As Narendra Modi government gets set to crack GST whip on tax evaders, India Inc voices concern

by | posted in: Corporate Updates, Economy, Business Updates, Corporate Affairs, Income Tax,e-Filing- Individuals, Firms, Companies | 0
According to Section 132 of the Central GST Bill cleared by the Lok Sabha recently, the taxman can also proceed against anyone for wrongly availing input tax credits.

Many functionaries from corporate India and tax experts have voiced concerns over the government’s plan to give unprecedented teeth to the country’s indirect tax administrators by making tax evasion above `5 crore a “cognizable and non-bailable offence” in the upcoming Goods and Services Tax (GST) regime. According to Section 132 of the Central GST Bill cleared by the Lok Sabha recently, the taxman can also proceed against anyone for wrongly availing input tax credits or refunds above the same threshold, treating it as a cognizable and non-bailable offence, where the police have the authority to arrest the person concerned without warrant.

While non-remittance of tax deducted at source could lead to non-bailable warrant under the Income-Tax Act, this has been sparingly used – one recent instance was that of the Bengaluru High Court denying a request of the I-T department to issue a non-bailable warrant against the beleaguered businessman Vijay Mallya.  The punitive provisions under indirect tax laws have, however, been less biting.

The service tax department had invited the Delhi high court’s ire last September for arresting a senior executive of travel portal MakeMyTrip for failing to deposit tax after collecting it from those who booked hotel room nights via the portal. Disturbed over the fact that the arrest took place without even issuing a show cause notice to the firm and giving it an opportunity to defend itself, the court awarded costs to the travel portal and asked the taxman to refund the service tax collected after the arrest. The tax department went in appeal against the court’s decision and the matter is now before the Supreme Court.

“It may be reasonable to make “collection of tax but non-payment to government’ a non-bailable offence, as there is very little room here for interpretation in such case. But availing tax credits through wrong invoices or obtaining higher-than-admissible refunds are subject to technical interpretations in the early days of GST and it would be extremely stringent to make these non-bailable offences,” Bipin Sapra, Indirect Tax partner at EY said. Echoing the view, Anita Rastogi, partner-indirect tax, PwC India said the country’s indirect laws have never had such tough provisions against tax evasion.

Section 132 of the CGST Bill also spells out the punishment for tax evasions above Rs.1 crore: if the amount evaded exceeds Rs. 5 crore, imprisonment up to five years is possible along with fine, Rs. 2-5 crore evasion could lead to imprisonment extending to three years and fine, Rs.1-2 crore evasion could invite up to 1-year jail term and fine.

Source: http://www.financialexpress.com/economy/as-narendra-modi-government-gets-set-to-crack-gst-whip-on-tax-evaders-india-inc-voices-concern/613908/

Parliament passes bill for easier debt recovery

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0
Parliament today passed a bill which empowers banks to confiscate security in the case of loan default, a development that assumes significance in view of the episode surrounding industrialist Vijay Mallya.
The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016, will not, however, apply to loans for agricultural land as well as student loans.
The bill, approved by Lok Sabha last week and cleared by Rajya Sabha today, amends four laws — Sarfaesi Act, DRT Act, Indian Stamp Act and Depositories Act. Replying to a debate on the bill, Finance Minister Arun Jaitley emphasised the need for “firmness coupled with fairness” in recovering bad loans. He said the banks must be empowered to take effective legal action against defaulters and the insolvency law, securitisation law and DRT law are steps in that direction.
“So far the laws were in favour of the defaulters. We tried to correct the balance. There should be firmness, coupled with fairness in recovery of loans,” he said. He said banks should take a “compassionate view” on education loan defaults but there will be no waiver and somebody will have to pay. The Minister further said that fears regarding farm and education loans are “exaggerated”.
Jaitley said banks are supposed to give loans and “if banks start squeezing loans”, there will be no economic growth.
“The cause of worry is when loan becomes either NPA or stressed asset or the activity in which the loans are invested is not generating money,” he said adding in some cases there will be willful default.
The development assumes significance as it comes against the backdrop of the episode involving Mallya, who owes Rs 9,000 crore to banks, but has left the country to take refuge in England.
Jaitley said if loan has been taken it must be repaid. The Minister said stressed assets were mostly in sectors such as steel, power and textile.
The law simplifies the procedure which ensures quick disposal of pending cases of banks and financial institutions by Debt Recovery Tribunal (DRT). DRTs will have to dispose a case in 180 days and the affected party will have to deposit 25 per cent of the amount if he or she chooses to appeal against the order.

There are around 70,000 loan related cases pending in the DRTs. To further stress his point, he said 20 people sitting on bank money prevent the lender from giving credit to another 20,000 people. It should not happen that a bank manager has to keep awake all night after he clears a loan, he said.

Source : http://www.moneycontrol.com/news/economy/parliament-passes-bill-for-easier-debt-recovery_7238101.html?utm_source=ref_article

SEBI cross with UB over Mallya’s board seat

by | posted in: Corporate Updates, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0

The Securities and Exchange Board of India (Sebi) is not pleased with United Breweries (UB) allowing Vijay Mallya to continue on its board of directors, despite being tagged a wilful defaulter.

Mallya is chairman of the board of Bengaluru-based UB. Several banks have formally declared him a wilful defaulter and under new Sebi norms (late last month), any individual so tagged is barred from holding a board position in a listed company.

“Mallya should have stepped down as UB chairman and from its board, following Sebi’s new regulations. (We) are keeping a watch on the board functioning,” said a Sebi official, requesting anonymity.

IN TROUBLED WATERS

SEBI’s new curbs on wilful defaulters

  • New rule bans wilful defaulters from taking any board positions
  • Disallow defaulters from setting up market intermediaries
  • Defaulters would not be allowed to take control of other listed company
  • No wilful defaulter shall make a public announcement of an open offer for acquiring shares or enter into any transaction
  • Sebi’s rule disqualifies Mallya from various posts he holds at the moment

The regulator could soon initiate action if UB is in violation of the corporate governance norms, said the official. The regulator is believed to have also raised questions on the role of independent directors on UB’s board.

UB refused to comment on an email query sent to it.

Earlier this year, Mallya had resigned as chairman and managing director of United Spirits, as part of a deal with the company’s new owner, Diageo. Mallya, however, continued to serve on the board of other companies, including UB. Diageo now owns 55 per cent of USL and Mallya had stepped down from the board in February, for a $75 million payoff.

From the March quarter shareholding data, Mallya holds 8.08 per cent in UB in his personal capacity. Another 22 per cent in UB is owned by his group companies.

Heineken acquired a 37.5 per cent stake in United Breweries in 2008 through its takeover of Scottish & Newcastle and has since increased its holding to 42.4 per cent.

The banks say Mallya had given personal guarantees, apart from pledging his stake in UB Group companies, to raise funds for his now-grounded Kingfisher airline. This resulted in Mallya losing control over his liquor empire to global players — Diageo in spirits and Heineken in beverages.

Mallya reportedly left India on March 2, allegedly to escape enforcement action by multiple probe agencies and Indian banks, to which he owes Rs 6,963 crore in loans. In March, a consortium of lender approached the Supreme Court to stop Mallya from going abroad but he’d left; on April 18, a court in Mumbai issued a non-bailable arrest warrant against him.

Last week, the enforcement directorate had attached United Breweries Holdings and Mallya assets worth Rs 1,411 crore in Mumbai, Bengaluru, Coorg and Chennai. He was also declared a proclaimed offender early this week.

This was issued in response to a plea by the Enforcement Directorate on April 15 before the special court hearing cases under the Prevention of Money Laundering Act, 2002. There were allegations on him that he transferred Rs 4,000 crore ($590 million) to tax havens.

Source: http://www.business-standard.com/article/markets/sebi-cross-with-ub-over-mallya-s-board-seat-116061600885_1.html

Banks on takeover drive of defaulting companies

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0

Banks are taking over companies under the strategic debt restructuring (SDR) scheme and forcing defaulters to sell assets.

On November 30, banks announced the conversion of Rs 15,000 crore of Gammon India’s loans into equity. On the same day, they informed Hyderabad-based road developer IVRCL that they were converting Rs 7,500 crore of loans into equity.

On Thursday, Electrosteel Steels said its board of directors would meet on December 8 to take on record an SDR package. The Kolkata-based Electrosteel Steels owes banks Rs  9,500 crore.

Banks have also invoked SDR against Lanco Teesta Hydro Power, VISA Steel, Jyoti Structures, Monnet Ispat and Energy.

The SDR scheme was cleared by the Reserve Bank of India in June. The scheme was introduced because banks felt the corporate debt restructuring (CDR) scheme failed to help them recover their money. The CDR cell had approved restructuring loans worth Rs 4 lakh crore till March this year. Under the SDR scheme, banks convert loans into equity and can change the management of the company.

“Banks are not in a mood to listen to borrowers. That is why we are selling our assets in India and abroad to avoid the SDR scheme,” said the promoter of a large corporate group who did not wish to be named. With SDR as a stick,  banks have also put defaulters on notice that if they are unable repay loans by selling assets then they will do it for them. This has expedited the sale of assets by many debt-laden groups.

Banks on takeover drive of defaulting companies

Essar Steel announced on November 8 it had appointed SBI Caps and ICICI Securities to sell stakes in the company. This was apart from its own plans to sell assets worth Rs 11,200 crore by March 2016.  “The promoters will infuse another Rs 1,500 crore into the company in 2015-16,” Firdose Vandrevala, executive vice-chairman, Essar Steel, had said in a recent interview.

Soon after selling its two telecom circles to Idea Cellular, Videocon Industries said it would sell telecom assets, including spectrum, worth Rs 14,000 crore to bring down its Rs  39,000 crore net debt.

The Anil Ambani-owned Reliance Infrastructure said it would sell its cement assets and 11 road projects to cut its  Rs 25,000 crore debt. On Friday, another Ambani company Reliance Communications announced its plans to sell its telecom tower company to private equity firms, Tillman Global and TPG to reduce its debt.   Hyderabad based GMR and GVK are also taking steps to raise funds. On Friday, GMR announced that it is raising $300 million by way of a foreign currency convertible bond.  Similarly, GVK is planning to get an investor for its airport arm. Most debt-heavy companies have been battered on the stock exchanges as investors fear asset sales will pull down future sales and profits.

Banks have also been aggressive with Vijay Mallya, chairman of the UB Group who defaulted on Rs  7,000 crore of loans taken by Kingfisher Airlines and have declared him as a defaulter.

Source: http://www.business-standard.com/article/finance/with-sdr-teeth-banks-move-to-take-over-defaulting-firms-115120400289_1.html

Yes Bank invokes United Breweries’ shares worth Rs 778 cr

by | posted in: Accounting Standards, Audit, Due Diligence, Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0

Private sector lender Yes Bank has invoked 3.02 percent stake of United Breweries , pledged by McDowell Holdings, a unit of Vijay Mallya-led UB Group, by selling shares worth Rs 778 crore.

 

The move comes after State Bank of India (SBI) declared Mallya, Kingfisher Airlines and its holding company United Breweries Holdings, as willful defaulters for defaults on nearly Rs 7,000-crore loans to the long-grounded carrier.

 

In a notification to exchanges, United Breweries said that Yes Bank has invoked a total of 79.81 lakh shares, amounting to 3.02 percent stake. These shares were pledged by McDowell Holdings.

 

At Friday’s closing price of Rs 974.80 apiece, the shares sale of United Breweries is valued at Rs 778 crore.

 

Yes bank has invoked the stake “to secure loans given to group companies.”

 

Currently, Mallya and his family members hold 34.04 percent stake in United Breweries through various companies and 15.57 percent of stake was pledged with various financial institutions.

 

Now, Heineken is the largest shareholder of United Breweries with 42.22 percent stake.

 

Last week, Yes Bank had sold 4.25 lakh shares of United Breweries, India’s largest brewer that makes Kingfisher Beer, for Rs 39.48 crore through an open market transaction. These shares were purchased by Heineken International BV, the maker of Heineken beer.

 

Meanwhile, the 17 lenders to the airline had said they will e-auction the assets of the grounded airline, in their latest bid to part recover their dues of around Rs 7,000 crore and accrued interest on the principal, that has not been serviced since January 2013.

 

The airline, owned by flamboyant liquor baron Mallya, had taken Rs 6,900 crore from a consortium of 17-lenders, led by SBI, in early 2010 after a second debt restructuring for the airline.

 

United Brewerie stock price On November 30, 2015, United Breweries closed at Rs 952.05, down Rs 22.75, or 2.33 percent. The 52-week high of the share was Rs 1225.00 and the 52-week low was Rs 732.05.

 

The company’s trailing 12-month (TTM) EPS was at Rs 9.80 per share as per the quarter ended September 2015. The stock’s price-to-earnings (P/E) ratio was 97.15. The latest book value of the company is Rs 69.95 per share. At current value, the price-to-book value of the company is 13.61.
Source: http://www.moneycontrol.com/news/business/yes-bank-invokes-united-breweries-shares-worth-rs-778-cr_4373361.html