Update for the Day 27th December 2018
Companies get tax demands on ‘high’ premiums in FDI, M&A & share allotment deals
After issuing notices in foreign direct investment (FDI) situations, the taxman has now started raising tax demands that could run into hundreds of crores in various cross-border investment situations and in investments by Indian companies in their subsidiaries.
Several companies—that have received investments, invested in subsidiaries, issued preference shares or borrowed money— have in the last few days got tax demands, asking them to pay tax on premiums over fair market value in such investments by March end next year. In all the situations, the taxman has challenged valuations of these deals, claiming that investments were made at more than the fair market value, people familiar with the development told ET.
Tax demands were made even in cases where premium of Rs 1 was paid per share over the fair market value, they said.
Companies need to comply with BIS norms on after-sales support
Companies providing after-sales service in India will now have to comply with quality standards laid down by the government’s Bureau of Indian Standards (BIS).
BIS, which lays down norms with regards to quality and safety of goods sold in the country, has formed a panel, called Services Sector Divisional Council, to frame regulations in this regard, according to a senior official. BIS works under the ministry of consumer affairs, food and public distribution.
“The committee will take care of the initial stages of policy-making in India, where consumers are going to benefit significantly,” Vijay Kumar Singh, member secretary of the council, told ET.
Companies CSR expenditure rises 47 per cent in 4 years to FY18: Survey
Companies in India spent Rs 7,536.3 crore on corporate social responsibility (CSR) activities in 2017-18, a 47 per cent rise compared to 2014-15, says a survey.
“This is a significant rise, clearly demonstrating higher expenditure towards CSR activities from the mandated year, 2014,” said the KPMG India CSR Reporting Survey 2018.
The cumulative expenditure by top 100 companies from 2014-15 to 2017-18 is about Rs 26,385 crore, the survey said.
The average amount spent per company has gone up to Rs 76.1 crore as compared to Rs 58.8 crore during 2014-15, up 29 per cent, it said.
The survey further said that the total unspent amount has reduced by Rs 749 crore to Rs 989 crore during 2017-18 from Rs 1,738 crore in 2014-15.
Govt extends deadline for US MNCs to submit financial information by three months
In what may come as sigh of relief for US multinationals present in India, the government has extended deadline to submit global revenues, profit and sales to the taxman by three months.
The multinationals were first required to submit the details by December 31, but instead they would now be required to do so by March end next year.
Central Board of Direct Taxes (CBDT) on Tuesday extended deadline to submit these details for US subsidiaries in India, under Base Erosion and Profit Shifting (BEPS) framework.
ET was first to write on December 22 that most of the companies including Google, Facebook, Dell and IBM may be in a spot as they were required to submit these figures by year end.
Let’s split the bill: GST Council wants more services unbundled
You may soon get separate bills for taxable and non-taxable components in bills that include services exempt under the goods and services tax (GST) regime.
The GST Council has decided to extend the unbundling of bills beyond healthcare for all categories of services currently exempt from the tax, such as education.
The proposal considered by the council was for healthcare.
“The view within the council was that the provision be extended to all exempt services,” a government official, familiar with the deliberations of the council, told ET.
The move is aimed at bringing more transparency in billing for consumers as also protecting the government’s revenues.
The GST Council had considered a proposal in respect of hospitals.
E-tailers, traders hail new norms but small vendors fret over 25% limit
E-commerce firms and trade groups Wednesday appreciated the new rules for the sector, noting that the norms would help create level playing for all sellers.
But small vendors are a worried lot over the condition on vendors to sell only 25 per cent of their products through an e-commerce platform.
Commending the new guidelines, Snapdeal founder and CEO Kunal Bahl in a tweet said, “Snapdeal welcomes updates to FDI policy on e-commerce. Marketplaces are meant for genuine, independent sellers, many of whom are MSMEs. These changes will enable a level playing field for all sellers, helping them leverage the reach of e-commerce.”
While there was no comment from Flipkart, e-commerce firm Amazon India said, “We are evaluating the circular”.
NTPC for single window registration for MSEs
Buoyed by over 36 per cent of its procurement from micro and small enterprises (MSEs), power giant NTPC has pitched for their universal registration for supplies to all CPSUs in India.
“To promote ease of doing business for MSEs, NTPC Chairman Gurdeep Singh has proposed a single window registration for MSEs across CPSUs,” a senior company official told PTI.
As against the government mandate for minimum 25 per cent procurement from MSEs, NTPC has achieved 36 per cent procurement from MSEs in the current fiscal till November 2018, the official added.
NTPC’s total procurement reaches around Rs 1,000 crore in a year from 3,500 vendors. Last fiscal, it stood at Rs 1,163 crore.
“NTPC’s endeavour is to better its contribution in association with MSEs year on year. Therefore, Singh proposed on different fora that there should a one registration for all MSEs for procurements by CPSUs. But it is the MSME ministry which would take final call on it,” the official added.
Faster patents for women, small business
The government has proposed to fast-track patent applications from women and small businesses in its latest bid to encourage innovation from new category of innovators.
Currently, the benefit of expedited patents is available to startups, with over 350 companies taking advantage of the special window that was opened in May 2016 as part of the government’s flagship Start-up India scheme. Now, the department of industrial policy and promotion (DIPP), has floated draft rules to amend the Patent Rules, 2003 and extend the facility to other groups, including Indian women as part of a policy to encourage innovation and entrepreneurship. India is probably the only country to look at encouraging patent applications from women, a government official said.
The draft rules, released earlier this month, have also suggested that the window be opened to government undertaking. While no time frame has been proposed, the fastest patent application under the expedited window was granted in 81 days, data accessed by TOI showed.
NCLT helps recover Rs 80,000 crore in 2018; kitty may cross Rs 1-lakh crore in 2019
Tasked with a key job of helping recover unpaid corporate loans, the NCLT has helped resolve insolvency and bankruptcy proceedings involving more than Rs 80,000 crore in the year passing-by and the kitty is expected to swell beyond Rs 1 lakh crore in 2019 with several big-ticket default cases pending.
Plans are afoot to further strengthen the National Company Law Tribunal (NCLT) by increasing number of judges and benches and provide adequate infrastructure to fast-track the process, according to government officials.
The new year will not only test the mettle of the Insolvency and Bankruptcy Code (IBC), but also of the NCLT and its appellate body NCLAT, as several high-profile cases need to be resolved — Essar Steel (involving over Rs 80,000 crore alone) and Bhushan Power & Steel (about Rs 45,000 crore due to its lenders) are just a few, experts said.
Cos may have to deal with fewer GST accounts
The government is looking at further simplification of processes for GST payers, after reducing the number of ledgers or accounts that they have to maintain from nearly 20 to four. “We will look at moving to fewer ledgers in the coming months,” said a senior government official.
The move to reduce number of ledgers follows repeated complaints from trade and industry, especially the smaller businesses, which were seeing it as rigid. “It is a very good move as it shows that the government is really working towards simplification of the regime. Procedural changes finalised on Saturday are more useful for businesses than rate changes,” said MS Mani, partner at Deloitte India.
India to hold talks with RCEP nations
Indian officials will hold bilateral meetings with a few countries, including China and some ASEAN members, in the coming days to iron out issues hindering negotiations of the Regional Comprehensive Economic Partnership (RCEP) trade deal, an official said.
After the bilateral meetings, the RCEP members will meet for the 25th round of negotiations in February in Indonesia.
The main issues that need resolution include number of goods on which import duties should be eliminated and norms to relax services trade.
RCEP members want India to eliminate or significantly cut customs duties on maximum number of goods that it traded on.
NBFC, HFC heads meet Modi over liquidity issue
Executives from housing finance companies and nonbanking finance companies met Prime Minister Narendra Modi on Wednesday to discuss ways to restore confidence in the sector that is seeking to overcome a slowdown in growth after the IL&FS defaults.
The Prime Minister met Aditya Birla Capital’s MD Ajay Srinivasan, Indiabulls Group’s chairman Sameer Gehlaut, Dewan Housing Finance chairman Kapil Wadhawan, Shriram Transport Finance MD Umesh Revankar, Srei Infrastructure’s Sunil Kanoria, and L&T Finance MD Dinanath Dubhashi.
“The Prime Minister gave a patient hearing to the industry representatives and heard each one of us,” said a person who attended the meeting. “The sector is working well but growth has slowed down after the IL&FS crisis. The idea behind the meeting was to set the sentiment right.”
Former RBI Governor Bimal Jalan to head Economic Capital Framework committee
The Reserve Bank of India has formed an expert committee under former governor Bimal Jalan to decide the appropriate level of reserves that the regulator should hold. This comes more than a month after the bank’s central board proposed the panel’s formation following a dispute between then governor Urjit Patel and the government over that and various other issues, which eventually led to his departure.
The six-member panel has former deputy RBI governor Rakesh Mohan as its vice chairman and comprises economic affairs secretary Subhash Chandra Garg, RBI central board members Bharat Doshi and Sudhir Mankad and deputy governor NS Vishwanathan.
The panel will submit its report within a period of 90 days from the date of its first meeting.
It will review “the need and justification of various provisions, reserves and buffers” that RBI has maintained for contingency purposes and suggest an adequate level of risk provisioning.
The central bank said in its statement that the panel will “propose a suitable profits distribution policy taking into account all the likely situations of the RBI, including the situations of holding more provisions than required and the RBI holding less provisions than required.”
Safeguard duty on steel: India appeals against WTO’s panel ruling
India has challenged the WTO dispute panel’s ruling that the country’s move to impose safeguard duty on some iron and steel products was inconsistent with certain global trade norms, an official said.
The appellate body and the panel are part of the World Trade organisation’s (WTO) dispute settlement mechanism. It is a 164-member multilateral body which make rules related to global exports and imports.
“On December 14, India notified the WTO’s dispute settlement body of its decision to appeal to the Appellate Body on certain issues of law and legal interpretations in the panel report, the official said.
The issue pertains to a case filed by Japan in December 2017 against India’s decision to impose safeguard duty on some iron and steel products.
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CMA H Padmanabhan