The Central Board of Direct Taxes (CBDT) has widened the scope of details required to be provided in the transfer pricing report, which includes issue of shares to its overseas related entities, such as group companies. Form 3CEB, which is the transfer pricing documentation report, now requires a company to disclose details of "international related party transactions of purchase or sale of marketable securities or issue of equity shares". The revised form was recently notified by CBDT. The transfer pricing report in the revised form, certified by a chartered accountant, is to be filed by a company along with its tax return. For the financial year ended March 31, 2013, the due date for such filing is September 30. If a tax payer is required to file Form 3CEB, the due date is November 30, 2013. One of the arguments raised by Shell India in its defence is that issue of shares results in a capital receipt and thus cannot be taxed. As of now, the matter is pending before the Bombay high court. The Finance Act, 2012, had amended the definition of an international transaction with retrospective effect from April 1, 2002, to include capital financing. However, tax experts state that even if issue of shares by an Indian company to an overseas related party is an international transaction, it should not give rise to 'chargeable income' in the hands of the Indian company and there should be no transfer pricing adjustment and consequential tax demand. "A change in disclosure requirements of Form 3CEB is an indication that litigation will increase as tax authorities may take steps to scrutinize and tax all Shell-type transactions. The matter can now be resolved only at the judicial level," sums up an advocate. |
Sunday 16 June 2013
Central Board of Direct Taxes tightens disclosure guidelines
TPO can’t reject segmental analysis and compute ALP without verifying each segment, Matter remanded
Global Cotton Inventory Smaller Than Usda Estimate
16-Jun-2013
The global cotton inventory in the upcoming 2013/14 season will be 3 percent smaller than the 93 million bales currently predicted by the US government due to shrinking output and uncertainty about demand from China, the world's No 1 importer, according to a poll of nine co-operatives, traders and analysts. The carryover for the upcoming marketing season which starts on August 1 will rise just over 1 percent to a fresh high of 88.9 million 480-lb bales, the median forecast from the poll showed.
The overhang will exceed this year's record of 84.7 million, and will be largely due to China's massive stockpile, which will account for at least half of the total. The forecast is much lower than the US Department of Agriculture's official estimate announced last month, as industry estimates for output differ from the official ones.
Industry participants expect a 5-percent drop in global output to 115 million bales as farmers switch to higher priced grains, according to the poll, while the USDA has pegged production to fall 1.7 percent to 118 million bales. To be sure, forecasts will likely be adjusted as the season gets underway and the outlook becomes clearer.
The wide range of the carryover estimates from 84 million to 92 million bales also reflects uncertainty over demand from China, the world's No 1 textile industry. Traders worry that import demand may wane if the government curbs its buying as it overhauls its stockpiling policy, which has underpinned demand for fibre and supported prices for the past three years.
"Aside from the anticipated (US) harvest size, the biggest factor colouring the outlook for new-crop cotton exports is likely to be China and its rather opaque cotton policy," said INTL FCStone analyst Gary Raines. Beijing's state reserve is expected to top 48 million bales in the current season to July 31, accounting for 60 percent of the expected carryover. That could feed the country's textile mills for more than one year, based on USDA estimates.
"If (China's) mills tap the vast reserve supplies, purchases from the rest of the world could plunge," Raines said. Differences in supply estimates have also clouded the outlook. World output will fall 5 percent from 2012/13 to 115 million bales, the poll showed, below the USDA's estimate of 118 million bales.
Using a record yield projection, the USDA's estimate for China is too high still, Sharon Johnson, cotton specialist at Knight Futures, said. The country's cotton association said last week it expected a decline in output of 5 percent, but the USDA has pegged the drop at 2.7 percent to 35 million bales.
The US outlook appears to be clearer and brighter after the world's third-largest producer has whittled down a massive oversupply caused by soaring output and weakening demand over the past four years. Cotton inventory will fall over a fifth to 3.13 million bales as lower output and steady demand offset declining exports, according to a median of 10 participants. That is only slightly higher than the USDA's current estimate of 3 million.
Farmers will produce 14 million bales of cotton, their smallest crop in four years and in line with the USDA's estimate, lured by higher-priced grains and as drought conditions threaten crops in Texas, the country's largest producing state. Abandonment rates may hit their second-highest on record in Texas, where dry weather is expected to persist well into the summer, although that may be offset by better growth prospects in the Southeast, INTL's Raines said.
Source:-www.brecorder.com
Salman Khurshid's Iraq Visit: Oil Import Likely To Be Top On Agenda
16-Jun-2013
NEW DELHI: External affairs minister Salman Khurshid will embark on a two-day visit to Iraq on June 19 during which he will hold talks with top Iraqi leadership on issues of mutual interest including import of oil.
Khurshid, the first senior Indian leader to visit the oil-rich Arab country in last 23 years, will meet his Iraqi counterpart HoshiyarZebari and discuss bilateral, regional and international issues of mutual interest.
Khurshid is expected to discuss the issue of import of oil from Iraq, which has emerged as India's second largest crude oil supplier, replacing sanctions hit Iran.
In recent years, India's import of oil from Iraq has seen a significant rise. Iraq has the world's third largest proven oil reserves.
Till recently, Iran was India's second-biggest crude oil supplier after Saudi Arabia, meeting about 12 per cent of the country's needs.
But India has reduced its dependence on Iranian oil in the wake of US and EU sanctions on the import of oil from the Islamic Republic.
India imported about 13.3 million tonnes of crude oil from Iran in 2012-13 fiscal, down from 18.1 million tonnes shipped in the previous financial year.
Early this month, the United States exempted India and eight other countries from financial sanctions for six-month for significantly reducing their dependence on Iranian oil.
Khurshid is also expected to call on Prime Minister Nouri Al-Maliki, and chairman of Council of Representatives and deputy Prime Minister of Iraq.
India remains committed to support the ongoing post-war reconstruction and development efforts in Iraq, said a statement from the ministry of external affairs.
This forthcoming visit is expected to add an impetus to our bilateral relations and elevate our ties to a higher level for the mutual benefit the people of India and Iraq, the statement added.
Former external affairs minister I K Gujral, who later became the Prime Minister, had visited Iraq in 1990 in connection with the evacuation of Indians in the wake of Gulf war.
Source:-timesofindia.indiatimes.com
Rupee Down 33 Paise Against Dollar
The rupee fell by 33 paise to Rs 57.84 per dollar in early trade on the Interbank Foreign Exchange market on Monday, weighed down by dollar’s gains against other currency.
The rupee had bounced back by 47 paise to close at one-week high of 57.51 against the US dollar on Friday following strong recovery in local stocks and fresh dollar selling by exporters.
Meanwhile, the BSE benchmark Sensex higher by 79.48 points, or 0.41 per cent, to 19,257.41 in early trade.
Source:-www.thehindu.com
Recent Changes In Export Rules
The commerce ministry has trimmed the list of adjudicating authorities and also allowed re-export of imported goods to Iran in rupees. The Reserve Bank of India (RBI) has now prescribed a time limit for realisation of export proceeds for units in Special Economic Zones (SEZs) and raised the limit for receiving payments through online payment gateways.
Section 13 of the Foreign Trade Development and Regulation Act, 1993, empowers the Director General of Foreign Trade (DGFT) or any officer specified by the central government to impose a penalty or order confiscation for contravention of any provisions of the said Act or rules, orders or notifications made/issued under it. Last Thursday, the commerce ministry stripped the powers of the Foreign Trade Development Officer, Dy. DGFT, Zonal Joint DGFT and Export Commissioner to adjudicate. The powers of other authorities to adjudicate remained unchanged. The ministry also empowered the DGFT to constitute a bench of two Additional DGFTs as appellate authority on matters relating to export-oriented units (EOUs).
Re-export of goods imported against payment in freely convertible currency was permitted against payment in freely convertible currency. Last week, the government allowed export of such goods against payment in rupees to the countries notified by the DGFT, subject to at least 15 per cent value addition. The DGFT notified Iran as an eligible country under this relaxed provision. The ministry also mandated the production of a Sanitary Import Permit from the department of animal husbandry, dairying & fisheries for import of livestock and certain other items.
Exporters are required to bring in export proceeds within specified time limits. However, SEZ units were exempted from this discipline. Last week, RBI prescribed a time limit of 12 months from the date of export for realisation of the export proceeds by SEZ units. This discipline was somewhat overdue. But, RBI left some SEZ units in doubt on whether this would apply to exports already made. RBI also surprised the SEZ units by stating that any extension of time beyond this stipulated period may be granted by RBI on a case to case basis. This prescription is more stringent than those prescribed for other exporters who can seek extension from banks, more or less on an automatic basis. RBI should quickly clarify that even for exports made before last week's circular, extensions should be obtained for bills unrealised within 12 months.
It should also examine if it would be better to let banks consider requests for extension in the time limit from SEZ units. AD (Authorised Dealer) Category-I banks were permitted to offer the facility to repatriate export-related remittances by entering into standing arrangements with Online Payment Gateway Service Providers (OPGSP) for export of goods and services for a value up to $3,000 a transaction, subject to certain conditions. Last week, RBI increased the value per transaction from $3,000 to $10,000 for export-related remittances received via OPGSPs. This move will help sale of consumer goods such as gems and jewellery, apparel, books, music, movies, home appliances, carpets, spare parts, etc. Rafeeque Ahmed, president, Federation of Indian Export Organisations, said it would help boost India's exports through the e-commerce route to grow 30 per cent from the current level of $1 billion.
Source:-www.business-standard.com
India Offers To Slash Import Duty On Wines, Spirits To 40%
In a make-or-break scenario for signing of the free trade agreement (FTA) with the European Union, India has offered to drastically cut Customs duties on wines and spirits to 40 per cent from the current 150 per cent.
The offer - made by Commerce and Industry Minister Anand Sharma to EU trade commissioner Karel de Gucht on the sidelines of the Organisation for Economic Co-operation and Development summit in Paris recently - was huge, compared to India's earlier proposal to cut the Customs duty to 80 per cent. It would mean up to a 73-percentage-point cut in India's Customs duty.
India also proposed to cut the entry price per bottle of wine to $3.7 and whisky to $5.5.
However, the EU is bargaining for concessions. According to senior officials involved in the talks, the Europeans want the duties for wines and spirits reduced further to 30 per cent and the prices of a bottle of wine and whisky to $3.5.
"This is the best we could offer at this time. It is a make-or-break situation now. We have told them clearly what it is and we cannot go below this. We have to follow the TERC (Trade and Economic Relations Committee) mandate," a senior commerce department official told Business Standard. Apparently, during the last ministerial meeting that took place on May 14, EU had handed over a letter by its agriculture commissioner Dacian Ciolos to Sharma, asking him to reduce the Customs duty to 30 per cent and maintain the same price point for both wine and whisky at $3.5 a bottle.
The issue was also discussed at length during the meeting of chief negotiators from both sides last month. At that time as well, India had told EU it would not go below what had been mandated by the TERC, headed by Prime Minister Manmohan Singh.
India's wine segment is up in arms against the government's offer. "A reduction of duties to 40 per cent across the board means opening the gate for cheap imports. This way, the Indian wine industry will perish and this will also impact the farming community," said Subhash Arora, president, Indian Wine Academy. He said the government cannot afford to take such a decision at election time. "If this happens, prices will come down so much that nobody will then opt for Indian wines anymore. And even if they are able to sign the treaty on this, Parliament will not let it pass."
Last year, India had said it would cut the duties to 80-90 per cent to make imported wine and spirits from European countries affordable to Indian consumers.
Sharma and Gucht are expected to meet again to salvage the deal. However, the dates for the meeting have not been fixed. It might happen later this month or early next month in Brussels.
India and the 27-nation bloc have been negotiating this treaty since 2007. The agreement aims at slashing or eliminating duties on over 90 per cent of the goods traded between the two sides, while liberalising services and investments sectors. Both sides have failed to meet the deadlines due to stiff differences of tariff cuts, especially on wines and spirits, as well as automobiles.
Source:-www.business-standard.com
Services Exports In April Up 22% At $12.84 Bn
MUMBAI: India's services exports in April 2013 stood at $12.84 billion, up 22.5 per cent over $ 10.48 billion reported in corresponding period of last fiscal, according to data released by Reserve Bank of India.
According to the data, during 2012-13 fiscal the services receipt amounted to $133.43 billion while imports of services were valued at $80.49 billion during 2012-13 (April-March).
Import of services (payments) in April 2013 stood at $7.38 billion versus $6.51 billion a year earlier.
The services sector contributes about 55 per cent to the country's Gross Domestic Product. And it has emerged as a prominent sector in terms of its contribution to national and states' incomes, trade flows, FDI inflows and employment.
RBI releases the provisional aggregate monthly data on the country's international trade in services with a lag of 45 days.
The monthly data on services are provisional and generally undergo revision when the Balance of Payments ( BoP) data is released on a quarterly basis.
Source:-economictimes.indiatimes.com
Why A Falling Rupee Doesn't Always Mean An Export Windfall
Deepak Kapoor of Rompak International exports ethnic furniture to South Africa, Mauritius, Thailand and Myanmar. As he sources all his raw materials from the domestic market, the recent fall of the rupee to a record low — of 58.98 on June 11 — should earn him a windfall. But Kapoor is cautious.
Despite being confident that his clients won't insist on renegotiating terms on earlier consignments after the rupee's unprecedented depreciation earlier in the week, he hears disturbing stories of foreign buyers threatening to severe relations if Indian exporters fail to give a waiver.
Anup Pujari, director general of foreign trade (DGFT), calls it a myth that the depreciation of the rupee necessarily results in massive gains for Indian exporters. For two reasons: one, India's top five exports -- petroleum products, gems and jewellery, organic chemicals, vehicles and machinery -- are so much import-dependent that the currency fluctuation in favour of exporters gets neutralised. In other words, exporters spend more in importing raw materials, which in turn erodes their profitability.
Two, as buyers are aware of the currency fluctuation, renegotiation is becoming a trend now. "The moment the rupee falls sharply against the dollar foreign buyers try to renegotiate their earlier deals. As most exporters give in to the pressure and split the benefits, the advantages of a weak rupee disappear," says Pujari.
Two exporters who ET Magazine spoke to say such renegotiation is becoming more a norm now than it used to be. "We are encountering more such negotiations in recent times. Buyers tend to negotiate even after an advance payment is made. The instances of such negotiations are, however, fewer when transactions take place through a letter of credit in which the bank is also a party," says one exporter who did not want to be named.
Big Boys Cash in
Merchandise exports constitute an important component in India's gross domestic product (GDP). In fact, the percentage share of merchandise exports in India's GDP rose from 13.9% in 2009-10 to 17.7% in 2011-12, according to data available with the commerce ministry. Also, trade statistics from the World Trade Organisation (WTO) show that India's share in total global merchandise exports rose marginally from 1.48% in 2010 to 1.6% in 2012.
It's, however, unlikely that the current depreciation of the rupee will trigger a further improvement in those statistics. KT Chacko, former director of Indian Institute of Foreign Trade, explains: "We are not in a seller's market. Buyers of Indian goods have an upper hand. If our exporters fail to match their expectations, they will move to other geographies."
Large exporters, however, do make some gainswhenever the rupee witnesses a sharp fall. Here's how: they keep the proceeds of exports in permissible overseas accounts if they anticipate a sharp fall in the rupee in coming months. These exporters maximise profits by bringing that money back at the opportune time. "But only large export houses which have deep pockets can afford to adopt that strategy. The small exporters will need the money for day-to-day running of the business," Chacko adds.
Some buyers now insist that transaction agreements be made in rupee terms so as to hedge against a further slide of the Indian currency, one exporter says. In that case, if rupee falls further, the foreign buyer tends to gain. After all, the currency uncertainty between the order and the delivery gets negated.
Source:-economictimes.indiatimes.com
When do you need to consult a financial planner?
Sunanda Verma represents a large segment of well-paid professionals, which does not have the time to manage its money affairs. Verma needs an adviser, who can take care of her finances, but before she engages someone, she should be clear about the mandate and terms on which she wants her money to be managed. First, Verma needs to collect all the information about her investments. Since she has not paid attention, her investments may be lying in multiple folios and accounts. She should get her adviser to draft a letter to all her mutual funds, banks, registrars, brokers and depository participants, seeking information about her holdings. This can be done even if she does not remember her folio numbers.
Second, she must consolidate her portfolio and review it. The adviser should tabulate all the information that has been sought and plug the required details. He should then assess the portfolio for its current value, compute the return earned, and summarise how each investment is faring. A review should enable Verma to decide what to keep, what to close, and what to consolidate. Third, with all the details in hand and having estimated the current value of the investment portfolio, she should sit with her adviser to decide how it will be managed in the future. The adviser can take a detailed financial planning approach or he may choose a wealth creation approach, which is based on an agreed return at an acceptable level of risk. The payment to the adviser should be based on mutually accepted terms, and subject to completing the paperwork and processes, and reviewing the portfolio. Verma should also play fair by not dropping him after the processes are completed. She may then find herself in the same financial mess after a few years.
(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre and Arti Bhargava.)
Smart things to know: Rupee depreciation and global funds
2) The extent of appreciation also depends on the amount that is invested globally and where. The funds that are invested in falling markets will naturally offer lower returns.
3) Some global funds invest 65% of their holdings in the Indian markets to take advantage of the tax benefits. Such funds will not deliver as high a return as those that are fully invested in global markets.
4) If you think investing now is a good idea because of the past returns, you are assuming that the rupee will depreciate further from the current level.
5) The currency risk is an additional aspect to consider in international funds. A depreciating rupee enhances their returns, while an appreciating rupee cuts into the returns.
(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre and Arti Bhargava.)