TMI Tax Updates - e-Newsletter
April 23, 2012
Case Laws in this Newsletter:
Articles
By: Dr. Sanjiv Agarwal
Summary: Individual taxpayers with total income up to Rs. 5 lakh are exempt from filing income tax returns for the financial year 2011-12, subject to specific conditions. This exemption applies only to individuals with salary income and bank interest not exceeding Rs. 10,000. Eligible individuals must have a permanent account number, report their PAN and interest income to their employer, and have tax deducted at source by the employer. They must have worked for only one employer and not be due any tax refunds. Firms and HUFs are excluded, and the exemption is void if a return filing notice is issued.
News
Summary: Dr. Kaushik Basu, Chief Economic Advisor, clarified his remarks from a lecture at the Carnegie Endowment, highlighting that his views may not reflect those of the Indian government. He discussed a potential global economic crisis in 2014 due to European banks repaying loans, suggesting this could lead to India becoming the world's fastest-growing economy post-crisis. Basu noted India's economic slowdown due to coalitional democracy, affecting reforms like GST. He suggested that reforms such as FDI in multi-brand retail might proceed without opposition support, potentially boosting economic sentiment. Misreporting linked his comments on Europe with the 2014 Indian elections.
Summary: The Finance Minister of India addressed the BRICS Finance Ministers' meeting in Washington D.C., focusing on global economic challenges and cooperation. Key topics included the need for a credible action plan for economic recovery, strengthening the Global Financing Safety Nets, and IMF governance reforms. The minister emphasized addressing global unemployment, enhancing investment in infrastructure, and international taxation issues, including tax avoidance and transfer pricing. The meeting also discussed the proposal for a new Development Bank to support global growth, with plans for a working group to explore its feasibility, aiming to report findings at the next BRICS Summit.
Summary: The G-24 Ministers met in Washington D.C. to discuss the global economy, international financial institution reform, and infrastructure financing. Concerns were raised about the fragile global economic recovery, high oil prices, and the impact on emerging markets. The group emphasized the need for immediate actions to boost growth and job creation, and called for the fulfillment of ODA commitments to low-income countries. They expressed reservations about the IMF's proposed approach to capital flow management and stressed the importance of IMF quota reforms. The group also urged the World Bank to enhance its financial capacity and responsiveness, and supported infrastructure investment and the exploration of a new Development Bank by BRICS.
Summary: The Finance Minister of India addressed the BRICS Finance Ministers' Meeting in Washington, D.C., focusing on global economic challenges and cooperation. Key topics included the need for a credible action plan for economic recovery, addressing global employment issues, and enhancing investment in infrastructure. Discussions also covered strengthening the Global Financing Safety Nets, IMF governance reforms, and international taxation issues. The Minister emphasized the importance of a unified BRICS approach in international forums and proposed a working group to explore the feasibility of a new Development Bank, aiming to report progress by the next BRICS Summit in South Africa.
Summary: The Union Finance Minister addressed the G-20 Finance Ministers and Central Bank Governors, highlighting global economic challenges such as volatility in commodity prices, high oil prices, and rising sovereign debt. He emphasized the need for coordinated efforts to address deflationary and inflationary pressures and stressed the importance of fiscal consolidation and vigilant monetary policy in India. The minister called for a credible and ambitious action plan to promote global recovery, job creation, and sustainable growth. He underscored the necessity of focusing on employment issues and increasing investment in infrastructure to support global demand and job creation.
Summary: India's Finance Minister emphasized the robust strategic partnership between India and the United States, highlighting cooperation in defense, counter-terrorism, trade, and other sectors. During a meeting with the US Treasury Secretary, discussions focused on economic and financial cooperation, including recent tax amendments in India. The Finance Minister clarified that the tax amendments are intended to clarify legislative intent, not introduce substantive changes. He assured that tax cases cannot be reopened beyond six years and reiterated that companies with capital gains from Indian assets must pay taxes in either their home country or India, avoiding double taxation.
Summary: The Indian government approved 22 foreign direct investment (FDI) proposals totaling approximately Rs. 586.137 crore, following recommendations from the Foreign Investment Promotion Board. These approvals span various sectors, including electronics, steel, health, defence, and telecommunications. Notable approvals include increased foreign equity in a pharmaceutical company and the establishment of joint ventures in defence systems. Additionally, 18 proposals were deferred, 5 were rejected, and 1 was withdrawn. The deferred and rejected proposals involved sectors such as aerospace, pharmaceuticals, telecommunications, and real estate, highlighting ongoing regulatory scrutiny in these areas.
Summary: Trade ministers from Brazil, Russia, India, China, and South Africa (BRICS) welcomed Mexico's initiative in hosting the first G20 Trade Ministers Meeting, emphasizing the importance of strengthening the multilateral trading system for sustainable growth. They highlighted the role of global value chains in trade and stressed the need for equitable participation and development impact. The ministers urged for balanced services liberalization, adequate trade facilitation support, and stable financial environments to promote trade. They called for resisting protectionism, enhancing trade policies, and concluding the Doha Development Round to ensure inclusive global economic integration, urging G20 cooperation for a sustainable trade system.
Summary: The Indian Minister of Commerce, Industry, and Textiles emphasized the importance of maintaining the development agenda central to the Doha Round discussions at the G-20 Trade Ministers Meeting in Puerto Vallarta, Mexico. He cautioned against forming exclusive agreements on services that could disrupt the balance of the Doha Round and undermine the WTO. The Minister highlighted the need for equitable trade negotiations, addressing issues like restricted mobility of natural persons due to visa and qualification barriers. He stressed the significance of manufacturing growth for job creation and the simplification of trade procedures following tariff reductions.
Notifications
Central Excise
1.
24/2012 - dated
19-4-2012
-
CE (NT)
Regarding CENVAT credit taken or utilized on the process cutting, slitting or printing of aluminium foils.
Summary: The Government of India issued Notification No. 24/2012 under the Central Excise Act, 1944, stating that CENVAT credit taken or utilized for the processes of cutting, slitting, and printing of aluminium foils will not need to be reversed. This applies even though such processes are not considered manufacturing, as per a tribunal and Supreme Court ruling. This non-reversal applies to credits taken up to March 15, 2012, provided excise duty was paid on the final product's removal, and no refund claims are made. Credits taken by buyers up to the same date also do not require reversal.
DGFT
2.
111(RE-2010) / 2009-14 - dated
18-4-2012
-
FTP
Indian Trade Classification(Harmonised System) of Export and Import Items, 2012 [ITC(HS),2012].
Summary: The Indian government, under the Ministry of Commerce and Industry, has issued Notification No. 111(RE-2010)/2009-14, dated April 18, 2012, announcing the Indian Trade Classification (Harmonised System) of Export and Import Items, 2012 (ITC (HS), 2012). This classification includes Schedule 1, detailing the Import Policy, and Schedule 2, outlining the Export Policy. Each item in these schedules is accompanied by the current import/export policy and any applicable policy conditions. The notification aligns with the HS 2012 of the World Customs Organisation and the Customs Tariff Schedule, effective immediately.
Circulars / Instructions / Orders
VAT - Delhi
1.
F.3(277)/Policy/VAT/2012/30-40 - dated
19-4-2012
Order - DVAT Rules, 2005 - Extension of time limit prescribed in sub-rule (4) of Rule 26
Summary: The Commissioner of Value Added Tax for the Government of National Capital Territory of Delhi has extended the deadline for submitting the intimation for a change in the tax period in Form DVAT-55 by 30 days for the fiscal year 2012-13. This extension is exercised under the authority of rule 49A of the Delhi Value Added Tax Rules, 2005, specifically affecting the time limit set in sub-rule (4) of Rule 26, in alignment with sub-rules (1) and (3) of the same rule.
2.
F.3(11)/P-II/VAT/Misc/2005/02-10 - dated
12-4-2012
Order - DVAT, 2004 - Direction to deposit the due tax in respect of each quarter within 21 days of the conclusion of the quarter
Summary: The Commissioner of Value Added Tax for the Government of the National Capital Territory of Delhi has issued an order under the Delhi Value Added Tax Act, 2004. Dealers with a tax period of six months or one year must deposit their due taxes for each quarter within 21 days after the quarter ends. This directive supersedes a previous order from December 5, 2005, and is effective immediately.
FEMA
3.
110 - dated
20-4-2012
Exim Bank's Line of Credit of USD 15 million to the Government of the Republic of Togo.
Summary: Exim Bank of India has established a USD 15 million Line of Credit (LOC) with the Government of Togo to support the Rural Electrification Project. The agreement, effective from March 30, 2012, mandates that at least 75% of goods and services must be sourced from India, while the remainder can be procured internationally. The LOC facilitates exports of eligible goods and services under India's Foreign Trade Policy. No agency commission is payable under this LOC, but exporters may use their resources for commission payments. Authorized banks are instructed to inform exporters and ensure compliance with relevant regulations.
4.
111 - dated
20-4-2012
External Commercial Borrowings (ECB) Policy – Liberalisation and Rationalisation.
Summary: The circular addresses the liberalization and rationalization of the External Commercial Borrowings (ECB) policy. It allows Indian power sector companies to use up to 40% of new ECBs for refinancing domestic Rupee loans, provided 60% is used for new infrastructure projects. Additionally, ECBs can now be used for capital expenditure on toll systems for roads and highways, if part of the original project. These changes are effective immediately, while other ECB policy aspects remain unchanged. Authorized Dealer Category-I banks are instructed to inform their clients of these updates, issued under the Foreign Exchange Management Act, 1999.
5.
112 - dated
20-4-2012
External Commercial Borrowings (ECB) Policy – Refinancing / Rescheduling of ECB.
Summary: The circular addresses the policy on External Commercial Borrowings (ECB), specifically regarding the refinancing or rescheduling of existing ECBs. Authorized Dealer Category-I banks are informed of the guidelines allowing borrowers to refinance existing ECBs by raising a fresh ECB at a lower all-in-cost. The policy now permits refinancing at a higher all-in-cost under the approval route, provided it does not exceed the prescribed ceiling. These changes take immediate effect, while all other aspects of the ECB policy remain unchanged. Banks are instructed to inform their clients, and necessary amendments to the regulations will be issued separately.
Highlights / Catch Notes
DGFT
-
DGFT Updates 2012 ITC(HS) Classification for Import/Export, Standardizing International Trade in India.
Notifications : Indian Trade Classification(Harmonised System) of Export and Import Items, 2012 [ITC(HS),2012]. - Ntf. No. 111(RE-2010) / 2009-14 Dated: April 18, 2012
FEMA
-
New Policy for Refinancing and Rescheduling External Commercial Borrowings Under FEMA Aims to Ease Foreign Debt Management.
Circulars : External Commercial Borrowings (ECB) Policy – Refinancing / Rescheduling of ECB. - Cir. No. 112 Dated: April 20, 2012
-
ECB Policy Updated: Easier Access to International Funds with Liberalized Rules in Circular No. 111, April 20, 2012.
Circulars : External Commercial Borrowings (ECB) Policy – Liberalisation and Rationalisation. - Cir. No. 111 Dated: April 20, 2012
-
Exim Bank Grants $15M Credit to Togo for Economic Projects Under FEMA Circular No. 110, April 2012.
Circulars : Exim Bank's Line of Credit of USD 15 million to the Government of the Republic of Togo. - Cir. No. 110 Dated: April 20, 2012
Central Excise
-
CENVAT Credit Guidelines on Cutting, Slitting, Printing Aluminum Foils Refer to Notification No. 24/2012 by Central Excise.
Notifications : Regarding CENVAT credit taken or utilized on the process cutting, slitting or printing of aluminium foils. - Ntf. No. 24/2012 - Central Excise (N. T.) Dated: April 19, 2012
VAT
-
Time Limit Extension for Rule 26(4) Under DVAT Rules 2005 Announced via Circular No. F.3(277)/Policy/VAT/2012.
Circulars : Order - DVAT Rules, 2005 - Extension of time limit prescribed in sub-rule (4) of Rule 26 - Cir. No. F.3(277)/Policy/VAT/2012/30-40 Dated: April 19, 2012
-
Delhi VAT: Quarterly Taxes Must Be Paid Within 21 Days After Quarter Ends, per Circular No. F.3(11)/P-II/VAT/Misc/2005/02-10.
Circulars : Order - DVAT, 2004 - Direction to deposit the due tax in respect of each quarter within 21 days of the conclusion of the quarter - Cir. No. F.3(11)/P-II/VAT/Misc/2005/02-10 Dated: April 12, 2012
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