Professional Documents
Culture Documents
Taxation
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Name
Roll No
Sohil Baghadia
FM203
Abhishek Iyer
FM213
Shashank Mahadik
FM223
Manas Sharma
FP233
Shweta Karia
FP243
Jalpan Shah
FP253
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ACKNOWLEDGEMENT
WE take this opportunity to express our deep and sincere gratitude to Prof. Anil
Gor for his valuable guidance and encouragement in implementing the
knowledge gained through lectures in the form of a project. It is because of his
support that we could synchronize the efforts in covering the manifold features
of the project. I acknowledge the infrastructural support provided by the
organization.
Finally I am thankful to all the members of the organization and friends who
have given their full support in collecting the required and continuous help
during the preparation of the project.
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TABLE OF CONTENTS
SR. NO
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2
3
4
5
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TOPIC
Excise sops to automobile sector
may
halt beyond December,
companies to oppose the move
SEBI Received Tip-off from Tax
Department.
New-look Bipa won't let MNCs milk
tax havens
Restaurant Industry seeks tax relief,
less regulation
SITS suggestion to consider Tax
Evasion as a Criminal Offence.
Impact of GST on various sector.
PAGE NO.
8
11
15
19
22
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Category
Commercial
wheelers
Present rate
vehicles
and
two 8%
Old rate
12%
SUVs
24%
30%
24%
27%
Present scenario
The auto industry posted growth of around 10% in the first 8 months
of this fiscal year. This was mainly due to a 12% jump in two wheeler
sales. However, the critical commercial vehicles segment saw a
decline in sales by around 7.3%. Passenger vehicles segment (cars
and SUVs) sales grew by around 2.7% in the same period.
Auto makers say that this growth has been selective i.e. only certain
players like Maruti Suzuki, Hyundai and Honda have shown
consistent growth, while TVS, Hero MotoCorp, and Honda
Motorcycle and Scooter India have good numbers in two wheeler
segment.
The view in the Finance Ministry is towards scrapping these
incentives, in order to improve indirect tax collections. The revenue
from these indirect taxes has grown by a modest 7% in April
November period to around 3.28 lakh crore, which is well short of the
targeted growth of around 20% in this fiscal.
Another reason for reversing the duty cuts is that the reduction in
excise for some segments has created a peculiar problem of inverted
duty inputs attracting higher duty and the final product lower duty
leading to accumulation of input credit.
The Finance Ministry is contemplating these steps to avoid the
possibility of a shortfall in revenue collections, which would lead to a
slippage in the fiscal deficit target of 4.1% of the GDP this year.
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Impact
The automobile industry, which benefited from these incentives for
almost a year, will be hit hard. The incentives had resulted into
price reductions between Rs. 1500 80000, depending upon the
vehicle category, thereby stimulating auto sales in an economy
which was slowly beginning to come out of a slowdown.
To keep stimulating sales, the auto companies may have to dole out
attractive discounts, which will reduce their bottom-lines.
Consumer demand for vehicles will reduce, as auto loans are also
not available on easier credit terms (high interest rates)
Downstream elements like the automotive components industry
may also feel the heat due to lower demand for automobiles on
account of higher prices.
Revenue collection by way of indirect taxes increases, but not
significant enough as only 3 months left for the end of FY15.
Remarks
I feel that the Government can extend these incentives for another 2-3
months. The automobile industry is one of the important sectors in our
economy, and a good measure of consumer demand. The incentives
have helped the auto industry to break even, and avoid a third year of
decline in sales. Also, since the interest rates are high, easy credit i.e.
auto loans are not attractive enough. The fiscal deficit target of 4.1%
of GDP had already reached 90% last month, so these steps by the
Government wont be of much help in achieving this target. It has
other tools to bridge this gap in deficit divestment, proceeds from
spectrum sale etc. Therefore, I feel that the incentives can be
continued till February-March, to allow for full recovery of the auto
sector.
NEWS : SEBI Received Tip-off from Tax Department.
DATE: 18th December 2014
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1) SUMMARY:
SEBI is probing various small companies listed in stock exchange
which are assumed to be a shell companies and having a role in
converting black money to legitimate money for various clients,
showing it as a capital gain in their books of account. (Shell
companies are the corporation without active business operation or
significant assets, not necessary illegal or illegitimate but can act as
tax avoidance for legitimate business.)
SEBI have found out many of this shell company have generated
fictitious long term capital gain for many individuals. SEBI is probing
to find out ultimate beneficiary of such a transaction. It was also
reported that the black money is routed though multi layer of accounts
so that it becomes untraceable. SEBI is looking for know your client
in order to trace the money.
SEBI received this information from the income tax dept. that several
entities were using preferential allotment route to perform this action
of gaining long term capital gain on which stock and equity mutual
funds are not tax if held for more than one year. It was observed that
this preferential allotment was granted to the person who want to
evade tax and the promoter of such companies are involved in such an
activity to make money legitimate. SEBI has alleged that investment
in a company having poor fundamentals cannot be termed as rational
investment behaviour.
How shell companies play role in converting black money into white?
Under income tax act stock and equity mutual fund are not tax on
capital gain if held for more than one year.
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Real investors who have invested in this shell companies suffers the
loss.
The overall sentiments and confidence of investor about market and
market regulators is hurt if the number of such a shell companies
increases.
Income tax department and government suffer heavy loss in the
revenue by such activities.
It gives more encouragement to black money and fraudulent
activities and discourage the real investors.
3) REMARKS:
SEBI can amend the norms which will allow equity and mutual
funds only be allotted if funds are received from bank account of
that person inorder to curb such an activity.
Tax department should amend its law to tax the capital gain above
certain amount.
Authorities should become more stringent in application of KYC
norms.
News in brief :
The government plans to replace BIPA (Bilateral Investment
Protection Agreement) with a new pact that will provide protection
only to those companies and natural persons with substantial business
activity in their home country.
The finance ministry has drafted a new model BIT (Bilateral
Investment Treaty) and is moving Cabinet saying that there is a need
to revisit BIPAs in order to prevent treaty shopping and to properly
balance the objective of investor protection and the interest of the
nation.
The need for the review of the BIPA framework arose since there has
been a rise in the number of disputes under BIPA. More specifically,
the number of disputes rose up to 550 in 2012. 58 new cases were
taken up in the year 2012, itself, the highest in a single year.
What is Treaty Shopping?
Treaty shopping generally refers to a situation under which a person
who is not entitled to the benefits of a tax treaty uses an intermediary
entity that is entitled to such benefits in order to indirectly obtain
those benefits.
For example, a corporation (CayCo) resident in the Cayman Islands
(the home country) may own a corporation (USCo) in the U.S. (the
source country). Dividends paid from USCo to CayCo would be
subject to a 30% U.S. withholding tax. If CayCo were to form a
corporation (UKCo) in the U.K. (the third country) and transfer the
stock of USCo to UKCo, dividends would be paid from USCo to
UKCo and, without anti-treaty shopping rules, these dividends would
qualify for benefits under the U.S.-U.K. Income Tax Treaty.
If this approach were successful, the dividend withholding tax of 30%
on dividends paid by USCo could be reduced to zero.
What are tax havens?
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A tax haven any country having a low or zero rate of tax on all or
certain categories of income, and offering a certain level of banking or
commercial secrecy. Tax havens exist because countries are usually
not obligated to provide customer information to foreign taxing
authorities (though investigations of criminal activity, terrorism, or
other behavior may require disclosure). Switzerland is the most
famous tax haven, followed by a number of Caribbean countries.
Tax havens must have reputable banks in order to attract business, and
they must exist in regions with relatively low tax rates. Customer with
accounts in tax havens may be required to pay taxes in that region, but
if those taxes are considerably lower than what the customer would
pay on that income is his home country , the savings can be
considerable, especially over the long run.
What is arbitration?
Arbitration is a procedure in which a dispute is submitted, by
agreement of the parties, to one or more arbitrators who make a
binding decision on the dispute. In choosing arbitration, the parties
opt for a private dispute resolution procedure instead of going to
court.
Arbitrator is an independent person or body officially appointed to
settle a dispute.
Impact
1. The new model that has been proposed would entertain the
claim of investors with at least 50 percent stake or the right to
appoint a majority of the directors or senior management
personnel and would also exclude claims of indirect or minority
shareholders. A holding company will also not be considered for
protection.
2. Any tax measure introduced by the host country will not be
subject to any dispute settlement under the BIT.
3. It plans for the removal of broad obligations found in the current
BIPA model. The most favoured nation obligation would be
removed.
4. Introduction of an early review mechanism and a mechanism
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News in brief :
The Delhi restaurant industry is suffering under the twin burdens of
confused and heavy regulation and over-taxation, and is demanding
longer operating hours, the National Restaurant Association of India
(NRAI) said at an industry meet organized on Dec 17,2014.
At the meeting, the NRAI presented a list of challenges and policy
changes it wants to see in the Delhi government. Calling themselves a
"heavily licensed and overtaxed industry,"
The NRAI's key demands include
Lower taxes,
Longer permitted operating hours,
Reduced barriers to liquor retail, Simplified licensing, & A
single window clearance system for licensing.
1) Lower Taxes :
The NRAI believes restaurants are unfairly overtaxed compared to
similar industries such as retailers and hotels.
"Service tax is on services, VAT is on goods. So if you're serving
food, they say okay you're selling food but you're also provide
service, so we're going to charge you double the taxes," said Riyaaz
Amlani, President of the NRAI.
"Restaurants are the only industry which pays VAT as well as service
tax - it doesn't happen. It should either VAT or service tax."
2) Longer Permitted Operating Hours :
Other demands include permitting operating hours up to 24 hours a
day current regulations mandate closing shop by 1am.
3) Reduced barriers to liquor retail, Simplified licensing, & A
single window clearance system for licensing.
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NEWS IN BRIEF:
The Special Investigation team formed by president Narendra Modi is
working on ways to get back the unaccounted wealth (Black Money)
of the Indians preserved in the Swiss Bank and other sources abroad.
It has made a suggestion to make Tax Evasion a Criminal offence
under the I-T Act 1961. Till date it is treated as a criminal offence and
hence no cooperation is received from governments abroad to trace
the unaccounted wealth.
Civil Offence: Civil offence is violation of rule rather law and the
person has to pay a penalty/fine or monetary compensation
Criminal Offence: Criminal Offence is violation of law and it has
severe consequences on the society as well. The person is imprisoned
and fined.
Summary:
Tax evasion needs to be made a serious 'criminal offence' to force
foreign countries to reveal names and account details of Indians
stashing illicit wealth abroad, the Special Investigation Team on black
money has said.
At present, tax evasion is a civil offence in India and it is dealt under
the Income Tax Act, 1961 while forex violations are dealt under the
Foreign Exchange Management Act (FEMA).
Both the laws are civil in nature and do not have criminal proceedings
attached as such.
If tax crimes remain civil in nature, the foreign governments will not
cooperate. If this is made a crime, then there is no difficulty and then
they (foreign countries) are bound to reveal the names. That is the
main purpose.
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What is GST?
Goods and Service Tax or GST is expected to be a critical reform in
spurring growth in the economy. When introduced, GST will not only
make the tax system simpler, but will also help in increased
compliance, boost tax revenues, reduce the tax outflow in the hands of
the consumers and make exports competitive. It is hoped that the new
Government will set forth a roadmap of the GST implementation in
the upcoming Budget.
To begin with, the GST is a value added tax to be levied on both
goods and services (except for a list of exempted goods and services),
at both the centre and state level (Central GST and State GST
respectively). This is a single tax which will be levied on the product
or service which is sold. In other words, multiple taxes like CENVAT,
central sales tax, state sales tax, octroi, etc will not exist and will be
replaced by GST. This comprehensive tax covers all stages from
manufacture to sale. The tax will be levied only on the value added at
each stage of the life cycle.
Simpler tax structure: As multiple taxes on a product or service are
eliminated and a single tax comes into place, the tax structure is
expected to be much simpler and easier to understand. Paperwork will
become simpler and there will be a reduction in accounting
complexities for businesses. A simple taxation regime can make the
manufacturing sector more competitive and save both money and
time. Experts opine that the implementation of GST would push up
GDP by 1%-2%.
Increased tax revenues: A simpler tax structure can bring about
greater compliance, thus increasing the number of tax payers and in
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turn tax revenues for the Government. The current state of the Indian
economy demands fiscal consolidation and reduction in fiscal deficit.
A recent report by CRISIL states that GST is the countrys best bet to
achieve fiscal consolidation. As there is not much scope to reduce
Government expenditure, increasing tax revenues is the best
alternative to improve the fiscal health.
Competitive pricing: GST will eliminate all other forms of indirect
taxing. This will effectively mean that the tax paid by the final
consumer will come down in most cases. Lower prices will help in
boosting consumption, which is again beneficial to companies. The
biggest positive of GST is that goods and services will be taxed on a
common basis.
Boost to exports: When the cost of production falls in the domestic
market, Indian goods and services will be more price-competitive in
foreign markets. This can bode well for exporters, who compete with
manufacturers abroad facing a lower cost structure.
The rate for GST is as yet undecided, but it would be in a range that
would make exports competitive. A sub-committee of the Empowered
Committee of state finance ministers had proposed revenue-neutral
rates (RNR) for the Central and state components at 12.77 per cent
and 13.91 per cent, respectively, taking the effective GST rate to
26.88 per cent. This is much stiffer than the 14-16 per cent in most
countries.
LATEST UPDATES ON GST: Finance minister Arun Jaitley on
Friday introduced in the Lok Sabha the much-awaited bill to amend
the Constitution for introduction of goods and services tax (GST),
which he described as the biggest tax reform in Independent India.
Jaitely promised that the Centre will compensate states for the losses
incurred by them after the introduction of the tax to create a unified
market. The centre has made a provision in the Bill promising to
compensate states for five years for losses arising from GSTs
implementation. While states will be compensated for 100% of their
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losses in the first three years, it will be 75% in the fourth year and
50% in the fifth year.
The Constitution amendment bill provides for giving states and the
Centre simultaneous powers to legislate on GST and also set up a
GST Council with the Union FM and state ministers as members. The
Centre will have a one-third say, while the states together will have
two-thirds. Any decision will need the backing of 75% of the
members. "The states will have a majority and the Centre alone can't
push a decision. The two have to decide together and no one can
decide arbitrarily.
Date: 19/12/14
Source: Business Standard
NEWS: GST to benefit e-commerce the most.
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Date: 19/12/14
Source: Business Standard
NEWS: AUTOMOBILE, LOGISTICS COMPANIES TO REAP
RICH GST DIVIDEND.
NEWS IN BRIEF:
GST is expected to result in a reduction in the cost of doing business
by removing the cascading effect of taxes especially for automotive
distributors, which attracts high rates of CENVAT duties as well as
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Date: 20/12/14
Source: Business Standard
NEWS: Why FMCG firms are cautiously optimistic on
GST
NEWS: The Union Cabinets approval to the Constitution
amendment Bill for implementing the goods and services tax (GST)
earlier this week has paved the way for the Bills introduction in
Parliament. This implies a boost for the long-pending indirect tax
reforms. Yet, executives in Indias Rs 3-lakh-crore fast-moving
consumer goods (FMCG) sector, who were earlier lobbying for
implementation of GST, now are cautiously optimistic.
The reason: A lack of clarity on the tax rate under GST. GST speaks
of a harmonised goods and services tax. But estimates suggest this
harmonised, or revenue-neutral rate will be 24-27 per cent. This,
interestingly, is what had been recommended last month by the
empowered committee of state finance ministers. This group,
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