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Imports : US apples, almonds to be costlier, but India’s tariff strike spares Harley bikes

In retaliatory strikes on the Donald Trump administration, India on Thursday hiked import tariffs on over two dozen US goods. However, this list excludes the contentious Harley-Davidson Motorcycles.

The decision to hike duties on US goods comes after the Trump administration’s decision to unilaterally raise import levies on certain steel and aluminium products earlier this year, which had a tariff implication of Rs. 241 million on India. India’s latest measures will have an equal impact on the US.

The Finance Ministry issued two notifications on Wednesday, spelling out the new tariff structure. Normally, any change to indirect taxes such as import duty (also known as Customs duty) comes into effect from the date of the notification. However, in this case, it will apply from August 4.

A senior tax official told BusinessLine that the date for imposing the duty had been announced in advance so that “there is room for negotiation, if required”.

However, the nearly 45-day gap between the announcement and the implementation of the tariff structure has stoked concerns that importers may buy products at lower duty, hoard, and then sell at the higher rates effective after August 4. However, experts rule out such a situation as it would involve a higher working capital requirement.

Bipin Spara, Partner, EY, said the government notification is primarily for the removal of Customs duty benefits for certain goods originating in the US. “These may become part of the ongoing trade negotiations with the US and the time gap appears to be a reasonable for the conclusion of these discussions.” Anita Rastogi, Partner, PwC, feels that effecting the duties at a later date advantages businesses.

The notification includes 29 products: walnuts, almonds, pulses, apples and non-iron among others. Shelled almonds imported from the US will now attract import duty at Rs. 120/kg, as against Rs. 100/kg earlier.

Almonds in shell will attract import duty at Rs. 42 per kg (up from Rs. 35/kg). The levy on walnuts in shell will be 120 per cent, against 30 per cent earlier; apples will attract 75 per cent import duty, up from 50 per cent.

Among pulses, the duty on chickpeas, Bengal gram (chana) and masur dal has been raised to 70 per cent from 30 per cent, while that on lentils has been hiked to 40 per cent from 30 per cent. Duty on flat-rolled iron products has been raised to 27.50 per cent, from 15 per cent, while certain flat-rolled stainless steel products will now attract 22.50 per cent duty against 15 per cent earlier. Duty on artemia, a kind of shrimp, has been raised to 30 per cent.
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RBI : RBI tells banks to upgrade ATMs ‘in a phased manner’

As part of its ‘control measures for ATMs’, the Reserve Bank of India has directed banks and white-label ATM operators (WLAOs) to implement anti-skimming and whitelisting solutions by March 2019, and also upgrade, in a phased manner, all ATMs with supported versions of the operating system by June 2019.

Unsupported software

The central bank flagged the vulnerability arising out of the ATMs operating on unsupported version of the operating system and non-implementation of other security measures.

This could potentially affect the interests of the banks’ customers as well as impinge on the image of the bank.

The RBI asked banks and WLAOs to implement security measures such as BIOS password, disabling USB ports, disabling auto-run facility, applying the latest patches of operating system and other software, terminal security solution, and time-based admin access, among others, by August 2018.

In April 2017, the RBI highlighted concerns about the ATMs running on Windows XP and/or other unsupported operating systems.

Banks were also advised to put in place, with immediate effect, suitable controls.
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Direct Tax : Transfer pricing disputes: Interest payout relief coming for MNCs

The Central Board of Direct Taxes (CBDT) proposes to provide a relief to MNCs on the interest payable by them on the untaxed profits stashed abroad, requiring to be repatriated back to India under the transfer pricing regime.

It now plans to ease a rule on the manner of computation of interest in the case of MNCs opting for a Mutual Agreement Procedure (MAP)/Advance Pricing Agreement (APA) process to settle transfer pricing disputes.

The relief — on the computation of interest — would arise only in situations where the APA/MAP resulted in a secondary transfer pricing adjustment for the taxpayer The CBDT has come out with a draft notification that specifies that interest (on secondary adjustments) would have to be paid from the date of resolution of MAP/APA.

Currently, the income-tax rules specify interest on secondary adjustments would have to be computed from the date of return of income.

This rule was seen as a burden and many tax experts felt that it was not fair to force a taxpayer to pay interest from a prior period before the resolution under APA/MAP came into effect.

Now, the CBDT seeks to correct this through a change in the date from which interest would be computed.

An APA is an agreement between a taxpayer and the tax authority concerning the transfer pricing method and the rate applicable to the taxpayers’ inter-company transactions, and normally covers multiple years.

What is MAP?

MAP is a procedure that allows the Competent Authorities from the governments of the Contracting States to interact with the intent to resolve international tax disputes.

In the recent years, the Centre has not only been eyeing a fair share of taxes on international transactions undertaken between related parties of a multinational network with presence in India, but even untaxed profits stashed overseas.

Last year through new measures — popularly called secondary adjustment provisions under transfer pricing — the government made sure that profits parked abroad via such transactions come back to India within a specified time limit.

Under this move, the excess money (primary adjustment over Rs. 1 crore) that is available with the foreign associated enterprise, if not repatriated to India within the prescribed time, will be “deemed” as an “advance” and interest on such advance (loan) will be levied till the money comes back to India.

This interest income will also be taxed in the hands of the Indian affiliate entity, the Government had said.

Experts’ take

Rahul Mitra, Partner, Dhruva Advisors LLP, said the latest CBDT move is indeed welcome and would remove undue hardship to taxpayers, which the government would have not intended. “The earlier situation of counting interest from the date of return of income for MAP/APA cases involving secondary adjustments was not workable. The CBDT has now come with a more practical solution,” Mitra told BusinessLine.

Rakesh Nangia, Managing Partner, Nangia Advisors LLP, said this can be seen as a clarificatory amendment to provide relief to MNCs operating in India and who have opted for APA or MAP programme to obtain certainty with respect to their transfer pricing positions in India.

Sanjay Kumar, Senior Director, Deloitte India, said that certainty and predictability on tax matters are always useful and the draft intends to bring that.
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Direct Tax : Panama Papers: CBDT says the latest leaks will be probed thoroughly

The fresh expose made in the media on Thursday over ‘Panama Paper leaks’ is being promptly looked into by the law enforcement agencies under the aegis of the Multi Agency Group (MAG) already in existence, the Central Board of Direct Taxes (CBDT) said on Thursday.

As per the standard operating procedures in place for investigating such cases, examining the information revealed in the media release with the disclosures made by the alleged persons in the annual returns of income filed, particularly in the foreign assets (FA) schedule, foreign remittance details, etc., will be undertaken expeditiously, followed by raising of relevant queries, an official release said.

Subsequently, investigations in appropriate cases would be carried out to bring them to a logical conclusion, the release added.

Follow-up action

The Panama Paper leaks were originally revealed by the International Consortium of Investigative Journalists (ICIJ) on April 4, 2016. On the same day, the Centre constituted the MAG, headed by the CBDT Chairman as its convener, comprising representatives of the Income-Tax Department, Enforcement Directorate, Financial Intelligence Unit and the RBI

The Panama Paper leaks involving 426 persons have been investigated by the I-T Department and other member agencies of MAG.

Since the database released by ICIJ did not contain any financial details or details of beneficial ownership, these had to be sought from foreign jurisdictions under tax treaties in most cases. After thorough investigation, involving examination of the disclosures made in the ITRs, particularly the FA schedule, residential status, responses to questionnaires issued, responses received from foreign jurisdictions and details of foreign remittances made, 352 cases were found to be non-actionable.

In the 74 cases found actionable, invasive actions were taken in 62 cases with searches conducted in 50 cases, and surveys in 12 cases, leading to detection of undisclosed foreign investments of about Rs. 11,140 crore. In 16 cases, criminal prosecution complaints have been filed in jurisdictional courts, which are at various stages of hearing. In 32 cases, notices under section 10 of the Black Money Act have been issued.

The investigations conducted in the Panama Paper cases reflect the Centre’s continued focus on dealing with black money stashed abroad, said the release. The promptness in action is more than evident as most of the actionable cases have been effectively addressed, it added.

Though the investigating agencies faced problems of incomplete data and absence of financial information as well as not very prompt cooperation from other countries, the overall outcome has been very satisfactory.

The government would like to assure that the fresh series of Panama Papers information would also be effectively addressed within a reasonable time frame, the release added.
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SEBI : SEBI approves amendments to takeover, buyback norms

Markets regulator SEBI today approved changes to takeover regulations wherein entities would get additional time for upward revision of open offer price during share tendering period. Besides, buyback regulations would also be amended.

These proposals were cleared at the board meeting of SEBI here today.

“... it has been decided to grant additional time for upward revision of open offer price till one working day before the commencement of the tendering period,” SEBI said in a release.

According to the regulator, the amendments are mainly aimed at simplifying the language, removing redundant provisions and inconsistencies as well as update references to Companies Act, 2013. In this regard, changes would be made to the SEBI (Substantial Acqusition of Shares and Takeovers) Regulations, 2011.

Talking to reporters after the board meeting, SEBI Chairman Ajay Tyagi said changes to takeover as well as buyback regulations have been approved. The watchdog would be reframing buyback regulations, with inclusion of definition of buyback period.
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SEBI : SEBI does away with grading of IPOs

SEBI has cut the time for announcement of price band of IPOs to two days from five and recast share buyback norms. In a press meet, post its board meeting on Thursday in Mumbai, SEBI Chairman Ajay Tyagi also said they intended to further rationalise regulations for FPIs and mutual funds.

Safety net provisions go

“Under the new regulations, the buyback period has been defined as the period between the board of directors resolution/date of declaration of results for special resolution authorising the buyback of shares and the date on which the payment consideration is made to the shareholders,” a SEBI release said. Grading of IPOs may not be compulsory from now. SEBI, on Thursday, said it had deleted provisions pertaining to safety net and IPO grading. The provisions with regard to IPO safety net were first introduced in 2013 to ensure investment bankers act fairly while fixing IPO prices as it was observed then that over two-thirds of the issues listed in three years prior to 2013 were trading below their issue prices. SEBI also said that it had deleted the chapter relating to the institutional placement programme.

Among a few other changes approved by SEBI at its board meet are the public interest directors of stock exchanges and other market infrastructure companies will be limited to three terms of three years across entities. The MD can serve only two terms of five years.

The time for financial disclosures in case of public/rights issues will now be three years as against five years earlier. Restated and audited financial disclosures in the offer document are to be made on consolidated basis only. Audited standalone financials of the issuer and material subsidiaries will have to be disclosed on the website of the issuer company. Incorporation of the principles governing disclosures of Indian Accounting Standards (IndAS) on Indian GAAP (IGAAP) Financials. Threshold for submission of draft letter of offer to SEBI in case of rights issues to be increased to Rs. 10 crore, against the earlier prescribed Rs. 50 lakh.

Shortfall of up to 10 per cent in minimum promoters’ contribution may be met by institutional investors such as foreign venture capital investors, scheduled commercial banks, public financial institutions and insurance companies registered with the IRDA, in addition to AIFs, without being identified as “Promoters”.

For a company to be eligible to make a fast-track rights issue, it should not have any audit qualifications or adverse opinion.

SME anchors

For the SME IPOs, SEBI has reduced the minimum anchor investor size to Rs. 2 crore from the existing Rs. 10 crore.

The shareholding threshold for identifying the promoter group has been revised to 20 per cent from 10 per cent. On group company disclosure, definition of group companies has been made more specific by clarifying that group company/ies shall include such companies (other than promoter(s) and subsidiary(ies)) with which there were related-party transactions, during the period for which financial information is disclosed (three years), as covered under the applicable accounting standards and also other companies as considered material by the board of the issuer.
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SEBI : SEBI to plug gaps that led to leak of ASM stocks: Tyagi

SEBI Chairman Ajay Tyagi on Thursday said the markets regulator will take corrective measures following the leak of a list of stocks ahead of their being placed under Additional Surveillance Measures (ASM).

On June 6, SEBI had ordered a probe following a BusinessLine report that operators in Mumbai and Gujarat may have had access to the ASM list ahead of its official release on May 31, and that they used the information to profit from it by short-selling the stocks on the list.

“We have taken the leak of THE ASM list very seriously and have set up an internal probe. (We) will take corrective measures. The exchanges, too, have set up their own inquiry. Culprits will be taken to task,” Tyagi told reporters on Thursday.

It is likely that SEBI will minimise the interval between the issue and publication of its surveillance measures. Also, SEBI may include the exact time of the preparation of the surveillance circular by its internal staff and the time taken for its publication, in the circular itself, a source told BusinessLine. Further, a strict vigil may be kept on those involved in preparing the list and for uploading it on websites of regulator and exchanges.
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SEBI : SEBI cracks the whip in NSE co-location scam

Four-and-a-half years after a whistle-blower first highlighted that unfair access was given to stock brokers for high-frequency trading at the National Stock Exchange (NSE), markets regulator SEBI on Thursday declared it had initiated enforcement action against entities involved in the scam.

On May 8 this year, BusinessLine was the first to report that a final report by the Securities and Exchange Board of India (SEBI) on the scam may suggest “enforcement action” against those involved in manipulating the NSE’s trading systems.

The enforcement action was based mainly on the findings of SEBI’s Technical Advisory Committee (TAC) in 2016.

The TAC had said in its report that “preferential access was given by the NSE to stock-broker(s), wherein it was possible for a stock-broker to log in to multiple dissemination servers through multiple Internet protocols assigned to them.”

TAC findings

The NSE had consistently dismissed the allegations.

In September 2016, at a SEBI meeting, the TAC report was read out to key members of the NSE Board. Following this, some top-level executives quit the NSE.

“We have received the NSE investigation report in the co-location case...(We) have initiated enforcement action,” said SEBI Chairman Ajay Tyagi, while addressing a press conference. “Action will be against institutions and individuals.”

Thirteen NSE officials, including former top executives, have been issued show-cause notices by SEBI.

Among the stock-brokers who may have benefited from the scam, the name of Delhi-based OPG Securities figures prominently.

Responding to questions on the CBI’s charge that SEBI officials had also colluded with those involved in NSE scam, Tyagi said, “Let the investigative agency do its work and we will do ours.”

The CBI recently registered an FIR in the co-location case against unknown SEBI officials for collusion with a stock-broker, who, along with NSE officials, indulged in fraud, criminal conspiracy and destruction of digital evidence.

What SEBI probed

While the TAC committee was appointed under former whole-time members, Tyagi, who took office in April 2017, initiated the final leg of SEBI’s probe into the matter.

Prima facie, there are two questions that SEBI has looked at in its recent probe: first, if there is any case of systemic lapse; and second, who colluded and benefited from it? While a systemic lapse was established by previous probes, including the TAC, the final report was mainly to throw light on who mainly benefited from the manipulation, a source linked to SEBI said.
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MoF : CAD at 2.5% of GDP not a worry, govt geared to deal with outflows: FinMin

Current account deficit (CAD) at 2.5 per cent of gross domestic product (GDP) won’t be a worry as the government has the required instruments to deal with any imbalance created due to foreign fund outflow, Economic Affairs Secretary Subhash Chandra Garg said on Tuesday.

“2-2.5 per cent CAD is not a problem for us.... If there is stability, in the current year capital account (inflows) should be good enough to take care and we may not worry even if it (CAD) reaches 2.5 per cent,” Garg said.

CAD, which is the difference between the inflow and outflow of foreign exchange, jumped to $48.7 billion, or 1.9 per cent of GDP, in 2017-18 fiscal. This was higher than $14.4 billion, or 0.6 per cent, CAD in 2016-17 fiscal.

With rising oil prices, depreciating rupee and outflow of portfolio investments, there are concerns that CAD might rise in the current fiscal.

“Last year, we had $160 billion of trade deficit, $82 billion services surplus, and $70 billion remittances. In a way, we are pretty much in balance. But if oil goes up, this balance gets disturbed and the capital account funds it,” Garg said at a CII event in the Capital.

The price of Indian basket of crude surged from $66 a barrel in April to around $74 a barrel at present.

Asked about monetary policy tightening by the US, he said India can afford to be “less edgy and concerned” than it was during taper tantrum in 2013.

“In the last couple of years of monetary easing, you did not see flood of capital flows coming into emerging markets, including India. Unlike what happened in 2007. There is a confidence that the emerging market economies will do well,” he said.

He added the government needs to be “very careful and watch out” for the situation, but today “we are at a place where we can manage without having the consequences of what we saw in taper tantrum.”

“We have a number of other instruments to use in that case. We have not called upon them to use so far. Last time we came out with NRE (non-resident external) deposit. We are sitting on reserves which are highest ever at $415 billion. The place where we are is possibly not the kind of situation where we were in 2013,” he said.

Observing that the fund flow from portfolio investors depend on factors like yields and exchange rate, he said “we still are in good shape. CAD between 2.5-3 per cent is something not in our control. It depends on way the oil would behave.

“But we are definitely in a place where we can take care these things, unlike 10 years ago when we didn’t have firepower. I think on the macro front we need to be vigilant, but we can take care,” he added.

On managing fiscal deficit, he said the government has worked in a very prudent and sound manner. India would shortly achieve the targeted 3 per cent fiscal deficit level and it will be more permanent and sustainable in nature, Garg said.
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SEBI : Sebi plans to reduce cooling off period to 1-year for former employees

Sebi plans to reduce the cooling off period to one year for its former employees before they take up jobs elsewhere as well as introduce special casual leaves for staff with physical disabilities, according to a senior official.

Besides, the watchdog has proposed a comprehensive review of its recruitment policy.

The Sebi board, which is scheduled to meet on June 21, is expected to discuss these proposals, the official said.

At present, an employee who has retired or ceased to be in the service at the regulator is barred from taking up jobs with Sebi-registered intermediaries or any other commercial employment for a period of two years.

This period is proposed to be reduced to one year.

Once approved, the reduced time period will also be applicable to officials who have retired or have resigned but have not completed two years after being relieved from the services of the Securities and Exchange Board of India.

The reduction in cooling off period will also bring the condition applicable for Sebi employees in line with the RBI and the central government.

It would amend the Sebi (Employee's Service) Regulations, the official said.

According to him, there is also a proposal to introduce special casual leaves for persons with disabilities at the Sebi in line with provisions made by the Department of Personnel and Training and the RBI.

The official noted that the recruitment policy will be reviewed comprehensively as it is a dynamic environment where qualifications and skills expected from employees is changing.

One of the proposals is to increase the probation period for candidates hired for certain grades to two years from one year.
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