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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Fertilizer subsidy – DBT still a far cry
The ministry of finance and NITI Aayog are working on a road-map for direct benefit transfer [DBT] of fertilizer subsidy to farmers. The data base being used for giving Rs 6000/- per year to 120 million small and marginal farmers under PM Kisan Samman Nidhi – to be extended to cover all farmers [as promised in BJP election manifesto] – will be used for this purpose. DBT on fertilizers plus support under PM-KISAN will be given as quasi–universal basic income transfer. The proposal will be put up for consideration by the new government immediately after it takes charge. To begin with, this will be implemented on trial basis in select districts to cover small and marginal farmers only. However, full...
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GST – incentivize small but not at exchequer’s cost
The Goods and Services Tax [GST] Council – all powerful body which has the mandate to develop the GST architecture and determine tax slabs, rates etc – has adopted a liberal stance towards small businesses keeping in mind their huge employment generating potential and increasing income of the workers. The liberal stance is particularly reflected in (i) exempting businesses having turnover below a certain threshold Rs 2 million from registering under GST and pay tax; (ii) allowing a trader/manufacturer having turnover less than Rs 10 million to opt for ‘composition scheme’ under which it pays tax @1% and faces minimal compliance viz. returns to be filed quarterly against monthly for regular assesses; (iii) bring service providers under composition scheme under...
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Bridging fiscal deficit – real or fudged!
In the Union Budget for 2018-19, the finance minister had made an allocation of Rs 170,000 crore towards food subsidy – the amount needed to make subsidized food available to 2/3rd of the population @Rs 1/2/3 per kg for coarse cereals, wheat and rice respectively under the National Food Security Act [NFSA]. The amount is given by way of reimbursement to the Food Corporation of India [FCI] and other state agencies for the excess of the cost of procurement, handling and distribution over the sale price to the beneficiaries under the NFSA. Out of Rs 170,000 crore, Rs 140,000 crore was meant to be given to the FCI whereas, the balance Rs 30,000 crore allocated for other agencies. Of the...
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LPG – don’t involve OMCs in subsidy transfer
In a meeting with ministry of petroleum and natural gas [MPNG], parallel marketers of packaged domestic liquefied petroleum gas [LPG] viz. Reliance Industries Limited [RIL], Nayara Energy [formerly Essar Oil] and Total have demanded that the government allow them to have a level-playing field with the state-run oil marketing companies [OMCs] viz. Indian Oil Corporation Limited [IOCL], Bharat Petroleum Corporation Limited [BPCL] and Hindustan Petroleum Corporation Limited [HPCL]. At present, only IOCL, BPCL and HPCL are allowed to sell subsidized LPG wherein consumers pay the full price upfront, but eligible beneficiaries [those with annual income < Rs 10 lakh] subsequently get back the subsidy amount in their bank account. Further, all domestic LPG producers have to supply their total output...
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Sugar imbroglio – robbing Peter to pay Paul
In the run up to assembly elections in Uttar Pradesh [UP] in early 2017, BJP had promised immediate payment of all sugarcane arrears [money that sugar mills owe to them for their cane supplies]. For the future also, it had promised to release of all dues by the 14th day counting from the day the sugarcane is delivered to the sugar mill. The UP government has been in office for over two years now and has since ensured payments of a whopping Rs 50,000 crore which includes Rs 10,500 crore for the sugarcane marketing year October 1, 2016 – September 30, 2017 and Rs 34,000 crore for the year October 1, 2017 – September 30, 2018 and Rs 5500 crore...
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Doubling farmers’ income – FPOs could be game changer
During the last five years, Modi – government has implemented measures such as increase in irrigation, issue of soil health cards [SHCs], neem coating of urea, crop insurance [at minimal premium], building rural roads, e-NAM [electronic national agriculture market], increase in credit availability and implementation of Dr Swaminathan committee recommendation to give minimum support price [MSP] equal to 150% of the production cost. These measures aim at increasing crop output, enhance efficiency of input use, fetch higher price from sale of agricultural produce and do on-farm value addition with the overarching objective of doubling farmers’ income by 2022. Further, to augment the income of small and marginal farmers [land holding < 2 hectare]. in the interim budget for 2019-20, it...
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NPAs resolution – SC puts a speed-breaker
In December 2016, Modi – government enacted the Insolvency and Bankruptcy Code [IBC] – a robust and impeccable legal framework for recovery of non-performing assets [NPAs] of lenders in a fast track mode. It also amended the Banking Regulation Act [BRA] [2017] arming the Reserve Bank of India [RBI] with powers to give directions to banks for making reference to National Company Law Tribunal [NCLT] for resolution of NPAs under IBC. Following this, the RBI had sent two lists involving 40 accounts with NPAs worth over Rs 400,000 crore to banks [June & December, 2017] for taking up resolution and in case not resolved [within deadline] make reference to NCLT. Meanwhile, on February 12, 2018, the RBI issued an order...
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What if, India loses ‘developing’ tag at WTO
With elections underway, even as different political parties compete with each other to promise more subsidies, there is trouble brewing for India at World Trade Organization [WTO] – the multilateral body which binds member countries to a common set of rules with regard to trade in goods and services with ‘fairness’ and ‘non-discrimination’ as the underlying principles. In May, 2018, in a hard hitting submission made to WTO Committee on Agriculture [CoA], the United States had lambasted India for indulging in substantial under-reporting of its market price support [MPS] program for wheat and paddy farmers alleging that the sops given by government far exceed the permissible limit. This was a counter to the latter’s notification to WTO in March, 2018....
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Power producers at risk, courtesy ailing discoms
As per reports, power plants with investment of over Rs 300,000 crore are in jeopardy as the state electricity boards [SEBs]/power distribution companies [PDCs] have not yet paid dues of about Rs 60,000 crore for the electricity purchase made by them. The concern is understandable as with so much money locked up in receivables, it is nearly impossible for the generators to run their plants. The situation is particularly critical for independent power producers [IPPs] who account for half of the dues and run the risk of turning into non-performing assets [NPAs]. The current scenario is a continuation of a trend seen for decades whereby SEBs/PDCs – faced with substantial shortfall in their revenue from sale of electricity to consumers...
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