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  • India Rejects Apple's Key Demands on Tax Incentives : India has not accepted 'most of the demands' on tax incentives that Apple Inc. had sought for establishing a manufacturing base in the South Asian nation, a senior official said, shifting focus to the rejection's fallout on the iPhone-maker's local assembly plans.

    Sources aware of the Cupertino, California-based company's proposals, however, said the first plant being set up by contract manufacturer Wistron, which will assemble iPhones in Bengaluru, will not get affected as the concession demands do not pertain to this plant. "Apple India has sought concessions, including duty exemptions on manufacturing and repair units, components, capital equipment including parts and consumables for smartphone manufacturing and service repair for a period of 15 years," Commerce and Industry minister Nirmala Sitharaman said in a reply to a question in Parliament. On whether the government has accepted most of the demands, Sitharaman said "No". Apple declined to comment on this development.

    India has earlier said that it is not possible to give exemptions to individual companies, especially as the Goods and Services Tax (GST) takes effect later this year, replacing a complex and tiered indirect-taxation structure.

    "There is no way we can give individual exemptions under the GST regime," Revenue Secretary Hasmukh Adhia had told ET. Apple's vice president of operations Priya Balasubramanium met Adhia, to discuss Apple's plans in India, a person aware of the meeting said.

    Apple had sought the concessions from the government to incentivize the high-end component manufacturers of iPhones to move to India as without their presence, it will be difficult for the iPhone maker to start full-fledged manufacturing operations locally. Apple sought a series of exemptions pertaining to import duties on components and equipment besides exemption from the mandatory 30% sourcing norm.
    (ET, Mar 23, 2017)
  • GST: Partial But Welcome Progress: The Goods and Services Tax (GST) Council has done well to clear a Bill that guarantees to fully compensate states for five years for any revenue loss during transition to the new tax regime. A legal backing provides comfort, but there should be ways to prevent states from slacking off on revenue collections. GST subsumes all indirect levies and avoids cascading of taxes, leading to potential revenue loss for states, but they will gain from being able to tax services. A precise estimate of gain or loss is not possible at this stage. Sensibly, states will be compensated on the basis of revenue projections from 2015-16 -when growth and revenue collections were buoyant.

    A protracted slowdown due to demonetization would hurt their revenues next year. In any case, the Centre will have to bear an extra fiscal burden if states have to be compensated for revenue shortfall. So, the need is to change the approach to sharing taxes with states. There is a compelling case to take the central goods and services tax (CGST) out of the divisible pool of taxes, leaving collections from income tax, corporate tax and customs du ties to be shared with states. Such a change in approach will, at least partially, safeguard the Centre's revenues.

    The tough part -of fixing the tax rates for different commodities under the four-tier GST structure, deciding the legalities in the Central GST Act, the Integrated GST Act and the State GST Act, decoding how to settle disputes and prevent taxpayers from having to face multiple levels of the administration to comply with the tax -is reportedly still to be settled. Economic Times in a leading article, has suggested that the GST Council should drop the anti-profiteering mechanism to ostensibly keep a check on the pricing policy of producers. It goes against the grain of a non-adversarial tax regime.

    The Centre is hopeful of rolling out GST on July 1. ET says, we reiterate that it makes sense to fix the launch date three months after the final state and central GST laws are passed and rules notified in order to enable companies to be ready with their accounting systems to meet the requirements of the new tax.
    (ET, Feb 20, 2017)
  • LED lighting Industry unhappy over Import Duty on Inputs, to meet Power Minister: LED lighting companies will meet power minister Piyush Goyal to raise concerns about the imposition of import duty on input components. Budget 2017 proposes to levy a 5% basic customs duty on all parts and other inputs used in manufacturing LED lights.

    There was no customs duty on imported MPCBs (motor protection circuit breakers) so far, while there was a 10% duty on finished LED products. However, prices of LED lights aren't expected to rise as the government has also reduced the excise duty on components to 6%. The LED lighting industry had asked the government for a 20% customs duty on finished LED lights, said Shyam Sujan, secretary general at industry association Elcoma.

    Sunil Vachani, Chairman of Dixon Technologies, said the industry will make representations to the power ministry seeking suitable amendments in the proposal. "The PCBs (components) imported for LED lamps manufacture falls in the ITA1list of the WTO of which India is a signatory. This bars imposition of customs duty on PCBs. The proposal would hurt the government's Make in India scheme," he said.

    Meanwhile, electrical companies which import drivers or PCBs for manufacturing LED lamps have hailed the move.

    "A course correction in CVD (countervailing duty) and BCD (basic customs duty) structure on renewable energy and LED products and components will give the necessary impetus to local manufacturers, aligned to government's `Make in India' vision," Anchor Electricals said in a statement issued post budget.

    Saurabh Kumar, MD of Energy Efficiency Services that implements the government's LED lamp distribution scheme, said: "Duty cuts in LED manufacturing will encourage further innovation and support our ongoing efforts to reduce the cost of cutting-edge technology. This is a stepping stone towards India becoming a global leader in energy efficiency programmes."

    EON Electric chairman VP Mahendru said: "With rural development being one of the major focuses for 2017-18, there has been an increased allocation for the rural electrification which will in turn benefit the manufacturing and sale of the electrical appliances."
    (ET, Feb 03, 2017)
  • FM's assurance about GST being on track corroborates Govt's Intent for earliest rollout: With GST round the corner, any significant changes in the excise service tax regime would have caused undue hardship to the taxpayers, possibly with no commensurate benefits.

    As expected, the finance minister did speak about the progress that has been made on all fronts around GST roll out. While he did not specifically mention July 2017 being the target implementation date, he provided enough assurance about GST being on track, with no major hurdles left to be crossed. In fact, the awareness sessions for taxpayers will commence from April, which further corroborates the intent of the government to roll out GST at the earliest.

    Purely from a GST perspective, there was a case to increase the service tax rate from 15% to say, 18%. However, the government's decision not to go ahead with the hike comes as a pleasant surprise to both industry and the common man. While one will have to brace for an increase in tax incidence on services under GST, any change in service tax rate at this stage, though temporary, would have warranted corresponding changes in the billing systems, etc.

    The proposal to withdraw the Research & Development Cess (levied at 5% on import of technology into India under a foreign collaboration) is a welcome move, as it currently becomes an incremental cost even to manufacturers, who are otherwise able to claim a set-off of service tax applicable on import of manufacturing know how. This also puts to rest the uncertainty around whether or not the R&D cess would continue under GST. However, the industry didn't get lucky on customs cess, which will continue at least under the current regime.

    Then there are a few changes in the customs excise duty rates to address the inverted duty structure, incentivize indigenous manufacturing and promote digital payments. These include exemptions concessions for miniaturized PoS card readers (including parts required for their manufacture), parts used in manufacture of LED lights or fixtures, etc. The basic customs duty rate on LNG has also been reduced from 5% to 2.5%, which was a longstanding demand of the industry.

    The advance ruling authority under customs excise service tax has been shifted to that under the I-T Act. Given the significant backlog of advance rulings under indirect taxes, one would hope that the proposed transition would lead to an expeditious resolution.

    Given that we would be transitioning to GST later this year, this may well turn out to be the last budget where the finance minister had the opportunity to propose any significant structural changes in central indirect taxes. As most of the changes under GST will be initiated through the GST Council (which also comprises the states), it will be interesting to see if the council will also have a similar `annual day' to announce changes in the GST laws!
    (ET, Feb 02, 2017)
  • IPhone-maker's key demand for certainty of countervailing duty exemptions will require support of states under GST regime: The central government may be keen for Apple to set up manufacturing facilities in the country, but this may not be enough -the states will need to come on board as well.

    Apple's key demand -predictability and certainty of countervailing duty (CVD) exemption -will require the support of states as the country adopts goods and services tax (GST) in the next financial year. Imports will then face Integrated GST in place of countervailing duty, which is levied in lieu of central excise duty. GST will subsume central taxes such as central excise duty, services tax, countervailing duty and state taxes, including value-added tax, octroi and purchase tax.

    "Exemptions under the GST regime will have to be decided by the GST Council," said a government official, indicating how difficult it will be for the Centre to offer assurances on this score.

    CVD is levied as part of import duty, but states have made clear that as it's in lieu of excise duty they want a say in what will be taxed and what will be exempt.

    A committee of central and state officials has been tasked by the GST Council to decide on the brackets goods will be placed in and those that will be exempted. The GST Council will take a final call on the committee's recommendations.

    The Centre will have to convince states to continue with the exemptions that it may deem imperative in the larger interest of the country
    (ET, Jan 27, 2017)
  • Software firms eye big opportunities in small businesses after GST roll-out: Software companies are sensing a big opportunity in the challenges small and medium enterprises will face in the transition to the goods and services tax (GST).

    The government expects 8 million returns will be filed in the first month after the GST us rolled out on July 1. Over 90 per cent these will be by small and medium enterprises. "We are serving 10,000 firms and look to expand by four times," said Archit Gupta, founder and chief executive officer, The Bengaluru-based start-up builds underlying software for tax purposes.

    "The GST is an opportunity for us to serve," said Sathya Pramod, Chief Financial Officer, Tally Solution, which works with SMEs in indirect taxes and has more than 1 million licenced users. Its products Tally.ERP 9 and Tally.Server 9 will have GST modules built in.

    EffiaSoft, a Hyderabad-based software firm, has built a mobile platform to help SMEs switch to the GST. "It is a self-serving platform where small and micro firms can enter details and it pulls the tax to be credited based on purchase and value added." Said Koushik Shee, founder and CEO of EffiaSoft.

    Since its launch early this month, the firm said, the Android app had been downloaded 3,000 times. Called Justbilling, the platform available in local languages can be accessed by small enterprises for monthly fees of Rs.650.
    (BS, Jan 21, 2017)
  • Govt. may Rewire Policy on Phone Manufacturing (Officials say change in norms must for success of 'Make in India': to help all cos) : The government won't offer any special concessions to Apple but is reviewing its entire policy on mobile phone manufacturing as part of an effort to promote the `Make in India' initiative, officials said. This could meet some of the demands that Apple has made apart from benefitting other phone makers as well.

    Apple had sought the concessions to set up plants in the country. The issue will be examined in depth at a high-level meeting with Apple executives. On Apple's wish list is said to be a 15-year customs duty holiday on the import of iPhone kits, new and used capital equipment, and consumables. Apple's requests are being considered by three government departments -revenue, industry and information technology.

    India needs to support an iconic brand like Apple for the success of the Make in India campaign, officials said.

    "Our import duty is high," one of them said. "As long as they are getting into exports, our objective should be to give them lowest duty so as to ensure that their product is competitive. Hence we may even relook at the policy as a whole."

    Another official said no decision had been taken but that concessions cannot be given to just one company. "Normally, similar dispensation has to be given to others similarly placed," he said.

    The Make in India programme is aimed at encouraging investment in manufacturing to drive job creation in the country and thereby boost growth and raise incomes to lift people out of poverty.

    Apple had earlier sought permission to set up fully owned retail outlets by forgoing the compulsory 30% local sourcing rule on the ground that it was bringing cutting-edge technology to India. The finance ministry didn't allow the exemption.

    Explaining the rationale behind a fresh look at the trade policy, the first official said India cannot be isolated from the rest of the world. "India has to follow same set of principles prevalent elsewhere which has helped players to become global manufacturers," the official said.
    (ET, Jan 18, 2017)
  • GST Rollout from July 1 as Centre, States Reach Deal (States to assess 90% taxpayers with turnover under Rs 1.5 cr, rest with Centre; States & Centre to share control for turnover exceeding Rs 1.5 crow): India will likely be able to roll out the goods and services tax (GST) from July 1 following a breakthrough over the seemingly intractable issue of tax administration after the Centre accommodated states' concerns.

    "It's a significant head way," Union Finance Minister Arun Jaitley said after a day-long meeting of the GST Council with both sides agreeing on most matters.

    Under the proposed tax regime, 90% of all assesses with a turnover of Rs.1.5 crore or less will be assessed for scrutiny and audit by state authorities, the remaining 10% by the Centre. Above that limit, Centre and states will assess in a 50:50 ratio. The agreement hammered out was based on a proposal by Tamil Nadu.

    "Each assessee would be assessed only by one authority," Jaitley said, putting to rest fears over dual administration by both state and the Centre." You won't have to jump from authority to authority, that's the advantage of GST... Computer programming will be done in such a way that there is no discretion (in selection of assesses)".

    This division of tax administration had been holding up the finalisation GST tax laws, making it difficult for the government to stick with the April 1 deadline. The GST Council, which has Jaitley as chairman and state ministers as members, resolved to share the entire taxation base between the assessment machinery of the Centre and the states.

    Both will have intelligence based assessment powers, Jaitley said. The Centre has also given leeway to states on integrated GST (I-GST), which deals with inter-state sales. Jaitley said the power to levy and collect the I-GST lies with the central government but states will also be cross-empowered in the same ratio as above through a special provision in law. Any IGST disputes among states will be resolved by the Centre.

    Regarded as one of India's most sweeping reforms since Independence, GST will help turn the country into a common market by removing state tariffs that act as a barrier to free movement of goods and services. The accord will come as a relief to the Centre after concerns that the November 8 demonetization may cause states to put up their price. To be sure, the constitutionally mandated timetable requires GST has to be in place by September at the latest.

    Jaitley said all ministers present at Monday's meeting agreed to the proposals except West Bengal finance minister Amit Mitra. The state wanted exclusive jurisdiction for states up to the limit of Rs. 1.5 crore. Other states did not support West Bengal's demand, said an official present at the meeting.

    Newspapers welcome GST switchover: It is indeed welcome that the Centre and the states have reached agreement on the vexed issue of dual control of administering the goods and services tax (GST), opening up the possibility of introducing the new, paradigm-shifting tax regime on July 1 this year. A more realistic view would be to set the launch date of the new tax three months after the final state and central GST laws are passed and the rules published. Companies need time to prepare their accounting systems in order to draw up an invoice that fully conforms to the requirements of the new tax on launch day.
    (ET, Jan 17 & 18, 2017)
  • Govt's Draft Software Policy welcomed (Sector welcomes move that aims to generate employment for 3.5 million people through the creation of 10,000 tech startups developing products): The industry has largely welcomed the Ministry of Electronics and Information Technology's (MeitY) draft policy for software products, which is open for consultation from the sector and other stakeholders.

    The policy aims to promote creation of a sustainable software product industry , which is largely being driven by the startup sector. It also aims to generate direct and in-direct employment for 3.5 million people through the creation of 10,000 technology startups developing products. "Having demonstrated the success of India's product ability, we firmly believe, India just needs a targeted policy to succeed in product arena. Most importantly , the policy should be able to remove frictions in trade of software products in the domestic market. Software products' need a recognition at par with other products or goods,"

    The policy will provide a boost to the Indian software product industry, the same way as the Software Technology Parks of India (STPI) policy helped the software services industry for its initial two decades. The policy covers issues ranging from funding, stock options, level-playing ground in taxation, trade promotion and research and development.

    "India needs to leapfrog ahead of the world. The intended policy will greatly enhance focus on Indian software products in the world and help in ease of doing business, trade promotions and simplifying government procurement.
    (ET, Nov 30, 2016)
  • Govt. Plans Policy Prescriptions to Make IT Fighting Fit: With an impending slowdown in the IT sector -considered to be the sunrise sector of the country not very long ago -the government is mulling a review of policies which could bolster the sector's sagging fortunes. On the cards is a committee which is expected to study the factors affecting the industry and give its recommendations on the possible measures that the government could take to contain the situation.

    As per initial discussions, the ministry of electronics and IT is deliberating whether there is a way the government can come up with policies that help the industry get back its focus and growth. "The review of the entire IT sector is being considered, even though some are contending that there is no slowdown in the sector, others have a feeling that jobs are moving from the software side and the situation has to be handled in a coordinated way so that the focus and growth of the sector continues," said an official privy to the discussion. The Indian IT sector reported one of its worst second-quarter results in a decade, as a slew of factors muted the sector's growth. Slowing growth in the banking and financial services sector, Britain's decision to leave the EU, weaker discretionary spending and growing pricing pressure in the traditional business along with the shift towards newer modes of businesses such as digital and cloud have led Indian IT firms to temper down expectations.

    Macro-economic challenges such as Brexit and a squeeze in client spending has led to slower growth across the IT sector.
    (ET, Nov 15, 2016)
  • Retain Differential Duty Under GST seek Handset-makers (Phone-makers say the government should impose a higher tax rate on imported handsets to encourage local manufacturing) : Handset makers have asked the government to continue differential duty advantage under the goods and services tax (GST) regime, and deincentivise import of fully built mobile phones by imposing higher rate than on locally produced phones.

    Unsure of the slab rate under GST, representatives of the Indian Cellular Association (ICA) and Consumer Electronics and Appliances Manufacturers Association (CEAMA) separately met senior officials in the revenue department to present possible solutions to keep local phone manufacturing going.

    "We have proposed that the government introduces a new concept, a negative list under GST for imports and trading of goods, which includes mobile handsets, on which no credit of central GST should be allowed," CEAMA vice president Sunil Vachani told ET after the meeting.

    The GST Council is yet to decide the rate category for mobile phones, which are at the forefront of PM's Make in India initiative. India is set to produce mobile phones worth Rs 94,000 crore locally this fiscal, up from Rs 54,000 crore in 2015-16.

    The government took the first step towards creating a uniform tax rate structure for the country with GST, but decided on a four-tiered tax system 5%, 12% 18% and 28% with the first three rate slabs comprising goods of mass consumption.

    Handset makers fear that lack of clarity on the duty dispensation could not only upset the momentum of local manufacturing growth but also put at risk investments made by device makers that assemble phones locally. They said if the duty differential is not continued, it may also threaten the proposed Phased Manufacturing Programme (PMP) that aims to make 1.2 billion mobile phones worth Rs 15 lakh crore by 2025-26 potentially employing 5.8 million people.

    Both ICA and CEAMA have proposed an alternative, whe re import GST rate of 12.5% without any credit should be applied on phones that are imported. In order to maintain differential duty structure for locally made phones, a nil central GST rate without input tax credit and state GST rate of 5% at each stage which is creditable, should be set.

    ET has seen details of the presentations made by both associations that represent leading mobile phone makers such as Samsung, LG and Micromax besides consumer durable makers such as Haier and Videocon.

    The government currently levies a 12.5% countervailing duty on fully made phones imported into India and a similar rate of duty on batteries, chargers and headsets of mobile phones.

    Senior officials from telecom and electronics and IT departments had earlier said that policy and regulatory framework would be supportive to the industry, seeking to position India as an emerging global hub for manufacturing of mobile phones. However, a final word from the government on the rates is awaited.
    (ET, Nov 12, 2016)
  • GST will have four-tier structure : India finalised a four-tier Goods and Services Tax (GST) structure ranging from 5% to 28% taking a significant step towards implementing the biggest reform of indirect taxes, which the government hopes will shield the common man from price shocks.

    The fixing of rates by the GST Council marks a crucial milestone towards the rollout of the single tax that will replace various state and central levies and create a seamless national market for goods and services. The four GST slabs are 5%, 12% 18% and 28%. The fifth rate for gold and precious metals, which was earlier proposed at 4%, will be decided later but is likely to be lower.

    "We are moving as per schedule. We have been able to finalise the GST tax structure," Finance Minister Arun Jaitley told reporters at the end of the two-day GST Council meeting in New Delhi.

    "Over time, the government should commit to converge to one or two rates," the Confederation of Indian Industry said in a statement. "It is also important that the bulk of goods and services should fall within the standard rate of 18% and only as exception to go to the higher rate of 28% and a lower rate for essential goods such as unprocessed food items."

    The government plans to roll out the new tax regime from April 1 and will introduce a Bill in the upcoming winter session of Parliament to complete the legislative process.

    The Centre's original proposal of 6% as the threshold rate and 26% as the highest slab was tweaked after states including Kerala said they wanted the lowest slab at 5%, the current threshold rate for value-added tax in many states.

    GST would be broadly tax-neutral, Jaitley said. The minister said he hoped the total indirect tax incidence on the people would come down with the seamless input tax credit that would reduce effective tax on goods.

    India Inc Welcomes Four-tier Tax Rates: India Inc, which will possibly benefit the most from the introduction of Goods and Services Tax, welcomed the rapid progress on this key reform even as it pointed out certain shortcomings that it hoped would be addressed over a period of time. Industry has called for a centralised registration system under GST, while flagging concerns around the burden of complexity that could arise due to multiple registrations for supply of goods and services in each state.

    "Businesses in the services sector such as telecom, banking, insurance, airlines, ecommerce undertake pan-India operations. Meeting requirements of each state through different registrations, audits and compliances would be a massive task," said Confederation of Indian Industry President Naushad Forbes. On the four-tier rate structure that was unveiled on Thursday, the CII suggested that over time the government converge those into one or two rates

    ET comment on GST rates: The Goods and Services Tax (GST) Council has done well to set four rates: ranging from 5% to 28%, with a cess for ultra-luxury and demerit goods. Multiple rates will not lead to systemic inefficiencies as GST allows manufacturers to claim credit for all input taxes paid across the value chain. Zero rating for essential items will not break the credit chain and is, therefore, welcome. The council should now focus on remedying flaws in the model GST law to make compliance simple. Border check posts must go to have one market. This is eminently feasible with an Integrated GST levied by the Centre rather than the states on inter-state supplies.

    The model law proposes to tax intra-firm supplies of goods and services, without any payment attached. That's a nightmare not just for IT and financial services that span multiple states, but for exporters too. A country does not export its taxes and exporters can claim a refund on the input taxes paid by them. But goods that move from one factory to another within the same legal ownership need to be tracked, identified, valued, invoiced and tax payments made. All movements have to be recorded for tax purposes and truckers must carry invoices.

    All this raises the compliance burden for exporters, blocks their working capital, and yields no revenue to the government. The answer is to scrap the tax on intra-firm supplies of both goods and services.
    (ET, Nov 04 & 05, 2016)
  • Upset over 18% GST Slab, Telcos Signal Increased Mobile Bills : Mobile phone companies are upset about the possibility of an increase in the tax rate on their services under the proposed four-tier Goods and Services Tax structure.

    A higher rate would make telecommunications more expensive for users, hit the government's Digital India ambitions and deal a blow to a financially stressed industry, they warned. Telecom services are currently taxed at 15%.

    The government has unveiled a four-tier GST structure, with rates of 5%, 12%, 18% and 28%, but has yet to announce segment wise rates. Industry executives expects the tax on telecom services to be 18% -tax at 12% is unlikely as it will mean a cut in revenue for the government. Nevertheless, the industry is seeking a lower rate.

    "Since telecoms is an essential service under Essential Services Maintenance Act, 1968, it was imperative that the GST rate should have been aligned with the merit rate of tax applicable for essential products and services, which is way below 15%," said Rajan Mathews, director-general of the Cellular Operators Association of India. COAI represents Bharti Airtel, Vodafone India, Idea Cellular and Reliance Jio Infocomm.

    A higher GST rate, he said, would hurt the common man the most and stymie growth of this critically important infrastructure sector.

    "It will have an inflationary effect on the overall cost of provisioning telecom services and increase costs for subscribers," Mathews told ET.
    (ET, Nov 05, 2016)
  • DoT to Begin Work on New Policy from April 2017: The telecom department is planning to begin work on the new telecom policy from April 2017, to set the path for future growth for the sector, Telecom Secretary JS Deepak says. Over the next few months till the process begins, the department will undertake pending reforms including notifying guidelines for right of way.

    "My preference would be to handle what is on the plate and start working on the new policy in April 2017, which would actually be 25 years of commencement of wireless revolution in this country," he said at the India Telecom event.

    The new policy's predecessor -National Telecom Policy (NTP) 2012 which continues till date -was the one under which telecom licenses were delinked from spectrum, and several other reforms were taken including spectrum trading and sharing norms, full mobile number portability and making large quantities of spectrum available to carriers for purchase through auctions. While the new telecom policy would look at meeting requirements of next generation technologies but some targets set under the existing policy are yet to be fulfilled.

    The government has scrapped requirement of a wireless operating license -a separate licence for installing and operating base stations and other wireless equipment which is now part of the unified access service license. The move would, in turn, facilitate ease of doing business.
    (ET, Nov 03, 2016)
  • Electronic Products Policy Will Now Focus on Exports: NITI Aayog, the government's premier think tank, has junked its first dedicated 'Make in India Strategy for Electronic Products' and has floated another policy that is more export-oriented and favours developing coastal economic zones.

    The previous policy paper had faced opposition from the Ministry of Electronics & Information Technology as well as reservations from other stakeholders mainly because of its domestic focus and its emphasis on semiconductors.

    "They had floated a policy paper once that never went forward since many people had reservations on it" a senior ministry official told ET on condition of anonymity. The official added that the ministry is, however, fully supportive of the second draft paper submitted by the think tank.

    "They are talking of port-based electronic manufacturing clusters. They seem to have discussed it with the industry and then floated the paper. It's a good paper, which nicely analyses the prospects. We are fully supportive of it. However, it is still a policy paper and may take some time to take shape," the official said. "The idea is to promote greater exports of electronics and drive larger investments. We have achieved a certain level in terms of manufacturing so far and this will take it to the next level."

    India's domestic consumption of electronics hardware was $63.6 billion in 2014-15, with in ports accounting for 58% of the total. NITI Aayog had initially come out with a draft policy that sought to attract global electronic manufacturers to set up units in India and give a push to Prime Minister Narendra Modi's pet project, Make in India. The draft policy suggested a 10-year tax holiday for companies investing over $1 billion in electronics manufacturing or creating 20,000 jobs in India.

    It has now been shelved in favour of the proposal to set up coastal economic zones for labour-intensive sectors in the country, much along the lines of China, to enable manufacturers to tap overseas markets without much difficulty.

    "We are not pursuing the electronics policy as the Aayog is pushing for comprehensive coastal economic zones, which would serve the purpose and would be a better option," Aayog vice chairman Arvind Panagariya told ET.

    Besides, the think tank was of the view that the sector needed an export-oriented strategy to cater to the global market, which exceeds $2 trillion.

    NITI suggested that the country needs to forge free-trade agreements to create duty-free markets for electronic goods. It had said India's current approach with respect to such agreements is defensive because it is a bigger importer of electronic products than an exporter.

    An industry official said the policy paper could not fructify since it talked about investments from semiconductor companies, something that appears impossible to pursue at the moment.
    (ET, Oct 17, 2016)
  • Industry pitches for GST rate of 18%: Companies have pitched for a standard goods and services tax (GST) rate of 18 per cent and sought time to switch over to the new regime at a meeting with the empowered committee of state finance ministers chaired by West Bengal Finance Minister.

    States, which are seeking a higher tax rate of 20 per cent, asked companies if they would pass on low rates to consumers. The finance ministers did not buy the argument of the e-commerce industry, which sought an exemption from the tax, that it merely provided a platform for vendors and customers and did not make money out of sales.

    This was the first meeting of the empowered committee of state finance ministers since the passage of the Constitution Amendment Bill for the GST in Parliament. The meeting discussed GST rates and the accountability of the goods and services tax network.

    Thirteen states have ratified the Bill. Telangana and Mizoram have had the legislation approved by their assemblies.

    The Centre is targeting April 1, 2017 to roll out the GST, but industry said it needed more time to prepare. The Federation of Indian Chambers of Commerce and Industry (Ficci) said at least six months would be needed from the date of adoption of the GST law by the GST Council. Flipkart, Amazon and Snapdeal argued they provided service to vendors and were liable to pay the tax only on service income. They said the vendors selling goods on their portals should be liable to pay the GST.
    BS, Aug 31, 2016)
  • MeitY draws up draft National Software Policy: The draft of the National Policy on Software Products is likely to be put up for public consultation within days, according to sources close to MeitY. Early August, Minister of State for Electronics and IT PP Chaudhary told the Lok Sabha that the government has drawn up the draft National Policy on Software Products.

    Expectations from the policy to revamp the software product sector are high. The policy should be aimed at making a conducive environment for the sector, said Ravi Gururaj, who chairs the product council at Nasscom.

    "While many of the startup ecosystem challenges are being addressed, a policy should specifically address startup needs of the IT sector -software products, cloud solutions, etc. Specific infrastructure needs like evaluation infrastructure, and sector focus such as IoT that DeitY is currently acting on could be enhanced," said Gururaj.

    One of the main aims of the new policy is to help the software product industry increase its contribution to the economy.

    "The government has drawn up the draft National Policy on Software Products with an aim to strengthen the software products ecosystem in the country and to give further impetus, so that software product sector contributes significantly in terms of business and employment," the minister had said, in his written reply to the Lok Sabha on August 10.
    (ET, Aug 23, 2016)
  • A ray of hope for GST roll out: It is welcome that the government and the Opposition have found common ground on amending the Constitution to enable the transition from a fragmented set of indirect taxes to a harmonized system of goods and services taxes across the country. The Congress has dropped its demand for specifying a cap on the GST rate in the Constitution and has settled for the cap being specified in the central GST and Integrated Goods and Services Tax (IGST) Bill. The government, on its part, has dropped a 1% tax on inter-state sales and accepted the need for a dispute resolution mechanism and agreed to compensate states for full five years for any loss in their indirect tax collections they suffer on account of moving to GST.

    The Constitution Amendment removes statutory incapacity of the Centre to collect taxes on retail sales of goods and of the states to tax services; creates a new IGST for goods and services sold across state borders, to be levied by the Centre and apportioned with the concerned states; and creates the GST Council with representation from all states and the Centre. This is a major step forward. But for the transition to GST to be complete, Parliament has to pass two Bills, on the central GST and on IGST, and the states must pass state GST laws. There has to be agreement on the rates of tax and on how the GST Council would work. Without reaching agreement on the rates and procedures to be adopted, these Bills would not be converted into Acts. If the process stretches into 2017-18, leaving implementation of the tax to April 2018 at the earliest, the government itself would not be keen to embrace the unpredictable consequences of adopting a new tax system in the run-up to the next general elections.

    While much work remains to be done before the levy can be rolled out, Finance Minister Arun Jaitley has said he's optimistic about getting it in place by April 1 next year.
    (ET, Aug 04, 2016)
  • Handset Vendors Making in India Seek continuation of duty structure that will make handset imports expensive: Handset vendors, worried about how the proposed goods and services tax (GST) regime will affect the Make in India initiative, intend to seek clarity from the government on incentives offered for manufacturing phones locally. The companies are preparing a proposal for the government, seeking continuation of a duty structure that will make it more expensive to import handsets than to produce them in the country. A formal request, with the consensus of all handset makers, will be sent to the revenue department.

    "We're mulling a proposal where we will be asking the government to keep the differential duty structure as is in order to keep the benefits for local manufacturing," said Pankaj Mohindroo, chairman of the Fast Track Task Force established by the government to achieve its target of 500 million locally made handsets as part of the Make in India programme.
    (ET, Aug 03, 2016)
  • Cabinet Nod to Capital Goods Policy Cutting Reliance on Imported Parts : The Cabinet has approved a first ever national capital goods policy that seeks to reduce reliance on imported equipment by incentivising domestic production and in the process creating crores of jobs The policy seeks to increase production of capital goods from Rs. 2.3 lakh crore in 2014-15 to Rs. 7.5 lakh crore in 2025 and also raise direct and indirect employment from the current 84 lakh to three crore.

    "Capital goods manufacturing, if it happens in India, along with the manufacturing that is going to happen downstream, the entire economy gets fillip," said Railway Minister Suresh Prabhu after the Cabinet meeting.
    (ET, May 26, 2016)
  • Buckling under handset manufacturers' pressure, Government reverses duties, hitting components (Relief for populated PCBs, 4% import duty imposed): Buckling under pressure from handset manufacturers the government has put through a series of notifications reversing duties adding up to around 29.44% on import of batteries used in mobile phones, chargers, wired headsets and speakers imposed in the Budget. These components, which comprise 15-20% of the cost of a mid-size phone, can now once again be imported at zero per cent duty. This will also come as a big relief for global manufacturers such as Samsung.

    A section of industry observers were puzzled at the reversal in the government's stance as the duties on these components were added in this year's Budget to encourage domestic manufacturing and value addition. It has been government's agenda to promote big-time domestic manufacturing of electronic goods and electronic components. Sources said that handset manufacturers protested stating that there wasn't enough domestic manufacturing happening of the products that attracted the levy so the increased duty would lead to an increase in the prices of their products. The levy of the duties in the Budget came as a surprise for the industry as it was not prepared for it and needed some time to prepare itself. However, another section of the industry said that by reversing the rates, the government has killed the scope for any domestic manufacturing to happen in these products.

    "It seems that the government has given time to the industry to prepare itself. It is not that it has removed the duty for all time to come but may bring it back in, say, six months' to a year's time," Sanjay Garg, partner, indirect tax, KPMG said.

    The government also imposed a 4% import duty on populated printed circuit boards (PCBs) for customer premise equipment if imported for broadband modems, routers, set-top boxes for TV and DTH, CCTV cameras, DVRs and NVRs, while removing the 2% levy for mobile phones. The idea is to encourage domestic value addition. Earlier, the duty on these products was zero. If these products are manufactured domestically, there will be an excise duty of 4% while components can be imported without any duties. Populated PCBs or semi-knocked down kits are basically assembled products that are disassembled and then imported and reassembled and so do not lead to any value addition.

    Prior to Budget 2016-17, import of almost all mobile handset accessories did not attract any import duty while domestic manufacturing (assembling) was subjected to a concessional excise duty of 1% without the facility of Cenvat credit. Since this was not leading to shifting of core manufacturing activities to India by foreign players (the value-addition in assembling was less than 10%), the Budget, while retaining the 1% excise duty on domestic manufacturing, imposed import duties on chargers, adapters, batteries, wired headsets and speakers, taking the cumulative tax incidence (including basic customs duty, countervailing duty of 12.5% and special additional duty of 4%) on these products to 27-28%. Finished handsets attract a countervailing duty at 12.5%, with 30% abatement, and the tax incidence is high enough to give domestic manufacturing an edge.
    (FE, May 07, 2016)
  • NITI Aayog Moots Tax Breaks for Electronics Manufacturing (UNDER MAKE IN INDIA Policy body recommends steps like preferential buying by govt; end to inverted duty structure & creation of mega coastal economic zone under Sagarmala project) : Seeking to capture world electronics markets with China vacating some space in the sector, the government's key body on policy formulation has suggested a series of reforms to kick-start electronics manufacturing under the Make In India initiative, including tax breaks for big investors and a special coastal zone for production.

    In a new policy paper on electronics manufacturing, NITI Aayog has suggested that with a policy shift, India is poised to make a dent in the global market with high input costs in China but warns that this is 'perhaps India's last such opportunity'. It argues that the strategy should be export oriented with import substitution to expand production of electronic goods in the short run.

    The strategy paper, a copy of which was accessed by ET, suggests that a mega coastal economic zone (CEZ) be set up under the Sagarmala project with international standard infrastructure and flexible land acquisition and labour laws to kick-start the sector. "A CEZ may be up to 200 to 250 km wide from the coastline, approximately equal distance in length and encompassing a modern deep dredge port. It would have minimal red tape and relatively flexible labour and land acquisitions laws," NITI Aayog has suggested.

    Within the new CEZ, companies making large investments and creating big employment have been recommended for a massive tax break, besides a suggestion to end the inverted duty structure and ending all taxes on exports. "A 10-year tax holiday for a firm that invests a substantial sum and generates a large employment within CEZ. For this purpose an investment threshold of US $ 1 billion with the employment of 20,000 may be considered," the paper suggests.

    For import substitution, NITI Aayog has suggested a modification of the preferential market access policy, allowing preference in government procurement, specially in the high value area of defence, for domestic products. The policy organisation has deeply studied the Chinese model and has said that India has an unusual opportunity at hand. "Real wages in manufacturing in China have been rising at 10% per year since 2007.These increased wages are rendering China uncompetitive in employment intensive activities.firms currently located in China are loo king for locations with less expensive labour," it says arguing that India should not even shun away from low value addition production as massive production orders in the sector 'translates in a large total value addition and large number of jobs'.

    Recommendations summary:

    For exports:
    • Set up coastal Economic Zone (CEZ) between 2-3,000 sq km under Sagarmala project.
    • 10-year tax holiday for firm that invests over $1 billion with 20m,000 employment
    • All tariffs and domestic taxes paid to be rebated back at exit point
    For import substitution:
    • Modify preferential market access policy, allow preference for govt. procurement
    • Defence procurement through domestic sources
    • 10 year tax holiday for company creating 15,000 jobs and investing $1 billion
    • Impose countervailing duty equivalent to domestic indirect taxes on imports
  • Imposition of Service Tax will Push Up Tariffs: Telcos : Telecom companies have warned that the finance ministry's proposal to impose a 15% service tax on all spectrum allotments, including auctions and trading deals, would cost the industry . 30,000 crore in the first year, ` forcing telecom operators to raise tariffs.

    The move would not only make the cost of acquiring spectrum higher by 47-71%, dampening the bidding interest in the upcoming auctions, it would also cut into the telcos' corpus required to expand services like 3G and 4G, telcos have represented to the Finance Minister Arun Jaitley.
  • Govt. unveils new defence procurement policy: After a delay of over a year, the much-awaited new defence procurement policy was unveiled by the government on Monday with an aim to ensure transparency, fast-track acquisition process and give a push to the 'Make in India' initiative.

    The Defence Procurement Procedure (DPP) 2016 announced by defence minister Manohar Parrikar will be applicable from April. The procurement policy lays the roadmap on how India, the world's largest arms importer, will acquire defence equipment in the future.

    The announcement was made at the inaugural ceremony of Defence Expo (Defexpo) 2016, the largest ever of its type to be hosted by India.

    Parrikar said a review of the new DPP will be undertaken after six months. "I do not say that the document is foolproof. Let us take a review after six months. Nothing is perfect, but we are taking it to perfection," he said.

    He further said the DPP can push the agenda of 'Make in India' and India's target of achieving defence industry network.

    With the new DPP, it will be ensured that there is greater transparency and faster clearances, he said.

    The DPP has been loaded online on the defence ministry's website and would be made available in hard copy format after 15 days.

    Financial Express in its Editorial Comment says, while it was always known that the success if the Make-in-India programme hinged critically on how quickly defence production picked up in the country, defence minister Manohar Parrikar has furthered this with his new defence procurement policy. While the earlier policy also gave a higher priority to deals where the manufacturing was predominantly done in India, the new policy brings in a new category - Indian Designed, Developed and manufactured (IDMM) - which will be the most preferred acquisition category. To qualify for this, apart from being designed and developed in India, the local content has to be at least 40%. Even more important, for the first time ever, the policy states that while the lowest bid will get selected under normal circumstances. If there is a superior product, it will also be considered - in other words, L-1 will no longer be the only method of procurement. Developers chosen to work on prototypes will get more of their money back than earlier - up to 80% of the cost was reimbursed up till now and the new policy raises that to 90%.

    While there have been a few companies that have already offered to set up manufacturing facilities in India, a lot more will have to be done for it to really pick up steam.
  • New Defence Policy Likely to Give Local Production a Boost: The new defence procurement policy may have mandatory local production clause with technology transfer as part of the government's Make in India programme, says minister of defence Manohar Parrikar.

    For certain categories, the government is likely to stipulate mandatory local sourcing clause, he told reporters at the Make in India week.

    Parrikar said even as there is a push for local production, there is need to improve transparency in the defence procurement procedure (DPP), which can help reduce cost by 20-25% without compromising on quality. He said the government has finalized the DPP and it been approved by the Defence Acquisition Council (DAC).

    "If Make in India goes at the same speed, (GDP) growth will be in double digits, definitely more than the current 7-8%," Parrikar said.

    The minister said that while there will be a push to local manufacturing, "not all items can be produced here" as there will be some specialized parts that will have to be imported, and localization also depends on the volume content.

  • Commerce Ministry seeks service tax exemption for exports: To boost waning exports, the commerce ministry has suggested that exporters be exempted from payment of service tax in the coming Budget. Exemption from the levy could help in reducing transaction cost and boost exports, an official said. Currently, exporters pay service tax and then apply for its refund, which is a cumbersome process, according to exporters body FIEO. "First paying the service tax and then applying for refund increases transaction cost and time. Many times, small exporters do not apply for refund as it takes a lot of documentation and time," Federation of Indian Exports Organization DG Ajay Sahai said.

  • Speedy disbursal of pending Service Tax refund claims of exporters under rule 5 of the CENVAT Credit Rules, 2004 : CBEC has accorded primacy to speedy sanction of refunds in case of export of services. This initiative is not a substitute for the various notifications but is meant to complement them and is aimed at enabling ease of doing business.

    The provision is applicable to service tax registrants who are exporters of services, with respect to refund claims under rule 5 of the CENVAT Credit Rules, 2004, which have been filed on or before 31-3-2015, and which have not been disposed of as on date of the issue of this circular.

    Jurisdictional Deputy/Assistant Commissioner is allowed to make a provisional payment of 80% (eighty per cent) of the amount claimed as refund, within five working days of the receipt of Certificate from the statutory auditor in the case of companies, and from a chartered accountant in the case of assesses who are not companies along with an undertaking.

    For more information, please refer link:

    ELCINA welcomes these decisions of CBEC and also Government initiatives towards Ease of Doing Business. ELCINA would like to request for more prominent and permanent steps to support manufacturing and exports.
  • Electronics Exports to developed countries (including US) are now eligible for export incentives under MEI

    Welcome decision for Indian Electronic Industry

    As per recent announcement from DGFT, electronics exports to developed countries including US as well as the other neighbouring countries will be eligible for duty credit scrips, a benefit that was taken away the Foreign Trade Policy 2015-20. The Latest Public Notice has added 110 New Product HS Codes across the industry thus the total no. of HS Codes now under MEIS is increased to 5,054 from 4,944.

    ELCINA along with many industry Associations strongly recommended and pursued for restoration and enhancement of export incentives for electronic industry. ELCINA members met Ms. Nirmal Sitaraman, Hon'ble MoS, Industry & Commerce, Mr. Praveer Kumar, the then DGFT and Mr. DK Singh, ADGFT. This is a welcome decision and a big encouragement for electronics manufacturers who were disappointed after the benefits under FMS and FPS Schemes were withdrawn for electronic products and components from many key markets adversely impacting their exports.

    Please also find below the link of news published in "The Economic Times" dt. 31st Oct. 2015.

    Copy of the relevant portion of the above mentioned News:

    "Under the MEIS, the government provides duty benefits at 2%, 3% and 5%, depending upon the product and the country. With the revision, the government has extended the MEIS benefits to textile and readymade garments exports to the African countries. As per the change, electronics exports to developed countries including US as well as the neighbouring countries will be eligible for duty credit scrips-a benefit that was taken away this year in the Foreign Trade Policy. Similar, textile exporters will now get the MEIS benefits when they send their shipments to category A or developed.` countries like the US."

    Stakeholders may check the exact benefits regarding percentage of export incentive and goods eligible for availing these benefits as mentioned on the Public Notice by DGFT at

    These new export incentive benefits are applicable from immediate effect (i.e. from 29.10.2015).
  • Big Holes in India's Encryption Policy - say Experts: India's proposed encryption policy has come under heavy fire with internet experts and online activists alleging that it provides blanket backdoors to law enforcement agencies to access user data, which could be abused by hackers and spies.

    The Department of Electronics and Information Technology (DeitY) has asked for public comments on the 'Draft National Encryption Policy' on its website until October 16. The stated mission of the policy on encryption -or, the practice of scrambling data to make it unintelligible for even the service providers -is to "provide confidentiality of information in cyber space for individuals, protection of sensitive or proprietary information for individuals & businesses, (and) ensuring continuing reliability and integrity of nationally critical information systems and networks".

    However, almost all the experts ET spoke to, while agreeing that a policy for encryption is a welcome move, felt that the policy document in its current form is not well thought-out and makes suggestions that could harm businesses and individuals, and thwart research and development in the field of encryption. The most contentious provision in the draft policy document is perhaps the one requiring businesses and individuals to keep a plain text copy of the data they encrypt for storage and communication, for 90 days, and make it available to law enforcement agencies "as and when demanded in line with the provisions of the laws of the country".

    "The mission of the policy is to promote national security and increase confidentiality of information, but it specifically excludes 'sensitive departments agencies', which most need such protection. The content of the policy shows why they have been excluded: the policy, in fact, decreases security and confidentiality of information," said Pranesh Prakash, policy director at the Centre for Internet and Society
  • GST rollout - hope rekindled ( Infosys tech for GST) : Welcome news that Information Technology (IT) Firm Infosys has won a Rs.1,400 crore contract from GST Network (GST-N) to build the IT system so that the goods and services tax (GST) regime is rolled out on schedule.

    GST-N Chairman Navin Kumar told Business Standard, Our Board has approved the contract to Infosys. It is worth Rs.1,380 crore.

    The company is supposed to lay the IT-backbone to implement the GST regime.

    Once the backbone is ready, Infosys will operate it for five years, Kumar said.

    "After that, it will be seen whether we will have the capability to operate it ourselves or hand it over to some other company," he added. When asked if the network would be ready on time to ensure the roll-out of the new indirect tax regime by April 2016, if the government decides to do that, Kumar said it was one of the conditions in the bidding.
  • Defence Electronics Policy in Final Stages: The government could announce India's first Defence Electronics Policy, which will seek to streamline procurement and boost local manufacturing, as early as this September with the drafting of the document in its final stages.

    The Indian Electronics and Semiconductor Association (IESA) and the National Association of Software and Services Companies (Nasscom) - both are involved in the drafting -have recommended strengthening of aerospace and defence ecosystem to boost domestic manufacturing in tandem with Prime Minister Narendra Modi's Make in India initiative.

    The policy draft will put forth categorical recommendations for immediate, short-term, intermediate and long-term arrangements to boost indigenous production and localised integrators and suppliers.

    "The final draft version is almost ready and we will be presenting it to officials in the Ministry of Defense in the second week of August," IESA President and former Karnataka Principal Secretary M N Vidyashankar said. The framework will be unveiled on September 9, during the defence symposium, DEFTRONICS 2015, he said.

    Guarantee Local Defence Procurement, with Quality: We certainly need a proactive policy to incentivize local manufactures for the defence sector. One traditional method to step up research, development and specialized expertise has been to offer generous tax incentives. But such tax exemptions and attendant credits and holidays merely make the tax code much too complex and inefficient. Instead, guarantee procurement, while setting rigorous standards and delivery timelines. We also need a more conducive investment environment to coagulate funds and expertise to have a better endowed military-industrial complex. This, without doubt, will have spill-over benefits across the economy.
  • Success of Digital India Hinges on Net Neutrality Policy: A government policy that protects net neutrality is critical for the success of its Rs 1.13 lakh crore Digital India process of its ` gram as any sort of prioritizing, throttling or blocking of the Web would stifle the digital ecosystem in the country.

    According to experts, preserving an open internet will prove to be the true test of whether the Narendra Modi government is able to execute its vision of Digital India.

    "The PM spoke of creating more Googles and successful start-ups in the country under the Digital India initiative and that can only happen if the Internet is neutral," said Nikhil Pahwa Founder, Editor & Publisher, He added that at the core of Digital India lies the development of the digital ecosystem in terms of apps and app-based government services, as well as free and equal access to all these for consumers across the country .

    "Any move to throttle access or create hurdles towards development of start-ups working on apps will hit at the essence of net neutrality, " Pahwa added.

    Prime Minister Narendra Modi's ambitious Digital India project is aimed at broadening digital access for Indians and making sure government functions and services are available online to citizens. It hopes to launch a number of health, education and governance initiatives digitally in an attempt to deliver the essential services to all citizens even in far-flung areas
  • Cabinet Nod to New Skill and Entrepreneurship Policy (proposal to integrate skill development norms among 21 ministries & depts. has also been approved) : The Union Cabinet has approved a proposal to integrate skill development guidelines among 21 ministries and departments in order to streamline the Skill India mission and reap a better demographic dividend, finance minister Arun Jaitley said.

    The Cabinet has also approved a new skill development and entrepreneurship policy to improve the efficiency of human resources, besides clearing the institutional framework for the National Skill Development Mission in keeping with the commitment made in the Union Budget.

    As part of the common rules of skill development, the hours and cost of training will become uniform. Currently, training courses offered by ministries range from 80 to 675 hours.

    As per the new rule, a minimum of 200 hours' training is required for fresh skilling courses and 80 hours for re-skilling programmes.

    The vision of the new skill policy is "to create an ecosystem of empowerment by skilling on a large scale at speed with high standards and to promote a culture of innovation based entrepreneurship, which can generate wealth and employment so as to ensure sustainable livelihoods for all citizens in the country", a Cabinet statement said.
  • India Inc Urges PM Cut Cost of Funds: Indian corporate leaders have urged Prime Minister Narendra Modi to take steps to further reduce the cost of capital to help boost manufacturing in the country and generate consumer demand.

    The request made at Indian industry associations' first interaction with the prime minister after the new government came to power in May last year on Tuesday -reflects the industry's disappointment with meagre rate reductions announced by banks after the Reserve Bank of India cut policy rates for the third time in six months in June.

    "Industries across sectors are yet to reach the level of optimal capacity utilisation, indicating that the consumer demand continues to be weak," a person who attended one of the meetings said. "Hence, we have urged the PM to look into ways of bringing down the cost of capital further to help industry enhance investment while giving a push to consumer demand.
  • Politics scuttling GST (accommodation, not confrontation, is the key: It is unfortunate that a vital reform needed by the economy is being held hostage to politicking between the government and the Opposition. The goods and services tax enjoys bipartisan support in principle, although operational consensus has eluded the tax over two terms of the UPA government, thanks essentially to stonewalling by the BJP. Now, the Congress is playing the same game. It should not. It should cooperate with the government in getting the constitutional amendment passed and, more importantly, in implementing the new tax in the states where it runs the government and where it is the principal Opposition.

    The BJP is not helping matters by insisting on a deadline for passing the Bill that has little to do with legislative dynamics. If the Congress wants the amended GST Bill to be reviewed by a committee of legislators drawn from all parties, and is amenable to making that review time-bound, there is little harm in the ruling side acceding to that demand. There are provisions in the Bill, such as the 1% central sales tax that is to continue for at least two more years, which are eminently objectionable. If a multiparty consensus can create a better framework for such a vital change in the country's taxation structure, there is no harm in deferring the Bill to the next session of the legislature just a couple of months away . Accommodation will help, rather than confrontation.

    The Congress must understand that the public at large can distinguish between genuine desire to scrutinise the amended Bill and eagerness to do unto the BJP what the BJP had done to the Congress when its government was trying to push GST through the political system. Getting back at the BJP might be a legitimate goal for the Congress, but do not expect the public at large to have any sympathy for such a move. Voters want to see political parties play a constructive role in taking the economy forward. They will dislike Congress obstructionism just as much as BJP high-handedness. And they are the final arbiters, in our democracy.
  • GST beneficial to States, Centre (Chief of empowered panel of finance ministers says he is hopeful of meeting April 2016 deadline): "The Goods and Services Tax will be mutually beneficial for both the states and the Centre. I am hopeful of all stake-holders arriving at an amicable negotiated decision on the implementation of the GST regime within the 1, April, 2016 deadline", said Kerala's Finance Minister K M Mani, the newly appointed chairman of the empowered committee of state finance ministers on GST.

    I look forward with hope. I am aware that most of the states are aware of the benefits they will get from GST. Of course, there is also different perspective as far as the producing and non-producing states are concerned. But all stake-holders are also aware that the GST will help the states that have, otherwise, no powers to levy taxes on services and the Centre which has no powers to levy sales taxes.
  • India needs to relook its IPR policy for some sectors: India needs to relook its intellectual property rights (IPR) policy with a view to bring in a differentiated regime for sectors that have a greater manufacturing potential says commerce secretary Rajeev Kher. However, he adds that he is not recommending a review of Indi's IPR policy. "I would personally feel we need to take a look at and I am not recommending a review of our IPR policy. I am recommending that we need to look at (that), can we identify sectors facilitate manufacturing at the upper end by bringing in a differentiated concept in IPR. But the country which perhaps thinks about graduating its production to a larger part of the value chain needs to look at how it wants to utilize IPR for the benefit of exclusivity of production in certain identified segments of industry," Kher said.
  • Commerce Ministry busy with Depts. to improve ease of doing biz : The commerce ministry is intensely engaged with different departments, including revenue and shipping to reduce paper work in a bid to cut transaction cost for exporters and improve ease of doing business. The Directorate General of Foreign Trade (DGFT), under the commerce ministry, has prepared a report suggesting various ways to improve India's ranking in the World Bank's report of ease of doing business, reduce transactions cost for exporters and boost outward shipments.

    The ministry aims at reducing the number of mandatory documents from nine to three (bill of lading, invoice and shipping bill) for exports, and from 10 to four for imports.

    "DGFT is regularly meeting officials of different departments, including revenue and shipping, to achieve this goal. Reduction in paper work would improve ease of doing business, reducing transactions costs and time and also boost India's exports," and official told PTI. The report, Trade Across Borders, was circulated to all the departments concerned and they have expressed commitment to help achieving targets by March 31, the official said, adding commerce secretary Rajeev Kher has written to the departments to take actions on these recommendations.

    This explains why the new Foreign Trade Policy (FTP) is being delayed and it has now been stated that the FTP will be released only after Budget Announcement for 2015-16.
  • SEZs hobbled by taxes, infrastructure: Special Economic Zones (SEZ) are likely to be central to realizing Prime Minister Narendra Modi's ambitious Make in India agenda. But the withdrawal of tax incentives has made SEZs an unattractive proposition, say industry experts.

    Under the original scheme, businesses in SEZs were exempted from the minimum alternate tax (MAT) on book profits and developers were exempted from payment of the dividend distribution tax (DDT). But with indications that companies were misusing the policy for real estate arbitrage and that information technology companies were using the policy to recoup tax benefits that they lost when the Software Technology Parks of India (STPI) scheme ended, these exemptions were withdrawn.
  • Notifications:
    • DGFT talks of procedural simplification (new Foreign Trade Policy being delayed to cover ease of doing business): The government will unveil a new foreign trade policy only when the time is right, Director General of Foreign Trade Pravir Kumar said. He added it was unlikely the government would release it in the winter session of Parliament.

      "For preparing the new policy, we have had very extensive consultations. We are pondering on issues that are making it difficult for exporters to export to other countries. Therefore, the focus will be on ease of doing business. We will be looking at simplification of procedures and rationalization of paperwork and bring in reforms," he said.

      Kumar added one of the thrust areas of the new foreign trade policy would be ensuring taxes weren't exported and infrastructural deficiencies were addressed. Incentives would be provided for exporting to difficult areas, especially landlocked countries, with optimal usage of natural resources, he said.

      This is after many years that the government has delayed rolling out a new foreign trade policy.
      (BS, Nov 30, 2014)
    • Clarification regarding availment of CENVAT credit after six months: CBEC, Ministry of Finance, Department of Revenue issued Notification No. 21/2014-CE (NT) dated 11.07.2014, vide which, inter alia, amendment was made in Rule 4(1) and 4(7) of CENVAT Credit Rules, 2004 (CCR, 2004) to prescribe that manufacturer or output service provider shall not take CENVAT credit after six months of the date of issue of any of the documents specified in sub-rule (1) of Rule 9.

      2. According to CBEC Circular No.990/14/2014-CX-S dated 19th November 2014, Concerns had been expressed by trade that in view of above changes, the re-credit taken in following three situations may be hit by the time limit of six months prescribed:
      1. 3rd proviso to Rule 4(7) of CCR, 2004 prescribes that if the payment of value of input service and service tax payable is not made within three months of date of invoice, bill or challan, then the CENVAT Credit availed is required to be paid back by the manufacturer or service provider. Subsequently, when such payment of value of input service and service tax is made, the amount so paid back can be re-credited.
      2. According to Rule 3(5B) of CCR, 2004, if the value of any input or capital goods before being put to use on which CENVAT Credit has been taken, is written off or such provisions made in Books of Account, the manufacturer or service provider is required to pay an amount equal to credit so taken. However, when the inputs or capital goods are subsequently used, the amount so paid can be re-credited in the account.
      3. Rule 4(5)(a) of CCR, 2004 prescribes that in case inputs sent to job worker are not received back within 180 days, the manufacturer or service provider is required to pay an amount equal to credit taken on such inputs in the first instance. However, when the inputs are subsequently received back from job worker, the amount so paid can be re-credited in the account.
      3. The matter has been examined. The purpose of the amendment made by Notification No. 21/2014-CE (NT) dated 11.07.2014 is to ensure that after the issue of a document under sub-rule (1) of Rule 9, credit is taken for the first time within six months of the issue of the document. Once this condition is met, the limitation has no further application. It is, therefore, clarified that in each of the three situations described above pertaining to Rule 4(7), Rule 3(5B) or Rule 4(5) (a) of CCR, 2004, the limitation of six months would apply when the credit is taken for the first time on an eligible document. It would not apply for taking re-credit of amount reversed, after meeting the conditions prescribed in these rules.
      (F.No.267/72/2013-CX.8 (pt.)
  • Centre wants committee to review GST threshold limit of Rs.10 lakh: The Centre is against keeping the threshold limit at Rs.10 lakh for levying GST and wants the panel on dual control to take a final view on the matter after detailed discussions.

    It has suggested the state finance ministers that the meeting of the Committee on Dual Control. Threshold and Exemptions be convened at the earliest for "detailed discussion and analysis" of the issues concerning the threshold limit.

    It has argued that the limit be kept high as the cost of collection of revenues from small traders and dealers is disproportionately high as compared to the revenue collected from them.
  • Streamlining the procedure for grant of industrial licenses : The Ministry of Commerce and Industry, Department of Industrial Policy & Promotion has issued Press Note No.5 (2014 series) dated 2nd July 2014 increasing the initial validity period of Industrial Licences to three years instead of two years allowed earlier. This measure is designed to ensure ease of doing business

    Guidelines for Extension of
    validity of Industrial License

    Note:-These guidelines are applicable for extension of validity of Industrial license in cases where the license holder has not commenced production of the items within three years of issue of license.
    1. The application for extension of license should be submitted to the concerned Administrative Ministry, 60 days prior to the expiry of the three years period or otherwise specified for commencement of commercial production. In case the application is not received in time, justification for late application shall have to be submitted along with the application.
    2. At the time of applying for grant of extension of validity of license the condition and status of the firm should be same as mentioned in the Industrial License issued to the firm. Thus any amendment, viz. change in the name of the company, increases/changes in license capacity, alteration or change in the premises, part shifting etc. should have been endorsed in the License.
    3. Applicant's request should be forwarded to Ministry of Home Affairs* and concerned State Government and after seeking comments of these agencies, case should be considered for Extension of validity. MHA may be consulted only if there is change in Board of Directors/key personnel.
    4. Applicant should meet following conditions at the time of applying of extension.
      1. Land should have been acquired, either under ownership or on lease for minimum period of 30 years
      2. The construction on the projects should have commenced (a certificate from appropriate local body viz. Municipal Corporation) may be provided in this regard.
      3. Orders for plant and machinery for the project should have been placed.
    5. Cases involving transfer, suspension or cancellation of license in the intervening period shall not be considered for extension.
    6. Renewal of license would be allowed for a period of two years. Any Industrial License, wherein commercial production has not started within a period of five years of issue of license, will be treated as automatically lapsed.
    7. The applicants fulfilling the above guidelines may be granted extension of Industrial License with the approval of concerned Joint Secretary of the Administrative Ministry without referring the application to Licensing Committee.
    [*Applicable in case of applicant for extension of validity of Industrial License in Defence and Explosive sector.]
  • India Inc Seeks Robust Fiscal Policy for Growth: India Inc has urged the Narendra Modi government to bite the bullet on making the government's fiscal position absolutely clear by paying off all outstanding dues to subsidized sectors like petroleum and fertilizers and use this opportunity to start from a clean slate for a zero-based budgeting system.

    Corporate chieftains also hope that the government will do away with retrospective taxation policies and have stressed that it is a misconception that industry wants a hire and fire regime for employees.

    Enthused by the Narendra Modi government's first two weeks in office and its agenda outlined in the President's address to the joint session of Parliament, India Inc has expressed hope that the new administration's approach of cutting red tape and working together with states will lead to quicker and bolder decisions.

    CII president Ajay Shriram told ET that the new PM has managed to bring in the change of sentiment needed to accelerate India's development and growth, which was the BJP's election plank.
  • Foreign Trade Policy to be smoothened (Commerce & Industry Minister is also MoS Finance) : The new Commerce & Industry Minister of State Nirmala Sitharaman not only holds independent charge of the Ministry of Commerce & Industry, but is also Number Two to Finance Minister Arun Jaitley, as the Minister of State for Finance and Corporate Affairs.

    The roles of the two ministers will be a good example of the cluster approach indicated by Prime Minister Narendra Modi to make ministries more effective. The two ministries have often been at loggerheads over key policy issues. What is important is to see where unnecessary overlaps have caused time delays. If there is efficiency in bringing activities and departments together, it is beneficial for the country," Sitharaman said after taking change of the Ministry of Commerce and Industry.

    The first coordination issue that Jaitley and SItharaman will have to sort out is the FDI policy. Since Sitharaman has been a Jaitley protege in some ways, their equation is bound to reflect in both ministry's relationship.

    Agenda of new Commerce & Industry Ministry
    • Boost domestic manufacturing by improving ease of doing business.
    • Rationalization of income-tax act to support manufacturing
    • Implement Foreign Trade Policy 2014-19 to push exports in a big way
    • Revive special economic zones (SEZs)
    • Liberalize FDI regime further
  • Govt. may tweak manufacturing policy to make it investor friendly: The new government is expected to review the National Manufacturing Policy (NMP) to make it more investor friendly. The department of industrial policy and promotion (DIPP) is readying a set of suggested changes in this regard, a senior official told Business Standard such as tax breaks and other fiscal benefits. When the NMP was rolled out in 2011, the aim was to raise the contribution of manufacturing to GDP from 16 per cent then to 25 per cent by 2022. However, it fell to 12.85 per cent in 2013-14 from 14.06 per cent the previous year. The policy also intends to create an additional 100 million jobs and support required skill development programmes.

    At present, the NMP states a series of fiscal incentives, including tax sops, will be offered but only to small and medium enterprises. The incentive would be case-to-case, depending on the preparedness of a particular state that wants to attract industry and make it a manufacturing hub. "The fine print of the policy has not gone down well with international as well as domestic investors," the official added. Apart from offering some tax incentives, the new government is likely to focus on "proper and transparent implementation of the policy which did not happened under the (outgoing) regime", the official said.
  • Notifications:
    • Manufacturing policy extended to address land crunch issues: The government has extended the national manufacturing policy across the country wherever industry is able to organise itself into clusters, hoping to address the crucial issue of land crunch that the sector faces.

      Clusters including expansion projects will be eligible for all benefits available under the national manufacturing policy, the government has said in a notification. The policy envisages national investment and manufacturing zones with a minimum area of 5,000 hectare each, a condition that is difficult to meet in several states due to unavailability of suitable land.

      Therefore, the government hopes the extension of the policy will help provide much-needed boost to manufacturing activity. "Besides the National Investment & Manufacturing Zones (NIMZs) which are envisaged as integrated industrial townships, the policy is also applicable to manufacturing industry throughout the country wherever industry is able to organise itself into clusters and adopt a model of self-regulation as enunciated in the policy," the notification said.

      The small and medium enterprises in the cluster will get access to the Technology Acquisition and Development Fund for acquiring appropriate technologies, which will subsidise technology acquisition costs up to a maximum of Rs. 20 lakh to acquire appropriate technologies patented up to a maximum of five years

      Manufacturing, which is considered key to generating jobs, expanded a measly 1 per cent in 2012-13. "Since acquisition of land is a major bottleneck for large projects like NIMZs that require 5,000 hectare, extending benefits to existing clusters where land has already been acquired or allotted will help accelerate industrial growth in these clusters, most of which need significant upgradation in terms of infrastructure and eco-system," said A Didar Singh, secretary General of FICCI.

      A cluster is a concentration of manufacturing industry units located within a clearly demarcated geographical area with the land use notified as such by the state government. "The rationalisation of rules and regulations as envisaged under national manufacturing policy will also be available for clusters other than NIMZs now, thereby resulting in reduced regulatory burden in these clusters for manufacturing units."

      For each such cluster, the state government concerned will constitute a special purpose vehicle which will be registered as a section 25 company. Clusters with high growth potential may be identified for strategic interventions in terms of internal and external infrastructure, regulatory rationalisation and simplification, skill development and technology up gradation, the Notification said.
  • Notifications:
    • Exemption from payment of SAD to parts, components and accessories etc. of Mobile Handsets under Notification No.21/2012-Cus dated 17/093/2012-reg. : Customs circular No.43/2013 dated 8th November 2013 has been issued by Tax Research Unit of the Ministry of Finance. It clarifies that exemption from SAD under notification No.21/2012-Customs ( S.No. 1 of the Table) may be allowed at the port of import on the basis of registration and the certificate issued by the jurisdictional central excise authorities w.r.t. S.No.431 of notification No.12/2012-Customs without any requirement of a separate registration/certificate issued under the said Rules w.r.t. notification No.21/2012-Customs, dated 17-03-2012.

      Customs Circular No.43/2013 dated 8th November 2013 is being reproduced for information of Members.
  • Govt Subsidy to Provide 2.5 Cr Phones : The Telecom Commission has ratified the Rs 5,000-crore government proposal to give away 2.5 crore mobile handsets at subsidized prices but has raised objections to the other proposed scheme to hand out 90 lakh tablets to class XI and XII students of the state and central government schools.

    The panel has decided to alter the criteria for allotting the mobile phones. Telecom commission is the highest decision-making body in the telecom ministry.
  • Home Ministry Objects to Telecom Security Policy : The Home Ministry has expressed strong reservations over the proposed National Telecom Security Policy saying it must lay down guidelines allowing interception of communication network by only law enforcement agencies.

    The Ministry conveyed to the Department of Telecommunication the policy must clarify that the law enforcement agencies will be empowered to intercept telephone calls, voice-mails, emails and other services like BlackBerry Messenger on a real time basis and also specify proper code for setting up a secure communication network.

    The policy should have enough provisions for priority communications for specified users over all networks like cellular, landline and broadband, the Home Ministry told the DoT, adding that the concerns of the security agencies have not been addressed in the draft policy.

    The Ministry has asserted that these issues needed to be addressed before policy finalization.
  • PC vendors need to excel in hardware and design : The Indian PC market might be feeling the brunt of the surge in popularity of mobile devices, but a recent IDC research has brought some good news to the beleaguered sector. According to the IT research firm, the overall India PC shipments for Q2 2013 stood at 3.53 million units - a substantial year-on-year growth of 24.0% over Q2 2012 and a quarter-on-quarter surge of about 30.2% over Q1 2013. Spending on notebooks steered commercial investments in the India PC market in Q2 2013. Special projects currently being executed in states like UP, Rajasthan and Tamil Nadu accounted for roughly one-third of the total PC market size in Q2. "But the underlying market has actually been rather weak, especially in the enterprise segment which has seen a shrinkage," says Mr. Jaideep Mehta, vice-president & country general manager, IDC India. "The explosion of mobile devices is out there for everyone to notice. The PC vendors have realized that they have to focus on this growing trend to exist in the marketplace.

    He says, overall, with PC (and tablet) penetration very low in India, growth potential is still significant. Content, connectivity and device quality and versatility will drive volumes in the PC segment. Gradually, the market has moved from a product to an ecosystem battlefield. In this new world, vendors need to excel in the hardware and design, but more importantly they need to excel in the user experience, as well as services and content offering.
  • Home Ministry asks DoT to address security concerns : The home ministry has told the telecom department (DoT) that its concerns around security and audit had not been addressed in the national telecom security policy and therefore these must be addressed in the final draft, according to an internal document seen by ET. This means that the policy will have to be reworked. The ministry wants DoT to spell out guidelines for establishing a secure network and lay down procedures for checking and auditing the security systems in this network, according to details of the note.
  • DIPP seeks NIMZ capital gains relief for NIMZ : The department of industrial policy and promotion (DIPP) has asked the finance ministry to give a relief to the national investment and manufacturing zones (NIMZs) from capital gains tax.

    The department has asked the revenue department in the finance ministry to ensure manufacturing zones enjoy tax benefits in the Direct Tax Code (DTC) Bill.
  • Flat Panel (LCD/LED/Plasma) TV allowed input under new Baggage Rules : The Ministry of Finance, Government of India has issued Custom Notification No. 84/2013-Cus dated 19th August, 2013.

    Under this Rules, have been framed called Baggage (Second Amendment) Rules, 2013.

    The Rules which come into force on the 26th day of August, 2013, allow input of Flat Panel (LCD/LED/Plasma) Television, apart from Gold and Silver in any form other than ornaments.
  • Conflicting regulatory policy changes irk telecom firms : Government departments appear to be working at cross purposes in overhauling key telecom laws, which are likely to trigger more uncertainty for a troubled sector that is pinning its hopes of revival on an improved regulatory climate.

    On one hand, the communications and the information & broadcasting ministry is looking to repeal the archaic Indian Telegraph Act, 1885, and the Telecom Regulatory Authority of India Act, 1997, later this year by ushering in the Communications Convergence Bill. The bill envisages a single regulator for both sectors. On the other hand, the communications ministry also plans to amend these telecom laws to ring in critical changes in telecom policy.

    For instance, communications minister Shri Kapil Sibal is poised to clear the amendment of the Indian Telegraph Rules, 1951 (which falls within the ambit of the IT Act, 1885) to make it mandatory for mobile phone companies to get all telecom gear used in Indian telecom networks certified by the Telecom Engineering Centre (TEC)-the technical arm of the telecom department-from January 1, 2014.

    His ministry will also move a Cabinet note shortly to amend the Trai Act to give more teeth to the sector regulator to penalize service providers, according to an internal telecom department note.

    The conflicting regulatory moves have caused confusion since companies operating on both the GSM and CDMA platforms are clueless whether the proposed amendments in the Indian Telegraph Rules or the Trai Act will at all be effective if the government eventually repeals both Acts, once the proposed Communications Convergence Bill is introduced in Parliament.
  • Government plans to invest in electronics manufacturers : A bulging import bill and the near absence of electronics manufacturing in the country has forced the government to seek help from venture capital firms to identify companies where it can invest.

    The Department of Electronics and Information Technology, abbreviated as Deity, said it is in advanced talks with leading Indian venture capital firms and will invest up to Rs 100 crore in a project expected to start next month.

    The government will invest for a 15% to 20% stake in each company that will be part of the project. The rest will come from venture capital firms that are currently shortlisting startups in the hardware segment. India now imports more than 90% of its electronics equipment.

    "The government's ability to take risk is very low. So, we are taking help of venture capital firms who will professionally manage and invest in these startups," said Shri Ajay Kumar, who heads the electronics and hardware manufacturing division at Deity.

    He said the initiative is aimed at reducing India's dependence of electronic imports, which is expected to cross $300 billion ( Rs 19 lakh crore) by 2020 and exceed that of crude oil. Kumar declined to divulge the names of venture capital firms the government is in talks with.

    It is a good initiative as government backing would bring more stability to domestic manufacturing segment. Most of the electronics hardware startups in India are struggling due to absence of working capital.

    The government has been taking increasing interest in venture capital investing in recent months. In March, it said investors committed at least Rs 400 crore to a government backed fund which will provide capital to new ventures that serve the needs of India's low-income communities. The fund's eventual size is envisaged at more than Rs 5,000 crore.

    Earlier this year, Deity said it would propose higher duties on imported electronic items to support local manufacturing.
  • Changed Rules of SEZs : By notifying the Special Economic Zones (Amendment) Rules, 2013 to implement the SEZ reforms announced on April 18, 2013, the government has put to rest all speculation over the continuance of the policy. In view of an extremely grim balance of payment scenario, there is no option for India other than promoting exports and foreign direct investment (FDI).

    Considering that the SEZ programme can be a promising instrument for achieving both these objectives, government has turned to SEZs once more, after a series of controversial policy reversals. Under the new rules, the minimum land area requirement has been halved for different categories of SEZs. Further, there will be no minimum land requirement for setting up information technology/IT enabled service SEZs. The package also includes greater flexibility in utilizing SEZ land tracts, sectoral broad-banding and an exit policy for SEZ units.

    However, it is doubtful if these reforms rekindle investor confidence in SEZs. The fact is that, there are more indirect benefits for units outside these enclaves and constant policy flip-flops have made them unattractive.
  • Commerce Minister seeks Balanced Trade with China: Commerce and industry minister Anand Sharma has raised the issue of trade imbalance with his Chinese counterpart in Brunei, seeking measures for a more balanced trade.

    In 2012-13, India had a traded deficit of $38.7 billion with China. India imported $52.2 billion worth of goods while its exports added up to $13.5 billion. Sharma was assured that China would make efforts to bridge trade imbalance, the commerce ministry said in a statement from Delhi.

    "A favorable action in the matter is needed from Chinese side. India and China have many complementarities in these sectors particularly in IT and ITeS sector and the pharmaceutical sector.
  • Govt slaps 10% import duty, 12.5% CVD: Indian travellers returning home will now have to pay Customs duty on TV sets they buy overseas. The government slapped a 10% Customs duty and 12.5% countervailing duty on such imports, as part of its efforts to discourage import of non-essential items and reduce the current account deficit that has put enormous pressure on the rupee.

    Till now, travelers could bring a TV set worth Rs. 35,000 with them without having to pay import duty. This had resulted in Thailand, Dubai, Singapore and Malaysia becoming attractive shopping destinations.
  • Procedures relating to filing of application to obtain Status Recognition Certificate / Nominated Agency Certificate : DGFT has issued Policy Circular No. 4/2009-2014 (RE 2012) in the above subject.

    RAs / Development Commissioners are following different practices while issuing Status Recognition Certificate / Nominated Agency Certificate in case of IEC holders having both DTA units as well as SEZ Units. Para 4A.4 of FTP read with para 4A.35 of HBP, empowers only the concerned RAs (as authorised under Appendix 1A), to grant the Nominated Agency Certificate, whereas both, the concerned RA or the concerned DC of SEZ may issue Status Recognition Certificate.

    2. To bring greater clarity into the matter and also to have uniform and harmonious practice by RAs and Development Commissioners, a tabular chart has been provided below:
    S No. Category Issuing /renewing Authority for Status Recognition Certificate Issuing / Renewing Authority for Nominated Agency Certificate
    1 IEC holder having DTA unit as well as SEZ/EOU unit R A concerned As per Appendix 1 RA concerned As per Appendix 1A
    2 IEC holder having SEZ/EOU unit only DC concerned As per Appendix 1 No such Certificate for such applicants.
    3 IEC holder having DTA unit only RA concerned As per Appendix 1 RA concerned As per Appendix 1A

    3. It has been clarified that existing Status Recognition Certificates and Nominated Agency Certificates that have been issued already shall not be withdrawn, irrespective of whether it has been issued by concerned RA or DC. After the expiry of validity period of existing certificates, it can be renewed only as per the authority indicated in Para 2 above.
    [Policy Circular No. 4/2009-2014 (RE 2012), Ministry of Commerce & Industry]
  • New ICT policy offers subsidy sops for IT parks : The proposed Information Communication Technology Policy of Odisha promises entry-tax waiver on machines, equipment, capital goods and construction material for Information Technology parks.
  • "Electronics Commission" proposal unlikely to set nod: A proposal to set up an Electronics Commission on lines of the existing Space Commission and Atomic Energy Commission is set to be shot down. It drew little support from the Planning Commission, particularly on the issue of granting it financial autonomy to the tune of Rs. 300 crore. Officials said the Prime Minister's Office and the Finance Ministry, too; were not very keen to go ahead with the proposal on the ground that it would not be feasible to grant financial autonomy to the said body.

    Senior officials said the proposed commission, mooted by the Department of Electronics & Information Technology, intended to fast-track growth of the electronics sector in India and was to have been modeled on the lines of the existing space and atomic energy commissions.
  • Electronic goods likely to escape higher import duty : The government might not levy higher customs duty on imports of non-essential items like electronic goods. The commerce ministry has told the finance ministrythat most electronic goods are covered under information technology (IT) agreements with other countries, and India unilaterally cannot raise the rates. The ministry argues raising duty rates on IT products would not make much difference to the current account deficit.
  • Cos can expand SEZ Ops into other zone (move makes special economic zones more attractive to investors as it simplifies norms) : Providing clarity to the SEZ policy, the government has allowed companies that have operations in one special economic zone to expand into another, making these export enclaves more attractive for investors.

    Responding to an application from Sony India Software Centre, the Department of Commerce said companies can expand into another SEZ, but will need to be registered as a new unit and avail tax benefit for the unexpired period.

    Up till now if companies wanted to set up a unit in another zone, they sought permission from the Board of Approval as the SEZ policy was not clear on the expansion aspect, which effectively meant a full-fledged new application.
  • Govt. may scrap SEZ policy (existing units stay operational; those approved may not be notified, land could be used for other purposes): Plagued by a series of controversies and scams, it seems, the government is finally planning to do away with the Special Economic Zone (SEZ) programme it had launched in 2006 with much fanfare.

    While the existing SEZs will continue to remain operational, those approved might not be notified and developers be allowed to utilize the land for other purposes.

    The commerce ministry has asked the Export Promotion Council for EoUs and SEZs (EPCES) to commission a study to find if SEZs have met the economic objectives for which the programme was rolled out. It has been given six months for the study.

    Ministry officials told Business Standard this had been done to end the turf war between the commerce and finance ministries, as the latter believed some numbers given out by the former on exports, investments and jobs in SEZs were exaggerated.
  • DEITY's Modified Special Incentive Package Scheme: To promote Electronic System Design and Manufacturing (ESDM) there is a Modified Special Incentive Package Scheme, under which Government provides attractive incentives for electronic manufacturing.

    The Department of Electronics and Information Technology (DeitY) has issued newspaper advertisements to announce a package of incentives which cover:
    • Subsidy of 25% of Capex in non-SEZs (20% in SEZs) over 10 years
    • Reimbursement of CVD/Excise for capital equipment in non-SEZs
    • New Units/Expansion of existing Units // Relocation from abroad eligible
    For manufacturing in different ESDM verticals including:
    • Avionics
    • E-Waste Processing
    • Telecom Equipment, Mobile sets
    • LEDs, LCDs
    • Medical Electronics
    • Bio-metric/Identity Devices
    • IT Hardware
    • Consumer Electronics
    • Power Supply for ESDM Products
    • Opto-Electronics
    • Automotive Electronics
    • Electro-Mechanical Components
    • Nano-electronics
    • Fabs for ESDM Products
    • Electronics Manufacturing Services, etc.
    • Solar Photovoltaics
    • Semiconductor Wafering
    • Semiconductor Chips & Components
    Application form and details available at: Apply online at
  • Plugging loopholes in the SEZ policy : While announcing the Annual Supplement 2013-14 to the foreign trade policy 2009-14 on 18th April, 2013, Minister of Commerce, Industry narrated significant achievements of the Special Economic Zones Scheme and said that the scheme has not been able to realize its full potential so far. He, therefore, announced a package of reforms for reviving investors interest in the scheme of SEZs. This is the outcome of a comprehensive review of SEZ policy after intense consultations with stake holders over a year long process. Salient features of the package were detailed. But these have yet to be formalized in SEZ policy, Rules & Regulations to be notified and are anxiously awaited by the trade and industry.

    It may be noted that there is a major loophole in the SEZ policy, namely absence of mandatory exports in the SEZ Act. This is reported to have led to misuse of SEZ scheme. In fact, Public Accounts Committee (PAC) has already pointed out that units located in SEZs enjoy considerable tax benefits and are expected to fuel economic growth. The Committee, therefore, recommended that an effective and reliable mechanism needs to be established to plug the misuse. The committee in this regard, endorsed the view of Ministry of Finance that at least 51 per cent of production of goods and services by a units in SEZ be physically exported out of India.
  • New Defence buy policy effective from June 1: The new defence procurement policy which aims at enhancing transparency and probity in military purchases and gives first right of refusal to Indian vendors to promote indigenous industry has come into force. The Defence Procurement Procedure 2013 which takes effect from 1st June aims to balance the competing requirements of expediting capital procurement, developing a robust indigenous defence sector and conforming to the highest standards of transparency, probity and public accountability," the defence ministry said in a release. The Defence Minister says the emphasis is on giving a boost to the Indian defence industry, both in the public and the private sectors, by according to a higher preference to the 'Buy (India)', 'Buy and Make (Indian)' and 'Make' categorization, bringing further clarity in the definition of the 'Indian Content' and simplifying the 'Buy and Make (Indian)' procedure.
  • Format of ANF 3F (for Incremental Export Incentivisation Scheme): DGFT has issued Public Notice No.13 (RE 2013)/2009-14 dated 17th May 2013 on the above subject. ANF 3F for claiming benefit of Incremental Export Incentivisation Scheme has been notified.

    Annexure to the above Public Notice includes ANF 3F - for Incremental Export Incentivisation Scheme applications for exports during 1st Jan - 31st March 2013 vis-a-vis 1st Jan - 31st March 2012.

    It may be noted that export shipments from all EDI ports can be filed in one application while for export shipments from each Non-EDI ports, separate application is required to be filed. Such applications have to be filed in same RA.
  • Procedure for refund/revalidation of DEPBs/Reward Scrips for re-credit of 4% CVD (SAD): Director General of Foreign Trade has issued Public Notice No.6 (RE-2013)/2009-2014 dated 18th April'13 on the above subject.

    Paragraph 2, 13.2A of the Handbook of Procedures (Vol.1), 2009-14 has been amended with the following changes:
    1. "Only for the purpose of utilization of re-credit of 4% Special Additional Duty (SAD) of customs, the freely transferable duty credit scrips (including DEPB), shall be deemed to have been revalidated till 30.09.2013. No further endorsement by the respective RA on such scrips shall be required.
    2. If the consolidated certificate (Credit Note) has already been issued by Customs or gets issued by 30.06.2013, the amount (4% SAD) indicated in consolidated certificate by customs shall be deemed to have been re-credited in the scrips in such cases, without any further reference to any RA of DFGT".
    The Public Notice says this is the last and final extension to use the re-credited scrips. No further extension shall be considered by the Government under any circumstances. Importers desirous of such refund in future must make the payment of SAD in cash.
  • Customs Notification No.17/2013 dated 26th March 2013, makes changes in Notification No.69/2011-Customs dated 29th July 2011, by altering the customs duty when imported into India from Japan from so much of duty of customs leviable as is in excess of the amount calculated at the rate of specified in the corresponding entry in column 4 of the table. Chapter Heading / Sub-heading 85 is covered in the following Table. It may be noted the rates of CD have been considerably reduced. more
  • New defence policy in the works, focus on local technology: Intense discussions are on within the government even as the commerce ministry has dug its heels over hiking the Foreign Direct Investment (FDI) cap in the defence sector.

    Highly placed sources told FE, "The Discussions are at a very crucial stage and the defence ministry in the next two months will soon be announcing an amended Defence Procurement Procedures (DPP), introducing some major changes in its procurement policy, priority to local companies, the offsets policy as well as issues relating to FDI."

    "The idea is to encourage both the public and private sectors. This 'India First' policy is expected to provide first opportunity in all contracts to both private and public sector companies, while placing procurement from foreign suppliers as the last option."

    The move would be a major shift from the existing priority given to acquisitions from foreign companies, which today accounts for 70% of purchases. Most of the remaining is procured from Indian public sector units and ordinance factories while Indian private sector only gets a very limited number of contracts." Once the amended policy comes into force, private sector companies will get a significant boost opening new opportunities for supplying equipment as well as establishing joint ventures with foreign producers of military systems," sources said.
  • Deity's support for Electronic Manufacturing comes under Modified Incentive Package Scheme (M-SIPS) : Department of Electronics and IT (DeitY) provides attractive incentives for Electronics Manufacturing in the following manners :
    1. 25% of capex in non-SEZs (20% in SEZs) for 10 years
    2. Reimbursement of CVD/Excise for capital equipment in non-SEZs
    3. Reimbursement of Central taxes and duties for 10 years in select high-tech units like fabs and ATMPs
    These incentives will be available for
    • For new units and expansion of existing units
    • For electronic verticals including
      • AVIONICS
    A detailed advertisement by DeitY in newspapers says detailed terms and conditions, timelines and application form available at For any queries contact : Nodal Officer (M-SIPS), ESDM, IPHW Division, Department of Electronics & IT, Electronics Niketan, 6, CGO Complex, Lodhi Road, New Delhi - 110 003, E-mail :
  • Amendment in FTP (RE-2012)(2009-2014)-post Export EPCG Scheme : DGFT has issued Notification No.33/(RE-2012)/2009-2014 dated 8th February 2013 to make an amendment in Post Export EPCG Scheme.

    It has been clarified that duty credit scrips issued under Post Export EPCG Scheme will be issued only in respect of basic Customs Duty amending para 5.11 of the Foreign Trade Policy 2009-2014 (RE 2010), and will have the same features as Chapter 3 scrips.
  • Inverted Duty structure anomalies to be tackled in Budget: Finance Minister P. Chidambaram is likely to announce several tariff-related measures in the forthcoming Budget to address duty inversion problems in an effort to boost the domestic manufacturing sector as well as exports from the country.

    Duty inversion basically means that raw materials and intermediates are taxed higher than the finished products and the Budget may tackle the issue by altering customs duty rates. "Several tariff measures will be taken in this year's Budget which will promote domestic manufacturing. Various export promotion councils have brought to our notice that there are several duty inversions. So, the government intends to now set this thing right." a senior commerce department official told Business Standard. The move, official said, will promote domestic production and manufacturing, which will give a fillip to Indian exports as well.

    ELCINA has already pleaded with the Finance Ministry as also Commerce & Industry Ministry to rectify the duty structure urgently in the case of Electronics and Hardware Industry, most of which has been under 0% import duty, while the imports continue to suffer 5-10% duties rendering manufacture unviable. This is opening the floodgates for imports.
  • FM on govt. policies investor confidence: Finance Minister P Chidambaram has reiterated the government's policies would be directed towards containing the fiscal deficit, boosting growth and encouraging foreign investments in the country. Speaking at the Sixth Meeting of the Financial Stability and Development Council (FSDC), Chidambaram highlighted the efforts being made to turn the economy around.

    The Finance Minister informed FSDC members that to encourage foreign flows into India and offer reassurance on the positive investment climate, he has recently held discussions with a cross-section of international investors at Singapore, Hong Kong London and Frankfurt and hoped to get positive results.
  • Paving way for Rollout of GST Formula (Centre, States agree on CST compensation formula) : The Centre and States have resolved the contentious issue of compensation to the states for phasing out of the Central Sales Tax, brightening the prospects for the rollout of the goods and services tax (GST).

    The empowered committee of State Finance Ministers that met in Bhubaneswar has approved the recommendations of a sub group set up by the union Finance Minister P Chidambaram to resolve the issue. "It's a significant breakthrough. States have agreed to the formula suggested. Deadlock has been resolved," Sushil Modi, Bihar deputy CM and chairman of the empowered panel told ET from Bhubaneswar.

    States will receive Rs.34,000 crore more as compensation for reduction in central sales tax for three years beginning 2010-11, Modi said. Modi said States had also agreed to receiving the compensation in staggered manner in view of the centre's fiscal's constraints.

    The Centre and State Government had agreed in 2006 to cut CST by 1% every year from April 1, 2007 and eliminate it by April 1, 2010 to coincide with launch of the GST. However, delay in implementation of GST, due to lack of unanimity over its structure, and the global financial crisis led to a phase-out plan. The government had budgeted Rs.12,000 compensation for 2011-12 but according to revised estimates paid out only Rs.4,173 crore. In 2012-13, the then finance minister Pranab Mukherjee provided only Rs.300 crore, leading to further hardening of positions of GST. The centre's contention was that it could not go on compensating States for CST reduction if they kept delaying finalization of structure of GST.
  • Special report on National Policy on Electronics: One of the cornerstones of this policy is the facilitation of the building of a semiconductor fabricator, known as a "fab", which can then churn out a large number of "wafers" that house electronic chips. Another is to provide fiscal incentives across the electronics value chain via a Modified Special Incentive Package Scheme (M- SIPS), which aims to offset India's infrastructure gaps.

    At first glance, the policy looks like a no- brainer. Today, almost everything we use from phones to medical devices to kitchen mixers contains electronics of some sort. Globally, this is a $ 1.75trillion industry with India consuming around $ 100 billion of it. This burgeoning demand will shoot up to $ 400 billion by 2020, according to government figures.

    While the domestic industry will cater to a fourth of this demand, India will still need to import $ 300 billion of it, roughly equivalent to our oil import bill.

    What has really driven technocrats into a tizzy is the fact that China manufactures a good chunk of the semiconductor processors that are also used in industries of national importance, such as aerospace, defence and telecom. "Today, the semiconductor industry has become a strategic weapon, much like our space or nuclear program, and not just a commercial opportunity," says Satya Gupta, Chairman of the Indian Semiconductor Association (SIA).

    Therefore, the rationale for an electronics policy looks like a fundamentally good idea.

    However, building this industry from scratch is a gargantuan, incredibly complex, and exorbitant proposition. Not only does this require billions of dollars to build, it also needs additional billions to refurbish and upgrade since chip- making technology tends to evolve at a lightning speed.

    Which is why it is a good thing that this new policy has a noticeable absence of the government hand. Instead, it aims to provide a catalyst to private enterprise at almost every level of the value chain so that an ecosystem can take shape organically.

    "If we pre-decide where to go, we will likely go wrong," says Ajay Kumar, joint secretary, Ministry of Communications and Information Technology.

    The ministry's solution is a dizzying array of incentives worth over Rs. 15,000 crore to begin with, for manufacturers domestic or foreign to set up shop here. This ranges from subsidies on capital expenditure ( for 20 per cent of firms ensconced in SEZs, or 25 per cent for those outside); preferential market access in areas of government procurement; subsidies for the development of electronic "clusters", much like those in Japan and Taiwan; Rs. 10,000 crore in risk capital towards a proposed Rs.40,000 crore Electronic Development Fund; a plethora of grants for faculty, young researchers and aspiring Ph. D candidates in the chip- making arena; A pioneering push in training and curriculum development catered towards the shop floor. " If you don't do all of it together, likelihood of success diminishes. Each sector impacts another one," says Kumar.

    Dipping one's toes into the world of semiconductors is not for everyone. Yesterday's chips that allowed phones to map out directions speedily on Google will not be capable of streaming Indian Premier League matches on it tomorrow, but you can be sure that the competition is trying to make that happen through fab upgrades. These can ravage balance sheets and can lead to frustrating cyclicality's and cash flow crunches. So, it's a good think that India has some critical advantages.

    Many of the world's leading chip design companies are here and thriving, which means an already flourishing talent pool. And despite India's bleak history in hardware, its work in the "embedded" space- an amalgam of software and hardware that produces " smart" devices such as controllers- will ensure migration of skilled professionals up the design value chain.
  • Notifications:
    • Classification of Cordless Infrared Devices for the Remote Control : The Central Board of Excise & Customs, Ministry of Finance has issued Circular No.01/2013-Customs dated 1st January 2013 to clarify classification of Cordless Infrared Devices for the Remote Control, as follows :
      1. When cordless infrared devices for the remote control are presented in a set put up for retail sale, that is, they are put up in a manner suitable for sale directly to users without repacking, along with principal / main device with which they are to be used, they shall be classified along with the principal / main device by application of GR1 3(b) and 6.
      2. In cases where cordless infrared devices for the remote control are presented separately, they shall be classified under heading 8543, sub-heading 8543.70, by application of GR1 and 6.

        The CBEC circular says all pending assessments, if any, may be finalized and suitable instructions may be given to the filed formations. Difficulties, if any, faced in the implementation of this circular, may be immediately brought to the notice of the Board.
  • More sops for exporters, interest subsidy extended: The government has announced more sops to stem the slide in exports that has led to alarming widening of the trade deficit and depreciation of the rupee.

    The incentives include extension of the 2% interest subsidy available to certain sectors by one more financial year, until the end of March 2014, and expanding coverage to a few engineering sub-sectors to make exports more competitive.

    Besides, all small and medium enterprises, irrespective of sectors, will get this subsidy, an incentive that the government hopes will help push exports by the end of the current fiscal

    "With these incentives, we will be able to give a push to exports in the last quarter of this fiscal. The objective is to stabilize the situation and move from negative territory to positive and keep the trade deficit in control," commerce and industry minister Anand Sharma said, even as he admitted that the target of $360 billion for exports in the current fiscal is likely to be missed.

    India's exports contracted 5.95% to $189.2 billion during April-November, contributing significantly to the high trade deficit of nearly $130 billion.

    "Our export performance has also to be viewed in the backdrop of the global slowdown, particularly the developments in Europe," the minister said.

    The sectors covered under the interest subsidy scheme include handicrafts, carpets, handloom, readymade garments, processed agriculture products, sports goods and toys.

    The government also announced additional incentives for incremental exports to the US, European Union and Asian countries, besides adding New Zealand, Cayman Islands, Latvia, Lithuania and Bulgaria to its 'focus market scheme'.

    The scheme aims to make exports more competitive in certain overseas markets by offsetting high freight costs.

    Sharma also announced a pilot scheme of 2% interest subsidy for project exports through Exim Bank for countries in the SAARC region, Africa and Myanmar to spur exports to new markets.
  • PM takes bullish stance on telecom sector's future: Prime Minister Manmohan Singh has expressed confidence in the future of India's telecom sector, saying the period of tough challenges for the industry was coming to an end.

    Inaugurating the India Telecom Summit 2012, PM underscored the significant departure in the government's telecom policy from allotting spectrum at an administered price to a market-discovered one. "The government has attempted to allot spectrum in a transparent manner through a market discovered price," he said.

    Singh said that the government has taken a number of forward-looking initiatives to address the concerns of investors and provide impetus to the sector for accelerating growth.

    "This sector has had to face some tough challenges in the past months. However, I believe under the distinguished leadership of Kapil Sibal, the period of difficulties is now coming to an end. During the last one year, the Government has taken a number of forward-looking initiatives in the telecom sector," Singh said. He said the government ha attempted to clarify policy position on a number of complex issues and "ensured adequate availability of spectrum and its allocation in a transparent manner through a market related processes".
  • Providing services abroad liable to service tax : According to Rule 8 of the Place of Provision of Services Rules, 2012, "Place of provision of a service, where the location of the provider of service as well as that of the recipient of service is in the taxable territory, shall be the location of the recipient of service". Rule 14 of the said rules notes. "Notwithstanding anything stated in any rule, where the provision of a service is, prima facie, determinable in terms of more than one rule, it shall be determined in accordance with the rule that occurs later among the rules that merit equal consideration." Therefore, the said Rule 8 will prevail over Rule 4 (relating to immovable property) of the said rules. This position is also clarified at Para 5.8.2 of the Educational Guide of the CBEC on Taxation of Services.
  • Notifications:
    • Liberalized Realization and Repatriation of export proceeds (Goods and Software): The Reserve bank of India have issued Circular No.40 dated 1st November 2011 enhancing the period of realization and repatriation to India of the amount representing the full export value of goods or software exported, from six months to twelve months from the date of export. This relaxation was available up to September 30, 2012.

      RBI has come up with another Circular (No.52) dated 20th November 2012 which offers further liberalization. It has been decided, in consultation with the Government of India, to extend the above relaxation w.e.f. October 01, 2012 till March 31, 2013.

      The provisions in regard to period of realist ion and repatriation to India of the full export value of goods or software exported by a unit situated in a Special Economic Zone (SEZ) as well as exports made to warehouses established outside India remain unchanged.
  • To boost domestic manufacturing, Cabinet clears electronics policy (aims to generate two million new jobs and attract $100-bn investment in equipment making, encouraging R&D and seed funding) : To boost indigenous manufacturing of electronic goods, the Cabinet has cleared the National Policy on Electronics 2012, which would offer fiscal incentives for setting up electronic manufacturing clusters. The idea is to fill a gap between domestic demand and supply in electronics goods which is slated to rise to $300 billion by 2020 and lead to huge imports, higher than even petroleum products.

    "The Union Cabinet approved the Policy. The draft National Policy on Electronics was released for public consultation and it has now been finalized based on comments from various stakeholders," an official statement said.

    Through the policy, the government targets to attract about $100 billion of investment in the electronic equipment manufacturing industry.

    The policy would also give preferential market access to domestically manufactured electronic products and setting up of semiconductor wafer fabrication facilities. Based on the Cabinet approval, a high level empowered committee has been constituted to identify and shortlist technology and investors for setting up two semiconductor wafer manufacturing fabrication facilities.

    The government expects that the new policy would generate fresh employment for about two million people. The government would also set up an Electronic Development Fund, the statement said.

    The policy stated that indigenous availability of electronic components as raw material is estimated to increase to more than 60 per cent of the requirements by 2020 from 20-25 per cent at present.

    Demand for electronics products has been rapidly growing in the country. However, the domestic production in 2008-09 was worth about $20 billion.

    In the absence of a government initiative, it was estimated that at the current rate of growth, domestic production can cater to a demand of $100 billion by 2020 as against the total demand of $400 billion. The rest would have to be met by imports.

    "This aggregates to a demand supply gap of nearly $300 billion by 2020. Unless the situation is corrected, it is likely that by 2020, electronics import may far exceed oil imports," the statement said.

    The policy emphasized on creating a globally competitive Electronic System Design and Manufacturing (ESDM) industry, besides building the chip designing and embedded software industry.

    The government targets to increase exports of ESDM to $80 billion by 2020 from $5.5 billion at present.

    The policy also said the government should give special focus on enhancing skilled manpower. It aims to have about 2,500 PhD holders on electronics and related subjects annually by 2020.

    The government would also increase fund flow for research & development (R&D) seed capital and venture capital for start-ups in the ESDM and nano electronics sectors.

    Based on another Cabinet approval, a policy for providing preference to domestically manufactured electronic goods has been announced.

    To secure talent pool, the government would seek involvement of private sector universities and institutions for scaling up capacities. The policy also called for setting up a specialized Institute for semi-conductor chip design.
  • Govt. Flexible on GST, Breakthrough Likely: A breakthrough is in sight for the United Progressive Alliance governments' ambitious indirect taxes reform, the goods and services tax (GST), after central government showed willingness to take on board most of states key concerns including the dropping the controversial dispute settlement authority and compensation for phase out of central sales tax.

    Goods and service tax proposes to replace a plethora of Indirect taxes with one single levy, a system that will help all stakeholders.

    Originally to be rolled out from April 1, 2010, the GST is still caught up in states-centre fight. CST has been reduced to 2% from 4% in phases, to be abolished when GST is rolled out. States to be compensated for the loss of revenue. While states sought full compensation till GST rollout, centre wanted to limit it till 2010-11.

    States says it will undermine their authority to decide on rates. Centre may drop it. Can have a mechanism within GST Council to address disputes.

    GST has two components - Central ans State. States say they have no say in the rates. The centre is now open to a floor rate with different rate bands.

    States have no power to levy tax. Centre amendable to allowing states to levy a new tax in an emergency such as a flood.
  • Notifications:
    • Submission of Service Tax Return date extended: Order No.3/2012 dated 15th October 2012 issued by Commissioner of Service Tax, Central Board of Excise and Customs in exercise of the powers conferred by sub-rule (4) of rule 7 of the Service Tax Rules, 1994., the Central Board of Excise & Customs hereby extends the date of submission of the return for the period 1st April 2012 to 30th June 2012, from 25th October, 2012 to 25th November 2012.
    • Notification No.12/2012 dated 17th March 2012: This Notification exempts certain goods from so much of the duty of customs leviable thereon under the said First Schedule as is in excess of the amount calculated at the standard rate specified.

      In the said Notification, in the Table, against Sl.No.265, in the entry in column (3), for "CD-ROMS", "CD-ROMs or DVD-ROMs" shall be substituted.
  • Notifications:
  • Need to revisit DTC and GST provisions, says Shome : There was a need to look again at the provisions of the proposed direct taxes code (DTC) and the goods and service tax (GST), said Parthasarathi Shome, director and chief executive, Indian Council for Research on International Economic Relations.

    There should be fresh consultation over DTC and the structure of GST was not being put together in an ideal way, he said. "Construction of GST is not happening the way it should. We should have a GST that makes sense, and (where goods and services are treated equally".

    GST and DTC are expected to be implemented by April 2013. The two tax reforms have already missed April 2011 and April 2012 deadlines.
  • GST in a year, with some give & take (there is no need to aim for a perfect tax right now): Everybody loves goods and service tax (GST). It is designed to facilitate seamless flow of goods and services through different taxation points. There will be optimum contact with taxmen and minimal cascading adding effect of taxing the taxes. GST will subsume many existing central and state taxes. There will be two streams of GST: the central GST and the state GST, to be collected by the Central and States, respectively. With uniformity and certainty in mind, the two tax administrations and the Centre and States will have commonality of law, procedure and dispute resolution mechanisms. Due to a substantially higher tax base, the GST rate is expected to be much less than what a consumer pays now in the form of different central and state taxes.

    In brief, GST would bring down prices of goods and services. Why then is this much loved tax not coming? The reasons are not many.

    In view of the existing Union List, State List and Concurrent List of the Constitution, the first imperative is the amendment of Constitution empowering both the Centre and States to levy and collect GST. The Centre has placed an amendment Bill in Parliament.

    It is now under examination of the Parliamentary Standing Committee on Finance that is expected to place its report in the winter session.
  • Notifications:
    • Payment of Customs Duty electronically : The Ministry of Finance has issued Customs Notification No.83/2012-N.T. dated 17th September 2012 specifying following classes of importers who shall pay customs duty electronically, namely :
      1. Importers registered under Accredited Clients Programme.
      2. Importers paying customs duty of one lack rupees or more per bill of entry.
  • Notifications:
    • Making E-payment of Customs Duty Mandatory:The Ministry of Finance has issued customs Circular No.24/2012 dated 5th September 2012 on the above subject.

      The Central Board of Excise & Customs has now decided to make e-payment of duty mandatory for importers registered under Accredited Clients Programme and importers paying customs duty of one lakh rupees or more per Bill of Entry with effect from 17.09.2012.
  • UP plans road shows abroad to hardsell industrial policy : The ruling Samajwadi Party has announced Uttar Pradesh's new Industrial and Infrastructure Investment Development Policy 2012.

    The policy, which comes eight years after the last policy was formulated in 2004, promises a bag-full of goodies to investors, including 24 hour power supply, 100% waiver in stamp duty for industrial units in Poorvanchal, Madhyanchal and Bundelkhand, 100% exemption to those who build infrastructure facilities such as roads, power, wholesale, transshipment centres, warehousing, cold storage as well as information technology, biotech and agro-processing units. Even industrial estates developed by the private sector will get reimbursement of 25% in stamp duty. Apart from this, iron and steel units will be exempted from entry tax.

    The eligibility criteria for new industrial units to avail incentives has been brought down from Rs.10 core to Rs.5 crore for Poorvanchal, Madhyanchal and Bundelkhand, while it has been reduced to Rs.12.5 crore from Rs.25 crore for the rest of state. Under this scheme, interest-free loan equivalent to VAT and Central Sales Tax paid by industrial units will be provided for a period of 10 years.

    The policy will also launch a new capital interest subsidy shceme, under which new industrial units to be set up in Poorvanchal, Mahdyanchal and Bundelkhand shall get reimbursement at the rate of 5% on interest rate of 5% on interest rate of loan taken for plant and machinery, maximum up to Rs.50 lakh for a period of five year.
  • Global pressure forces govt. to drop 50% local tools clause : India plans to drop a controversial clause from its proposed telecom security policy that mandates that at least 50% of all 'core telecom network equipment' be indigenously developed or manufactured.

    Western vendors as well as governments of several countries, including the United States had rapped India's tough stance in its draft telecom security policy unveiled by the telecom department (DoT) earlier this year, as they disagreed with the country's stance of securing commercial telecom networks through local manufacturing.

    While the draft policy said that India must 'progressively develop indigenous capacity to manufacture telecom equipment - both hardware and software - with the aim to have at least 50% of the core telecom network equipment being inducted into the network to be indigenously developed and manufactured in the country', the revised version, dated August 3, has suitably modified this guideline. The revised version states that the India will 'progressively develop indigenous capacity to manufacture electronic telecom equipment and software being inducted into the network'.
  • Notifications:
    • 24x7 Customs Clearance Operations: Customs Circular No.22/2012 dated 7th August 2012, issued by the Ministry of Finance, Department of Revenue, has announced round the clock customs clearance operations. The beginning will be made from 1st September 2012 on a pilot basis at identified Air Cargo Complexes and Seaports in respect of following categories of imports and exports.

      a) Facilitated Bills of Entry where no examination and assessment is required; and
      b) Factory stuffed export containers and export consignment covered by Free Shipping Bills.

      The Air Cargo Complexes and Seaports identified for 24x7 Customs clearance are:
      S No. Air Cargo Complexes Seaports
      1 Bangalore Chennai
      2 Chennai JNPT
      3 Delhi Kandla
      4 Mumbai Kolkata
  • Notifications:
  • Electronics Policy could bring in $1 bn : The clearance of the proposed National Policy on Electronics (NPE) is expected to bring in investments of around $1 billion in the mobile phone segment during the next three years.

    "We estimate investment of $750 million to $1 billion (into the century) can happen quickly to either start new production facilities or to expand existing plants on implementation of the proposed NPE," according to the Indian Cellular Association President. He said "the final version of the NPE, along with the formal approval schemes like Electronic Development Fund and a robust incentive policy for encouraging exports of electronics, would have to be in place" before investments proposals started crystallizing.

    According to the Ica, the demand for mobile handsets in the country is expected to grow at 10 to 12 per cent per annum and will touch 280 million units by 2012. These demands can be met by producing handsets locally.
  • Electronics Manufacturing Units get Rs.30,000 cr push : India has set aside Rs.30,000 crore worth of incentives and subsidies to encourage firms to set up electronics manufacturing units in the country. Startups interested in creation of apps for mobile phones, tablets and other electronic hardware will also benefit, as a package of Rs.10,000 crore is in the offing for them.

    "About Rs.20,000 crore has already been approved. While the rest has been put forth for approval by the Cabinet for startups interested in IP creation, as an electronic development fund," J Satyanarayana, IT Secretary, at department of electronics and IT told ET.

    The fund will also be used for providing incentives to the tune of 20-25% as subsidy for capital expenditure incurred. Firms such as Nokia, Samsung, LG, Dell, Lenovo, who are already manufacturing in India, will also benefit from the new fund.

    Government has also drafted a marketing plan to encourage 'Made in India' electronics in the global market.

    "We will visit global trade fairs and exhibitions and invite component and electronic makers in Korea, Taiwan, China, Japan, Germany and US, to locate units in India," Satyanarayana added. A delegation of Ministry officials is visiting a trade fair in Germany next month to scout for potential candidates. The Union Cabinet last month approved Rs.10,000 crore, as financial support for the development of electronic manufacturing clusters.
  • Union Cabinet approves Modified SIPS Manufacturing Policy: (Modified Special Incentive Package Scheme to offset disability and attract Investments in Electronics Systems Design and Manufacturing Industries).

    The Union Cabinet has approved the proposal to provide a special incentive package to promote large-scale manufacturing in the Electronic System Design and Manufacturing (ESDM) sector. The scheme is called the Modified Special Incentive Package Scheme (M-SIPS). According to a Press Release issued by the Cabinet on 12th July 2012, the main features of M-SIPS are as follows:
    1. The scheme provides subsidy for investments in capital expenditure - 20% for investments in SEZs and 25% in non-SEZs. It also provides for reimbursement of CVD/excise for capital equipment for the non-SEZ units .for high technology and high capital investment units, like fabs, reimbursement of central taxes and duties is also provided.
    2. The incentives are available for investments made ina project within a period of 10 years from the date of approval.
    3. The incentives are available for 29 category of ESDM products including telecom, IT hardware, consumer electronics, medical electronics, automotive electronics, solar photovoltaic, LEDs, LCDs, strategic electronics, avionics, industrial electronics, nano-electronics, semiconductor chips and chip components, other electronic components and EMS. Units across the value chain starting from raw materials including assembly, testing, packaging and accessories of this category of products are included. The scheme also provides incentives for relocation of units from abroad.
    4. The scheme is open for three years from notification. Approvals for incentives not exceeding Rs. 10,000 crores will be granted during the 12th Plan period.
  • Excise duty is not payable if imported goods are re-exported: Excise duty is leviable on goods manufactured or produced in India. If one re-exports imported goods in the same form without carrying out any processing, excise duty is not leviable. The CT-1 or ARE-1 procedure need not be followed. One can claim drawback of the customs duty paid on the imported goods under Section 74 of the Customs Act, 1962. Procedures laid down in Re-export of Imported Goods (Drawback of Customs Duties) Rules 1995 have to be followed. On imported goods that have not been used after import, you can claim drawback of 98 per cent of the customs duty paid. Drawback is available provided you satisfy the Customs authorities that the goods you export are the same as the goods imported under a particular bill of entry.
  • GST to miss the bus once again (State finance ministers raise doubts over preparedness to implement much-delayed tax regime) : The rollout of the United Progressive Alliance government's ambitious indirect tax reform seems to have run into rough weather with state finance ministers raising doubts over country's preparedness to implement the much delayed goods and service tax (GST) from next year.

    "There are lots of issues which have not been resolved in GST. we are nowhere near IT infrastructure which has to be in place. It is important for implementation of successful GST".

    States are angry, they are agitated. We have urged the PM to resolve the issue by August said Sushil Modi, Deputy Chief Minister, Bihar.
  • Notifications:
    • Clarification on point of Taxation Rules: The Central Board of Excise & Customs, Ministry of Finance, has issued Circular No.162/13/2012-ST dated 8th July 2012 to clarify point of Taxation Rules. Following changes introduced at the time of Budget 2012 in the Point of Taxation Rules, 2011, together with revision of the service tax rate from 10% to 12% and the subsequent changes that have been made effective from 01.07.2012, the following clarifications have been desired:

      (a) Point of taxation and the rate applicable in respect of continuous supply of services at the time of change in rates effective from 01.04.2012;

      (b) Applicability of the revised rule 2A of the Service Tax (Determination of Value) Rules, 2006 to ongoing works contracts for determination of value when the value was being determined under the erstwhile Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007; and

      (c) Applicability of partial reverse charge provisions in respect of specified services.

      2.1 The issues have been examined. The continuous supply of services was governed by rule 6 until 31.03.2012. The rule started with the wordings "notwithstanding anything contained in rules 3, 4 ." Therefore, the point of taxation in respect of services provided in terms of the said rule on or before 31.03.2012 would remain unaffected by rule 4.

      2.2 To clarify the matter further, if the invoice had been issued or payment received in respect of such services on or before 31.03.2012, the point of taxation would stand determined under rule 6 accordingly and shall not alter due to the subsequent changes in the Point of Taxation Rules, 2011 that became effective only from 1.4.2012.

      3.1 However the position has undergone a change at the time of transition towards the Negative List and the introduction of other accompanying changes in Service Tax (Determination of Value) Rules, 2006 and partial reverse charge. At the said time rule 6 stood omitted and the point of taxation was required to be determined ordinarily in such cases under the main rule i.e. rule 3. This rule is, however, overridden by rule 4 when there is a change in effective rate of tax. The "change in effective rate of tax" has been defined in clause (ba) of rule 2 to include a change in the portion of value on which tax is payable.

      3.2 To illustrate, the following would be changes in effective rate of tax:-
      (i) the change in the portion of total value liable to tax in respect of works contract other than original works (from @ 4.8% earlier to @ 12% on 60% of the total amount charged, or effectively @ 7.2% now).
      (ii) exemption granted to certain works contracts w.e.f. 1st July 2012 which were earlier taxable.
      (iii) taxability of certain works contracts which were hitherto exempted.
      (iv) change in the manner of payment of tax from composition scheme under the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 to payment on actual value under clause (i) of rule 2A of the Service Tax (Determination of Value) Rules, 2006.

      3.3 However, the following will not be a change in effective rate of tax:-
      (i) works contracts earlier paying service tax @ 4.8% under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 and now required to pay service tax @12% on 40% of the total amount charged, keeping the effective rate again at 4.8% (as only the manner of expression has been altered).
      (ii) works contracts which were outside the scope of taxation (and not merely exempted) but have become now taxable e.g. construction of residential complex comprising of 2 to 12 residential units, construction of buildings meant for use by NGOs etc. (Rule 5 of the Point of Taxation Rules, 2011 shall apply to such services.)

      3.4 Thus the point of taxation for services provided in respect of taxable works contracts in progress on 01.07.2012 would need to be determined under rule 4 of the Point of Taxation Rules unless there is no change in effective rate of tax.

      4. It is further clarified that the provisions of partial reverse charge would also be applicable in respect of such services where point of taxation is on or after 01.07.2012 under the applicable rule in respect of the service provider.

  • Notifications:
    • Amendmtents in EPCG Scheme and export obligations: The Ministry of Finance, Department of Revenue has issued Customs Notification No.42/2012 dated 22nd June 2012. The Notification seeks to make amendments in Notification Nos.100/2009-Cus, No.101/2009-Cus, No.1202/2009-Cus and 103/2009-Cus, all dated11 September 2009 related to import of Capital goods and the quantum of export obligation under EPCG Scheme.
      Notification No.42/2012 of 22nd June 2012 is being reproduced for information of Members.
  • The finance ministry has notified safeguards, conditions and limitations for grant of refund of Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004. The idea is to enable manufacturers and service providers, who take credit for duty paid on inputs and service tax paid on input services and export goods and services without payment of excise duty or service tax, to a refund of unutilised credit on the basis of a formula specified in Rule 5 of the Rules. Refund of unutilized credit has always been a problematic issue. The latest notification (numbered 27/2012-CE (NT) dated June 18) calls for a single refund application (separate for goods and services) every quarter in the prescribed Form A, along with, for exporters of services, a certificate in Form A1 from the auditors of the claimant. The notification specifies what is meant by 'the value of goods cleared for export', 'total value of goods cleared', 'value of services exported', 'value of all services, other than export' and others. One of the conditions is that the refund claimed should not be more than the amount in the balance at the end of the quarter for which the refund claim is being made or at the time of filing of the refund claim, whichever is less.
  • Notifications:
    • Refund of Cenvat Credit: (New Safeguards notified) : CThe Central Board of Excise Customs, Ministry of Finance, has issued Notification No.27/2012-N.T. dated 18th June 2012 on the above subject. Refund of CENVAT Credit under rule 5 of the Rules is being subjected to the following safequards, conditions and limitations:-
      The Central Board of Excise Customs, Ministry of Finance, has issued Notification No.27/2012-N.T. dated 18th June 2012 on the above subject. Refund of CENVAT Credit under rule 5 of the Rules is being subjected to the following safequards, conditions and limitations:-

      2.0 Safeguards, conditions and limitations.- Refund of CENVAT Credit under rule 5 of the said rules, shall be subjected to the following safeguards, conditions and limitations, namely:-
      1. the manufacturer or provider of output service shall submit not more than one claim of refund under this rule for every quarter: provided that a person exporting goods and service simultaneously, may submit two refund claims one in respect of goods exported and other in respect of the export of services every quarter.
      2. in this notification quarter means a period of three consecutive months with the first quarter beginning from 1st April of every year, second quarter from 1st July, third quarter from 1st October and fourth quarter from 1st January of every year.
      3. the value of goods cleared for export during the quarter shall be the sum total of all the goods cleared by the exporter for exports during the quarter as per the monthly or quarterly return filed by the claimant.
      4. the total value of goods cleared during the quarter shall be the sum total of value of all goods cleared by the claimant during the quarter as per the monthly or quarterly return filed by the claimant.
      5. in respect of the services, for the purpose of computation of total turnover, the value of export services shall be determined in accordance with clause (D) of sub-rule (1) of rule 5 of the said rules.
      6. for the value of all services other than export during the quarter, the time of provision of services shall be determined as per the provisions of the Point of Taxation Rules, 2011.
      7. the amount of refund claimed shall not be more than the amount lying in balance at the end of quarter for which refund claim is being made or at the time of filing of the refund claim, whichever is less.
      8. the amount that is claimed as refund under rule 5 of the said rules shall be debited by the claimant from his CENVAT credit account at the time of making the claim.
      9. In case the amount of refund sanctioned is less than the amount of refund claimed, then the claimant may take back the credit of the difference between the amount claimed and amount sanctioned.
      3.0 Procedure for filing the refund claim. -
      1. The manufacturer or provider of output service, as the case may be, shall submit an application in Form A annexed to the notification, to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, as the case may be, in whose jurisdiction,-
        1. the factory from which the final products are exported is situated.
        2. the registered premises of the provider of service from which output services are exported is situated.
      2. The application in the Form A along with the documents specified therein and enclosures relating to the quarter for which refund is being claimed shall be filed by the claimant, before the expiry of the period specified in section 11B of the Central Excise Act, 1944 (1 of 1944).
      3. The application for the refund should be signed by-
        1. the individual or the proprietor in the case of proprietary firm or karta in case of Hindu Undivided Family as the case may be;
        2. any partner in case of a partnership firm;
        3. a person authorized by the Board of Directors in case of a limited company;
        4. in other cases, a person authorized to sign the refund application by the entity.
      4. The applicant shall file the refund claim along with the copies of bank realization certificate in respect of the services exported.
      5. The refund claim shall be accompanied by a certificate in Annexure A-I, duly signed by the auditor (statutory or any other) certifying the correctness of refund claimed in respect of export of services.
      6. The Assistant Commissioner or Deputy Commissioner to whom the application for refund is made may call for any document in case he has reason to believe that information provided in the refund claim is incorrect or insufficient and further enquiry needs to be caused before the sanction of refund claim.
      7. At the time of sanctioning the refund claim the Assistant Commissioner or Deputy Commissioner shall satisfy himself or herself in respect of the correctness of the claim and the fact that goods cleared for export or services provided have actually been exported and allow the claim of exporter of goods or services in full or part as the case may be.
  • SEZ Policy to be revisited as growth in exports dips (Commerce min mulls sectoral broad-banding as de-notifications rise): With exports from special economic zones (SEZs) seeing a sharp decline and the number of applications for denotification of approved SEZs on the rise, the commerce ministry plans to revisit the SEZ policy to make establishment and help set up information technology SEZs in smaller cities and towns.

    The policy seeks to address the issue of sectoral broad-banding of SEZs to allow similar manufacturing and services sector industries to tap into the synergies arising from scale of operations and infrastructural requirements. According to the ministry, this approach balances the need to optimally use land with the requirements of economies of scale. It would cut transaction costs and time involved in setting up of units.

    In another proposed amendment, the ministry is mulling a differential incentives regime favouring the SEZs' movement away from urban agglomerates and encourage such zones in the rural areas.

    With IT exports contributing over a quarter of the SEZ exports, the reforms proposed by the ministry involve streamlining the incentives for such SEZs to come up in tier-II and tier-III cities.
  • New Export scheme not for all: In this year's annual supplement to the Foreign Trade Policy (FTP), a new post-export Export Promotion Capital Goods (EPCG) scheme has been introduced. This gives an option to exporters but regular ones might not prefer this dispensation.

    The new scheme gives the exporters a choice to import or locally procure capital goods (CG) on duty payment and claim the duty back (the portion not taken as Cenvat credit), as and when exports take place, by way of transferable duty credits that can be used for payment of customs duty on imported goods or excise duty on locally procured goods.

    An exporter who opts for the scheme has to file an application for EPCG authorization before making any exports. The Handbook of Procedures, Vol. 1, says EPCG authorization will mention 'not for import', meaning the authorization need not be produced before the customs for import clearance, as the CG will have to be imported on payment of normal duty. The authorization will mention the annual average exports to be maintained and specific export obligation (EO). The mention of EO need not bind the exporter; if he does no exports, the only consequence is that he will not earn any duty credits. The mention of EO is only to enable computation of the entitlement of duty credits, in case of any claims against exports made after issue of authorisation.

    The EO will be fixed at 85 per cent of the normal, says the FTP, but it is not clear whether the normal EO will be based on the three per cent or zero duty EPCG scheme and whether the exporter has the option to ask for normal EO to be reckoned in line with one of those schemes. The duty saved under the three per cent or zero duty schemes is based on the full duty leviable but for the exemption. In the case of a post-export EPCG scheme, full duties have to be paid on imported goods but the component of Countervailing Duty (CVD) and Special Additional Duty(SAD) can anyway be taken as Cenvat credit by most manufacturers. Even so, it appears their EO will be based not on 85 per cent of the basic customs duty and cess that cannot be taken as Cenvat credit but on 85 per cent of full duty paid, including CVD and SAD.

    From time to time, an exporter who has opted for the scheme may file application(s) for issue of duty credit scrip(s) in proportion to the EO completed. With the first such application, proof of actual duty paid on CG (including evidence of duty Cenvated or otherwise), nexus and installation certificate(s) of CG, etc, must be filed along with evidence of exports made. Subsequently, only documents showing additional exports need be sent.

    The new scheme might be useful for manufacturers and service providers who are unsure about fulfilling export obligations.
  • Cabinet approves new telecom policy: The Cabinet on Thursday approved a new Telecom policy, replacing more than a decade-old rules, aiming to boost transparency and revive growth in one of the country's showpiece sectors that has been rocked by a massive scandal. The policy will separate telecom permits and radio airwaves, against the current practice o bundling them, and will charge a market-derived price for lucrative airwaves, among other things. Under the new policy, India will also seek to re-farm, or switch, airwave bands held by government agencies and private telecom operators "from time to time" to make way for new technologies, telecom minister Kapil Sibal told reporters after a meeting of the cabinet. Private telecom carriers have been opposing the airwave switch plan. The policy, whose broad contours were announced previously, also seeks to ease mergers and acquisition rules in the sector to facilitate consolidation in the crowded market.
  • Drawback rates do not apply to goods produced in discharge of export obligation : According to condition No.8 of notification no.68/2011-Cus(NT) dated 22.09.2011, the rates of drawback specified in the said Schedule (i.e. the All Industry Rate Schedule) shall not be applicable to export of a commodity or product if such commodity or product is manufactured or exported in discharge of export obligation against an Advance Authorization or Duty Free Import Authorization issued under the Duty Exemption Scheme of the relevant Export and Import Policy or the Foreign Trade Policy.
  • Treatment of Capital Goods sourced from SEZ and import of spares for such Capital Goods under EPCG Scheme - Para 5.2A of FTP : Directorate General of Foreign Trade (DGFT) has issued Policy Circular No.65(RE-2010)/2009-14 dated 18th May, 2012, clarified that Capital Goods sourced from SEZ are treated as 'imported goods'. Hence, EPCG Scheme - under Para 5.2A is available for import of spares for such imported Capital Goods (i.e. sourced from SEZ) with reduced EO. Besides this, EPCG Authorisation for "Spares" is also allowed under Para 5.2 as clarified in Policy Circular No.12 dated 17.01.2011 (Point No.2).
  • Policy package to shore up falling rupee on cards : The rupee's alarming plunge and the central bank's limited and depleting armoury to stem the fall have jolted the government into coming up with a comprehensive policy package. According to top government sources who do not wish to be identified, several measures to boost dollar liquidity are likely over the next few days. Oil marketing companies, whose dollar requirement is the highest among all importers, and in whose case a deferment of purchase is hardly an option, might again be allowed to buy greenbacks directly from the central bank, a facility that was last put in place in January. This will make the spot markets for dollar less crowded and help other importer buyers of the American currency. Further, the sources said, gold imports would be discouraged further without putting any extra physical barriers. The prime minister's office and finance ministry, which in recent days discussed the issues arising out of the weak rupee and its adverse impact on capital flows and corporate India's foreign obligations, have resolved to ask the market and insurance regulators to announce steps to make these financial savings products more attractive, sources said
  • Notifications:
    • Exemption from whole of customs duty to certain goods imported from Singapore under Notification No.73/2005-Customs dated 23-07-2005 amended: CBEC, Ministry of Finance has issued Notification No.33/2012 - Cus dated 14th May 2012, to make some changes in Not.73/2005-Cus. of 22nd July, 2005, which gives exemption from the whole of Customs duty leviable on certain goods when imported into India from the Republic of Singapore..
      A copy of Notification No.33/2012 is attached.
  • Notifications:
    • Sub: Classification of Micro/Mini SD Cards: The Central Board of Excise and Customs (CBEC), Ministry of Finance has issued Customs Circular No.12/2012 dated 1st May'12 on the above subject. Doubts have been expressed regarding classification of Micro / Mini SD cards under sub-heading 852351, covering Semiconductor media, Solid-state non-volatile storage devices.
      A copy of circular No.12/2012 is attached.
  • Notifications:
    • Changes made in Notification No.69/2011-Cus. Dated 29th July 2011: The Ministry of Finance, Govt. of India has issued Notification No.28/2012 dated 27th April, 2012 through which a number of changes have been made in Not. No. 69/2011-Cus. Dated 29th July, 2011. Click here for the Revised Table (Ch. 85).
  • Better Cenvat credit system : Presenting the Budget this year, the finance minister admitted that disbursement of the taxes that go into the export of services had been an irritant for long. He announced a scheme to simplify refunds without voluminous documentation or verification, covering manufacturers, too.

    The necessary amendments to Rule 5 of the Cenvat Credit Rules (CCR) were issued through notification 18/2012-CE(NT) dated March 17 and the amended Rule 5 took effect on April 1. The notification prescribing safeguards, conditions, procedures and limitations is yet to be issued.

    A letter, DOF No 334/1/2012-TRU dated March 16, issued by the joint secretary (tax research unit) of the Central Board of Excise and Customs (CBEC), explaining the various changes made on Budget Day, said in introductory remarks that "no more will an exporter be asked whether an input service has been used in export to claim a Cenvat refund". Elaborating later that "a simplified scheme for refunds is being introduced by substituting Rule 5 of Cenvat Credit Rules, 2004. The new scheme does not require the kind of correlation needed now between exports and input services used in such exports. Duties or taxes paid on any goods or services that qualify as inputs or input services will be entitled to a refund in the ratio of the export turnover to total turnover. The notification prescribing the detailed manner and safeguards will be issued by the policy wing shortly."

    The amended Rule 5 is a significant improvement over the earlier dispensation. The provision for refund of unutilised Cenvat credit is available not only for service providers that export services without payment of service tax but also for manufacturers who export without payment of duty under bond or letter of undertaking. As a incentive, such refunds are also admissible for taxes on taxable services that have been exempted. Significantly, the amended Rule allows refund even against clearance of intermediate products for export against bond. Second, the new dispensation prescribes a formula for grant of maximum refund and defines various elements in the formula rather clearly. Third, it does not put any condition that refund will be available only when a manufacturer or service provider is not in a position to utilise the credit in any other manner.

    Getting refund of unutilised credit has long been vexatious. Based on recommendations of the Economic Advisory Council to the Prime Minister, the CBEC had prepared a scheme to refund 80 per cent of the amount due, based on the refund and rebate claims filed by the exporters within 15 days of filing claims, subject to final settlement within the next 30 days. It simply did not work because the CBEC could not make its field officers obey the instructions. Rule 5 of CCR and the related notification, 5/2006-CE(NT) dated March 14, 2006, have been repeatedly amended to facilitate refunds but exporters have not been able to get these quickly.

    The new dispensation, once again, raises hopes that refund of unutilized Cenvat credit will be granted quickly. The CBEC should quickly issue the necessary notification and instructions, and institute suitable mechanisms to ensure its field formations follow the instructions for quick refunds.
  • Electronic policy likely soon: The government is likely to approve the National Policy on Electronics, which aims to create a domestic electronics manufacturing system worth $400 billion by 2020, within a week.
  • GST rollout likely in 2013-14: Even as the Centre, has refrained from stating as to when the goods and service tax (GST) will come into effect, chairman of the empowered committee of State Finance Minister Sushil Modi has expressed the hope that the indirect tax reform initiative could be launched by the beginning of the next financial year. "Things will move very fast in the coming days as the standing committee on finance will start discussing the Bill (Constitution Amendment Bill) after the Budget session concludes on May 24". I hope that the Bill could be introduced is cleared by Parliament and also ratified by some of the state assemblies by March 31, 2013." Modi said after the meeting of the panel to clear ground for GST rollout.
  • Notifications:
    • Revised format for Excise and Service Tax Return - Draft for comments
      The Central Board of Excise & Customs (CBEC) has issued a draft circular containing details of proposed amendments to harmonize the ER-1, ER-3 and ST-3 returns so that a single common return can be prescribed instead of these three returns as measure of simplification of the Business Processes in respect of filing the Return by assesses. The draft is being placed in public domain for widest possible circulation and an extensive debate from all stakeholders in trade and industry as also from all the field formations of the department. Suggestions and feedback from Trade as well as Field formations have been invited. Suggestions can be emailed at or at latest by 15th May 2012. The feedback and suggestions received would be considered for revising the proposed amendments.
  • Notifications:
    • Refund of 4% CVD (SAD) - Extension of time up to 30th June 2012, for using re-credited 4% CVD (SAD) amount in DEPB : The Ministry of Finance has issued Customs Circular No.10/2012 dated 28th March 2012 extending the date of refund of 4% CVD (SAD) up to 30th June, 2012 for using re-credited 4% CVD (SAD) amount in DEPB. A copy of Circular No.10/2012 dated 29th March'12 is given below:

      Circular No.10/2012-Customs

      Government of India
      Ministry of Finance
      Department of Revenue
      Central Board of Excise and Customs

      North Block, Room No. 253-A,
      New Delhi, the 29th March 2012.

      All Chief Commissioners of Customs/Customs (Prev.),
      All Chief Commissioners of Customs & Central Excise,
      All Commissioners of Customs/Customs (Prev.),
      All Commissioners of Customs & Central Excise.

      Subject:- Refund of 4% CVD (SAD)-Extension of time upto 30th June 2012, for using re-credited 4% CVD (SAD) amount in DEPB-Regarding.

      Sir / Madam,
      Your kind attention is invited to the Circular No.02/2012-Customs, dated 16-02-2012, regarding procedure on refund of 4% CVD (SAD). The above Circular provides the facility of manual filing of Bill of Entry for utilizing the amount of re-credited 4% CVD refunds (SAD) for payment of duty in case of re-credited DEPB/ Reward Scheme scrips upto 31-03-2012.

      2. The matter has been examined in consultation with Director General of Foreign Trade (DGFT) and it has been decided to extend time limit for using re-credited DEPB scrips/ Reward Scheme scrips in case of 4% CVD (SAD) upto 30-06-2012.

      3. Board also directs all Chief Commissioner of Customs to ensure that all pending application for refund of 4% SAD paid through DEPB/reward scrips are disposed of by 30-04-2012. The Chief Commissioner may constitute a special team to liquidate these refund claims. The report in this regard should be sent to Board by 04-05-2012.

      4. Board also reiterates Para 8 of Board's Circular No. 27/2010-Customs, dated 13-08-2010 wherein it was mentioned that in the interest of ensuring expeditious grant of refund of 4% SAD, the importers may be advised to make the initial payment of 4% CVD in cash. DGFT has also informed that no re-crediting shall be done if such payment is made by means of scrips. In other words, in future exporters should pay SAD component in cash if they want a refund.

      5. A suitable Public Notice and Standing Order may be issued for the guidance of the trade and staff.

      Yours faithfully,

      Under Secretary (Customs-III/VI)

  • Self Assessment System helps bring sea-change in customs' operations: Winds of change are blowing across the Department of Customs, thanks to the introduction of proposals to simplify its procedures made in last year's Budget.

    Perhaps the most impactful measure is the introduction of self assessment for Customs duties levied on exim consignments.

    Customs is no longer in the process of assessment of duties, the power for which is now entrusted with importers and exporters. Only 25% of bills of entry would be routed through the Customs officials, who would do the checking. As per the programme design, the rest would be routed through Risk management Systems (RMS).

    Any document that is filed with the Customs, it is presumed that it is self assessed. If an importer does not or cannot assess, he could approach the department for help. With the new system, the responsibility of deciding the duty, the policy and the valuation of the cargo is rested with the importer himself and not with the department, which stands relieved of the onerous job.

    The new dispensation has substantially changed the procedural rules and now even an importer or exporter could get release of his goods which are disputed.
  • Latest Cenvat credit rule implications: The government has made some helpful and some not very helpful amendments to the Cenvat Credit Rules, 2004. Exporters can hope to get refunds without much hassle and input service distributors can expect some nuisance in distributing the credits.

    Rule 5 now allows refunds on the basis of a prescribed formula. The new scheme does not require the correlation needed at present between exports and input services in such exports. Duties or taxes paid on any goods or services that qualify as inputs or input services will be entitled to be refunded in the ratio of the export turnover to total turnover. This is subject to the condition that the same duties or taxes should not have been claimed through the drawback route. The conditions, procedures and safeguards for grant or refund will be notified later. The new dispensation will apply for exports made from April 1. Refunds under the existing dispensations must be claimed before March 31.
  • Welcome CRR cut by RBI: Monetary policy is most effective when it is unanticipated, and the Reserve Bank of India's (RBI's) decision to cut the cash reserve ratio, for banks by 75 basis points was indeed unexpected. This is a pleasant change, for the central bank has in recent times chosen to focus on its regular schedule of reviews instead of responding to the needs of the market more spontaneously. This cut was welcome not just for its well-planned timing, but also for its relative size; the RBI has, too often, moved with baby steps when strides are called for. Now, by cutting CRR by 75 basis points to 4.75 per cent.
  • Notifications:
    • Relaxed documentation: Importers need not fill up A-1 form or furnish any documents for remittance of foreign exchange up to $5,000 towards the goods they bring into the country. They need furnish only a simple letter to banks giving their name and address, amount to be remitted, name and address of the beneficiary and the purpose of remittance.

      A recent Reserve Bank of India (RBI) circular granting this relaxation says the exchange being purchased must be for a current account transaction - and not included in the Schedules 1 and 2 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000. Of course, the payment must be made by a cheque drawn on the applicant's bank account or by a demand draft.
  • Ministry is to dilute defence offset policy: The Defence Ministry is to finalise long-awaited amendments to the defence offset policy. The key steps that the apex Defence Acquisition Council (DAC) is likely to okay; permitting vendors to offer technology as offsets; allowing offsets to be discharged in commercial ship-building and allowing "offset multipliers" in order to canalize offset Facilitation Agency (DOFA) would be responsible for administering offsets, a decision that would permit the expansion and empowerment of this department.

    Offsets, which were first introduced in the Defence Procurement Policies of 2005 and 2006 (DPP-2005 and 2006), required foreign vendors who were awarded defence contracts worth Rs.300 crore or more to plough back at least 30 per cent of the contract value into Indian defence production or R&D. But global vendors, particularly US companies, have lobbied hard to dilute this policy, insisting that the Indian defence industry does not have the capacity to absorb the Rs.40,000 - 50,000 crore worth of offsets that could arise over the next five years.
  • Industry for 14% mfg growth: Industry leaders including Ratan Tata, joined commerce and industry minister Anand Sharma to debate on the National Manufacturing Policy recently.

    The meeting of the National Manufacturing Competitiveness Council headed by V Krishnamurthy discussed how to attain a 12-14% manufacturing growth rate as envisaged in the policy.

    There was unanimity that achieving 12-14% manufacturing growth rate and creating about 100 million jobs over the next 10 years was absolutely critical for inclusive growth and social stability. The members of the NMCC welcomed the National Manufacturing Policy.
  • Reforms in anti-dumping rules: The Finance Ministry has amended the Anti-dumping Rules to discourage those who try to get around them. Provisions have been made to determine and refund amounts collected in excess of the dumping margin.

    The duty is levied to protect domestic producers from predatory pricing by foreign exporters. The idea is to make imports expensive enough to deny the advantage of dumping or offset the material injury dumped imports cause. Though the duty is meant to be exporter-specific, the notifications, issued after due investigations and recommendations by the 'Designated Authority' specify the product, country of origin, exporting country and duty to be levied. Some importers try to circumvent the duty, by importing dumped goods in unassembled form or by changing the nomenclature, or by routing the goods through third countries.

    The latest amendments say any assembly, finishing or completion of dumped goods imported in unassembled, unfinished or incomplete form that gives less than 35 per cent value addition is to be considered circumvention of anti-dumping duty in force.

    The Anti-dumping Rules say if the final duty is higher than the provisional one, the importer need not pay the difference but if it is lower, he can ask to refund the excess paid. Also, if duty is withdrawn after final findings, what had been levied on the basis of provisional findings may be refunded. The latest amendments say if the importer claims he has paid any anti-dumping duty in excess of the margin of dumping, at his request, the Designated Authority can investigate, determine and recommend the amount to be refunded. The procedures, time limits, etc. for refund are prescribed in the new Rules or refund of duty paid in excess of the actual margin of dumping. These refunds will also be subject to the bar of unjust enrichment, as usual.
  • Refund of 4% CVD (SAD)-Extension of time up to 31st March 2012 for Using re-credited 4% CVD(SAD) amount in DEPB : The Central Board of Excise and Customs (CBEC) has issued Circular No.02/2012-Customs dated 16-01-2012 on the above subject. CBEC had issued Circular No.30/2011 earlier on 19/7/2011, providing the facility of manual filing of Bill of Entry for utilizing the amount of re-credited 4% CVD refunds (SAD) for payment of duty in case of re-credited DEPB/Reward Scheme scrips up to 15-09-2011. On several representations having been received from trade and industry to extend the time limit for using re-credited 4% CVD (SAD) amount in DEPB as they have not been able to utilize the re-credited DEPB/Reward Scheme scrips within the stipulated time it has been decided to extend time limit up to 31.03.2012. No further extension shall be given under any circumstances.
  • Notifications:
    • Refund of 4% Additional Duty of Customs (4% CVD) in terms of Notification No.102/2007-Customs dated 14.09.2011: Customs Circular No.01/2012 dated 5th January 2012 issued by the Ministry of Finance on the above subject now entitles a Certificate for refund of 4% Additional Duty of Customs (4% CVD) by Cost Accountants / Statutory Auditors also rather than restricting the authority only to "Chartered Accountants" only as per present practice.

      A copy of the Circular dated 8th January 2012 is reproduced below:
      1. Circular No. 18/2010-Customs dated 8th July, 2010), vide which Board has simplified procedure for sanction of refund of 4% SAD in case of ACP importers. Vide Para 4.1 (d) of the Circular No.18/2010-Customs, dated 08.07.2010 it was provided that the amount of 4% CVD refund shall be sanctioned in full, on preliminary scrutiny of the documents and certificate of statutory auditor/Chartered Accountant, for correlating the payment of ST/VAT on the imported goods with the invoices of sale and also to the effect that the burden of 4% CVD has not been passed on by the importer to the buyer. However, as Para 6 of the said Circular only Charted Accountant can issue a certificate that incidence of burden of 4% CVD has not been passed on by the importer to the buyer.
      2. Representations have been received in the Board for amending Para 6 of the said Circular to make it in consonance to Para 4.1 (d) ibid to enable Cost Accountants to issue the Certificates as statutory auditors for the purpose of refund of 4% CVD.
      3. The matter has been examined in the Board. Board noted that the Circular No.18/2010-Customs dated 08.07.2010 disentitles Cost Accountants in regard to issue of requisite certificate though they may be statutory auditors of the importer. Board also observed that several States currently recognize Cost Accountants for purpose of VAT audit and it would be a hardship to trade already using statutory auditors/Cost Accountants to get required certificate for amount of 4% refund from Chartered Accountants. Therefore, as a measure to facilitate the trade Board has approved the amendment of the Circular No.18/2010 Customs dated 08.07.2010 so as to authorize Statutory Auditors/ Cost Accountants/ Chartered Accountants to issue a certificate, certifying that burden of 4% CVD has not been passed on by the importers to any other person.
      4. Accordingly, para 4.1(d) and Para 6 of Board Circular No.18/2011-Customs, dated 08.07.2010, stands modified to above extent.
      5. Suitable Public Notices or standing orders may be issued to guide the trade / industry and officers.
    • Exemption from Customs Duty in goods imported from Republic of Korea: Customs Notification No.122/2011 dated 30th December 2011 issued by the Ministry of Finance has made some changes in Notification No.151/2009 of 31st December 2009 on the above subject.

      As a result goods covered under Chapter 85 entitled to exemption from Customs Duty on goods imported from the Republic of Korea have been changed. The revised list is placed below:

      Chapter Heading Description of goods
      850450 to 850490 All goods
      851410 to 851430 All goods
      851490 All goods
      8517 All goods
      851810 All goods
      851822 to 851840 All goods
      851890 All goods
      851950 All goods
      852290 to 852313 All goods
      852329 All goods
      852352 All goods
      852359 All goods
      85238020 All goods
      852560 All goods
      85258020 All goods
      852713 All goods
      852791 All goods
      85279911 All goods
      852841 All goods
      852851 All goods
      852910 (except 85291021, 85291091) All goods
      852990 All goods
      853120 to 853400 All goods
      853650 All goods
      853669 All goods
      853890 All goods
      854040 All goods
      8541 to 8542 All goods
      85431010 All goods
      854330 All goods
      854370 to 854390 All goods except electric fence energizer
      854442 All goods
      854470 All goods
      8710 All goods

    • Exit policy for Telcos issued: Telecom Regulatory Authority of India (TRAI) has issued a consultation paper on the proposed exit policy for telecom service providers. Currently, there are as many as 13 players in a service area. Many new operators do not find it viable to launch services and they want to exit from the market. Once TRAI gives its recommendations, the department of telecommunications will formulate the policy.
    • National manufacturing policy gets govt. push: The Industry department has written to all states and select ministries, including finance and environment, to take all required measures for speedy implementation of its ambitious National Manufacturing Policy which was approved by the Cabinet in November 2011.

      "There is an urgent need to arrest the slowdown in Indian manufacturing and it Is important for the policy to be implemented in a time-bound manner" DIPP secretary P K Chaudhary has written in his letter to his counterparts in departments of revenue and economic affairs and ministries of labour and environment and all state chief secretaries.

      The manufacturing policy aims to create 100 million additional jobs by 2025 and develop new mega industrial zones (NMIZ) with world-class infrastructure facilities and flexible labour and environment regulations.
    • Commendable codifying of self-assessment rules: The Central Board of Excise and Customs (CBEC) has released a Manual for Self Assessment. It explains the legal provisions and procedures to be followed and notified for new regulations for filing bills of entry / shipping bills electronically and for provisional assessment. The idea is to move to trust based Customs control.

      The new system of self-assessment can help easier movement of cargo through the Customs but importers/exports will be responsible any mistakes they make also face periodic Customs audit at their offices after clearance of the goods.

      The self-assessment scheme, shifting the responsibility for assessment to importers/exporters while retaining the power of Customs officers to verify such assessments and make re-assessment, was introduced this April by amendments to Sections17, 18, 46 and 50 of the Customs Act, 1962

      The essence of the new self-assessment scheme is that the verification of declarations and assessment is done by the importers/exporters, except for cases wherein a speaking order is passed while re-assessing duty. The importer/exporters can file their bills of entry/shipping bills from remote locations (either themselves or through the Customs House agents) or by using the service centers at the Customs Houses. Once the system accepts the declarations and generates the bill of entry/shipping bill number, the self-assessment is complete. Then, it is a matter of duty payment (electronically, for duty of Rs.1 lakh or more), generation of bills of entry/shipping bill copies and obtaining the subsequent export or other order, on an automatic basis.

      The Customs Officer can intervene, especially if the RMS selects any bill of entry/shipping bill for re-assessment. He may order examination or testing of the imported/exported goods or may require production of any relevant document or ask the importer/exporter to furnish any relevant information. If he finds the importer/exporter has not done self-assessment currently, he may pass speaking order for reassessment, after giving due opportunity. He may order provisional assessment if he does not have enough details to verify the self-assessment of if the importer/exporter pleads inability to make self-assessment.
    • Pricey Spectrum : In response to a recent decision by the government to charge telecom service providers a steep rate of Rs.4,572 crore for each MHz of spectrum they hold above 6.2 MHz, these companies have collectively represented to the Prime Minister that spectrum price should be determined through auctions. The telcos' concern over high up-front costs of spectrum is perfectly valid, but the solution they offer is not. The official policy on spectrum allocation cannot be decided on the basis of either how much revenue the government can mop up or what is acceptable to telecom operators. Spectrum is a scarce natural resource. The use of which should maximize economic returns to society at large. Maximising economic returns would indeed, translate into optimal revenue accrual to the government over time.
    • GST rollout may be delayed further (Dispute between Centre and States over CST set to upset April 2012 deadline): The proposed goods and services tax (GST) continues to be ill-fated. The latest round of dispute has cropped up - again between the Centre and States. This time, it was over compensation to the states on revenue loss due to a cut by half in the central sales tax (CST) from the present 4 per cent. The imbroglio will serve another reason to the rollout of the GST regime, originally slated to begin from April 2010.

      In any case, the introduction of the GST, envisaged to replace most of the country's present indirect taxes from the next financial year, looked set for another round of delay, as it is only from January that a parliamentary panel would start discussing with stake-holders in the pertinent constitution amendment bill.

      The States are angry about having not received CST compensation for 2010-11, according to Sushil Modi, chairman of the Empowered Committee of state finance ministers. "We are sending a strong-worded letter to the finance minister (Pranab Mukherjee)", he told reports. "This will put a question mark on the creditability of the Centre, because this one thing the Centre committed when we are trying to create a congenial atmosphere for GST."

      The CST is a tax on interstate movement of goods. It was reduced from four per cent to three per cent from April 1, 2007, and further to two per cent over a year later. It was to be abolished by 2010-11, before authorities ultimately decided to wind it up once the GST was rolled out. The CST is being removed since it is considered a distortion in the way of the common Indian market. An effort has been on to create it - first, through state-level VAT and, now, with the proposed GST.

      Since the CST means revenues to state, the Centre had agreed to compensate them. As much as Rs.12,000 crore has been provided in the Budget 2011-12 as well for this purpose, pointed out Modi, who is Bihar deputy chief minister and finance minister, after meeting of the empowered committee.
    • National Solar Mission policy to be fine-tuned: In a bid to attract more players into the clean energy business, the ministry of new and renewable energy (MNRE) is now willing to fine-tune the National Solar Mission (NSM) policy. The government will be working with the stakeholders to modify the policy, as the market is constantly evolving and requires constant monitoring. Inaugurating Solarcon India 2011, MNRE director Bharat Bhargava said the ministry feels that there was a need for regular course correction to increase the interests among states and private players. The NSM aims to produce 20 giga watts of solar power by 2022.
    • China inflation cools in Oct, more policy changes seen : China's annual inflation rate fell sharply in October to 5.5% in a further pullback from July's three-year peak, giving Beijing more room to fine-tune policy to help an economy feeling the chill of a global slowdown.

      Other data, including figures showing industrial output in October grew at its weakest annual pace in a year, provided the latest evidence of a modest slowdown in the world's second-biggest economy.

      Industrial output rise in October by 13.2% from a year earlier, slightly below expectations for a 13.4% rise and the weakest pace since October 2010, suggesting factories were bearing the brunt of the economic slowdown.

      Inflation fell from 6.1% in September and marked the third straight decline since a peak of 6.5% in July, bolstering expectations that price pressures were on a solid downtrend.
    • Centre prods States on manufacturing policy: In a written missive to chief secretaries, the Centre has urged them to ramp up their internal working process at the earliest, to ensure faster implementation of the national manufacturing policy at the ground level.

      The idea is to expedite acquisition of land for the proposed National Industrial and Manufacturing Zones (NIMZs) and rationalize regulations for manufacturing.

      In his letter to states, DIPP secretary Mr. PK Chaudhary says: "The policy seeks to address these (increasing the share of manufacturing and creating 100 million jobs) through specific instruments. But, these instruments can be effective only with the active collaboration of the States. The partnership between States is central to the policy. As such I trust, that you will get the policy document examined quickly and initiate steps to implement the proposals, as appropriate, in the context of your State."

      The Centre wants the states to soon come up with sizeable land banks, consisting of "government-owned land, existing defunct industrial areas/ sick units, including PSUs" for NIMZs.
    • Telecom Path-Breaker - Does the draft National Telecom Policy - 2011 reflect true brilliance or smoke and mirrors, asks Shyam Ponappa : There's much to criticize the government for not initiating systematic reforms. Yet, the draft National Telecom Policy 2011 (NTP-2011), announced three weeks ago, is a stunner. It begins with a solid, integrated-systems preamble to IT, Communications and Electronics, followed by an excellent vision statement: "[to provide] secure, reliable, affordable and high quality... telecommunication services anytime, anywhere." A sound beginning, although open-ended in terms of how the details could evolve.

      There are potential problems with such high-level pronouncements, of course. A number of commentators castigate the motherhood in the draft. With a lofty perspective and few details, much depends on how the open-ended possibilities develop, including the difficulties of execution in dealing with ground realities and obstacles.


      NTP-2011 addresses six major areas: spectrum, licensing, broadband, convergence, roaming, and manufacturing. On the first two, there are sweeping proposals:
    • licenses will not be linked to spectrum; and
    • spectrum sharing will be permitted.
    Some view the separation of licences and spectrum as retrograde, because spectrum is essential for service delivery. Others suggest that transgressions that led to the scams are now being inducted as new policies, e.g., operators accessing networks they do not own, which is characterised as being against the public interest. Some heap opprobrium, alleging that like the previous policy, NTP-99, which they call retrograde (although it led to the phenomenal growth in mobile telephony), its main purpose is to allow companies to avoid paying licence/auction fees to the government.

    The last expostulation is the most ludicrous, because revenue collections after NTP-99 far exceeded estimated fees foregone: Rs 20,000 crore estimated "loss" by March 2007, but Rs 40,000 crore actually collected, and Rs 80,000 crore collected by March 2010. Add tax collections on exponential growth with increased profits, and the result is even higher total government revenues.

    Opposing operator access to networks arises from confused objectives; blocking access is like cutting off one's nose to spite one's face. The purpose of the sector is to provide services and access to users for legitimate activities. The public interest lies in facilitating access on appropriate terms.

    To evaluate licensing and spectrum, begin with the premise of shared spectrum. Spectrum is essential for effective service provision, particularly in the rural and semi-urban areas with about 70 per cent of the population. An aspect not commonly known is that larger bands of spectrum enable more efficient throughput. For example, 1 MHz of a 12 MHz band carries 50 per cent more traffic than 1 MHz of a 6 MHz band. An estimate of the benefit to Indian operators of more bandwidth at international norms is a reduction of 20 per cent in operating costs.

    In practice, assigned spectrum is idle much of the time, except during the busy hours in India's heavy-traffic metros, for extraneous reasons: too many operators, with too little spectrum, in too-narrow bands. This aspect becomes clear from spectrum utilisation or occupancy studies.

    • High-traffic cities like Delhi and Mumbai have much higher utilisation than cities elsewhere in the world. It comes at increased costs to operators, because of advanced equipment and the closer spacing of towers, as well as has negative environmental effects. If a system with on-demand access to centralised, more efficient spectrum bandwidth were available, the capacity would be much higher, while operators would gain tremendous savings.
    • Another aspect has to do with the structuring and pricing of shared spectrum. One scenario for sharing is to enable operators to share assigned bands on mutually acceptable terms, leaving the onus of structuring and deployment on the respective operators, as for mobile telephony towers. As with the towers, there are likely to be coalitions of operators/independent entities who are able to work out arrangements among themselves, while not attaining the ultimate efficiency of unified coordination. For instance, participants who share towers in India share passive but not active infrastructure, and a critical element of active infrastructure is spectrum.
    • An alternative scenario would be mandated spectrum sharing. Spectrum on demand could be made available to any operator/counterparties for the duration of every communication "transaction". This would need a database-driven Dynamic Spectrum Assignment facility, as deployed by Spectrum Bridge in the US. The more efficient throughput would mean higher traffic capacity for a given investment through better utilisation.
    • The distributed processing alternative through cognitive radio in every user device is (a) much less efficient, and (b) far more expensive. The market consolidation-through-acquisition approach, with more auctions, is the least efficient and most expensive.

    There would be further efficiencies if the entire network (and not just the spectrum) were accessed on-demand for payment per use. Another benefit from a public perspective would be much lower collective investment in resources, because of better utilisation. A third benefit would be the reduced environmental impact because of a lower carbon footprint and radiation from two or three common-access national networks (assuming competition is essential for effectiveness and efficiency).

    In other words, database-driven, shared spectrum and networks have to be organised and managed as a coordinated unit if the potential benefits are to be realised. America is doing this with TV white spaces/the digital dividend, through the appointment of 10 database administrators (including Spectrum Bridge, Google and Microsoft).

    Once the government and stakeholders accept these concepts, the next major task is structuring the networks as consortiums to align the interests of operators and network providers, with state-of-the-art lead partners. In this process, incorporating and reorienting BSNL and MTNL as guardians of national interests with oversight by an adequately empowered regulator will be the remaining major tasks.
  • GST to be in place by Oct'12: CBEC Chairman: The CBEC Chairman says a task force set by the finance minister has just submitted its report on the business process. The discussion paper on this covers key definitions that will form the very basis of taxation. Drafting GST legislation on this basis can be done in a month. It would be put in the public domain after due examination and given to the states. After feedback from all quarters, drafting of the GST legislation would be done. Work is progressing well on the GST net also. The standing committee has just started work on the bill. So if they give the report by the winter session then we can take it up in the budget session. After that we will have to get GST bill passed in Parliament and also state assemblies. We can have GST in place by October 2012.
  • New Manufacturing Policy approved: Changing Industrial Landscape - Policy contribution: boost manufacturing share in GDP to 25% from 16% in 10 yrs.

    Proposed excellence zones: 7 investment regions along the DMIC, 5 integrated townships, Fund for patent pool, incentives for green manufacturing.

    The Union Cabinet has approved the National Manufacturing Policy that seeks to raise the sector's contribution to GDP and create 100 million jobs over a decade.

    "The NMP seeks to enhance the share of manufacturing in the GDP to 25% within a decade and create 100 million jobs as part of the inclusive growth agenda of the UPA," Commerce Minister Anand Sharma said after the cabinet meeting.

    At present, manufacturing contributes 15% to 16% to the country's GDP. Close to 20 million people are added to the country's work force every year, for which employment opportunities need to be created. The prime minister had approved the policy in June by the details took long to settle because of inter-ministerial differences.

    The policy envisages large integrated industrial townships, national investment and manufacturing zones (NIMZs) with state-of-the-art infrastructure, lesser regulatory and compliance burden, faster clearances and fiscal incentives.

    It is proposed that the zones, developed with private participation, will be positioned as self-governing and autonomous bodies.

    Industry welcomed the new policy. "The policy is one of the most significant developments since the economic reforms of 1991, and is poised to transform the industrial poised to transform the industrial landscape in the country," ITC chairman YC Deveshwar said, adding, "the move will power a new paradigm of competitive growth in the country".

    FICCI secretary Rajiv Kumar said, "We are very pleased that the manufacturing policy has been passed and hope it will be implemented immediately. State Governments should take up the opportunity to build NMIZs, which will provide a fillip to manufacturing."

    But, some experts were skeptical. "As far as land acquisition for NMIZs is concerned, it will not be easy in our country," Planning Commission member Arun Maira said, adding, "But overall, I don't expect it to be a repeat of the SEZ episode, we have learnt from our mistakes there."

    The Cabinet also raised the housing loan ceiling for availing 1% interest subsidy from Rs.10 lakh to Rs.15 lakh. It also raised the cost of houses covered under the scheme to Rs.25 lakh from Rs.20 lakh. The decision is likely to benefit borrowers by up to Rs.14,865 every year.

    The budget provision of Rs.500 crore has been made for 2011-12 from the implementation of the scheme, which was introduced in 2009.

    The government also approved capital infusion of Rs.3,000 crore over two year in state-run National Bank for Agriculture and Rural Development (NABARD) to help it mobilize higher resources from the market.

    The move will raise the bank's paid-up capital to Rs.5,000 crore. At present, the authorized capital of Nabard is Rs.5,000 crore, of which, the paid up capital is Rs.2,000 crore.
  • Draft Policies on the National Agenda for ICTE, 2011
    Draft policies to drive National Agenda for ICTE, 2011, which cover Electronics, IT apart from Telecom, have also been announced. The salient features of these policies have been communicated to ELCINA Members on 10th October 2011 for their comments.
  • Draft National Policy on Electronics 2011 announced - Comments invited.

    The Ministry of Communications & IT has announced the Draft National Agenda on ICTE. This includes the Draft National Policies on Electronics, IT and Telecom. The Draft National Policy on Electronics was announced on 4th October.

    The National Policy of Electronics, 2011 envisions creating a globally competitive ESDM industry including nano-electronics to meet the country's needs and serve the international market. The Main Policy Objectives are:
    • To achieve a turnover of about USD 400 Billion by 2020 involving investment of about USD 100 Billion and employment of around 28 million by 2020.
    • To set up over 200 Electronic Manufacturing Clusters
    • To increase export in ESDM sector to USD 80 billion by 2020
    • To develop core competencies in sectors like automotive, avionics, industrial, medical, solar, information & broadcasting, etc.
    • To significantly enhance availability of skilled manpower and upscale high-end human resource creation
  • New electronic policy aims $400-bn by 2020: In order to promote manufacturing of electronic and telecom products in India, Communications and IT Minister Kapil Sibal has proposed creating an electronic development fund, very large scale integration (VLSI) specific incubation centres across India and a 10-year stable tax regime for the manufacturing industry.

    This is a part of the proposed National Policy of Electronics 2011 (NPE 2011) released by the minister. The government proposes to achieve a turnover of $400 billion by 2020 involving an investment of about $100 billion. This includes $55 billion in chip design and embedded software industry and $80 billion of exports in the sector. It also aims at ensuring employment to around 28 million in the sector by 2020.

    The size of electronic manufacturing industry in India was $20 billion in 2009.

    The policy also proposes setting up over 200 electronic manufacturing clusters. Another important objective of the policy is to significantly upscale high-end human resource creating to 2500 PhDs annually by 2020 in the sector.

    The draft policy also proposes to provide preferential market access for domestically manufactured electronic products including mobile devices, SIM cards (subscriber identity module) with enhanced features, with special emphasis on Indian products for which IPR reside in India. This is to address strategic and security concerns of the government.
  • After taking a decision to end the tax-refund DEPB scheme from October 1, the government is likely to restore interest subsidy of exporters to maintain the country's competitiveness in the global market. "The small exporters may get subsidy between 3.5% - 3.75%, whereas for large corporate it may be 2% subvention," a source said. The decision in this regard may be announced soon, he said. He said the discussions have already been held between top exporters' organizations and the Finance Ministry in this regard.
  • Manufacturing in China slows as US, Europe stall : China's manufacturing sector contracted for a third consecutive month in September while a measure of inflation picked up, suggesting the world's No.2 economy may not be able to provide much of a counterweight to flagging US and European growth. HSBC's China Flash Purchasing Managers' Index, designed to give an early snapshot of the month's factory activity, dipped to 49.4 from August's final figure of 49.9. A reading below 50 indicates contraction.

    Economists and Chinese officials have widely predicted China's growth will slow, largely because of waning exports. The country, known as the factory to the world, is especially vulnerable to fading demand from the United States and Europe, its two biggest export markets. "The exports sector looks increasingly at risk given the global fundamentals," said Connie Tse, an economist at FORECAST in Singapore.

    While prospects dim abroad, demand has held up well at home. That should keep China's economic growth securely above 8%, the level that many economists see as the minimum required to generate enough jobs for the country's rapidly urbanizing population. "Fears of a hard landing are unwarranted," said Qu Hongbin, China economist at HSBC. However, that resilient domestic demand is also keeping inflation elevated. Data shows input costs rising rapidly, which could handcuff China's central bank. Back in 2008, when the global economy tipped into a deep recession, China's quick policy response was credited with helping to hasten the worldwide recovery. As long as inflation is high, Beijing will be less inclined to repeat that feat.
  • Centre to announce sops for exporters soon: Khullar : The Centre will soon announce an export stimulus package to sustain growth and make life easy for exporters reeling under high interest rates.

    Commerce secretary Rahul Khullar said the package is expected to be unveiled in the next three weeks. The central government had recently conducted a survey to indentify sectors that still need assistance.

    "Times have changed, budget conditions have changed, in another week DEPB (Duty Entitlement Passbook) scheme will die. Lots of things have changed. We need to re-jig that package. Second, interest rates have radically changed between the last year and now."

    Khullar said exchange rates are going to remain volatile for the time being because the financial markets are unstable and investors are moving between assets and currency exchanges for achieving safe havens.

    During April-August exports increased by 54.2 per cent to $ 134.5 billion. On Wednesday, the Ministry of Finance and notified duty drawback rates covering all products of the DEPB Scheme, which is going to be withdrawn from October 1.
  • E-commerce gaining steam in towns and villages: Survey : Rural India, as well as towns of the tier-II and tier-III category, are fast catching up with the metros in e-commerce, study says. What is more, women are increasingly getting active in shopping online by prominently buying lifestyle and electronic items, says the fourth edition of eBay Census.

    The exercise - capturing the year-long trends of buying and selling on the eBay platform from July last year - has also revealed that every minute sees four buyers making purchases at the Indian subsidiary of the American internet consumer-to-consumer company.
  • 2-3% interest relief for Exporters likely (amid fears of a double dip, Sharma promises sops for exporters latest by early November) : Acting early to shield exporters from an impending slump in global demand, the government has decided to announce a host of sops, including an interest subsidy scheme for select sectors in a month. "After the sectoral reviews, we will be announcing the incentives. You can definitely expect it by the end of October or first week of November," Commerce and Industry Minister Anand Sharma told reporters after the meeting of an industry-government task force. The minister said that the export target of $300 billion for the year was on track, but concerns over global slump were real and diversification into new markets was the only way forward for ensuring growth over the coming months.

    Sharma said the finance ministry has agreed to an interest subvention scheme for export credit and the Reserve Bank of India is expected to notify it soon. While the minister did not reveal what the subsidy level would be, some officials said it could be between 2% and 3%. The RBI raised key interest rates by 25 basis points last week for the 12th time since March, 2010.

    Exports in April-August 2011 posted a sharp growth of 54.21% to $134.5 billion, but Commerce Secretary Rahul Khullar had pointed out while announcing trade figures earlier this month that growth had started tapering. Khullar said growth would start declining in September-October as the weakness in the US and the Eurozone would shrink total demand.

    We have to act before the slow-down kicks in, he said. The government may carry out a re-jig in sops by offering it for products that need support and incentivizing export to new markets.
  • DEPB Replacement set to cut tax refunds by 1-3% : The government has expanded its duty drawback scheme to cover items under a lucrative duty reimbursement mechanism for exporters that ends this month, reducing the benefits under the transitory alternative regime.

    The 1,100 items under the popular exports incentive, Duty Entitlement Pass Book (DEPB) scheme, will now move to the duty drawback scheme from October 1, which will be valid for a year. Both schemes give credit to exporters for the taxes paid on the inputs used in producing goods, but DEPB yields more benefits.

    The new regime will lower tax refunds to exporters by 1% to 3% from October 1, finance Secretary R S Gujral said while announcing the switchover. The government had last year provided Rs.8,700 crore refund under the DEPB scheme, largely benefiting engineering, chemical, pharma, textile and marine products industries. With the inclusion of these 1,100 items the drawback schedule will now have nearly 4,000 items.

    Effectively, the reduction amounts to reducing the stimulus of higher DEPB rates announced after exports crashed in the wake of the global financial crisis.

    "Since reduction would only be to the extent of the stimulus component added to the DEPB rates in October 2008, the new rates would be by and large acceptable to the industry", said Ramu Deora, president, Federation of Indian Export Organisations.

    The product-wise duty drawback rates will be announced shortly. The rates are based on the recommendations of a committee headed by Planning Commission member Saumitra Chaudhuri.
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