The government should legitimise direct selling by foreign companies in Indian retail without any riders In the backdrop of complaints by the Confederation of All India Traders (CAIT) regarding violation of the Foreign Direct Investment (FDI) policy by global e-commerce players, Amazon and Walmart-owned-Flipkart etc, the Ministry of Consumer Affairs has proposed a set of new rules called Consumer Protection (e-commerce) Rules, 2020 which the government proposes to implement after factoring in the views of all stakeholders. The rules require all e-commerce entities that are not established in India, but intending to operate here: (i) register with the Department for Promotion of Industry and Internal Trade (DPIIT) in the Commerce Ministry; (ii) bar affiliated entities from selling on e-commerce platform...
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Category: Foreign investment & other inflows
FDI in retail: Remove the smokescreen
A pragmatic approach would be one wherein the Modi Govt legitimises direct selling by foreign companies in Indian retail in all forms For the last couple of years, the Confederation of All India Traders (CAIT) was complaining about a blatant violation of the Foreign Direct Investment (FDI) policy and the Foreign Exchange Management Act (FEMA) by global e-commerce players like Amazon and Walmart-owned-Flipkart, etc. Addressing their concerns, the Ministry of Commerce and Industries in December 2020 asked the Reserve Bank of India and the Enforcement Directorate to take action against these global giants. Earlier this year, Commerce Minister Piyush Goyal promised to ensure that the e-commerce sector works “in the true spirit of the law”. As a follow-up, the Ministry of Consumer...
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Taxing MNCs — G-7 formula is erroneous
The source country should have the freedom to decide the tax rate it deems fit in sync with its policy imperatives The agreement reached by the Finance Ministers of advanced economies at the G-7 meeting on taxing MNCs stands on two main pillars, viz., a global minimum corporate tax (GMCT) rate of 15 per cent and secondly, “reaching an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20 per cent of profit exceeding a 10 per cent margin for the largest and most profitable multinational enterprises”. They also agreed that while coordinating international taxation rules around these two pillars, concurrent efforts will be made for the removal of all Digital Services...
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India gets poorer, investors richer
The Corona pandemic may have brought about sharp deceleration in India’s economic growth – the sharpest ever during the last 4 decades or so – but has yielded a bonanza for the investors. The wealth of investors in the stock market as represented by the market capitalization of Indian equities (market value of shares multiplied by their number) almost doubled from around Rs 113 trillion (a trillion equals 100,000 crore) as on March 31, 2020 to Rs 226 trillion as on March 31, 2021. In contrast, India’s GDP at current prices declined from Rs 203 trillion during 2019-20 to Rs 197 trillion during 2020-21. As a result, the market capitalization to GDP ratio almost doubled from 56% during 2019-20 to...
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A flawed idea that the US must abandon
Imposing a global corporate minimum tax will interfere with the right of a country to determine its tax policy and impair its ability to galvanise the policy to achieve certain objectives The Joe Biden Administration is pushing for a Global Corporate Minimum Tax (GCMT) rate under the new international tax rules being coordinated by it with G20 countries. In 2017, the erstwhile Donald Trump Administration had introduced the US corporate offshore minimum tax called the Global Intangible Low-Taxed Income (GILTI). It is applied on the offshore incomes of US multinationals (MNCs) having subsidiaries in low-tax countries, at 10.5 per cent, which is half the Domestic Corporate Tax Rate (DCTR) of 21 per cent. US President Biden wants to double GILTI...
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Global corporate minimum tax – a flawed idea
The Biden administration is giving a big push for a global corporate minimum tax (GCMT) rate under the new international tax rules being coordinated by it with G20 countries. In 2017, the erstwhile Trump administration had introduced the U.S. corporate offshore minimum tax called “Global Intangible Low-Taxed Income (GILTI)”. It is applied on the offshore income of US multinationals (MNCs) having subsidiaries in low-tax countries @ 10.5% which is half the domestic corporate tax rate (DCTR) of 21%. Biden wants to double GILTI to 21% and correspondingly increase the DCTR to 28%. The US move is prompted by a tendency among MNCs (US companies included) to register in low-tax countries such as Singapore, Mauritius, Ireland etc and show their revenue...
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The Govt should avoid a Catch-22 situation
Team Modi should legitimise direct selling by foreign companies in Indian retail — not just online but also offline — without any riders In view of the complaints by the Confederation of All India Traders (CAIT) regarding blatant violation of the Foreign Direct Investment (FDI) policy and the Foreign Exchange Management Act (FEMA), 1999, by Amazon and Walmart-owned-Flipkart, Union Commerce Minister Piyush Goyal alluded to it while issuing a clarification to ensure that the e-commerce sector works “in the true spirit of the law.” Earlier in December 2020, the Ministry of Commerce had asked the Reserve Bank of India (RBI) and the Enforcement Directorate (ED) to take necessary action against these global e-commerce giants. The above actions may not enthuse when viewed...
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Paratroop reforms on the ground
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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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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