The ‘rounding tripping’ – a euphemism for the coming back, in the garb of foreign capital, of Indian money which left our shores in a clandestine manner – is a phenomenon that characterized wholly the first decade of the present century, persisted on a somewhat reduced scale during the first half of current decade [2011-2015] and is more or less fizzling out during the second half. The dubious practice proliferated when there was little oversight on money leaving the country and there were tax haven jurisdictions such as Mauritius, Singapore etc ever ready to attract it. The shell companies – mostly owned by persons to whom the money belonged set up in those countries – would then, invest in India....
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Category: Foreign investment & other inflows
Consumers fleeced – MNCs disingenuous methods
In a market-driven economy, the actions of all stakeholders in the supply chain viz. manufacturers, importers, distributors, retailers etc [including in the e-commerce segment] are driven by age-old dictum ‘consumer is the king’. They are all expected to ensure that the consumers get access to goods at competitive/low price besides providing quality services. On their part, successive governments have introduced reform measures during the last over three decades overarching focus being on removal of controls and liberalization. Additionally, 99% of the sectors have been opened to foreign investment to increase competition and bring more benefits to the consumers. Yet, it is ironical that in their zeal to increase profits, manufacturers including multinational companies [MNCs] have resorted to ‘disingenuous’ ways to...
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Taxing MNCs in India – clear rules needed
A committee set up by the Central Board of Direct Taxes [CBDT] – the policy making body on direct taxes in the revenue department, ministry of finance [MoF] – has come up with a draft report proposing rules for taxing profits attributed to Indian operations of multinational companies [MNCs] carrying offshore operations from India and have permanent establishment [or business connection] in the country. The permanent establishment [PE] refers to a fixed place of business normally located in the territory of the source country [in this case, India] from where a foreign enterprise conducts transactions – including sales made in India – and is defined in tax treaties. The Income-Tax [I-T] Act provides for levy of tax on the profit attributed...
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Angel tax – no blanket exemption please
The tax assessment notices issued by the Income-Tax [IT] department to thousands of start-ups [acronym for companies which turn ‘innovative idea’ in to attractive business venture] and tax demands raised on hundreds of them has led to widespread consternation. The iSPIRT, a think-tank for the Indian software products industry, estimates that over 38% of the start-ups in the country — 39,000 at last count — have received one or more ‘angel tax’ notices during 2018 leading to a drop of 21% year-on-year in critical capital infusion in these entities at the seed stage. It has sought immediate intervention by Prime Minister, Modi to halt these tax notices. The government has responded by quashing all tax assessment notices. As regards, cases where...
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Protectionism hurts e-commerce
Instead of the extreme steps proposed by a new policy, the government should consider a pragmatic and flexible arrangement to address the concerns on protection of sensitive data With increasing penetration of internet, surging middle-class and focus on customer convenience and affordable pricing, online retail commerce in India has grown at a phenomenal 70 per cent during the last five years reaching about US $40 billion during 2017. This is projected to increase five-fold to US $200 billion by 2026. Much of the growth has been driven by foreign majors such as Amazon,Walmart/Flipkart and so on under a policy notified in 2016-17 which allowed 100 per cent foreign direct investment (FDI) in the marketplace model of e-commerce. The marketplace is an...
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Dual-class share structure – a flawed idea
An advocacy group IndiaTech representing some of the most high profile entrepreneurs have made a submission to the ministry of corporate affairs [MCA] and the markets regulator Securities Exchange Board of India [SEBI] for allowing a dual-class share structure with differential voting rights for founder-promoters of start-ups to encourage country’s most valuable companies to get listed on the domestic stock exchanges instead of overseas exchanges such as Nasdaq and New York Stock Exchange [NYSE]. At present, the Companies Act [2013] permits firms having consistent track record of distributable profits for three years to issue shares with differential voting rights [DVR] subject to a cap of 26% of the total share capital. The lobby group wants the MCA to dispense with...
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E-commerce policy draft – needs overhaul
With increasing penetration of internet, surging middle-class, its growing aspirations and focus on customer convenience, online retail commerce in India is projected to increase from an already high of US$ 38.5 billion in 2017 to over US$ 200 billion by 2026. Seizing the unfolding opportunities, foreign majors such as Amazon,Walmart/Flipkart etc have already made substantial investment in the marketplace model of e-commerce. Under a policy notified in 2016-17, the government allowed 100% foreign direct investment [FDI] in this format. The market-place is an electronic platform on which the sellers/vendors get connected with the end consumers and carry out the sale/purchase transactions. The owner of the platform is expected to act only as a facilitator by providing support services viz. warehousing, logistics,...
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Foreign majors still dominate ‘marketplace’
India has come a long way since the process of economic reforms and liberalization started nearly three decades ago [1991] – with major focus on abolishing controls and license raj. It can boast of unprecedented progress with corresponding gains by way of putting the economy on a high growth trajectory. The achievements have been particularly noteworthy under Modi – dispensation. Yet, our governance systems including those which have a strong bearing on the economy continue to remain shackled by bureaucratic controls and red tape. The ability of the bureaucrats [a sophisticated nomenclature to describe officials] to maneuver and navigate things the way they want has not diminished. One can see a vivid demonstration of their ability in the way the subject...
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Free up FDI in Indian retail
Amidst reports of millions of retailers facing heat from the e-commerce majors such as Amazon, Walmart/Flipkart etc, the announcement by Reliance Industries Limited [RIL], chairman, Mukesh Ambani – at the Vibrant Gujarat Summit on January 18, 2019 to make a foray into e-commerce business on a mega scale involving its 3 million merchants [besides its own 7,500 retail stores, 350 million customers and 215 million Jio subscribers] should bring cheer to them all. In a first step towards launching its e-commerce portal, it will sell over a million PoS [point of sale] machines in Gujarat alone as it targets 1.2 million small retailers through e-commerce play. Available at a refundable security deposit of Rs 3,000/-, these machines would help them...
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FDI in retail: The way forward
Only a 100 per cent FDI can create good market dynamics that can address concerns of predatory pricing and market dominance Retailers’ associations have complained to the Government against e-commerce majors such as Amazon and Flipkart giving deep discounts on sales on their platform which is detrimental to the ubiquitous ‘mom-and-pop’ stores. They also apprehend that once the latter is decimated, the former will start exploiting the consumers in the long-run by charging exorbitant prices. Domestic companies in organised retail (or the so-called ‘brick and mortar’ segment) viz Reliance Retail Limited (RRL) and Futures Group among others, too, are facing the heat from these e-commerce giants. They are not against MNCs per se but their grudge is mainly due to...
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