India is world’s 40th most competitive economy: WEF

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The Global Competitiveness Index (GCI) is prepared on the basis of country-level data covering 12 categories or pillars of competitiveness.

India has been ranked as the 40th most competitive economy — slipping one place from last year’s ranking — on the World Economic Forum’s global competitiveness index, which is topped by Switzerland.

On the list of 137 economies, Switzerland is followed by the US and Singapore in second and third places, respectively.

In the latest Global Competitiveness Report released today, India has slipped from the 39th position to 40th while neighbouring China is ranked at 27th.

“India stabilises this year after its big leap forward of the previous two years,” the report said, adding that the score has improved across most pillars of competitiveness. These include infrastructure (66th rank), higher education and training (75) and technological readiness (107), reflecting recent public investments in these areas, it added.

According to the report, India’s performance also improved in ICT (information and communications technologies) indicators, particularly Internet bandwidth per user, mobile phone and broadband subscriptions, and Internet access in schools.

However, the WEF said the private sector still considers corruption to be the most problematic factor for doing business in India.

“A big concern for India is the disconnect between its innovative strength (29) and its technological readiness (up 3 to 107): as long as this gap remains large, India will not be able to fully leverage its technological strengths across the wider economy,” it noted.

Among the BRICS, China and Russia (38) are placed above India.South Africa and Brazil are placed at 61st and 80th spots, respectively.

In South Asia, India has garnered the highest ranking, followed by Bhutan (85th rank), Sri Lanka (85), Nepal (88), Bangladesh (99) and Pakistan (115).

“Improving ICT infrastructure and use remain among the biggest challenges for the region: in the past decade, technological readiness stagnated the most in South Asia,” WEF said.

Other countries in the top 10 are the Netherlands (4th rank), Germany (5), Hong Kong SAR (6), Sweden (7), United Kingdom (8), Japan (9) and Finland (10).

The Global Competitiveness Index (GCI) is prepared on the basis of country-level data covering 12 categories or pillars of competitiveness.

Institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation are the 12 pillars.

According to WEF’s Executive Opinion Survey 2017, corruption is the most problematic factor for doing business in India.

The second biggest bottleneck is ‘access to financing’, followed by ‘tax rates’, ‘inadequate supply of infrastructure’, ‘poor work ethics in national labour force’ and ‘inadequately educated work force’, among others.

The survey findings are mentioned in the report.

“Countries preparing for the Fourth Industrial Revolution and simultaneously strengthening their political, economic and social systems will be the winners in the competitive race of the future,” WEF founder and Executive Chairman Klaus Schwab said.

Only Rs 12,000-cr Input Credit claims valid

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GST regime allows tax credit on stock purchased during the previous tax regime

The government on Friday said only Rs 12,000 crore of the Rs 65,000 crore of input tax credit claimed by assessees for the pre-GST stocks were valid.

The governments, both the Centre and states, had got Rs 95,000 crore of revenues from the goods and services tax (GST) for July, the first month of the indirect taxation system. But after claims of Rs 65,000 crore were made for refunds of taxes paid on stocks lying with businesses as of June 30, the government was startled, as that would  have meant just Rs 30,000 crore of revenues from GST, which would be shared between the Centre and the states. The finance ministry said Rs 95,000 crore was the amount actually paid in cash, other than availing credit.


The Press Trust of India reported the government has estimated valid transitional credit claims of taxpayers in July were just Rs 12,000 crore and not Rs 65,000 crore, as previously claimed. This would give the government a short in the arm in its efforts to mop-up additional resources to perk up a subdued economy.

 

Only Rs 12,000-cr credit claims valid

The GST regime allows tax credit on stock purchased during the previous tax regime. This facility is available only up to six months from the date of the GST roll-out. Even these claims could be adjusted in future months, a statement by the finance ministry suggested.

An expert explained that some of the credit available in earlier taxes would be blocked in the new regime. For instance, he said, the credit for taxes paid on purchasing vehicles were not available for businesses under the new tax unless it was a dealership or business of carrying passengers. Also, credits claimed might be under litigation and, therefore, it might not be available to the assessee to carry forward or for utilisation.

Earlier in the day, the finance ministry had issued a statement to allay concerns about high transitional credit claims, saying the Centre’s revenue kitty would not go down because of these claims. It said claims worth Rs 65,000 crore does not mean that businesses would have used all of this for payment of their output tax liability for July. In other words, the credit, which now stands reduced to Rs 12,000 crore could be utilised for future tax liability.

On how the government would stagger the adjustment, Abhishek Rastogi of Khaitan & Co cited the example of banking services. In the earlier regime, banks had to pay a centralised service tax. Under GST, they will pay state-wise tax as well. So adjusting credit for pre-GST stocks may take some time as tax liability in one centre, which used to pay earlier taxes, might not be as huge this time.

The ministry also said Rs 65,000-crore transition credit claimed was “not incredibly high” as Rs 1.27 lakh crore of credit of central excise and service tax was lying as closing balance as of June 30, 2017.

The statement said some assessees would have committed a mistake in filing the form TRAN-1 and hence, the government will allow facility of revision of TRAN-1 by the middle of October.

The GST Council has already extended by a month the date for filing TRAN-1 form till October 31.

Archit Gupta, CEO of ClearTax said while the move to extend the deadline is a good step, there would be confusion to reconcile the credit available in the old regime with the one in the GST system.

Source: Business Standard

Jurisdiction-free I-T assessment on the cards

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The identities of the taxpayer and his assessing officer will be hidden in a bid to check corruption and harassment assessees face at the hands of over-zealous officers.

To check corruption and harassment, the tax department will soon launch a pilot of “jurisdiction-free assessment” where a tax officer will not get to know identity of the assessee as allotment of cases will be done randomly by computers rather than on the basis of area.

The success of the pilot, to be first carried out in New Delhi and Mumbai, will determine if the plan has to be expanded all over the country, a senior revenue department official said.

The country is divided into 18 tax zones. Taxpayers are assessed by the officers of the region they are based in.

Under the new system, the assessment zones will be demolished and a special computer software will allocate a taxpayer to any officer anywhere in the country, he said.

The identities of the taxpayer and his assessing officer will be hidden in a bid to check corruption and harassment assessees face at the hands of over-zealous officers.

The tax department is working on a major reform initiative to make compliance taxpayer friendly and a 13- member committee of tax officers has been formed to look into implementation issues, the official said.

But before the country-wide launch, the pilot is being run to spot implementation issues.

“After you initiate jurisdiction-free assessment, a taxpayer might say he wants to meet the tax officer face to face and explain his case. What do we do in that case? Can we deny the taxpayer an option to meet his assessment officer (AO)? Say, we allow them to have video conferencing, then we will have to set up the facility in tax offices. These are issues we need to address,” he explained.

Among draft recommendations of a technical committee submitted to the CBDT, the apex policy-making body on income tax matters, the tax department wants to move to the jurisdiction-free I-T assessment where the taxpayer will not have to meet his assessing officer face to face.

The official also said the proposals were broadly reflected in the Prime Minister’s speech in Rajaswa Gyan Sangam earlier this month when he had said the relation between the tax department and an assessee should be that of an examiner and an examinee where either party does not know each other.

Modi, the official said, had also called for redrafting of the archaic income tax laws so that these become simpler. The humongous Income Tax Act has been in place since 1961 and the UPA government had proposed a Direct Tax Code to replace the Act.

However, since the government changed in 2014, the DTC could not be taken up.

Tax authorities to scan GST transition credit claim of 162 companies

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As many as 162 companies that have claimed GST transitional credit of over Rs. 1 crore are under the scanner of tax authorities who would verify whether the claims are eligible.

In the transitional credit form TRAN–1 filed by taxpayers along with their maiden returns for July, businesses have claimed credit of over Rs. 65,000 crore for excise, service tax or VAT paid before the GST was rolled out from July 1.

In view of such huge claims, the Central Board of Excise and Customs (CBEC) in a letter to Chief Commissioners said that as per the GST law carry forward of transitional credit is permitted only when such credit is permissible under the law.

“The possibility of claiming ineligible credit due to mistake or confusion cannot be ruled out … It is desired that the claims of ITC credit of more than Rs. 1 crore may be verified in a time-bound manner,” CBEC said.

It asked the chief commissioners to send a report on the claims made by these 162 companies to the CBEC, which is the apex decision making body for indirect taxes, by September 20.

To ensure that only eligible credit is carried forward in the GST regime, the CBEC has asked field offices to match the credit claimed with closing balance in returns filed under the earlier law. They would also check if the credit is eligible under the GST laws.

Till last week, as many as 70 per cent of 59.57 lakh taxpayers had filed returns for July resulting in a maiden revenue of Rs. 95,000 crore under the Goods and Services Tax (GST) regime.

However, out of this, the input tax credit (ITC) data for Central GST (CGST) claimed in TRAN–1 has shown that registered businesses have claimed over Rs. 65,000 crore as transitional credit.

The government had, in late August, come out with form TRAN–1 for businesses to claim credit for taxes paid on transition stock. Traders and retailers had 90 days time to file for claim. Also businesses have been allowed to revise the form once till October 31.

PwC India Partner and Leader (indirect tax) Pratik Jain said that the Rs. 65,000 crore amount looks high particularly given the fact that lot of large companies have not yet submitted TRAN–1.

Under the transition rules, traders and retailers are allowed to claim credit of 60 per cent of taxes paid earlier against the CGST or SGST dues where the tax rate exceeds 18 per cent. In cases where the GST rate is below 18 per cent, only 40 per cent deemed credit will be available against CGST and SGST dues.

Further, the government would also refund 100 per cent excise duty for goods costing above Rs. 25,000 and bearing a brand name of the manufacturer and are serially numbered like TV, fridge or car chassis.

To avail this, a manufacturer can issue a Credit Transfer Document (CTD) as evidence for excise payment on goods cleared before the introduction of GST to the dealer. The dealer availing credit using CTD would also have to maintain copies of all invoices relating to buying and selling from the manufacturer to the dealer, through intermediate dealers.

Source: The Hindu Business Line

CBEC plans strategy to bring more businesses in GST net

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Tax officials are working out strategies to encourage more businesses to register for the Goods and Services Tax (GST) and further increase the taxpayer base.

At present, there are about 90 lakh businesses registered to file returns and pay taxes under the new levy, which kicked in from July 1.

But, the Central Board of Excise and Customs will now also encourage small businesses and dealers, who may be exempt from registering for GST.

“We plan to increase awareness of even small businesses about the benefits of GST and why they should register,” said a senior official, pointing out that in the long run it will be beneficial to them as suppliers would only choose to buy from those businesses from where they can get input tax credit.

Further, in some cases tax officials may also verify whether businesses that were paying taxes earlier have registered for GST.

Officials believe that as the new tax system stabilises, more businesses will register under GST, taking the tax base to over one crore in the next one year, if not before.

At present, businesses with an annual turnover of up to ₹20 lakh (or ₹10 lakh in some States) are exempt from registering for GST.

Though the number of taxpayers registered with the GSTN is much higher than the original estimate of about 80 lakh, Prime Minister Narendra Modi had, at the recent Rajaswa Gyan Sangam, urged the Centre and State tax officials to further expand the tax base under GST.

“To enable all traders to take maximum benefit of GST, we should work towards ensuring that all traders, including even relatively smaller traders with a turnover below ₹20 lakh, should register with the GST system,” he had said, asking officials to further increase the taxpayer base.

The issue was also then followed up by Prime Minister’s Office. Also Cabinet Secretary PK Sinha and Revenue Secretary Hasmukh Adhia, at a recent video-conferencing meeting with Centre and State tax officials, assessed the roll out of the new levy and measures to increase the tax base.

Source: The Hindu Business line

Auditors come under lens amid crackdown on shell companies

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A multi-agency clampdown has begun on shell companies to tackle the black money menace wherein the role of auditors has come under the scanner for alleged connivance in facilitating illegal transactions.

The auditors’ role is also being looked into for not raising the red flag as several cases have come to the fore, including at listed companies, for alleged mismatch in financial statements, sharp erosion in net worth, siphoning off funds to group and promoter entities, sources said.

Stepping up the vigil, the corporate affairs ministry as well as Sebi and other regulatory authorities are keeping a close tab on activities carried out by shell companies.

Sources said regulatory agencies are examining the role of auditors to ascertain whether they were also involved in suspected illegal activities.

The ministry as well as Sebi are closely looking at the functioning of auditors in various companies, especially those that have not been carrying out business for long. After a detailed analysis, the authorities would decide on the next course of action, sources added.

Auditors, who have greater responsibilities under the Companies Act, 2013, are required to ensure that financial statements of a company are proper and can red flag dubious transactions.

As part of larger efforts to fight illicit fund flows and tax evasion, the ministry has already struck off the names of over two lakh companies from the records and further action is expected.

Besides, Sebi has taken against 331 listed entities that are suspected shell companies. While the watchdog had imposed strict trading restrictions on these scrips, curbs have been eased in some cases after the companies went on appeal against Sebi’s move.

On Tuesday, the government said more than 1.06 lakh directors would be disqualified for their association with shell companies.

The ministry, which is implementing the companies law, has also identified professionals, chartered accountants, company secretaries and cost accountants associated with the defaulting companies.

Besides, such people “involved in illegal activities have been identified in certain cases and the action by professional institutes such as ICAI, ICSI and ICoAI is also being monitored”, an official release said on Tuesday.

Separately, authorities are looking at the possibility of having stricter scrutiny of global auditing firms to make them more accountable with such auditors coming under the lens in various corporate misdoings.

A big area of concern pertains to the big guns seeking to wash off their hands whenever their names crop up in any accounting wrong-doing while their delaying tactics in the name of jurisdiction have also been noticed, an official had said earlier.

While the existing legal framework provides for stringent provisions for auditing activities, there is no specific system in place when it comes to overseas audit firms.

While discussions on having tighter regulations for foreign audit firms are going on, the ministry is already examining the recommendations of the 3-member expert panel on various issues related to audit firms amid concerns over certain practices circumventing regulations.

 The expert panel, headed by Teri Chairman Ashok Chawla, had submitted its report in March this year.
Source: Times of India