One nation, one tax department: I-T takes cue from GST

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The move, which will require a change in the income tax law, would also end the relevance of various geographic divisions in the form of wards and circles.

The one-nation, one-tax principle that underlines the goods and services tax (GST), set to be rolled out on July 1, could be adopted in a much more broader sense by the income tax department through a path-breaking initiative on jurisdiction-free assessment.

This would mean that a taxpayer in Mumbai could be assessed by an income tax officer located in Patna, a significant leap toward eradicating corruption by reducing the need for face-to-face contact between citizens and tax officials to the absolute minimum besides speeding up processing.

The move, which will require a change in the income tax law, would also end the relevance of various geographic divisions in the form of wards and circles with the whole country becoming one jurisdiction. This, it is hoped, will put an end to a system in which bribery is said to be used as a tool to ease processes through human intervention.


A high-level internal report of the Central Board of Direct Taxes (CBDT) recommended the move, which is under active consideration, a senior official told Economic Times.

“We are looking at it,” the CBDT official said.

The government may consider implementing the process in the next financial year.

 

The Catalyst
The key catalyst for such a significant reform is the massive shift toward e-filing of returns, which is already jurisdiction-free with returns going to the Central Processing Centre in Bengaluru.

In the last financial year, over 42.1 million tax returns had been filed online by February. The number of e-returns processed by then was 43 million, which included some backlog from previous years.

Multiple Benefits
In line with this move towards e-processing, the income tax department may even opt for e-scrutiny for all limited scrutiny cases where assesses can explain the transactions in question over email, the official said.

A complete jurisdiction-free environment would make geography redundant and the income tax department completely faceless for taxpayers. Any review or scrutiny of return could happen anywhere in India through an electronic interface, ensuring that the payee is not forced to interact with officials. “A taxpayer would not need to have any physical interface with his assessing officer,” said the official cited above.

CBDT had earlier constituted a seven-member committee to formulate a Standard Assessment Procedure for e-scrutiny to promote greater certainty, transparency and accountability. The board has in recent times taken a number of initiatives to reduce the face-to-face contact between tax officials and assessees and make the system non-adversarial.

These include directing field offices to raise only specific queries in income tax assessment cases picked up for scrutiny. It also directed the expeditious completion of those scrutiny cases where income concealed is up to Rs 5 lakh. “Jurisdiction-free assessment will help the tax department plan and allocate assessment work across the country,” said Jiger Saiya, partner, direct tax, BDO India.

Source: http://economictimes.indiatimes.com/articleshow/59026099.cms

Bad loan crisis: Arun Jaitley says visible action on NPA’s soon

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The resolution of the vexed issue of massive non-performing assets (NPAs) in the banking system is a work in progress and some “visible action” will be initiated over the next few days under the NPA ordinance promulgated recently, finance and defence minister Arun Jaitley said.

The resolution of the vexed issue of massive non-performing assets (NPAs) in the banking system is a work in progress and some “visible action” will be initiated over the next few days under the NPA ordinance promulgated recently, finance and defence minister Arun Jaitley said on Thursday.

 

“The RBI was taking measures under the existing mechanism. We have now taken other steps and there would be visible action taken under the new mechanism in the next few days,” Jaitley said, addressing media on achievements of the ministries under him over the past three years. The Centre won’t provide any special package to any state to waive farm loans but the states are free to spend from their own budgets should they take any such decision, the minister said.

 

Here are few excerpts from FM’s media briefing:

 

On NPAs and other things constraining private investments

Massive toxic assets impact the ability of banks to support growth, although record levels of foreign direct investments (gross FDI inflows touched $60 billion in 2016-17) and higher government spending have offset inadequate private investments to a certain extent. Linked to it (NPAs) is the challenge of wanting to increase private sector investment, even though our FDI and public investments have significantly increased. And of course there is a significant (adverse) impact of the global situation also (on private investments).

 

“Note ban not sole reason for Q4 GDP slowdown”

Demonetisation could be one of the several factors, and not the sole reason, that contributed to the slowdown of GDP growth to an 8 quarter-low of 6.1% in Q42016-17. What you think is very clear (that note ban dragged down Q4 growth) isn’t very clear. There are several factors which can contribute to GDP in a particular quarter. There was some slowdown visible, given the global and domestic situations, even prior to demonetisation in the last year. Financial services, which used to have 9-10% growth, has come down (to 2.2% in Q42016-17). Under the current global situation, 7-8% growth, which is at the moment the Indian normal, is fairly reasonable by our own standard and very good by global standards.

 

And I am sure as the impact of all these policies (taken by the government) holds out, growth will gather momentum. There won’t be any adverse impact of GST on GDP growth. The GST by itself should normally add to growth.

 

(Chief economic adviser Arvind Subramanian pointed out that under the GST, the incidence of tax is going to come down. While there could be some teething problem in implementation, at the most, initially, the tax cut would be positive to both reduce inflation and stimulate consumption).

 

On Pradhan Mantri Garib Kalyan Yojana

PMGKY wasn’t an isolated scheme in last financial year. First we introduced the Income Disclosure Scheme; after the IDS, there was a (post-demonetisation) phase of people depositing cash in the banking system. And the PMGKY was over and above these. To assess the total amount of (black money) disclosures made, you have to look at all the three collectively.

 

Revenue secretary Hasmukh Adhia said the response to PMGKY hasn’t been very good; only Rs 5,000 crore has been declared under the scheme. There are mainly two reasons for it. First, even before the scheme was announced, people had tried to deposit their cash in different accounts and tried to “adjust their money”. Secondly, many people found the (PMGKY) rate – 50% tax plus 25% as interest-free for four years – too high).

 

No central funds for farm loan waiver by states

The Centre won’t provide any special package to any state to waive farm loans but states are free to spend from their own budgets should they take any such decision. The Centre will continue to provide the states funds in accordance with the latest Finance Commission suggestions, and not more to waive farm loans (clarified that states are free to take decision on farm loan waivers from their own budgets but they have to stick to the 3% fiscal deficit target, as stipulated under the fiscal responsibility legislation).

 

On Air India

As far as AI is concerned, Niti Aayog has given its suggestion to the civil aviation ministry and the ministry will have to explore all the options for divestment or privatisation of the airline. The civil aviation minister will now devise the methodology ( for disinvestment / privatisation). As far the merger of oil PSUs are concerned, the petroleum ministry will have to take a call.

 

On “jobless growth”

Jobs aren’t created outside the economic structure. If the economy grows then it’s only natural that the formal sector would create jobs and in this country job creation is even faster in the informal sector. Since there is no firm statistics available on job growth in the informal sector, the term ‘jobless growth’ is being bandied about.

 

On the amount of demonetised currency

On the total currency given to the banks, the RBI used to give the figures frequently during the process of demonetisation, but now that the exercise is complete, as a responsible institution it can’t give an approximation. Today, every currency note is to be counted and if there are counterfeits these also need to be counted before arriving at the real count. The exercise is enormous and large but the RBI will give the accurate figure when it is complete.

Source: http://www.financialexpress.com/economy/bad-loan-crisis-arun-jaitley-says-visible-action-on-npas-soon/697527/

Foreign investors pour in $4.2 billion in May, mostly in Debt

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According to latest depository data, FPIs invested a net Rs. 7,711 crore in equities last month, while they poured Rs. 19,155 crore in the debt markets.

Foreign investors have pumped $4.2 billion in the country’s capital market in May due to finalisation of GST rates for bulk of the items and prediction of a normal monsoon.

Interestingly, most of the funds have been invested in the debt markets by the foreign portfolio investors (FPIs).

“The differential spread between 10-year bond yields in the US and India is still around 4.5-5 per cent, this, coupled with stable outlook for the Indian currency bodes well for FPI flows into debt market,” Sharekhan Head Advisory Hemang Jani said.

According to latest depository data, FPIs invested a net Rs. 7,711 crore in equities last month, while they poured Rs. 19,155 crore in the debt markets during the period under review, translating into a net inflow of Rs. 26,866 crore ($4.2 billion).

This comes following a net inflow of close to Rs. 94,900 crore in the last three months (February-April) on several factors, including expectations that BJP’s victory in recently held assembly polls will accelerate the pace of reforms.

Prior to that, such investors had pulled out over Rs. 3,496 crore from debt markets in January.

“FPIs sold into Indian equities in the first few days of May. It was only in the second week that they started buying. The most prominent reason is expectation from the government that it would speed up development and economic reforms in their last two years in office before going for elections in 2019.

“The government finalising GST rates and expectation that it will be rolled out on time, in addition to forecast of normal monsoon also led to positive sentiments,” Himanshu Srivastava, Senior Analyst Manager Research at Morningstar India said.

Going forward, there are few challenges but not strong enough to disrupt the current trend. Markets and the rupee are surging higher, which offer a good profit booking opportunity for FPIs. They did that in April and they can again use this opportunity to book profits going forward.

“The flow is largely driven by expectation, and for the flows to sustain, the government has to meet those expectation. Monsoon will be another thing to watch out for as it tends to have big economic implications,” he added.

With the latest inflow, total investment in capital markets (equity and debt) has reached Rs. 1.21 lakh crore this year.

Source: http://profit.ndtv.com/news/market/article-foreign-investors-pour-in-4-2-billion-in-may-mostly-in-debt-1707650

World Bank projects 7.2% growth rate for India in 2017

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Even as the World Bank has revised India’s growth figures by 0.4 percentage points as compared to its January forecast, India remains the fastest growing major economy in the world, the World Bank officials said.

Noting that India is recovering from the temporary adverse effects of demonetisation, the World Bank has projected a strong 7.2 per cent growth rate for India this year against 6.8 per cent growth in 2016.

Even as the World Bank has revised India’s growth figures by 0.4 percentage points as compared to its January forecast, India remains the fastest growing major economy in the world, the World Bank officials said.

The growth projections for China remains unchanged at 6.5 per cent for 2017 and then 6.3 per cent for the next two years 2018 and 2019. The World Bank in its latest Global Economic Prospects, projects India’s growth to 7.5 per cent in 2018 and 7.7 per cent in 2019.

In both the years, the forecast has been downgraded by 0.3 per cent and 0.1 percentage points as compared to the January 2017 forecast.

“A downgrade to India’s fast pace of expansion,” the World Bank said, is “mainly reflecting a softer-than-expected recovery in private investment.”

In 2016, in India, activity was underpinned by favourable monsoon rains that supported agriculture and rural consumption, an increase in infrastructure spending, and robust government consumption, the report said.

“In India, recent data indicate a rebound this year, with the easing of cash shortages and rising exports. An increase in government spending in India, including on capital formation, has partially offset soft private investment,” it said.

“While manufacturing Purchasing Managers’ Indexes have generally picked up, industrial production has been mixed,” the Bank said in its latest report.

Observing that India’s growth is forecast to increase to 7.2 per cent in Financial Year 2017 and accelerate to 7.7 per cent by 2019, is slightly below previous projections, the Bank said this outlook mainly reflects a more protracted recovery in private investment than previously envisaged.

“Nonetheless, domestic demand is expected to remain strong, supported by ongoing policy reforms, especially the introduction of the nationwide Goods and Services Tax (GST),” it said.

“Significant gains by the ruling party in state elections should support the government’s economic reform agenda, which aims at unlocking supply constraints, and creating a business environment that is more conducive to private investment,” the Bank said.

M Ayhan Kose, Director of the World Bank Group’s Development Prospects Group, in response to a question, underscored the need of reforms in the banking sector.

“The government has especially taken steps to address the banking sector weakness, but that remains on the to-do list,” Kose told PTI.

“Second (to do list) of course is the initiative by the government to remove some of the public investments, exactly the right thing to do to stimulate – to try to reinvigorate -private investment, which has been weak,” the Bank official said in response to a question.

Source: http://indianexpress.com/article/business/banking-and-finance/world-bank-projects-7-2-growth-rate-for-india-in-2017-4689537/

FDI in services sector up 26% to $8.68 billion in FY17

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FDI inflows in the services sector rose by about 26% to $8.68 billion in 2016- 17 with the government taking steps to improve ease of doing business and attracting foreign investments.

The services sector, which includes banking, insurance, outsourcing, research and development, courier and technology testing, had received foreign direct investment (FDI) worth $6.89 billion in 2015-16, according to data of the Department of Industrial Policy and Promotion (DIPP).

The government has taken several measures such as fixing timeliness for approvals and streamlining procedures to improve ease of doing business in the country and attract foreign investments.

With FDI growth in key sectors like services and telecom, the overall foreign investment inflows in the country too increased by 9% to $43.5 billion last fiscal.

Increasing FDI inflows in the services sector assumes significance as it contributes over 60% to India’s gross domestic product. The sector accounts for about 18% of the total FDI India received between April 2000 and March 2017, followed by key sectors such as computer software & hardware, construction development and telecommunications.

To further boost FDI inflows in the sector, the government is considering relaxation of policy in areas like single brand retail, multi-brand retail, print media and construction. The government is also focusing on enhancing services exports. It is organizing global services exhibition besides the commerce and industry ministry is looking at relax norms in areas like higher education to attract foreign players.

Foreign investments are considered crucial for India, which needs around $1 trillion for overhauling its infrastructure sector such as ports, airports and highways to boost growth. A strong inflow of foreign investments helps improve the country’s balance of payments situation and strengthen the rupee value against other global currencies, especially the US dollar.

Source: http://www.livemint.com/Money/oqGqFei9Aeuk00ls8ZgXLI/FDI-in-services-sector-up-26-to-868-billion-in-FY17.html

Finnish companies looking for new opportunities in India

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Nina Vaskunlahti, Ambassador of Finland to India Paul Noronha

India is becoming one of the favorite destinations for investments in manufacturing, clean tech, infrastructure and hi-tech for Finnish companies.

Nina Vaskunlahti, Ambassador of Finland to India, in an interview with BusinessLine said, “There is increasing interest in economic cooperation, and Finnish companies are looking for new opportunities in India.”

Investment protection

According to Vaskunlahti, although India’s legislative framework can be a little complicated and the judicial system overworked and under-resourced leading to delays in solving disputes for foreign investors, overall the atmosphere is “welcoming and pretty open”.

However, according to the Ambassador, Finland is worried over India’s move to terminate investment protection agreement with 82 countries. “We are not quite sure what is the purpose of this,” Vaskunlahti said. While the treaty between India and Finland is still in force, according to Vaskunlahti, India and the European Union seem to be stuck over negotiating a new investment protection treaty after a year back India had sent request for renegotiation for the Bilateral Investment Treaty (BIT) to over 80 countries with whom it had earlier signed Bilateral Investment Promotion and Protection Agreements (BIPA).

“As a member of EU, we cannot negotiate on our own, because it’s the EU Commission that has a negotiating mandate,” Vaskunlahti said. “What we have now on the table is called a comprehensive negotiating mandate which covers both free trade agreement and the investment protection agreement. For the moment, nothing much is happening, but efforts and work are being done in background to push it forward.”

The new model of the BIT was cleared by the Union Cabinet in December 2015 and was seen to give more stability to foreign investors and prevent disputes with multinational companies by excluding matters such as government procurement, taxation, subsidies, compulsory licences and national security.

Arbitration mechanism

At the same time, the new model BIT brings in a provision obliging foreign investors to first exhaust the option of local judicial system at least for five years before going to international arbitration mechanism in case of disputes.

Some of the cases when foreign investors challenged India in international arbitrage, invoking clauses of earlier BIPAs include Devas Multimedia, Vodafone, Deutsche Telekom, Sistema and Cairn.

Source: http://www.thehindubusinessline.com/info-tech/finnish-companies-looking-for-new-opportunities-in-india/article9719905.ece

Income Tax department warns against cash dealings of Rs 2 lakh, seeks tip-off

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Income Tax department warns against cash dealings of Rs 2 lakh.

Income Tax department today warned people against indulging in cash transaction of Rs 2 lakh or more saying that the receiver of the amount will have to cough up an equal amount as penalty.

It also advised people having knowledge of such dealings to tip-off the tax department by sending an email to ‘ blackmoneyinfo@incometax.gov.in ‘.

The government has banned cash transactions of Rs 2 lakh or more from April 1, 2017, through the Finance Act 2017.

The newly inserted section 269ST in the Income Tax Act bans such cash dealings on a single day, in respect of a single transaction or transactions relating to one event or occasion from an individual.

“Contravention of Section 269ST would entail levy of 100 per cent penalty on receiver of the amount,” the tax department said in a public advertisement in leading dailies.

In the 2017-18 Budget, Finance Minister Arun Jaitley had proposed to ban cash transaction of over Rs 3 lakh. This limit was lowered to Rs 2 lakh as an amendment to the Finance Bill, which was passed by the Lok Sabha in March.

The restriction is not applicable to any receipt by government, banking company, post office savings bank or co- operative bank, the tax department said.

The move to ban cash transaction above a threshold was aimed at curbing black money by discouraging cash transaction and promoting digital economy.

The tax department had started the email address ‘ blackmoneyinfo@incometax.gov.in ‘ in December last year post the demonetisation of 500 and 1000 rupee notes.

It had then asked people having knowledge about conversion of black money into black/white to inform the government through this mail id.

Post the demonetisation of 500 and 1,000 rupee notes, people with unaccounted wealth had illegally converted their black money held in old notes to new 500 and 2,000 rupee notes.

The government had come out with a tax amnesty scheme PMGKY (Pradhan Mantri Garib Kalyan Yojana) under which people holding unaccounted cash could come clean by declaring their wealth and pay 50 per cent as tax and penalty. Also, a mandatory deposit of 25 per cent of the black money was to be made in a zero-interest bearing account for four years.

 

Source:  http://economictimes.indiatimes.com/articleshow/58959395.cms