RETROSPECTIVE TAX About a fortnight ago, the income tax (I-T) department sent a reminder notice to the UK-based Vodafone Group Plc to pay Rs 14,300 crore in tax dues and threatened to seize the assets in case of non-payment. Foreign investors have taken umbrage to it. Vodafone termed this as an act completely out of sync with Prime Minister Narendra Modi’s promise “Retrospective tax is a matter of past… We are ensuring that neither this government nor future governments can open this chapter” made during India – France Business Summit in January, 2016. Others opined this is return of tax terrorism, a phrase coined in the wake of a retrospective amendment in tax laws initiated by then finance minister Pranab...
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Category: Foreign investment & other inflows
2016-17 – budget that helps poor earn decent living
The Union Budget for 2016-17 presented the finance minister, Arun Jaitely on February 29, 2016 carries the imprint of prime minister Modi’s unflinching and genuine commitment to ameliorate the conditions of millions of poor – engaged in farming and other occupations – by creating all right conditions to enable them do productive work and earn good income. Driven by latter’s pledge to double farmers income by 2022 [75th year of Independence], the former has unveiled a plethora of initiatives/steps to bring about a structural transformation in the way farming is conducted and agricultural produce is marketed. Boost to farmers income & rural employment The measures that will enhance farmer’s capability to increase yield include a mammoth capital spend of Rs...
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I-T reminder to Vodafone – Is tax terrorism back?
The income tax [I-T] department has sent a reminder notice to UK-based Vodafone Group Plc to pay Rs 14,300 crores in tax dues and threatened to seize the assets in case of non-payment. The revenue secretary, Hasmukh Adhia has described the notice as routine exercise of sending collection notices to all those whose dues are not stayed by any court. The party can always approach assessing office with a request to stay the demand as per the law. In case, the assessing officer does not agree, party can go to the next higher authority and get a stay. Despite the clarification, foreign investors have taken umbrage to the notice and even opined that this is the return of tax terrorism,...
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POLICY MUDDLE IN FDI RETAIL
The Government’s unrealistic policy of barring foreign direct investment in the business-to-consumer segment has pushed e-commerce retailers to camouflage themselves as market places to access funds from abroad The Delhi High Court is hearing a plea filed by the All-India Footwear Manufacturers and Retailers Association, regarding the alleged flouting of foreign direct investment rules by e-commerce companies. In its affidavit to the court, the Department of Industrial Policy and Promotion has argued that its job is to formulate policy — not monitor implementation. The DIPP added that it has already laid down a ‘transparent’ and ‘predictable’ policy which permits 100 per cent FDI in business-to-business transactions in e-commerce, but only prohibits in the business-to-customer segment. Further, it does not recognise...
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FDI in retail – policy muddle confounded
The Delhi High Court (DHC) is hearing the plea of Retailers Association of India [RAI] and All India Footwear Manufacturers & Retailers Association [AIFMRA] regarding alleged violation of rules relating to foreign direct investment [FDI] in multi-brand retail by e-commerce companies. The writ petitions were filed by the two associations in May, 2014 and August, 2014 respectively. In its affidavit submitted to DHC, the department of industrial policy and promotion [DIPP] has argued that its job is to formulate policy and has nothing to do with its implementation. It added that it has already laid down a ‘transparent’ and ‘predictable’ policy which permits 100% FDI in B2B [business-to-business] transactions in e-commerce but prohibits in B2C [business-to-customer]. Furthermore, it does not...
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Economic policies – NDA versus UPA
Some time back, Arun Shourie a senior minister in the then NDA [National Democratic Alliance] government under Vajpayee [1998-2004] and erstwhile member of BJP observed that the economic policies being followed by Modi – government are just a continuation of UPA [United Progressive Alliance] plus the “cow’ [a euphemistic reference to sacred animal worshiped by majority Hindu community in India]. Shourie’s view is shared by many thinkers. UPA – dispensation II [2009-2014] had pushed the country towards economic paralysis with all key indicators i.e. growth [manufacturing in particular], inflation, fiscal deficit, current account deficit [CAD], foreign exchange reserves and infrastructure etc showing dismal trend. In this backdrop and since, Modi is also following the same policies, they aver that outcomes...
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US should shed rigid stand
In a just concluded meeting of the Trade Policy Forum, United States Trade Representative (USTR) Mic-hael Froman, emphatically rejected India’s request for signing a Social Security Agreement (SSA), nick named totalisation pact. The US argued that, “India did not meet the legislative requirement of minimum social security net (SSN) for 50 per cent of its population.” When Commerce Minister Nirmala Sitharaman drew his attention to the Atal Pension Yojna, Pradhan Mantri Jeevan Jyoti Bima Yojana and Pradhan Mantri Suraksha Bima Yojana in addition to Employees Provident Fund Organisation, the US official’s reaction was that being “non-mandatory”, those schemes did not qualify for social security. The USTR opined that he is open to discussing new social security schemes that India may...
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Social Security Agreement – US should shed intransigence
In a just concluded meeting of the Trade Policy Forum [TPF] attended by commerce minister, Nirmala Sitharaman from India and US Trade Representative [USTR], Michael Froman, US has emphatically rejected India’s request for signing a Social Security Agreement [SSA] – nick named totalisation pact. The possibility of signing the Agreement – pending for long – had got a boost early this year when prime minister, Modi raised the issue with President Obama during his January, 2015 visit to India. As a follow up, in August a ‘negotiating forum’ was set up to discuss a possible SSA between India and US. Though the forum is still active, in view of rejection at highest policy making level, chances of getting US agree...
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Continue rate cut
ECONOMIC GROWTH : Having made a good head start (though belated), the RBI must not stop as there is potential for another 50-75 basis points reduction Prior to the fourth bi-monthly monetary policy review on September 29, RBI Governor Raghuram Rajan had come under unprecedented pressure to cut the policy repo rate [interest rate at which the apex bank lends money to commercial banks] to help government’s efforts in giving a fillip to the economy and putting it on a higher growth trajectory. Almost all stakeholders – industry and commerce, investors, experts/ economists – were unanimous in demanding a cut. While refraining from taking any position [lest this be misconstrued as interference in RBI’s autonomy], the government had nonetheless given...
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Add 100% FDI to the cart
Allowing 100% FDI in e-tail will make it easier for tax authorities to bring e-com firms under the tax net. In 2012, the UPA had permitted 51% FDI in multi-brand retail (MBR) with riders. The riders included sourcing 30% of requirements from small enterprises, a minimum investment of $100 million, besides giving full leeway to states on whether to grant permission or not. The policy was as bad as saying ‘no’ to FDI in MBR. The Modi government has continued with that policy decision. Finding that the direct route of entering MBR was choked, foreign investors have been looking for opportunities to make inroads. They found one in e-commerce where business was growing leaps and bounds. How did they manage...
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