President Donald Trump, and feels it must make a strong stand for open and fair international markets.

“We need to stop unfair trade actions from spreading,” said a Japanese industry ministry official, explaining a Dec. 20 request for WTO dispute consultations with India over steel safeguard duties and a minimum import price for iron and steel products.

“If consultations fail to resolve the dispute, we may ask adjudication by a WTO panel,” the industry ministry official said. Such action could come as soon as 60 days – in February –  after its consultation request was filed in December.

 Tokyo says India’s actions are inconsistent with WTO rules and contributed to the plunge in its steel exports to India, which dropped to 10th-largest on Japan’s buyer list in 2016 through November, down from sixth-largest in 2015.

“We are following the WTO guidelines,” said a top official at India’s steel ministry, though adding that New Delhi is ready to sit across the table for trade talks.

GROWING GLOBAL TRADE DISPUTES

There has been a series of trade disputes over the past few years amid massive exports of cheap steel products from China, the world’s top producer, with Vietnam, Malaysia and South Africa taking or planning measures to block incoming shipments.

China’s steel exports dropped by 3.5 percent in 2016 to 108 million tonnes, still about as much as Japan produces in a year.

Japan is also monitoring its small volume of imports for signs of dumping, fearing that steel products with nowhere to turn because of import restrictions may head to it own market.

 “All trade need to be fair. If there are trades that violate the rules, we will take necessary actions while consulting with our government,” Kosei Shindo, chairman of the Japan Iron and Steel Federation, told a news conference on Friday.

But in an environment where a new U.S. president is threatening to tear up trade treaties and impose import duties in the world’s biggest economy, Tokyo may be at risk of helping to set off a trade war it is trying to avoid.

“We may see a battle of trade litigations especially after Trump takes the helm in the U.S.,” said Kazuhito Yamashita, research director at Canon Institute for Global Studies.

Source : Economic Times

No.F.NO.275/192/2016-IT(B)- Dated: 24-01-2017


Corrigendum to Circular No. 1/2017 dated 02.01.2017 on TDS under section 192 of Income-tax Act, 1961 – Circular

F. No. 275/192/2016-IT (B)

Government of India Ministry of Finance Department of Revenue

Central Board of Direct Taxes

North Block, New Delhi

24th January, 2017

CORRIGENDUM

Sub: Corrigendum to Circular No. 1/2017 dated 02.01.2017 on TDS under section 192 of Income-tax Act, 1961.

In para 3.6.1 in clause (a) below the table at page 4 of the captioned Circular, the words “3 years” appearing in line 1 may be read as “5 years”.

2. The table in para 4.9.1 on page 9 of the captioned Circular may be read as under:

TABLE: Due dates of filing Quarterly Statements in Form 24Q

Sl. No. Date of ending of quarter of financial year

Due date

1 30th June 31st  July of the financial year
2 30th  September 31st October of the financial year
3 31st  December 31st  January of the financial year
4 31st March 31st May of the financial year immediately following the financial ear in which the deduction is made
[Refer to Notification No. 30/ 2016 dated 29.4.2016]

3. In para 5.5.10 in clause (d) at page 26 of the captioned Circular, the words “Rs.2000/-” appearing in line 2 may be read as “Rs. 5000/-”.

(Sandeep Singh)

Under Secretary to the Govt. of India

Notification No.6/2017 24-01-2017


Section 10(46) of the Income-tax Act, 1961 Central Government notifies Punjab Building & Other Construction Workers Welfare Board, constituted by the Government of Punjab, in respect of the specified income arising to that Board – 6/2017

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

NOTIFICATION NO. 6/2017

New Delhi, the 24th January, 2017

S.O. 245(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, Punjab Building & Other Construction Workers Welfare Board, constituted by the Government of Punjab, in respect of the following specified income arising to that Board, namely:-

(a) labour cess collection; and

(b) interest income on deposits.

2. This notification shall be effective subject to the conditions that Punjab Building & Other Construction Workers Welfare Board,-

(a) shall not engage in any commercial activity;

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

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

3. This notification shall be applicable for the financial year 2016-17 to 2020-21.

[F. No. 300196/20/2016-ITA-I]

DEEPSHIKHA SHARMA, Director

No.F.NO.225/12/2016-ITA.II Dated: 24-01-2017


Transfer of unlisted shares by SEBI registered Category I & Il Alternative Investment Funds- directions – Order-Instruction

F. No. 225/12/2016/1TA.ll

Government of India Ministry of Finance

Department of Revenue (CBDT)

North Block, New Delhi, the 24th of January, 2017

To

All Principal Chief-Commissioners of Income-tax/

All Principal Directors General of Income-tax

Sir/Madam

Subject: Transfer of unlisted shares by SEBI registered Category I & Il Alternative Investment Funds- directions- regd.

Vide order dated 02.05.2016 in F.No.225/12/2016/lTA.ll, the Central Board of Direct Taxes (‘the  Board’) had clarified the position regarding tax treatment of income arising from transfer of unlisted shares. It was communicated that income from such a transfer would be taxable as ‘Capital Gains’ irrespective of the period of holding of the unlisted shares. However, certain situations were provided in para 3 of the said order where the Assessing Officers were required to take appropriate view in the matter. In this regard, a representation has been received in the Board that the exception in clause (iii) of para 3 regarding transfer of unlisted shares along with ‘control and management of the underlying business’ should not be made applicable in case of certain Alternative Investment Funds (‘AIFs’).

2.  The matter has been considered by the Board. Primarily, SEBI registered Category I & II AlFs invest in unlisted shares of ventures, many of which are new set-ups or start-ups, and thus, some form of ‘control and management of the underlying business’ may be required to be exercised by such AlFs to safeguard the interest of the investors. Therefore, it is further clarified that exception in clause (iii) of para 3 of order dated 02.05.2016 in file of even number, would not be applicable in cases of SEBI registered Category I & II AlFs only.

3.  The above may be brought to the notice of all officers in your jurisdiction for necessary compliance.

(Rohit Garg)

Director- ITA. II

Notification No.5/2017 24-01-2017


Section 10(46) of the Income-tax Act, 1961 Central Government notifies Punjab State Electricity Regulatory Commission , a Commission, constituted by the Government of Punjab, in respect of the specified income arising to that Commission – 5/2017

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

NOTIFICATION No. 5/2017

New Delhi, the 24th January, 2017

S.O. 246(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, the Punjab State Electricity Regulatory Commission, constituted by the Government of Punjab, in respect of the following specified income arising to that Commission, namely:-

(a) amount received in the form of processing fee for determination of tariff;

(b) amount received in the form of licence fee;

(c) amount received in the form of petition fee; and

(d) amount of interest income earned on bank deposits.

2. This notification shall be effective subject to the conditions that Punjab State Electricity Regulatory Commission,-

(a) shall not engage in any commercial activity;

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

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

3. This notification shall be applicable for the financial years 2016-17 to 2020-21.

[F. No. 300196/3/2016-ITA-I]

DEEPSHIKHA SHARMA, Director

No.06/2017 Dated: 24-01-2017


Guiding Principles for determination of Place of Effective Management (POEM) of a Company – Circular

Circular No. 06 of 2017

F. No. 142/11/2015-TPL

Government of India Ministry of Finance Department of Revenue

Central Board of Direct Taxes

******

Dated: 24th January, 2017

Subject: Guiding Principles for determination of Place of Effective Management (POEM) of a Company.

Section 6(3) of the Income-tax Act, 1961 (the Act), prior to its amendment by the Finance Act, 2015, provided that a company is said to be resident in India in any previous year, if it is an Indian company or if during that year, the control and management of its affairs is situated wholly in India. This allowed tax avoidance opportunities for companies to artificially escape the residential status under these provisions by shifting insignificant or isolated events related with control and management outside India. To address these concerns, the existing provisions of section 6(3) of the Act were amended vide Finance Act, 2015, with effect from 1st April, 2016 to provide that a company is said to be resident in India in any previous year, if-

(i) it is an Indian company;

or (ii) its place of effective management in that year is in India .

2. “Place of effective management” is defined in the Act to mean a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance, made.

3. The Finance Act, 2016 has changed the effectivity of the said amendment to section 6(3) of the Act. Therefore, the amended provision would now be effective from 1st April 2017 and will apply to Assessment Year 2017-18 and subsequent assessment years.

4. ‘Place of effective management’ (POEM) is an internationally recognised test for determination of residence of a company incorporated in a foreign jurisdiction. Most of the tax treaties entered into by India recognises the concept of ‘place of effective management’ for determination of residence of a company as a tie-breaker rule for avoidance of double taxation. The guiding principles to be followed for determination of POEM are enumerated in the following paragraphs.

5. For the purposes of these guidelines, -

(a) A company shall be said to be engaged in “active business outside India” if the passive income is not more than 50% of its total income; and

(i) less than 50% of its total assets are situated in India; and

(ii) less than 50% of total number of employees are situated in India or are resident in India; and

(iii) the payroll expenses incurred on such employees is less than 50% of its total payroll expenditure.

Explanation: For the aforesaid purpose, -

(A) the income shall be, -

(a) as computed for tax purpose in accordance with the laws of the country of incorporation; or

(b) as per books of account, where the laws of the country of incorporation does not require such a computation.

(B) the value of assets, -

(a) In case of an individually depreciable asset, shall be the average of its value for tax purposes in the country of incorporation of the company at the beginning and at end of the previous year; and

(b) In case of pool of a fixed assets being treated as a block for depreciation, shall be the average of its value for tax purposes in the country of incorporation of the company at the beginning and at end of the year;

(c) In case of any other asset, shall be its value as per books of account;

(C) the number of employees shall be the average of the number of employees as at the beginning and at the end of the year and shall include persons, who though not employed directly by the company, perform tasks similar to those performed by the employees;

(D) the term “pay roll” shall include the cost of salaries, wages, bonus and all other employee compensation including related pension and social costs borne by the employer.

(b) “Head Office” of a company would be the place where the company’s senior management and their direct support staff are located or, if they are located at more than one location, the place where they are primarily or predominantly located. A company’s head office is not necessarily the same as the place where the majority of its employees work or where its board typically meets;

(c) “Passive income” of a company shall be aggregate of, -

(i) income from the transactions where both the purchase and sale of goods is from / to its associated enterprises; and

(ii) income by way of royalty, dividend, capital gains, interest or rental income;

However, any income by way of interest shall not be considered to be passive income in case of a company which is engaged in the business of banking or is a public financial institution, and its activities are regulated as such under the applicable laws of the country of incorporation.

(d) “Senior Management” in respect of a company means the person or persons who are generally responsible for developing and formulating key strategies and policies for the company and for ensuring or overseeing the execution and implementation of those strategies on a regular and on-going basis. While designation may vary, these persons may include:

(i) Managing Director or Chief Executive Officer;

(ii) Financial Director or Chief Financial Officer;

(iii) Chief Operating Officer; and

(iv) The heads of various divisions or departments (for example, Chief Information or Technology Officer, Director for Sales or Marketing).

6. Any determination of the POEM will depend upon the facts and circumstances of a given case. The POEM concept is one of substance over form. It may be noted that an entity may have more than one place of management, but it can have only one place of effective management at any point of time. Since “residence” is to be determined for each year, POEM will also be required to be determined on year to year basis. The process of determination of POEM would be primarily based on the fact as to whether or not the company is engaged in active business outside India.

7. The place of effective management in case of a company engaged in active business outside India shall be presumed to be outside India if the majority meetings of the board of directors of the company are held outside India.

7.1 However, if on the basis of facts and circumstances it is established that the Board of directors of the company are standing aside and not exercising their powers of management and such powers are being exercised by either the holding company or any other person (s) resident in India, then the place of effective management shall be considered to be in India. For this purpose, merely because the Board of Directors (BOD) follows general and objective principles of global policy of the group laid down by the parent entity which may be in the field of Pay roll functions, Accounting, Human resource (HR) functions, IT infrastructure and network platforms, Supply chain functions, Routine banking operational procedures, and not being specific to any entity or group of entities per se; would not constitute a case of BoD of companies standing aside.

7.2 For the purpose of determining whether the company is engaged in active business outside India, the average of the data of the previous year and two years prior to that shall be taken into account. In case the company has been in existence for a shorter period, then data of such period shall be considered. Where the accounting year for tax purposes, in accordance with laws of country of incorporation of the company, is different from the previous year, then, data of the accounting year that ends during the relevant previous year and two accounting years preceding it shall be considered.

8. In cases of companies other than those that are engaged in active business outside India referred to in para 7, the determination of POEM would be a two stage process, namely:-

(i) First stage would be identification or ascertaining the person or persons who actually make the key management and commercial decision for conduct of the company’s business as a whole.

(ii) Second stage would be determination of place where these decisions are in fact being made.

8.1 The place where these management decisions are taken would be more important than the place where such decisions are implemented. For the purpose of determination of POEM it is the substance which would be conclusive rather than the form.

8.2 Some of the guiding principles which may be taken into account for determining the POEM are as follows:

(a) The location where a company’s Board regularly meets and makes decisions may be the company’s place of effective management provided, the Board-

(i) retains and exercises its authority to govern the company; and

(ii) does, in substance, make the key management and commercial decisions necessary for the conduct of the company’s business as a whole.

It may be mentioned that mere formal holding of board meetings at a place would by itself not be conclusive for determination of POEM being located at that place. If the key decisions by the directors are in fact being taken in a place other than the place where the formal meetings are held then such other place would be relevant for POEM. As an example this may be the case where the board meetings are held in a location distinct from the place where head office of the company is located or such location is unconnected with the place where the predominant activity of the company is being carried out.

If a board has de facto delegated the authority to make the key management and commercial decisions for the company to the senior management or any other person including a shareholder, promoter, strategic or legal or financial advisor etc. and does nothing more than routinely ratifying the decisions that have been made, the company’s place of effective management will ordinarily be the place where these senior managers or the other person make those decisions.

(b) A company’s board may delegate some or all of its authority to one or more committees such as an executive committee consisting of key members of senior management. In these situations, the location where the members of the executive committee are based and where that committee develops and formulates the key strategies and policies for mere formal approval by the full board will often be considered to be the company’s place of effective management.

The delegation of authority may be either de jure (by means of a formal resolution or Shareholder Agreement) or de facto (based upon the actual conduct of the board and the executive committee).

(c) The location of a company’s head office will be a very important factor in the determination of the company’s place of effective management because it often represents the place where key company decisions are made. The following points need to be considered for determining the location of the head office of the company:-

  • If the company’s senior management and their support staff are based in a single location and that location is held out to the public as the company’s principal place of business or headquarters then that location is the place where head office is located.
  • If the company is more decentralized (for example where various members of senior management may operate, from time to time, at offices located in the various countries) then the company’s head office would be the location where these senior managers,-

(i) are primarily or predominantly based; or

(ii) normally return to following travel to other locations; or

(iii) meet when formulating or deciding key strategies and policies for the company as a whole.

  • Members of the senior management may operate from different locations on a more or less permanent basis and the members may participate in various meetings via telephone or video conferencing rather than by being physically present at meetings in a particular location. In such situation the head office would normally be the location, if any, where the highest level of management (for example, the Managing Director and Financial Director) and their direct support staff are located.
  • In situations where the senior management is so decentralised that it is not possible to determine the company’s head office with a reasonable degree of certainty, the location of a company’s head office would not be of much relevance in determining that company’s place of effective management.

(d) The use of modern technology impacts the place of effective management in many ways. It is no longer necessary for the persons taking decision to be physically present at a particular location. Therefore physical location of board meeting or executive committee meeting or meeting of senior management may not be where the key decisions are in substance being made. In such cases the place where the directors or the persons taking the decisions or majority of them usually reside may also be a relevant factor.

(e) In case of circular resolution or round robin voting the factors like, the frequency with which it is used, the type of decisions made in that manner and where the parties involved in those decisions are located etc. are to be considered. It cannot be said that proposer of decision alone would be relevant but based on past practices and general conduct; it would be required to determine the person who has the authority and who exercises the authority to take decisions. The place of location of such person would be more important

(f) The decisions made by shareholder on matters which are reserved for shareholder decision under the company laws are not relevant for determination of a company’s place of effective management. Such decisions may include sale of all or substantially all of the company’s assets, the dissolution, liquidation or deregistration of the company, the modification of the rights attaching to various classes of shares or the issue of a new class of shares etc. These decisions typically affect the existence of the company itself or the rights of the shareholders as such, rather than the conduct of the company’s business from a management or commercial perspective and are therefore, generally not relevant for the determination of a company’s place of effective management.

However, the shareholder’s involvement can, in certain situations, turn into that of effective management. This may happen through a formal arrangement by way of shareholder agreement etc. or may also happen by way of actual conduct. As an example if the shareholders limit the authority of board and senior managers of a company and thereby remove the company’s real authority to make decision then the shareholder guidance transforms into usurpation and such undue influence may result in effective management being exercised by the shareholder.

Therefore, whether the shareholder involvement is crossing the line into that of effective management is one of fact and has to be determined on case-to-case basis only.

(g) It may be clarified that day to day routine operational decisions undertaken by junior and middle management shall not be relevant for the purpose of determination of POEM. The operational decisions relate to the oversight of the day-to-day business operations and activities of a company whereas the key management and commercial decision are concerned with broader strategic and policy decision. For example, a decision to open a major new manufacturing facility or to discontinue a major product line would be examples of key commercial decisions affecting the company’s business as a whole. By contrast, decisions by the plant manager appointed by senior management to run that facility, concerning repairs and maintenance, the implementation of company-wide quality controls and human resources policies, would be examples of routine operational decisions. In certain situations it may happen that person responsible for operational decision is the same person who is responsible for the key management and commercial decision. In such cases it will be necessary to distinguish the two type of decisions and thereafter assess the location where the key management and commercial decisions are taken.

8.3 If the above factors do not lead to clear identification of POEM then the following secondary factors can be considered :-

(i) Place where main and substantial activity of the company is carried out; or

(ii) Place where the accounting records of the company are kept.

9. It needs to be emphasized that the determination of POEM is to be based on all relevant facts related to the management and control of the company, and is not to be determined on the basis of isolated facts that by itself do not establish effective management, as illustrated by the following examples:

(i) The fact that a foreign company is completely owned by an Indian company will not be conclusive evidence that the conditions for establishing POEM in India have been satisfied.

(ii) The fact that there exists a Permanent Establishment of a foreign entity in India would itself not be conclusive evidence that the conditions for establishing POEM in India have been satisfied.

(iii) The fact that one or some of the Directors of a foreign company reside in India will not be conclusive evidence that the conditions for establishing POEM in India have been satisfied.

(iv) The fact of, local management being situated in India in respect of activities carried out by a foreign company in India will not , by itself, be conclusive evidence that the conditions for establishing POEM have been satisfied.

(v) The existence in India of support functions that are preparatory and auxiliary in character will not be conclusive evidence that the conditions for establishing POEM in India have been satisfied.

10. It is reiterated that the above principles for determining the POEM are for guidance only. No single principle will be decisive in itself. The above principles are not to be seen with reference to any particular moment in time rather activities performed over a period of time, during the previous year, need to be considered. In other words a “snapshot” approach is not to be adopted. Further, based on the facts and circumstances if it is determined that during the previous year the POEM is in India and also outside India then POEM shall be presumed to be in India if it has been mainly /predominantly in India

11. The Assessing Officer (AO) shall, before initiating any proceedings for holding a company incorporated outside India, on the basis of its POEM, as being resident in India, seek prior approval of the Principal Commissioner or the Commissioner, as the case may be.

11.1 Further, in case the AO proposes to hold a company incorporated outside India, on the basis of its POEM, as being resident in India then any such finding shall be given by the AO after seeking prior approval of the collegium of three members consisting of the Principal Commissioners or the Commissioners, as the case may be, to be constituted by the Principal Chief Commissioner of the region concerned, in this regard. The collegium so constituted shall provide an opportunity of being heard to the company before issuing any directions in the matter.

12. Illustrations:

The following are certain illustrations intended to highlight applicability of certain principles enumerated in the foregoing paragraphs of the guidelines. The facts assumed have been simplified to highlight the principle. Actual determination of POEM of a company shall depend on all relevant facts.

Example 1: Company A Co. is a sourcing entity, for an Indian multinational group, incorporated in country X and is 100% subsidiary of Indian company (B Co.). The warehouses and stock in them are the only assets of the company and are located in country X. All the employees of the company are also in country X. The average income wise breakup of the company’s total income for three years is, -

(i). 30% of income is from transaction where purchases are made from parties which are non-associated enterprises and sold to associated enterprises;

(ii). 30% of income is from transaction where purchases are made from associated enterprises and sold to associated enterprises;

(iii). 30% of income is from transaction where purchases are made from associated enterprises and sold to non-associated enterprises; and

(iv). 10% of the income is by way of interest.

Interpretation: In this case passive income is 40% of the total income of the company. The passive income consists of, -

(i). 30% income from the transaction where both purchase and sale is from/to associated enterprises; and

(ii). 10% income from interest.

The A Co. satisfies the first requirement of the test of active business outside India. Since no assets or employees of A Co. are in India the other requirements of the test is also satisfied. Therefore company is engaged in active business outside India.

Example 2: The other facts remain same as that in Example 1 with the variation that A Co. has a total of 50 employees. 47 employees, managing the warehouse, storekeeping and accounts of the company, are located in country X. The Managing Director (MD), Chief Executive Officer (CEO) and sales head are resident in India. The total annual payroll expenditure on these 50 employees is of ₹ 5 crore. The annual payroll expenditure in respect of MD, CEO and sales head is of ₹ 3 crore.

Interpretation: Although the first limb of active business test is satisfied by A Co. as only 40% of its total income is passive in nature. Further, more than 50% of the employees are also situated outside India. All the assets are situated outside India. However, the payroll expenditure in respect of the MD, the CEO and the sales head being employees resident in India exceeds 50% of the total payroll expenditure. Therefore, A Co. is not engaged in active business outside India.

Example 3: The basic facts are same as in Example 1. Further facts are that all the directors of the A Co. are Indian residents. During the relevant previous year 5 meetings of the Board of Directors is held of which two were held in India and 3 outside India with two in country X and one in country Y.

Interpretation: The A Co. is engaged in active business outside India as the facts indicated in Example 1 establish. The majority of board meetings have been held outside India. Therefore, the POEM of A Co. shall be presumed to be outside India.

Example 4: The facts are same as in Example 3 but it is established by the Assessing Officer that although A Co.’s senior management team signs all the contracts, for all the contracts above ₹ 10 lakh the A Co. must submit its recommendation to B Co. and B Co. makes the decision whether or not the contract may be accepted. It is also seen that during the previous year more than 99% of the contracts are above ₹ 10 lakh and over past years also the same trend in respect of value contribution of contracts above ₹ 10 lakh is seen.

Interpretation: These facts suggest that the effective management of the A Co. may have been usurped by the parent company B Co. Therefore, POEM of A Co. may in such cases be not presumed to be outside India even though A Co. is engaged in active business outside India and majority of board meeting are held outside India.

Example 5: An Indian multinational group has a local holding company A Co. in country X. The A Co. also has 100% downstream subsidiaries B Co. and C Co. in country X and D Co. in country Y. The A Co. has income only by way of dividend and interest from investments made in its subsidiaries. The Place of Effective Management of A Co. is in India and is exercised by ultimate parent company of the group. The subsidiaries B, C and D are engaged in active business outside India. The meetings of Board of Director of B Co., C Co. and D Co. are held in country X and Y respectively.

Interpretation : Merely because the Place of Effective management of an intermediate holding company is India the POEM of its subsidiaries shall not be taken to be in India. Each subsidiary has to be examined separately. As indicated in the facts since companies B Co., C Co. and D Co. are independently engaged in active business outside India and majority of Board meetings of these companies are also held outside India. The POEM of B Co., C Co. and D Co. shall be presumed to be outside India.

(Rajesh Kumar Kedia)

Director (Tax Policy & Legislation)

Budget 2017: Digital Businesses hope FM to unravel red tape : 24-01-2017


The digital economy — all things that use digital computing technology, including m-commerce, digital payment banks or internet startups — is set to double in three years from around $80 billion and expand to $0.5 trillion ($500 billion) in less than a decade. The catch? Digital businesses are still often covered by brick-and-mortar factory-era rules.

As the digital economy makes inroads into our daily lives, regulations for the new economy — often from the industrial era — are still catching up. Investments in growing fledgling businesses are looked upon with suspicion. Permits to start a company take one day on paper, but a few months in reality. Regulation is clearly behind the curve.

TV Mohandas Pai, chairman, Manipal Global Education, says, “There are a lot of unnecessary regulations. But a start must be made by the government itself. All payments and receivables by the government should be mandatorily by digital means only, without face-to-face interactions with citizens. Rules have to change.”

There are multiple issues, including different taxes for foreign and local entities, which encourage roundtripping. R Chandrashekhar, president, Nasscom says, “The tax rate for long-term capital gains is 20% for local entities and 10% for foreign. Such anomalies should be repealed.”

Madhur Singhal, partner, Bain & Company, a management consulting firm, adds, “For the digital economy to get to its full potential, doing business has to be easier and appreciation around the operating nature of early-stage companies has to deepen. Traditional industrial era compliance and filings shouldn’t be applied to digital era firms.” Nonetheless, “the cheese has moved,” says Padmaja Ruparel, president, Indian Angel Network (IAN), referring to the growing internet startups ecosystem that has 5,000+ companies.

However Ruparel, who heads a grouping of the largest angels in the country, adds, “The Central Board of Direct Taxes (CBDT) plays spoilsport. Startups get tax holidays on one hand and tax notices on the other. There’s a dis-alignment in the system.”

Source : PTI

‘Rights’ awareness programmes to be held in all States: banking standards board : 24-01-2017


To create greater awareness at the grassroot level, the Banking Codes and Standards Board of India (BCSBI) will organise a “know your rights” programme in all the States.

For this, the organisation will focus on tier-II cities, metros and other backward areas, Anand Aras, CEO, BCSBI, said.

With the opening of a large number of Jan-Dhan accounts and increased use of formal and transparent modes of financial transactions, it is now imperative for the lesser-privileged sections of society to understand their rights, he added.

Aras, who was here to organise a programme in association with Kudumbashree, a State initiative aimed at poverty reduction, said that conducting an educational programme through an interactive session would prove to be more beneficial as people relate to things better when delivered in simple language with situational references than through a classroom session.

“We believe that when one educates a woman you educate the entire ecosystem. This is because women, by the sheer trust that their family and friends have in them, have an influence on the decisions and actions taken by people around them. So, educating them about their banking rights will help in spreading and increasing the awareness of right banking practices,” he added.

During earlier customer interactions, it had become evident that most of the complaints had their genesis in the lack of awareness of relevant provisions relating to banks’ commitment to customers — as amended from time to time — both, among the banking staff as well as the customers.

This is evident from the latest Banking Ombudsman report, which indicates that nearly 34 per cent of all the complaints addressed to them related to non-adherence of BCSBI codes, he said.

Source : Economic Times

No.05/2017 Dated: 23-01-2017


Measures for reducing litigation- Clarification on Circulars 21/2015 and 8/2016 – Circular

CIRCULAR NO. 5/2017

FTS No. 279157/1TJ

Government of India Ministry of Finance Central Board of Direct Taxes

New Delhi, Dated 23rd January, 2017

Subject: Measures for reducing litigation- Clarification on Circulars 21/2015 and 8/2016 reg.

Instructions were issued vide CBDT Circular No. 21/2015 dated 10.12.2015, to the effect that appeals/SLPs should not be filed in cases where tax effect does not exceed the monetary limits specified under para 3 of the said Circular. It was also clarified therein that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed in the said Circular.

2.  In para 8 of the aforesaid Circular No. 21/2015, it has been unambiguously and expressly provided that adverse judgements relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in Circular or even if there is no tax effect:

a.     Where the Constitutional validity of the provisions of an Act or Rule are under challenge, or

b.     Where Board’s order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or

c.     Where Revenue Audit Objection in the case has been accepted by the Department

d.     Where the addition relates to undisclosed foreign assets/ bank  accounts.

The direction to ‘contest on merits’ negates the mechanical filing of appeals in these cases.

3.  However, it has been noticed that para 8 (c) of Circular No. 21 / 2015, regarding cases where addition made on account of Revenue Audit Objection is deleted, is being erroneously interpreted and appeals are being mechanically filed by the Department without proper examination of the case on merits. This is contrary to the instructions contained in Circular No. 21/2015 and Circular No. 8/2016. It is, therefore, clarified that the import and intent of para 8 of the Circular No. 21/2015 is that even on issues mentioned in the said para, appeals against the adverse judgment should only be filed on merits.

4.  Accordingly, henceforth, appeals should not be filed by the Department in violation of instructions mentioned above. Further, appeals that may have been filed in violation of these instructions may be withdrawn.

5.  The above may be brought to the notice of all concerned.

(Neetika Bansal)

DS (ITJ),

CBDT, New Delhi

India may face pressure to open up ecommerce sector : 23-01-2017


India is likely to face pressure from developed countries to open up its ecommerce sector. G-20 has for the first time asked various countries, including India, their views on ecommerce.

In three issue notes circulated to the governments of member countries, the forum has asked for views on enhancing the readiness of countries to engage in digital trade, how the WTO can promote ecommerce and measuring the digital economy.

“The German G-20 presidency aims to develop a conceptual framework for measuring cross-border digital trade,” the grouping said. “In addition, the G-20 could explore the applicability of WTO rules for digital trade, including potential limits of and gaps within these rules, and assess its development dimension.”

A commerce ministry official acknowledged that “G-20 has sought comments on digital trade for the first time.” The issue is likely to be taken up at the G-20 meeting this year.

India does not allow foreign investment in business to consumer ecommerce retail. Amazon and foreign investor-funded Flipkart function as marketplaces. Citing lack of international accounting standards and common understanding as challenges in capturing the digital trade in statistics, G-20 noted that the uptake of ecommerce is uneven. It has called for full participation of SMEs in developing countries and less developed economies to benefit from online trade.

Ahead of the WTO’s ministerial conference in Argentina in December, G20 has posed queries on the extent to which the existing WTO framework contributes to promoting ecommerce and the areas where new trade rules are needed, besides lessons that can be learnt from rules being made on ecommerce in various regional trade agreements. “The G20 should assess how the WTO could play off its particular strengths by providing for a substantive outcome for digital trade/ecommerce at the 11th ministerial  conference (MC),” the G-20 said in one of the notes.

India’s response will be crucial since it has reservations about ecommerce getting included in the WTO’s agenda. More than 30 delegations, most of which are G-20 members, have asked to explore linkages between digital trade and economic development within the WTO grouping while addressing “digital protectionism.” “This would allow members to identify elements that could possibly be used at the 11th ministerial conference, while  others might be deliverables in the longer term,” said the WTO note.

“Ecommerce will be attacked in multiple ways at WTO endorsed by the G-20,” an expert said. “Though there is no negotiating mandate for ecommerce to be discussed at WTO, an early harvest of a few issues is possible at MC 11 and negotiations on the difficult decisions could take place later.”

Source : Business Line

FAITH approaches finance ministry on service tax issue : 23-01-2017


The Federation of Associations in Indian Tourism and Hospitality of FAITH has approached the finance ministry on the matter of increasing service tax levies on outbound tour operators from India to an effective 9% from 22 January.

FAITH stated Indian tour operators who sell ‘internationally based’, accommodation and travel bookings and packages do not get any input tax credits for CENVAT from them. Thus a 9% levy (post 40% abatement on service tax) will immediately pass through their bookings to travellers and will make travel booked out of India, by Indian ‘tours & travel’ businesses immensely uncompetitive

FAITH has highlighted that in their GST representation dated 4th November, and in their earlier meetings with service tax officials, they had mentioned that the ‘place of provision’ of service, for outbound is not in India and hence, for Indian tour operators ‘booking travel from India’ the ‘place of provision’, clause for service taxes should ideally not apply.

FAITH said an increase of 500%, from 1.5% to 9% on international hotel bookings will have massive disruptive implications and will impact the holiday booking season for April end onwards which starts between 3-6 months in advance. If this is immediately not addressed, travellers from India will resort to booking with ‘international tour operators and online travel agents based outside of India, which do not have such tax levies in their jurisdictions.

FAITH has requested ministry of finance to consider the matter for corrective action and has also brought it to the notice of tourism minister, tourism secretary and commerce secretary for their intervention.

Source : PTI

Budget may put consumers before taxes to spur demand : 23-01-2017


Taxes are anything but certain for Indian Prime Minister Narendra Modi.

Faced with a slump in demand after his shock clampdown on cash, he’s expected to lower taxes in the Feb. 1 budget to spur consumption. The risk is that a cut will rob Modi of a short-term revenue spurt, which his administration had been touting as proof of success of the currency policy change.

“Economic growth is unlikely to accelerate in the near term on its own so the situation for the government is such that in order to improve their own credibility, the government will have to improve demand for goods and services,” said Nihal Kothari, executive director at tax firm Khaitan and Co. in Mumbai. “So the personal income tax slabs or rate may be reduced in the budget to give higher purchasing power to consumers.”

We assess the sustainability of the tax revenue surge amid expectations from the budget.

INDIRECT TAXES
Net revenue from customs, excise and service taxes rose 25 percent in April-December from a year earlier, meeting 81 percent of the government’s budgeted target for the year through March 31. The bulk of this however came from a surge in excise collections, underpinned by nine increases in the levy on gasoline and diesel since Modi came to power in 2014. Imposing this tax was relatively simple while global oil prices were low, but could become politically  difficult as crude costs rebound.

“The government may be forced to roll back some of the excise increases on fuel as this could feed into inflation,” Kothari said. “So additional tax revenues will come from greater compliance as we near the GST regime and the threat of scrutiny rather than economic growth.”

For instance, net indirect tax collection through November 2016 grew 26.2 percent due to higher tax rates and other special measures and just 8 percent after you strip out these effects Service tax numbers too are flattered by an increase in the rate to about 15 percent last year from 12.4 percent in April 2015 Customs collections may dip as Modi’s cash ban crimps demand for gold, one of India’s biggest imports Lobby group Associated Chambers of Commerce in India has sought cuts in customs duty  rates on aluminum and iron to boost local production of machinery while raising the levy on basic electronic goods such as microwave ovens and air conditioners Assuming the government doesn’t announce special measures, growth in tax collections will settle between 12 percent to 14 percent compared with about 17 percent to 18 percent in the past years, according to Edelweiss Financial Services Ltd.

DIRECT TAXES
Net revenue from corporation and income taxes rose 15.1 percent April-November from a year earlier, helping meet about 49 percent of the government’s budget goal. Collections rose to 65 percent of the target in December, the government said Jan. 9.

What’s unclear, though, is how much of this came from two amnesty programs offered to citizens, implying a one-time gain in collections. Another distortion is the government’s decision to allow corporations to collect tax payments in invalidated bills, which may have prompted early payments.

From the budget, Assocham’s seeking a road map for the government’s promised reduction in corporate tax rates to 25 percent from about 30 percent Tax breaks may be offered to those who invest in funds that contribute to building crucial roads, ports and highways Lowering the personal income tax rate would boost compliance and since less than 1 percent of the population pays this tax, revenue losses would be limited, according to Kotak Securities Ltd., which calls for a cut.

Currently individuals earning more than 1 million rupees a year pay the top rate of 30 percent tax plus surcharges There’s also speculation that the government may raise the threshold before income tax is charged to as high as 500,000 rupees from 250,000 rupees.

“One of the main reasons for India’s stunted tax base is the lack of trust between the government and taxpayers,” analysts at Kotak, including Sanjeev Prasad in Mumbai, wrote in a Jan. 17 report. “We expect the government to gradually deliver on its vision of moderate tax rates and a broad-based taxation system over the next one or two years with a start in the union budget on Feb. 1, 2017.”

Source : Economic Times

RBI, Customs dept move to plug gaps in exim trade : 21-01-2017


The Customs Department and the RBI are sharing data to plug gaps in the export-import trade that leads to situations where remittances are made from importers’ accounts even if goods are not been shipped from the selling country.

Banks usually ask for export and import documents — which include bill of lading and customs clearance — before they release funds.

While India was generating a unique number for exports, it was not generating a unique number based on the shipping bill for imports.

Following the Bank of Baroda scam in 2015, when foreign exchange was remitted from importers’ accounts despite there being no import of cargo, the RBI brought in advisory to generate a unique number for each import as well. This was done about a year and half ago.

“After there were problems, we started generating a unique number for imports as well. This helped capture each remittance against each bill of entry. Also, it prevented multiple remittances from being made against each bill of entry,” said Ajai Sahai, DG and CEO, Federation of Indian Export Organisations.

Moreover in imports, payment has to be made within a year. “This also helps prevent a situation which would cause a sudden surge in remittances, leading to sudden increase in demand for dollars and thus further depreciation of currency,” explained an industry source.

These documents are taken as proof for exports from the other country following which remittances are released.

“There was the Bank of Baroda scam where remittances were being made despite shipments not coming in. Earlier, customs and banks were not linked. But there is an RBI advisory which links the information between banks and customs. This will raise a red-flag when there are any discrepancies,” said a government official, on the sidelines of a conference recently.

The customs department asked the private sector to partner the government in formulating rules and norms that would help improve the speed and efficiency of doing business, while ensuring that the cost of compliance does not push up the overall cost of doing business.

Source : PTI

Budget 2017: Income tax relief must be blended with additional tax measures : 21-01-2017


Given there is all round expectation of income tax relief to assuage the demonetisation pains of the people, FM Arun Jaitley may have already decided on lowering of the tax burden through some measures in the Budget to be presented on February 1. While doing so he would be bogged by the same problem that his predecessors have faced, to increase the tax-to-GDP ratio in India. While expectations are that the government would increase public spending to stimulate the economy, this cannot be achieved on a low-tax base, which has been mark of the Indian economy. In fact, India has one of the lowest tax-to-GDP ratios, with emerging market economies’ averaging 21% and OECD’s averaging 34%.

Recent data for the April-December period shows that direct collections have increased 12.1%, while indirect tax mop-up is up by 25%, this may help in achieving the goal of 10.8% this year, but it would still fall short of the 12% level. An analysis of Budget data highlights that the tax-GDP ratio has remained much the same since 1990s. It was just 9.9% in FY15, only 10 bps higher than what it was in FY91. In the case of central taxes, FY08 is the only year the share of taxes increased to 11.9%, but thereafter fell below the 11% threshold again. Now, according to the medium term fiscal statement even the government is projecting it to increase to 11.1% in FY19.

While a large part of low compliance has to do with high taxes and low reporting, government’s efforts to reduce taxes have not created enough stir to increase India’s tax base. Consider the case of direct taxes, starting off from a low base the ratio increased from 1.88% in FY91 to 3.07 in FY98, when tax rates were reduced to the present 10, 20, 30% category. Then it started to rise again after FY01 with not much change till the government increased its exemption limit in FY07, which led to the highest tax-GDP ratio of 6.26% in FY08. But the ratio has been falling ever since despite the government increasing exemption limits. On the other hand, indirect tax to GDP ratio has fallen for most part since FY91. The ratio fell from 7.94% in FY91 to 5% in FY02, thereafter increasing to 5.79% in FY07. Since then, it has stayed below the 5.8% level.

This means that income tax relief will have to be blended with the additional tax measures, which can also come through extension of the tax base and increased tax compliance if the tax burden is lowered—on the indirect tax side, the implementation of GST will have to do the same for the tax kitty. Although with sluggish growth, the task may not be as easy even with the GST and income-tax push.

Source : Financial Express

Investors worried: Gaar may spoil tax treaty benefit for FPIs : 21-01-2017


Key benefits given to Foreign Portfolio Investors (FPIs) under amended tax treaties with Singapore, Cyprus and Mauritius may be negated by the implementation of General Anti-Avoidance Rules (Gaar).

Domestic anti-avoidance law will prevail over treaty benefits in the event of a dispute under the Singapore and Mauritius treaties. This could threaten the lower tax rate for FPIs in the two years between April 1, 2017, and March 31, 2019. Under the amended treaties, short term capital gains tax for FPIs is 15%. However, during the transition window cited above, this will be 7.5%, subsequently doubling to 15%. The tax treaties with these countries were amended last year.

Many FPIs are also worried that benefits under the amended treaties for derivatives and debt instruments may be questioned under Gaar. Tax officials confirmed that Gaar will take effect on April 1 and that the government is not looking at issuing any additional regulations before March 31 at a meeting held recently with industry representatives, said people aware of the development.

TWO MAJOR BENEFITS FOR FPIs UNDER TREATIES

Concerned about this, many FPIs have reached out to their advisers in India. “In Singapore and Cyprus treaties, it is provided that the treaty will not prevent a country from applying its domestic anti-avoidance law,” said Sameer Gupta, tax leader, financial services, EY. “However, one hopes the general understanding of law that a specific anti-avoidance provision (as prescribed in Limitation of Benefits article under the treaty) prevails over general provision (anti-avoidance rules) should be accepted and the government should allow FPIs to avail (themselves of) the benefits under the respective treaty.” Limitation of Benefits or LoB refers to provisions aimed against treaty shopping. Every FPI will have to follow LoBs or risk not getting treaty benefits.

KEY BENEFITS
There are two major benefits for FPIs under the treaties. The first is the grandfathering clause, whereby any investment in India before March 31, 2017, will be treated as an old one and hence not taxed in India. The other is the two-year, 7.5% window.

“While Gaar may not be invoked on each and every transaction, especially because action can be taken only after obtaining approval of the commissioner and the approving panel, as things stand as per the law, in case of a conflict between Gaar and Singapore or Mauritius or Cyprus treaties, Gaar will prevail,” said Rajesh H Gandhi, partner, Deloitte Haskins & Sells. “This could mean that the 50% tax leeway for next two years under the Singapore/Mauritius treaties may not mean much.” The  government formed an expert committee in 2012 that needs to approve any Gaar adjustment made by a tax official.

LARGER QUESTION

Experts said the question isn’t a simple one of whether Gaar will apply in spite of FPI coming from a treaty country. “The larger question is, can a domestic law apply to an investment in a country where an international treaty is already signed?” said a tax expert. Additionally, investment in other instruments apart from equity may be impacted, experts said.

“The exemption for capital gains from sale of derivatives and debt instruments, which continues even under the revised treaties with Mauritius and Singapore, is not subject to any expenditure threshold under those two treaties,” said Gandhi. “So it is all the more likely that Gaar could be invoked in those cases and may put a dampener to the exemption.”

Source : Economic Times

No.04/2017 Dated: 20-01-2017


CBDT kept the Clarifications on Indirect Transfer provisions under the Income Tax Act. 1961 in abeyance for the time being

Circular No. 4/2017

F.No.500/43/2012-FT&TR-IV

Government of India Ministry of Finance Central Board of Direct Taxes

New Delhi, Dated 20th  January, 2017

Circular No.41/2016 [F.No.500/43/2012-FT&TR] dated 21.12.2016.

The Central Board of Direct Taxes had issued Circular No.41/2016 on 21st December, 2016 regarding Indirect Transfer Provisions under the Income Tax Act, 1961.

2. After the issue of circular No.41/2016, representations have been received from various FPIs, FIIs, VCFs and other stakeholders. The stakeholders have presented their Concerns stating that the circular does not address the issue of possible multiple taxation of the same income. The representations made by the stakeholders are currently under consideration and examination.

3. Pending a decision in the matter, operation of Circular No.41 of 2016 dated 21st December, 2016 is kept in abeyance for the time being.

(Dr O N Supriya Rao)

Under Secretary (FT&TR-IV(2

Supreme Court to hear plea seeking postponement of Union Budget : 20-01-2017


The Supreme Court on Friday will hear a plea seeking intervention for postponing the Union Budget presentation after March once the assembly elections in five states are over. The plea filed by Manohar Lal Sharma claimed that due to upcoming assembly elections, people will be facing a lot of problem. In December last year, the apex court refused to give an urgent hearing to a plea filed by lawyer Manohar Lal Sharma in which he demanded the budget be presented in March.

An apex court bench headed by Chief Justice Jagdish Singh Khehar said they would hear the matter in due course of time. “I have mentioned the matter before the bench of the apex court seeking postponing of the annual budget to be presented by the government in view of impending assembly polls,” Sharma told ANI. “The apex court, however, said they would hear the matter on due course of time,” said Sharma.

Source : Business Standard

Budget 2017: For GST success, a single, uniform outlook by Centre, states is a must : 20-01-2017


The ninth meeting of the GST Council will go down in history as one of its most crucial one, where the prickly issues of dual control and jurisdiction of the coastal states were discussed and solutions were agreed upon between the Centre and the states—a commendable feat achieved in record time. Further, the finance minister announced July 1, 2017, as the new target date for GST to come alive. Looking at all indications, GST is poised to finally see the light of day. Given the new implementation date, there is not much time between now and July 1 when one looks at the to-do list for the government as well as businesses.

At the top of the list is the finalisation of all important GST rates. The discussion on the GST rates and classification of goods and services under the rate slabs of 0%, 5%, 12%, 18% and 28% is yet to be concluded. Businesses are waiting with bated breath to understand this last but most important facet of the GST reform. Given the way the discussions and decisions on the dual-control issue played out in the GST Council, it is but natural that a conclusion on an universally-acceptable rate classification would also require a considerable length of time. In the next Council meeting, scheduled for February 18, ideally, a draft of the goods and services classification should be circulated for discussion so that a final decision can be taken in the subsequent meeting. This will also help states firm up their FY18 budgets and assist businesses in finalising their GST impact studies.

The indirect tax eco-system consists of various stakeholders. The prominent ones are taxpayers, tax administrators and the tax advisors. All stakeholders play their respective roles in such a manner that there is harmony and balance in the eco-system. The GST would be a revolutionary tax system whereby technology will disrupt the way these stakeholders function. Innovation and digitisation are the new mantras. While, on the one hand, the taxpayers expect the new system to be simple and certain, on the other, tax administrators worry about likely abuse and hence tend to make the system complex. A very strong and user-friendly IT mechanism would go long way in bridging this gap. The focus should be more on how to make the system simple and effective so that it can be used seamlessly by even the smallest taxpayer rather than making it complex fearing abuse by a few. The GST Network (GSTN) is expected to cater to these requirements.

The indirect tax function in an organisation is also poised to undergo significant change. Apart from technical skills, additional skills such as big-data analysis, risk-control mechanics, etc, will be in demand as the details of every B2B transaction in the country are expected to be uploaded on to the GSTN (subject to prescribed threshold limits). The sheer volume of data and the reconciliation that one is expected to do on a monthly basis would warrant IT intervention, and achieving all this manually is simply ruled out.

Coming back to the dual-control issue, the agreed distribution of the assessees between the Centre and the states looks very simple prima facie and has to be worked out in detail. The agreement for assessing and auditing taxpayers deals with those who are registered and have been filing returns. The distribution of enforcement/anti-evasion powers between the Centre and the states needs to be also agreed upon. Certain protocols and procedures need to be meticulously followed by both the authorities in dealing with such cases. Since the GST would be a destination-based consumption tax, any additional assessment of tax would accrue to the destination state where the ultimate consumption has taken place. While it is irrelevant for the CGST authorities, it is not known whether the destination state GST authorities would get involved or the origin state GST authorities would get involved in a case where tax has been sought to be evaded on inter-state transactions. Or, is it that the IGST authority, which is the CGST authority, alone will be tasked with dealing with tax evasion cases relating to inter-state supply of goods and/or services? These and many more questions require answers before the new tax is rolled out.

Assessments and audits are still a year-and-a-half away at the least, and there is perhaps enough time to agree to the detailed procedures. However, anti-tax evasion and enforcement measures should be in place from day-1 to be fair to the honest taxpayers.

 Another important aspect of GST is the interpretation of the GST law and rules across the country. For GST to succeed, it is imperative that it is uniformly applied by the Union and state GST authorities and therefore it is extremely necessary to have a joint approach for a single and uniform outlook which is applicable consistently across the country. Otherwise, it will lead to litigation across the country. A joint GST policy team should be formed, comprising representatives from the CGST and SGST authorities. This team should be entrusted the work of uniformly interpreting the GST law and rules and issue clarifications/ instructions which would be uniformly applicable across the country. The current roles of the Tax Research Unit (at the Centre) and the VAT policy departments (at the state level) need to be merged and entrusted to the joint GST policy team. This will go a long way in achieving the much sought after uniformity in application of the indirect tax laws.

The upcoming Budget 2017 offers the opportunity to announce proposals completely aligned to the GST implementation. There is just not enough time left for getting GST ready. GST implementation is back, right at the centre of the discussion tables!

Source : PTI

Modi’s note ban drive seen biting into economic growth: Poll : 20-01-2017


Economy lost momentum in the final three months of 2016 after Prime Minister Narendra Modi’s ban on high-value notes hurt consumption and businesses but it is set to pick up this quarter, a Reuters poll found.

Having posted growth of above 7 percent for six consecutive quarters, India’s gross domestic product is expected to have expanded just 6.5 percent in the October-December quarter – the weakest in nearly three years.

The poll also suggested growth would remain below 7 percent in the first quarter of 2017, at 6.9 percent.

India’s GDP for the fiscal year to March 2017 is expected to grow 6.9 percent, according to the poll of over 20 economists. That is higher than the International Monetary Fund’s estimate of 6.6 percent.

“If the demonetization exercise has led to some permanent supply-side disruptions, growth could be weaker for longer,” wrote Pranjul Bhandari, chief economist for India at HSBC, in a note.

The Nov. 8 announcement of the ban on high-value notes, which coincided with Donald Trump’s U.S. Presidential election victory, has caused major disruptions in the cash-reliant economy.

Industrial and services output have been hobbled, with a survey earlier this month showing private sector activity contracted in December.

“Lower growth for at least two quarters means that the output gap will take longer to close, suggesting that the revival of the investment cycle, which is already very weak, could be pushed out even further,” added Bhandari.

Still, a majority of economists answering a separate question said they were confident or somewhat confident the government’s demonetization drive would boost consumption and investment in the longer-term.

A slight majority, nine of 15 economists, said the initial aim of removing unaccounted money from the system will not be achieved. Eight of the 13 forecasters said the social cost to the poor and small businesses from the currency ban will be eclipsed by underlying benefits in the long-term.

In a surprise move, the Reserve Bank of India chose not to cut its repo rate in December to combat the fallout from the demonetization, keeping it steady at 6.25 percent.

Inflation hit a two-year low in December, with consumer prices rising 3.41 percent, well below the RBI’s near-term target of 5 percent by March 2017.

It is expected to hover between 4.1 and 5.2 percent from now to mid-2018, giving the RBI room to make further rate cuts.

But analysts expect the central bank to make only one rate cut over the poll horizon, tipping a 25 basis point cut at its upcoming Feb. 8 meeting, a week after the government presents the federal budget for the 2017/18 financial year.

Source : Economic Times

Notification No. F.No.3(1)-W&M/2016 – SO 204(E) 19-01-2017


Amendment to Pradhan Mantri Garib Kalyan Deposit Scheme, Notification No S.O. 4061(E) – F. No.3(1)-W&M/2016 – S.O. 204(E)

MINISTRY OF FINANCE (Department of Economic Affiairs)

NOTIFICATION

New Delhi, the 19th January, 2017

Amendment to Pradhan Mantri Garib Kalyan Deposit Scheme, Notification No S.O. 4061(E)

S.O. 204(E).- In exercise of the powers conferred by clause (c) of section 199B of the Finance Act, 2016 (28 of 2016) (hereinafter referred to as the Act), the Central Government hereby amends the conditions specified in clause 7 of the Pradhan Mantri Garib Kalyan Deposit Scheme notified vide Notification No. S.O.4061 (E). dated December 16, 2016.

2. In place of clause 7 (1) of the said notification the following shall be substituted:

7. Authorised banks.-(1) Application for the deposit in the form of Bonds Ledger Account shall be received by any banking company, other than Cooperative Banks, to which the Banking Regulation Act, 1949 (10 of 1949) applies”.

By Order of the President of India,

[ F. No.3(1)-W&M/2016]

PRASHANT GOYAL, Jt. Secy

Are multiple service tax rates in the offing? : 19-01-2017


For consumers like us, service tax is omnipresent, well quite literally. From eating-out to travelling to entertainment, almost every expense that one makes has an element of service tax in it.

While Budget 2016 had hiked the service tax by 0.5 per cent to 15 per cent, all eyes will be on Budget 2017 to see if there will be any further increase in it. Or, will the government wait for the Goods and Services Tax (GST) to kick in on July 1, 2017?

It will be interesting to witness whether the Centre raises the service tax rate from the existing 15 per cent by at least one percentage point to 16 per cent as a precursor to the GST rollout. This, however, seems unlikely as there could be multiple rates for the service tax applicable on different services.

For some services, the rate could be set lower at 12 per cent, while for most others it might settle at 18 per cent. Budgets, especially over the last two years, have given the indication that the service tax rate is slowly being increased to bring service tax closer to the expected GST rate of 18 per cent.

The GST Council had already agreed on a four-slab structure as 0, 5, 12, 18 and 28 per cent. The Council has, however, still not announced the schedule of goods and services under each slab rate. It remains to be seen whether all services are to be taxed at standard rate of 18 per cent or few of them will enjoy lower rate.

Will there be multiple service tax rates for consumers?
For the government, GST is planned as a revenue-neutral exercise, which means that the switchover to the new regime should not impact the government’s overall tax revenues.

For the consumer, however, there might not be the same scenario. In November 2016, Revenue Secretary Hasmukh Adhia had said that a decision on the services bracket would be taken later, although it would most likely attract the standard rate of 18 per cent. He had, however, added that some services that enjoy higher abatement would be put in the lower tax slabs of 12 or 5 per cent, depending on their current overall tax incidence. The government officials at that time also indicated that  ”multiple rates had been decided keeping consumer interest in mind”.

Service tax over the years
Budget 2016 had proposed to impose a cess, called the Krishi Kalyan Cess, @ 0.5 per cent on all taxable services. The new effective service tax, therefore, is settled at 15%. While presenting Budget 2015, the FM had increased the service tax rate from 12.36 to 14 per cent. This new rate of service tax @ 14 per cent was applicable from June 1, 2015. Moreover, from November 15, 2015, Swachh Bharat Cess @ 0.5 per cent also got applicable. Therefore the effective rate of service tax is currently at 14.5 per cent with effect from November 15, 2015.

Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers. It is categorised under indirect tax and came into existence under the Finance Act, 1994.

The proceeds of Krishi Kalyan Cess would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers. The cess will come into force with effect on June 1, 2016. The Krishi Kalyan Cess shall be in addition to any cess or service tax leviable on such taxable services under Chapter V of the Finance Act, 1994, or under any other law for the time being in force.

Impact
Total tax collection in India (direct and indirect), currently stands at Rs 14.6 lakh crore, of which almost 34 per cent comprises indirect taxes, with Rs 2.8 lakh crore coming from excise and Rs 2.1 lakh crore from service tax. With the implementation of the GST, the entire indirect tax system in India (excise, state-level VAT, service tax) is expected to evolve

According to an EY study, most services are likely to be costlier due to increase in tax rate. However, impact may not be as high as 3 per cent (from current service tax of 15 per cent) if service providers pass on savings due to higher tax credits.

Impact of service tax on inflation
According to Edelweiss Securities, the overall transition to GST will not have a significant impact on inflation. At present, according to Edelweiss, services-oriented components constitute about 25-30 per cent of the Consumer Price Index (CPI) basket, with a major share belonging to housing, transport and communication sector. Service tax is not imposed on certain (12 per cent of the CPI basket) services and these services are expected  remain exempt under the GST regime. A hike in tax rate on services is unlikely to have any material direct impact on the CPI.

Source : PTI

Budget 2017: How Arun Jaitley can cut everyone’s tax burden, pay the poor and still be revenue neutral : 19-01-2017


In our January 14 article (goo.gl/zYYrlq), we had outlined what we believe is a major opportunity for the Modi government to bring in a structural reform to our income tax structure. What we suggested, and expand today, is an integrated approach to both taxation and redistribution. The latter can take, and has taken, many forms over the years. Technology (Aadhaar) and political will (demonetisation) allows India to finally begin to think BIG, and efficiently, in terms of redistributive policies.

But the two are necessary, not sufficient, for successful implementation. There is money involved, and the last thing the Modi government should do is to revert to the bad old days of “in the name of the poor” corrupt policies like PDS, NREGA, loan waivers, fertiliser subsidies, etc. There is buzz around that the Budget might contain a basic income policy. One of us (Bhalla) had offered a discussion of how Rs 1,000 per person per month could be transferred to every one in the bottom half of the population, and that the cost would be Rs 5 lakh crore (trillion). As Subhashis Banerjee has correctly pointed out (A Contentious Proposal, The Indian Express, January 14, 2017), the calculations are incorrect if transfers have to be made to the bottom 50%; the calculations are correct if transfers are to be made to the bottom 20%, the percentage poor according to the upwardly adjusted poverty line of Rs 1,525 per person per month. The Tendulkar poverty line for FY17 is a lower Rs 1,250 per person per month. The error is unfortunate, and regretted.

Negative income tax: We are proposing, in lieu of basic income for all or even for a targeted population, that each non-farmer worker (hereafter, just worker) receive a transfer upto a maximum of Rs 15,000 a year. The negative income tax is obtained according to the formula 15,000 – 0.05 X income of worker (upto an income of Rs 3 lakh). In the aggregate, for about 240 million workers (72.7 % of the worker population), the total outgo for net income transfer (NIT) is Rs 1.7 lakh crore, or an average of Rs 7,100 per earner recipient of NIT.

The Tendulkar poverty line, for a family of five, in FY17 prices, is Rs 75,000 a year. According to NSS data, the average number of earners in a poor family are close to 3.1; even for a two-earner household, the transfer will be equal to an average of Rs 16,000 (Rs 8,000 per earner). The average earnings for the bottom 25% of earners is Rs 90,000. Thus, for these 25%, the take-home post NIT income is 2 X (90,000+8,000) or Rs 196,000 a year, i.e., well above the five-person poverty level income of Rs 75,000.

graph-1

Proposed income tax system: In several comments received over our previous proposal, the one overwhelming response was that while the flat tax rate of 12% was appreciated, most felt that it was politically unrealistic in the Indian context. Hence, we now propose a new revenue neutral system. This will be a two-rate structure, 10% and 20%. For the income range Rs 3-6 lakh, the tax rate is 10%; for those above Rs 6 lakh, the rate is 20%. Details are presented in the accompanying table. Note that there is a loss of Rs 1,181 billion in the new system with compliance unchanged. What is noteworthy about tax compliance in India in 2013-14 is that while tax compliance for those earning less than Rs 10 lakh was close to 30%, the rate for those earning more than Rs 10 lakh is as low as 20%. As the PM had mentioned, in FY14, there were only 2.4 million earners with income above Rs 10 lakh—our NSS distribution for FY17 suggests that the number of workers in this category is around 12 million.

Why should our numbers/estimates be believed? For two reasons: the mean income of our constructed distribution matches the mean income as obtained from national accounts (this is by construction!). Second, and more importantly, official tax receipts for each of the years 2011-12 to 2015-16 broadly matches (within 10%) the receipts obtained via our synthetic distribution. Note that compliance rates are estimated via the number of official taxpayers (finance ministry data, 2013-14) and the taxpayers as per the constructed distribution.

There are significant gains for all workers in the new system. A person earning Rs 4 lakh has her tax liability reduced by 35%; for those earning Rs 8 lakh, the tax liability is reduced by 20%, and for those earning Rs 16 lakh, the reduction is 27%. A minimum set of compliance changes assumed by us are as follows: all compliance in the new tax regime is estimated to be 40%.

With this change in compliance, the new system will still entail a loss of Rs 640 billion. This will still mean that only four out of 10 workers actually pay taxes in India. In the US, 85 of every 100 people pay taxes. We will still have a very long way to go—but we can begin to get there!

This loss can be made up either by another few percentage points increase in compliance (even with the reduced tax rates, we are assuming only a 40% compliance rate) or by removing all budgeted tax incentives. In 2015-16, total incentives for tax payers was Rs 550 billion, with Section 80C (mutual fund investments for rich taxpayers!) accounting for a fat Rs 450 billion. There is no need for this payment to the rich in the new system—hence, removal of this exemption, is able to reduce the tax loss in the new system to practically zero; actually, a small loss of Rs 90 billion.

What remains is the financing of the NIT. As outlined above, the cost of NIT is Rs 1.7 lakh crore. If NIT is part of official tax policy, then there seems to be precious little need for anti-poverty programs like PDS or NREGA. These programmes are not only costly, but also involve a lot of corruption—as most analysts (and us), and politicians, have pointed out over the years. Starting with Rajiv Gandhi, who in 1985 stated that only 15% of the money meant for the poor actually reached the poor! Currently, total expenditure on these two wasteful programmes is Rs 1.75 lakh crore. If the government decides to eliminate other “in the name of the poor” (but not benefiting the poor) programmes, then the NIT, per worker, can be increased.

With the adoption of this new thinking, and new anti-poverty policies, absolute poverty will be zero in India, and according to a much higher poverty line. And with no extra cost. The only assumption we are making in the tax reform is that tax compliance rates have to increase to 40%. The demonetisation policy has provided the stick for increased tax compliance—our proposed policy provides a much-needed carrot.

Bhalla is contributing editor, The Financial Express, and senior India analyst at Observatory Group, a New York-based macro policy advisory group. Virmani is chairman, Policy Foundation. Views are personal. Twitter: @surjitbhalla, @dravirmani

Source : Financial Express

FM Arun Jaitley’s A-team: Meet the who’s who : 19-01-2017


In a year that’s likely to see many changes in both the budget and its process, Finance Minister Arun Jaitley has a well-settled team, one that has been on the job for a while.

The squad, though, has the unenviable task of delivering a budget that’s the most anticipated in recent years, with expectations running high post demonetisation.

ASHOK LAVASA, Finance Secretary

Lavasa, a 1980-batch IAS officer of the Haryana cadre, spearheaded the streamlining of approvals at the environment ministry, which, under the previous government, was blamed for tardy clearances and corruption. Lavasa, an avid photographer who co-authored a book, An Uncivil Servant, has a tough task, with this budget likely boasting of many firsts. As finance secretary, he leads the budget-making exercise and has to strike a balance between the expectations of ministries and departments seeking larger allocations and the fiscal deficit goals of the government.

SHAKTIKANTA DAS, Secretary, Department of Economic Affairs

If there is one bureaucrat who knows the budget better than anyone, it is Das. He has seen it right from the time he was joint secretary budget and has also run the machine from the top for a few years. Das has to deliver a glitch-free budget and pack it with enough reforms to meet expectations. He needs to provide ideas to put the economy back on track post demonetisation and something extra so that the private sector starts to invest.

HASMUKH ADHIA , Secretary, 3 Department of Revenue

Adhia faces the difficult task of delivering big tax collections through the disclosure scheme announced during demonetisation. A trusted aide of Prime Minister Narendra Modi from Gujarat, Adhia’s key focus soon after coming to the revenue department from financial services was to reduce complaints against tax authorities. He has been able to move swiftly against the black sheep in  the department and also take steps to reduce litigation. This budget will be keenly watched for path-breaking changes in direct taxes, starting with elimination of exemptions, reduction in the corporate tax rate and going on to implementation of the goods and services tax.

NEERAJ KUMAR GUPTA, Secretary, Dept 4 of Investment and Public Asset Mgmt

Strategic asset sales are expected to be the top agenda given that there are approvals to dilute the government’s stake in as many as six companies. This fi nancial year, Gupta has managed to prevail on cash-rich companies to go for buybacks, which fetched the government `15,982 crore, and the year could end with all-time high disinvestment receipts. The government will seek to monetise stakes held through the Specifi ed Undertaking of the Unit Trust of India and push for listing of profitable subsidiaries of state-run companies. Winding up of loss-making companies and selling their assets will also keep Gupta busy in 2017.

ARVIND SUBRAMANIAN, Chief Economic Advisor

The CEA hasn’t figured prominently in the demonetisation process, but he could have a big impact on the budget. While he could not get the government to relax the fiscal goals last time, a bigger idea of his could find a place in the budget. The Economic Survey is likely to lay out the concept of universal basic income as a poverty alleviation tool. Although the notion has its set of critics, it is likely that the finance minister may adopt it in some form.

ANJULY CHIB DUGGAL, Secretary,Department of Financial Services

Following demonetisation, the government will aggressively pursue its cashless drive, with state-run financial institutions at the forefront. After having put the Banks Board Bureau in place, reforms in public sector banks will be high on the agenda. Bad loans plague the banking sector and the government may need to fi nd additional resources to meet  their capital needs and lessen their burden. The listing of state-run general insurers will keep Duggal busy. After the merger of State Bank of India with its subsidiaries, some action could be seen on the merger of public sector banks.

KEY CHALLENGES BEFORE THE TEAM:

Presenting an all-new budget with many changes.
Pack ideas to encourage job creation.
Find ways to revive private investment.
Readying a blueprint to put economy back on track.
Raise enough resources to give something to everyone.

Source : Economic Times

Notification No. F. No. 354/42/2016-TRU [ST] 18-1-2017


Corrigendum – Notification No. 1/2017-Service Tax, dated the 12th January, 2017 – F. No. 354/42/2016-TRU

MINISTRY OF FINANCE (Department of Revenue)

CORRIGENDUM

New Delhi, the 18th January, 2017

G.S.R. 47(E).- In the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 1/2017-Service Tax, dated the 12th January, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 24 (E), dated the 12th January, 2017, at page 2, in line 32, for “customs station of clearance in India” read “customs station of clearance in India received by persons specified in clause (c)”.

[F. No. 354/42/2016-TRU]

ANURAG SEHGAL, Under. Secy.

Demonetisation can do little to stop future blackmoney flow: Assocham : 18-01-2017


Demonetisation may wipe out the present stock of black money held in cash from the economy but cannot eliminate the ill-gotten wealth converted into assets such as gold and real estate, Assocham said today. However, the industry body has suggested measures like lowering stamp duty on property transactions to tackle the menace.

“Invalidating existing high-denomination notes addresses the stock of black money but does little to address future flows. Eliminating such flows will require further reforms like lowering stamp duty on property transactions, electronic registration of real estate etc,” the Assocham study said.

Moreover, it said, indications that most of the scrapped currency has returned to the banking system through right or wrong means do suggest that demonetisation may not even fully wipe out the existing stock of ill-gotten cash.

“To that extent, even our study may turn out to be ambitious if the tax authorities are not able to trace the money laundered through different accounts. Given the resource constraints with the tax authorities, carrying out such an exercise for identification of laundered money may be a herculean task,” Assocham Secretary General DS Rawat said.

The study pointed out that high denomination currency withdrawal is not without some inherent problems.

“It is very difficult to separate black money from white money because distinction is not once-and-for-all. White money used to purchase something becomes black if the shopkeeper does not pay sales tax,” the study noted, adding that much of conspicuous consumption is paid for in unaccounted money, which, in the hand of the recipients can again become perfectly legal income.

Ultimately, the problem of undisclosed incomes and wealth has to be tackled at the source, Assocham highlighted.

“Government must reduce the opportunity and incentives for unaccounted transactions by narrowing the gap between the market value and the one fixed by the government agencies for different levies like stamp duty etc,” Rawat said.

Further, in order to check the menace of black money, the chamber suggested measures, which include reducing discretionary powers of officers by framing rules and laws clearly and not leaving them to individuals’ interpretation.

“Ironically, several of our laws are badly drafted and framed, leaving scope for official discretion. The problem in a way starts here,” the chamber said.

A strong political will would be required to deal with this issue and bureaucrats drafting the proposed legislations should be clearly instructed not to leave any grey areas, it added.

Source : Financial Express

Bid to end the fear of jail time under GST regime : 18-01-2017


India is proposing to dilute the provisions of arrest under the proposed goods and services tax (GST) to ensure there is no ‘raid raj’ under the new tax regime.

Offences dealing with non-payment of tax or forgery of up to Rs 2 crore would be made bailable. “This issue has been discussed…The plan now is to make offence of tax evasion or forgery of up to Rs 2 crore bailable,” said a senior government official privy to the deliberations of the GST Council, the apex decision-making body for the upcoming tax regime.

This means the accused will get bail immediately. That will make the provisions lighter than those in the Indian Penal Code which treat cheating or forgery as a non-bailable offence under Section 420. The move follows apprehensions raised by some states that under the proposed GST regime, tax officials may get unlimited power for prosecution and arrest, leading to harassment of businesses.

“There can be interpretational issues because of which a trader may not pay tax, but he should not be arrested for this,” said another government official.

“There is a need to relook at the provisions to ensure that there is no rampant misuse of powers at the ground level as GST would deal with small traders.”

Most states do not have arrest provisions in their framework for value added tax. Under service tax rules, arrest provisions kick in for evasion of more than Rs 2 crore, while in excise, the trigger is Rs 50 lakh.

“Given that GST aims to tax small dealers and service providers, a high threshold needs to be kept for any stringent provisions of arrest to be evoked to avoid misuse and undue hardship to small taxpayers,” said Bipin Sapra, a partner at EY.

However, there is a view that there should be stringent punishment for those who collect tax but do not deposit it with the government above a certain threshold. Provisions under the existing model GST law are more inclined towards those in excise law.

Under the proposed law, offences recognised as ‘cognizable and non-bailable’ for ‘arrest’ are those where the amount of tax evaded (including wrong input tax credit and refund taken wrongly) exceeds Rs 1 crore.

These include supply of goods or services without issue of invoice or gross misdeclaration in description of supply on invoice, to intentionally evade tax, issue of invoice for supply of goods or services in violation of GST laws leading to wrongly availing credit or duty refund, collection of tax but not depositing it with the government within three months, collection of any tax in contravention of GST laws and non-payment to the government and taking or utilising input tax credit without actual receipt of goods or services.

Suitable changes would be carried out in the GST legislations to ensure that there is no misuse of such provisions, the official said.

Experts also pitch for changes to the existing provisions. “The proposed provision of arrest seems to be wider than what currently exists for service tax laws and is closer to what we have under excise … Government should consider some measures to ensure that ‘arrest powers’ are not abused by the tax officials,” said Pratik Jain, leader-indirect tax at PwC India

GST seeks to replace multiple taxes on goods and services levied by the Centre such as excise duty and service tax and states such as value added tax, purchase tax and electricity duty into a single tax creating a seamless national market.

Source : PTI

No.02/2017 Dated: 18-01-2017


Clarifications on the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016 – Circular

Circular No.2 of 2017

F.No.142/33/2016-TPL(Part)

Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes

(TPL Division)

***

Dated: 18th of January, 2017

Clarifications on the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016

The Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016 (hereinafter ‘the Scheme’) provides an opportunity to persons having undisclosed income in the form of cash or deposit in an account maintained with a specified entity to declare such income and pay tax, surcharge and penalty totaling in all to 49.9 per cent. of such declared income and make a mandatory deposit of not less than 25% of such income in the Pradhan Mantri Garib Kalyan Deposit Scheme, 2016.The Scheme has commenced on 17.12.2016 and shall remain open for declarations/deposit upto 31.03.2017.

Queries have been received from the stakeholders seeking further clarity on certain provisions of the Scheme. The Central Government has considered the queries and decided to clarify the same in the form of questions and answers as follows.-

Question No.1: Whether the amounts deposited in an account maintained with a bank or post office like Saving account, Current Account, Recurring Deposit Account, Fixed Deposit Account, PPF Account, Senior Citizen Saving Scheme Account, Monthly Income Scheme Account, Jan Dhan Yojana Account are eligible for being declared in the Scheme?

Answer: As per section 199C(1) of the Scheme, a person can make declaration in respect of any income in the form of deposit in an account maintained by the person with a specified entity and as per Explanation to section 199C(2) the banks and post offices come under the definition of specified entity. Hence, the undisclosed income deposited in the accounts specified above can be declared under the Scheme.

Question No.2: Whether declaration under the Scheme can be made in respect of income which is represented in the form of investment in any asset like jewellery, stock or immovable property?

Answer: No. Under the Scheme, only income represented in the form of cash or deposit in an account maintained with specified entity can be declared. The Scheme is hence not available for declaration of an income which is represented in the form of assets like jewellery, stock or immovable property.

Question No.3: In case a deposit is made by interbank transfer i.e. transfers from one account to another account, whether such deposit can be declared under the Scheme?

Answer: Yes, a declaration under the Scheme can be filed in respect of deposits made in an account maintained with a specified entity by any mode such as cash, cheque, RTGS, NEFT, or any electronic transfer system.

Question No.4: Where a notice under section 142(1)/ 143(2)/ 148/ 153A/ 153C of the Income-tax Act has been issued to a person for an assessment year, will such person be eligible for making a declaration under the Scheme?

Answer: Yes, such person is eligible to avail the Scheme subject to fulfilment of conditions specified in the Scheme.

Question No.5: Can a person against whom a search/ survey operation has been initiated, file declaration under the Scheme and whether the cash seized during search operation can be declared under the Scheme?

Answer: Yes, a person against whom a search/survey operation has been initiated is eligible to file declaration under the Scheme in respect of undisclosed income represented in the form of cash or deposit in an account maintained with specified entity.

Question No.6: Whether credit of advance tax paid, tax deducted at source (TDS), tax collected at source (TCS), in respect of an income declared under the Scheme would be available?

Answer: No credit for advance tax paid, TDS or TCS shall be allowed under the Scheme.

Question No.7: Whether undisclosed income represented in the form of deposits in foreign bank account is eligible for the Scheme?

Answer: Clause (d) of section 199-O of the Scheme provides that the Scheme shall not apply in relation to any undisclosed foreign income and asset which is chargeable to tax under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Hence, undisclosed income represented in the form of deposits in foreign bank account is not eligible for the Scheme.

Question No.8: Can a person come under the Scheme with respect to deposit made in a bank account prior to the Financial Year 2016-17?

Answer: A person can avail the Scheme for any assessment year commencing on or before the 1st day of April, 2017. Hence, deposits made in bank account prior to financial year 2016-17 can also be declared under the Scheme.

Question No.9: If a person does not declare undisclosed cash deposited in an account between 01.04.2016 to 15.12.2016 under the Scheme, then whether such undisclosed deposit shall attract tax at the rate provided in the Taxation Laws (Second Amendment) Act, 2016?

Answer: The amended provisions of section 115BBE of the Income-tax Act, 1961 shall apply to A.Y.2017-18, relating to F.Y. 2016-17. Hence, undisclosed deposits between 01.04.2016 to 15.12.2016 shall also attract tax at the rate provided in the Taxation Laws (Second Amendment) Act, 2016.

Question No.10: Whether undisclosed income deposited/repaid in an Overdraft Account or Cash Credit Account or any loan account maintained with a bank is eligible for being declared under the Scheme?

Answer: Yes, the amount deposited or repaid against an overdraft account/cash credit account/any loan account maintained with a bank or any specified entity is eligible for being declared under the Scheme.

Question No.11: Whether the cash seized during a search and seizure action of the Department and deposited in Public Deposit Account is allowed to be adjusted against the payments required to be made under the Scheme?

Answer: The adjustment of cash seized by the Department and deposited in the Public Deposit Account may be allowed to be adjusted for making payment of tax, surcharge and penalty under the Scheme on the request of the person from whom the cash is seized. However, the said amount shall not be allowed to be adjusted for making deposits under the Pradhan Mantri Garib Kalyan Deposit Scheme.

Question No.12: Person ‘A’ made an advance in cash for procurement of goods (other than immovable property) or services to person ‘B’. Person ‘B’ deposits this amount in his bank account. Person ‘B’ subsequently returns this amount to person ‘A’ in cash or through digital means as the purpose for which advance was made did not materialise. Can person ‘A’ declare this amount under the Scheme? Whether penalty under section 271D or 271E shall be attracted in the case of person ‘B’?

Answer: Yes, person ‘A’ is eligible to declare the said amount under the Scheme. Since the advance was made for procurement of goods (other than immovable property) or services, no penalty under section 271D or 271E of the Act shall be attracted in respect of the said transactions.

(Dr. T.S. Mapwal)

Under Secretary to the Government of India

Govt puts on hold its move to tax indirect transfers : 18-01-2017


Foreign investors highlighted issue of possible multiple taxation of same income

In a relief to FPIs who were fearing multiple taxation, the tax department on Tuesday kept in abeyance its recent circular on indirect transfer of shares by foreign investors.

The Central Board of Direct Taxes (CBDT) on December 21, 2016, came out with a notification giving 19 illustrations with regard to how the indirect transfer regulations would kick in and the tax impact.

The illustration, particularly in the context of offshore PE/VC funds and FPIs, according to experts ignored the practical issues arising from indirect transfers.

CBDT today said it has received representations from various FPIs, FIIs, Venture Capital Funds and other stakeholders who said that the circular does not address the issue of possible multiple taxation of the same income.

“The representations made by the stakeholders are currently under consideration and examination. Pending a decision in the matter the operation of the above-mentioned circular is kept in abeyance for the time being,” CBDT said.

Nangia & Co Partner Amit Agarwal said FII/FPIs are highly sensitive breed of investments and the circular had brought in more apprehensions than clarity.

“The withdrawal of the circular is indeed welcome. The consultative process adopted by the government too deserves appreciation,” Agarwal said.

The December 21 circular contained responses to questions raised by various stakeholders in the context of the applicability of the indirect transfer provisions under the Indian I-T Act.

While the circular was intended to provide clarity on the circumstances in which the indirect transfer provisions are to be applied, it fails to address the concerns of various stakeholders, chiefly FPIs, with regard to issues like potential double and triple taxation, onerous compliance requirements, and lack of tax neutral foreign corporate restructuring.

Section 9(1) of the I-T Act was amended by Finance Act 2012 with retrospective effect to provide for taxing the gains arising out of transfer of an asset, even if registered or incorporated outside India, which derives its value, directly or indirectly, substantially from an asset situated in India.

Source : Business Standard

Notification No.4/2017 18-01-2017


Central Government specifies the NCDEX Investor (Client) Protection Fund Trust (PAN AABTN7481R) set up by the National Commodity and Derivatives Exchange Limited, Mumbai – 4/2017

 

MINISTRY OF FINANCE (Department of Revenue) (Central Board of Direct Taxes)

NOTIFICATION NO. 4/2017

New Delhi, the 18th January, 2017

INCOME TAX

S.O. 177(E).-In exercise of the powers conferred by sub-section (23EC) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby specifies the NCDEX Investor (Client) Protection Fund Trust (PAN: AABTN7481R) set up by the National Commodity and Derivatives Exchange Limited, Mumbai a commodity exchange, for the purposes of the said clause for the assessment year 2013-14 and subsequent assessment years.

[F.No. 173/51/2013-ITA-I]

DEEPSHIKHA SHARMA, Director

Explanatory Memorandum:-Interests of no person shall be adversely affected by such retrospective effect.

Notification No.67/2017-S.O.163(E) 17-1-2017


Corrigendum – Notification Number S.O. 3018(E) dated 22.9.2016 – 67/2016 – S.O.163(E)

MINISTRY OF FINANCE  (Department of Revenue)

Notification No. 67/2016

CORRIGENDUM

New Delhi, the 17th January, 2017

S.O.163(E).- In the notification of the Government of India, Ministry of Finance (Department of Revenue) number S.O. 3018(E) dated 22.9.2016, published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (ii), relating to the name of the Organization i.e ‘Maa Madhuri Brij Varis Sewa Sadan Sansthan’, may be read as ‘Maa Madhuri Brij Varis Sewa Sadan Apna Ghar Sanstha’.

[F.No. 27015/4/2016-SO(NAT.COM)

S.R. SHARMA, Director (National Committee

Notification No.64/2017-S.O.162(E) 17-1-2017


Corrigendum – Notification No. S.O.3018(E) dated 22.9.2016 – 64/2016 – S.O. No. S.O.162 (E)

MINISTRY OF FINANCE (Department of Revenue)

Notification No. 64/2016

CORRIGENDUM

New Delhi, the 17th January, 2017

S.O.162 (E) - In the Notification of the Government of India, Ministry of Finance (Department of Revenue) number S.O.3018(E) dated 22.9.2016, published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (ii), in column ‘4’ at Serial No. ‘2’, relating to Srinivasa Educational Academy, R.V.S. Nagar, Murukambattu Post, Tirupathi Road, Chitoor, Andhra Pradesh-517127 the project cost, “Rs. 4.70 crore”, may be read as “Rs. 47.00 crore”.

[F.No.V.27015/4/2016-SO (NAT.COM)

S.R. SHARMA, Director (National Committee

Notification No.02/2017-S.O.161(E) 17-1-2017


U/s 35AC – Notifies the various institutions Approved by the National Committee – 2/2017- S.O. 161(E)

MINISTRY OF FINANCE (Department of Revenue)

NOTIFICATION No. 2/2017

New Delhi, the 17th January, 2017

S.O. 161(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, 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

Gramin Vikas Trust, 5th Floor, KRIBCHO Bhawan,    A-Wing,            A-10, Sector-1,   NOIDA    –    201301(UP)
  • Western India Rainfed farming project.
  • Eastern India Rainfed farming project.

 

  • S.O.461(E) dated 5.04.2004 for a period of three financial year till 2005-06 for ₹ 9.00 crore.
  • S.O.1834(E) dated 26.10.2006 for a period of three financial year till 2008-09;
  • S.O.1253 (E) dated 18.05.2009 for a period of three financial year till 2011-12;
  • S.O.1469(E) dated 17.06.2008 the project cost was enhanced to ₹ 16 crore including a corpus fund of ₹ 5.00 crore;
  • S.O. 471(E) dated 16.3.2012 for a period of three financial year till 2014-15 alongwith enhancement in the project cost to ₹ 29 crore including a corpus fund of ₹ 8 crore;
  • S.O. 58(E) dated 6.1.2015 the project cost was enhanced to ₹ 29 crore including a corpus fund of ₹ 10.50 crore
 Approved extension of period of approval for the  financial year  till 2016-17 without any change in the approved cost of ₹ 29.00 crore including a corpus fund of ₹ 10.50 crore

Since the financial year 2015-16 has already lapsed it would be notified that no exemption shall be available for the said financial year 2015-16.

2 Shri Ramroti Annakshetra Ashram Vill. Kotharia, Taluka: Wadhawan City, District. Surendranagar,  Gujarat – 363030. Maintenance and expansion of present project
  • S.O 3696(E) dated 18.12.2013 for a period of three financial years till 201516for ₹ 6.00 crore.
Approved extension of period of approval for the  financial year  till 2016-17 without any change in the approved cost of ₹ 6.00 crore  
3 Gandhi  Handicapped Rehabilitation Society, Goner Road, Purana Ghat, Jaipur – 302 003, Expansion of existing Hospital, School, Hostel and Vocational Training Centre.

 

  • S.O. No. 3033(E) dated 7.10.2013 for three financial years till 2015-16 for ₹ 4.52 Crore.
Approved extension of period of approval for  the  financial year  till 2016-17 without any change in the approved cost of ₹ 4.52 crore  
4 Dr. Sheela Sharma Memorial charitable Trust sub unit Shanker Institute of Cancer therapy and Research, 140 Mile Stone, Masani Delhi Bye Pass Link road, Mathura 281003. Expansion of facilities in Shanker Institute of Cancer Therapy and Research.

 

  • S.O. No. 1052 (E) dated 11.05.2010 for a period of three years till 2012-13 for ₹ 42.26 crore (including corpus fund of ₹ 10 crore);
  • S.O. No. 3056 (E) dated 10.11.2015 for a period of three years till 2015-16.
 Approved extension of period of approval for the  financial year  till 2016-17 without any change in the approved cost of 42.26 crore (including corpus fund of ₹ 10 crore)
5 Pakhar Sankul, 157, South Kasba,  Shree Shubharai, Maharaj Math, Solapur 413005 The Building of Adharkendra For Women Vocational Training Centre

 

  • S.O. No. 2835(E) dated 19.12.2011 for three financial years till 2013-14  for ₹ 3.52 Crore including a corpus of ₹ 1.50 crore.
 Approved extension of period of approval for the  financial year  till 2016-17 without any change in the approved cost of ₹ 3.52 Crore including a corpus of Rs.  1.50 crore

Since the financial year 2014-15 and 2015-16 have already lapsed it would be notified that no exemption shall be available for the said financial year 2015-16.

6 Dean Foundation Old No.73/ New No.59, Second Street, Aspiran Garden Colony, Kilpauk, Chennai – 600 010.
  • Hospice out patients and home based programme (already running).
  • Mobile Hospice Rural outreach Programme.
  • Home based and rural outreach community Integrated Hospice Programme for AIDS.

 

  • S.O. No.461(E) dated 05.04.2004 for a period of three financial year till 2006-07 for ₹ 3.43 crore;
  • S.O..No. 1505(E) dated 07.09.2007 for a period of three financial year till 2009-10;
  • S.O. No.1153(E) dated 17.05.2010 for a period of three financial year till 2012-13;
  • S.O. No.3874(E) dated 27.12.2013 for a period of three financial year till 2015-16.
 Approved extension of period of approval for  the  financial year  till 2016-17 without any change in the approved cost of ₹ 3.43 crore
7 Jamia Islamia Ishaatul Uloom, Amlibari Molgi Road,   District Nandurbar, A/P. Akkalkuwa,  Maharashtra–425415. Maintenance and expansion of present activities.
  • S.O.No.2907(E) dated 17.11.2009 for a period of three financial years till 2012-13 for ₹ 17.00 crore;
  • S.O. No. 3127(E) dated 17.10.2013 for another three financial year still 2015-16;
  • S.O. No. 1954(E) dated 31.07.2014 for financial year till 2016-17 alongwith enhancement in project cost from ₹ 17.00 crore to ₹ 35.22 crore.
  Approved enhancement of cost from  ₹ 35.22 crore to ₹ 51.47 core for the  financial year   2016-17.
8 Hemophilia Federation, A-128, Mohammadpur,  Behind Bhikaji Cama Place, New Delhi 110066. Extending Hemophilia Care to persons with Hemophilia through chapter empowerment.

 

  • S.O. No. 1649 (E) dated 12.07.2010 for a period of three financial till 2012-13; ₹ 15.30 crore
  • S.O. No. 3160 (E) dated 17.10.2013 for a period of three financial till 2015-16.
 Approved extension of period of approval for the  financial year  till 2016-17 without any change in the approved cost of ₹ 15.30  crore
9 Vyakti Vikas Kendra India 19, 39th “A” Cross, 11the Main, IV ‘T’ Block, Jayanagar, Bangalore – 560 041. Tribal Schools and Welfare Initiatives.

 

  • S.O 1794(E) dated 23.10.2007 for a period of three financial years till 2009-10 for ₹ 6.42 crore;
  • S.O. No. 2358(E) dated 29.09.2010 for a period of three financial years till 2012-13and also enhancement in the project cost from ₹ 6.42 crore to ₹ 11.51crore;
  • S.O. 3129(E) dated 17.10.2013 for a period of three financial years till 2015-16.
  • S.O. 1972(E) dated 20.7.2015 enhancing the project cost from ₹ 11.51 crore to ₹ 21.99 crore.
 Approved extension of period of approval for  the  financial year  till 2016-17 without any change in the approved cost of Rs.  21.99 crore
10 Smt. Ushaben Rasiklal Shaw Digvijay Lion  Dardi Sahayak Trust,  106, Vishranti Gruh, Opposite Civil Hospital, Asarwa, Ahmedabad 380016. Running of free medical services by Dardi.

 

  • S.O. No. 1267(E) dated 28.12.2001 for a period of three financial years till2002-03 for ₹ 51.00 lakh including corpus of ₹ 15.00 lakh,
  • S.O. No. 783(E) dated 05.07.2004 for a period of three inancial year till 2006-2007;
  • S.O 237(E) dated 15.02.2007 for a period of two financial year till 200809 and amending the project cost from ₹ 51.00 lakh including corpus of ₹ 15.00 lakh including corpus of ₹ 15.00 lakh to ₹ 102.00 lakh including corpus of ₹ 15.00 lakh;
  • S.O. 1254(E) dated 18.05.2009 for a period of three financial year till 2011-12;
  • S.O. 2887(E) dated 27.12.2011 for a period of three financial year till 2014-15 and amending the project cost from ₹ 102 lakh to ₹ 171 lakh including a corpus fund of ₹ 15 lakh;
  • S.O. 1970(E) dated 20.07.2015 for a period of three financial year till 2017-18.
 Approved enhancement of cost from  ₹ 171.00 lakh (including a corpus fund of ₹ 15.00 lakh) to Rs. ₹ 241.00 lakh (including a corpus fund of ₹ 15.00 lakh) for the  financial year   2016-17.
11 Revathi Charity Trust No. 10, C.K. P. Layout Valanyankadu Main Road, Kumar Nagar West, Tiruppur – 641 603 Tamil Nadu Women Empowerment for the Rural Poor.
  • S.O. No. 3696 dated 18.12.2013 for a period of three  financial years till  2015-16 for ₹ 11.27 crore including a corpus fund of ₹ 1.60 crore
 Approved extension of period of approval for  the  financial year  till 2016-17 without any change in the approved cost of ₹ 11.27 crore including a corpus fund of ₹ 1.60 crore
12 Bharat Lok Shiksha Parishad, A-131/3, Group Industrial Area, Wazirpur, Delhi 110052. Running of 3150 One Teacher School.
  • S.O.2835(E) dated 19.12.2011 for a period of three financial year till 2013-14 for ₹ 1554.88 lakh;
  • S.O.1926(E) dated 31.7.2014 for a period of three financial year till 201617 alongwith enhancement in the project cost from ₹ 1554.88 lakh to ₹ 3024.00 lakh;
  • S.O. 484(E) dated 11.2.2015 enhancement in the project cost from ₹ 3024.00 lakh to ₹ 4524.00 lakh (till 2016-17).
 Approved enhancement of   cost from ₹ 4524.00 lakh to ₹ 5154.00 lakh for the  financial year  2016-17.  
13 Chington Development Society, Phaibung Khullen, P.O. Senapati, Senapati District,  Manipur-795106 Economic Empowerment of Tribal poor through Income Generation Programme.
  • S.O.3021(E) dated 23.12.2010 for a period of three  financial years till  2012-13 for  ₹ 484.50 lakh;
  • S.O. No. 1951 dated  31.7.2014 for a period of three  financial years till  2015-16 alongwith enhancement in Project Cost from ₹ 484.50 lakh to ₹ 1007.50 lakh:
  • S.O. No. 1503 dated 26.4.2016 for a period of three  financial years till 2018-19
 Approved enhancement of   cost from    ₹ 1007.50 lakh  to ₹ 1900.00 lakh for the  financial year    2016-17.   
14 Bhai Kahnaiyaji Birdh Ghar, Yatimghar,  Ayurvedic Dawa Khana, Bhai Majh Sahib Road,  Sultanwind, district Amritsar, Punjab-143001. Bhai Kahnaiyaji Birdh Ghar Yatim Ghar Ayurvedic Dawaghar Welfare Society.
  • S.O. 3021(E) dated 23.12.2010 for a period of  three financial years till 2012-13 for  ₹ 1.55 crore  ;
  • S.O. 3041(E) dated 10.11.2015 for a period of  three financial years till 2015-16.

 

 Approved extension of period of approval for the  financial year  till 2016-17 without any change in the approved cost of ₹ 1.55 crore
15 Deceased Bhavsar  Devchandbhai Muljibhai Talajiya &  Deceased Khamalaxmi Devchandbhai Talajiya  ANKUR Special School for Mentally Retarded Children. Plot No.1945, Near Working Womens Hostel, Sardarnagar Circle, Bhavnagar – 364 002. “ANKUR” Special School for Mentally Retarded Children.
  • S.O.1794(E) dated 23.10.2007 for a period of three financial years  till 2009-10 for ₹ 120.00 lakh as corpus fund;
  • SO 1793(E) dated 21.7.2010 for a period of three financial years till 2012-13  for ₹ 120.00 lakh as corpus fund to ₹ 175.00 lakh  including corpus fund of ₹ 160.00 lakh;
  • SO 1940(E) dated 31.7.2014 for a period of three financial years till 2015-16;
  • SO 2611(E) dated 4.8.2016 for a period offinancial year till 2016-17.
 Approved enhancement of amount from ₹ 175.00 lakh including corpus fund of ₹ 160.00 lakh to ₹ 432.00 lakh including corpus fund of ₹ 160.00 lakh for  new project to establish a full fledged vocational training center for the  financial year  till 201617.
16 Arpit Mahila Evam Gramin Vikas Sansthan, 242 Bhabha Nagar,  Sanigwan Raod, Kanpur Nagar –21. HIV/AIDS awareness, training and  rehabilitation  programme.
  • S.O. No. 614(E) dated 18.03.2010 for a period of three financial years till 2012-13 for ₹ 5.92 crore including corpus fund of ₹ 1.00 crore;
  • S.O. No. 1979(E) dated 20.7.2016 for a period of three financial years till 2015-16.
 Approved extension of period of approval for the  financial year  till 2016-17 without any change in the approved cost of ₹ 5.92 crore including corpus fund of ₹ 1.00 crore
17 Tamilnad Kidney Research Foundation, 17, Wheatcrofts Road, Nungambakkam, Chennai 600 034. Corpus fund

 

  • S.O. 2370(E) dated 3.10.2008 for a period of three financial years till 2010-11 for  ₹ 6 crore;
  • S.O. 2406(E) dated 18.10.2011 for a period of three financial years till 2013-14;
  • S.O. 1955(E) dated 31.07.2014 for a period of three financial years till 2016-17;
Approved enhancement of amount from ₹ 6 crore as corpus fund to ₹ 12.00  crore as corpus fund for the  financial year  till 201617.  
18 Economic Rural Development Society, 6, Kiran Sankar Roy Road, Ground Floor, Room No. 3, Kolkata 700001. Infrastructure Development for School and Vocational Training Centre.
  • S.O. No. 466(E) dated 29.03.2007 for a period of three financial years till 2009-10 for  ₹ 1.03 crore;
  • S.O. No. 1133(E) dated 17.05.2010 for a period of three financial years till 2012-13;
  • S.O. No. 3132(E) dated 17.10.2013 for a period of three financial years till 201516 .
 Approved extension of period of approval for the  financial year  till 2016-17 without any change in the approved cost of ₹ 1.03 crore
19 SAVALI Association for Mentally Retarded  and Cerebral Palsy Children, Alankar, Plot No.14, S.No. 133,  Kothrud, Pune 411029. Purchase of equipment and running of socioeconomic promotion of cerebral palsy children and adults through education, institutional care, training and vocational guidance.
  • S.O. No. 198(E) dated 12.3.1998 for a period of three financial years till 1999-2000 for  ₹ 171.21 lakh;
  • S.O. No. 858(E) dated 21.9.2000 for a period of three financial years till 2002-2003;
  • S.O. No.607(E) dated 20.5.2004 for a period of three financial years till 2005-06;
  • S.O. No.479(E) dated 29.03.2007 for three financial years till 2008-09;
  • S.O. No. 249(E) dated 21.01.2009 for a period of three financial years till  2011-12;
  • S.O. No. 665(E) dated 12.3.2013 for a period of three financial years till 2014-15 alongwith enhancement of project cost from ₹ 71.21 lakh to 171.21 lakh;
  • S.O. No. 1475(E) dated 4.6.2015 for a period of three financial years till 2017-18.
 Approved enhancement of the   cost from   ₹ 171.21 lakh to ₹ 371.21 lakh for financial year 2016-17.
20 Indian Red Cross Society, H.No.3-6-212, Street No.15, Himayatnagar, Hyderabad 500 029. a) Upgrading of Red Cross Blood Banks in Andhra Pradesh.

b) Construction of AYUSH Hospital with a research centre.

c) Establishing medicine banks in 23 districts of Andhra Pradesh.

d) Construction of cottages for senior citizens (old age home) at Senior citizens resort, Nazebnagar, Ranga Reddy district and

e) Construction of Administrative block of Indian Red Cross society , A.P. State branch.

 

  • S.O. No. 614 (E) dated 18.03.2010 for a period of three financial years till 2011-12 for ₹ 70.62 crore;
  • S.O. No 2403(E) dated 9.10.2012 for a period of three financial years till 2014-15;
  • S.O. No 3032(E) dated 10.11.2015 for a period of three financial years till 2017-18.
 Approved  Enhancement from  ₹ 70.62 crore to  ₹ 83.32 crore and change in the title of project:  

Name of Project 

1) Upgradion of Red Cross Blood Banks in 13 Districts of Andhra Project 

Estimated cost    ₹ 30.60 crore

2) Establishing Medicine banks in 13 districts of  Andhra Pradesh 

Estimated cost   ₹ 3.25 crore

3) Construction of  Administrative Building & ware housing facilities incl. maternity center at Guntur 

Estimated cost   ₹ 14.00 crore

4) Construction of cottages for senior citizen resort at Ongole

 Estimated cost   Rs.  9.97 crore

5) Construction of AYUSH Hospital with a research centre at Nellore 

Estimated cost   ₹ 25.50 crore

for the  financial year   2016-17.

II. 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.

III. The exemption u/s 35AC 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.27015/6/2016-SO (NAT.COM)]

S. R. SHARMA, Director (National Committee)

Notification No.1/2017 17-01-2017


Procedure for registration and submission of statement of financial transactions (SFT) as per section 285BA of Income-tax Act, 1961 read with Rule 114E of Income-tax Rules, 1962 – 1/2017

Government of India Ministry of Finance Central Board of Direct Taxes

Directorate of Income Tax (Systems)

Notification No. 1 of 2017  

New Delhi,  17th January, 2017

Procedure for registration and submission of statement of financial transactions (SFT) as per section 285BA of Income-tax Act, 1961 read with Rule 114E of Income-tax Rules, 1962

Section 285BA of the Income Tax Act, 1961 (hereunder referred to as the “Act”) requires specified reporting persons to furnish statement of financial transaction. Rule 114E of the Income Tax Rules, 1962 (hereunder referred to as the “Rules”) specifies that the statement of financial transaction required to be furnished under sub-section (1) of section 285BA of the Act shall be furnished in Form No. 61A. The nature and value of transaction to be furnished by the reporting person under Rule 114E is enclosed as Annexure A.

2.  As per sub rule (6)(a) of Rule 114E, every reporting person/entity shall communicate to the Principal Director General of Income-tax (Systems) the name, designation, address and telephone number of the Designated Director and the Principal Officer and obtain a registration number.The procedure for registration for statement of financial transactions (SFT) was specified in Notification No. 13 dated 30th December, 2016. The functionality for submission of statement of financial transactions has now been enabled and the earlier instruction is being updated.

3.  As per sub rule (4)(a) of Rule 114E, the statement of financial transactions shall be furnished through online transmission of electronic data to a server designated for this purpose under the digital signature of the person specified in sub-rule (7) and in accordance with the data structure specified in this regard by the Principal Director General of Income-tax (Systems). The Post Master General or a Registrar or an Inspector General have the option to furnish the statement in a computer readable media, being a Compact Disc or Digital Video Disc (DVD), alongwith verification in Form-V on paper. The statement of financial transactions shall be furnished on or before the 31st May, immediately following the financial year in which the transaction is registered or recorded. The statement of financial transaction in respect of Cash deposits during the period 1st April, 2016 to 8th November, 2016 and 9th November, 2016 to 30th December, 2016 shall be furnished on or before the 31st day of January, 2017.

4.  As per sub-rule (4)(b) of Rule 114E Principal Director General of Income-tax (Systems) shall specify the procedures, data structures and standards for ensuring secure capture and transmission of data, evolving and implementing appropriate security, archival and retrieval policies.

5.  In exercise of the powers delegated by Central Board of Direct Taxes (‘Board’) under sub rule (4)(a) and (4)(b) of Rule 114E of the Income tax Rules 1962, the Principal Director General of Income-tax (Systems) hereby lays down the following procedures:

a) Registration and Generation of Income Tax Department Reporting Entity Identification Number (ITDREIN): The reporting person/entity is required to get registered with the Income Tax Department by logging in to the e-filing website (https://incometaxindiaefiling.gov.in/) with the log in ID used for the purpose of filing the Income Tax Return of the reporting person/entity. A link to register reporting person/entity has been provided under “My Account>Manage ITDREIN”. Once ITDREIN is generated, the reporting person/entity will receive a confirmation e-mail on the registered e-mail ID and SMS at registered mobile number. There will be no option to de-activate ITDREIN, once ITDREIN is created.

b) Registration of designated director and principal officer: The reporting person/entity will be required to submit the details of designated director and principal officer. The designated director and principal officer will receive a confirmation e-mail with an activation link. An SMS alongwith OTP (One time Password) will also be sent to the registered Mobile Number. For completion of registration, the designated director and principal officer should click on the Activation link, enter the Mobile PIN (OTP), Password and Confirm Password and click on Activate Button. On success, the registration will be complete.

c) Submission of Form No. 61A: Every reporting person/entity is required to submit the Statement of Financial Transaction (SFT) in Form No. 61A. The prescribed schema for Form No. 61A can be downloaded from the e-filing website home page under “Schema” tab and a utility to prepare Form No. 61A XML file can be downloaded from the e-filing website home page under forms (other than ITR) tab. General and transaction specific guidelines for preparation of SFT in the specified format is enclosed as Annexure B and Annexure C respectively. The designated director is required to login to the e-filing website with the ITDREIN, PAN (of the designated director) and password. The form is required to be submitted using a Digital Signature Certificate of the designated director.

dSubmission of correction statement : In case the filer subsequently discovers any defect in the statement so furnished, he is required to remove the defect by submitting a correction statement. Further, the defects in the statement so furnished will be communicated separately by the prescribed authority. Sub-section (4) of Section 285BA requires the filer to rectify the defect within the time allowed and submit a correction statement.

eSecurity, archival and retrieval policies: The reporting person/entity is required to document and implement appropriate information security policies and procedures with clearly defined roles and responsibilities to ensure security of submitted information and related information/documents. The reporting person/entity is also required to document and implement appropriate archival and retrieval policies and procedures with clearly defined roles and responsibilities to ensure the submitted information and related information/documents are available promptly to the competent authorities.

(S.S. Rathore)

Pr. DGIT (System), CBDT

 

Annexure A

Nature and value of transactions to be reported under Rule 114E  
Sl. No.

Nature and value of transaction

Class of person (reporting person)

(1)

(2)

(3)

1.

(a) Payment made in cash for purchase of bank drafts or pay orders or banker’s cheque of an amount aggregating to ten lakh rupees or more in a financial year.

(b) Payments made in cash aggregating to ten lakh rupees or more during the financial year for purchase of pre-paid instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 (51 of 2007).

(c) Cash deposits or cash withdrawals (including through bearer’s cheque) aggregating to fifty lakh rupees or more in a financial year, in or from one or more current account of a person.

A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act).

2.

Cash deposits aggregating to ten lakh rupees or more in a financial year, in one or more accounts (other than a current account and time deposit) of a person. (i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);

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

3.

One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person aggregating to ten lakh rupees or more in a financial year of a person. (i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);

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

(iii) Nidhi referred to in section 406 of the Companies Act, 2013 (18 of 2013); (iv) Non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Bank of India Act, 1934 (6 of 1934), to hold or accept deposit from public.

4.

Payments made by any person of an amount aggregating to-

(i) one lakh rupees or more in cash; or

(ii) ten lakh rupees or more by any other mode, against bills raised in respect of one or more credit cards issued to that person, in a financial year.

A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act) or any other company or institution issuing credit card.

5.

Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring bonds or debentures issued by the company or institution (other than the amount received on account of renewal of the bond or debenture issued by that company). A company or institution issuing bonds or debentures.

6.

Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring shares (including share application money) issued by the company. A company issuing shares.

7.

Buy back of shares from any person (other than the shares bought in the open market) for an amount or value aggregating to ten lakh rupees or more in a financial year. A company listed on a recognised stock exchange purchasing its own securities under section 68 of the Companies Act, 2013 (18 of 2013).

8.

Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring units of one or more schemes of a Mutual Fund (other than the amount received on account of transfer from one scheme to another scheme of that Mutual Fund). A trustee of a Mutual Fund or such other person managing the affairs of the Mutual Fund as may be duly authorised by the trustee in this behalf.

9.

Receipt from any person for sale of foreign currency including any credit of such currency to foreign exchange card or expense in such currency through a debit or credit card or through issue of travellers cheque or draft or any other instrument of an amount aggregating to ten lakh rupees or more during a financial year. Authorised person as referred to in clause (c) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999).
10. Purchase or sale by any person of immovable property for an amount of thirty lakh rupees or more or valued by the stamp valuation authority referred to in section 50C of the Act at thirty lakh rupees or more. Inspector-General appointed under section 3 of the Registration Act, 1908 or Registrar or Sub-Registrar appointed under section 6 of that Act.
11. Receipt of cash payment exceeding two lakh rupees for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10 of this rule, if any.) Any person who is liable for audit under section 44AB of the Act.
12. Cash deposits during the period 09th November, 2016 to 30th December, 2016 aggregating to ̶ (i) twelve lakh fifty thousand rupees or more, in one or more current account of a person; or (ii) two lakh fifty thousand rupees or more, in one or more accounts (other than a current account) of a person. (i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);

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

13. Cash deposits during the period 1st April, 2016 to 9th November, 2016 in respect of accounts that are reportable under Sl.No.12. (i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); (ii) Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).”;

 

Annexure B

General Guidelines for Preparation of Statement of Financial Transactions (SFT)

Section 285BA of the Income Tax requires specified reporting persons to furnish statement of financial transaction. Rule 114E of the Income Tax Rules, 1962 specifies that the statement of financial transaction required to be furnished under sub-section (1) of section 285BA of the Act shall be furnished in Form No. 61A.

The prescribed schema for Form 61A can be downloaded from the e-filing website home page under “Schema & Validation Rules” tab and a utility to prepare Form 61A XML file can be downloaded from the e-filing website home page under forms (other than ITR) tab.

Transaction Types

Reporting person/entity is required to furnish separate Form 61 A for each transaction type.  The transaction types under SFT have been categorised as under:

  • SFT- 001: Purchase of bank drafts or pay orders in cash
  • SFT- 002: Purchase of pre-paid instruments in cash
  • SFT- 003: Cash deposit in current account
  • SFT- 004: Cash deposit in account other than current account
  • SFT- 005: Time deposit
  • SFT- 006: Payment for credit card
  • SFT- 007: Purchase of debentures
  • SFT- 008: Purchase of shares
  • SFT- 009: Buy back of shares
  • SFT- 010: Purchase of mutual fund units
  • SFT- 011: Purchase of foreign currency
  • SFT- 012: Purchase or sale of immovable property
  • SFT- 013: Cash payment for goods and services
  • SFT- 014: Cash deposits during specified period (1st April, 2016 to 8th November, 2016 and 9th Nov to 30th Dec, 2016).

Identification of transactions to be reported

The first step in preparation of Statement of Financial Transactions (SFT) is to identify transactions/persons/accounts which are reportable under Rule 114E. In the second step, the reporting person/entity is required to submit details of transactions/persons/accounts which are determined as reportable.

Aggregation Rule

Aggregation rule needs to be applied for specified transaction types to identify transactions/persons/accounts which are reportable. Rule 114E specifies that the reporting person shall, while aggregating the amounts for determining the threshold amount for reporting in respect of any person –

(a) take into account all the accounts of the same nature maintained in respect of that person during the financial year;

(b) aggregate all the transactions of the same nature recorded in respect of that person during the financial year;

(c) attribute the entire value of the transaction or the aggregated value of all the transactions to all the persons, in a case where the account is maintained or transaction is recorded in the name of more than one person;

The aggregation rule is applicable for all transaction types except SFT- 012 (Purchase or sale of immovable property) and SFT- 013 (Cash payment for goods and services).

Reporting Format 

Form 61A has four parts. Part A contains statement level information is common to all transaction types. The other three parts relate to report level information which has to be reported in one of the following parts (depending on the transaction type):

  • Part B (Person Based Reporting)
  • Part C (Account Based Reporting)
  • Part D (Immovable Property Transaction Reporting)

The applicability of the reporting format is discussed in following paragraphs.

Person Based Reporting (Part B)

Part B shall be used for person based reporting which is relevant to following transactions:

  • SFT- 001: Purchase of bank drafts or pay orders in cash
  • SFT- 002: Purchase of pre-paid instruments in cash
  • SFT- 005: Time deposit
  • SFT- 006: Payment for credit card
  • SFT- 007: Purchase of debentures
  • SFT- 008: Purchase of shares
  • SFT- 009: Buy back of shares
  • SFT- 010: Purchase of mutual fund units
  • SFT- 011: Purchase of foreign currency
  • SFT- 013: Cash payment for goods and services

For determining reportable persons and transactions, the reporting person/entity is required to aggregate all the transactions of the same nature recorded in respect of the person during the financial year (refer to the applicability of aggregation rule). In a case, where the transaction is recorded in the name of more than one person, the reporting person/entity should attribute the entire value of the transaction or the aggregated value of all the transactions to all the persons.

The reporting person/entity is required to submit details of persons and transactions which are determined as reportable. The reporting format also enables reporting person/entity to furnish information relating to each individual product within a product type. E.g: if a person has multiple credit cards and the aggregate value of the transactions in all credit cards exceeds the threshold value, the aggregate transaction value will be reported in section B3 of form 61 A and the transactions pertaining to individual credit cards can be reported in section B4 of form 61 A.

Account Based Reporting (Part C)

Part C shall be used for account based reporting which is relevant to following transactions:

  • SFT- 003: Cash deposit in current account
  • SFT- 004: Cash deposit in account other than current account
  • SFT- 014: Cash deposits during specified period (1st April, 2016 to 8th November, 2016 and 9th Nov to 30th Dec, 2016).

For determining reportable persons and accounts, the reporting person/entity is required to take into account all the accounts of the same nature maintained in respect of that person during the financial year and aggregate all the transactions of the same nature recorded in respect of the person during the financial year (refer to the applicability of aggregation rule). In a case where the account is maintained in the name of more than one person, the reporting person/entity should attribute the entire value of the transaction or the aggregated value of all the transactions to all the persons. In case of SFT- 003 (Cash deposit or withdrawals in current account), the threshold limit has to be applied separately to deposits and withdrawals in respect of transactions. After identification of reportable persons and accounts, the reporting person/entity is required to submit details of accounts which are determined as reportable. Part C3 of the form 61 A has details of the accounts that need to be reported along with the aggregate transaction values. Aggregation of transaction has the same definition as explained in person based accounting.

Immovable Property Transaction Reporting (Part D)

Part D shall be used for reporting of purchase or sale of immovable property (SFT- 012). The reportable immovable property transactions have to be determined by applying the threshold limit. The reporting person/entity is required to submit specified details of immovable property transactions which are determined as reportable.

Statement Type

One Statement can contain only one type of Statement. Permissible values for type of Statement are:

  • NB – New Statement containing new information
  • CB – Correction Statement containing corrections for previously submitted information
  • ND – No Data to report

Statement Number and Statement ID

Statement Number is a free text field capturing the sender’s unique identifying number (created by the sender) that identifies the particular Statement being sent. The identifier allows both the sender and receiver to identify the specific Statement later if questions or corrections arise. After successful submission of the Statement to ITD, a new unique Statement ID will be allotted for future reference. The reporting person/entity should maintain the linkage between the Statement Number and Statement ID. In case the correction statement is filed, statement ID of the original Statement which is being corrected should be mentioned in the element ‘Original Statement ID’. In case the Statement is new and unrelated to any previous Statement, ‘0’ will be mentioned in the element ‘Original Statement ID’.

Report Serial Number

The Report Serial Number uniquely represents a report within a Statement. The Report Serial Number should be unique within the Statement. This number along with Statement ID will uniquely identify any report received by ITD. In case of correction, the complete report has to be resubmitted. The Report Serial Number of the original report that has to be replaced or deleted should be mentioned in the element ‘Original Report Serial Number’. This number along with Original Statement ID will uniquely identify the report which is being corrected. In case there is no correction of any report, ‘0’ will be mentioned in the element ‘Original Report Serial Number’.

Form 61 Acknowledgement No.

If reporting person/entity has received declarations in Form 60 in respect of transactions listed in Rule 114E, Form 61 is required to be furnished to ITD. As mentioned in Chapter I, on successful loading of Form 61 (containing the particulars of Form 60), an Acknowledgement No. would be generated which has to be mentioned at the time of filling Form 61A. Hence, unless Form 61 has been furnished, Reporting person/entity may face difficulty in filling Form 61A. Accordingly, it is to be ensured that Form 61 is furnished to the Department before Form 61A is filled.

Additional Resources

The reporting person/entity may refer to following resources released by the Directorate of Systems:

User Manual for ITDREIN Registration and Upload User Manual to explain steps in registration of filer and upload of SFT (Form 61A)
SFT Report Generation Utility Java utility to assist the filer in preparation of SFT (Form 61A) in XML file
SFT Report Generation  Utility User Guide User Guide to explain steps in using the Java utility to assist the filer in preparation of SFT (Form 61A) in XML file
SFT Quick Reference Guide One page document with steps for preparation of SFT

The developers who want to develop program to generate XML may refer to the following:

Form 61A Schema

 

XSD file which contains the schema in which SFT (Form 61A) needs to be prepared and uploaded/submitted
Form 61A Schema Guide Guide to assist the filer in understanding the Form 61A Schema

Annexure C

Transaction Specific Guidelines for Preparation of Statement of Financial Transactions (SFT)

Transaction specific guidelines for preparation of Statement of Financial Transactions (SFT) are given in following paragraphs.

SFT- 001: Purchase of bank drafts or pay orders in cash

Transaction Code SFT- 001
Transaction Description Purchase of bank drafts or pay orders or banker’s cheque in cash
Nature and value of transaction Payment made in cash for purchase of bank drafts or pay orders or banker’s cheque of an amount aggregating to ten lakh rupees or more in a financial year.
Class         of         person

required to furnish

A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act).
Remarks
  1. For purchase of bank drafts or pay orders or banker’s cheques from a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) it is obligatory to quote PAN for payment in cash for an amount exceeding fifty thousand rupees during any one day (refer Rule 114B)
  2. All transactions of the same nature recorded in respect of person during the financial year should be aggregated (refer Rule114E)
  3. The entire value of the transaction or the aggregated value of all the transactions should be attributed to all the persons, in a case where the transaction is recorded in the name of more than one person (refer Rule114E)
  4. The relevant reporting format is Part A (Statement Details) and Part B (Report Details)
  5. The Report Type should be specified as AF- Aggregated Financial Transactions (A.2.7)
  6. One report would include details of one person along with transaction details
  7. The Product Type should be specified as DD – Bank draft or pay order or banker’s cheque(B.3.1)

SFT- 002: Purchase of pre-paid instruments in cash

Transaction Code SFT- 002
Transaction Description Purchase of prepaid instruments in cash
Nature and value of transaction Payments made in cash aggregating to ten lakh rupees or more during the financial year for purchase of pre-paid instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 (51 of 2007).
Class of person required to furnish A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act).
Remarks 1. For purchase of prepaid instruments from a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) it is obligatory to quote PAN for payment in cash for an amount exceeding fifty thousand rupees during any one day (refer Rule 114B)

2. All transactions of the same nature recorded in respect of person during the financial year should be aggregated (refer Rule114E)

3. The entire value of the transaction or the aggregated value of all the transactions should be attributed to all the persons, in a case where the transaction is recorded in the name of more than one person (refer Rule114E)

4. The relevant reporting format is Part A (Statement Details) and Part B (Report Details)

5. The Report Type should be specified as AFAggregated Financial Transactions (A.2.7)

6. One report would include details of one person along with transaction details

7. The Product Type should be specified as PI –Prepaid Instrument (B.3.1)

SFT- 003: Cash deposit or withdrawals in current account

Transaction Code SFT- 003
Transaction Description Cash deposits or cash withdrawals (including through bearer’s cheque) in current account.
Nature and value of transaction Cash deposits or cash withdrawals (including through bearer’s cheque) aggregating to fifty lakh rupees or more in a financial year, in or from one or more current account of a person.
Class of person required to furnish A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act).
Remarks 1. For deposits in a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) it is obligatory to quote PAN for payment in cash for an amount exceeding fifty thousand rupees during any one day (refer Rule 114B)

2. All the accounts of the same nature maintained in respect of that person during the financial year should be considered and the entire value of the transaction or the aggregated value of all the transactions should be attributed to all the persons, in a case where the account is maintained in the name of more than one person (refer Rule114E)

3. The threshold limit should be applied separately to deposits and withdrawals (refer Rule114E)

4. Once the accounts to be reported are identified by the aggregation rule, one report would include details of one account alongwith details of account and related persons

5. The relevant reporting format is Part A (Statement Details) and Part C (Report Details)

6. The Report Type should be specified as BA –Bank/Post Office Account (A.2.7)

7. The Account Type should be specified as BC -Current Account (C.2.1)

SFT- 004: Cash deposit in account other than current account

Transaction Code SFT- 004
Transaction Description Cash deposits in one or more accounts (other than a current account and time deposit) of a person.
Nature and value of transaction Cash deposits aggregating to ten lakh rupees or more in a financial year, in one or more accounts (other than a current account and time deposit) of a person.
Class         of        person

required to furnish

A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act).

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

Remarks
  1. For deposits ina banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) it is obligatory to quote PAN for payment in cash for an amount exceeding fifty thousand rupees during any one day (refer Rule 114B)
  2. All the accounts of the same nature maintained in respect of that person during the financial year should be considered and the entire value of the transaction or the aggregated value of all the transactions should be attributed to all the persons, in a case where the account is maintained in the name of more than one person (refer Rule114E)
  3. Once the accounts to be reported are identified by the aggregation rule, one report would include details of one account alongwith details of account and related persons
  4. The relevant reporting format is Part A (Statement Details) and Part C (Report Details)
  5. The Report Type should be specified as BA – Bank/Post Office Account  (A.2.7)
  6. The Account Type should be specified as BS – Savings Account or ZZ – Other Account (C.2.1)

005: Time deposit

Transaction Code SFT- 005
Transaction Description Time deposits (other than a time deposit made through renewal of another time deposit)
Nature and value of transaction One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person aggregating to ten lakh rupees or more in a financial year of a person.
Class         of         person

required to furnish

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

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

(iii) Nidhi referred to in section 406 of the Companies Act, 2013 (18 of 2013);

(iv) Non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Bank of India Act, 1934 (6 of 1934), to hold or accept deposit from public.

Remarks
  1. For payment for a credit card ina banking company or a cooperative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) it is obligatory to quote PAN for payment in cash for any amount(refer Rule 114B)
  2. All transactions of the same nature recorded in respect of person during the financial year should be aggregated (refer Rule114E)
  3. The entire value of the transaction or the aggregated value of all the transactions should be attributed to all the persons, in a case where the transaction is recorded in the name of more than one person (refer Rule114E)
  4. The relevant reporting format is Part A (Statement Details) and Part B (Report Details)
  5. The Report Type should be specified as AF- Aggregated Financial Transactions (A.2.7)
  6. One report would include details of one person along with transaction details
  7. The Product Type should be specified as TD – Time Deposit (B.3.1)

006: Payment for credit card

Transaction Code SFT-006
Transaction Description Payments made by any person in respect of one or more credit cards issued to that person, in a financial year.
Nature and value of transaction Payments made by any person of an amount aggregating to-

(i) One lakh rupees or more in cash; or

(ii) Ten lakh rupees or more by any other mode, against bills raised in respect of one or more credit cards issued to that person, in a financial year.

Class         of         person

required to furnish

A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act) or any other company or institution issuing credit card.
Remarks
  1. For payment for a credit card ina banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) it is obligatory to quote PAN for payment in cash for any amount(refer Rule 114B)
  2. All transactions of the same nature recorded in respect of person during the financial year should be aggregated (refer Rule114E)
  3. The entire value of the transaction or the aggregated value of all the transactions should be attributed to all the persons, in a case where the transaction is recorded in the name of more than one person (refer Rule114E)
  4. The relevant reporting format is Part A (Statement Details) and Part B (Report Details)
  5. The Report Type should be specified as AF- Aggregated Financial Transactions (A.2.7)
  6. One report would include details of one person along with transaction details
  7. The Product Type should be specified as CC- Credit Card  (B.3.1)

007: Purchase of debentures

Transaction Code SFT-007
Transaction Description Purchase of debentures year for acquiring bonds or debentures issued by the company or institution.
Nature and value of transaction Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring bonds or debentures issued by the company or institution (other than the amount received on account of renewal of the bond or debenture issued by that company).
Class         of         person

required to furnish

A company or institution issuing bonds or debentures.
Remarks
  1. For payment for acquiring bonds issued by any institution it is obligatory to quote PAN for purchase of bond of amount exceedingRs 50,000/-(refer Rule 114B)
  2. All transactions of the same nature recorded in respect of person during the financial year should be aggregated (refer Rule114E)
  3. The entire value of the transaction or the aggregated value of all the transactions should be attributed to all the persons, in a case where the transaction is recorded in the name of more than one person (refer Rule114E)
  4. The relevant reporting format is Part A (Statement Details) and Part B (Report Details)
  5. The Report Type should be specified as AF- Aggregated Financial Transactions (A.2.7)
  6. One report would include details of one person along with transaction details
  7. The Product Type should be specified as BD – Bonds or Debentures (B.3.1)

008: Purchase of shares

Transaction Code SFT-008
Transaction Description Purchase of shares (including share application money) issued by the company.
Nature and value of transaction Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring shares (including share application money) issued by the company.
Class         of         person

required to furnish

A company issuing shares.
Remarks
  1. For payment for acquiring shares in any institution it is obligatory to quote PAN for purchase of shares of amount exceedingRs 1,00,000/- (refer Rule 114B)
  2. All transactions of the same nature recorded in respect of person during the financial year should be aggregated (refer Rule114E)
  3. The entire value of the transaction or the aggregated value of all the transactions should be attributed to all the persons, in a case where the transaction is recorded in the name of more than one person (refer Rule114E)
  4. The relevant reporting format is Part A (Statement Details) and Part B (Report Details)
  5. The Report Type should be specified as AF- Aggregated Financial Transactions (A.2.7)
  6. One report would include details of one person along with transaction details
  7. The Product Type should be specified as SI–Shares issued  (B.3.1)

009: Buy back of shares

Transaction Code SFT-009
Transaction Description Buy back of shares
Nature and value of transaction Buy back of shares from any person (other than the shares bought in the open market) for an amount or value aggregating to ten lakh rupees or more in a financial year.
Class         of         person

required to furnish

A company listed on a recognised stock exchange purchasing its own securities under section 68 of the Companies Act, 2013 (18 of 2013).
Remarks
  1. All transactions of the same nature recorded in respect of person during the financial year should be aggregated (refer Rule114E)
  2. The entire value of the transaction or the aggregated value of all the transactions should be attributed to all the persons, in a case where the transaction is recorded in the name of more than one person (refer Rule114E)
  3. The relevant reporting format is Part A (Statement Details) and Part B (Report Details)
  4. The Report Type should be specified as AF- Aggregated Financial Transactions (A.2.7)
  5. One report would include details of one person along with transaction details
  6. The Product Type should be specified as SB – Shares bought back (B.3.1)

010: Purchase of mutual fund units

Transaction Code SFT-010
Transaction Description Purchase of mutual fund units in a financial year for acquiring units of one or more schemes of a Mutual Fund
Nature and value of transaction Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring units of one or more schemes of a Mutual Fund (other than the amount received on account of transfer from one scheme to another scheme of that Mutual Fund).
Class           of         person

required to furnish

A trustee of a Mutual Fund or such other person managing the affairs of the Mutual Fund as may be duly authorised by the trustee in this behalf.
Remarks
  1. For payment for acquiring mutual funds of any financial institution it is obligatory to quote PAN for purchase of mutual fund of amount exceeding ₹ 1,00,000/-(refer Rule 114B)
  2. All transactions of the same nature recorded in respect of person during the financial year should be aggregated (refer Rule114E)
  3. The entire value of the transaction or the aggregated value of all the transactions should be attributed to all the persons, in a case where the transaction is recorded in the name of more than one person (refer Rule114E)
  4. The relevant reporting format is Part A (Statement Details) and Part B (Report Details)
  5. The Report Type should be specified as AF- Aggregated Financial Transactions (A.2.7)
  6. One report would include details of one person along with transaction details
  7. The Product Type should be specified as MF – Mutual Fund  (B.3.1)

011: Purchase of foreign currency

Transaction Code SFT-011
Transaction Description Purchase of foreign currency
Nature and value of transaction Receipt from any person for sale of foreign currency including any credit of such currency to foreign exchange card or expense in such currency through a debit or credit card or through issue of travellers cheque or draft or any other instrument of an amount aggregating to ten lakh rupees or more during a financial year.
Class           of         person

required to furnish

Authorised person as referred to in clause (c) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999).
Remarks
  1. For payment for acquiring foreign exchange from any institution it is obligatory to quote PAN for purchase of foreign currency in cash for amount exceedingRs 50,000/-(refer Rule 114B)
  2. All transactions of the same nature recorded in respect of person during the financial year should be aggregated (refer Rule114E)
  3. The entire value of the transaction or the aggregated value of all the transactions should be attributed to all the persons, in a case where the transaction is recorded in the name of more than one person (refer Rule114E)
  4. The relevant reporting format is Part A (Statement Details) and Part B (Report Details)
  5. The Report Type should be specified as AF- Aggregated Financial Transactions (A.2.7)
  6. One report would include details of one person along with transaction details
  7. The Product Type should be specified as FC – Foreign Currency (B.3.1)

012: Purchase or sale of immovable property

Transaction Code SFT-012
Transaction Description Purchase or sale of any person of immovable property.
Nature and value of transaction Purchase or sale by any person of immovable property for an amount of thirty lakh rupees or more or valued by the stamp valuation authority referred to in section 50C of the Act at thirty lakh rupees or more.
Class           of          person

required to furnish

Inspector-General appointed under section 3 of the Registration Act, 1908 or Registrar or Sub-Registrar appointed under section 6 of that Act.
Remarks
  1. For payment for acquiring any immovable propertyit is obligatory to quote PAN for purchase of amount exceedingRs 10,00,000/-(refer Rule 114B)
  2. The relevant reporting format is Part A (Statement Details) and Part D (Report Details)
  3. The Report Type should be specified as IM – Immovable Property Transactions (A.2.7)
  4. One report would include details of one property along with seller and purchaser details

013: Cash payment for goods and services

Transaction Code SFT-013
Transaction Description Cash payments for goods and services.
Nature and value of transaction Receipt of cash payment exceeding two lakh rupees for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10 of Rule 114E)
Class    of        person required to furnish Any person who is liable for audit under section 44AB of the Act.

 

Remarks 1. For sale or purchase, by any person, of goods or services of any nature it is obligatory to quote PAN for amount exceeding two lakh rupees per transaction: (refer Rule 114B)
  2. The aggregation rule is not applicable for identification of reportable transactions
  3. The relevant reporting format is Part A (Statement Details) and Part B (Report Details)
  4. The Report Type should be specified as AF- Aggregated Financial Transactions (A.2.7).
  5. The reporting format aggregates the transactions of one person in one report
  6. One report would include details of one person along with transaction details
  7. The Product Type should be specified as ZZ – Others  (B.3.1)

014: Cash deposits during specified period

Transaction Code SFT- 014
Transaction Description Cash deposits during the period 1st April, 2016 to 8th November, 2016 and 9th November, 2016 to 30th December, 2016.
Nature and value of transaction Cash deposits during the period 09th November, 2016 to 30th December, 2016 aggregating to ̶ (i) twelve lakh fifty thousand rupees or more, in one or more current account of a person; or (ii) two lakh fifty thousand rupees or more, in one or more accounts (other than a current account) of a person.

Cash deposits during the period 1st April, 2016 to 9th November, 2016 in respect of accounts that are reportable.

Class        of       person

required to furnish

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

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

Remarks
  1. The due date for furnishing statement containing details of cash deposits during the period 1st April, 2016 to 8th November, 2016 and 9th November, 2016 to 30th December, 2016 (SFT-014) is 31st January, 2017.
  2. For deposits in a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) it is obligatory to quote PAN for payment in cash for an amount exceeding fifty thousand rupees during any one day or aggregating to more than two lakh fifty thousand rupees during the period 09th November, 2016 to 30th December, 2016.” (refer Rule 114B)
  3. All the accounts of the same nature maintained in respect of that person during the financial year should be considered and the entire value of the transaction or the aggregated value of all the transactions should be attributed to all the persons, in a case where the account is maintained in the name of more than one person. (refer Rule114E)
  4. Once the accounts to be reported are identified by the aggregation rule, one report would include details of one account.
  5. The relevant reporting format is Part A (Statement Details) and Part C (Report Details)
  6. The Report Type should be specified as BA – Bank/Post Office Account(A.2.7)
  7. The Account Type should be specified as BS (Savings Account), BC (Current Account) or ZZ (Other Account)

 

WTO chief to meet policy makers on key issues : 17-01-2017


World Trade Organisation Director-General Roberto Azevedo will meet top industrialists in India in an event organised by International Chamber of Commerce (ICC) headed by telecom giant Sunil Mittal next month and is likely to push for disciplines in e-commerce in addition to less controversial issues such as fisheries subsidies.

“The WTO DG had made a strong case for beginning discussions on e-commerce at the ICC meeting in San Francisco in August 2016.

“While India could agree to go along with a pact on fisheries subsidies as long as its sensitivities are protected, the issue of e-commerce is tricky and the country is not prepared to venture into the area yet,” a Commerce Ministry official told BusinessLine.

Consensus push

Azevedo, who has been trying to gain consensus for starting discussions on e-commerce at the forthcoming trade ministers’ meet in Buenos Aires in December, will also meet Commerce & Industry Minister Nirmala Sitharaman.

“The WTO DG is likely to reach out to players in the telecom industry, e-commerce companies and various internet service providers including e-wallets to push the idea of greater cooperation between countries in the digital space,” the official added.

The WTO DG’s office confirmed that Azevedo would attend an event organised by the ICC on February 8 and meet Sitharaman on February 9.

Bridging the divide

In an earlier event organised by the ICC in San Francisco, Azevedo had met representatives from Facebook, Google and PayPal and stressed how an increase in digital trade could help bridge the divide between the globe’s rich and poor countries.

The US is one of the proponents of e-commerce at the WTO.

Speaking at another seminar of e-commerce last month, Azevedo had emphasised that e-commerce has been on the WTO agenda since 1998 and not much happened for a long time in that dossier.

“Perhaps as a result of our two successful ministerial conferences, it seems that now the debate here is significantly more dynamic.

“We now have eight e-commerce submissions on the table for discussion,” he had said.

Azevedo may, however, find it a bit difficult to convince India to give its nod to negotiations on e-commerce, which it says is a new issue. Sitharaman, who recently chaired a review meeting on WTO and the path ahead with her group of negotiators from Geneva, said that new issues or any issue would come in the agenda only after consensus emerges and there was no consensus.

New Delhi’s interests

New Delhi is also working out how to ensure the continuation of the on-going Doha Round of talks, with several development issues on the agenda, that many developed countries want scrapped.

The two pending issues related to food security, which includes a special safeguard measure to help developing countries protect poor farmers against import surges and flexibility for food security subsidies, are also on India’s priority list.

Source : Business Line

Watch out! Four tax uncertainties can take Indian market down, warns CLSA : 17-01-2017


India has been tightening its tax laws on equity investors and there are a lot of uncertainties that investors across the globe as well as back home have to grapple with.

Fear of a possible rise in capital gains tax on equities was high in the runup to the Union Budget last year, but it was subsequently belied and the market outperformed other emerging markets by 6 percentage points over the next three months post-budget.

“A possible resolution of the tax issues in favour of investors this time around may drive outperformance in Indian equities after the Budget. If not resolved favourably, investor sentiment will be impacted negatively,” CLSA said in a note.

GAAR: Tightening tax treaties

In May 2016, the government moved to tighten the India-Mauritius tax treaty, after which foreign portfolio investors (FPIs) will end up paying at the same short-term gains tax rate of 15 per cent on Indian equities. Similar changes were made to the tax treaties with Cyprus and Singapore by the end of 2016.

“Renegotiation of tax treaties with Mauritius, Singapore and Cyprus would raise taxes from April 2017 for investors using those routes,” CLSA said in a note.

Additionally, recent clarifications by the authorities that large foreign portfolio investors that have over 50 per cent of their AUMs in India may be liable to pay taxes on redemption raises the possibility of double taxation.

“We hope these issues are resolved in the Feb 1 Union Budget. If resolved in favour of investors, the underperformance of the domestic market would reverse, in the same way it did last year when similar concerns existed,” the note said.

Retrospective FPI tax fears rise again: Towards the end December 2016, the government issued ‘clarifications’ on indirect tax provisions that bring end-investors in a foreign fund under Indian tax laws

The clarifications impact those FPIs with over 50 per cent of AUMs in India with a concentrated end-investor base i.e. end-investor with less than 5 per cent of the AUM.

“Some of the India-dedicated funds will likely be impacted. Large end-investors in these funds may be subject to double taxation with this development,” said the CLSA note.

Fear of impact on India-focused funds: Master-feeder funds structure and offshore funds with an India-focused sub-fund may be impacted by these clarifications. Operational complications include the onus of withholding tax falling on FPIs.

“Several affected investors have made representations to the tax authorities on these issues and the government authorities may take a relook at these issues,” said the note.

Equity capital gains tax: Back home, Prime Minister Narendra Modi’s recent comments raised a possibility of increased capital gains tax on equities in general. If this happens, unit-linked insurance plans (Ulips) may see larger inflows.

Listed shares in India attract long-term capital gains (over 1 year holding, LTCG) tax at 0 per cent and short-term (less than 1 year holding) capital gains tax at 15 per cent. This is against a 30 per cent top tax bracket on interest and personal income.

The global brokerage firm is of the view that there is a possibility that short-term capital gains tax on equities which is partly being offset by the Securities Transaction Tax currently may be raised. “If any of the above happens, Ulips may gain prominence as they enjoy a tax advantage,” it said.

Source : PTI

Notification No.01/2017-S.O.160(E) 17-1-2017


U/s 35AC – Notifies the various institutions Approved by the National Committee – 1/2017 – S.O.160(E)

MINISTRY OF FINANCE

(Department of Revenue)

NOTIFICATION No. 1/2017

New Delhi, the 17th January, 2017

S.O.160(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

Late Janabai Bhutange Shikshan Sanstha, chicholi, Tah.Tusar, Distt.  Bhandra Maharashtra – 441912 Late Janabai Bhutange Shikshan Sanstha, Chicholi,

Rs.  415.00 lakh  (Rs.190.10 lakh as Recurring and ₹ 225.00  lakh  Corpus  donations)

Approved the cost of  ₹ 415.00 lakh  (Rs.190.10 lakh as Recurring and ₹ 225.00 lakh Corpus donations) for financial  year 2016-17

2

Lopaamudra Charitable Trust Dhoni Road, Olavakode, P.O. Palakkad-678002 Kerala Padamguruji Mobile Hospitality Unit

Rs.  4.50 crore

Approved the cost of  Rs.  4.50 crore for financial year 2016-17.

3

Girijana Vikas Swtchanda Seva Sanstha G.K.  Veedhi-531133, Visakhapatnam  District Andhra Pradesh Development of Mango & Fauna orchards by tribal communities for sustainable livelihoods

Rs.  4.19 Crore

Approved the cost of  Rs.  4.19 Crore for financial year 2016-17

4

Sahyog  Sevabhavi  Sanstha Vishnupuri, Nanded At Post Vishnupuri, Tq & District Nanded Maharashtra-431606 (i) For construction of School & Hostel building of Existing primary  school  and

(ii) Treatment of Malanutrited child in rural area. Rs.  12.00 crore

Approved the cost of  Rs.  12.00 crore for financial year 2016-17

5

Khidmat Charitable Trust

344/346, A.K. Chambers, Office  No  102,  1st  Floor Vadgadi, Opp. State of India, Samuel Street, Mumbai – 400003.

Maintenance of Present Activities (Medical Relief)       ₹ 15.00 crore. Approved the cost of  Rs.  15.00 crore for financial year 2016-17

6

Delhi  E.N.T. Hospital and Research Centre 127, Navjivan Vihar, New Delhi-110017 Rehabilitation Centre for revention of hearing impairment and reduction of noise trauma

₹ 5.00 Crore

Approved the cost of  Rs.  5.00 crore for financial year 2016-17

7

Jan Swasthya Sahyog Village & Post Office Ganiyari, Bilaspur Chhattisgarh-495112 Running low cost health center catering to rural & tribal population in the tribal belt of Bilaspur District, Chhattisgarh alongwith creating and educating a local health workers force and improving the tribal/rural child health scenario in the area

₹ 44.25 Crore

Approved the cost of  Rs.  44.25 crore for financial year 2016-17.

8

Asian Society of Continuing Medical Education Sharika Mansion No.2, Lake Area First Street Nungambakkam Chennai-600034, T.N. Asian Society of Continuing Medical Education (Dialysis Project)

₹ 2244.40 lakh

Approved the cost of  ₹ 2244.40 lakh for financial year 2016-17

9

Shri Ramkrishna Adhyatmik

Kala, Krida

Shaikshnik Samajik Pratishthan

AT Post Alandi Devachi Dehu

Alandi Road

Tel Khedi- District Pune

Maharashtra

Establishment of Hostel Building, Vocational Training Centre for poor and weaker section from rural and adivasi areas of  Pune District, Maharashtra

₹ 3.03 Crore

Approved the cost of  Rs.  3.03 crore for financial year 2016-17.

10

Native Medicare Charitable

Trust 5/39,

Kalappanaickenpalayam

Somayampalayam Post

Coimbatore-641108

A Dream Home for the deprived for dignified living at Kamadai &

Annur Block, of Coimbatore District, Tamil Nadu

₹ 5.00 Crore

Approved the cost of  Rs.  5.00 crore for financial year 2016-17

11

Integrated Development Society

(IDS)

AT/PO – Dasamantapur

District Koraput

Odisha-764028

Sustainable Quality Education for 200 Tribal Orphan Children with residential facilities along with production centre

₹ 5.32 Crore

Approved the cost of  Rs.  5.32 crore for financial year 2016-17

12

Bala Mandir Kamaraj Trust

No.8, G.N. Shetty Road

T.Nagar, Chennai-600017

Corpus fund for supporting education (Schools and vocational training) at Chennai, Tamil Nadu  ₹ 6.00 Crore Approved the cost of  Rs.  6.00

crore for financial year 2016-17

13

Shri Ram Sanskritik Shodh

Sansthan Nyas

B-945, MIG Flats,

CHITRAKUT, East  of Loni,

Delhi-110093

Punya Bhumi Bharat

₹ 519.00 Crore

Approved the cost of  Rs.

519.00 crore for financial year

2016-17

14

Spastics Society of Karnataka

(Centre for Developmental

Disabilities)

31-5th Cross, Off  Vth Main

Indira Nagar,

I Stage, Bangalore-560038

Karnataka

Special School, vocational training centre and Early Child Education and Intervention for

Children with Neuro Muscular &

Developmental Disabilities

₹ 5.00 Crore

Approved the cost of  Rs.  5.00 Crore for financial year  2016-17.

15

Mallick Kati Sundarban Shishu

Kalyan Samity

Mallick Kati, P.S. Jibantala

District South 24 Parganus

West Bengal-743502

Sushiksa – Empowering

Education of Sundarban, West

Bengal

₹ 4.46 crore

Approved the cost of  Rs.  4.46 crore for financial year 2016-17

16

Rabia Abdul Kader Millwalla

Trust

83/3, Jail Road(South)

Mumbai-400009

Maintaining present activities and raising corpus for future Income

₹ 20.00 crore (including Rs.

10.00 crore as Corpus fund)

Approved the cost of  Rs.  20.00 crore (including ₹ 10.00 crore as Corpus fund) for financial year 2016-17.

17

Youth 4 jobs Foundation

H.No.21-7-587, Near High

Court

Khokarwadi, Hyderabad

Telangana-500002

Project Parivartan – From Disability to Ability

₹ 19.19 Crore

Approved the cost of  Rs.  19.19 Crore for financial year 2 016-17.

18

Kalike

#317/85, 1st Floor,

18th  Cross, Near Udaya

School

M.C. Layout, Vijayanagar

Bangalore-560040

(i) Strengthening Early Childhood Development  estimated cost ₹ 9.08 Crore

(2) Enhancing the Quality of Education in Primary Schoolsestimated cost ₹ 12.42 Crore

(3) Enhancing Proficiency in English language in Primary & Upper Primary Schools  estimated cost   ₹ 2.65 Crore

(4) Promoting reading through 100 school Libraries   estimated cost   ₹ 1.33 Crore

(5) ICT Intervention in High Schools  estimated cost   ₹ 2.65 Crore

(6) Water and Sanitationestimated costRs. 6.65 Crore

(7) Addressing Health and Livelihoods of communities in Yadgir District, Karnataka   estimated cost   ₹ 7.70 Crore

Total ₹ 42.33 Crore

Approved the cost of  Rs.  42.33 crore  for financial year 2016-17 as per break up of estimated cost indicated in column 3.

19

Elite Trust

#23-A, Mettu Koluthur,

Koluthur Post

Kancheepuram

District Tamil Nadu-603310

To provide education to orphan children & to establish old age home

₹ 5.01 crore

Approved the cost of  Rs.  5.01 crore for financial year 2016-17.

20

Deepam Foundation

No.1, Bharath Complex

Mangalam Raod,

Andipalayam(P.O.)

Tirupur-641687

Construction of Bridge across

Noyyal River, Rayapuram

Village, Tirupur, Tamil Nadu

₹ 4.25 crore

Approved the cost of  Rs.  4.25

crore for financial year 2016-17

21

Helping Hearts Trust 62, Nethaji Street, Marappalam Erode-638001 Tamil Nadu Enhancement of present Ashram School activities for the street Children, run away children, abandoned children, orphan children and HIV Aids Children

₹ 2.99 crore

Approved the cost of  Rs.  2.99 crore for financial year 2016-17.

22

Sphoorti Foundation

484, EC Nagar, HCL Post

Hyderabad-500051

To provide free education and hostel facility for upcoming 200 children especially for girls

₹ 3.01 crore

Approved the cost of  Rs.  3.01 crore for financial year 2016-17.

23

Selvamoni Memorail Trust

Door No. 7/52, Chentharavilai

Attor Post

Kanya Kumari District-629191

Tamil Nadu

Upgradation of present vocational training centers & establishment of new centers with new courses especially for SC/ST/OBC/BPL category women

₹ 1.05 crore

Approved the cost of  Rs.  1.05 crore for financial year 2016-17.

24

Swami Dayananda Saraswati

Sukhanand

Career Public School

Educational Society

Chadreswar Nagar

Behind Andhra Ashram

Rishikesh,Dehradun-249201

Uttarakhand

Free Student Care & Education

₹ 113.49 lakh

Approved the cost of  Rs.  113.49 lakh for financial year 2016-17.

25

Shri Kutchi Visha Oswal Jain

Manav Seva Kendra

Opposite Manav Kalyan Kendra

Chowk

Corner of Swamy Vivekanand,

L.T. Road, Dahisar(E) Mumbai400068

Continuation and extension of present activities (Hospitals)

₹ 12.95 crore

Approved the cost of  Rs.  12.95  crore for financial year 2016-17.

26

Seva Bharti

13, Bhai Veer Singh Marg,

Gole Market,

New Delhi-110001.

(i) Seva Bharti Balwadi  estimated cost ₹ 5.25 Crore  (ii) Seva Dham Vidya Mandir  estimated cost ₹ 1.22 Crore

(iii) Seva Bharti Street Children

Project  estimated cost ₹ 8.45 Lakh

(iv) Seva Bharti Matrichhya Project estimated costRs. 31.50 lakhd

(v) Seva Bharti Health Centresestimated costRs. 22.54 lakh

Total   ₹ 7.10 crore

Approved the cost of  Rs.  7.10 crore for financial year 2016-17 as per break up of estimated cost indicated in column 3.

28

Janaseva Foundation,

Indulal Complex, Above Rupee

Co-op Bank,

Navi Peth, L.B.S Road,

Pune- 411030

Care and Education of Street and Destitute Children

₹ 45.00 lakh

Approved the cost of  Rs.  45.00 lakh for financial year 2016-17.

29

Terrain Foundation of Retail (TRRAIN)

c/o IL&FS Trust Company

Limited, Al-Latheef, 1st Floor #

2 Union Street,

Off Infantry Road, Bangalore560001 Karnataka

Pankh – Wings of Destiny

₹ 32.45 lakhs

Approved the cost of  Rs.  32.45 lakhs  for financial year 201617.

II. 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.

III. The exemption u/s 35AC 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.-27015/6/2016-SO (NAT.COM)]

S. R. SHARMA, Director (National Committee)

Parliament panel members set to grill RBI governor over note ban on Jan 18 : 17-01-2017


Reserve Bank of India (RBI) Governor Urjit Patel (pictured) will face questions on demonetisation and its aftermath when he appears before the Parliament’s standing committee on finance on Wednesday.

Opposition party members on the panel, said sources, were not satisfied with the documents RBI and the finance ministry had given the committee, in support of Prime Minister Narendra Modi’s November 8 announcement banning Rs 500 and Rs 1,000 currency notes.

A major concern of these members was whether RBI’s autonomy was compromised by the note ban decision. Another issue would be if the decision violated citizens’ rights over their legal money in banks, guaranteed by RBI, with withdrawal limits. Further, the members would like to know if the cashless economy agenda being pushed by the Centre was feasible as several major economies such as the US, Japan, the UK and Singapore have still not gone completely cashless.

Members would also ask questions on whether the banking system was equipped to implement the note ban. The fact that at least 100 people reportedly lost their lives in the aftermath of the note ban and if their relatives got compensation would also be thrown at the RBI chief, sources said. “The note ban has messed up the economy. All the concerns of the public would be raised at the meeting,” a lawmaker told this newspaper, on condition of anonymity.

The government had advised the central bank on November 7, 2016, to consider the note ban and RBI’s board recommended the same on November 8, hours before Modi announced the note ban. “We would like to know how many new currency notes were printed and what is the cash supply situation,” said another member. “We would like to know the impact of note ban on industrial production, agriculture and resultant job losses.”

According to the documents submitted before the panel by RBI and the ministry, the Centre was alarmed at the spurt in the circulation of counterfeit Rs 500 and Rs 1,000 notes and wanted to take immediate action. The data provided to the panel showed an increase of 76.4 per cent in the supply of fake Rs 500 notes and 109 per cent in fake Rs 1,000 notes over the previous five years. Fearing that the infusion of fake currency by a neighbouring country contributed to terror funding and black money, the government opted for the note ban.

Estimating the fake currency in India at Rs 400 crore, the government document said authorities had seized fake currencies worth Rs 27.79 crore till September 2016. It was Rs 43.8 crore in 2015 and Rs 41 crore in 2014.

Source : Economic Times

Note ban: Big buys via cards down since Nov, small-sized purchases up : 16-01-2017


High-value purchases on instalments by using cards has halved across India since November, when the government undertook the demonetisation exercise.

At the same time, card transactions of less than Rs 500 have increased substantially as more Indians began using debit cards to buy goods and services, due to the low supply of cash.

Innoviti, a payment solutions company that handles a fifth of the country’s card transactions among businesses, provided no data.

Innoviti, backed by N R Narayana Murthy’s Catamaran Ventures, has seen a 17 per cent decrease in all instalment-based purchases on cards. Most pronounced were transactions of Rs 50,000 and above, with the number diving from 21.7 million to 11.3 million in the eight weeks till January 10.

“It will take at least a couple of quarters for EMI (equated monthly instalment) transactions to recover to the pre-demonetisation levels,” says Rajeev Agrawal, chief executive officer, Innoviti.

Card-based EMI transactions dropped about 60 per cent in the first week after demonetisation and then recovered steadily.  However, these are not yet back to the levels before November 8.

Apart from uncertainty in the economy, distribution in the country, predominantly cash-driven, has been substantially hit. “As a result, the supply is being affected and brands have cut down on offers. This will revive once cash flow becomes steady and offers are back in the market,” Agrawal added.

Demonetisation has also triggered a sustained rise in card-based transactions, up about 2.5 times from the previous period. And, predominantly driven by transactions from Tier-2 and Tier-3 cities, albeit a smaller base compared to the metros. In the latter, card transactions grew 156 per cent over the eight weeks; the rise has been 162 per cent and 203 per cent, in Tier-2 and Tier-3 cities, respectively.

However, as cash flow is slowly increasing, the growth trend is saturating or bending downwards in Tier-2 and Tier-3 cities, possibly triggered by people going back to cash transactions.

Also, given the previous transaction rates (at 10-15 per cent in the Tier-2 and Tier-3 cities), the current rise is short of expectations. “The growth could have risen, with the figures touching at least four or five times the previous levels in these cities,” says Agrawal. This indicates the impact of demonetisation has been limited by lack of infrastructure and a natural resistance to behavioural change among consumers.

Source : Financial Express

India will remain one of the fastest growing major economies in 2017: ICRA : 16-01-2017


Moody’s Investors Service and its Indian affiliate ICRABSE -2.15 % said India will remain one of the fastest growing major economies globally in 2017, although GDP growth will moderate in the first half of the year, as the economy adjusts after demonetisation.

India is rated Baa3 positive by Moody’s.

Moody’s also believes that the government will likely achieve its fiscal deficit target of 3.5% of GDP for the current fiscal year ending 31 March 2017, the international rating agency said in a statement on Monday.

ICRA expects the country’s growth of gross value added at basic prices to remain healthy in 2017, although such growth will ease somewhat to about 6.6% from around 7.0% in 2016, with a likely pick-up in H2 2017, it said.

“Even after the currency in circulation is replenished, we expect that India’s economic growth will stabilize with a lag, while remaining strong,” said Aditi Nayar, an ICRA Principal Economist.

“The adjustment and recovery period could stretch to as much as 2-3 quarters for certain sectors,” she said.

ICRA said that the focus on digital transactions and the introduction of a goods and services tax (GST) will likely reduce the competitiveness of the unorganised sector. “ICRA therefore anticipates a relatively healthier expansion of the organised sectors in 2017, at the cost of the unorganised sectors,” the statement said.

Source : PTI

Budget 2017: Government may accord infrastructure status to low-cost housing : 16-01-2017


The government may tweak the definition of the infrastructure sector in the upcoming budget to include low-cost or affordable housing, a move that would reduce costs for developers and attract investors, two people with the knowledge of the matter told ET.

The change is being proposed about a month after Prime Minister Narendra Modi announced concessions on interest rates for low-cost housing loans under the Pradhan Mantri Aawas Yojana. “If we want housing for all by 2020,  re-categorising affordable housing as infrastructure is essential. The government had sought feedback about this about a week ago,” a person familiar with the development said. “I see this happening in the upcoming budget.”

The government has been pushing Modi’s pet project of providing about 20 million houses across India by 2020. IT has reached out to senior finance ministry officials and the Reserve Bank of India for feedback on the proposed change and how to prevent it from being misused.

“The important thing here would be to define affordable housing or low-cost housing. And these projects will have to be insulated in a way that no one is able to take money out without completion of the project,” another person aware of the development said.

Real estate developers have been under stress as they have borrowed funds at a higher cost. In addition, banks are reluctant to lend money to the sector and the situation worsened after the November 8 announcement scrapping high-denomination currency notes, leading to a fall in real estate sales.

“If affordable housing is given infrastructure status, it would lower the borrowing cost for the developers. Also, regulations should be simplified to directly borrow foreign debt, which can cost around 4-5% on dollar return,” said Hemal Mehta, a partner at Deloitte Haskins & Sells. Industry experts said that while it may appear to be a small change, categorising low-cost housing as infrastructure could have far-reaching results.

“Real estate industry has been asking for the infrastructure status for affordable housing for last three years, but this time it is only logical that it could go ahead. This is mainly because the prime minister has announced the new scheme and infrastructure status will help reduce the borrowing cost and help accelerate growth,” said Jeenendra Bhandari, partner at MGB and Co, an audit and tax firm. The government’s focus is on affordable housing in the rural areas and there could be additional  tweaks in this aspect in the budget. Emailed queries sent to finance ministry officials, the Central Board of Direct Taxes and the RBI did not elicit any response.

Regulations will have to be changed so that low-cost housing projects do not attract adverse taxes but easier project finance even from investors outside India, the people in the know said. Industry experts said a change in status, along with clear guidelines, could mean low-cost housing could attract investment from foreign pension funds and insurance companies.

“These projects could have a dollar-denominated debt and offer a return of 4-5%. This would work well for both domestic developers as well as foreign investors,” an expert said. As per the recommendations, the government can look at allowing tax-free returns to foreign investors that invest in low-cost housing. This could solve some of the funding issues the sector is facing.

Source : Economic Times

To push digital transactions, Modi government lines up measures to discourage large cash use : 13-01-2017


Among many proposals to incentivise digital transactions, a ‘cash tax’ is being considered by the government. If the proposal is cleared, it may figure in the February 1 budget.

The government is weighing the pros and cons of the proposal, which could be a tweaked form of the earlier banking cash transaction tax under the United Progressive Alliance government, under which tax will be levied on cash withdrawals above a certain ceiling from bank accounts, a government official  familiar with deliberations on this matter said.

“A number of steps are under discussion,” the official said. The aim of the new tax is to shrink the scope of cash economy and encourage digital transactions.

The government has taken a series of measures since demonetisation in November last year to incentivise digital transactions. The final call will be taken “at the highest political level”, one official said.

To push digital transactions, Modi government lines up measures to discourage large cash use

“The idea is under consideration and there is good chance it could be announced in the budget,” another official said.

Officials who spoke to ETfor this story did so on the condition they not be identified, since they are not authorised to speak on budget matters. The Special Investigation Team (SIT) on black money has already recommended a ban on cash transactions above `3 lakh and a Rs 15 lakh limit on individual cash holding.

The Tax Administration Reform Commission (TARC), headed by Parthasarathi Shome, had also recommended the reintroduction of banking cash transaction tax (BCTT). TARC had also noted that currently there is no instrument that captures details of cash withdrawals from bank accounts, other than savings accounts data.

Officials and experts have been pointing out that while digital transactions involve, in some forms, explicit costs at micro levels in terms of annual fees for credit cards or transaction charges at points of sale, the macro cost of producing large amounts of cash is even greater.

A January 2015 study – ‘Cost of Cash in India’ – commissioned by MasterCard and brought out by the Institute For Business In The Global Context estimated India’s central bank and commercial banks bear an annual currency operations cost of Rs 21,000 crore. Government strategists on post demonetisation policies have been emphasising that saving on costs of currency operations is an economic plus, apart from the transparency benefits of digital transactions.

Source : PTI

What aam aadmi wants from Budget 2017 : 13-01-2017


A cut in income tax rates and greater spending on infrastructure — these are the key expectations of people from the upcoming budget following demonetisation, according to a survey.

ET brings out the findings of the LocalCircles Citizen Budget 2017, which reached out to almost 1,00,000 people to get a sense of their major demands and concerns.

For the railways, safety has emerged the biggest worry after recent accidents. People want more investment to improve the infrastructure of government hospitals and aggressive funding of public transport systems to tackle pollution.

What aam aadmi wants from Budget 2017

What aam aadmi wants from Budget 2017
What aam aadmi wants from Budget 2017

 

What aam aadmi wants from Budget 2017
Source : PTI

Government to simplify customs norms,to reach out to ports, airports, border areas : 13-01-2017


The government plans to sensitise ports, airports, border areas, tier-II states and land customs stations about a global trade agreement that seeks to expedite movement of goods and simplify customs procedures .

The commerce department is set to begin an outreach programme in a fortnight to make industry aware of the simplified norms under the World Trade Organisation’s Trade Facilitation Agreement which is expected to come into force this month.

“We are working on an all-India sensitisation plan for the industry because ultimately they have to implement and benefit from the easier norms,” said an official, who did not wish to be identified.

The agreement is part of the WTO’s Bali ministerial package of 2013 and will come into force after it is formally accepted by two-thirds of the organisation’s members.

The agreement is part of the WTO’s Bali ministerial package of 2013 and will come into force after it is formally accepted by two-thirds of the organisation’s members.

A working group under the National Committee on Trade Facilitation is already looking at procedural bottlenecks that hinder easy movement of goods. “The enquiry points have to be vibrant,” said another official.

The agreement comprises articles covering provisions such as information availability and publication, advance rulings, review procedures, customs cooperation and exportimport of goods, among others, with various provisions that countries have to comply with.

India has sought five years to make legislative changes required to implement the agreement which seeks to expedite the movement, release and clearance of goods, including goods in transit.

It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues.

ET View: Improve Governance

We need to leverage our prowess in IT to Boost Innovation digitise documentation and approvals for better trade facilitation. It can quickly rev up the ease of doing business across sectors.

But in tandem, it is crucial to improve governance standards. Singapore takes first place in trade facilitation global rankings, not only because of a modern natural port but also because of superb governance. Besides, we do need improved infrastructure and logistics to systematically boost exports.

Source : Economic Times

27 – 12-01-2017


EVIDENCE OF IMPORT UNDER IMPORT DATA PROCESSING AND MONITORING SYSTEM (IDPMS)

A.P. (DIR SERIES 2016-17) CIRCULAR NO.27DATED 12-1-2017

Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to A.P. (DIR Series) Circular No. 05 dated October 06, 2016 read with section 5 and section 10 of the Foreign Exchange Management Act 1999 (42 of 1999), Government of India Notification No. G.S.R. 381(E) dated May 3, 2000 viz., Foreign Exchange Management (Current Account Transaction) Rules, 2000 on import of goods, FED Master Direction No. 17 dated January 1, 2016 on Import of Goods and Services and A.P. (DIR Series) Circular No. 9 dated August 24, 2000 which outlines the procedure, mode/manner of payment for imports and submission of related returns. Within the contours of the extant instructions on import of goods, specific attention is invited to the directions on Obligation of Purchaser of Foreign Exchange and submission of document as Evidence of Import.

2. Bill of Entry (BoE) data is received in IDPMS from Customs Department for EDI ports and from NSDL for SEZ on daily basis. BoE data for non-EDI ports are entered by AD Category – I bank of the importer on receipt of BoE (importer’s copy) and then the bank uploads the data in IDPMS through “Manual BOE reporting” process. In order to enhance ease of doing business and reduce transaction costs, it has been decided to discontinue submission of hardcopy of Evidence of Import documents i.e. BoE, with effect from December 01, 2016, as it is available in IDPMS. The revised procedures are as set out below:

i. AD Category – I bank will enter BoE details (BoE number, port code and date) as received from the importer and download the BoE message data from “BOE Master” in IDPMS. Thereafter, match and settle the BoE data with Outward Remittance Message (ORM) associated with the payment for import as per the message format “BOE Settlement” in IDPMS. Multiple ORMs can be settled against single BoE and also multiple BoE(s) can be settled against one ORM.
ii. In respect of imports on ‘Delivery against Acceptance’ basis, on request of importer, AD Category – I bank shall verify the evidence of import from IDPMS at the time of effecting remittance of import bill.
iii. On settlement of ORM with evidence of import AD Category – I bank shall in all cases issue an acknowledgement slip to the importer containing the following particulars:
a. importer’s full name and address with code number;
b. number and date of BoE and the amount of import; and
c. a recap advice on number and amount of BoE and ORM not settled for the importer.
iv. The importer needs to preserve the printed ‘Importer copy’ of BoE as evidence of import and acknowledgement slip for future use.

3. The extant instructions and guidelines for Evidence of Import in Lieu of Bill of Entry will apply mutatis mutandis. The evidence of import in lieu of BoE in permitted/approved conditions will be created and uploaded by AD Category – I bank of the importer in the form of BoE data as per message format “Manual BOE reporting” in IDPMS.

4. Follow-up for Evidence of Import : AD Category – I banks shall continue to follow up for outward remittance made for import (i.e. unsettled ORM) in terms of extant guidelines and instructions on the subject. In cases where relevant evidence of import data is not available in IDPMS on due dates against the ORM, AD Category – I bank shall follow up with the importer for submission of documentary evidence of import. Similarly, if BoE data is not settled against ORM within the prescribed period AD Category – I banks shall follow up with the importer in terms of extant instructions.

5. Verification and Preservation: Internal inspectors and IS auditors (including external auditors appointed by AD Category – I bank) should carry out verification and IS audit and assurance of the “BOE Settlement” process in IDPMS. Data and process followed by AD Category -I bank for “BOE Settlement” should be preserved in terms of the guidelines under Cyber Security Framework in the bank. However, in respect of cases which are under investigation by investigating agencies, the data, process and/or documents may be destroyed only after obtaining clearance from the investigating agency concerned.

6. Authorised Dealers may bring the contents of this circular to the notice of their constituents and customers concerned.

7. Master Direction No. 17 dated January 1, 2016 is being updated to reflect the changes.

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

 

26 – 12-01-2017


EXIM BANK’S GoI SUPPORTED LINE OF CREDIT OF USD 0.17 MILLION TO GOVERNMENT OF REPUBLIC OF BURUNDI

A.P. (DIR SERIES 2016-17) CIRCULAR NO.26DATED 12-1-2017

Export-Import Bank of India (Exim Bank) has entered into an Agreement dated February 14, 2014 with the Government of the Republic of Burundi for making available to the latter, a Government of India supported Line of Credit (LOC) of USD 0.17 million (USD One hundred seventy thousand) for the purpose of financing for preparation of detailed project report for an Integrated Food Processing Complex in Burundi. The 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, services of the value of at least 75% of the contract price shall be supplied by the seller from India and the remaining 25% 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 December 20, 2016. Under the LOC, the last date for opening of letter of Credit and disbursement will be 48 months for Project Export Contracts from the scheduled completion date(s) of contract(s) and 72 months for supply contracts, from the date of execution of the Agreement.

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

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

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

6. The directions contained in this circular have been issued under 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 : 04/2017 Dated: 12-01-2017


Seeks to amend notification No. 26/2012-ST dated 20.06.2012 so as to rationalize the abatement for tour operator services – 4/2017

GOVERNMENT OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE)

NOTIFICATION No. 4/2017-Service Tax

New Delhi, the 12th January, 2017

G.S.R. —(E).-In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.26/2012- Service Tax, dated the 20thJune, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 468 (E), dated the 20thJune, 2012, namely:-

1. In the said notification, in the first paragraph, in the TABLE, for Sl. No. 11 and the entries relating thereto, the following shall be substituted, namely:-

(1)

(2)

(3)

(4)

“11 Services by a tour operator 60 (i) CENVAT credit on inputs and capital goods used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.

(ii) The bill issued for this purpose indicates that it is inclusive of charges of accommodation and transportation required for such a tour and the amount charged in the bill is the gross amount charged for such a tour including the charges of accommodation and transportation required for such a tour.”.

2. This notification shall come into force on the 22nd day of January, 2017.

[F. No. 354/42/2016-TRU]

(Anurag Sehgal)

Under Secretary to the Government of India

Note:-The principal notification No. 26/2012 – Service Tax, dated 20thJune, 2012, was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-Section (i) vide number G.S.R. 468 (E), dated the 20thJune, 2012 and was last amended by notification No.38/2016- Service Tax, dated the 30th August, 2016, vide G.S.R. 835(E), dated the 30th August, 2016.

Notification No : 03/2017 Dated: 12-01-2017


Seeks to amend notification No. 30/2012-ST dated 20.06.2012 so as to specify the person complying with the sections 29, 30 or 38 read with section 148 of the Customs Act, 1962 (52 of 1962) as the person liable for paying service tax in case of services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India – 3/2017

GOVERNMENT OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE)

NOTIFICATION No. 3/2017-Service Tax

New Delhi, the 12th January, 2017

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

1. In the said notification,-

(i) in paragraph I, in clause (A), after the sub-clause (vi), the following sub-clause shall be inserted, namely:-

“(vii) provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India;”;

(ii) in paragraph (II), in the Table, after Sl. No. 11 and the entries relating thereto, the following Sl. No. and entries shall be inserted, namely:-

“ 12. in respect of services provided or agreed to be provided by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India Nil 100%”.

(iii) after Explanation III, following Explanation shall be inserted, namely:-

Explanation IV.- For the purposes of this notification, in respect of services provided or agreed to be provided by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, person liable for paying service tax other than the service provider shall be the person in India who complies with sections 29, 30 or 38 read with section 148 of the Customs Act, 1962 (52 of 1962) with respect to such goods.”.

2. This notification shall come into force on the 22nd day of January, 2017.

[F. No. 354/42/2016-TRU]

(Anurag Sehgal)

Under Secretary to the Government of India

Note:-The principal notification was published in the Gazette of India, Extraordinary, vide notification No. 30/2012 – Service Tax, dated the 20th June, 2012, vide number G.S.R. 472 (E), dated the 20th June, 2012 and last amended vide notification No. 49/2016-Service Tax, dated the 9th November, 2016 vide number G.S.R. 1058(E), dated the 9th November, 2016.

Supreme Court retains tax relief for parties : 12-01-2017


The Supreme Court on Wednesday threw out a petition challenging total tax exemption given to political parties, saying that they needed funds to propagate their ideologies.

In the public interest litigation, the petitioner had asked why the common man was being taxed while political parties were exempt. Donations to political parties are 100 per cent exempt from tax, he said, challenging the relevant provisions in the IT Act and the Representation of the People Act as arbitrary and deplorable.

But a bench led by new Chief Justice JS Khehar rejected his argument. A political party needs money, the CJI suggested, to project its ideology and swing around the electorate to its side.

Parties need money to ensure that the voter is represented in governance and the legislature, he said. Sharma tried to argue in vain that the term ‘political party’ did not have any constitutional status and was only introduced statutorily in 1989.

The CJI didn’t accept it as a reason. “The Constitution does not recognise the Hindu undivided family either, but it is recognised under the tax laws,” he commented. The CJI also rejected an argument that the step was discriminatory. “

It is up to those who govern to decide who should be taxed and who should be exempt,” he said, holding out the example of agricultural income which is still exempt from taxes in the country.

The bench, also comprising Justice DY Chandrachud, rejected a plea to extend such 100 per cent exemption to unattached independent lawmakers. An individual only fights for himself, but the party which fights on the basis of a particular ideology needs to set up an establishment to run its affairs, the CJI said. “All this needs money.”

Source : Business Standard

Notification No : 02/2017 Dated: 12-01-2017


Seeks to amend Service Tax Rules, 1994 so as to, (i) exclude such persons from the definition of aggregator who enable a potential customer to connect with persons providing services by way of renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes subject to fulfillment of certain conditions; (ii) Specify the person complying with the sections 29, 30 or 38 read with section 148 of the Customs Act, 1962 (52 of 1962) as the person liable for paying service tax in case of services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India – 2/2017

GOVERNMENT OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE)

NOTIFICATION No. 2/2017-Service Tax

New Delhi, the 12th January, 2017

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

1. (1) These rules may be called the Service Tax (Amendment) Rules, 2017.

(2) They shall come into force on the 22nd day of January, 2017.

2. In the Service Tax Rules, 1994, in rule 2, in sub-rule (1),-

(i) in clause (aa), the following proviso shall be inserted, namely:-

“Provided that aggregator shall not include such person who enables a potential customer to connect with persons providing services by way of renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes subject to following conditions, namely:-

(a) the person providing services by way of renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes has a service tax registration under provision of these rules; and

(b) whole of the consideration for services provided by such service provider is received directly by such service provider and no amount, which forms part of the consideration of services of such service provider, is received by the aggregator directly from either recipient of the service or his representative.”;

(ii) in clause (d), in sub-clause(i), after item (EEB), the following item shall be inserted, namely:-

“(EEC) in relation to services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, the person in India who complies with sections 29, 30 or 38 read with section 148 of the Customs Act, 1962 (52 of 1962) with respect to such goods;”.

[F. No. 354/42/2016-TRU]

(Anurag Sehgal)

Under Secretary to the Government of IndiaNote:- The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide notification No. 2/94-Service Tax, dated the 28th June, 1994 vide number G.S.R. 546 (E), dated the 28th June, 1994 and last amended vide notification No. 53/2016- Service Tax, dated the 19th December, 2016 vide number G.S.R. 1155 (E), dated the 19th December, 2016.

Will Budget 2017 fulfill Narendra Modi’s motto of ‘reform, perform and transform’? Find out here : 12-01-2017


The Modi government’s motto has been ‘reform, perform and transform’. The Union Budget 2017 will reflect the government’s intention to take forward its reform agenda. While the implementation of the Goods and Services Tax (GST) will be the biggest tax reform in recent years, given the recent impasse in the GST Council, the focus may now shift to other proposals that would take the reform process ahead and resolve various issues that are creating an inefficient and uncertain indirect tax structure for businesses.

One of the expectations on the rate front is that the government will maintain the existing service tax and excise duty rates so that there are no significant changes as the industry transitions to GST. However, sectors like e-commerce clearly require assistance on tax matters plaguing the sector. Aggregators, for example, are growing at a rapid pace and are also victims of tax inefficiency. While aggregators are required to deposit service tax on the whole consideration received from users, they are barred from utilising their CENVAT credit to discharge service tax liability on such consideration. CENVAT credit can be utilised only for payment of service tax on the aggregator’s commission. Once the liability to pay tax shifts from the actual service provider to the aggregator, no further restrictions should be imposed on utilisation of credit to discharge this liability. The provisions could be amended to allow the aggregators to utilise CENVAT credit balance against the entire liability (their own and as an aggregator), as it would not only lead to efficient utilisation of credits by the aggregator, but would also minimise cash flow.

Another key topic is the dual levy of tax, which is a common issue in many transactions, such as supply of software, works contract, delivery charges, e-books, etc. Specifically, the subject of dual levy of tax on software has been much debated for many years, with no clarity brought under the law so far. Dual levy of VAT and service tax on software increases the cost to the end-customer and results in inefficiency in the business. The industry has been waiting for clarity on this aspect for a long time.

Likewise, taxability on sale of electronic books (e-books) is also a grey area. First, there is uncertainty in categorisation of the transaction between supply of goods or services. Second, if such supply is treated as a supply of goods, there is lack of clarity on applicability of VAT rate on e-books and the situs of sale. Under most VAT legislations, books are taxed at zero rate of VAT. However, there is no clarity on whether e-books would qualify as books or as an independent product. Clarity in this regard would definitely bring certainty in the tax position on this matter.

Double taxation of works contract is another issue which adds to the inefficiency of the indirect tax structure in case of turnkey contracts/ composite contracts. VAT is levied on 70-75% of the contract value and service tax on 40-70%. This leads to double taxation of 40-45% of the contract value. Appropriate amendment in the service tax provisions to either provide for levy of service tax on such portion of the value of contract on which VAT is not levied or deeming 30% of the contract value as service consideration may be considered to do away with the inefficiency of double taxation.

With effect from December 1, 2016, taxation of digital supplies made by foreign service providers to Indian customers (B2C transaction) has been introduced under the service tax provisions. Consequently, foreign service providers are required to obtain registration and undertake necessary compliances that are quite cumbersome. The same principles have also been introduced under the Model GST law. While the timeline provided for implementation of this provision was very short, many issues still persist in implementing this requirement. Challenges persist like identifying whether the end-customer has a service tax registration number, payment of tax through designated foreign bank accounts, non-availability of CENVAT credit of service tax charged by certain Indian service providers, etc. While the government had come out with a detailed set of guidelines, there are still many unresolved issues.

Source : Financial Express

Notification No : 01/2017 Dated: 12-01-2017


Seeks to amend notification No. 25/2012-ST dated 20.06.2012 so as to (i) withdraw the exemption from service tax for services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India; (ii) exempt services provided by a business facilitator or a business correspondent to a banking company with respect to accounts in its rural area branch – 1/2017

GOVERNMENT OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE)

NOTIFICATION No. 1/2017-Service Tax

New Delhi, the 12th January, 2017

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

In the said notification, in the opening paragraph,-

(i) in entry 29, for item (g), the following item shall be substituted, namely:-

“(g) business facilitator or a business correspondent to a banking company with respect to accounts in its rural area branch.”

(ii) in entry 34, for the proviso, the following proviso shall be substituted with effect from 22nd day of January, 2017, namely,-

“Provided that the exemption shall not apply to –

(i) online information and database access or retrieval services received by persons specified in clause (a); or

(ii) services by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India;”.

[F. No. 354/42/2016-TRU]

(Anurag Sehgal)

Under Secretary to the Government of India

Note:-The principal notification was published in the Gazette of India, Extraordinary, vide notification No. 25/2012 – Service Tax, dated the 20th June, 2012, vide number G.S.R. 467 (E), dated the 20thJune, 2012 and last amended vide notification number 52/2016 – Service Tax, dated the 8th December, 2016 vide number G.S.R. 1122 (E), dated the 8th December, 2016.

Fintech startups make a beeline for partnering tech firms on GSTN : 12-01-2017


Financial-technology companies building applications to allow businesses more choice on filing returns under the new tax regime are rushing to strike partnerships with the firms selected to provide the backend interface. The Goods and Services Tax reform is expected to be implemented in the coming financial year and all such tie-ups have to be stitched and in place by then.

The government has shortlisted 34 companies including Deloitte Touche Tohmatsu India and Reliance Corporate IT Park to provide the core backend infrastructure for the Goods and Services Tax Network, the non-profit entity building the technology backbone for GST. Firms such as ClearTax and RazorPay are free to build enterprise-facing applications on top of this infrastructure to facilitate easy filing of tax returns.

These can be mobile applications, returns filing systems and invoice upload functionalities for businesses, which will be required to file GST returns every month. While ClearTax, LegalRaasta and Quicko are developing returns filing systems, companies such as RazorPay are focused on the payments part of the process.

“We are in discussion with two GSPs and will make a final call based on who goes live first,” said Harshil Mathur, chief executive of Tiger Global Management-backed RazorPay

GSPs, or GST Suvidha Providers, are the companies selected to build backend infrastructure. The firms building the enterprise-facing interfaces are application service providers, or ASPs.

Digital tax filing platform Quicko is building a mobile application and a web interface, which will be enabled by National Securities Depository Ltd, for companies to file GST

“Currently, we are helping traders have a seamless transition from (value-added tax) and excise duty to GST registration,” founder Vishvajit Sonagara said, adding that about 4 million traders have so far registered for GST through different platforms, including Quicko.

LegalRaasta has developed a mobile app for companies to send invoices directly. “We are also providing add-on services so (small and medium enterprises) can send the image of an invoice or their details through an Excel sheet, which will be uploaded by us,” said Himanshu Jain, founder of LegalRaasta.

Revenue models, however, are yet to be decided for both the backend infrastructure and application providers .

“That is one of the reasons why we are open to tying up with multiple startups and companies in the space,” said Ankit Agarwal, director of Alankit Ltd, a certified GST Suvidha Provider. “Startups have the potential to bring on large volume of business, especially in specialised sectors like pharma and healthcare,” he said

A GSTN official said the entity will not regulate the fees that GSPs can charge for their service or the number of applications providers they can work with. “However, if we receive feedback on unfair practices or complaints about a GSP, we have maintained a leverage in our agreements to end their licences,” the official said.

“The accountability of security of GST filings also lie with the GSPs, which will need to conduct audits regularly and ensure the cybersecurity strength of ASPs they work with.”

Source : Economic Times

Notification No. : 02/2016 Dated: 11-01-2017


SECTION 5A OF THE CENTRAL EXCISE ACT, 1944 – EXEMPTION FROM DUTY OF EXCISE – POWER TO GRANT – OMNIBUS GENERAL EXEMPTION TO GOOD SPECIFIED IN CHAPTERS 1 TO 98 OF TARIFF – AMENDMENT IN NOTIFICATION NO.12/2012-C.E., DATED 17-3-2012

NOTIFICATION NO.2/2017-C.E.DATED 11-1-2017

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, in the Table, after serial number 277 and the entries relating thereto, the following serial number and entries shall be inserted, namely:—

(1) (2) (3) (4) (5)
“277A 8702 90 21, 8702 90 22, 8702 90 28 or 8702 90 29 All goods 12.5% -”;

Notification No. : 01/2016 Dated: 11-01-2017


SECTION 11C, READ WITH SECTION 3 OF THE CENTRAL EXCISE ACT, 1944 – RECOVER DUTY OF EXCISE NOT LEVIED OR SHORT-LEVIED AS A RESULT OF GENERAL PRACTICE – POWER NOT TO – DUTY OF EXCISE PAYABLE UNDER SECTION 3 OF SAID ACT ON PLAIN (UN-MODIFIED) TAMARIND KERNEL POWDER FALLING UNDER HEADING 1302 NOT REQUIRED TO BE PAID IN ACCORDANCE WITH SAID PRACTICE

NOTIFICATION NO.1/2017-C.E. (N.T.)DATED 11-1-2017

Whereas the Central Government is satisfied that according to a practice that was generally prevalent regarding levy of duty of excise (including non-levy thereof) under section 3 of the Central Excise Act, 1944 (1 of 1944), (hereinafter referred to as the said Act), on Plain (Un-modified) Tamarind Kernel Powder falling under heading 1302 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the said goods), was not being levied according to the said practice, during the period commencing on the 19th day of July, 2011 and ending with the 18th day of July, 2016;

2. Now, therefore, in exercise of the powers conferred by section 11C of the said Act, the Central Government hereby directs that the whole of the duty of excise payable under section 3 of the said Act on the said goods but for the said practice, shall not be required to be paid in respect of the said goods on which the said duty of excise was not levied during the period aforesaid in accordance with the said practice.

FM Arun Jaitley may drop tough tax accounting rules : 11-01-2017


India Inc could get a breather as the finance ministry may take a benevolent view of its pleas to abolish the Income Computation and Disclosure Standards (ICDS), which came into effect from the financial year commencing April 1, 2016 (FY2016-17).

Budget 2017 is also likely to indicate a road map for transition towards a new accounting year — January to December — instead of the currently prevailing 12-month period starting on April 1 of one year and ending on March 31 of the next calendar year.

ICDS, which are accounting standards for income tax (I-T) purposes, resulted in a greater administrative burden and also advanced recognition of income of a subsequent year in the current year, consequently resulting in a higher I-T outflow.

FM Arun Jaitley may drop tough tax accounting rules

 The Justice Easwar-led committee on I-T simplification, in its report released in 2016, had pointed out its drawbacks. It said that multiple accounting methods — one for the books of accounts (under the Companies Act) and the other for tax purposes (ICDS) create confusion, interpretation issues, and additional compliance burden, which may outweigh any gains to be obtained. It had called for a further study of implications.

Ameet Patel, chairperson of the taxation committee at Bombay Chartered Accountants’ Society (BCAS), says, “ICDS is not in line with fundamental principles of accounting and taxation, viz: prudence, materiality and accounting of foreseeable losses. In several situations, this results in advancing the recognition of income or deferring recognition of expenses or losses — both of which have a potential tax impact (see table).”

Valuation of securities held as stock-in-trade, import of goods used in manufacturing or of forex hedges also result in income-recognition challenges for India Inc. BCAS is one of the many associations that has represented to the government for scrapping of ICDS.

For the purpose of computing advance taxes and also for filing of I-T returns, taxpayers have to adopt ICDS. The due dates of the returns for the FY2016-17 — the first year of application of ICDS — fall in the second half of 2017 onward.

These standards apply to all taxpayers who follow the mercantile system of accounting for computing income under the heads ‘Profits and gains from business and profession’ or ‘Income from other sources’. India Inc is required to mandatory follow the mercantile system. Further, individuals and Hindu Undivided Families are exempt from application of ICDS if they do not fall in the category of those who have to get their accounts audited for tax purposes. Taxpayers are already facing challenges relating to adoption of ICDS and its abolition will be welcomed.

“Indian Accounting Standards (IndAS), introduced by the ministry of corporate affairs, are already in place for larger listed companies. From April 1, 2017, their ambit will be wider. IndAS is closely aligned to international accounting standards and already serves the objective of real-time disclosure and accounting of income. Thus, there is no plausible reason for introduction of ICDS and adding to the administrative burden of India Inc,” says Sudhir Kapadia, tax leader at EY India.

A committee led by former chief economic adviser Shankar Acharya recently submitted its report to the finance ministry, advocating adoption of the calendar year as the accounting year. “With introduction of goods and service tax (GST) later on in the year, it is possible that the new accounting year will come into being from January 2019 and not January 2

Source : Financial Express

GST to be simple, less burdensome for industry: Revenue Secretary Hasmukh Adhia : 11-01-2017


 Goods and Services Tax will usher in a very simple and less burdensome taxation regime as it will be a single rate indirect tax which can be paid by debit/credit cards, cheque and NEFT, Revenue Secretary Hasmukh Adhia said today.

He said, GST will make it easier for traders and industry to access Input Tax Credit and also ease compliance burden as the entire country will become a single market.

“GST is a very very simple thing to follow, it is going to be very easy for all of you. There will not be any border restriction when you move goods from one state to another. And many of the small small taxes will go away. It will be one unified tax,” Adhia said at the Vibrant Gujarat global Summit here.

The government had planned to roll out GST, which will subsume excise and service tax and other local levies, from April 1,2017. However, vexed issues like jurisdiction over assesses, remain to be resolved by the GST Council chaired by Union Finance Minister Arun Jaitley.

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“We are working overtime to make it a reality as early as possible. Our target date is April 1, 2017, and we will see to it that we try our best to bring it to people,” Adhia said, adding that taxes can be paid by way of NEFT, RTGS, cheque, and debit/credit cards.

Explaining the procedure of tax payment under the new tax regime, he said GST is a single tax and Integrated GST on cross border movement of goods and services is only an “interim” tax for which input tax credit can be claimed.

“GST will indeed become a very simple and less burdensome tax for most of the people of the country. Be it manufacturers or traders. Simple tax, single compliance procedure, it will become very very simple for the people to pay taxes,” Adhia said.

The GST Council has already reached an agreement on a 4-tier tax structure — 5,12,18 and 28 per cent. Besides, a cess on demerit, luxury and some more goods would be levied. PTI MBI JD ANZ JM 01111105 NNNN

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Source : PTI

Modi’s demonetisation drive is disruptive, but won’t hurt his election chances : 11-01-2017


Prime Minister Narendra Modi’s disruptive cash ban is unlikely to damage his party’s performance in upcoming state polls. In fact, it might even help.

Modi’s move to invalidate 86 per cent of circulated currency in Asia’s third-largest economy forced millions of Indians into lengthy bank queues. It has also dented India’s world-beating growth as the country’s cash-dependent economy stalled.

But even with millions enduring serious hardship, numerous polls and political analysts indicate Modi’s Bharatiya Janata Party will perform well in upcoming state elections, suggesting Modi could win a second term in the 2019 national poll. With less than a month to go before the elections, Modi’s surprise cash ban remains popular with India’s poor, who think it will hit rich tax evaders, even as the move is criticized by economists such as Nobel laureate Amartya Sen.

“Many people think this is good for the nation,” said Sanjay Kumar, a director at the New Delhi-based Center for the Study of Developing Societies. “There is a dominant belief that this will help the country in the long run. And this belief overshadows the pain in the short term.”

The elections in Uttar Pradesh — a state of 200 million people where the BJP won 71 out of 80 seats in the 2014 national election — will likely be the most significant Indian political event of 2017.

To be held between Feb. 11 and March 11, a strong BJP win would consolidate the prospect of a second term for Modi. A weak showing would raise doubts about re-election prospects in 2019 and could “severely impact business sentiment and the government’s resolve to stay the course on its reform agenda,” according to Mumbai-based Bloomberg Intelligence analyst Abhishek Gupta.

Either way, the results will move markets and lead to big increases in government’s spending on rural areas, said Indranil Sen Gupta, India economist with Bank of America Merrill Lynch.

Polls suggest the BJP will do well in most of the upcoming elections. The party could move from a distant third to either second or first position in Uttar Pradesh, an India Today-Axis poll published Jan. 4 shows. Meanwhile, a CSDS poll suggests the BJP could win 27 percent of the vote, just behind the ruling Samajwadi Party, which is now riven by infighting. Several other polls showed the BJP placing first in Uttar Pradesh.

The BJP is likely to do well in four of the five states, said Kumar, who does polling across India. Modi’s party will form governments in Uttarakhand and Goa, and will likely retain power in Punjab with its senior coalition partner, he said. The India Today-Axis poll suggests the BJP may also unseat the ruling Congress government in Manipur, a remote northeastern state.

Squarely Focused on 2019’

Despite signs the cash ban hasn’t netted as much corrupt wealth as intended, the BJP has successfully sold demonetization as a noble anti-corruption measure, said Manoj Joshi, a distinguished fellow with the Observer Research Foundation think-tank in New Delhi.

“The opposition somehow has not been able to cash in on this, on what I would call a blunder. They could have mounted a sharper attack,” Joshi said.

Modi is now squarely focused on 2019, Joshi said, and demonetization, as well as surgical strikes across the border into the Pakistan-administered part of disputed Kashmir, are all aimed at shoring up populist support for his party

‘Risky Strategy’

Modi still faces several risks.

The BJP is relying on Modi’s national reputation in Uttar Pradesh, rather than appointing a state chief ministerial candidate, like other parties. In late 2015, the BJP tried this strategy in Bihar and lost the election

And with results not due until March 11, the feeling that corrupt elites were hit harder than the poor could still shift “swift and fierce,” said Richard Rossow, who studies Indian states at the Washington, D.C.-based Center for Strategic and International Studies.

A further threat to Modi’s chances could emerge if the cash ban-related contraction deepens further.

“There is widespread support for the anti-corruption intent of the currency move, but there is frustration with how it has been rolled out,” said Milan Vaishnav, a South Asia senior fellow with the Carnegie Endowment for International Peace. “Administrative capability was supposed to be the BJP government’s calling card, and the opposition smells weakness there.”

Source : Economic Times

Notification No. 383/2016-RB/GSR 17(E) 10-01-2017


FEM (TRANSFER OR ISSUE OF SECURITY BY A PERSON RESIDENT OUTSIDE INDIA) (AMENDMENT) REGULATIONS, 2017 – AMENDMENT IN SCHEDULE 1

NOTIFICATION NO. FEMA.383/2017-RB/GSR 17(E)DATED 10-1-2017

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) (hereinafter referred to as ‘the Principal Regulations’), namely:—

Short Title & Commencement

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

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

Amendment to Schedule 1

2. In Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, (Notification No. FEMA 20/2000-RB dated 3rd May 2000), in Schedule 1, in Annex B.

A. The existing Paragraph F.4 shall be substituted by the following namely:—

“F.4 Infrastructure Company in the Securities Market
F.4.1 Infrastructure companies in Securities Markets, namely, stock exchanges, commodity derivative exchanges, depositories and clearing corporations, in compliance with SEBI Regulations. 49% Automatic
F.4.2 Other Conditions:
(i) Foreign investment, including investment by FPIs, will be subject to the Guidelines/ Regulations issued by the Central Government, SEBI and the Reserve Bank from time to time.
(ii) Words and expressions used herein and not defined in these regulations but defined in the Companies Act, 2013 (18 of 2013) or the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) or in the concerned Regulations issued by SEBI shall have the same meanings respectively assigned to them in those Acts/ Regulations.

B. The existing Paragraph F.6 shall be deleted.

C. The existing Paragraphs F.7, F.8, F.9 and F.10 shall be re-numbered as F.6, F.7, F.8 and F.9 respectively.

Notification No. 377/2016-RB/GSR 16(E) 10-01-2017


FEM (TRANSFER OR ISSUE OF SECURITY BY A PERSON RESIDENT OUTSIDE INDIA) (FIFTEENTH AMENDMENT) REGULATIONS, 2016 – AMENDMENT IN REGULATION 2 AND INSERTION OF REGULATION 6D

NOTIFICATION NO.FEMA.377/2016-RB/GSR 16(E)DATED 10-1-2017

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 & Commencement

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

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

2. Amendment to Regulation 2

In the Principal Regulations, in Regulation 2, after clause (ii), a new clause shall be inserted namely:—

“(iiA) ‘convertible note’ means an instrument issued by a startup company evidencing receipt of money initially as debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of such startup company, within a period not exceeding five years from the date of issue of the convertible note, upon occurrence of specified events as per the other terms and conditions agreed to and indicated in the instrument;”

Insertion of a new Regulation

3. After the existing Regulation 6C, the following shall be inserted, namely:—

6D Issue of Convertible Notes by startup Companies (1) A person resident outside India (other than an individual who is citizen of Pakistan or Bangladesh or an entity which is registered/incorporated in Pakistan or Bangladesh), may purchase convertible notes issued by an Indian startup company for an amount of twenty five lakh rupees or more in a single tranche.

Explanation: For the purpose of this Regulation, a ‘startup company’ means a private company incorporated under the Companies Act, 2013 or Companies Act, 1956 and recognised as such in accordance with notification number G.S.R. 180(E) dated February 17, 2016 issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry.
(2) A startup company engaged in a sector where foreign investment requires Government approval may issue convertible notes to a non-resident only with approval of the Government.
Explanation: For the purpose of this regulation, the issue of shares against such convertible notes shall have to be in accordance with the Schedule 1 of the Principal Regulations.
(3) A startup company issuing convertible notes to a person resident outside India shall receive the amount of consideration by inward remittance through banking channels or by debit to the NRE/FCNR (B)/Escrow account maintained by the person concerned in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016, as amended from time to time.
Provided that an escrow account for the above purpose shall be closed immediately after the requirements are completed or within a period of six months, which ever is earlier. However, in no case continuance of such escrow account shall be permitted beyond a period of six months.
(4) NRIs may acquire convertible notes on non-repatriation basis in accordance with Schedule 4 of the Principal Regulations.
(5) A person resident outside India may acquire or transfer, by way of sale, convertible notes, from or to, a person resident in or outside India, provided the transfer takes place in accordance with the pricing guidelines as prescribed by RBI. Prior approval from the Government shall be obtained for such transfers in case the startup company is engaged in a sector which requires Government approval.
(6) The startup company issuing convertible notes shall be required to furnish reports as prescribed by Reserve Bank”.

Notification No.3/2017 10-01-2017


Agreement between the Government of the Republic of India and the Government of Republic of Cyprus for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes – 3/2017

 

MINISTRY OF FINANCE (Department of Revenue)

Notification No. 3/2017

New Delhi, the 10th January, 2017

S.O.64(E).-Whereas, an Agreement and Protocol between the Government of the Republic of India and the Government of the Republic of Cyprus for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income (hereinafter referred to as the said Agreement and Protocol ) as set out in the Annexure to this notification, was signed at Nicosia, Cyprus on the 18th day of November, 2016;

And whereas, the date of entry into force of the said Agreement and Protocol is the 14th day of December, 2016, being the date of the later of the notifications of completion of the procedures as required by the respective laws for entry into force of the said Agreement and Protocol, in accordance with paragraph 1 of Article 29;

And whereas, paragraph 2 of Article 29 of the said Agreement and Protocol provides that the provisions of the said Agreement and Protocol shall have effect forthwith from the date of entry into force;

Now, therefore, in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that all the provisions of the said Agreement and Protocol between the Government of Republic of India and the Government of Republic of Cyprus for the avoidance of double taxation and the Prevention of Fiscal evasion with respect to taxes on income as set out in the annexure hereto, shall be given effect to in the Union of India with effect from the 1st day of April, 2017 being the First day of Fiscal year next following the year in which the said Agreement and Protocol entered into force.

[F. No. 504/05/2003-FTD-I]

PRAGYA S. SAKSENA, Jt. Secy.

 

AGREEMENT

BETWEEN

THE GOVERNMENT OF THE REPUBLIC OF INDIA

AND

THE GOVERNMENT OF THE REPUBLIC OF CYPRUS

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 Cyprus, desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and with a view to promoting economic cooperation between the two countries, have agreed as follows:

Article 1

PERSONS COVERED

This Agreement shall apply to persons who are residents of one or both of the Contracting States.

Article 2

TAXES COVERED

1. This Agreement shall apply to taxes on income imposed on behalf of a Contracting State or of its political subdivisions or local authorities, irrespective of the manner in which they are levied.

2. There shall be regarded as taxes on income all taxes imposed on total income, or on elements of income including taxes on gains from the alienation of movable or immovable property and taxes on the total amounts of wages or salaries paid by enterprises.

3. The existing taxes to which the Agreement shall apply are in particular:

a) in India, the income tax, including any surcharge thereon;

(hereinafter referred to as “Indian tax”);

b) in Cyprus:

(i) the income tax;

(ii) the corporate income tax;

(iii) the special contribution for the defence of the Republic; and

(iv) the capital gains tax

(hereinafter referred to as “Cyprus Tax”).

4. The Agreement shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of the Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes that have been made in their respective taxation laws.

Article 3

GENERAL DEFINITIONS

1. For the purposes of this Agreement, unless the context otherwise requires:

a) the term “India” means the territory of India and includes the territorial sea and airspace above it, as well as any other maritime zone in which India has sovereign rights, other rights and jurisdiction, according to the Indian law and in accordance with international law, including the U.N. Convention on the Law of the Sea;

b) the term “Cyprus” means the Republic of Cyprus and, when used in a geographical sense, includes the national territory, the territorial sea thereof as well as any area outside the territorial sea, including the contiguous zone, the exclusive economic zone and the continental shelf, which has been or may hereafter be designated, under the laws of Cyprus and in accordance with international law, as an area within which Cyprus may exercise sovereign rights or jurisdiction;

c) the terms “a Contracting State” and “the other Contracting State” mean the Republic of India or the Republic of Cyprus as the context requires;

d) the term “person” includes an individual, a company, a body of persons and any other entity which is treated as a taxable unit under the taxation laws in force in the respective Contracting States;

e) the term “company” means any body corporate or any entity that is treated as a body corporate for tax purposes;

f) the term “enterprise” applies to the carrying on of any business;

g) the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

h) the term “international traffic” means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;

i) the term “competent authority” means:

(i) in India: the Finance Minister, Government of India, or his authorized representative;

(ii) in Cyprus: the Minister of Finance or his authorized representative;

j) the term “national” means:

(i) any individual possessing the nationality or citizenship of a Contracting State;

(ii) any legal person, partnership or association deriving its status as such from the laws in force in a Contracting State;

k) the term “tax” means Indian or Cyprus tax, as the context requires, but shall not include any amount which is payable in respect of any default or omission in relation to the taxes to which this Agreement applies or which represents a penalty or fine imposed relating to those taxes;

l) The term “fiscal year” means:

(i) In the case of India: the financial year beginning on the 1st day of April;

(ii) In the case of Cyprus: the year of assessment beginning on the 1st day of January.

2. As regards the application of the Agreement at any time by a Contracting State any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which the Agreement applies and any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State.

Article 4

RESIDENT

1. For the purposes of this Agreement, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature and also includes that State and any political subdivision or local authority thereof. This term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State.

2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:

a) he shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests);

b) if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual abode;

c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national;

d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall endeavour to settle the question by mutual agreement.

3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated. If the State in which its place of effective management is situated cannot be determined, then the competent authorities of the Contracting States shall settle the question by mutual agreement within two years from the date of invocation of Mutual Agreement Procedure, according to this Agreement.

Article 5

PERMANENT ESTABLISHMENT

1. For the purposes of this Agreement, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

2. The term “permanent establishment” includes especially:

a) a place of management;

b) a branch;

c) an office;

d) a factory;

e) a workshop;

f) a sales outlet;

g) a warehouse in relation to a person providing storage facilities for others;

h) a farm, plantation or other place where agricultural, forestry, plantation or related activities are carried on; and

i) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

3. (a) A building site or construction, installation or assembly project or supervisory activities in connection therewith constitutes a permanent establishment only if such site, project or activities last more than six months.

(b) The furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only where activities of that nature continue (for the same or connected project) within the country for a period or periods aggregating more than 90 days within any 12-month period.

4. Notwithstanding the preceding provisions of this Article the term “permanent establishment” shall be deemed not to include:

a) the use of facilities solely for the purpose of storage, display of goods or merchandise belonging to the enterprise;

b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display;

c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise;

e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character;

f) the maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs (a) to (e) , provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person- other than an agent of an independent status to whom paragraph 7 applies- is acting in a Contracting State on behalf of an enterprise of the other Contracting State, that enterprise shall be deemed to have a permanent establishment in the first mentioned Contracting State in respect of any activities which that person undertakes for the enterprise, if such a person:

a) has and habitually exercises in that State an authority to conclude contracts in the name of the enterprise, unless the activities of such person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph, or

b) has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise;

c) habitually secures orders in the first-mentioned State, wholly or almost wholly for the enterprise itself.

6. Notwithstanding the preceding provisions of this Article, an insurance enterprise of a Contracting State shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of that other State or insures risks situated therein through a person other than an agent of an independent status to whom paragraph 7 applies.

7. An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph.

8. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

Article 6

INCOME FROM IMMOVABLE PROPERTY

1. Income derived by a resident of a Contracting State from immovable property situated in the other Contracting State may be taxed in that other State.

2. The term “immovable property” shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships, boats and aircraft shall not be regarded as immovable property.

3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property.

4. The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services.

Article 7

BUSINESS PROFITS

1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

3. In determining the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment, including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere, in accordance with the provisions of and subject to the limitations of the tax laws of that State.

However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents, knowhow or other rights, or by way of commission or other charges for specific services performed or for management, or, except in the case of banking enterprises, by way of interest on moneys lent to the permanent establishment. Likewise, no account shall be taken, in the determination of the profits of a permanent establishment, for amounts charged (otherwise than toward reimbursement of actual expenses), by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents, know-how or other rights, or by way of commission or other charges for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the head office of the enterprise or any of its other offices.

4. Insofar as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall preclude Contracting State from determining the profits to be taxed by such an apportionment as may be customary; the method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in this Article.

5. No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

6. For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.

7. Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article.

Article 8

SHIPPING AND AIR TRANSPORT

1. Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.

2. For the purposes of this Article, profits from the operation of ships or aircraft in international traffic include profits derived from the rental of ships or aircraft on a full time (time or voyage) or bareboat basis.

3. Profits of an enterprise of a Contracting State from the use, maintenance or rental of containers (including trailers, barges and related equipment for the transport of containers) used for the transport of goods or merchandise shall be taxable only in that State, except where such containers are used for the transport of goods or merchandise solely between places within the other Contracting State.

4. For the purposes of this Article, interest on funds connected directly with the operation of ships or aircraft in international traffic shall be regarded as profits derived from the operation of such ships or aircraft, and the provisions of Article 11 shall not apply in relation to such interest.

5. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

Article 9

ASSOCIATED ENTERPRISES

1. Where

a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or

b) the same persons participate directly or indirectly in the management,control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,

and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

2. Where a Contracting State includes in the profits of an enterprise of the 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 10

DIVIDENDS

1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the dividends. This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

3. The term “dividends” as used in this Article means income from shares or other rights, not being debtclaims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

5. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company’s undistributed profits to a tax on the company’s undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

Article 11

INTEREST

1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such interest may also be taxed in the Contracting State in which it arises, and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 10 percent of the gross amount of the interest.

3. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be exempt from tax in that State, provided that it is derived and beneficially owned by:

(a) the Government, a political sub-division or a local authority of the other Contracting State; or

(b) in the case of India, the Reserve Bank of India, the Export-Import bank of India, the National Housing bank; and

(c) any other institution as may be agreed upon from time to time between the Competent authorities of the Contracting States through exchange of letters.

4. The term “interest” as used in this Article means income from debt claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor’s profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.

5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

6. Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

7. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

Article 12

ROYALTIES AND FEES FOR TECHNICAL SERVICES

1. Royalties or fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such royalties or fees for technical services may also be taxed in the Contracting State in which they arise, and according to the laws of that State, but if the beneficial owner of the royalties or fees for technical services is a resident of the other Contracting State the tax so charged shall not exceed 10 percent of the gross amount of the royalties or fees for technical services.

3. (a) The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films or films or tapes used for television or radio broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience. However, the term “royalties” will not include income for the use of, or the right to use aircraft and ships that falls under Article 8.

(b) The term “fees for technical services” as used in this Article means payments of any kind, other than those mentioned in Articles 14 and 15 of this Agreement as consideration for managerial or technical or consultancy services, including the provision of services of technical or other personnel.

4. The provisions of paragraph 1 and 2 shall not apply if the beneficial owner of the royalties or fees for technical services being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical services arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

5. (a) Royalties and fees for technical services shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority, or a resident of that State. Where, however, the person paying the royalties or fees for technical services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties or fees for technical services was incurred, and such royalties or fees for technical services are borne by such permanent establishment or fixed base, then such royalties or fees for technical services shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

(b) Where under sub-paragraph (a) royalties or fees for technical services do not arise in one of the Contracting States, and the royalties relate to the use of, or the right to use, the right or property, or the fees for technical services relate to services performed, in one of the Contracting States, the royalties or fees for technical services shall be deemed to arise in that Contracting State.

6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties or fees for technical services, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

Article 13

CAPITAL GAINS

1. Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.

2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such fixed base, may be taxed in that other State.

3. Gains from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State of which the alienator is a resident.

4. Gains from the alienation of shares of the capital stock of a company the property of which consists directly or indirectly principally of immovable property situated in a Contracting State may be taxed in that State.

5. Gains from the alienation of shares other than those mentioned in paragraph 4 in a company which is a resident of a Contracting State may be taxed in that State.

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

Article 14

INDEPENDENT PERSONAL SERVICES

1. Income derived by an individual who is a resident of a Contracting State from the performance of professional services or other independent activities of a similar character shall be taxable only in that State except in the following circumstances when such income may also be taxed in the other Contracting State:

(a) if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other State; or

(b) if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days in any 12 month period commencing or ending in the fiscal year concerned; in that case, only so much of the income as is derived from his activities performed in that other State may be taxed in that other State.

2. The term “professional services” includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, surgeons, dentists and accountants.

Article 15

DEPENDENT PERSONAL SERVICES

1. Subject to the provisions of Articles 16, 18, 19, 20 and 21, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first mentioned State if:

(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned, and

(b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and

(c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic, by an enterprise of a Contracting State shall be taxed in that State.

Article 16

DIRECTORS’ FEES

Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the Board of Directors in a company which is a resident of the other Contracting State may be taxed in that other State.

Article 17

ARTISTES AND SPORTSPERSONS

1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsperson, from personal activities as such exercised in the other Contracting State, may be taxed in that other State.

2. Where income in respect of personal activities exercised by an entertainer or a sportsperson in his capacity as such accrues not to the entertainer or sportsperson himself but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or sportsperson are exercised.

3. The provisions of paragraphs 1 and 2, shall not apply to income from activities performed in a Contracting State by entertainers or sportspersons if the activities are substantially supported by public funds of one or both of the Contracting States or of political subdivisions or local authorities thereof. In such a case, the income shall be taxable only in the Contracting State of which the entertainer or sportsperson is a resident.

Article 18

PENSIONS

Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State.

Article 19

GOVERNMENT SERVICE

1. (a) Salaries, wages and other similar remuneration, other than a pension, paid by a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.

(b) However, such salaries, wages and other similar remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who:

(i) is a national of that State; or

(ii) did not become a resident of that State solely for the purpose of rendering the services.

2. (a) Any pension paid by, or out of funds created by, a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.

(b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that State.

3. The provisions of Articles 15, 16, 17 and 18 shall apply to salaries, wages, and other similar remuneration and to pensions in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or a local authority thereof.

Article 20

PROFESSORS, TEACHERS AND RESEARCH SCHOLARS

1. A professor, teacher or research scholar who is or was a resident of the Contracting state immediately before visiting the other Contracting State for the purpose of teaching or engaging in research, or both, at a university, college or other similar approved institution in that other Contracting State shall be exempt from tax in that other State on any remuneration for such teaching or research for a period not exceeding 2 years from the date of his arrival in that other State.

2. This Article shall apply to income from research only if such research is undertaken by the individual in the public interest and not primarily for the benefit of some private person or persons.

3. For the purposes of this Article, an individual shall be deemed to be a resident of a Contracting State if he is resident in that State in the fiscal year in which he visits the other Contracting State or in the immediately preceding fiscal year.

Article 21

STUDENTS

1. A student who is or was a resident of one of the Contracting States immediately before visiting the other Contracting State and who is present in that other Contracting State solely for the purpose of his education or training, shall besides grants, loans and scholarships be exempt from tax in that other State on:

(a) payments made to him by persons residing outside that other State for the purposes of his maintenance, education or training; and

(b) remuneration which he derives from an employment which he exercises in the other Contracting State if the employment is directly related to his studies.

2. The benefits of this Article shall extend only for such period of time as may be reasonable or customarily required to complete the education or training undertaken, but in no event shall any individual have the benefits of this Article, for more than four consecutive years from the date of his first arrival in that other State.

Article 22

OTHER INCOME

1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that State.

2. The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

3. Notwithstanding the provisions of paragraph 1, if a resident of a Contracting State derives income from sources within the other Contracting State in form of lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any nature whatsoever, such income may be taxed in the other Contracting State.

Article23

METHODS FOR ELIMINATION OF DOUBLE TAXATION

Double taxation shall be eliminated as follows:

1. Where a resident of a Contracting State derives income which, in accordance with the provisions of this Agreement, may be taxed in the other Contracting State, the first-mentioned State shall allow as a deduction from the tax on the income of that resident, an amount equal to the income tax paid in that other State. Such deduction shall not, however, exceed that part of the income tax as computed before the deduction is given, which is attributable to the income which may be taxed in that other State.

2. Where in accordance with any provision of the Agreement income derived by a resident of a Contracting State is exempt from tax in that State, such State may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income.

Article 24

NON-DISCRIMINATION

1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances, in particular with respect to residence, are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States.

2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favorably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents.

3. Except where the provisions of paragraph 1 of Article 9, paragraph 7 of Article 11, or paragraph 6 of Article 12, apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first mentioned State. Similarly, any debts of an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable capital of such enterprise, be deductible under the same conditions as if they had been contracted to a resident of the first-mentioned State.

4. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected.

5. The provisions of this Article shall, notwithstanding the provisions of Article 2, apply to taxes of every kind and description.

Article 25

MUTUAL AGREEMENT PROCEDURE

1. Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 24, to that of the Contracting State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Agreement.

2. The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the Agreement. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States.

3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Agreement. They may also consult together for the elimination of double taxation in cases not provided for in the Agreement.

4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs. When it seems advisable in order to reach agreement to have an oral exchange of opinions, such exchange may take place through a Commission consisting of representatives of the competent authorities of the Contracting States.

Article 26

EXCHANGE OF INFORMATION

1. The competent authorities of the Contracting States shall exchange such information (including documents or certified copies of the documents) as is foreseeably relevant for carrying out the provisions of this Convention or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation there under is not contrary to the Convention. The exchange of information is not restricted by Article 1 and 2.

2. Any information received under paragraph 1 by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, the determination of appeals in relation to the taxes referred to in paragraph 1, or the oversight of the above. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. Notwithstanding the foregoing, information received by a Contracting State may be used for other purposes when such information may be used for such other purposes under the laws of both States and the competent authority of the supplying State authorises such use.

3. In no case shall the provisions of paragraph 1 and 2 be construed so as to impose on a Contracting State the obligation:

a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

b) to supply information (including documents or certified copies of the documents) which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

c) to supply information which would disclose any trade,business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public).

4. If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use its information gathering measures to obtain the requested information, even though that other State may not need such information for its own tax purposes. The obligation contained in the preceding sentence is subject to the limitations of paragraph 3 but in no case shall such limitations be construed to permit a Contracting State to decline to supply information solely because it has no domestic interest in such information.

5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.

Article 27

ASSISTANCE IN THE COLLECTION OF TAXES

1. The Contracting States shall lend assistance to each other in the collection of revenue claims. This assistance is not restricted by Articles 1 & 2. The competent authorities of the Contracting States may by mutual agreement settle the mode of application of this Article.

2. The term “revenue claim” as used in this Article means an amount owed in respect of taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to this Convention or any other instrument to which the Contracting States are parties, as well as interest, administrative penalties and costs of collection or conservancy related to such amount.

3. When a revenue claim of a Contracting State is enforceable under the laws of that State and is owed by a person who, at that time, cannot, under the laws of that State, prevent its collection, that revenue claim shall, at the request of the competent authority of that State, be accepted for purposes of collection by the competent authority of the other Contracting State, that revenue claim shall be collected by that other State in accordance with the provisions of its laws applicable to the enforcement and collection of its own taxes as if the revenue claim were a revenue claim of that other State.

4. When a revenue claim of a Contracting State is a claim in respect of which that State may, under its law, take measures of conservancy with a view to ensure its collection, that revenue claim shall, at the request of the competent authority of that State, be accepted for purposes of taking measures of conservancy by the competent authority of the other Contracting State. That other State shall take measures of conservancy in respect of that revenue claim in accordance with the provisions of its laws as if the revenue claim were a revenue claim of that other State even if, at the time when such measures are applied, the revenue claim is not enforceable in the first-mentioned State or is owed by a person who has a right to prevent its collection.

5. Notwithstanding the provisions of paragraphs 3 and 4, a revenue claim accepted by a Contracting State for purposes of paragraph 3 or 4 shall not, in that State, be subject to the time limits or accorded any priority applicable to a revenue claim under the laws of that State by reason of its nature as such. In addition, a revenue claim accepted by a Contracting State for the purposes of paragraph 3 or 4 shall not, in that State, have any priority applicable to that revenue claim under the laws of the other Contracting State.

6. Proceedings with respect to the existence, validity or the amount of a revenue claim of a Contracting State shall only be brought before the courts or administrative bodies of that State. Nothing in this Article shall be construed as creating or providing any right to such proceedings before any court or administrative body of the other Contracting State.

7. Where, at any time after a request has been made by a Contracting State under paragraph 3 or 4 and before the other Contracting State has collected and remitted the relevant revenue claim to the first-mentioned State, the relevant revenue claim ceases to be

a) in the case of a request under paragraph 3, a revenue claim of the first-mentioned State that is enforceable under the laws of that State and is owed by a person who, at that time, cannot, under the laws of that State, prevent its collection, or

b) in the case of a request under paragraph 4, a revenue claim of the first-mentioned State in respect of which that State may, under its laws, take measures of conservancy with a view to ensure its collection

The competent authority of the first-mentioned State shall promptly notify the competent authority of the other State of that fact and, at the option of the other State, the first-mentioned State shall either suspend or withdraw its request.

8. In no case shall the provisions of this Article be construed so as to impose on a Contracting State the obligation:

a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

b) to carry out measures which would be contrary to public policy (ordre public);

c) to provide assistance if the other Contracting State has not pursued all reasonable measures of collection or conservancy, as the case may be, available under its laws or administrative practice;

d) to provide assistance in those cases where the administrative burden for that State is clearly disproportionate to the benefit to be derived by the other Contracting State.

Article 28

MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS

Nothing in this Agreement shall affect the fiscal privileges of members of diplomatic missions or consular posts under the general rules of international law or under the provisions of special agreements.

Article 29

ENTRY INTO FORCE

1. The Contracting States shall notify each other in writing, through diplomatic channels, of the completion of the procedures required by the respective laws for the entry into force of this Agreement.

2. This Agreement shall enter into force on the date of the later of the notifications referred to in paragraph 1 of this Article.

3. The provisions of this Agreement shall have effect:

(a) In India,

(i) with respect to taxes withheld at source, for amounts paid or credited on or after 1st April of the fiscal year next following that in which the Agreement enters into force; and

(ii) with respect to taxes on income for any fiscal year beginning on or after 1st April of the fiscal year next following that in which the Agreement enters into force; and

(b) In Cyprus

(i) in respect of tax withheld at the source, for amounts paid on or after the first day of January in the calendar year next following that in which the Agreement enters into force; and

(ii) in respect of other taxes for years of assessment beginning on or after the first day of January in the calendar year next following that in which the Agreement enters into force.

4. The Agreement between the Republic of India and the Republic of Cyprus for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital signed on 13 June, 1994, shall be terminated on the date that this Agreement comes into effect.

Article 30

TERMINATION

This Agreement shall remain in force indefinitely until terminated by a Contracting State. Either Contracting State may terminate the Agreement, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year beginning after the expiration of five years from the date of entry into force of the Agreement. In such event, the Agreement shall cease to have effect:

(a) In India,

(i) with respect to taxes withheld at source, for amounts paid or credited on or after 1st April of the calendar year next following that in which the notice is given; and

(ii) with respect to taxes on income for any fiscal year beginning on or after 1st April of the calendar year next following that in which the notice is given; and

(b) In Cyprus

(i) in respect of tax withheld at the source, for amounts paid on or after the first day of January in the calendar year next following that in which the notice is given; and

(ii) in respect of other taxes for years of assessment beginning on or after the first day of January in the calendar year next following that in which the notice is given.

IN WITNESS WHEREOF the undersigned, duly authorized thereto, have signed this Agreement.

DONE in duplicate in Nicosia this day of 18 November 2016, each in the Hindi, Greek and English languages, all texts being equally authentic. In case of divergence of interpretation, the English text shall prevail.

For the Government of the

Republic of Cyprus

Sd/-

Name: (Harris Georgiades)

Position : Minister of Finance

For the Government of the

Republic of India:

Sd/-

Name : (Ravi Bangar)

Position : High Commissioner

PROTOCOL

At the signing of the Agreement between the Government of the Republic of India and the Republic of Cyprus for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on income, both sides have agreed upon the following provisions which shall be an integral part of the Agreement:

I. Ad. Article 10

It is clarified that at present, dividends distributed by an Indian Company is exempt from tax by virtue of section 10 (34) of the Income-tax Act, 1961. Accordingly, even though the treaty provides for withholding tax rate of 10%, so long as the present system of taxation of dividends in India continues, there will be no withholding tax from dividends paid by an Indian company to its shareholders.

2. Ad. Article 13

Notwithstanding anything in paragraphs 4 and 5 of Article 13 of the Agreement, gains from the alienation of shares that have been acquired at any time prior to the first day of April, 2017 shall be taxable only in the Contracting State of which the alienator is a resident. However, nothing in this paragraph will apply to gains from the alienation of shares that have been acquired on or after the first day of April, 2017.

3. Ad. Article 24

With reference to paragraph 3 of Article 24, it is understood that this provision shall not be construed as preventing a Contracting State from charging the profits of a permanent establishment which a company of the other Contracting State has in the first mentioned State at a rate of tax which is higher than that imposed on the profits of a similar company of the first mentioned Contracting State, nor as being in conflict with the provisions of paragraph 3 of Article 7.

4. Ad. Article 27

With reference to Article 27, it is understood that in no case shall this Article be construed so as to impose upon a Contracting State the obligation to carry out measures at variance with the laws, administrative practices, or public policy of either Contracting State with respect to the collection of its own taxes.

IN WITNESS WHEREOF the undersigned, duly authorized thereto, have signed this Protocol.

DONE in duplicate in Nicosia at this day of 18 November 2016, each in the Hindi, Greek and English languages, all texts being equally authentic. In case of divergence of interpretation, the English text shall prevail.

For the Government of the

Republic of CyprusSd/-

Name: (Harris Georgiades)

Position : Minister of Finance

For the Government of the

Republic of India:

Sd/-

Name : (Ravi Bangar)

Position : High Commissioner

RBI identity, autonomy dented by demonetisation, suggests YV Reddy : 10-01-2017


Former Reserve Bank of India Governor YV Reddy said the central bank’s identity seems to have been dented and its autonomy diluted. These comments are the strongest criticism of the RBI by a former governor following the currency squeeze sparked by the cancellation of Rs 500 and Rs 1,000 notes announced on November 8. Reddy said the institution doesn’t just dictate monetary policy but is also a full-service regulator with a wide range of responsibilities “To be very frank, my own suspicion is is that the institutional identity of the RBI has been damaged,” Reddy told CNBC in an interview after the launch of his Telugu memoir, Naa Gnapakalu (My Memories). “The Reserve Bank of India is the monetary authority, yes, but it is a full-service central bank and it was in charge of many other things. The recent emphasis appeared as though monetary policy is the main function.”

Reddy said the bank’s independence appears to have been undermined.

“The governor is accountable to monetary policy ,” he said. “So, is he not accountable to regulation, (is he) not accountable to currency , coins? There is confusion about relative importance. And that rela tive importance is being decided more outside than it is inside.” Some experts have said the RBI under governor Urjit Patel hasn’t been communicative enough nor has it been able to assert its independence,  especially in functions that are part of its remit.

Reddy, a bureaucrat turned central banker, wasn’t too pleased about the way in which the governor and deputy governors are being appointed either.

“There is a problem, especially after the legal amendments to the way governor is selected… the way deputy governor is selected… the way they are interviewed,” said Reddy . “Let me tell you, if a deputy governor is selected after interview with a secretary–I was myself a secretary–I can’t be interviewed by colleagues and juniors for a job. There is no way I would go.”

Source : PTI

Implementation of Indo-Japan free trade agreement needs to be expedited: Nirmala Sitharaman : 10-01-2017


The pace of implementation of Indo-Japan free trade agreement needs to be further enhanced in order to exploit the huge potential of the pact, Commerce and Industry Minister Nirmala Sitharaman said today.

The issue among others was discussed during the meeting between Sitharaman and her Japanse counterpart Hiroshige Seko.

She stated that the pace of implementation of India-Japan Comprehensive Economic Partnership Agreement (CEPA) has been rather steady and needed to be enhanced with faster pace to tap the huge potential of India- Japan bilateral trade, an official statement said.

Japan’s Economy Trade and Industry Minister Seko said that there is a huge potential for Indo- Japanese Cooperation and mentioned that 25 Japanese companies are participating in Vibrant Gujarat Summit with great enthusiasm.

The Japanese side requested that the issue of Transfer Pricing assessment and other ones as raised by Japan Chambers of Commerce and Industry in India (JCCII)from time to time need to be resolved for attracting greater Japanese investments in India, the statement said.

The Japanese business delegates briefed about their business presence in India and intimated that they wanted to diversify their business in India in Sectors such as Agriculture, Power, Electronics, Railways, Logistics Sectors, manufacturing of ATMs etc and wanted to contribute to the development of India.

The Japanese side expressed interest in enhancing cooperation in the area of Intellectual Property Rights (IPR) between India and Japan and intended to train Indian IPR examiners in Japan. They expressed the need for a high level meeting between India and Japan on IPR cooperation.

Minister of METI, Japan also extended an invitation to 100 IPR Examiners for training in Japan, the statement said.

Sitharaman requested the Japanese side to take steps to increase Indian Exports to Japan in Sesame seeds, Surimi fish and Indian generic drugs. She said that the Japanese Industrial Townships (JITs) in India would be transformational and will bring in significant Japanese investments and further strengthen India- Japan Economic Cooperation.

On the logistics front, she mentioned that India plans to build Logistics University wherein the cooperation from Japan would be needed.

Source : Financial Express

FM Arun Jaitley defends note ban with jump in tax numbers : 10-01-2017


The government’s tax collections were up in December 2016 bucking any impact of demonetisation with excise duty, levied at factory gate on goods, showing a growth of 31% .

Direct taxes grow by 12.01% and indirect taxes grow by 25% over the corresponding period last year April-December 2015, according to data released by the finance ministry on Monday.

Giving out the data, finance minister Arun Jaitley said: “Big picture is direct taxes are up for first three quarters and indirect taxes are up significantly”.

He said this tax data is real data and not estimation and a growth of 31% in excise showed that manufacturing remained robust. Advance tax collections in December quarter stand at Rs 2.82 lakh crore, which is 14.4% higher than the figures for the corresponding period of last year. Corporate advance tax grew by 10.6% while personal income tax advance tax registered a growth of 38.2%.

Indirect tax collections (Central Excise, Service Tax and Customs) up to December 2016 showed a growth of 25% at Rs 6.30 lakh crore.

Central excise collections stood at Rs 2.79 lakh crore during April-December, 2016 as compared to Rs 1.95 lakh crore during the corresponding period in the previous financial Year, registering a growth of 43%. Service tax during April-December, 2016 stood at Rs 1.83 lakh crore as compared to Rs 1.48 lakh crore during the corresponding period in the previous financial year, thereby registering a growth of 23.9%.

Customs collections during April-December 2016 stood at Rs 1.67 lakh crore as compared to Rs 1.60 lakh crore during the same period in the previous Financial Year, thereby registering a growth of 4.1%. During December 2016, the net indirect tax grew at the rate of 14.2% compared to corresponding month last year.

The de-growth in customs collections is largely on account of a decline of gold imports by about 46% (in volume terms) in December 2016 over December 2015, a statement said.

Source : Economic Times

How to boost the slowing Indian economy? Find out here : 09-01-2017


Finance minister Arun Jaitley is probably not off the mark when he says the government’s tax revenues for the current fiscal will top estimates. The minister’s optimism must stem from the trends in the collections between April and November, which have surprised on the upside. Excise duties, for instance, have jumped 46%, way above the targeted growth of 12% while corporation taxes are up a good 21%, against a budgeted 9%. The mop-up from service tax has been higher by as much as 27% against a conservative target of 10%. So, there is clearly some cushioning to absorb the shock to the economy due the disruption caused by demonetisation, which is expected to result in a fairly sharp slowdown across sectors in the second half of the year, shaving off anywhere between 150-200 basis points from the GDP for this period.

High frequency indicators—sales of CVs and two-wheelers, truck rentals and loan growth—show there may have been a fair bit of damage done by the acute shortage of currency in circulation. However, the government is probably betting on a revival in consumption demand in the last three months of the year once there’s more cash available with households, and also on the manufacturing sector regaining some of the lost momentum. In addition, a whole host of companies that were under-declaring their revenues are expected to report higher turnovers, though it is difficult to quantify how much this could fetch the government in terms of taxes. With the Income Disclosure Scheme-1 (IDS-1) netting around R15,000-20,000 crore of taxes, the Rs 16.3 lakh crore target should not be hard to meet. What’s worrying, though, is that there will be a shortfall in the planned Rs 56,500 crore mop-up from disinvestments since just R23,529 crore has been raised so far, and there is a large shortfall in telecom receipts as well.

It is critical the government is able to mobilise revenues because it needs to spend to keep the economy going—the extra revenues from IDS-2, and a possible demonetisation bonanza from RBI will help get extra revenues in FY18. It is now abundantly clear the economy had started slowing down even before the demonetisation exercise started—the advance CSO estimates peg the GDP growth for FY17 at 7.1% lower than the 7.6% in FY16, and this is based on data before demonetisation took place. The economy is being dragged down mainly by the manufacturing sector which has been under-performing for nearly two years now. In particular, gross fixed capital formation has been falling as a share of GDP, from an already low 28.3% in Q1FY17—it was 36.2% in Q2FY12—to 27.1% in Q2FY17. In the absence of spends by the private sector, the government must step on the accelerator. And its finances must allow it to spend without impinging on the deficit target. While total spends so far, at Rs 12.8 lakh crore of the budgeted Rs 19.8 lakh crore are reasonable, those on the capital account are less than 60%, and are undershooting targets. Given the budgeted expenditure on the capital account for 2016-17 was just 4% higher than that in FY16, the pace of spending needed to be stepped up meaningfully. Specifically, there needs to be a focus on execution with the government helping companies with permissions and clearances, so that projects get off the ground. Without a big pick-up in investments, the economy runs the risk of losing lot more momentum.

Source : Financial Express

Indian Accounting Standards: Insurers seek clarity on many issues as deadline nears : 09-01-2016


Even as the insurance industry is racing against time to comply with the Indian Accounting Standards (Ind-AS) from April, they point out some concern, particularly in regard to taxes that need to be addressed before the deadline by the insurance regulator Irda.

Various industry players and sectoral experts cite taxation issue as the most teething concern coupled with the impact on solvency, determining free reserves, measuring investment property as well as the fair value accounting which can create volatility.

Considering the short window, insurers have set up committees internally to ensure that the new accounting standard is implemented within the stipulated timeframe.

While the new reporting system becomes mandatory only from April 2018, the Irdai (Insurance Regulatory & Development Authority of India) has asked insurers to submit their accounts in the new format from the December quarter onwards.

It can be noted that in November, 2015, Irdai had asked the industry to converge their reporting with international financial reporting standard (IFRS). Following this, the Corporate Affairs Ministry asked Irdai to prepare a roadmap for Ind-AS adoption from April, 2018.

After this, to ensure smooth rollout, the Irdai set up an implementation group on the issue under the chairmanship of Irdai member V R Iyer.

Sai Venkateshwaran of KPMG India said before forcing the rollout, the ministry and regulator should to work together and take into account the recommendations of the implementation group and make suitable amendments to the regulations or even Ind-As standards.

The areas that need special attention are the impact on solvency, determination of free reserves, measurement of investment property, he said.

On the other hand, insurers claim they are fully prepared for the rollout of the new accounting standards despite these issues.

“We are fully prepared for implementation of new accounting standards, but still there are a few areas requiring clarification. Yet we are confident that Irdai would provide necessary support to ensure smooth implementation,” New India Assurance chairman G Srinivasan told PTI.

“Fair value accounting could create volatility for a company if it has large exposure to equities. We hope to get some time and special dispensation from the regulator to tide over this matter,” he added.

Srinivasan also pointed out that there is no clarity on taxation as yet and he hopes that insurers will not be made to pay tax on unrealised profit.

Private sector SBI Life, currently preparing for an IPO, has internally formed a committee for the implementation of the new accounting norms

Non-life player SBI General has also formed a committee internally for this.

“We have appointed an external consultant to manage the implementation project and effective transition from the current accounting practice,” its SVP and CFO Rikhil Shah said, adding, “fair valuation of investments will increase the balance sheet size.”

Major impact of Ind-AS on the balance sheet of a non- life insurer will be on its investment portfolios, he said.

According to Saha, the option and the decision with respect to valuation of investment will depend on how the business is managed and cash flows will be factored in.

“After a preliminary assessment, we feel that fair valuation of investments will increase the balance sheet size,” he said.

Source : PTI

PM Narendra Modi flying blind into budget as India’s growth a guessing game : 09-01-2017


Prime Minister Narendra Modi’s administration will probably have to prepare India’s $300 billion budget in the dark.

With less than a month to go before the annual presentation, his Statistics Office has refused to estimate the impact of Modi’s unprecedented cash clampdown on gross domestic product. All it said on Friday was that growth will slow to a three-year-low before the effects of the ban start to show.

“If the budget has to be tabled by Feb. 1, the papers will have to go for printing by Jan. 20. This would indicate that they won’t get any more data,” said Pronab Sen, who was India’s national statistician until 2010. The Statistics Office correctly used available data to offer an estimate of what the economy would look like without demonetization, and left the Finance Ministry to fill in the blanks, he said. “How much they will shave off, no one can guess.”

Sen estimates GDP will expand about 6 percent in the year through March 2017, compared with a median 6.8 percent projection in a Bloomberg survey.

The government has sufficient data to prepare the budget, Finance Ministry spokesman D.S. Malik said by phone on Sunday, without elaborating.

Yet there were only a handful of indicators available to the Statistics Office that capture the economy after Modi’s Nov. 8 decision to invalidate 86 percent of currency in circulation, such as farm output and sowing, government expenditure and sales tax. Corporate results won’t be filed before early February, said Dharmakirti Joshi, chief economist at Crisil Ltd., the local unit of S&P Global. The government will be handicapped in estimating recovery timelines for various sectors, he added, complicating an already fraught budget-making process.

A credible view on growth is essential for the government to project revenues and spending in a nation where a million people enter the workforce each month. The 2017 announcement is of special importance because it’ll be followed by a series of crucial state elections.

To further muddy the waters, Modi’s move will disproportionately be felt in India’s vast shadow economy, which relies on cash and employs more than 90 percent of India’s workers.

‘Never Know How This Will Turn Out’

These effects won’t be directly captured in the GDP data, according to Gita Gopinath, economics professor at Harvard University. Human suffering in the form of job losses risks flying under the radar, or showing up indirectly as an antiseptic dip in consumption as daily wage earners defer non-essential spending.

Modi had touted the move as India’s biggest step against tax evasion and graft. While critics decry it as short-sighted, supporters praise Modi for his boldness.

“No economist worth his salt should comment on the long term impact demonetization is going to have on the Indian economy,” said Abhay Aima, country head, private banking group, retail liabilities, digital banking and international consumer business at HDFC Bank Ltd. “There has been no precedence of something like this. You never know how this is going to turn out.”

Higher Tax Revenues

Tax collections in the year through March will exceed the government’s estimates as demonetization forces members of the shadow economy to declare unaccounted incomes, Finance Minister Arun Jaitley told reporters in New Delhi on Thursday. Windfall gains from the exercise will be between zero to 1 percent of GDP, according to Standard Chartered Plc. It predicts the government will retain its target of narrowing Asia’s widest budget deficit to 3 percent of GDP in the year starting April 1 though a deviation to 3.3 percent can’t be ruled out.

Apart from “forecasting challenges,” the government will also probably overhaul the format of its budget, removing a historical distinction between so-called plan and non-plan spending that was a relic of Soviet-style five-year plans, Standard Chartered analysts including Anubhuti Sahay wrote in a report on Friday.

“The finance minister will face new — and probably more significant — challenges than in recent years when he presents the budget,” they said. “Don’t miss the forest for the trees.”

Source : Economic Times

For reforms’ sake, Narendra Modi govt must stop pampering small savers : 07-01-2017


Though the surge of liquidity has allowed banks to sharply cut rates for new borrowers—no bank has cut base rates—a longer-run solution is not possible unless the government stops pampering small savers. As long as interest rates on small savings like NSC and PPF remain high, this acts as a floor to bank interest rates—else, depositors will abandon them for post office accounts—and, in turn, on lending rates. It is for this reason that, last February, the government decided to recalibrate small savings’ rates regularly, in keeping with the regular fall in rates on government securities (G-Secs) which are the benchmark for all interest rates in the economy. As the release said, ‘small savings interest rates are perceived to limit the banking sector’s ability to lower deposit rates’; so, ‘in the context of easing the transmission of the lower interest rates”, the government announced it would recalibrate interest rates on small savings on a quarterly basis to ‘align the small saving interest rates with the market rates of the relevant Government securities’. For certain schemes like Sukanya Samriddhi Yojana and the Senior Citizen Savings Scheme, the spreads were kept at very high levels—75 bps and 100 bps, respectively—while for others like Kisan Vikas Patras and 1/2/3-year deposits, the 25 bps spread was removed. Certain dates were fixed for the rates to be notified on the basis of the previous quarter’s average GSec rates.

The first rate-cuts were made for April, though the cut which was to be announced in June—for the July to September period—was not made, and a very minor reset was done for the October to December period. No reset was announced—it was to be done on December 15—for the January to March period. As a result, interest rates on small savings continue to remain very high. While the yield on a 5-year G-Sec has fallen from 7.378% in April to 6.179% today, interest rates on 5-year NSCs are at 8%, down from 8.5% in FY16—since such savings were to have a 25 bps spread, the rates should have been around 6.7-6.8%; bank deposits of a similar tenure have seen rates fall from 7.5% in early April to 6.5% today. The PPF rate, based on the 25 bps spread it was to have over 10-year GSecs, should have been under 7% since the 3-month average bond yield was 6.57%—the actual rate is much higher at 8%. Once you factor in the tax benefits on small savings—interest earnings on PPF are tax-free—and keep in mind bank interest rates are taxable, the difference becomes even worse. Given the government had announced this reform almost a year ago, why it is not being implemented is odd—this makes it clear that a high degree of ad hocism still remains when it comes to even notified reforms.

Source : Financial Express

Sebi gives approval to BSE for international clearing corporations : 07-12-2017


Markets regulator Sebi has given approval to BSE for setting up a global clearing corporation in international financial services centre (IFSC) at Gujarat’s GIFT city.

Sebi has granted recognition to India International Clearing Corporation for one year, commencing on December 29, 2016, and ending on the December 28, 2017, the regulator said in a notification.

BSE, in November, had received in-principle approval from Sebi to set up international exchange and clearing corporations at Gujarat International Finance-Tech City (Gift City).

Trading members are expected to trade through India International Exchange (India INX), an arm of leading domestic bourse BSE, which is expected to go ‘live’ next week.

The BSE board at its meeting held on May 5, 2016, had approved creation of two wholly-owned subsidiary companies for the purpose of setting up the first international exchange and clearing corporations.

Rival National Stock Exchange (NSE), is also going to open its international exchange at GIFT IFSC in the near future.

Source : PTI

Budget 2017: Basic income for bottom 50% of public will be a political master-stroke : 07-01-2017


What the prime minister’s speech of December 31, 2016, made clear was that India was firmly moving away from the anti-poverty policies pursued by all previous governments. The new approach, made possible by technology, is to get away from the Amartya Sen advocated in-kind income transfers to some version of cash transfers.

Two major in-kind poverty alleviation policies in operation are PDS and NREGA. Both involve a large scale government involvement. The former has the government (Food Corporation of India) involved in procurement, storage, transport, and distribution of food. NREGA has the government planning projects, employing people, on what is touted as the largest work programme in the world. What is not as well-advertised (especially by the sponsors) is that both are amongst the most corrupt schemes in the world. Though given the recent demonetisation effort, one must add the biggest daddy of all corrupt—the Indian tax administration—to the list.

Study after PDS study has proven Rajiv Gandhi right in his (informed) 1985 conjecture that no more than 15% of PDS food distribution reaches the poor. What is not well-recognised, especially by the persistent PDS advocates, is that only 50 % of food procured and stored by the government reaches anybody, rich or poor. Where does this 50% go? Towards the generation of black income for corrupt government officials, liquor manufacturers, food mills, etc. Ditto with the NREGA programme where jobs (and income) are allocated to ghost workers and panchayat leaders. Together, the black income generated by these two programmes is more than 1% of GDP, or Rs 175,000 crore.

Helped by technology, and Aadhaar (Supreme Court, please note), the Direct Benefit Transfer (DBT) scheme has gathered considerable momentum over the last few years. A logical expansion of DBT is the policy of Universal Basic Income (UBI), i.e., a guaranteed minimum income to all (population, adult, worker, or variant thereof). Chief economic adviser Arvind Subramaniam has stated that the new Economic Survey will contain a large section on UBI. For those interested in efficient redistribution of income, this news is extremely welcome.

But should income transfers be universal, i.e., to every individual in the economy, or should they be targeted to specific individuals? And should government still pursue schemes like PDS and NREGA, or should such wasteful and corrupt government schemes be scrapped so that deserving individuals can get more? These two questions will hopefully be addressed in the Economic Survey.

In the meantime, some preliminary calculations to aid our thinking, and formulation, of a UBI policy. The accompanying table contains some basic data for the Indian economy for FY17. If the assumption is made that the distribution of consumption has not changed since FY12 (the real distribution did not change between 1983 and FY12; so, this is an eminently reasonable assumption), then some reasonable calculations can be made about the magnitude, and efficacy, of income transfer policy.

For FY12, data are from the NSS survey. For FY17, approximate (and lower bound) consumption data are obtained from wage data for ploughman and carpenters. The rate of growth in these wages of the poor and semi-skilled indicate an increase of 58% and 69%, respectively, over the last five years. The lower 58% growth is taken as the mean growth in expenditure for all. Consumer prices rose by 40% between FY12 and FY17; this implies that the Tendulkar poverty level in FY17 is no more than 9% of the population.

basic-income-1

This background information for India, circa FY17, yields important policy conclusions. The defining line for the absolute poor should not be absolute—it should increase with the level of per capita income, and should include the lower middle-class as well. The Tendulkar definition of poverty is now obsolete and captures too few of those deserving income transfers.

A poverty line some 22% higher (R1,525 per person per month) than the equivalent Tendulkar poverty line of R1,250 for FY17 yields a national poverty rate of 20%. The average poverty gap with the higher poverty line is approximately R300 per poor person per month. The poverty gap is defined as the difference between the average consumption level of the poor and the relevant poverty line. To reduce this new absolute poverty level (20% of population or 265 million) to zero, the government needs to transfer, on an annual basis, R1 lakh crore. This is only 0.7% of GDP. At present, via PDS and NREGA, the government spends R1.75 lakh crore (R1.35 lakh crore on PDS and R0.4 lakh crore on NREGA).

So, here is an efficient way for the government to eliminate poverty on an ongoing basis, and to help the lower middle-class as well, say 50% of the population. The demonetisation policy will allow increased personal income tax collections, possibly around R1 lakh crore to R1.5 lakh crore a year. Thus, R3 lakh crore are available with the government for redistribution if it decides to scrap PDS and NREGA (if it is serious about rooting out corruption, no better place to begin). [Income tax and data on consumption of automobiles and two-wheelers can easily help the government target the bottom 50%.]

Without any strain on the budget, the government can transfer R3 lakh crore to 265 million people, or approximately R1,000 per person per month. This will result in a 50% increase in consumption for the (median) 50th percentile consumer; and a 65% increase for the 25th percentile consumer. The PDS scheme, at best, transfers R160 per month to each person, rich or poor, lucky enough to receive, the transfer (a subsidy of R20 for each kilogram of PDS food consumed).

The political Opposition is demanding that the Budget be postponed because there are elections in five states in February and March. Even though there is a 2012 precedent, this demand seems most illogical. However, it is not an absurd political demand. Perhaps, the Opposition has broadly done the above calculations and believes that it is likely that a targeted basic income transfer scheme is in the offing. If such a policy is announced, it will be an economic and political master-stroke. Which is why the Opposition will go to extreme lengths to prevail. Unfortunately for them, they don’t have logic, law, or the numbers in Parliament to prevail.

Source : Economic Times

Notification No.2/2017 06-01-2017


Income tax (1st Amendment) Rules, 2017 – 2/2017

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

NOTIFICATION NO. 2/2017

New Delhi, the 6th January, 2017

G.S.R. 14(E).-In exercise of the powers conferred by section 139A and section 285BA, read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1.  (1) These rules may be called the Income–tax (1st 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 (hereinafter referred to as the principal rules), in rule 114B, after the third proviso, the following proviso shall be inserted namely,-

“Provided also that a person who has an account (other than a time deposit referred to at S.No.12 of the Table and a Basic Saving Bank Deposit Account) maintained with a banking company or a cooperative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) and has not quoted his permanent account number or furnished Form No. 60, as the case may be, at the time of opening of such account or subsequently, he shall furnish his permanent account number or Form No. 60, as the case may be, to the person specified in clause (c) of sub-rule (1) of rule 114C on or before the 28th day of February, 2017.”.

3. In the principal rules, in rule 114C, after sub-rule (2), the following sub-rule shall be inserted, namely:-

“3. The person referred to in sub-rule (1) or sub-rule (2) who has received any document in which permanent account number is mentioned or as the case may be, a declaration in Form No.60 has been furnished, shall ensure that the valid permanent account number or the fact of furnishing of Form No.60, is duly mentioned in the records maintained for the transactions referred to in rule 114B and the permanent account number or the details of Form No.60 are linked and mentioned in any information furnished to the income-tax authority or any other authority or agency under any provision of the Act or any rule prescribed therein.”.

4. In the principal rules, in rule 114D, in sub-rule (2), the following proviso shall be inserted, namely:

“Provided that the statement in respect of the transactions listed in clause (ii) of column (3) of serial number (10) of the Table under rule 114B shall be furnished on or before the 15th day of January, 2017.”

5. In the principal rules, in rule 114E,-

(i) in sub-rule (2), in the Table, after serial number 12 and entries relating thereto, the following serial number and entries shall be inserted, namely:-

Sl. No. Nature and value of transaction Class of person (reporting person)
(1) (2) (3)
“13. Cash deposits during the period 1st April, 2016 to 9th November, 2016 in respect of accounts that are reportable under Sl.No.12. (i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); (ii) Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).”;

(ii) in sub-rule (5), in the proviso, after the words, brackets and figures “serial number (12)”, the words, brackets and figures “and serial number (13)” shall be inserted.

6. In the principal rules, in Appendix-II, in Form No.61A, in Part C, for ‘C.3’ and entries relating thereto, the following shall be substituted, namely:-

“C.3 ACCOUNT SUMMARY  
C.3.1 Aggregate gross amount credited to the account in cash  
C.3.2 Aggregate gross amount debited to the account in cash  
C.3.3 Aggregate gross amount credited to the account in cash from 1st day of April, 2016 to 8th November, 2016  
C.3.4 Aggregate gross amount credited to the account in cash from 9th day of November, 2016 to 30th day of December, 2016  
C.3.5 Remarks”.  

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

Dr. T. S. MAPWAL, Under Secy.

Note : The principal rules were published vide notification S.O. 969(E), dated the 26th March, 1962 and last amended vide notification S.O. 4168(E) dated the 27thDecember, 2016.

25 – 05-01-2017


EXIM BANK’S GoI SUPPORTED LINE OF CREDIT OF US 4.22 MILLION TO GOVERNMENT OF REPUBLIC OF BURUNDI

A.P. (DIR SERIES 2016-17) CIRCULAR NO. 25DATED 5-1-2017

Export-Import Bank of India (Exim Bank) has entered into an Agreement dated February 14, 2014 with the Government of the Republic of Burundi for making available to the latter, a Government of India supported Line of Credit (LOC) of USD 4.22 million (USD Four million two hundred and twenty thousand) for the purpose of financing the farm mechanization in Burundi. The goods, machinery, equipment, and services including consultancy services from India for exports under this Agreement are those which are eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by the Exim Bank under this Agreement. Out of the total credit by Exim Bank under this Agreement, the goods and services including consultancy services of the value of at least 75% of the contract price shall be supplied by the seller from India and the remaining 25% goods and services may be procured by the seller for the purpose of the eligible contract from outside India.

2. The credit agreement under the LOC is effective from December 20, 2016 and the date of execution of agreement is February 14, 2014. Under the LOC, the last date for opening of letter of Credit and Disbursement will be 48 months for Project Export Contracts from the schedule completion date(s) of contract(s) and 72 months for supply contracts, from the date of execution of the Agreement.

3. Shipments under the LOC will have to be declared on EDF/SDF Forms as per instructions issued by the Reserve Bank from time to time.

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

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

6. The directions contained in this circular have been issued under 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. : 01/2016 Dated: 05-01-2017


EFFECTIVE EXCISE DUTY PAYABLE ON SPECIFIED PRODUCTS – AMENDMENT IN NOTIFICATION NO. 2/2011-C.E., DATED 1-3-2011

NOTIFICATION NO. 1/2017-C.E.DATED 5-1-2017

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 amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 2/2011-Central Excise, dated the 1st March, 2011, published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (i), vide G.S.R. 117 (E), dated the 1st March, 2011, namely:-

In the said notification, in the Table, serial number 49 and the entries relating thereto shall be omitted.

 

No.01/2017 Dated: 04-01-2017


Double Taxation Agreement – India-Sweden Convention For Avoidable Of Double Taxation And Prevention Of Fiscal Evasion – Suspension Of Collection Of Taxes During Mutual Agreement Procedure (Map) – Order-Instruction

Instruction No. 1/2017

[F.NO.500/5/2016-APA-II],

Government of India Ministry of Finance Department of Revenue(Central Board of Direct Taxes)

New Delhi the, 4th January 2017

To,

All The Principal Chief Commissioners of Income-tax

Subject:  Double Taxation Agreement – India-Sweden Convention For Avoidable Of Double Taxation And Prevention Of Fiscal Evasion – Suspension Of Collection Of Taxes During Mutual Agreement Procedure (Map)

Attention is invited to Article 26 of the India – Sweden DTAC, which provides for Mutual Agreement Procedure (MAP) between the Competent Authorities of India and Sweden for avoiding taxation which is not in accordance with the Convention. During the pendency of MAP, recovery of tax demand could lead to potential hardships for the taxpayers as tax demand is yet to attain finality. Considering the hardship faced by the taxpayers during the pendency of MAP, as well as for efficient management of collection of revenue, the Competent Authorities of India and Sweden have signed a Memorandum of Understanding (MoLI) regarding suspension of collection of taxes during the pendency of MAP. In terms of the MoU, the collection of outstanding taxes in case of a taxpayer whose case is pending in MAP before the Competent Authorities of India and Sweden, would be kept in abeyance for a period of two years (extendable to a maximum period of five years through mutual agreement between the Competent Authorities of India and Sweden) subject to furnishing of a bank guarantee of an amount equal to the amount of tax under dispute and interest accruing thereon, as per the provisions of the Income-tax Act.

2. On receipt of a formal request for suspension of collection of outstanding tax from a taxpayer who is a resident of Sweden and where MAP has been invoked through the Competent Authority of Sweden, the Assessing Officers are required to keep the enforcement of collection of outstanding taxes in abeyance for a period of two years in respect of such taxpayers subject to fulfilment of the following conditions:

(i) the Foreign Tax and Tax Research I (FT&TR I) Division of the Central Board of Direct Taxes confirms the pendency of MAP; and

(ii) the taxpayer furnishes a bank guarantee to the Assessing Officer in the model draft format annexed to the MoU for an amount calculated in accordance with the manner indicated therein.

3. Further, the provisions of the MoU shall also apply to an Indian resident taxpayer in cases involving transfer pricing adjustments, where MAP has been invoked by the resident of Sweden through the Competent Authority of Sweden.

4. The effect of the MoU is that the furnishing of the bank guarantee should be treated as sufficient arrangement for exercising discretion by the Assessing Officer for extension of time limit for payment of taxes in terms of sub-section (3) of Section 220 of the Income-tax Act. The extension, however, shall subsist only for two years from the date on which communication from FT&TR I Division about the invocation/pendency of MAP is received by the Assessing Officer. This period of two years may be extended through mutual agreement between the Competent Authorities of India and Sweden and any such extension will be communicated to the Assessing Officer by FT&TR I Division of the CBDT. However, in no case shall the aggregate periods for which collection is suspended exceed five years.

5. In case the Competent Authorities of India and Sweden agree that there is no resolution possible, an intimation to this effect shall be given to the Assessing Officer who shall, thereafter, be entitled to enforce recovery of the taxes (including interest and penalty, if any). If the taxpayer fails to pay the taxes (including interest and penalty, if any), the Assessing Officer shall be entitled to invoke the bank guarantee. In case the time limit of two years has expired and no communication has been received from FT&TR I Division about MAP resolution, the Assessing Officer, before proceeding to making recoveries or invoking the bank guarantee, shall seek inputs from FT&TR I Division about the status of MAP in such cases. Recovery of taxes (including interest and penalty, if any) may only be proceeded with after getting confirmation from FT&TR I Division that no extension beyond two years has been granted through mutual agreement between the Competent Authorities of India and Sweden.

6. In cases where a resolution of dispute is arrived at by the Competent Authorities of India and Sweden after mutual consultation, the taxes (including interest and penalty, if any) payable by the Indian taxpayer shall be determined by the Assessing Officer in terms of such resolution, as per the procedure laid down in Rule 44H of the Income-tax Rules, 1962. After the revised notice of demand is sent to the taxpayer, the amount shall be recoverable from the taxpayer. In case the taxpayer fails to pay the demand, the bank guarantee so furnished shall be invoked after seeking the consent of the Indian Competent Authority, which shall grant the same after intimating its counterpart in Sweden.

7. The Assessing Officers as well as their controlling officers are advised to keep a close watch on the limitation of the bank guarantee furnished under the MAP. For this purpose, a control register should be maintained in the office of the Assessing Officers and the same may be periodically inspected by the jurisdictional Additional or Joint CIT and/or the jurisdictional Principal CIT or CIT.

8. A copy of the MoU, along with its Annexure containing the model draft format of the bank guarantee, is enclosed.

9. These instructions are issued under section 119 of the Income-tax Act and the same may be brought to the notice of all the officers in your charge.

MEMORANDUM OF UNDERSTANDING BETWEEN THE COMPETENT AUTHORITY OF INDIA AND THE COMPETENT AUTHORITY OF SWEDEN REGARDING SUSPENSION OF COLLECTION OF TAXES DURING MUTUAL AGREEMENT PROCEDURE

The Competent Authority of India

and

The Competent Authority of Sweden

Having regard to the hardship faced by the taxpayers during the pendency of a Mutual Agreement Procedure, under Article 26 of the Convention between the Government of the Republic of India and the Government of the Kingdom of Sweden for the avoidance of double taxation and the prevention of fiscal evasion with respect to faxes on income and on capital, which was signed on 24th June, 1997 (the “Convention”);

Having determined and agreed that efficient processing of Mutual Agreement Procedure (“MAP”) cases will be facilitated by suspending collection of any amounts of tax, including also any related interest or penalties, for any taxable years which are the subject of MAP proceedings;

WHEREAS:

(A) The Competent Authorities have arranged and desired to agree that with regard to amounts of taxes covered under Article 2 of the Convention and potentially payable to the Government of India, the Assessing Officer will suspend collection in accordance with this Memorandum;

and

(B) The Competent Authorities have arranged and desired to agree that with regard to amounts of taxes covered under Article 2 of the Convention and potentially payable to the Government of Sweden, the Swedish Tax Authority will suspend collection in accordance with this Memorandum.

NOW THEREFORE, in consideration of the premises, covenants and conditions herein contained and in implementing this arrangement:

(1) The tax authorities of India and Sweden shall retain the right to demand security in appropriate cases, as deemed fit and necessary to avoid prejudicing the interests of their respective governments.

(2) In India, as security, a taxpayer shall provide an irrevocable Bank Guarantee issued by any scheduled bank, or by an Indian branch of a foreign bank approved by the Reserve Bank of India to carry out banking business in India, as per Annexure ‘A’ to this Memorandum.

(3) In Sweden, as security, a taxpayer shall, upon demand, provide an irrevocable Bank Guarantee issued by a bank that is authorized by the Swedish Financial Supervisory Authority or any other form of security deemed adequate by the Swedish Tax Authority.

(4) The amount, if any, for which security is demanded under paragraph (2) or (3) above, as the case may be, shall not exceed the amount of additional tax demanded by the tax authority requiring the security (aggregated for all the periods pending before the Competent Authorities), and, if applicable, as adjusted by the Assessing Officer in accordance with domestic laws, and subject to further adjustment for interest on these amounts calculated at the statutory rate on non payments.

(5) Collection of any interest or penalty levied from the concerned taxpayer, in relation to amounts suspended from collection under this Memorandum, shall also be suspended subject to paragraph (A). For the avoidance of doubt, interest, if appropriate, will continue to run while the collection is suspended.

(6) The Competent Authorities shall endeavour to either resolve or close the case within a period of two years from the date on which one Competent Authority notifies the other that the application from the Taxpayer(s) for assistance under the MAP has been received.

(7) The maximum period for which collection can be suspended under this Memorandum shall be two years unless extended by mutual consent by both the Competent Authorities. However, in no case shall the aggregate periods for which collection is suspended exceed five years.

(8) Any draw-down upon a Bank Guarantee referred to in paragraph (2) or (3) above will be done after notification by one Competent Authority to the other about the completion of the Mutual Agreement Procedure, or of the time limit under paragraph (7), whichever earlier.

(9) In the event of a lapse of security under paragraph (2) or (3), the taxpayer shall be permitted to substitute another form of security under such paragraph, provided such substitution takes effect not less than 30 days prior to the lapse of the prior security. Such substitution will relieve the bank which provided the first Bank Guarantee from its obligations to the concerned Government of India or Sweden under that first security.

(10) The terms of this Memorandum may be reviewed by the Competent Authorities at anytime in the future upon the request of either party.

(11) This Agreement shall enter into force on the thirtieth day after the notification in writing by the Competent Authority of Sweden to the Competent Authority of India of the completion of the procedures required by its law for the entry into force of this Agreement. AVE AGREED as follows:

Dated at Stockholm, 7 February, 2013

For the Competent Authority of Sweden

For the Competent Authority of India

Annexure ‘A’

To

The President of India acting through and represented by

[Designation],

Income Tax Department,

Ministry of Finance,

Government of India, New Delhi.

Bank Guarantee

Bank guarantee as security for keeping the recovery of Tax Demand in abeyance during the pendency of Mutual Agreement Procedure (MAP)

[Applicable in case of non-resident assesses, and Indian companies and other entities affiliated with Swedish companies, who have invoked the Mutual Agreement Procedure]

This Deed of Bank guarantee made this . . . . . . . . . . . . . day of 20. . . , by [INSERT: Name and Address of Guaranteeing Bank] (hereinafter called “the Bank”, which expression shall, unless excluded by or repugnant to the context, include its successors and assignees) to the President of India acting through and represented by [Designation], Income Tax Department, Ministry of Finance, Government of India, New Delhi (hereinafter called “the Government”).

WHEREAS the Government has agreed that [INSERT: Name, Address, and permanent account number of the Assessee] (hereinafter called “the Assessee”, which expression shall, unless excluded by or repugnant to the context, include its successors and assignees) shall furnish a Bank Guarantee in respect of a demand of Rs. [INSERT: Amount of Tax in dispute] for the assessment year(s) . . . . . . . . . . . . in lieu of which the recovery of any part of such demand shall not be enforced until 30 days after the Assessing Officer receives written notice of the MAP Agreement between the Competent Authorities of the Governments of India and Sweden, and the Assessee will not be treated as in default for the above assessment year (s);

AND WHEREAS THE Bank has at the request of the Assessee agreed to execute these presents:

NOW THEREFORE THIS DEED WITNESSES AS FOLLOWS

In consideration of the Government agreeing to treat the Assessee as not in default for Rs. [INSERT: Amount of Tax in dispute, plus interest specified in paragraph (1) below] for the assessment year(s) . . . . . . . . . . . . . . . . .

1. The Bank irrevocably guarantees and undertakes, for the term provided in paragraph (2) below, that the Bank shall indemnify and keep indemnified the Government to the extent of the said sum of Rs [INSERT: Amount of Tax in dispute] (Rupees [written text]) and interest accruing at the rate specified in the Income-tax Act of 1961 as amended from time to time, for non-payment of taxes on this amount after [INSERT date from which recovery could otherwise be made] or any amount as adjusted by the order of the Assessing Officer which may be passed after the furnishing of the guarantee. On advice from the Government that the Assessee has failed and neglected to observe any of its obligations to the Government with regard to the terms and conditions of the agreements between the Assessee and the Government that may underlie this Bank Guarantee, the decision of the Government as to whether any amount should be paid out by the Bank to the Government hereunder shall be final and binding.

2. The Bank further agrees that the guarantee herein contained shall remain in full force and effect for a period of 3 years from the date hereof, i.e., till [INSERT: date]; and further agrees to renew this guarantee for another 3 years on the following terms: the Bank will provide the Government with written notice no later than 60 days prior to the expiration date of this Bank Guarantee if the taxpayer has not renewed the agreements between the Assessee and the Bank that underlie this Bank Guarantee for an additional period of 3 years. If the Government does not receive a renewal of this Bank Guarantee or a substitute Bank Guarantee for the amounts of tax and interest in dispute prior to 30 days before the expiration date of this Bank Guarantee, the Government may instruct the Bank to pay the guaranteed amounts prior to expiration of the Bank Guarantee.

Provided further that, notwithstanding any other things contained herein, the liabilities of the Bank shall be limited to the maximum of the guaranteed amount of Rs. [INSERT: Amount of tax in dispute]

(Rupees [INSERT: written text]), as increased by interest pursuant to paragraph (1) during the term of this Bank Guarantee; and unless a claim in writing is lodged with the Bank, or action to enforce the claim under the guarantee is filed or initiated against the Bank, within six months from the date of expiry of the guarantee period fixed hereunder or where such period is extended under the terms of this guarantee from the date of such extended period as the case may be, all the rights of the Government under this guarantee shall be forfeited and the Bank shall be relieved and discharged from liabilities hereunder.

3. The obligations of the Bank to the Government under this Bank guarantee will terminate upon the occurrence of any of the following for the taxable years in question:

(i) the payment by the Bank or the Assessee to the Government of the guaranteed amounts;

(ii) the payment by the Assessee to the Government of all amounts owed, as agreed to by the Competent Authorities in a MAP Agreement;

(iii) a MAP Agreement by the Competent Authorities that the Government will not seek to recover any part of the previously demanded amounts; or

(iv) the Assessee furnishes to the Government similar security from another Bank.

4. The guarantee herein contained shall not be discharged or affected by any change in the constitution either of the Assessee or of the Bank.

5. The Government shall have the fullest liberty without affecting the guarantee to postpone for any time, or from time to time, any of the powers exercisable by it against the Assessee, or to either enforce or forbear any of the terms and conditions under this guarantee or under the Income-tax Act and Income-tax Rules, and the Bank shall not be released from its liabilities under this guarantee by any exercise by the Government of the liberty with reference to the matter aforesaid or by reasons of time being given to the Assessee, or by any other act of forbearance or enforcement on the part of the Government, or by any indulgence by the Government to the Assessee, or by any other matter or thing whatsoever which under the law relating to sureties would but for these provisions have the effect of so releasing the Bank from its such liability. The Bank hereby agrees and undertakes that any claim which the Bank may have against the Assessee shall be subject and subordinate to the prior payment and performance in full of all the obligations of the Bank hereunder and the Bank will not without prior written consent of the Government exercise any legal rights or remedies of any kind in respect of any such payment or performance so long as the obligations of the Bank hereunder remain owing and outstanding, regardless of the insolvency, liquidation or bankruptcy of the Assessee or otherwise howsoever. The Bank will not counter claim or set off against its liabilities to the Government hereunder any sum outstanding to the credit of the Government with it.

6. This Bank Guarantee shall be governed by and construed in accordance with the laws of the Republic of India (without regard to its principles of conflict of laws).

7. The Bank undertakes not to revoke this guarantee during its currency except with the previous consent of the Government in writing.

8. Notwithstanding anything stated above, liability of the Bank under this guarantee is restricted to Rs. [INSERT: Amount of Tax in dispute, plus interest specified in paragraph (1) above] (Rupees [written text]) and is valid for the period(s) described in paragraph 2 above. Unless a demand or claim under this guarantee is lodged with the Bank on or before [INSERT: date, as established in paragraph (2) above], all rights of the Government under the said guarantee shall be forfeited and the Bank shall be relieved and discharged from all liabilities thereunder whether or not this document shall have been returned to the Bank.

IN WITNESS WHEREOF, the Bank, through its duly authorized representative, has set its hand stamp on this . . . . . . . . . . day of . . . . . . . . . .at . . . . . . . . . .

Witness For and on behalf of the Bank
(Signature) (Designation with Bank Stamp)
Name (Attorney as per power of Attorney No. . . . . . . . . . . )
Date

Budget 2017: No MAT relief for SEZ units likely : 04-01-2017


Special economic zone (SEZ) units and developers are unlikely to get relief from the minimum alternate tax (MAT) in the coming Budget despite a strong pitch for their removal by the commerce ministry, according to sources.

The revival of SEZs — once a growth engine for the country’s exports — was among the key steps proposed by the Board of Trade (BoT), headed by commerce and industry minister Nirmala Sitharaman, last year to help reverse a slowdown in the country’s exports. The BoT could again suggest steps to boost SEZs when it meets later this month, said an official. Currently MAT is levied at 18.5% on the book profit of firms, with the effective rate over 21%, factoring in surcharges and cess.

In fact, the commerce ministry has been consistent in its demand for the removal of MAT and the dividend distribution tax (on SEZ developers) in recent years on grounds that the tax exemption will improve export competitiveness in times of a slowdown in the international markets they cater for. However, the finance ministry is again reluctant to offer any breather, fearing revenue losses.

“The proposal (to scrap MAT, DDT) is very much there (this year), but you have to take a hard look at the revenue implications before anything of this sort is done,” an official source told FE. In the last Budget, international financial services centre were exempt from the DDT, but retained the same (at 20.4%) on SEZs.

Before the MAT and DDT were imposed in 2011-12, growth in exports from SEZs was as high as 121% (2009-10) and 43% (2010-11), far exceeding the increase in the country’s overall goods exports for these years. After a near 11% drop in 2014-15, exports from SEZs dropped 3.3% in the last fiscal.

Although they paid a few thousand crores as MAT in the last fiscal and another hundreds of crore as the dividend distribution tax, SEZs availed of direct tax breaks of R18,400 crore in 2014-15, a finance ministry official had earlier said, arguing that SEZs were still benefitting.

Source : Financial Express

Service charge advisory will create chaos: FHRAI : 04-01-2017


The apex body of restaurants and hotels in India has written to the Department of Consumer Affairs, asking it to withdraw an advisory making service charges optional, saying there was nothing illegal about levying the fee.

Making service charges discretionary will create chaos and disrupt the smooth functioning of restaurants across the country and lead to unnecessary litigation between them and consumers, said the Federation of Hotel & Restaurant Associations of India (FHRAI).

The department said on Monday that service charges billed by restaurants are optional and it is up to customers to pay them. The department cited complaints that hotels and restaurants are levying an additional 5 to 20% in bills in lieu of tips, regardless of the kind of service provided.

In its letter to the department, FHRAI said service charges – an amount paid to the staff of a restaurant or other establishment by customers and guests – are lawful and that it is up to an establishment to decide whether and how much to collect. FHRAI members met officials in the department on Tuesday and were told the matter would be looked into, said Pradeep Shetty, chairman of FHRAI’s legal matters sub-committee.

“We regret that the department came out with such an advisory, which pits consumers against the industry. While consumer rights are paramount, the rights of individual establishments should not be impinged upon,” Shetty said.

FHRAI said in its letter that service charges are “considered a beneficial payment since it is meant for the benefit of the staff of the establishment…The service charge is disclosed in advance and the same is clearly included as a separate heading in the bill as a charge not as a tax. Thus, there is complete transparency with regard to the amount, the rate and the purpose of the charge.”

The department said on Monday that service charges billed by restaurants are optional and it is up to customers to pay them. The department cited complaints that hotels and restaurants are levying an additional 5 to 20% in bills in lieu of tips, regardless of the kind of service provided.

In its letter to the department, FHRAI said service charges – an amount paid to the staff of a restaurant or other establishment by customers and guests – are lawful and that it is up to an establishment to decide whether and how much to collect. FHRAI members met officials in the department on Tuesday and were told the matter would be looked into, said Pradeep Shetty, chairman of FHRAI’s legal matters sub-committee.

“We regret that the department came out with such an advisory, which pits consumers against the industry. While consumer rights are paramount, the rights of individual establishments should not be impinged upon,” Shetty said.

FHRAI said in its letter that service charges are “considered a beneficial payment since it is meant for the benefit of the staff of the establishment…The service charge is disclosed in advance and the same is clearly included as a separate heading in the bill as a charge not as a tax. Thus, there is complete transparency with regard to the amount, the rate and the purpose of the charge.”

Citing previous rulings, FHRAI said the practice of collecting service charges has been upheld by the National Consumer Disputes Redressal Commission. “We request you to kindly withdraw the subject mentioned press note as there is nothing illegal or unlawful – much less unfair – in an establishment collecting a service charge from its guests,” it added.

Industry officials said the practice was critical to incentivise staff.

“The guidelines from the government should be clear with the processes that need to be followed,” said Vikas Chadha, executive director at Keys Hotels. “Customers and hotels should have clarity on how we reward service by the staff. It’s a huge motivation for the staff and makes the staff put in extra efforts rather than being transactional.”

“Levying service charge is an established practice of several years and it has even been upheld in the court of law,” said Anurag Katriar, executive director at Mumbai-based deGustibus Hospitality Pvt. Ltd. “Most of money collected goes to the staff and is an integral part of their incomes. Discontinuation of the same at this stage will adversely impact millions of workers and therefore we plan to continue levying the service charge as before.”

Source : PTI

Government may abolish place of effective management tax : 04-01-2017


The forthcoming budget is likely to introduce the concept of ‘Controlled Foreign Corporation’ (CFC) as an anti-avoidance measure. At the same time, the more subjective concept of taxing a foreign company if its ‘place of effective management’ (POEM) is in India may be done away with. This move is expected to help Indian companies with overseas subsidiaries as also MNCs with operations in India.

POEM was first introduced in Budget 2015 with effect from April 1 of the same year. However, as only draft guidelines were in place, Budget 2016 deferred its application to the fiscal year 2016-17

Currently , the provisions relating to POEM are in force, even as final guidelines are still awaited. Earlier a foreign company (be it a subsidiary of an Indian company or parent of an Indian company) was not subject to income tax (I-T) in India unless its affairs were `wholly controlled and managed’ in India. In general terms, this meant that a tax incidence would not arise in India, unless the entire decision-making team was in India.

Now, since April 1, 2016, a foreign company has the risk of a tax exposure in India if its POEM is considered to be in India -the determination of which is subjective according to tax experts. Government officials admit that the framework of CFC as also the challenges faced by companies under POEM have been discussed in the run-up to the budget.

“A CFC regime with adequate checks and balances can protect the revenue’s interest without jeopardising business houses whose global income can be caught within the Indian I-T net on account of ill-con ceived POEM regulations. POEM could be used as a harassment tool and create huge uncertainty in India, especially as there is no jurisprudence on the subject,“ says Nishith Desai, founder of the law firm Nishith Desai Associates.

Mukesh Butani, managing partner at BMR Legal, explains, “If at all anti-avoidance provisions are required -in addition to general anti-avoidance rules (GAAR), which will be introduced from April next -a CFC route is a better alternative. CFC regulations cover unlisted foreign companies, set up in low-tax countries that are owned and controlled by Indian resident holders, where the passive income (such as interest, dividend, capital gains, transactions with related parties) is accumulated  overseas instead of being repatriated back to India. A CFC does not result in the foreign company being treated as an Indian taxpayer. Rather, it isolates the passive income of the foreign company and subjects only such in come to tax in the hands of the Indian shareholders.“

On the other hand, the process of determination of POEM is primarily based on whether or not the foreign company is engaged in `active business’ outside India. To meet the `active business’ test, its passive (nonbusiness) income should not be more than 50% and it should meet certain parameters in terms of employees, assets and payroll expenditure.

“However, subjectivity creeps in even if the foreign company has an active business outside India. Practical aspects such as common directors on the board of the Indian parent company and its foreign subsidiary could trigger a POEM exposure for the foreign subsidiary and a tax incidence in India.Location of professional leadership teams in both India and the foreign country could also result in a POEM exposure. Under POEM, we are discouraging MNCs from locating their regional headquarters in  India or holding board meetings in India,“ says Butani.

Properly drafted CFC norms would provide more clarity and mitigate litigation compared to POEM, sum up experts.

Source : Economic Times

NEWSLETTER DATED JAN 03, 2017 FOR THE IT INDUSTRY


S3-Newsletter dated Jan 3 2017

Notification No. GSR 12(E) (F.NO.C-2/4/2016-SEZ), 03-01-2017


SPECIAL ECONOMIC ZONES (AMENDMENT) RULES, 2017 – AMENDMENT IN RULE 76

NOTIFICATION NO. GSR 12(E) (F.NO.C-2/4/2016-SEZ)DATED 3-1-2017

In exercise of the powers conferred by section 55 of the Special Economic Zones Act, 2005 (28 of 2005), the Central Government hereby makes the following rules further to amend the Special Economic Zones Rules, 2006, namely:—

(1) These rules may be called the Special Economic Zones (Amendment) Rules, 2017.
(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Special Economic Zones Rules, 2006, in Rule 76, for the words “professional services (excluding legal services and accounting) rental/leasing services without operators”, the words “professional services, rental/leasing services without operators” shall be substituted.

24 – 03-01-2017


EXCHANGE FACILITY TO FOREIGN CITIZENS

A.P. (DIR SERIES 2016-17) CIRCULAR NO. 24DATED 3-1-2017

Attention of Authorized Persons is invited to the A.P. (DIR Series) Circular No. 20 dated November 25, 2016 permitting foreign citizens to exchange foreign exchange for Indian currency notes up to a limit of Rs. 5000/- per week till December 15, 2016 and extended up to December 31, 2016 vide A.P. (DIR Series) Circular No. 22 dated December 16, 2016.

2. On a review it has been decided that the instructions contained in the A.P. (DIR Series) Circular No. 20 dated November 25, 2016 shall continue to be in force till January 31, 2017.

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

4. 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.