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Worry that this would be too low is misplaced A panel chaired by chief economic adviser Arvind Subramanian has reportedly recommended a goods and services tax (GST) rate of 18%. This is less than half the current incidence of cascading indirect taxes on goods. The rate is also the cap that the Congress wants prescribed in the GST law. The government would do well to accept a cap as well as the two other changes the Congress wants: do away with the 1% tax on inter-state sales and resolve tax disputes among the states or between the Centre and the states through a mechanism that excludes parties to the dispute. Continuing with a tax on inter-state sales on which the buyer cannot claim an input tax credit is against the logic of GST. And it is redundant as the Centre stands ready to compensate the states for any revenue loss during the transition. The Centre and the states must settle for an 18% rate when all taxes imposed on goods and services are collapsed into one. By subsuming m...

Pension body invests Rs.2,322 cr in ETFs till November 3 this year, with returns at 1.52% — far lower than those on others The Employees’ Provident Fund Organisation ( EPFO)’ s first brush with investment in equity instruments may turn out uninspiring for its future risks with the stock markets. The central board of trustees, ( CBT), chaired by Union Minister of State for Labour Bandaru Dattatreya, reviewed the first tranche of EPFO’s investment in exchange- traded funds. ( An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold.) After the trustees raised concerns over lowerthanexpected returns, the board directed the EPFO to have a re- look at its investment pattern. The EPFO will soon convene a meeting of its finance, investment and audit com...

Barely two days before the start of the winter session of Parliament, Finance Minister Arun Jaitley said the government was willing to reach out to the Congress over the goods and services tax ( GST) but counselled the party to reconsider some of its suggestions as they can “ damage” the new indirect taxation system. Speaking at the annual day function of Assocham in New Delhi on Tuesday, Jaitley termed “preposterous” the Congress’ suggestion that tariff must be mentioned in the Constitution amendment Bill. “ It did not dawn on them when ( the then finance minister) PChidambaram accepted the Standing Committee recommendations,” Jaitley said, adding it would be “ extremely unfair” to the country “ if we try to impose in the name of political compromise, a GST with a defective architecture”. “And when tariff rate has to be mentioned in the Constitution itself, ( then it) is a flawed architecture... Because the GST with flawed architecture can actually damage the system much more ...

Companies operating across more than 35 industries pay taxes at an effective rate of less than 25% and large companies pay taxes at a lower rate compared to smaller firms. In addition, the overall effective tax rate is only around 23.2% against the statutory tax rate of 32-34%. These are some of the reasons why the government is eager to phase out exemptions. Indeed, this will mean that despite a reduction in tax rates to 25%, its tax revenue will see an increase. In line with the budget announcement by finance minister Arun Jaitley of gradually reducing corporate tax rates to 25% from 30%, the government on Friday released a draft roadmap for phasing out corporate tax exemptions in the next two years. The phasing out of these exemptions is expected to impact fresh investments into SEZs, research and development as well as hit profit of companies operating in sectors such as infrastructure, IT, natural gas explorers and pharmaceuticals. All such investments currently get tax so...

Low rate likely to be acceptable to all, ensure compliance A key panel on goods and services tax is likely to recommend a revenue-neutral rate of about 18%. The group, headed by Chief Economic Adviser Arvind Subramanian, has zeroed in on the rate after considering various scenarios, brightening the chances for this important reform as the low rate should be acceptable to everyone. “It has worked out to about 18%,“ a government official privy to discussions said. Another official said the range for the tax could be 16-18%. GST, which seeks to replace a host of central and state indirect taxes on goods along with services tax, will create a pan-India market and is expected to help lift the country's gross domestic product (GDP) by 1-2%. A revenue-neutral rate means a rate at which there would be no revenue loss to the Centre or states under GST compared with current collections Low rate will help boost compliance and also cut the pain from increase in tax rate on services, wh...

At a meeting of the joint committee of Parliament examining the land acquisition Bill, Opposition members of the panel on Monday demanded the Bill be withdrawn now that the ordinance, which was identical to the Bill, has lapsed. They also demanded that Prime Minister Narendra Modi appear before the panel to explain the Bill. Bharatiya Janata Party and Shiv Sena members of the committee opposed both demands. Business Stnadard, New Delhi, 24th Nov. 2015

Govt proposes clean-up of rules that govern the prices of imports by related parties to reduce delays and disputes India proposes a major clean-up of decade-and-a-halfold rules that govern the prices of imports by related parties ­ such as arms of multinationals from their parent in an attempt to reduce delays and disputes and make it easier to do business. The finance ministry is not just looking at changing the rules but also the process itself, which is riddled with delays and cumbersome paperwork. “There is a need for a fresh look at these rules...A lot of water has flowed over 14 years,“ a finance ministry official told ET. With `ease of doing business' the guiding principle, the government now proposes to make the process swifter and introduce an electronic interface. One option is to link valuations to audits, a procedure that's considered more sound and thorough and followed internationally. Transactions between related parties usually do not follow normal b...

New issues likely to offer 7.25-7.5%, against 6.85-7.1% yield on old bonds Many investors are keeping their gunpowder dry these days by selling their taxfree bond units subscribed in 2012-2014. These investors are gearing up for the large taxfree bond issuances from National Highways Authority of India (NHAI) and Indian Railway Finance Corporation (IRFC) totaling around ` . 16,500 crore that are likely to hit the market in mid-December. These bonds are likely to be offered at higher yields than the existing ones that are traded on the bourses. These investors -both high networth and retail -will use the cash generated from the sale to apply for the forthcoming issues. The new tax-free bonds are likely to offer investors anywhere between 7.25 and 7.5%, while yields on old tax-free bonds are around 6.85-7.1%. The arbitrage will help investors make about 50 basis points. For example, the 8.3% NHAI bond issued in 2012 and maturing in January 2027, trades at Rs.1,119 in the secondar...

The government is looking to further simplify income tax return forms to help taxpayers fill them without seeking help from experts and the revenue department has set up a committee in this regard. The committee, according to sources, will be headed by a joint secretary level officer and would include chartered accountants and tax experts. "The tax department is trying to further simplify the return form so that no outside help is needed by those who want to file returns on their own," a source said. ALSO READ:  Income tax reforms that will make life less taxing The effort would be to come out with a simple formula for indexation to help assessees compute capital gains on sale of assets, the source added. "The Committee would also look into the possibility of reducing the number of pages in the return form," the source said. The Income Tax department had in June come out with a simplified tax return form for salaried class. Filers now have to disclose ...

Updates Of the Day 1.Government had proposed to implement its decision to phase out corporate tax exemptions and deductions by profit linked, investment linked and area based deductions will be phased out for both corporate and non-corporate tax payers etc. 2.Finance minister launched the “e-Sahyog” pilot project of the Income-tax. 3.If percentage of commission earned from AE transactions is higher than AE transactions no addition can be made. [ITAT held in Sumitomo Corporation India Pvt. Ltd]. 4.Form DS-2 mandatory for goods vehicles entering Delhi. File online/via SMS. Penalty of Rs. 50,000/-for non-compliance. Visit www.dvat.gov.in for details. 5.RBI allows Regional Rural Banks to provide internet banking to customers. Government issues draft rules to replace Trademarks Rules, 2002; Objections/suggestions to the rules shall be sent to Additional Secretary to the Government of India, Ministry of Commerce & Industry, DIPP. For more News Like us on https://www.facebook.com/c...

Place of effective management guidelines to affect pharma, energy, and manufacturing In an attempt to tighten loopholes to deter tax evasion by Indian multinational companies, the government is set to come out with guidelines on place of effective management ( POEM) in the coming few days. This will consider companies with effective control in India a resident liable to pay tax in the country. The norms will affect companies in sectors like pharma, energy, manufacturing, software. Meanwhile, companies have started restructuring operations to ensure that key decision- making is done outside the country and decisionmakers are out of the country at the time of decision- making to ensure compliance with POEM. “The POEM guidelines are almost ready. They should be out in the coming few days. We are aware of industry concerns. All new things have some complications, but the guidelines will offer sufficient clarity to companies regarding compliance. We have incorporated suggestions f...