Of crucial importance is the need to actually execute reforms and make them work on ground zero. Unfortunately, this is not happening Unlike the Economic Survey for 2019-20, which was prepared keeping in mind the ambitious target of achieving a $5 trillion economy by 2024-25, this time around, the overarching theme revolves around demonstrating how brilliantly the Government has managed the Coronavirus pandemic. Through lucid elaboration on the details and modeling with facts and figures — using international as well as inter-State comparison within India, Chief Economic Adviser (CEA) Krishnamurthy Subramanian has given ample justification for the “early” and “stringent” lockdown from March and thereafter calibrated lifting of restrictions from June onward. Tacitly, he has also admitted that this led to compression...
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Category: Foreign investment & other inflows
To avoid cartelization – allow FDI in retail
Based on complaints submitted by the Confederation of All India Traders (CAIT) to the Union Commerce Minister Piyush Goyal in the recent past for blatant violation of FDI (foreign direct investment) Policy and Foreign Exchange Management Act (FEMA), 1999 by Amazon and Walmart-owned-Flipkart, the Department for Promotion of Industries and Internal Trade (DPIIT) of the Ministry of Commerce has written letters in December, 2020 to the Reserve Bank of India (RBI) and the Enforcement Directorate (ED) asking them to take necessary action against these global e-commerce giants. This communication from the DPIIT may not enthuse when viewed in the backdrop of numerous such representations made in the past by CAIT as also other associations of small traders and businesses such...
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India must stand its ground
All objections raised by the USTR on the DST levied by India on foreign tech firms are baseless. The Govt must not yield to the pressure tactics of the US administration by withdrawing the tax In its findings on the Section 301 probe conducted under the US Trade Act, 1974, the US Trade Representative (USTR) has inter alia concluded that India’s digital services taxes (DST) or the so-called equalisation levy (EL) at the rate of two per cent, unfairly targets US companies. The USTR raised three aspects that, it alleges, are inconsistent with global tax principles: First, the levy on US companies has extra-territorial application; second, DST is a tax on the firm’s revenue, not its income; and third, it subjects US...
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Equalization levy – India must not backtrack
On June 2, 2020, the Trump administration had announced the “Section 301 investigation” under the US Trade Act, 1974 into digital services taxes (DST) that have been either adopted or were under consideration by its trading partners viz. Austria, Brazil, the Czech Republic, the European Union (EU), India, Indonesia, Italy, Spain, Turkey and the UK. Conducted by the United States Trade Representative (USTR), the objective of the probe was to determine whether levies on electronic commerce discriminate against US technological giants like Apple, Google, Amazon and so on. On January 6, 2021, the USTR released its findings on the probe and concluded that India’s 2% DST is discriminatory and restricts US commerce. It has raised three aspects which it alleges,...
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A taxing problem
India’s sovereign taxation rights on capital gains cannot be held hostage to its bilateral investment treaties with other countries The Permanent Court of Arbitration (PCA) tribunal in The Hague has rejected the back tax demands of Indian tax authorities in both, the Cairn and Vodafone cases. These back taxes relate to capital gains made on transactions in 2006-2007. According to the PCA, the demands have been rejected on two counts. First, they violate India’s obligations under Bilateral Investment Treaties. Second, they are based on a retrospective amendment to a tax law passed in 2012. Both the arguments are untenable. As regards the first, tax is levied on the earnings of the companies from their operations in India. The Government has done nothing...
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Taxing capital gains – legal muddle
In a span of just three months, Modi – government has been confronted with two orders of an international arbitration tribunal overturning demand raised by the Income – Tax (IT) department on multinational companies in back taxes on income arising from capital gains by made by the latter on sale of their ownership in Indian companies – running into tens of thousand crore. First, on September 25, 2020, an international arbitration tribunal rejected Indian tax authorities’ demand for Rs 22,100 crore in back taxes (Rs 7,990 crore plus interest and penalty) relating to Vodafone Group Plc (the British telecom giant) US$ 11billion acquisition of 67% stake in the Hutchison Essar Ltd (HEL) – an Indian company running mobile phone business...
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Open doors for trade
The Govt should shed its current protectionism. Instead, it should go for an open trade policy by slashing import duties and eliminating non-tariff barriers While presenting the Union Budget for 2020-21, Finance Minister Nirmala Sitharaman had renewed the commitment of the Modi Government to “Make in India.” She saw this as the most crucial component of the strategy to make India a $5 trillion economy by 2024-25. To achieve this, she targetted doubling of exports from the current over $500 billion to $1 trillion (that includes an increase in farm exports from $40 billion to $100 billion). Faced with a whopping contraction in the Gross Domestic Product (GDP) by close to 25 per cent during the first quarter, a continuing...
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Crushing the competition
The regulator itself refuses to see that competition is being crushed, and even when it sees, its ruling is stayed by appellate authorities—thus, the increasing dominance of digital giants is inevitable. Amazon, some allege, uses the data of products on its e-commerce platform to decide what to sell under its own brand. Big Tech firms such as Google, Facebook, Amazon, and Apple have come under the radar of many governments, including that of the US, Australia, and France, for trying to steamroll competition by either buying competitors out or pushing other vendors to avoid working with them. Here is a glimpse of how they allegedly misuse use their dominant position. Google’s search engine is accused of stealing content with the goal...
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Snap the stranglehold
The only way to avoid delay and expedite the process of privatisation of Central PSUs is to unshackle them from bureaucratic red tape Finance Minister Nirmala Sitharaman has announced the broad contours of the Narendra Modi Government’s plans on privatisation of Central Public Sector Undertakings (CPSUs). A CPSU is defined as an undertaking in which the Union Government has shareholding of more than 50 per cent and by virtue of this, exercises majority ownership and control (there were 249 operating CPSUs as on March 31, 2019). Its privatisation means the shareholding of the Centre will be brought down to below 50 per cent. Before we look at the plan and how the Government goes about implementing it, it may be worthwhile to...
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For Atmanirbhar Bharat, go for open trade policy
The ‘Make in India’ reverberated all through the speech of Prime Minister Narendra Modi during his Independence Day address on August 15, 2020. Even before the Corona pandemic, in the Union Budget for 2020-21, Finance Minister, Nirmala Sitharaman proclaimed the commitment of Modi government to this laudable goal. This is the most crucial component of the strategy to make India a US$ 5 trillion economy by 2024-25. Faced with a whopping contraction in GDP (gross domestic product) by close to 25% during the first quarter, continuing slide during the second quarter and projected decline for the whole of current year by 5% – 6.5%, US$ 5 trillion target may have lost much of its sheen for now. Nonetheless, the government...
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