Finance Ministry reduces penalty for customs duty fraud by 10 per cent

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The penalty in cases of customs duty fraud has been reduced by 10 per cent by the Finance Ministry.

Section 28 of the Customs Act, 1962, has been amended and now the amount of penalty payable in cases involving fraud, collusion, wilful mis-statement or suppression of facts with the intent to evade payment of duty, shall be fifteen per cent instead of 25 per cent.

Also, there will be a penalty not exceeding ten per cent of the duty sought to be evaded or Rs 5,000, whichever is higher, for improper export and import of goods.

Sections 112 and 114 of the Customs Act which, respectively provide for penalty for improper import and export of goods, have been amended by insertion of new clauses to provide for a penalty of up to 10 per cent of the duty sought to be evaded or Rs 5,000, whichever is higher, according to Finance Act, 2015.

The Ministry has also rationalised imposition of penalty on central excise duty and service tax evasions by fraud and other means.

In case of any wilful evasion of central excise duty, a penalty equal to the duty evasion will be payable. Similarly, the penalty will be hundred per cent of Service Tax amount involved in such cases.

A reduced penalty equal to 15 per cent of the Service Tax amount is to be paid if Service Tax, interest and reduced penalty is paid within 30 days of service of notice in this regard, the Act said.

There will be no penalty imposed on an assessee if the customs, excise duties or service tax are not properly levied, if those amounts along with interest are paid within 30 days of issuance of show-cause notices, it said.

The penalty waiver, which is part of Finance Act, 2015, that got President Pranab Mukherjee’s assent last month, is applicable in cases of fraud, collusion or wilful mis-statements.

Telangana sees Rs 1,500 cr investment with new industrial policy

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Telangana’s new industrial policy has started yielding results with 17 companies coming forward to set up their units with an investment of Rs 1,500 crore.

The state government has given all approvals to the investment proposals within 10 days against a time-limit of two weeks under the policy.

Ten days after the government unveiled the new policy at a gala ceremony here, the state has attracted the first investment. The government said these units will provide employment to 4,000 people.

Chief Minister K. Chandrasekhar Rao on Tuesday will handover a package of permit papers to the investors, said a statement from the chief minister’s office.

These companies include multi-business conglomerate ITC. ITC chairman Y.C. Deveshwar had announced at the launch of the new policy that the company would set up a world-class food processing unit in Medak district with an investment of Rs.800 crore.

The chief minister on June 12 had unveiled the new policy, which make Telangana the first state in India to bestow on investors the right to get clearance of their projects within a set time-limit.

Under the Telangana Industrial Project Approval and Self-Certification System (TS-iPASS), all the mega projects, over Rs 200 crore, will get clearance in 14 days while the other projects will be approved in a month.

Govt will go all out to support Bihar in a big way: Arun Jaitley

Arun Jaitley in US

Promising that the Centre will go “all out” to support Bihar in a “big way”, Finance Minister Arun Jaitley today said the government is likely to announce projects and schemes in a few weeks time to assist the resource-rich state.

“Bihar is a state with a lot of potential. It is a state which has very less industry. It has (a lot of) human resource. It has agriculture. Therefore for an equitable development of the country, Bihar needs to be supported,” Jaitley told reporters at the Stanford University here after delivering his remarks on ‘India’s Economic Future’.

“And therefore Government of India will go all out to support Bihar in a big way,” he said.

Responding to a question from an Indian-American, Ramesh Yadav, Jaitley said the central government is working on various schemes and projects for holistic development of the state.

Jaitley ruled this out as a pre-election package and stressed that this is not being done with an eye on state elections.

“Why do not you wait for a few weeks,” he said when asked to explain the government’s “all out” support for Bihar.

Jaitley’s remarks on Bihar were not part of his presentation, in which he spent a significant amount of time on states.

“Why your government has not planned for Bihar?” elderly Yadav asked, to which Jaitley responded, “Bihar has two great resources. One is water, as a result of which its agriculture is quite good. Second is human resources. Bihar has a huge human resource. In fact the first generation of expatriates who went to a lot of countries were from Bihar.”

Noting that in the last two decades Bihar has suffered a setback, Jaitley said a large number of people have left the state for other parts of the country for education and jobs.

“We are working on assisting Bihar. If you wait for literally a few weeks you may hear something from the central government with regard to Bihar,” Jaitley said without elaborating.

“Bihar needs infrastructure. It needs roads. It has two airports Bodh Gaya and Patna. Both of them are in terrible situation. It has not been able to exploit its tourism, including its religious tourism. Its universities need to be propped up a lot. Therefore the Central government is currently working (on projects and programmes to assist Bihar),” he said. “One of our policies has been when we support a state, we do not look from the point of view who rules the state. The fact is that if a state, which requires a certain amount of support, we must give it. For instance, Odisha and West Bengal they benefited from the policy of handing over the coal money to state itself. I think, it is good that these states in the eastern region required to be supported,” Jaitley said.

“The Prime Minister has repeatedly said that states in the eastern part of India are relatively less developed. Therefore they must get a better share of support from all of us,” he said.

Working with various ministries, Jaitley said he has developed a few ideas for Bihar and they are currently being circulated within the government.

Greek debt deal possible this week: Eurogroup president

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Eurogroup President Jeroen Dijsselbloem has said the new proposals from the Greek government which came in early on Monday were “a positive step” in the process and that it was possible to reach a deal within the week.

“New proposal from the Greek government came in this morning which we welcomed today, which was seen as a positive step in the process,” Dijsselbloem said in a press conference after a short Eurogroup meeting in Brussels.

“The Eurogroup has urged the institutions to work closely together with the Greek authorities to start immediately to go into the proposals, getting all the specifics and doing the calculations on them … and all of these with a view if possible to reach an agreement later this week, using the Greek proposals as basis for that,” Xinhua quoted Dijsselbloem as saying.

He said if all goes well the Eurogroup will have another meeting later this week to hear the final outcome of the Greek authorities.

“As I said, it’s a welcome step, and we consider it a positive direction, so I think it’s also an opportunity to get this deal later this week,” Dijsselbloem added.

“We looked at the proposals very quickly, it’s a good basis for work, work so have to be done on clarifying things and specify things, and check the overall consistency,” said European Commissioner for Economic and Financial Affairs Pierre Moscovici.

Moscovici also noted that the evening European Union summit was expected to provide political basis for future negotiations.

European Commission Vice President Valdis Dombrovskis confirmed there’ll be another Eurogroup this week through his twitter.

“Greece proposals a welcome step but more work together with institutions needed. Eurogroup to reconvene this week. We need a deal in coming days,” he said in his Twitter feed.

Monday was widely seen as a decisive day for Greece to avoid default. The crucial Eurogroup meeting may be the last opportunity for Greece and its international creditors to bridge the gaps over debt talks.

Talks over Greek debt issue have been in deadlock for five months. The European Commission, the International Monatary Fund (IMF) and the European Central Bank (ECB) are unwilling to unlock the final 7.2 billion euros ($8.2 billion) tranche of bailout funds until Greece agrees to economic reforms.

On June 30, the extension of Greece’s second bailout expires. Without a deal by then Athens may not cover a 1.5-billion-euro loan installment payment to the IMF due by the same day. The country will risk a default and exit from the Euro Zone.

AAP govt may may double allocation for education in Delhi budget; student loans up to Rs 10 lakh in offing

aam aadmi party

In order to improve education infrastructure, theArvind Kejriwal-led Aam Aadmi Party (AAP) government in Delhi may double the fund allocation for education sector in its first budget.

In the run up to Assembly polls, the Aam Aadmi Party (AAP) had promised to construct 500 new schools and 20 colleges in the national capital.

Deputy Chief Minister Manish Sisodia, who is also Education Minister, has also advocated improving teaching system in government schools.

According to officials, the allocation for education sector will be highest in 22 years.

The AAP government has also promised to provide education loan of up to Rs 10 lakh to students.

“The AAP Government wants to improve education infrastructure and in view this, more fund allocation for education is needed,” said a government official.

The increase in proposed allocation will be in line with the AAP’s political promises to upgrade education system in the national capital.

Sources said that health sector is also likely to see around 40 per cent increase in allocation in the budget which will be tabled on June 25 in the Assembly.

Greece debt crisis: 11 keypoints in Alexis Tsipras’s cash-for-reform proposals

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Greece presented new reform proposals on Monday which its euro zone partners cautiously welcomed as a possible basis for an agreement to unlock bailout funds needed to avert a possible debt default.

Here is a summary of the proposal as spelled out by Greek government officials.

1) PENSIONS

Early retirement to be curbed gradually from 2016 to 2025, but exemptions for some specific categories to be maintained, including for arduous professions and mothers with disabilities.

A special benefit for some low-income pensioners, amounting to between 57 to 230 euros ($64.66 to $260.89) a month to remain but to be replaced from 2020 by new protection framework for low pensions. This is a key point of friction between Greece and its lenders, who wanted it scrapped.

2) VAT

Greece to keep three value added tax rates of 23 percent, 13 percent and 6 percent. Electricity and restaurants to be taxed at 13 percent instead of being raised to 23 percent, as lenders had demanded, while medicines to be cut to 6 percent rather than raised to 11 percent as sought by lenders. Officials said lenders were asking for two rates of 11 percent and 23 percent.

3) TAX HIKE FOR HIGH EARNERS

Solidarity tax for higher income earners (revenues above 50,000 euros ($56,710) to be increased, while lowering the tax for revenues below 30,000 euros. It introduces a solidarity tax of 8 percent on revenues above 500,000 euros.

4) CORPORATE, LUXURY TAX HIKES

Tax plans to include: a) a special levy of 12 percent on businesses that post a profit of over 500,000 euros; b) Increases in luxury tax on pools, planes, big cars and private boats over 10 meters (33 feet); c) a tax on gambling slot machines (VLTs).

5) PRIVATISATIONS

Privatisations to impose a minimum amount of investment, a commitment by investors to promote the local economy and a participation of public equity.

The transfer of Greece’s state equity in Greek telecoms operator to the country’s privatisation agency will not be part of the lenders’ prior actions.

Greece will not privatise its power grid operator (ADMIE) nor its dominant power utility PPC, as requested by creditors.

6) PUBLIC SECTOR WAGES

No cuts to public sector wages from levels at end-2014.

7) SPENDING CUTS

Cut defence spending by 200 million euros.

8) PRIMARY BUDGET SURPLUS

Primary budget surplus of 1 percent in 2015 and 2 percent in 2016, compared with 3 percent and 4.5 percent agreed to by previous Greek governments.

9) BONDS

Greece repeated demand for euro zone to lend it money to buy back 27 billion euros of its bonds from European Central Bank – effectively rolling-over the debt on more favourable terms.

10) INVESTMENT

Greece wants deal to include financing of infrastructure and new technologies through an investment package from the European Commission and the European Investment Bank.

11) NUMERICAL TARGETS

According to leaked proposals on Greek websites, Greece also planned to increase pension contributions to cash in 605 million euros this year and 1.56 billion euros next year.

Spending cuts and tax revenues would produce budget measures equivalent to 2.69 billion euros or 1.51 percent of GDP this year and 5.2 billion euros or 2.87 percent of GDP in 2016, up from 1.99 billion or 1.1 percent of GDP and 3.58 billion euros or 2 percent of GDP previously. ($1 = 0.8817 euros)

China June factory activity still weak but some signs of stabilising: PMI

china market

China’s factory activity showed some signs of stabilising in June but still contracted for the fourth straight month, according to a preliminary private survey, suggesting more stimulus measures may be needed to support the world’s second-largest economy.

The HSBC/Markit Flash China Manufacturing Purchasing Managers’ Index (PMI) edged up to 49.6, a three-month high, from 49.2, but remained below the 50 mark which separates contraction from expansion.

New orders returned to positive territory at 50.3 and new export orders fell at a much slower pace, but companies stepped up layoffs, shedding jobs at the fastest pace in over six years, a trend which is sure to alarm Beijing.

Factories were also forced to cut prices for their products more deeply, pressuring profit margins.

“On one hand, the sector shows signs of improvement as output stabilised amid a slight pick up in total new work, while purchasing activity also rose slightly over the month,” said Annabel Fiddes, an economist at Markit.

“On the other hand, manufacturers continued to cut staff. This suggests companies have relatively muted growth expectations …. and suggests that authorities may step up their efforts to stimulate growth and job creation in the second half of the year.”

STIMULUS

Despite a flurry of stimulus and easing measures over the past year, economic growth slowed to a six-year low of 7 percent in the first quarter and analysts believe further momentum was lost in April-June.

Sluggish demand at home and abroad has left many factories, particularly in heavy industries, laden with overcapacity.

The PMI reading follows small signs of recovering demand, reflected in other private surveys and in public statements by officials, but China is still struggling to get monetary easing to translate into investment in growth.

Part of the problem is that central bank moves to add liquidity into the system are being absorbed by a stock market rally that began in November, and now by the bond market, which is being force-fed a massive plate of municipal bonds being issued as part of a debt swap programme.

But a toxic combination of conditions have combined to discourage the investment in “the real economy” that Beijing wants to jump-start a turnaround.

Because end-demand remains weak, returns on investment are low in the near- to mid-term. And because the cost of long-term credit remains far higher than capital returns, there’s little incentive for executives to borrow.

“Real interest rates are double digits, 11 or 12 percent. This is the real issue for the economy. You can cut nominal rates to zero and you are still seeing real rates around 5 percent. The profit margin is only around 3-4 percent,” said Zhou Hao, economist at ANZ Bank in Shanghai.

“We are still seeking new engines for the economy. Basically we need to deleverage first,” he said, adding that the recent stock market rally was being used by many executives to retire outstanding debt.

Quid pro quo: Firms to get lower corporate tax rate, fewer sops

arun jaitley corporate tax

Incentives such as accelerated depreciation and deductions for research and development (R&D) expenses will be among the first tax sops to be withdrawn by the government as it moves towards a 25% rate of corporate tax, sources familiar with the development said. The revenue forgone by the government on account of these two sops amounted to Rs 45,137 crore in FY15 and Rs 41,805 crore in FY14.

The government is unlikely to immediately touch exemptions, the removal of which might have legal implications such as incentives for special economic zones under Sections 10A and 10AA, sources explained. The revenue forgone on account of these concessions amounted to Rs 17,036 crore in FY14. Finance minister Arun Jaitley had announced in the Budget for 2015-16 that the rate of corporation tax, currently levied at 30%, would be gradually lowered to 25% over five years starting 2016-17. According to government data, 263 companies with a profit before tax of more than Rs 500 crore account for 54% of corporate tax collections.

The blueprint that the finance ministry is working on is expected to suggest that expiry dates for tax breaks given to large infrastructure sector players in the oil and gas and power sectors — production, transmission and distribution — not be extended. While the expiry date for such sops for crude oil production and refining was March 31, 2012, for
the power sector it is March 31, 2017.

However, those players that have started availing of the tax benefits before the expiry date will be allowed to take advantage of these for the full period. This is seven years for the oil and gas sector and 10 years for the power sector.

These exemptions fall under Section 80IB, which also offers benefits to other industrial units in backward areas.

The government now allows 100% investment-linked deduction or accelerated depreciation for investments in sectors such as fertilisers to encourage new players, which leads to a deferral of taxes. Pharmaceutical and automobile businesses currently enjoy a 200% weighted deduction of their R&D spending while calculating their taxable income. Government sources said that in many cases firms include litigation expenses in the research cost, which inflates the deduction claimed.

The Central Board of Direct Taxes would like to plug what they believe is a loophole. “Much of the litigation relates to tax exemptions,” a senior finance ministry official said, adding that “removing exemptions and lowering the tax rate is a better way to incentivise companies”.

India a bright spot in troubled global economy: Arun Jaitley

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Describing India as a bright spot in an otherwise troubled global economy, Finance Minister Arun Jaitley has said that the new Indian government offers a stable, predictable and transparent policy regime, making the country an attractive destination for investors.

Having interacted with top American businesses and corporate leaders over the past five days in both New York and Washington, Jaitley yesterday told reporters the feedback he is receiving is that investors need a stable policy regime and the Indian government is committed to that.

“In otherwise troubled time of the global economy, India clearly is a bright spot. As a bright spot, our growth rates are improving. Fiscal discipline is under control,” he said.

“This year we are targeting eight percent growth, which in current global situation appears to be reasonably impressive. And that is what makes us an attractive destination,” he said.

Jaitley, who met investors over the past few days in both New York and Washington, either on a one-to-one basis or collectively, said the meetings were an opportunity to explain to them what has happened in the past one year in terms of the reform programme and all that is in the pipeline.

“The government is fairly determined to continue this process so that it can give further boost to our economy,” Jaitley said, adding that the meetings were also an opportunity to understand how investors view India.

This would continue over the next three days, during the last leg of his visit to San Francisco, beginning today.

“There has been several game changing steps which the government of India has taken in the last one year. We opened up, we made several structural changes, the recommendation of the finance commission which we are implementing has created a huge amount of decentralisation potential,” he said.

“The taxation reforms which, we are taking in reducing direct tax rates to 25 per cent, and moving on to the goods and services tax (GST) regime, is probably one of the most important taxation reforms in recent history, subsidy rationalisation and using the DBT mechanism is extremely important, transparency in government’s functioning particularly in areas of natural resources has brought very important results,” the minister said.

Jaitley said: “It was important for us to explain to the general body of investors that we are clear about the right direction in which we are moving.”

He said that the economy has achieved a macro-economic stability.

“We consolidated fiscal discipline. The continuing reform programme has restored the credibility of the economy and obviously low oil prices has helped us,” the minister said.

“And as interests rates come down, with inflation under control, reform programme implemented, infrastructure investment being improved, the goods and services tax looking more likely, hopefully we should reach this year’s target of growth (of eight per cent),” Jaitley said.

He said: “I also carry back a message from the investors that the investors need a stable policy regime. Any form of unpredictability is never investment friendly. Therefore this interaction and outreach has been of immense utility.”

DERC to announce revised power tariff despite Arvind Kejriwal led AAP govt’s objections

delhi power tariff

Delhi’s power regulator DERC is all set to announce revised tariff for 2015-16 next month notwithstanding Arvind Kejriwal led (Aam Aadmi Party ) AAP government’s directive not to go ahead with the new rates till the CAG has submitted its report on the financial condition of three private power distribution companies.

Sources in Delhi Electricity Regulatory Commission (DERC) said the tariff determination process was going on and it will announce the new rates, which may see a marginal hike, even if the government had strong reservations about it.

On June 12, the DERC had hiked tariff by upto six per cent as it restored a surcharge to compensate the private distribution companies for rise in power purchase cost. The AAP government strongly criticised the DERC for the hike and said it was exploring legal option against the decision.

“We are going ahead with the tariff determination process. It is an annual exercise. We are analysing the financial details of the discoms and take decision accordingly,” said a top official in the DERC.

The Delhi government had asked the DERC not to hike tariff till the CAG submits its report on finances of the discoms.

Power tariff was a major issue for AAP during the Delhi polls. The Kejriwal government had in February announced a 50 per cent subsidy on monthly power consumption of up to 400 units till the government receives the CAG report on financial condition of the discoms.

In its first stint, the AAP government had ordered a CAG audit of all the three discoms, claiming that they have been misleading the government and the DERC about their financial position.

The city has seen a series of hikes in power tariff in the past two years.

The tariff was hiked by 22 per cent in 2011 followed by five per cent rise in February 2012.

The tariff was increased by up to two per cent in May 2012 and again by 26 per cent for domestic consumers in July 2012.
It was hiked by up to three per cent in February 2013 and again by five per cent in August 2013. It was increased by upto 7 per cent in November last year.

The cost of buying power has increased primarily on account of an increase in the input prices of raw material like coal and gas, officials said.

The DERC effected the hike of upto 6 per cent on June 12 following an order by Appellate Tribunal of Electricity which had asked the DERC to pass on Power Purchase Adjustment Cost (PPAC) to the private power distribution companies within three weeks.

The DERC said the PPAC surcharge has been approved considering claims of the discoms for last three quarters beginning July, 2014.

The DERC had introduced PPAC in 2012 to help the private power distribution companies recover additional cost on account of increase in coal and gas prices.

Delhi gets power from a number of gas and coal-based generation plants. The DERC had withdrawn the PPAC in July.